Agrimarche Ltd, Re

Commercial option contracts are construed objectively, using the language and background reasonably available to the parties. A reference to an exchange-traded future may identify a valuation mechanism rather than require delivery of the underlying commodity. An option is ordinarily exercisable during its contractual period and, when exercised, produces the contractual benefit immediately unless the agreement provides otherwise.

A term deeming an unexercised option to have been exercised will not be implied merely because it would be fairer or protect the holder against loss. An insolvency office-holder should give effect to legal rights unless refusing to do so would be dishonest, dishonourable, unfair or shabby. Claims under the options were therefore valued at the commencement of the liquidation.

Agrimarche Ltd was in creditors’ voluntary liquidation after a period of administration. Its business included call options sold to farmers and linked by contract wording to LIFFE wheat futures or MATIF oil-seed-rape futures.

The liquidator sought directions on whether exercised options required physical delivery or cash settlement, when exercise took effect, whether options in the money at expiry were automatically exercised, whether an email created an equitable obligation to treat them as exercised, and whether claims should be valued at administration or liquidation.

1. Construction and settlement. Applying Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, the contracts were to be understood objectively against the background reasonably available to the parties. The absence of physical delivery, the farmers’ commercial interests, the wording referring to LIFFE or MATIF futures, and the absence of specifications for the underlying commodities showed that the options were financial instruments. The Company’s obligation was therefore to make a cash payment calculated by reference to the relevant future, not to deliver wheat or oil seed rape.
2. Exercise. The options could be exercised at any time during their validity period, subject to compliance with any contractual time limit. Exercise entitled the holder to an immediate payment based on the value of the equivalent future, rather than a payment calculated only at expiry.
3. Automatic exercise. The LIFFE and MATIF option terms were not incorporated because the contracts referred only to futures. Following A-G of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, a term would be implied only if it represented the meaning of the instrument read as a whole against its background. Fairness or reasonableness alone was insufficient. No term deeming an option in the money at expiry to have been exercised was implied.
4. Office-holder’s conduct. The principle in Ex p James Re Condon (1874) LR 9 Ch App 609, as explained in Re Multi Guarantee Co Ltd [1987] BCLC 257, did not require the liquidator to treat the options as exercised. The email was unauthorised, expressed only an employee’s belief, was not shown to have reached or been relied upon by creditors, and could not fairly support the proposed benefit. The liquidator should give effect to legal rights.
5. Valuation date. Following the approach in Re Global Traders Europe Ltd (No 2) [2009] Bus LR 1327, claims were to be valued at the commencement of liquidation. Administration did not justify an earlier valuation date, since holders could exercise after administration began if they wished to crystallise their claims. The application was determined accordingly, and its costs were payable as an expense of the liquidation.

First-instance directions application in the creditors’ voluntary liquidation. No appeal history is stated in the judgment.