RGI International Ltd & Anor v Synergy Classic Ltd & Ors

Where a share subscription agreement contemplates shares being held through a nominee, an obligation to allot and issue shares to the investor may be satisfied by registration in the name of the investor’s authorised nominee. The expression “investor” should be construed in the context of the agreement as a whole and in accordance with business common sense. A failure to comply with a separate obligation concerning the delivery of a certificate or CREST arrangements does not trigger a contractual put option where that option arises only upon failure to allot and issue the shares. Contractual notice requirements imposed for one party’s benefit may be waived by that party, subject to the terms of the agreement.

RGI sought summary judgment on two construction issues arising under a share Subscription and Option Agreement with Synergy. The first issue was whether Synergy could exercise a put option because the Option Shares were allegedly not allotted and issued to it within the contractual period. The second, alternative issue concerned whether, if the put option were validly exercised, Synergy had to return both the First Shares and the Option Shares upon receiving the specified price.

The dispute was one of construction and involved no relevant factual dispute. The central question was whether registration of the Option Shares in the name of Synergy’s authorised nominee satisfied the obligation to allot and issue them to the investor.

1. First Issue allowed. RGI was entitled to declarations that it had not breached clause 5.2(b) of the SOA and that Synergy had no right to exercise the First Shares Put Option. The Second Issue therefore did not arise.
2. Clause 5.2 contained distinct obligations. The put option under clause 5.5 arose only if RGI failed to allot and issue the Option Shares in accordance with clause 5.2(b). A failure concerning the separate certificate or CREST obligation in clause 5.2(c) would not itself trigger the put option.
3. The SOA contemplated that Synergy might hold both the First Shares and the Option Shares through a CREST nominee. Reading “Investor” in clause 5.2(b) as meaning only Synergy as legal and beneficial owner would conflict with that contractual scheme. It would also make the purchase mechanism in clause 5.5 impracticable where the shares were held by a nominee.
4. The court applied the approach to business common sense reaffirmed in The Rainy Sky [2011] 1 WLR 2900. Synergy’s construction would give it a substantial windfall: it could retain beneficial ownership of the Option Shares while recovering their subscription price and an additional sum. That consequence supported the construction that registration in the name of Synergy’s authorised nominee amounted to allotment and issue to Synergy.
5. The Option Shares were registered in the name of Vidacos Nominees Limited, Synergy’s nominee, before the contractual deadline. Synergy’s belated contention that the nominee could not satisfy clause 5.2(b) was rejected.
6. Although unnecessary to the decision, the judge indicated that the authorised e-mail could have constituted a valid notice under clause 5.2(c). RGI could waive formal requirements concerning transmission and addressee because they existed for its benefit. The judge also accepted, subject to the agreement’s terms, that the written-waiver clause itself could be waived, referring to Credit Agricole Indo-Suez v BB Energy BV [2004] EWHC 750 (Comm).

First-instance summary judgment application. No appellate history was stated in the judgment.