Qatar Investment & Projects Development Holding Co W.L.L v Elanus Holdings Limited

A contractual pre-emption right triggered by a lender’s wish to sell requires a firmly formed and unequivocal intention to sell, which the lender is willing to carry into effect. A general desire to explore a sale, or to sell only if a satisfactory price is obtained, is insufficient. The relevant state of mind is attributed under the ordinary rules of company attribution and agency; the clause does not create a special attribution rule. The wish must continue when the pre-emption right is exercised. A notice preserving an option to decide later whether to buy is ineffective where the contract requires the notice itself to exercise the right.

The claimant, Qipco, claimed specific performance concerning a 70.21 carat diamond lent to it by the defendant, Elanus, under a 20-year Loan Agreement. Paragraph 10 gave Qipco pre-emption rights if Elanus wished to sell the diamond. In February 2020, Dr Neupert sent Qipco a letter stating that the family wished to sell and referring to the contractual valuation mechanism. Qipco later served purported notices exercising its rights.

The issues included the meaning and duration of a qualifying wish, whose state of mind could be attributed to Elanus, whether the February letter had ostensible or ratified effect, and whether the April and July notices were valid.

1. Claim dismissed. Elanus had no qualifying wish to sell under Paragraph 10. HBS wished to explore a sale and would have considered selling if the price was right, but he had not reached a settled intention to carry a sale into effect. None of the other family members wished to sell.
2. “The Lender” meant Elanus, not the Foundation and not only Elanus’s directors. The relevant state of mind was identified through the primary rules of attribution and ordinary agency principles. A shareholder’s state of mind could count if it had authority to bind Elanus, including through a valid application of the Duomatic principle, but those circumstances were not established.
3. The wish had to continue when Qipco served its exercise notice. Paragraph 10 was intended to prevent a sale to a third party without first offering the asset to Qipco, not to compel a sale after the lender had abandoned the wish to sell. Any qualifying wish had ceased before both purported notices.
4. Dr Neupert’s February letter could not itself create the contractual trigger, because the trigger was the existence of the wish rather than notice of it. There was no sufficient holding out of Dr Neupert as authorised to bind Elanus. In any event, Qipco was on notice of the lack of authority and had failed to make reasonable inquiries.
5. The directors had not ratified any wish. Their correspondence required formal consideration, approval and a Foundation recommendation, and did not unequivocally adopt the February letter. They also lacked full knowledge of the material circumstances.
6. The April Notice was invalid. Paragraph 10 required Qipco’s written notice to communicate that it was exercising its entitlement to purchase. The notice instead sought to preserve an option to decide later and expressly stated that Qipco was not bound to purchase.
7. It was unnecessary to determine the valuation and relief issues. The court nevertheless considered that no independent-valuation requirement could be implied into Paragraph 10, and that Qipco could rely on the April Estimate if the issue had arisen.