The High Court has looked at whether the obligation to pay for shares under a put option was conditional on certain documentation being provided or whether the obligation to pay and provide documents were interdependent.
The trigger event: no IPO
Iconic bought shares in Eagle. The parties envisaged an initial public offering. As protection, if the IPO did not occur, Iconic and the defendant entered into a put option enabling Iconic to require the defendant to buy Iconic’s shares. When Eagle did not go public, Iconic gave notice under the option. The defendant did not buy the shares.
Interpretation: conditional or concurrent obligations?
The defendant maintained that the put option required him to pay only if Iconic also complied with its obligations, which included producing a share certificate and other documents needed to effect the purchase, which the defendant said Iconic had not done.
Iconic contended that the parties’ obligations were interdependent and concurrent, meaning that delivery of completion documents and payment of the option price were intended to occur simultaneously.
Single completion and specific performance
The court preferred Iconic’s interpretation. The provision the defendant relied on did say, “Subject to Iconic complying with its obligations…”. However, read as a whole and in its commercial context, the agreement contemplated a single “completion” event with concurrent performance by both parties. The language the defendant relied on was part of the machinery. On that basis, the duty to deliver completion documents had to be performed simultaneously with the defendant paying the option price.
The court emphasised that clear language is required to render obligations independent rather than concurrent, and, in contrast to elsewhere in the agreement, the parties had not done so on this point.
The court also found that the defendant was neither willing nor able to complete at any material time. For specific performance, Iconic had to demonstrate it was ready and willing to perform, which it did. The court was satisfied that, had the defendant not indicated a lack of intention and ability to complete, the transaction would have completed as contemplated.
Judgment: Iconic v Textor (Westlaw)
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