HARVELA INVESTMENTS LTD. V/S ROYAL TRUST CO. OF CANADA, 1986

CITATION	[1986] AC 207
DATE OF JUDGMENT	11th July 1985
COURT	UK HOUSE OF LORDS
APPELLANT	HARVELA INVESTMENTS
RESPONDENT	ROYAL TRUST CO. OF CANADA (C.I) LTD.
BENCH	LORD DIPLOCK, LORD FRASER, LORD EDMUND, LORD BRIDGE, LORD TEMPLEMAN

INTRODUCTION

The case of ” Harvela Investments Ltd v Royal Trust Co. of Canada (C.I.) Ltd (1986) AC 207″ key issues regarding contract formation and referential bids in an auction. The issue is related to the auction of certain shares sold by Royal Trust and the bids made by the two interested parties – Harvela Investments and Sir Leonard. The key contention arises from the construction of the invitation, with Harvela alleging breach of contract by Royal Trust for accepting a referential bid from Sir Leonard Outerbridge. This case delves into issues surrounding the validity of referential bids, the interpretation of the invitation, and the entitlement to shares. 

FACTS OF THE CASE

1. The case of Harvela Investments Ltd and Royal Trust Company of Canada involved an invitation by the respondent vendors, Royal Trust Co of Canada (CI) Ltd, to the appellant, Harvela Investments Ltd, and Sir Leonard Outerbridge, to make offers to purchase the vendors’ shares in A Harvey & Co Ltd.
2. The invitation stipulated that offers must be made by sealed tender or confidential telex, which would not be divulged by the vendors before the invitation expired at 3 pm on 16 September 1981 when the vendors would accept ‘the highest offer’.
3. Harvela placed a bid of $2,175,000 while Sir Leonard offered $2,100,000 “or C$101,000 in excess of any other offer which you may receive which is expressed as a fixed monetary amount, whichever is the higher”. 
4. Royal Trust Co. informed Harvela of the offers made by both the interested parties and that they were bound to accept the higher offer which was made by Sir Leonard. Harvela sued Royal Trust for breach of contract. 

ISSUES RAISED

1. Whether the construction of the invitation to offer allowed for referential bids?
2. Whether the referential bid made by Sir Leonard was valid?
3. Whether Sir Leonard was entitled to the shares?

CONTENTIONS OF APPELLANT

1. The invitation did not allow for referential bids and that Sir Leonard’s offer was invalid.
2. Harvela’s offer of $2,175,000 was the highest valid offer and that they were entitled to the shares.
3. They were entitled to interest on the purchase price from the date of the contract until the date of payment.
4. Sir Leonard should pay the costs of the proceedings, as he was the unsuccessful party in the dispute over the shares. 

CONTENTIONS OF REPONDENT

1. The invitation allowed for referential bids, and therefore, Sir Leonard’s offer was valid.
2. They were entitled to accept Sir Leonard’s referential bid, which they claimed to have done on 29 September 1981.
3. Harvela was not entitled to interest on the purchase price, and they should pay interest at the short-term investment rate from the closing day until the actual payment of the purchase price.
4. The costs of the proceedings should be allocated based on the outcome of the dispute over the shares.

JUDGEMENT

The court’s judgment in Harvela Investments Ltd and Royal Trust Company of Canada addressed several legal issues, including the construction of the invitation, the validity of the offers made, and the entitlement to the shares.

The court held that the invitation did not allow for referential bids. The invitation required the parties to make fixed bids, and the vendors were bound to accept the highest fixed bid. The court concluded that the invitation was clear and unambiguous and did not allow for referential bids. This meant that Sir Leonard’s referential bid was invalid, as it was not a fixed bid. The court found that the invitation did not allow for referential bids, and Sir Leonard’s offer was not a valid offer. Therefore, he was not entitled to the shares.

Harvela, on the other hand, made a valid fixed bid of $2,175,000, which was the highest valid offer. The court concluded that Harvela was entitled to the shares, and the vendors were bound to accept their offer. The court’s decision was based on the legal requirements for a valid offer and the implications of the referential bid made by Sir Leonard.

The court also addressed the issue of entitlement to interest and costs. The court held that Harvela was entitled to interest on the purchase price from the date of the contract until the date of payment. The court also allocated the costs of the proceedings based on the outcome of the dispute over the shares.

Overall, the court’s judgment in Harvela Investments Ltd and Royal Trust Company of Canada clarified the legal requirements for a valid offer and the implications of referential bids in the context of a fixed bidding sale. The court’s decision emphasized the importance of clear and unambiguous invitations to offer and the need for parties to comply with the legal requirements for a valid offer. 

ANALYSIS

1. Referential Bid – A referential bid is an offer that makes a reference to another offer. In the present case, Sir Leonard made a referential bid of $101,000 in excess of any other offer received by Royal Trust. 
2. Clear and Unambiguous Offer – The court emphasized the importance of clear and unambiguous invitations to offer in the context of a fixed bidding sale. The court held that the invitation did not allow for referential bids, and the vendors were bound to accept the highest fixed bid.
3. Legal Requirements of valid offer – The court held that Sir Leonard’s referential bid was not a valid offer, as it was not a fixed bid. Harvela’s fixed bid, on the other hand, was a valid offer, and they were entitled to the shares.

CONCLUSION

In conclusion, the court’s judgment clarified crucial legal aspects in the Harvela Investments Ltd and Royal Trust Company of Canada case. It determined that the invitation did not permit referential bids, emphasizing the need for clear and unambiguous offers in fixed bidding sales. Sir Leonard’s referential bid was deemed invalid, and Harvela’s fixed bid was recognized as the highest valid offer, entitling them to the shares. The court’s decision underscores the significance of complying with legal requirements for a valid offer in such transactions.

REFERENCES

1. https://www.casemine.com/judgement/uk/5b46f2082c94e0775e7f0fae
2. https://definitions.uslegal.com/r/referential-bid/#google_vignette

This Article is written by Astha Samal student of National Law University Odisha; Intern at Legal Vidhiya.

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