Court of Cassation, Commercial Chamber. Judgement no. 365 Application for Review no. 85-16.716. Case Bowater Corporation Limited / Bertrand et autres . Bull.civ. Dismissal
20 May 1986
Translated by:
Mr. Trevor Brown and Miss Ann Yazikov
Professor B. S. Markesinis

THE COURT, at the public hearing of 22 April 1986 (……)

Regarding the first ground, taken in its three limbs :

Given that, according to the findings of the judgement under attack (Paris, 4 July 1985), (1) pursuant to a contract of 20 April 1973, Mr. du Vivier, both in his own name and on behalf of other shareholders, transferred to Iéna Industrie, a subsidiary of Bowater Corporation Limited (Bowater)], over two thirds of the shares of A. de Luze et Fils, a corporation(Luze); (2) on the same day, reciprocal to purchase and sell were exchanged between the same parties, providing a minimum and a maximum figure for the price still to be set, setting a deadline for the options in 1977 and relating to a number of shares, such that these documents taken together covered the totality of Luze’s capital (minus one share); (3) Mr. du Vivier having discharged Iéna Industrie from its obligations, Bowater, by a letter of 11 November 1975, granted an option to sell which, setting an option deadline in 1982, made it clear that the price would be fixed by common consent with reference to “the net value of tangible and corporeal assets” of Luze, failing that by an expert, and that the price could not be lower than FF 5 million; (4) in 1976, Bowater became a shareholder of Luze; (5) after having exercised the option, in order to get the minimum price agreed upon, Mr. du Vivier started an action which Bowater resisted, arguing that the clause setting such a price was null and void as it breached article 1844-1 of the Civil Code.

Given that (1)] the judgement is criticised in that, in ordering Bowater to make the payment claimed, it rejected this argument on the grounds that the option in question was not under attack, either in its object, since when it was carried out, its conditions were more favourable than those provided for by the options to sell granted by Iéna Industrie, or in its result, since Bowater had not provided any element of proof on the value of the shares, in real terms, on the day of the option, so that it had not been possible to determine if the fixing of a minimum price had had the effect of exempting Mr. du Vivier and the shareholders he represented of the totality of losses within the company, whilst, according to the application for review, (a)(i) on the one hand, any agreement seeking to relieve a shareholder of the company’s losses by transferring them on to other shareholders is void; (ii) it follows that the Court of Appeal could not, on the grounds that the conditions regarding price and deadline of the second option of 11 November 1975 were apparently more favourable than the conditions of the first option, abstain from investigating whether the aim of fixing, on the day of the option of 11 November 1975, a minimum guaranteed price which should have been applied, at the sole will of the beneficiary, when the shares were to be transferred, several years later, whatever the losses suffered by the company, was not to protect those shareholders benefiting from the option against the risks of the company’s losses, which would then be borne by the shareholder granting the option; (iii) the Court of Appeal’s decision thus lacks legal basis as regards article 1844-1 of the Civil Code, (b) on the other hand, (i)it had not been contested that the minimum guaranteed price, which had been determined on the day that the option was signed, corresponded to the real value of the shares on the day that the option was signed; (ii) by adopting unilaterally, and without calling for observations from the parties, an argument based on the fact that Bowater did not offer any element of proof on that value, even though, had its comments been sought, it would have been able to produce those elements, the Court of Appeal has breached article 16 of the New Code of Civil Procedure; (c) thirdly, (i) in its pleadings to the Court of Appeal, Bowater had, as the Court of Appeal itself pointed out, referred to elements of proof which demonstrated the disproportion between the share price resulting from the minimum guaranteed price fixed on the day of the promise (FF 861.30 per share) and the real value of the share at the time of the transfer (sale effected at FF 62.07 per share in 1980); (ii) as a result of this disproportion, the beneficiaries of the promises found themselves exempt from the losses suffered by the company during the period stipulated in the option; (ii) by failing to take into account these elements, crucial to the outcome of the case, the Court of Appeal has breached article 455 of the New Code of the Civil Procedure;

But given that (1) the Court of Appeal, once it had established that the agreement being litigated upon constituted a transfer, did not have to check if the fact of fixing a minimum price on the day of the promise had had the effect of relieving the transferor from all contributions to company losses; (2) indeed, the only thing prohibited by Article 1844-1 of the Civil Code is a clause which harms the corporate spirit (“pacte social”)in the way set out in that Article; (3) this could not be the case for an agreement, even between shareholders, whose only object (in the absence of fraud) was to ensure, by means of a price freely agreed upon, the transfer of securities; (4) therefore, without ignoring the principle that all parties must be heard and without having to enter into the detail of Bowater’s arguments, the Court of Appeal, for reasons of its own and others it has adopted, has correctly decided that the agreement being litigated upon had not harmed the corporate spirit; (5) the ground is therefore ill founded in all its limbs;

[Further grounds not relevant to the topic]

REJECTS the Application for Review.


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