Esat loses bid to stop Cablelink sale

High Court

The legal battle for Cablelink ended in bitter disappointment yesterday for the Esat-led consortium, Howberry Lane Ltd, when the courts cleared the way for the immediate sale of the company to US-based NTL Communications for £535 million (€679 million).

Early yesterday, the High Court dismissed an application by Howberry for an order preventing the sale pending the outcome of Howberry's action against Telecom Eireann and RTE (owners of Cablelink) and NTL.

Howberry immediately went to the Supreme Court where Mr Bill Shipsey SC sought to move an application for a fresh interim order preventing the sale until the Supreme Court could hear his appeal against the High Court's decision.

The Chief Justice, Mr Justice Hamilton, presiding, said the court would not hear the interim application. He also indicated that while the court would try to facilitate an early hearing of the appeal, it had a full list and the matter could not be heard immediately.

This effectively left Howberry without any further legal options to prevent the sale of Cablelink anytime after 2 p.m. yesterday.

In its proceedings before the President of the High Court, Mr Justice Morris, Howberry had argued the bidding process was unfair and neither open nor transparent, despite assurances to that effect in the various tender documents.

Howberry said its £410 million bid for Cablelink, submitted on April 23rd last, was the highest valid bid submitted on that date and should be accepted. An NTL offer on the same date to pay 15 per cent more than the highest bid was, Howberry claimed, a "formula bid" which should be excluded.

Howberry further argued that selling agent NM Rothschild was not entitled to proceed on April 26th to require the five bidders to submit revised final bids by April 27th. Howberry did submit, under protest, a revised final bid of £485 million while NTL submitted a bid of more than £525 million.

During the three-day hearing, Telecom and RTE said they proposed to proceed with the sale of Cablelink and insisted they were entitled to do so. NTL also rejected claims by Esat chairman Mr Denis O'Brien that it had sought to "fix" the bidding.

In his judgment yesterday, Mr Justice Morris said he was satisfied the true relief sought by Howberry was an order directing Telecom and RTE to sell Cablelink to it and the 17 other reliefs sought were preparatory to this.

The order requiring sale to Howberry was the one he must consider when determining whether Howberry had established there was a fair case to be tried at the full action.

He noted Cablelink's shareholders, in documents sent to bidders, had reserved the right to sell the company to "any person at any time" and stated they were under "no obligation to accept the highest bid offered or any bid at all". They also reserved rights "to accept or reject any offer made irrespective of whether it is the highest offer" and "not to accept any offer or to vary, amend or curtail the sale process at their discretion".

The judge said he was satisfied, even if Howberry obtained all 17 other reliefs, it would still not be entitled, as of right, to an order requiring Cablelink to be sold to it. Accordingly, he was satisfied no case had been made out that it was entitled to acquire Cablelink.

Howberry had relied on a number of Canadian cases in which the courts had inserted an implied term into the contract which effectively overrode such qualifications as set out in the tender documents and required completion of sale with the highest bidder, the judge said.

He was satisfied that in all those cases, special circumstances existed in which the courts saw it appropriate to introduce such an implied term. He was also satisfied that under no circumstances was such a term to be implied under present Irish law.

In the present case, such an implied term was not necessary and would be clearly inconsistent with the express wording of the contract. He did not accept the Canadian authorities as any indication of the emerging jurisprudence in this jurisdiction.

The judge also rejected Howberry's arguments, advanced on the basis of Canadian law, that, when submitting a bid in a transaction such as for Cablelink, a bidder enters into a contract which (provided the bid is satisfactory) entitles it to be offered a second contract for, in the present case, the purchase of Cablelink.

Even if this was emerging jurisprudence in Canada, Mr Justice Morris said he did not accept it represented Irish law. He also could not accept it applied to this case since the sellers at all stages reserved the right to withdraw from the tendering procedure.

Even if the principal order sought was a declaration that NTL's bid was invalid and Cablelink should not be sold to it, it appeared to him the only possible reason for seeking such an order was to discommode NTL to such an extent that Howberry would find it possible to "steal a march on it" and acquire Cablelink while NTL was disabled by an injunction.

Under no circumstances should a court of equity grant relief to a plaintiff "seeking to achieve such an unfair advantage", he said.

On claims by Mr O'Brien that NTL should be disqualified from the bidding process because it allegedly sought to form a "ring" to destabilise the bidding procedure, the judge said this argument could not affect the sellers' right to negotiate sale with any person they considered appropriate. He was also not satisfied that Mr O'Brien's allegations, even if proven, would disentitle NTL from acquiring Cablelink.

Mr Justice Morris also rejected claims that the balance of convenience favoured the granting of the injunction. He accepted the loss of Cablelink to Howberry would be of great magnitude and perhaps incalculable. But he also had no doubt the loss to NTL if the injunction was granted would be no less.

He said the injunction sought would preclude only NTL from acquiring Cablelink. He was satisfied the sellers would, in the nature of things, seek an alternative buyer while the injunction continued and NTL's opportunity to acquire Cablelink would have vanished.

The loss to both sides was equal and Howberry had not shown the balance of convenience favoured granting the injunction. The judge said he was far from satisfied that in such circumstances it was appropriate, as Howberry had argued, to look at the strength of Howberry's case. If he were to do so, and he had made his judgment independently of doing that, he would be satisfied Howberry's case was "so weak that it would tip the balance against it".