Perpetual Trustee Company Ltd v HIH Holdings (NZ) Ltd (in liquidation)

[2013] NSWCA 47

NSW Court of Appeal

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Interrogate

Catchwords

1. Banking and Finance
2. › Instruments
3. › Convertible notes
4. › Converting notes issued to be converted into ordinary shares unless issuer elected to redeem for cash
5. › No election to redeem and no conversion
6. › Whether noteholders entitled to prove in liquidation for face value of notes
7. › Whether debt repayable in cash or only dischargeable by subscription for shares
1. Contract
2. › Construction
3. › Trust deed and conditions of issue
4. › Converting notes
5. › Whether acknowledgment of indebtedness created unqualified right to cash repayment
6. › Effect of qualification 'subject to any obligation to convert'
7. › Whether termination of contract separated redemption obligation from share subscription obligation
1. Banking and Finance
2. › Debt obligations
3. › Non-recourse and limited recourse loans
4. › Whether parties may agree that debt can only be discharged by means other than cash payment
5. › Conditional obligation to repay

Quick Take

Where converting notes provide that debts are to be discharged exclusively by conversion into shares (unless the issuer elects cash redemption), noteholders cannot prove in the issuer's liquidation for the face value of the notes as a debt. Termination of the contract does not sever the redemption obligation from the share subscription obligation so as to create a standalone cash payment right; both obligations exist in tandem and both end on termination, leaving only a damages claim for breach.