Citicorp International Ltd v Castex Technologies Ltd

Contractual headings may assist construction where they describe the provision’s subject matter. A clause stating that headings are to be ignored does not necessarily require headings in a separate contractual document to be disregarded.

Condition 8.11, headed Redemption Notices, required information relevant to redemption notices. Its wording and specified contents did not extend those requirements to a mandatory conversion notice under Condition 8.2. The court may consider the commercial certainty and coherence of the proposed constructions. A construction requiring uncertain interpolation of words such as “if appropriate” was less persuasive than one giving the provision a clear and workable scope.

Citicorp International Limited, as trustee for holders of convertible bonds issued by Castex Technologies Limited, challenged Castex’s mandatory conversion notice dated 31 July 2015.

The parties agreed that the court should determine as a preliminary issue whether the notice was valid. The dispute concerned the proper construction of Condition 8.11 of the bond Conditions, which was headed Redemption Notices and specified information to be included in notices. The central issue was whether those requirements applied to a mandatory conversion notice issued under Condition 8.2.

1. Construction of Condition 8.11. The court held that Condition 8.11 applied to redemption notices only. Although the phrase “pursuant to this Condition” could potentially refer to Condition 8 as a whole or to Condition 8.11, the six specified items were all relevant to redemption notices. In particular, the aggregate principal amount of bonds outstanding had no useful application to a mandatory conversion notice, which converted all bonds.
2. Use of the heading. The Conditions were a separate document referred to in, but not forming part of, the Trust Deed. Clause 1.3 of the Trust Deed therefore did not require the headings in the Conditions to be ignored. In any event, the heading was admissible and consistent with the substantive wording. The court was entitled to consider it as descriptive of the provision’s subject matter.
3. Certainty and commercial coherence. The construction advanced by Citicorp required the court to interpolate an “if appropriate” qualification into the list of mandatory requirements, creating uncertainty for the draftsman of a notice. The competing construction gave Condition 8.11 a clear and workable operation.
4. Disposition. The notice complied with Condition 8.2 and did not need to include the information specified in Condition 8.11. The preliminary issue was therefore resolved in Castex’s favour, and the notice was valid.