PRAKASH INDUSTRIES LIMITED v PETER BECK UND PARTNER VERMÖGENSVERWALTUNG GmbH

Where contractual payment provisions establish a hierarchy, a payer must use the stipulated method. A non-compliant bank account does not remove an alternative obligation to pay by cheque. A failure to pay interest may remain a continuing default until payment, whereas late delivery of shares may support acceleration only before delivery or acceptance. Delay alone will rarely waive contractual default rights where the agreement preserves them.

For late conversion, the prima facie market measure applies where an available market exists. A claim for profits from a wider trading strategy is too remote where it depends on market movements and highly individual decisions that were not within the issuer’s reasonable contemplation. Losses must nevertheless be assessed separately for each proven conversion delay.

Prakash Industries Limited issued foreign currency convertible bonds subscribed for by Peter Beck und Partner Vermögensverwaltung GmbH. Prakash failed to pay coupon interest and delayed issuing shares following three conversion notices. It sought declarations that it was not liable. PBP counterclaimed for the early redemption amount and damages for late conversion.

The principal issues were whether payment into an account held by PBP’s controller satisfied the contractual payment provisions, whether defaults were continuing or had been waived, whether PBP had title to recover conversion losses, and whether its primary counterfactual claim for profits on converting its entire bondholding was recoverable.

1. Payment of interest. Conditions 7.1 and 7.2 established a hierarchy: payment by transfer was required only to a compliant registered account; otherwise payment had to be made by US dollar cheque to the registered bondholder. The controller’s personal account was not maintained by or on behalf of PBP. Prakash was therefore not obliged to transfer the interest there, but remained obliged to pay by cheque and was in breach by failing to do so.
2. Events of default and waiver. Non-payment of interest was a continuing breach capable of remedy by payment of outstanding sums. Late delivery of shares was treated as continuing, for Condition 10.1.2, until delivery, but PBP accepted the shares before serving notice and thereby lost any right to accelerate on that basis. Its demands for interest were also inconsistent with acceleration for late conversion. The 3 July 2019 notice based on unpaid interest was valid. Conditions 12.6 and 12.7 did not exclude waiver by positive conduct, but the delay here was insufficiently exceptional to constitute waiver.
3. Title and loss. PBP remained the legal and beneficial owner of the Bonds and converted shares. BCA2 was a device to facilitate payment of sale proceeds into the controller’s personal account and did not transfer ownership. PBP therefore had title to sue.
4. Conversion and damages. The contractual period began when a compliant conversion notice was deposited with the conversion agent. The primary claim for profits on the entire holding failed for remoteness, causation and failure to prove the counterfactual. The market measure applied to CN2 and CN3. Damages were to be calculated separately by reference to 12% of actual daily trading volumes.

The declaration claim was dismissed. Judgment was entered for PBP on the early redemption claim and the alternative late-conversion damages claim, with assessment remitted to the parties. Interest and costs were reserved.