Madison Pacific Trust Limited v Squaretwo Capital Limited & Anor

In construing trust deeds and bond conditions, the court must ascertain the objective meaning of the language read as a whole and in context. Commercial sense cannot justify rewriting clear and unambiguous wording. Where a bond condition makes prescription dependent on receipt of all contractually due principal and interest, partial insolvency distributions do not trigger the prescription period.

On an application for directions approving a trustee’s proposed exercise of discretion, the court asks whether the trustee acted within its powers, considered relevant matters, disregarded irrelevant matters, and reached a decision that no reasonable trustee could have reached. The court does not substitute its own view or select the best available course.

The claimant trustee sought declarations and directions concerning funds received in the insolvency of the issuer of three bearer-bond issues. The principal issues were the meaning of “Relevant Date” under Conditions 8 and 9, proposed amendments shortening prescription periods and addressing the insolvency distribution, whether Known Bondholders could lawfully approve those amendments despite Unknown Bondholders, and whether the trustee could administer the trusts accordingly.

The application was made under Parts 8 and 64 of the Civil Procedure Rules 1998. The court also considered the effect of an earlier notice concerning the final insolvency distribution.

1. Construction of the existing conditions. The court determined the interpretation issue. Under Condition 8(ii), “all moneys then due for payment” referred to the principal and interest contractually due under the Bonds and Coupons, not the lesser amount ultimately held on trust after the insolvency waterfall. Clause 6 created a subordination trust and regulated priorities and remedies; it did not reduce the Issuer’s contractual obligations or the Trustee’s proof in the insolvency. The Relevant Date therefore arose only when all contractually due amounts had been received and notice had been given under Condition 13. Since the Bonds had not been paid in full, it had not arisen.
2. The resulting indefinite continuation of the trusts and erosion of funds by costs was an anomaly, but the wording was clear. Commercial sense could not authorise the court to rewrite the contract.
3. Trustee’s proposed amendments. Applying the limited review applicable where the trustee retains its discretion, the court approved the proposed amendments to Conditions 7, 8 and 9. The Trustee had power to convene meetings, had taken extensive steps to trace Bondholders, and reasonably concluded that continued administration would erode funds without a realistic prospect of universal presentation. The proposed two-year period rationally balanced Known and Unknown Bondholders’ interests.
4. Voting. Known Bondholders could lawfully vote in favour of the amendments. The Known and Unknown descriptions were not fixed classes; any holder could identify themselves. The amendments did not expropriate rights or coerce action, preserved a two-year presentation period, and followed extensive tracing efforts. The Trustee’s assessment of the class interests was a proper one.
5. The August 2023 notice did not trigger the revised Condition 8 retrospectively. The amendments would operate prospectively, and the court approved future administration in accordance with them if validly adopted.