The Bank of New York Mellon, London Branch v. Xj International Holdings Co., Ltd

CACV 372/2024, [2025] HKCA 481

On Appeal from [2024] HKCFI 1378

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 372 OF 2024

(ON APPEAL FROM HCCW NO 187 OF 2024)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.This is the petitioning creditor’s appeal against the order of Deputy High Court Judge Le Pichon dated 28 August 2024 (“the Order”) dismissing the Petitioner’s winding up petition against XJ International Holdings Co Ltd (“the Company”) on the ground that there was a bona fide dispute of the petitioned debt on substantial grounds. The appeal raises the question of which is the proper party in a typical global note (in registered form), a form of debt securities often used in the international capital markets, to give notice of redemption of the bonds.

BACKGROUND FACTS

(i)  The Bonds

2.The Company is an investment holding company incorporated in the Cayman Islands. Its shares are listed on The Stock Exchange of Hong Kong (Stock Code 1765). The Company and its subsidiaries are engaged in the business of providing higher education and secondary vocational education primarily in the PRC and Malaysia.

3.Tequ Mayflower Limited (“the Issuer”) is a wholly owned subsidiary of the Company.

4.The Bank of New York Mellon is a banking corporation organized and existing under the laws of the State of New York, USA, and has a branch in, amongst other places, London (“the Petitioner”).

5.The petitioned debt in the present case arises out of certain bonds, namely, “US$350,000,000 Zero Coupon Convertible Bonds due 2026” (“the Bonds”), constituted by a trust deed dated 2 March 2021 (“the Trust Deed”) entered into amongst the Issuer, the Company (as Guarantor) and the Petitioner (as Trustee).

6.Under the Trust Deed and an associated agreement called “Paying, Conversion and Transfer Agency Agreement” (“the Agency Agreement”) entered into, amongst others, the Issuer, the Company and the Petitioner dated 2 March 2021, the Petitioner is also constituted (i) the “Principal Agent”/“Paying Agent” of the Issuer/Company, and (ii) the “Common Depositary” (or “Common Depository”), being a depository common to Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking SA (“Clearstream”), in relation to the Bonds.

7.Pursuant to Clause 3.1 of the Trust Deed, the Bonds would initially be represented by a global certificate (“the Global Certificate”) issued on the same date as the Trust Deed, and the Global Certificate was to be:

(1)  deposited with the Petitioner as the Common Depository; and

(2)  registered in the name of The Bank of New York Depository (Nominees) Limited (“the Nominee Company”), a nominee of the Petitioner.

8.Although the Global Certificate is physically in the custody of the Petitioner and registered in the name of the Nominee Company, the Bonds are held for the benefit of various parties who have accounts with Euroclear/Clearstream (“the accountholders”).

9.Under the terms of the Global Certificate, the accountholders, referred to as the “owners of interests in the Bonds”, are entitled to have title to the Bonds registered in their names and to receive individual certificates (“Definitive Certificates”) in certain specified circumstances. There is, however, no dispute that the specified circumstances have not occurred, and no Definitive Certificate has ever been issued in the present case.

10.The terms and conditions set out in Schedule 2 to the Trust Deed (“the Conditions”), as modified by the provisions of the Global Certificate, are applicable to the Bonds[1].

11.Condition 8(D) of the Conditions provides for “Redemption at the option of the Bondholders” (“the Put Option”), and states as follows:

“The Issuer will, at the option of the holder of any Bond, redeem all or some only of such holder’s Bonds on March 2, 2024 (the ‘Put Option Date’) at 103.04% of the principal amount. To exercise such option, the holder must deposit at the specified office of any Paying Agent a duly completed and signed put notice in the form for the time being current, obtainable from the specified office of any Paying Agent, together with the Certificate evidencing the Bonds to be redeemed not more than 60 days and not less than 30 days prior to the Put Option Date. A put notice, once delivered, shall be irrevocable and may not be withdrawn without the Issuer’s consent and the Issuer shall redeem the Bonds the subject of a put notice on the Put Option Date.”

12.It is common ground that Condition 8(D) is intended to be applicable to the situation where a Definitive Certificate or Definitive Certificates has/have been issued to the accountholder(s). As earlier mentioned, only a Global Certificate representing the Bonds has been issued, and no Definitive Certificate has ever been issued to any accountholder in the present case. Hence, in relation to the redemption of the Bonds, the application of Condition 8(D) is modified by a provision in the Global Certificate under the sub-heading “Bondholder’s Redemption” (“the Modified Provision”), which states as follows:

“The Bondholder’s redemption option in Condition 8(D) and 8(E) may be exercised by the holder of this Global Certificate giving notice to the Principal Agent of the principal amount of Bonds in respect of which the option is exercised and presenting this Global Certificate for endorsement or exercise (if required) within the time limits specified in the Conditions.”

13.Under Clause 2.2 of the Trust Deed, the Issuer covenants that it would, on any date when any Bonds become due to be redeemed in accordance with the Conditions, unconditionally pay to or to the order of the Trustee the principal amount of the Bonds becoming due for redemption on that date provided that, inter alia, subject to the provisions of Clause 2.4 (relating to payment after a default), payment of any sum due in respect of the Bonds made to the Principal Agent as provided in the Agency Agreement shall, to that extent, satisfy such obligation.

14.By Clause 5.1 of the Trust Deed, the Guarantor unconditionally and irrevocably guarantees, as “principal debtor”, the payment obligations of the Issuer under the Trust Deed or the Bonds by the time and on the date specified for payment.

15.Under Clause 9.1 of the Trust Deed, all moneys received by the Trustee thereunder would be held by it on trust to apply them, inter alia, in payment of any amounts (including any principal, premium, interest (if any) and any other amounts), owing in respect of the Bonds pari passu and rateably.

16.By Clause 10.19 of the Trust Deed, each of the Issuer and the Guarantor covenants to the Trustee that it would comply with and perform and observe the Trust Deed, the Agency Agreement, the Bonds and the Conditions relating to any Bonds, and the Trustee is entitled to enforce the obligations of the Issuer and the Guarantor under the Bonds and the Conditions as if the same were set out and contained in the Trust Deed, which shall be read and construed as one document with the Bonds.

17.By Clause 12.26 of the Trust Deed, the Trustee may, at its discretion, take any steps and/or actions and/or institute proceedings against the Issuer and/or the Guarantor to enforce payment of the Bonds after the Bonds have become due and payable. No holder of the Bonds was entitled to proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound to do so, fails to do so within a reasonable period and such failure is continuing.

(ii)  The exercise of the Put Option

18.Between January and February 2024, the Petitioner received instructions (“the Instructions”) from the accountholders holding 100% (representing US$315,000,000) of the aggregate outstanding principal amount of the Bonds to exercise the Put Option on 2 March 2024. The Instructions were contained in:

(1)  9 SWIFT messages dated between 4 January 2024 and 1 February 2024, and 9 corresponding completed and signed “Put Exercise Notices” (in the form set out in Exhibit E to the Agency Agreement) received through Clearstream; and

(2)  36 SWIFT messages dated between 8 January 2024 and 31 January 2024, and 36 corresponding completed and signed Put Exercise Notices received through Euroclear.

19.On 1 February 2024, the Petitioner (as Principal Agent) sent a facsimile to the Issuer notifying it of the nominal value of the accountholders’ instructions electing to exercise the Put Option. On 9 February 2024, the Petitioner further sent an email to (among others) the Issuer and the Company notifying them of the principal amount due for payment on 2 March 2024 upon exercise of the Put Option.

20.It is the Petitioner’s case that the Put Option was validly exercised, and the Issuer/Company were required to pay the aggregate outstanding amount of the Bonds in the sum of US$324,679,040 on 2 March 2024, but they failed to do so.

(iii)  The winding-up petition

21.On 5 March 2024, the Petitioner served a statutory demand on the Company demanding for repayment of, inter alia, US$324,679,040, being the aggregate outstanding amount of the Bonds. The Company failed to satisfy the statutory demand for more than 21 days after the service of the statutory demand on it. On 27 March 2024, the Petitioner issued the present winding-up petition against the Company pursuant to s 327(3)(b) and (4)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32).

22.Between 5 March 2024 and 3 April 2024, certain accountholders holding, in aggregate, US$45,850,000 in nominal amount of the Bonds requested to cancel their exercise of the Put Option. On 12 March 2024 and 4 April 2024, the Issuer consented to those cancellation requests. The outstanding amount of the Bonds was thereby reduced to US$280,763,160.16 (“the Debt”), comprising US$277,435,200, being the net principal amount due, plus interest thereon (as at 5 July 2024). The winding up petition against the Company was amended accordingly.

THE JUDGMENT

23.The Amended Petition was heard by the Judge on 8 August 2024, and she gave a written judgment (“the Judgment”) on 28 August 2024.

24.By the time of the hearing before the Judge, the Company’s opposition to the Amended Petition rested on the sole ground that there was a bona fide dispute of the Debt on substantial grounds. The Company contended that there was no proper or valid exercise of the Put Option in compliance with the Modified Provision, for the following reasons:

(1)  Under the Modified Provision, the exercise of the Put Option required “the holder of this Global Certificate giving notice to the Principal Agent of the principal amount of Bonds in respect of which the option is exercised and presenting this Global Certificate for endorsement or exercise (if required) within the time limits specified in the Conditions”.

(2)  The Company argued that a valid exercise of the Put Option required the Nominee Company (being the registered holder of the Global Certificate) to (i) give notice of the exercise of the Put Option to the Principal Agent (ie the Petitioner), and (ii) present the Global Certificate for endorsement or exercise (if required) within the time limits specified in the Conditions[2]. However, neither requirement was satisfied on the evidence before the court.

(3)  In respect of the first requirement, the Company pointed out that there was no averment in the Amended Petition that the Nominee Company gave notice of exercise of the Put Option to the Principal Agent. Nor was there any evidence from the Petitioner that the Nominee Company gave notice to the Principal Agent of the exercise of the Put Option before 1 February 2024[3].

(4)  In respect of the second requirement, the Company argued that the phrase “if required” referred to the words following that phrase, ie the situation where the Bondholder required the option to be exercised within the specified time limits. The Company submitted that the purpose of presentation of the Global Certificate was for “endorsement” or “exercise”. Where all the Bonds were redeemed, the Global Certificate would need to be cancelled. If redemption was only partial, it would need to be endorsed. Therefore, the certificate would always be required for one or other of the purposes[4]. There was, however, no evidence of any presentation of the Global Certificate by the Nominee Company to the Principal Agent.

25.The Petitioner disagreed with the Company on both points. In respect of the first requirement concerning the giving of notice of exercise of the Put Option, the Petitioner’s case before the Judge was that, as a matter of construction, the party entitled to give notice was the accountholders[5], and they had given the requisite notice to the Petitioner. Its argument, as originally put at §24 of the Skeleton Submissions of the Petitioner dated 23 July 2024 (“the Petitioner’s First Instance Skeleton Submissions”) before the Judge, was that:

“24.1 The Petitioner is (i) the ‘Common Depository’ who holds the Global Certificate through a nominee (who holds to the Petitioner’s order …), (ii) the ‘Principal Agent’, and (iii) the ‘Paying Agent’ …

24.2 The Petitioner received instructions to exercise the Put Option from the accountholders… Since the Petitioner is also the ‘Principal Agent’ and ‘Paying Agent’, notice of the Put Option exercise had been given (by the Petitioner qua holder of Global Certificate to itself qua ‘Principal Agent’).”

26.However, as recorded at §§44-45 of the Judgment, the Petitioner (through its former Senior Counsel, Ms Eva Sit, SC) informed the Judge at the hearing that the Petitioner would not be relying on the words within the parentheses in §24.2 of its written submissions, ie the words “(by the Petitioner qua holder of Global Certificate to itself qua ‘Principal Agent’)” quoted in §25 above. The Petitioner maintained, nevertheless, the rest of §24.2 of its written submissions[6]. Apparently, the Petitioner relied on the Instructions referred to at §18 above as the requisite notices of exercise of the Put Option given by the accountholders (being, on the Petitioner’s construction, the “holder of this Global Certificate” for the purpose of the Modified Provision) to the Petitioner (in its capacity as the Principal Agent) in satisfaction of the notice requirement under the Modified Provision.

27.In respect of the second requirement concerning the presentation of the Global Certificate for endorsement or exercise “if required”, the Petitioner’s position was that the deposit of the Global Certificate was only “if required” under the Modified Provision. The Principal Agent had confirmed that it had not required the Global Certificate to be presented for the exercise of the Put Option, since it already held it. Accordingly, there was no basis to suggest that the Put Option was not validly exercised[7].

28.As noted by the Judge at §29 of the Judgment, the parties’ respective contentions raised two points of construction of the Modified Provision: (i) the entity entitled to give notice; and (ii) whether the phrase “if required” attached to the requirement to present the Global Certificate or to the time limits for the exercise of the Put Option under the Conditions.

29.The Judge held that the Company had demonstrated that there was a bona fide dispute on substantial grounds that the Put Option had not been validly exercised, and therefore a substantial dispute existed as to the existence of the Debt. In respect of the first point, the Judge’s reasoning was set out at §§63-67 of the Judgment, as follows:

“[63] The Petitioner’s reliance on the provision under the rubric ‘Trustees Powers’ is hardly dispositive on the construction issue. That provision is merely permissive and does not impose any obligation on the Trustee. It simply says that in the situation (as is the present case) where the Global Certificate is registered in the name of a nominee of the common depository for a clearing system, in considering the interests of Bondholders the trustee ‘may … but without being obligated to do so …’ do various things.

[64] Further, the interpretation the Petitioner put forward directly contradicts the meaning expressly given to ‘Bondholder’, ‘holder of Bonds’ as defined in the Trust Deed and recognised in clause 3. It is not an interpretation one would adopt without exceptional and compelling reasons.

[65] Giving effect to the assigned meaning in clause 1.1 of the Trust Deed neither negates nor constrains the Trustee from exercising the Trustee’s Powers. Upon receiving the Put Option result from the clearing systems (which shows the wishes of the accountholders), the Petitioner could choose to exercise the Trustee’s Powers conferred by the Global Certificate by taking action to ensure that those Bonds are redeemed. As the Common Depository, it could direct or cause the Nominee Company to give the requisite notice to the Principal Agent which is the Petitioner.

[66] The Petitioner’s construction of that expression would create a parallel track for redemption which is not expressly provided in Trust Deed.

[67] Moreover, in view of § 51(iii) above, it is unclear how any entity other than the Registered Holder can be entitled to payments in respect of the Bonds.”

30.In respect of the second point, the Judge likewise held that the Company’s construction was validly raised and plainly arguable[8].

31.Accordingly, the Judge made the Order dismissing the petition with costs to the Company.

THE APPEAL AND THE STRIKE OUT APPLICAITON

32.The Petitioner was not satisfied with the Judgment, and lodged a Notice of Appeal against the Order on 16 September 2024. In the Notice of Appeal, three broad grounds are raised:

(1)  Ground 1 – the Judge erred in law in holding that the “holder of this Global Certificate” in the Modified Provision referred to the “Registered Holder” of the Bonds, ie the Nominee Company, and that a valid exercise of the Put Option required the Registered Holder to give notice to the Principal Agent. Upon the true construction of the Modified Provision, the reference to “holder of this Global Certificate” should be to the person having physical custody of the Global Certificate, ie the Common Depository (“the Petitioner’s Principal Construction”)[9].

(2)  Ground 2 – alternatively, the Modified Provision with respect to the giving of notice should be read as having been satisfied by the Principal Agent receiving statements of intention from the accountholders; in other words, properly construed, the phrase “holder of this Global Certificate” in the Modified Provision refers to the accountholders who are the ultimate beneficial owners of, and who have economic interests in, the Bonds (“the Petitioner’s Alternative Construction”)[10].

(3)  Ground 3 – the Judge erred in holding that the words “if required” in the Modified Provision referred to the situation where the Bondholder required the Put Option to be exercised within the specified time limes. Properly construed, those words must necessarily refer only to the presentation of the Global Certificate rather than the time limits within which to exercise the Put Option[11].

In the Notice of Appeal, Grounds 1 and 2 are grouped under the sub-heading “Notice Issue”, while Ground 3 is under the sub-heading “Presentation Issue”.

33.It can readily be seen that the Petitioner’s contention under Ground 1 is different from, and inconsistent with, the case that it ran before the Judge. Before the Judge, the Petitioner argued that the phrase “holder of this Global Certificate” in the Modified Provision referred to the accountholders, whereas under Ground 1, the Petitioner contends that it refers to the Common Depository.

34.On 17 October 2024, the Company issued a summons (“the Summons”) to strike out §§4-11 of the Notice of Appeal on the ground of abuse of process of the court.

GROUND 1 – THE PETITIONER’S PRINCPAL CONSTRUCITON

35.We shall deal with Ground 1 and the Summons together.

(i)  The parties’ arguments

36.Under this ground, the Petitioner contends that the Judge erred in holding that the phrase “holder of this Global Certificate” in the Modified Provision referred to the “Registered Holder” of the Bonds, ie the Nominee Company, and that a valid exercise of the Put Option required the Registered Holder to give notice of exercise of the Put Option to the Principal Agent. Instead, she ought to have held that, upon the true construction of the Modified Provision, the phrase “holder of this Global Certificate” referred to the person holding and having physical custody of the Global Certificate, ie the Common Depository.

37.In the Skeleton Argument for the Petitioner dated 20 March 2025 (“the Petitioner’s Skeleton Argument”), Mr Jat Sew-Tong, SC puts the Petitioner’s case in the following way[12]:

(1)  It is common ground that Condition 8(D) takes effect as modified by the Modified Provision in relation to the exercise of the Put Option in the present case.

(2)  Under the Modified Provision, the Put Option “may be exercised by the holder of this Global Certificate giving notice to the Principal Agent …”. The Modified Provision does not impose any particular form or manner by which notice must be given. In the present case, there was valid exercise of the Put Option when, by SWIFT messages and Put Exercise Notices sent to the Petitioner as Paying Agent (which term includes the Principal Agent) between 4 January 2024 and 1 February 2024 through Clearstream and 8 January 2024 and 31 January 2024 through Euroclear –

(a)  the accountholders (being the ultimate beneficial owners of the Bonds) irrevocably exercised the Put Option;

(b)  the Petitioner as Common Depository received notice of the accountholders’ intention to exercise the Put Option; and

(c)  the Petitioner as Principal Agent received notice and aggregated the principal amount of the Bonds in respect of which the Put Option was being exercised, and informed the Issuer of the same.

(3)  The Judge was wrong to accept that there was a bona fide dispute that the phrase “holder of this Global Certificate” in the Global Certificate referred to the “Registered Holder” of the Bonds, ie the Nominee Company. On that construction, a valid exercise of the Put Option would require the Nominee Company to give notice, and deliver the Global Certificate (which the Nominee Company does not hold), to the Principal Agent, ie the Petitioner. That makes no sense for a number of reasons.

(4)  First, the Judge ignored the natural and ordinary meaning of the words used. The Modified Provision does not refer to the “Registered Holder” (or “Bondholder” or “holder of the Bonds”, which are references to the “Registered Holder”), which is defined in the Global Certificate as the Nominee Company. Rather, after referring to “Bondholders’ redemption option”, the phrase “holder of this Global Certificate” is used. In contrast, the defined term “Registered Holder” is used in specific provisions of the Trust Deed and the Global Certificate (eg in the preamble to the Global Certificate, and Clause 3.1 of the Trust Deed) – but not in the Modified Provision. It is well-established that a legal draftsman “uses the same words throughout the document to express the same thing or concept and consequently if he uses different words the presumption is that he means a different thing or concept”: Prestcold (Central) Ltd v Minister of Labour [1969] 1 WLR 89, 97; Lewison on the Interpretation of Contracts (8^th edn, 2024), §7.18. The use of the phrase “holder of this Global Certificate” in the Modified Provision is deliberate. It accords with the natural and ordinary meaning of the expression, which is a reference to the person having physical custody of the Global Certificate, ie the Common Depository.

(5)  Second, construing “holder of this Global Certificate” as the Common Depository – who has physical custody of the Global Certificate – makes commercial sense in the context of the Trust Deed provisions where the Global Certificate may need to be physically presented for endorsement or the exercise of rights. Instances include the exercise of conversion rights, redemption, purchase and cancellation of the Bonds, the issuance of definitive certificates or further bonds, and payment of interest. In such circumstances, the only natural and commercially sensible construction would be to read “holder of this Global Certificate” as the Common Depository, ie the only entity which has physical custody of the Global Certificate and could present it for endorsement (as opposed to the Nominee Company, which does not have physical custody of the Global Certificate, and so could not make available the Global Certificate for endorsement).

(6)  Third, this construction is the only commercially sensible construction when considered against the broader context of the global note structure, whereby (i) the economic interests of the Bonds vest in the accountholders who make decisions on whether to exercise the conversion or redemption rights attached to the Bonds; and (ii) the Nominee Company holds the Global Certificate on trust indirectly for the accountholders and has no economic interest in the Bonds: see the authorities discussed in Re Leading Holdings Group Ltd [2023] 4 HKLRD 71, at §§61-64. The Global Certificate expressly recognises the persons with economic / beneficial interests in the Bonds (for example, in the exercise of the Trustee’s Powers, the Petitioner may have regard to the interests of the accountholders).

(7)  Against the above context, to construe “holder of this Global Certificate” as the Common Depository (such that the Petitioner received notice qua Principal Agent simultaneously as it did qua Common Depository) would accord not only with the contractual provisions but also ensure a clear and efficient flow of instructions for the exercise of the redemption right electronically from the accountholders. This construction further dovetails with the role of the Principal Agent under the Agency Agreement to notify the Issuer of the amount of the Bonds for which the Put Option is exercised. By contrast, to construe the phrase as referring to “Registered Holder” would mean that the Modified Provision envisages an additional, circular and redundant set of instructions – as well as the delivery of the Global Certificate – from the Common Depository (the Petitioner as agent of Euroclear and Clearstream) to the “Registered Holder” (the Nominee Company who is the registered holder without any active role at all), and from the “Registered Holder” back to the “Principal Agent” (the Petitioner). Such construction does not sit well with the role of the Petitioner or the Nominee Company.

38.On behalf of the Company, Mr Victor Joffe, SC argues that the Petitioner should not be permitted to advance Ground 1, for the following reasons:

(1)  Although the Petitioner’s case before the Judge was unclear and inconsistent, based on the Amended Petition and the Petitioner’s evidence, as well as its oral submissions, the Petitioner’s case seemed to be that the beneficial owners of the Bonds (ie the accountholders) had exercised the Put Option.

(2)  The Petitioner expressly stated to the Judge that it would not rely on the words in the brackets in §24.2 of the Petitioner’s First Instance Skeleton Submissions (quoted in §25 above) but would “continue to rely on [the reminder of paragraph 24.2] and it’s wholly consistent with the construction that [the Petitioner’s former senior counsel was] putting forward”. This “concession” was an acknowledgement that those words were inconsistent with its case that it was the beneficial owners who gave notice of the Put Option exercise.

(3)  It would be a clear abuse of process for the Petitioner to now seek to withdraw the concession, abandon its case before the Judge, and run a new case that the “holder of this Global Certificate” refers to the Common Depository, because –

(a)  Ground 1 is an entirely new case that was not explored before the Judge.

(b)  It not only deviates from the Petitioner’s case before the Judge – it is also inconsistent with the Amended Petition and the Petitioner’s evidence, which state that it was the beneficial owners who gave notice of exercise of the Put Option to the Principal Agent, and there is no evidence that the Common Depository gave notice of exercise of the Put Option to the Principal Agent under the Modified Provision. There is no reason why the Court should travel beyond the allegations contained in the petition in adjudicating this matter.

(4)  Even if the Court is not minded to strike out §§4-11 of the Notice of Appeal, the Court should not entertain Ground 1 because it is a new point and is moot in any event (since it is not only unsupported by, but also contradictory to, the evidence)[13].

39.Mr Joffe further argues that on a true construction, the phrase “holder of this Global Certificate” in the Modified Provision means the Nominee Company, for the following reasons[14]:

(1)  The term “holder” is expressly and consistently defined in the Trust Deed and Conditions as the Nominee Company/Registered Holder. The Global Certificate adopts the same definitions used in the Trust Deed and Conditions. Since the Global Certificate represents “Bonds that are registered in the name of a nominee of a Common Depository”, the term “holder” in “holder of this Global Certificate” naturally refers to the Registered Holder.

(2)  Given that the Conditions are linked to the Global Certificate, the law will try to read them consistently with each other: Durham v BAI [2012] 1 WLR 867, at §69 per Lord Mance. Condition 8(D) provides that the “holder” must deposit a completed and signed put notice at the specified office of any Paying Agent to exercise the Put Option. In the absence of any other indication, “holder of this Global Certificate” in the Modified Provision would likewise refer to the “holder” mentioned in the Conditions.

(3)  The Modified Provision provides that the redemption option in Condition 8(D) may be exercised by the holder of the Global Certificate. Condition 8(D) states that redemption is at the option of “the holder of any Bond”. In other words, the Modified Provision envisages that the “holder of this Global Certificate” is also the party who can exercise the redemption option under Condition 8(D), ie, the Nominee Company qua “the holder of any Bond”.

(4)  The Trust Deed, Conditions and Global Certificate do not attach any significance to the physical custody and/or possession of the Global Certificate. On the contrary, those documents attach legal significance to the registration of the Bonds. For example, Clause 3.4 of the Trust Deed provides that the registered holder of the Bond is the absolute owner for all purposes. While Clause 3.1 of the Trust Deed states that the Global Certificate shall be “deposited with the Common Depository” and will be “registered in the name of a nominee of the Common Depository”, that is a statement of fact/future intention. No legal consequence turns on such distinction.

(5)  The above-mentioned interpretation of “holder of this Global Certificate” as the Registered Holder is consistent with commercial common sense, for the reasons set out at §25 of the Skeleton Submissions of the Company dated 3 April 2025 (“the Company’s Skeleton Submissions”) –

(a)  The absolute owner of the Bonds is the Registered Holder[15], ie the Nominee Company, which is a separate and distinct legal person from the Petitioner.

(b)  As absolute owner of the Bonds, the Nominee Company has the right to direct the Common Depository to present the Global Certificate for endorsement or exercise.

(c)  The Petitioner’s submission that it makes sense to read “holder of this Global Certificate” as the Common Depository because the “involvement of the person with physical custody of the Global Certificate is required” is an argument purely from expediency rather than principle. This argument would effectively turn the registered-form into the bearer’s form, which is directly contradictory to the terms of the Global Certificate.

(d)  The Petitioner has not explained why a person in physical custody of the Global Certificate (as opposed to the Registered Holder) is entitled to present the Global Certificate.

(6)  The Petitioner’s Principal Construction is not the “only commercially sensible construction”, for, inter alia, the following reasons[16] –

(a)  The fact that the economic interests in the Bonds vest in the accountholders and/or the indirect participants is neither here nor there.

(b)  It is not open to the Petitioner to argue that there is no need for notice to be given by the “holder of this Global Certificate” since the Common Depository and the Principal Agent are one and the same (ie the Petitioner) as that is completely contradictory to the express terms of the Modified Provision.

(c)  The Petitioner’s criticism that the Company’s interpretation of “holder of this Global Certificate” is “devoid of commercial common sense” as it would entail an “additional, redundant set of instructions” is unfounded. The fact that an additional set of instructions must be given stems from the way the transaction is structured, including the usage of a nominee. In a case where the trustee is also the registered holder of the global note and the common depository, there would be no need for an additional set of instructions.

(ii)  The strike out application

40.The first question which arises for consideration is whether §§4-11 of the Notice of Appeal ought to be struck out on the ground of abuse of process.

41.Mr Joffe relies on the judgment of the Singapore Court of Appeal in JWR Pte Ltd v Edmond Pereira Law Corp and another [2020] 2 SLR 744 to support his argument that the Petitioner’s attempt to re-argue a point which it allegedly “conceded” before the Judge amounts to an abuse of process. In that case, the appellant in a negligence suit which had been dismissed at first instance sought to raise a new allegation of negligence against the respondents which was not raised during the trial. The appellant applied for leave to raise the new point and to amend the statement of claim to plead the new allegation, contending that the new allegation raised a point of law which did not require any fresh evidence, and the respondents could not have offered a satisfactory response to it even if it had been raised at the trial. The Singapore Court of Appeal refused to allow the appellant to raise and rely on the new allegation because if it were to entertain the appellant’s new case on appeal, it would not have all the relevant evidence and findings of fact before it, and there were gaps in the appellant’s case which would have been extremely prejudicial to the respondents. In short, the application was refused based on what is often referred to in this jurisdiction as the Flywin principle. At §32 of its judgment, the Singapore Court of Appeal went on to state as follows:

“In addition to the issue of prejudice to the respondents, there was also the issue of abuse of the appeal process. The appeal before us would certainly not be an appeal arising from dissatisfaction with the Judge’s decision (as the appellant was not even going to address the [judgment of the High Court]) but would essentially be an appeal arising from dissatisfaction with the way the appellant’s previous counsel conducted the entire case in the High Court. In reality, there would be no appeal at all because the Court of Appeal would not be considering whether the Judge was wrong or otherwise in reaching the conclusions set out in his [judgment of the High Court]. Instead, the Court of Appeal would be effectively conducting a second trial. We have reminded counsel in various previous appeals that they should not be coming before the Court of Appeal as if it were a second trial court and we hope we do not need to sound the same admonition against such abuse of the appeal process for future appeals.”

42.Strictly speaking, the Singapore Court of Appeal’s observation at §32 of its judgment about “abuse of process” was not necessary for its decision, because the court had already come to the view that the appellant should not be permitted to raise and rely on the new allegation in view of the existence of evidential gaps which would be extremely prejudicial to the respondents should the appellant be permitted to run the new allegation in the appeal (§30). We do not read the above observation of the Singapore Court of Appeal as intending to lay down any general proposition that a party who seeks to rely, in an appeal, on a new argument or ground which was not raised in the proceedings from which the appeal is brought is necessarily guilty of abuse of process. Neither do we consider that to be a sound, general proposition of law.

43.In our view, the question of whether a party should be permitted to rely on a new allegation or ground on appeal which was not raised in the proceedings below depends on an assessment of the fairness of the situation. As pointed out by the Singapore Court of Appeal at §27 of its judgment in JWR, “[t]he essential question … is whether the opposing party is unduly prejudiced by the raising of a new point or a totally new case against it”.

44.In the present case, while there could be a reasonable debate on whether the Petitioner’s relevant statement to the Judge (namely, that it would not rely on the contention that notice of the Put Option exercise had been given by the Petitioner qua holder of Global Certificate to itself qua Principal Agent) should properly be regarded as a “concession” on the true interpretation of the phrase “holder of this Global Certificate” in the Modified Provision, it is clear that the Petitioner’s Principal Construction sought to be advanced under Ground 1 is a departure from, and inconsistent with, the case that the Petitioner ran before the Judge. Nevertheless, the correct interpretation of the Modified Provision is a question of law. The Petitioner is not seeking to rely on any new evidence which was not before the Judge in advancing its new case before the Court of Appeal. Essentially, the parties are engaged in the same exercise that was engaged in the court below, save that the Petitioner is seeking to come to a different construction of the Modified Provision. The question which this Court is asked to consider, namely, the true construction of the phrase “holder of this Global Certified” in the Modified Provision, is also the same question that the Judge had to consider. If, as submitted by Mr Joffe, the construction of the Modified Provision now advanced by the Petitioner is inconsistent with the petition and/or the Petitioner’s evidence, that may well mean that the Petitioner cannot prove its pleaded case or make out a proper case for the winding up of the Company, or it may lead to the conclusion that there is a bona fide substantial dispute of the Debt. It does not follow, however, that the Petitioner’s conduct in seeking to put forward the new construction of the Modified Provision should be regarded as an abuse of the court’s process.

45.In passing, we noted that in the Summons, the Company is seeking to strike out the entirety of the “Notice Issue” as set out at §§4-11 of the Notice of Appeal. While §§4-10 of the Notice of Appeal is relevant to Ground 1, §11 is relevant to Ground 2, ie the Petitioner’s Alternative Construction that was argued before the Judge. We can see no basis for striking out §11 of the Notice of Appeal on the ground of abuse of process in any event.

46.In all, we are not persuaded that §§4-11 of the Notice of Appeal ought to be struck out on the ground of abuse of process.

(iii)  The meaning of “holder of this Global Certificate”

47.The relevant principles for construction of a commercial contract are well-settled, and do not have to be repeated here.

48.In his oral submissions on the proper construction of the phrase “holder of this Global Certificate” in the Modified Provision, Mr Jat places heavy reliance on the fact that the Bonds in the present case took the form of a “global note structure”, which is a form of debt securities often used in the international capital markets. The essential features of a global note structure were explained by Kwan J (as she then was) in Re Jinro (HK) International Ltd (No 2) [2003] 4 HKC 637, at §30-40, and more recently by Deputy High Court Judge Jenkin Suen, SC, in Re Leading Holdings Groups Ltd [2023] 4 HKLRD 71, at §§51-65. The learned Deputy Judge reviewed a number of English authorities, including the judgments of the English Court of Appeal in Elektrim SA v Vivendi Holdings 1 Corp [2008] EWCA Civ 1179, and Secure Capital SA v Credit Suisse AG [2017] EWCA Civ 1486. Mr Jat has also referred us to a helpful summary of the global note structure in Geoffrey Fuller, The Law and Practice of International Capital Markets (3^rd edn), at §§1.131-1.132. From the above authorities, one can extract the following salient features of the global note structure which are relevant to a proper understanding of the roles of different parties in the present case:

(1)  Euroclear and Clearstream, based in Belgium and Luxembourg respectively, are the two major electronic trading platforms for internationally traded securities including debt securities such as global notes.

(2)  A classic global note may be in bearer or registered form. In the case of a bearer global note, it is issued to, and held by, a “common depository” on behalf of Euroclear/Clearstream. In the case of a registered global note (as in the present case), although the physical document is also held by a common depository, it is registered in the name of a nominee of the common depository as the registered holder thereof.

(3)  Euroclear/Clearstream maintain accounts for members (banks and others) which hold and deal in interests in the global note as accountholders. Each accountholder’s interest in the global note at any time is recorded by Euroclear/Clearstream. The accountholders may hold interests for themselves as principal or to the order of their customers. Strictly speaking, it is not the global note, but interests in the note, that are traded through the clearing systems operated by Euroclear/Clearstream.

(4)  The common depository is appointed by Euroclear/Clearstream rather than by the issuer of the global note. However, in order to simplify the process of payments, etc, the issuer would often appoint as its principal/paying agent a financial institution on the clearing systems’ list of approved common depositories. In this way, payments on the global note by the issuer would be made to the common depository or its nominee (depending on whether the note is in a bearer or registered form), which would then pass the payments on to the clearing systems for credit to the accountholders.

(5)  A typical global note structure would provide for the appointment of a trustee, who would be the only party entitled to take enforcement action against the issuer. The accountholders cannot proceed directly against the issuer unless the trustee fails to take action in accordance with the bond documentation. The purpose of such provision is to constitute the trustee as representing the interests of all the accountholders as a class, and ensure that the class of accountholders all acted through the trustee, such that there was neither competition between the accountholders, nor the potential for multiplicity of actions or duplication of actions brought by the trustee on the one hand and individual accountholders on the other.

(6)  Further, under the global note structure, the holder (or registered holder), through the trustee, would be the only person entitled to receive payment from the issuer. The issuer’s obligation is discharged by payment to the common depository or its nominee, which then makes payment to the accountholders in respect of their recorded interests.

(7)  The principles mentioned in (5) and (6) above are referred to as the “no look through” principle, whereby each party has rights only against their own immediate counterparty.

49.In our view, the correct identification of the party which should be regarded as being the “holder of this Global Certificate” in the Modified Provision depends largely on a proper reading of the provisions of the Trust Deed, Conditions and Global Certificate. They together make up a set of contemporaneous documents which constitute the Bonds and set out the rights and obligations inter se amongst various parties to the Bonds, and ought to be read together and as a whole.

50.The following provisions in the Trust Deed, Conditions and Global Certificate are relevant to the proper interpretation of the phrase “holder of this Global Certificate” in the Modified Provision:

(1)  In the Trust Deed, the expressions “Bondholder”, “holder of the Bonds” and, in respect of a Bond, “holder” are defined to mean –

“a person in whose name a Bond is registered in the register of Bonds (or, in the case of joint holders, the first named thereof)”.

(2)  Condition 2(B) of the Conditions also provides, inter alia, that –

“In these Conditions, ‘Bondholder’ and (in relation to a Bond) ‘holder’ means the person in whose name a Bond is registered”.

(3)  In the preamble to the Global Certificate, it is stated that –

“The Bonds of [the Issuer] in respect of which this Global Certificate is issued are in registered form (the ‘Bonds’).

The Issuer hereby certified that The Bank of New York Depository (Nominees) Limited (‘the Registered Holder’) as nominee of the Common Depository for Euroclear and Clearstream is, at the date hereof, entered in the register of Bondholders as the holder of Bonds in the principal amount of U.S.$350,000,000 or such other amount as is shown on the register of Bondholders as being represented by this Global Certificate …”.

(4) In the preamble to the Global Certificate, it is further stated that –

“Terms defined in the Conditions or the Trust Deed have the same meanings when used herein”.

(5) Likewise, in the Conditions, it is expressly provided that –

“Unless otherwise defined, terms used in these Conditions have the meaning specified in the Trust Deed.”

(6) Finally, Clauses 1.1 and 3.1 of the Trust Deed and the preamble to the Global Certificate all expressly state that the Bonds are represented by the Global Certificate.

51.The above provisions, read together, would strongly support the Company’s argument that for the purpose of the Trust Deed, Conditions and Global Certificate, the expressions “Bondholder”/“holder of the Bonds”/“holder” (in relation to a Bond) all mean and refer to the person in whose name the Bonds are registered; in other words, the registered holder of the Bonds. It is not in dispute that the person in whose name the Bonds are registered is the Nominee Company. Hence, the phrase “holder of this Global Certificate” in the Modified Provision would likewise mean and refer to the Nominee Company.

52.We are not persuaded by Mr Jat’s arguments advanced in support of the Petitioner’s Principal Construction referred to in §§37(4) to (7) above:

(1)  The argument that the Judge ignored the natural and ordinary meaning of the words “holder of this Global Certificate” has no merit. As a matter of natural and ordinary meaning, holder may mean either “physical” or “registered” holder. However, the Trust Deed, Conditions and Global Certificate all expressly define “Bondholder”, “holder of the Bonds” and “holder” (in relation to a Bond) to mean or refer to the registered holder of the Bonds.

(2)  The interpretative rule or presumption relied on by Mr Jat that a legal draftsman “uses the same words throughout the document to express the same thing or concept and consequently if he uses different words the presumption is that he means a different thing or concept” does not assist the Petitioner because, although different expressions (namely, “Bondholder” or “holder of the Bonds” or “holder” (in relation to a Bond)) are used in the Trust Deed, Conditions and Global Certificate, they are all defined to bear the same meaning.

(3)  The fact that the Nominee Company does not have physical custody of the Global Certificate and therefore cannot make available the Global Certificate for endorsement or exercise of various rights is not significant because, under the Trust Deed, the registered holder of the Bonds is treated as the “absolute owner for all purposes”. As absolute owner, the Nominee Company plainly has the right to direct the physical holder (ie the Common Depository) to present the Global Certificate for endorsement or exercise of rights.

(4)  The fact that the economic interests of the Bonds vest in the accountholders, and the registered holder only holds the Global Certificate on trust for the accountholders and has no economic interest in the Bonds, does not advance the Petitioner’s argument, because the same considerations apply to the Common Depository.

(5)  As earlier noted, the registered holder of the Bonds is regarded as being the absolute owner of the Bonds for all purposes under the Trust Deed. That being so, there is nothing uncommercial, insensible or unreasonable that notice of exercise of the Put Option should be given by the registered holder (ie the Nominee Company). On the other hand, to construe “holder of this Global Certificate” as the Common Depository would go against the express contractual provisions of the Trust Deeds, Conditions and Global Certificate.

(6)  Lastly, Mr Jat’s argument that construing the phrase “holder of this Global Certificate” in the Modified Provision to refer to the Nominee Company would lead to some additional, circular and redundant set of instructions is not persuasive because, as submitted by Mr Joffe, the fact that an additional set of instructions may require to be given stems from the way in which the transaction is structured, including the usage of a nominee.

53.There is one other difficulty with the Petitioner’s Principal Construction. As pointed out by Mr Joffe, on the Petitioner’s pleaded case[17] and evidence[18], the Common Depository did not give notice, but received notice, of exercise of the Put Option. Further, it appears not to be in dispute that there is no evidence that the Petitioner (qua Common Depository) ever gave notice of exercise of the Put Option to the Principal Agent[19]. Although, as mentioned at §19 above, there was a facsimile and an email sent by the Petitioner to the Issuer and/or the Company on 1 and 9 February 2024 relating to the exercise of the Put Option, Mr Ma on behalf of the Petitioner has expressly disavowed either as being the requisite notice for the exercise of the Put Option[20].

54.Faced with this evidential gap about the giving of notice of exercise of the Put Option by the Common Depository, Mr Jat developed a new argument in the course of the hearing of the appeal, to the effect that no notice of exercise of the Put Option was required to be given before there could be a valid exercise of the Put Option, because:

(1)  The Modified Provision concerning the exercise of the Put Option by notice was permissive, not mandatory (“The Bondholder’s redemption option in Conditions 8(D) … may be exercised by the holder of this Global Certificate giving notice to the Principal Agent …”).

(2)  Since the Petitioner occupied the dual role of Common Depository and Principal Agent, it would serve no useful purpose for any notice of exercise of the Put Option to be given by the Petitioner (in the capacity of Common Depository) to itself (in the capacity of Principal Agent).

(3)  The Put Option could be exercised otherwise than in accordance with the Modified Provision. In particular, the Put Option could be, and was in the present case, exercised pursuant to Condition 8(D) itself, which did not require any notice of exercise of the Put Option to be given by the Common Depository.

55.We see considerable difficulty with this new argument, not least because (i) it is contrary to the express requirement in the Modified Provision that, in order to exercise the Put Option, notice is required to be given by the holder of the Global Certificate to the Principal Agent, and (ii) it is common ground that Condition 8(D) has no application to the redemption of the Bonds because that condition in its unmodified form is intended to be applicable only to the situation where Definitive Certificate(s) has/have been issued, but no Definitive Certificate has ever been issued in the present case. In our view, the use of the words “may be” in the Modified Provision does not give the Bondholder a free or unrestricted choice of the manner of exercise of the Put Option. In the absence of any other relevant provision, if the Bondholder wishes to exercise the Put Option, it is bound to do so in the manner as prescribed by the Modified Provision.

56.For the purpose of disposing of this appeal, it is not necessary for us to reach a definitive view on the true construction of the phrase “holder of this Global Certificate” in the Modified Provision. Although the construction of a written contract is a question of law and the court may, in appropriate circumstances, be willing to go more deeply in an issue of construction if the resolution of that issue would determine whether there is a bona fide dispute of the petitioned debt on substantial grounds, the legal test is still the same. In a creditor’s winding up petition, if the court comes to the conclusion that the debt is bona fide disputed on substantial grounds, the petition ought to be dismissed, leaving it to the petitioner to establish the existence of the debt in ordinary civil litigation.

57.In our view, it is at least reasonable arguable that, upon the true construction of the Modified Provision, the phrase “holder of this Global Certificate” means and refers to the registered holder of the Bonds (ie the Nominee Company). If this construction of the Modified Provision is correct, the absence of evidence that the Nominee Company ever gave notice of exercise of the Put Option to the Principal Agent in accordance with the requirement of the Modified Provision would mean that there was no valid exercise of the Put Option. It follows that the Judge was correct to conclude that the Debt was bona fide disputed on substantial grounds.

GROUND 2 – THE PETITIONER’S ALTERNATIVE CONSTRUCTION

58.The conclusion in §57 above also disposes of the Petitioner’s Alternative Construction under Ground 2.

GROUND 3 – THE PRESENTATION ISSUE

59.The conclusion in §57 above means that strictly speaking, Ground 3 does not require determination. For the sake of completeness, we shall briefly deal with it.

60.Under the Modified Provision, the Bondholder’s redemption option may be exercised by the holder of the Global Certificate “…presenting this Global Certificate for endorsement or exercise (if required) within the time limits specified in the Conditions”. The Petitioner argues that the words “if required” qualify the requirement of presentation of the Global Certificate (ie the words preceding “if required”), while the Company argues that they qualify (or attach) to the time limits for exercise of the Put Option (ie the words following “if required”).

61.There is some force in Mr Jat’s submission that it is unnatural and makes little commercial sense to read “if required” as referring to the time limits for exercising the Put Option, because (i) had the parties intended the words “if required” to qualify the timing requirement, it would have been natural and reasonable for those words to be placed after the words “within the time limits specified in the Conditions”, and (ii) the time limits for the exercise of the Put Option are prescribed by Condition 8(D), namely, not more than 60 days and not less than 30 days prior to Put Option Date (2 March 2024), and are not variable at the option of the Bondholder.

62.On the other hand, the Petitioner’s reading of the words “if required” is not without its own difficulties. As submitted by Mr Joffe, the Global Certificate would always be required for one reason or another: if it is an entire redemption, the certificate would need to be cancelled; while if it is a partial redemption, the certificate needs to be endorsed. Furthermore, there is nothing in the Trust Deed, Conditions or Global Certificate which states or implies that the requirement of presentation of the Global Certificate is at the option of the Petitioner.

63.We accept that a natural reading of the provision would tend to suggest that the words “if required” are intended to qualify the preceding words in the Modified Provision (“presenting this Global Certificate for endorsement or exercise”). We also take note of the fact that the parties have not been able to proffer any situation where a redemption of the Bonds would not require the presentation of the Global Certificate for cancellation (in the case of full redemption) or endorsement (in the case of partial redemption). That does not necessarily mean, however, that the requirement of presentation of the Global Certificate is optional, or can be dispensed with at the will of the Petitioner. The requirement for the delivery up of the Global Certificate for cancellation or endorsement is not for the benefit of the Petitioner, but for the Issuer, being the party called upon to redeem the Bonds (wholly or partially). Hence, the Global Certificate is required to be presented to the Principal Agent (as agent of the Issuer). In our view, the true meaning of the words “if required”, and whether there was a valid exercise of the Put Option in the absence of any evidence of presentation of the Global Certificate to the Principal Agent in accordance with the Modified Provision (or any acknowledgement by the Petitioner that it held the Global Certificate in its capacity as the Principal Agent for the Issuer), are moot, and we agree with the Judge that the Presentation Issue also gives rise to a bona fide substantial dispute of the Debt.

DISPOSITION

64.The Notice of Appeal and Summons are both dismissed. An overall costs order nisi is made that the Company shall have 80% of the costs incurred in the proceedings in the Court of Appeal (including costs incurred in resisting the Notice of Appeal and pursing the Summons), to be taxed if not agreed, with certificate for 2 counsel only. The above costs order nisi shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment. In the event that an application is made to vary the order nisi, the application shall be dealt with on paper, and the Court will give further directions on the conduct of the application, including the filing of submissions and costs statement/objections in respect of the application.

Mr Jat Sew-tong, SC leading Mr Justin Ho, instructed by Allen Overy Shearman Sterling, for the Petitioner

Mr Victor Joffe, SC leading Mr Du Jinsong and Mr Shaun Elijah Tan, instructed by Chan King Wong and Co., for the Company

The Official Receiver, absent