Energy World Corporation Limited v Standard Chartered Private Equity

Factual matters

1. SCB started a private equity business in Asia in 2002 which, until 2007, consisted primarily of making minority equity investments in companies across Asia through its subsidiaries, including SCPE. From 2007, SCB's private equity business expanded and became known as the Principal Finance business, which included an Energy, Resources and Infrastructure (ERI) industry specialisation.
2. In 2013, SCB, through SCPE, made an investment in an entity related to EWC by subscribing to notes issued by Energy World Philippines Holdings Limited (EW Philippines) in a principal amount of US$50 million. Prior to the 14 May 2018 maturity date, EWC approached SCPE to negotiate a replacement instrument.
3. Subsequently, in August 2018, a term sheet was agreed which provided that EWC would issue the Notes and Warrants to SCPE to replace the notes issued by EW Philippines (Term Sheet).
4. The Term Sheet recorded that EWC's obligations to SCPE would be senior to the obligations of EWC to EWI (EWC's major shareholder), any financing provided to EWC by Slipform (a company related to EWC) and any other related party of Stewart Elliott (EWC's Chairman and EWI's founder and Managing Director) (clause 35), and made execution of a subordination deed a condition precedent to SCPE investing in the Notes and Warrants (clause 31). The Term Sheet also recorded that the Notes and Warrants would be freely transferable by SCPE without consent; that all outstanding Notes would only be transferrable in total, not as individual tranches; and that SCPE would give EWI and Slipform a first right of refusal to buy all of the Notes if it wished to transfer its entire holding except for a transfer by SCPE to an affiliate or related party or as part of an SCPE separation from SCB (clause 37).
5. The 2018 deal between SCPE and EWC resulted in a range of agreements being entered into and instruments being created. They relevantly included: 1. a deed poll dated 14 September 2018 executed by EWC and styled "Note Deed Poll relating to Notes issued by [EWC]" (Notes Deed Poll). The Notes Deed Poll provides that each Noteholder is to receive a Note Certificate(s) in respect of its entire holding of the Notes, which Certificate(s) is to be in the form set forth in Annex A (with the Conditions endorsed thereon); 2. a Subscription Agreement between EWC and SCPE dated 14 September 2018 relating to the Notes and Warrants; 3. a Subordination Deed between EWC, SCPE and each of the Buyer Parties dated 14 September 2018 pursuant to which the rights of EWI (in respect of its US$45 million loan facility with EWC) and Slipform (in respect of its US$432 million loan agreement with EWC) to receive repayment of and to enforce their loans were postponed until after the Notes had been repaid; 4. a Note Certificate dated 15 October 2018 certifying that SCPE is the registered holder of Notes issued by EWC in the principal amount of US$50 million, that the Notes are issued on and subject to the terms and conditions attached (Conditions), and that EWC undertakes to perform and comply with the Conditions. The Conditions are in the same form as Annex A to the Notes Deed Poll. Condition 3.1 relates to the transferability of the Notes and is set out in full below; 5. a Warrant Instrument executed by EWC dated 15 October 2018 and a certificate of the same date certifying that SCPE is the holder of the Warrants entitling it to purchase newly issued Ordinary Shares subject to the terms of the Warrant Instrument. There are no restrictions on the transferability of the Warrants contained in the Warrant Instrument; 6. a Security Trust Deed between EWC and National Australia Bank Limited dated 14 November 2018, under which NAB agreed to hold certain security assets on trust for the benefit of, relevantly, SCPE and any successor or permitted substitute or assign; and 7. a Share Security Deed between EWC and National Australia Bank Limited dated 14 November 2018, under which EWC granted security interests to NAB (as Security Trustee) in EWC's shares in its Australian Subsidiaries to secure the repayment of the Notes.

SCB sells part of its private equity business

1. In around 2012, SCB decided to reduce its exposure to private equity assets and sell some of the investments made by the Principal Finance business to third parties. As part of that process, in 2016, the ERI team was disbanded and the management of the ERI assets, including SCPE's 2013 investment in EW Philippines, was moved to the private equity team.
2. By 2018, SCB's Principal Financial business comprised a range of private equity assets, including SCPE's interests in the Notes and Warrants, as well as private equity management services carried on by its subsidiaries (Management Business).
3. In late 2018, SCB sold most of its private equity assets and its Management Business. The sale was affected by a transaction agreement dated 16 December 2018 between Finventures UK Limited (a wholly owned subsidiary of SCB) (Finventures), SCB, ICG Augusta Partners LP (ICG), Affirma and Augusta Fund 1, LP (Augusta Fund), as amended and restated on 8 July 2019 (Transaction Agreement).
4. Under the Transaction Agreement: 1. the private equity assets of SCB and Finventures (which were held through various subsidiaries, including SCPE) in 36 companies were acquired by ICG. Those assets, which included SCPE's interests in the Notes and Warrants, were to be transferred directly into the newly established private equity Augusta Fund (or a nominated subsidiary of the Augusta Fund) as the Portfolio Purchaser, and to be managed by Affirma on an ongoing basis. Augusta was the nominated subsidiary in respect of the Notes and Warrants; and 2. the Management Business, defined as the "Management Securities", was sold to Affirma and its subsidiaries, which were companies that had been set up by members of the SCPE management team, including Mr Philipps.
5. While the majority of SCB and Finventures' private equity assets were transferred to the Augusta Fund, there were some assets which remained with SCB. Those assets were not bought and/or sold for reasons including there was a potentially imminent external sale or ongoing litigation connected to the assets. Of the 55 investment professionals employed by SCB to carry out the management of the private equity business, approximately 53 moved across to Affirma and maintained the same roles they had at SCB.
6. The Transaction Agreement involved a phased completion. The First Completion, which occurred on 31 July 2019, included the sale of the Notes and Warrants. On or about that day, SCPE executed instruments of transfer by which SCPE transferred the Notes and the Warrants to Augusta.

Events leading to these proceedings

1. On 15 October 2019, the executed instruments of transfer of the Notes and Warrants were provided to EWC. It was also notified that amounts due and payable under the Notes were to be paid to Augusta.
2. As referred to above, EWC declined to register the transfers, initially on the basis that it questioned the veracity of the transfer instruments.
3. On 3 December 2019, SCPE's solicitors wrote to EWC, enclosing a newly executed instrument of transfer of the Notes. The letter directed EWC to register the transfer of the Notes and Warrants to Augusta and demanded payment of all amounts that had become due and payable under the Notes since 14 October 2019.
4. In response, EWC's solicitors queried the documentation provided in respect of the transfer of the Notes and asserted that EWC did not have a sufficient basis to assess whether there had been compliance with the Conditions relating to the transferability of the Notes.
5. On 17 December 2019, SCPE's solicitors provided EWC with a detailed paper prepared by Clifford Chance (the solicitors for the Augusta Fund) which responded to the queries raised by EWC in relation to the transaction and explained why the transfer of the Notes constituted a Permitted Transfer. EWC was also later provided with an extract of the Transaction Agreement in so far as it was relevant to the transfer of the Notes and Warrants.
6. On 10 March 2020, SCPE and Augusta issued a joint payment instruction directing EWC to pay all outstanding amounts to SCPE. In response, EWC asserted that any amounts that may have fallen due under the Notes ought to have been paid to one of the Buyer Parties rather than to SCPE or Augusta on the basis that SCPE had not complied with the obligation under the Conditions to offer the right to purchase the Notes to the Buyer Parties.
7. On 28 January 2020, EWC commenced these proceedings.

Relevant contractual terms

1. The Notes Deed Poll contains provisions relating to the rights of Noteholders and obligations of the Issuer, who is defined as EWC. These include the right of the Noteholder to payment of the principal amount and interest in accordance with the Conditions and an irrevocable undertaking by the Issuer to make all those payments on the due date and to comply with the Conditions: cl 3.1(a), (b).
2. The Conditions provide that: 1. the Notes shall bear interest from and including the date of issue of the Notes at the rate of fifteen per cent (15%) per annum (the "Coupon") of the outstanding principal amount of the Notes, which shall accrue on a daily basis and be repayable on each Repayment Date or semi-annually in arrears: Condition 4(a); 2. the Issuer must redeem the Notes for an aggregate principal amount in cash in accordance with the table referred to, which table details four Repayment Amounts and the dates on which those amounts are to be paid: Condition 9.1; and 3. Interest shall accrue on unpaid sums from the due date up to the date of actual payment at the rate of two and a half per cent (2.5%) per annum calculated daily on the basis of a 365-day year (default interest): Condition 8.4.
3. Condition 3.1 of the Conditions relates to the transferability of the Notes and is the key condition relevant to the dispute in these proceedings. It provides as follows: 3.1 Transferability; Right of First Offer; Register. (a) The Issuer shall keep the Register in accordance with the provisions of the Note Deed Poll. Each Noteholder shall be entitled to receive one or more Note Certificates (as it may request) in respect of its holding of Notes. (b) Subject to Conditions 3.1(c), (d) and (e) below, each Noteholder shall be entitled to transfer its Notes without restriction by delivery of the Note Certificate issued in respect of that Note, with the form of transfer attached thereto duly completed and signed, to the principal place of business of the Issuer in Hong Kong. (c) Prior to 30 June 2019, the Noteholder may not transfer any part of the Notes to any party except an Affiliate, a Related Party of the Noteholder, or in connection with a Standard Chartered Principal Finance Exit Transaction. (d) If at any time a Redemption Event occurs then prior to the Initial Noteholder exercising its rights of enforcement under Condition 11, then Condition 3.1(e)(i) applies. (e) After 30 June 2019, if the Initial Noteholder intends to transfer any part of its holding of Notes (other than a Permitted Transfer) then: (i) the Initial Noteholder must offer each of PT Slipform, Slipform Engineering and EWI (each a "Buyer Party") the right, but not the obligation, to purchase the aggregate principal amount outstanding (including all accrued but unpaid interest) under that portion of Notes that it wishes to sell and each Buyer Party must: (1) respond by no later than 10 Business Days from the date of such offer; and (2) if the Buyer Party agrees to purchase any part of those Notes that are for sale, the Buyer Party must complete the transfer of the Notes and the payment of consideration within a further 20 Business Days, otherwise, the Initial Noteholder may transfer the Notes (in whole or in part) to any party in its sole discretion or if a Redemption Event has occurred require the Issuer to redeem the Notes in accordance with Condition 9.2 (Redemption). (f) No transfer of title to any Notes will be effective unless and until entered on the Register.
4. Clause 1.1 of the Notes Deed Poll contains the following defined terms which have the same meaning in the Conditions (Condition 1(c)): "Initial Noteholder" means Standard Chartered Private Equity (Singapore) Pte. Ltd and any of its Related Parties, Affiliates or transferees in connection with a Standard Chartered Principal Finance Exit Transaction pursuant to a Permitted Transfer. "Noteholders" means the holder or holders of the Notes from time to time. "Permitted Transfer" means a transfer by Standard Chartered Private Equity (Singapore) Pte Ltd. of its interest in the Notes to a Related Party, an Affiliate or any transferee(s) in connection with a Standard Chartered Principal Finance Exit Transaction. "Standard Chartered Principal Finance Business" means the private equity business carried on by members of the Standard Chartered Group including (a) those companies in the Standard Chartered Group that act as general partner or investment manager (or similar) of any limited partnership (or other investment vehicle or entity) in respect of which the limited partners or investors include third parties (being persons other than members of the Standard Chartered Group) and which, for the avoidance of doubt, includes the Initial Noteholder; and (b) current and future assets held by members of the Standard Chartered Group as part of the private equity business. "Standard Chartered Principal Finance Exit Transaction" means one or more transactions entered into by Standard Chartered Bank, or any subsidiary or subsidiary undertaking of Standard Chartered Bank or any entity managed, advised or controlled by any such person, to give effect to a direct or indirect transfer of ownership or management of the Standard Chartered Principal Finance Business, whether in whole or part, to one or more third parties.
5. Clause 11.4 of the Subscription Agreement provides: 11.4 Standard Chartered Principal Finance Exit The Parties acknowledge that Standard Chartered Bank, or any subsidiary or subsidiary undertaking of Standard Chartered Bank or any entity managed, advised or controlled by any such person, may enter into one or more transactions to give effect to a direct or indirect transfer of ownership or management of the Standard Chartered Principal Finance Business, whether in whole or part, to one or more third parties (each such transaction, a "Standard Chartered Principal Finance Exit Transaction"). Notwithstanding anything contained in this Agreement, [EWC] irrevocably consents to any Standard Chartered Principal Finance Exit Transaction. In the paragraph above, "Standard Chartered Principal Finance Business" means the private equity business carried on by members of the Standard Chartered Group including (a) those companies in the Standard Chartered Group that act as general partner or investment manager (or similar) of any limited partnership (or other investment vehicle or entity) in respect of which the limited partners or investors include third parties (being persons other than members of the Standard Chartered Group) and which, for the avoidance of doubt, includes [SCPE]; and (b) current and future assets held by members of the Standard Chartered Group as part of the private equity business.
6. Clause 20.3 of the Subordination Deed, clause 20 of the Security Trust Deed and clause 26 of the Share Security Deed are in similar terms as clause 11.4 of the Subscription Agreement and provide irrevocable consents by EWC and the Buyer Parties (as relevant) to any Standard Chartered Principal Finance Exit Transaction.

Legal principles

1. The legal principles relevant to the construction of the Notes Deed Poll and Conditions, as commercial contracts, are well known. The Court is to give them a business-like interpretation by considering the language used by the parties, the circumstances which they address and the commercial purpose or objects which they are intended to secure. The rights and liabilities of the parties are to be determined objectively by reference to their entire text as well as any contract, document or statutory provision referred to in the text of the contract: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (Mount Bruce Mining) at [46], [47].
2. Unless a contrary intention is indicated, a Court is entitled to approach the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result. Put another way, a commercial contract should be construed to avoid it making commercial nonsense or working commercial inconvenience: Mount Bruce Mining at [51].
3. In construing a commercial contract, the grammatical and ordinary sense of the words are to be adhered to: Watson v Phipps (1985) 60 ALJR 1 at 3. There is also a presumption against redundancy such that every word should be given effect. However, that presumption does not operate as an invariable rule, and in some cases, it may be appropriate to interpret words in a way that makes them redundant. It may be appropriate to do so where the alternative construction is inconsistent with other provisions of the contract or the commercial purpose of the contract or where it appears that the words have been included out of abundant caution: XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215 at [72] quoting with approval AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985 at [13].
4. If the language used in a contract is open to two constructions, a construction that avoids an unreasonable result is to be preferred to one that does not, even though the construction adopted "is not the most obvious, or the most grammatically accurate". However, if the words used are unambiguous the Court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different: Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99; [1973] HCA 36 at 109.
5. Where the Court is called upon to interpret a commercial contract that includes defined terms, the definitions should not be considered in isolation but by reading the words of the definition into the operative text: Wiggins Island Coal Export Terminal Pty Ltd v New Hope Corporation Limited [2019] NSWCA 316 at [39] and [118]; Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103].

Was the transfer of the Notes by SCPE to Augusta a Permitted Transfer?

1. The issue for determination is whether the transfer by SCPE of the Notes to Augusta is a Permitted Transfer for the purposes of Condition 3.1(e) of the Conditions.
2. To be a Permitted Transfer, the transfer by SCPE of its interest in the Notes to Augusta has to be in connection with a Standard Chartered Principal Finance Exit Transaction. This raises the question of whether the transactions between SCB, Finventures, ICG, Affirma and the Augusta Fund, as given effect to by the Transaction Agreement, is a Standard Chartered Principal Finance Exit Transaction.
3. The dispute between the parties is of a relatively narrow compass. It is common ground that the Transaction Agreement: 1. involved one or more transactions; 2. was entered into by SCB and its subsidiary, Finventures; and 3. gave effect to a direct transfer of ownership or management of the majority of the Standard Chartered Principal Finance Business to third parties.
4. EWC and the Buyer Parties also accept that Augusta was nominated under the Transaction Agreement as the acquirer of the Notes. Thus, there is no dispute that the transfer of the Notes by SCPE to Augusta was in connection with the Transaction Agreement.
5. The dispute, which raises a question of the proper construction of the Notes Deed Poll and Conditions, is whether a Standard Chartered Principal Finance Exit Transaction must give effect to the direct or indirect transfer of ownership or management of the whole of the Standard Chartered Principal Finance Business, as EWC and the Buyer Parties contend, or, as SCPE and Augusta submit, whether it can give effect to the transfer of that Business in part only, as was effected by the Transaction Agreement.
6. EWC and the Buyer Parties submit that, on a proper construction, Standard Chartered Principal Finance Exit Transaction must involve the transfer of the whole of the Standard Chartered Principal Finance Business as it is defined in cl 1.1 to mean "the private equity business…"; is picked up and referred to in the definition of Standard Chartered Principal Finance Exit Transaction in the singular; and there is only one Standard Chartered Principal Finance Business which may be the subject of and to which the definition of a Standard Chartered Principal Finance Exit Transaction is directed.
7. They submit that the words "whether in whole or part, to one or more third parties" in the definition of Standard Chartered Principal Finance Exit Transaction should be given a distributive reading such that the words apply to the "one or more transactions entered into by Standard Chartered Bank" and not to the phrase "Standard Chartered Principal Finance Business". They submit that the word "whole" should be read as applying to "one … transaction …", and "part" applying to "transactions", but in each case effecting the transfer of the singular object of the definition, being the Standard Chartered Principal Finance Business with the result that the transfer may be achieved by "one transaction in whole … to one or more third parties", or through multiple transactions, each of which may involve the transfer of part of the Business but which together in aggregate effect the transfer of the whole Business to one or more parties.
8. In contending for their construction, EWC and the Buyer Parties accept that it may not be the most "grammatically accurate" but submit that it is to be preferred to the construction advanced by SCPE and Augusta, having regard to the purpose of the Buyer Parties' right to purchase the Notes conferred by Condition 3.1(e)(i) of the Conditions (First Right). They argue that an interpretation that allows for the transfer of only part of the assets comprising the Standard Chartered Principal Finance Business could render the First Right illusory because the transfer of the Notes by themselves, as an asset of the Business, would always be a Permitted Transfer and the First Right would never arise. They submit that, in order to give effect to the purpose of the First Right in favour of the Buyer Parties, the definition of a Standard Chartered Principal Finance Exit Transaction cannot be construed in the way SCPE and Augusta contend.
9. I am not persuaded by EWC and the Buyer Parties' submissions. I accept SCPE and Augusta's submission that, on a proper construction of the Notes Deed Poll and Conditions, the transfer of the majority of the Standard Chartered Principal Finance Business, as provided for by the Transaction Agreement, is a Standard Chartered Principal Finance Exit Transaction.
10. I have come to this conclusion primarily for the reason that I consider this to be the correct construction based on the ordinary and natural meaning of the words "whether in whole or part" and their location as they appear in the definition of Standard Chartered Principal Finance Exit Transaction. In my view, the words "whether in whole or part" are unambiguous and make plain that a Standard Chartered Principal Finance Exit Transaction may involve the transfer of either the whole of the Standard Chartered Principal Finance Business, or the transfer of the Business in part.
11. I accept SCPE and Augusta's submission that, as a matter of grammar and syntax, the words "whether in whole or part" serve to qualify the immediately preceding composite phrase "transfer of ownership or management of the Standard Chartered Principal Finance Business" and should not be read as qualifying the words "one or more transactions" that appear at the start of the definition, as EWC and the Buyer Parties submit.
12. To my mind, the distributive construction contended for by EWC and the Buyer Parties is not only grammatically strained, but also fails to give any real work to the words "whether in whole or part" and has the effect of making them redundant. I do not accept the submission, as was put at the hearing, that the words "whether in whole or part" are not unnecessary but are there to provide clarity that the object of the definition (the transfer of the Business) may be achieved by one transaction transferring the whole, or multiple transactions of parts making up a transfer of the whole, and should be interpreted as having been included as an aid to the proper construction. If the words "whether in whole or part" were intended to operate in that way, it is to be expected that they would appear immediately after the words "one or more transactions" or some other place in the definition. In my view, and consistent with the principles of interpretation referred to at [34] to [38], the words "whether in whole or part" in the definition of Standard Chartered Principal Finance Exit Transaction are to be read as serving a purpose different to that served by the words "one or more transactions", namely to make clear that an Exit Transaction may give effect to the transfer of the whole or only part of the Standard Chartered Principal Finance Business.
13. I also consider that this construction is supported by the other provisions of the Conditions and relevant documents and the apparent commercial purpose of the arrangements between EWC and SCPE.
14. The prohibition on the transfer of "any part of the Notes to any party except an Affiliate….or in connection with a Standard Chartered Principal Finance Exit Transaction" in Condition 3.1(c) is at odds with the contention that a Standard Chartered Principal Finance Exit Transaction must involve the transfer of the whole of the Standard Chartered Principal Finance Business, given the Condition refers to the transfer of "part of the Notes" in connection with an Exit Transaction.
15. Clause 11.4 of the Subscription Agreement refers to "any Standard Chartered Principal Finance Exit Transaction" and "each such transaction", indicating that the parties contemplated that there may be more than one Exit Transaction. This also supports the construction that an Exit Transaction may involve the transfer of part of the Standard Chartered Principal Finance Business and does not require the transfer of the whole. As noted at [33], the Subordination Deed, Security Trust Deed and Share Security Deed include similar provisions to clause 11.4.
16. The combination of the phrases "one or more transactions", "entered into by [SCB], or any subsidiary or subsidiary undertaking of [SCB] or any entity managed, advised or controlled by any such person", "whether in whole or part" and "to one or more third parties" in the definition of Standard Chartered Principal Finance Exit Transaction gives considerable flexibility to what might constitute such a Transaction. When read in the context of the other parts of Condition 3.1 and provisions of the related transaction documents to which I have referred, the breadth of that definition lends support to the conclusion that the parties intended that SCPE was not to be hindered or prevented from transferring the Notes as part of a wider transaction involving its private equity business by requiring EWC or the Buyer Parties' consent or having to offer to sell the Notes to the Buyer Parties.
17. I am also unpersuaded by EWC and the Buyer Parties' submission that an interpretation that provides for an Exit Transaction to include the transfer of part of the Standard Chartered Principal Finance Business should be rejected because it would not give effect to and render the First Right illusory. There are three issues with that submission.
18. First and foremost, the submission is based on the premise, which I do not accept, that the transfer of the Notes by themselves would be a Standard Chartered Principal Finance Exit Transaction for the purposes of a Permitted Transfer, such that the First Right would never arise.
19. The definition of Permitted Transfer refers to the transfer of SCPE's interest in the Notes in connection with a Standard Chartered Principal Finance Exit Transaction. Thus, as Augusta submits, the definition distinguishes between the transfer of the Notes on the one hand and the Standard Chartered Principal Finance Exit Transaction on the other, with the words "in connection with" indicating that the transfer of the Notes is to be linked with the transfer of something else.
20. I accept that the definition of Standard Chartered Principal Finance Business includes assets held by SCPE, such as the Notes. That said, in my view, to constitute a Standard Chartered Principal Finance Exit Transaction and engage the exception in Condition 3.1(e) as a Permitted Transfer, the transfer of the Notes must be in connection with a transaction that involves the transfer of more than just the transfer of the Notes themselves. The transfer of SCPE's interest in the Notes without the transfer of any other part of SCB's private equity business would be a transfer of a single investment or asset, not the transfer of sufficient assets and/or rights to meet the description of a transfer of ownership or management of the Standard Chartered Principal Finance Business in part. Nor would it be the transfer of part of the Business, as that concept would be reasonably understood.
21. Second, on my construction the First Right is not rendered illusory as it would have been enlivened if there had been an intended transfer by SCPE of the Notes alone or, possibly, the transfer of the Notes in connection with other assets that did not qualify as a transfer of sufficient assets and/or rights to meet the description of a transfer of ownership or management of the Standard Chartered Principal Finance Business in part.
22. Third, and while there is some obvious logic to the Buyer Parties having the right to purchase the Notes if a proposed transfer concerned only the investment in EWC, I am not persuaded that it would be a commercially absurd outcome if the exception in Condition 3.1(e) was engaged by the transfer of the Notes by SCPE in connection with a transaction of more than just the Notes, such as the transfer of other debt instruments or SCPE's Philippines business (adopting one of the examples that was referred to at the hearing). Why should SCPE have to offer the Buyer Parties the right to purchase the Notes in circumstances where they are intended to be transferred to a third party in connection with the sale of a broader pool of assets that qualifies as a transfer of ownership or management of part of the Standard Chartered Principal Finance Business, and the Buyer Parties are not offered the opportunity to purchase those other assets?
23. Conversely, as Augusta submits, there seems to be no commercial rationale why the transfer of the Notes in connection with the transfer of the majority of the Standard Chartered Principal Finance Business would trigger the First Right, but a transfer of the whole of that Business would not.
24. In any event, irrespective of where the line is to be drawn as to which transactions would, or would not, constitute a Standard Chartered Principal Finance Exit Transaction, I am satisfied that the transfer of the majority of the Standard Chartered Principal Finance Business would constitute such a Transaction and does not defeat the commercial purpose of the First Right.
25. For these reasons, on a proper constriction of the Notes Deed Poll and Conditions, a Standard Chartered Principal Finance Exit Transaction does not require one or more transactions to give effect to the transfer of the whole of the Standard Chartered Principal Finance Business, but may involve the transfer of part of that Business.
26. Based on the evidence from Mr Philipps, which is summarised at [15] to [20], I am satisfied that the Transaction Agreement gave effect to the transfer of sufficient assets and/or rights to meet the description of a transfer of ownership or management of the Standard Chartered Principal Finance Business in part and is a Standard Chartered Principal Finance Exit Transaction. I am also satisfied that the transfer by SCPE of its interests in the Notes to Augusta was in connection with the Transaction.
27. It follows that the transfer by SCPE of its interests in the Notes to Augusta was a Permitted Transfer and the obligation on SCPE to offer the Buyer Parties the right to purchase the Notes under Condition 3.1(e)(i) of the Conditions did not arise.

Other issues - price and declaratory relief

1. On the conclusion I have reached, the other issues raised by EWC and the Buyer Parties' claims for declaratory relief do not arise. As it was the subject of submissions, I have said something about the issue of the price at which SCPE would need to offer the Notes to the Buyer Parties if the First Right was engaged.
2. The price issue raises a question of construction of Condition 3.1(e)(i).
3. EWC and the Buyer Parties submit that Condition 3.1(e)(i) should be construed as requiring SCPE to offer each of the Buyer Parties the right to purchase the Notes at the same price at which the Notes were to be transferred to Augusta. They submit that this construction arises because: 1. the words "the aggregate principal amount outstanding (including all accrued but unpaid interest) under that portion of Notes that [SCPE] wishes to sell" identifies the subject of the First Right in Condition 3.1(e)(i) but not the price at which the Notes must be offered to the Buyer Parties; 2. an interpretation that the offer is to be on the face value of the Notes confuses the concept of redemption of the Notes, as addressed in Conditions 9 and 11, and a right of purchase arising in the context of a sale to a third party; and 3. it gives effect to the purpose of the First Right, which would otherwise be defeated if SCPE were at liberty to offer the Notes at an inflated price relative to that which Augusta was willing to pay.
4. SCPE and Augusta submit that, having regard to its language, context and purpose, Condition 3.1(e)(i) should not be construed in that way but interpreted as providing that the obligation on SCPE to offer the right to purchase the Notes to each of the Buyer Parties is by paying the total amount outstanding under the Notes at the time they are offered. I agree.
5. Condition 3.1(e)(i) addresses two circumstances in which SCPE must offer the right to each of the Buyer Parties but not the obligation to purchase the Notes. The first circumstance arises if SCPE intends to transfer any part of its holding of the Notes (other than by way of a Permitted Transfer); the second is if a Redemption Event occurs: Condition 3.1(d).
6. In both circumstances, what must be offered by SCPE to the Buyer Parties is the right to purchase "the aggregate principal amount outstanding (including all accrued but unpaid interest) under that portion of Notes that [SCPE] wishes to sell", as opposed to simply the right to purchase the Notes [that are for sale]. Pausing here, it appears that the drafters did not pay close attention to the interrelationship between the two circumstances as the references to Notes that SCPE "wishes to sell" and "are for sale" are not apt where a Redemption Event occurs.
7. A difficulty with EWC and the Buyer Parties' construction is that it seeks to distinguish the "price" at which the Notes are to be offered based on the circumstances in which the First Right arises, although Condition 3.1(e)(i) does not make any such distinction. It also seems to me to fail to give any real work to do to the words "aggregate principal amount outstanding (including all accrued but unpaid interest) under… the Notes" if the First Right arises in the context of a sale of the Notes by SCPE.
8. Condition 3.1(e)(i) does not refer to the price at which SCPE intends to sell the Notes. Nor does it require SCPE to inform the Buyer Parties of the price at which it intends to sell the Notes or provide any mechanism by which that price is to be identified. In the absence of any reference to those matters, I do not accept that a right of purchase arising in the context of a sale to a third party or the references to "wishes to sell" and "are for sale" are sufficient indicators of an intention that SCPE was to be obliged to offer the Notes at the same price or on the same terms as those offered to and agreed with the buyer.
9. In my opinion, just as the words "aggregate principal amount outstanding (including all accrued but unpaid interest) under… the Notes" work to identify the amount to be paid by the Buyer Parties if the purchase right arises by way of Redemption Event, they would be understood by a reasonable business person as identifying the dollar amount that the parties intended the offer of the right to purchase the Notes was to be made in the context of a sale of the Notes by SCPE. As Augusta submits, the fact that Condition 3.1(e)(i) requires the same offer to be made by SCPE to the Buyer Parties in the event of a Redemption Event is a strong contextual indicator that the parties intended that the obligation under that Condition is an obligation on SCPE to offer the Buyer Parties the right to purchase the aggregate principal amount outstanding (including all accrued but unpaid interest) under that portion of Notes that it wishes to sell by paying that amount to SCPE.
10. The other difficulty with EWC and the Buyer Parties' construction is that, in my opinion, it makes little commercial sense in circumstances where the intended transfer of the Notes by SCPE was part of a broader transaction that involved the sale of the majority of SCB's private equity business. Why would the parties have agreed that the subordinated lenders would get the benefit of a price for the Notes that was determined by reference to the purchase of a portfolio of assets (and which may be at a discount), when they are not required to buy those other assets? In that context, I also do not accept EWC and the Buyer Parties' submission that the purpose of the First Right would be defeated if SCPE were able to offer the Notes to the Buyer Parties at a price higher than the price ascribed to it as part of the Transaction Agreement.
11. As Augusta submits, and I accept, the evident commercial purpose served by the First Right is to give the Buyer Parties, in their capacity as related parties of EWC with subordinated debt, the right to purchase by paying out the total amount outstanding under the Notes so as to protect their position as subordinated creditors and prevent the Notes being owed by EWC to a different senior lender or enforcement action being taken against EWC by way of a Redemption Event. It is not a right to purchase the debt at whatever price SCPE negotiated with a third party. If that was what was intended, it would be expected that significantly different language and machinery provisions to have been included in Condition 3.1(e)(i).
12. EWC and the Buyer Parties also submitted that, as SPCE and Augusta had refused to disclose the price at which the Notes were transferred to Augusta as part of the Transaction Agreement, the usual inference should be drawn that the price at which SCPE offered to sell, and Augusta was prepared to buy, is nominal. I do not accept this submission.
13. I see no basis for drawing such an inference in circumstances where the question of whether the revelation of the price ascribed to the Notes in the Transaction Agreement has already been the subject of debate and the Court concluded that it was not yet relevant for EWC and the Buyer Parties to know that price: Energy World Corporation Limited v Standard Chartered Private Equity (Singapore) Pte Ltd [2020] NSWSC 1348 at [11]. As Stevenson J concluded, it would be necessary for the price to be revealed if EWC and the Buyer Parties established that the transfer of the Notes to Augusta was not a Permitted Transfer, SCPE must give them the right to purchase the Notes and the price at which they should be offered is the price at which they were sold to Augusta: at [12]. For the reasons set out above, they have not established those matters.
14. At the hearing, there was also a dispute about whether EWC and the Buyer Parties would be entitled to declaratory relief obliging SCPE to offer the Buyer Parties the right to purchase the Notes had they succeeded in establishing that the transfer was not a Permitted Transfer. As I do not need to reach a concluded view on that issue, I simply note that I would not have been inclined to grant declaratory relief akin to specific performance in the terms sought by EWC and Buyer Parties. In my view, there is merit to the submissions advanced by SCPE and Augusta that, if EWC and the Buyer Parties are right and the transfer was not a Permitted Transfer, then the transfer was ineffective, the Notes remain the property of SCPE and SCPE has no present intention to transfer the Notes to August as the only relevant intention to transfer was as part of the Transaction Agreement.

Orders and costs

1. It is common ground that, if the Court concludes that the transfer of the Notes to Augusta was a Permitted Transfer, orders should be made requiring EWC to register the transfer of the Notes to Augusta forthwith and for judgment to be entered against EWC in favour of SCPE for the amounts due and payable under the Note Deed Poll and Conditions.
2. The evidence from Mr Philipps is that, as at 25 November 2020, the total amount due and payable under the Notes was US$32,824,088.53, comprising two unpaid Repayment Amounts and Coupon interest that remains unpaid. He also gives evidence that default interest will continue to accrue, which he calculates to be at a daily rate of US$2,210.58 for the period from 25 November 2020 to 31 December 2020 and US$2,216.63 from 1 January 2021, noting that the rate for 2020 is slightly lower as there were 366 days in that year.
3. At the hearing, EWC and the Buyer Parties' Senior Counsel accepted that EWC was obliged to pay the amounts identified by Mr Philipps and did not dispute the accuracy of his calculations. Based on his evidence and this concession, I am satisfied that judgment should be entered in favour of SCPE in the amount of US$32,826,299.10 (being the sum of US$32,824,088.53 and default interest for 26 November 2020), together with default interest for the period from 27 November 2020 to the date of judgment at the rates calculated by Mr Philipps.
4. Augusta also seeks a declaration that the sum of US$32,826,299.10 was due, payable and owing by EWC to SCPE under the Notes as at the date of the hearing. No objection was taken to a declaration being made in those terms by EWC and the Buyer Parties. While a declaration may not be strictly necessary in circumstances where judgment is also being entered, it serves the purpose of clarifying that the judgment relates to the amounts that were due, payable and owing but not to future Repayment and Coupon amounts that become payable under the Notes. I note that, according to Mr Philipps' evidence, as at 25 November 2020, the total amount outstanding under the Notes is US$56,098,678.69.
5. The usual order as to costs is that they follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. As EWC and the Buyer Parties have failed on the principal issue relating to the Notes and accepted the obligation to transfer the Warrants on the day of the hearing, I see no reason not to make an order for them to pay SCPE and Augusta's costs of the proceedings in the terms sought by Augusta's draft short minutes handed up at the hearing.
6. For these reasons, I make the following orders: 1. The Amended Commercial List Summons filed 9 March 2020 be dismissed. 2. The First Plaintiff forthwith register, in the register of Noteholders referred to in the Note Deed Poll executed by the First Plaintiff dated 14 September 2018 (Note Deed Poll), the transfer from the First Defendant to the Second Defendant of Notes in the principal amount of US$50 million referred to in Note Certificate No.1 issued by the First Plaintiff dated 15 October 2018 (Notes). 3. The First Plaintiff upon registering the transfer of Notes referred to in order 2, forthwith deliver to the Second Defendant a Note Certificate complying with the requirements of the Note Deed Poll in respect of the Second Defendant's holding of Notes. 4. A declaration that, as at 26 November 2020, the sum of US$32,826,299.10 was due, payable and owing by the First Plaintiff to the First Defendant under the Notes. 5. Judgment be entered in favour of the First Defendant against the First Plaintiff for US$32,826,299.10 together with default interest at a daily rate of: 1. US$2,210.58 for the period from 27 November 2020 to 31 December 2020: and 2. US$2,216.63 for the period from 1 January 2021 to 15 January 2021. 1. The Plaintiffs pay the Defendants' costs of the proceedings as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 January 2021