BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd

BB Retail Capital Pty Ltd (the appellant) appealed to the Court of Appeal of New South Wales against orders made by Stevenson J in proceedings against Alexandria Landfill Pty Ltd (the first respondent) and another party (the second respondent). The dispute concerned the construction of a commercial agreement, specifically whether certain convertible notes were converted at the rate specified in their terms of issue or on a different basis agreed by the parties. A further issue related to whether a borrowing undertaken to raise funds to redeem these convertible notes fell within the definition of "organic debt" as defined in the terms of issue.

The primary legal issues before the Court of Appeal were: (1) the proper construction of the terms of issue of the convertible notes regarding the rate of conversion; (2) whether the parties had "otherwise agreed" to a different conversion rate; and (3) whether the borrowing constituted "organic debt" under the agreement. Additionally, the court considered the admissibility of extrinsic evidence, specifically pre-contractual negotiations, to demonstrate the manner of calculation of an exercise price in a related put option agreement.

The Court of Appeal found that the terms of issue for the convertible notes were clear and unambiguous regarding the conversion rate, and there was no evidence of an agreement to convert on a $1 to $1 note basis. The court also determined that the borrowing in question did not fall within the definition of "organic debt" as it was not incurred for the purpose of funding the acquisition of assets or for general working capital as contemplated by the agreement. Regarding the admissibility of extrinsic evidence, the court held that pre-contractual negotiations were not admissible to contradict or vary the clear terms of the put option agreement.

The appeal was allowed, and the cross-appeal was dismissed. The orders made by Stevenson J were set aside. The second respondent was ordered to pay the appellant's costs of the appeal and cross-appeal, and of the proceedings at first instance, with a certificate under the Suitors’ Fund Act 1951 (NSW) to be granted if eligible. The parties were directed to bring in short minutes for any consequential orders.