Re Ziff Communications Company

The matter of *Re Ziff Communications Company* concerned an application by the liquidator of Ziff Communications Company (in liquidation) for directions regarding the distribution of surplus assets. The dispute arose from competing claims to these surplus assets by ordinary unsecured creditors and holders of certain convertible notes. The application was heard in the Supreme Court of New South Wales.

The primary legal issue before the Court was whether the holders of the convertible notes were entitled to rank as ordinary unsecured creditors for the purpose of receiving a distribution of surplus assets, or whether their rights were confined to the terms of the notes themselves, which did not provide for participation in surplus asset distribution upon liquidation. The Court was required to interpret the terms of the convertible notes and the relevant provisions of the *Corporations Act 2001* (Cth) concerning the distribution of surplus assets in a winding up.

In reaching its decision, the Court considered the nature of the convertible notes and the rights conferred upon their holders. It was held that the notes constituted a form of debt and that their holders were, in the absence of express provisions to the contrary, entitled to rank as unsecured creditors in the liquidation. The Court applied the principle that where a debt instrument does not expressly exclude participation in surplus assets upon winding up, the holder of that debt is generally entitled to do so, subject to the order of priority established by the *Corporations Act*. The Court found no such exclusion in the terms of the convertible notes before it.

The Court accordingly directed that the holders of the convertible notes were entitled to participate in the distribution of the surplus assets of Ziff Communications Company (in liquidation) as ordinary unsecured creditors.