Burton J stated that he would find it "… impossible not to be assisted" by a clause heading in construing it, despite a provision that "… headings shall be ignored".  Citicorp International Limited v Castex Technologies Limited, 24 February 2016 draws together the authorities on the use of headings as an aid to interpretation of clauses, and examines the effectiveness of "headings shall be ignored" type provisions, which commonly appear in commercial contracts. 

Castex Technologies Limited (Castex), a company listed in India, had issued convertible bonds due to convert to equity shares of Castex in 2017. Citicorp International Limited (Citicorp) was the bond trustee. The bond conditions permitted Castex, in certain circumstances, to force the conversion of the bonds into shares before 2017 following the giving of a "Mandatory Conversion Notice". It purported to give that notice on 31 July 2015 (Notice). Citicorp, on the instruction of certain of the bondholders, commenced proceedings alleging the Notice did not comply with the formalities requirements of the bond conditions.

The bond issue was governed by a trust deed, including as a schedule a "form of certificate for definitive bonds". The bond conditions (which were referred to in the form of certificate and in the trust deed definitions) appeared in a separate document. The trust deed provided in Clause 1.3 that "Headings shall be ignored in construing this Trust Deed."

In the bond conditions, condition 8 dealt with redemption and conversion notices. Condition 8.2 expressly provided for the giving of conversion notices, and Castex purported to give the Notice under that provision. Condition 8.11, which Citicorp contended was applicable to the Notice, had the following noteworthy features:

• it was headed "Redemption notices"; and
• it provided that all notices given under "this Condition" would specify six matters that did not all appear in the Notice.

Citicorp accepted that the matters relating to redemption in Condition 8.11 were not required to be included in the Notice (because this was not a redemption scenario). Argument centred on whether the other matters specified in the condition, which were omitted from the Notice, would invalidate it.

Condition 8.11 not applicable and, if it was, the heading could not be ignored

Without reference to the heading, Burton J found that Condition 8.11 did not apply to the Notice (principally because the absent matters related to redemption and not conversion notices). Further, as the Conditions "… are simply referred to in, and stand alongside" the trust deed, rather than being incorporated in them, Burton J found that the "headings shall be ignored" clause (clause 1.3) of the deed would not apply to the Conditions.

Use of headings in agreements

Burton J also commented that he would "… find it impossible not to be assisted" by the heading to Condition 8.11 even were clause 1.3 of the trust deed to apply. The judge referred to two lines of authority. First, in SBJ Stephenson Ltd v Mandy [2000] FSR 286 and Doughty Hanson & Co. Ltd v Roe [2007] EWHC 222 (Ch) the court was faced with a clause to the effect "clause headings are inserted for convenience only and shall not affect the construction of the agreement". In SBJ Stephenson, Bell J determined the court could look to the heading where it could "tell the reader at a glance what the clause was about." Similarly, in Doughty Hanson, Mann J determined the relevant clause was admissible "as descriptive of what the provision is about".

Secondly, in Gregory Products (Halifax) Ltd v Tenpin (Halifax) Ltd [2012] 2 AER (Comm) 645, where Lewison J indicated "… respect for party autonomy means that the headings cannot be allowed to alter what would otherwise have been the interpretation of the clause in question" – albeit in the context of a clause where the heading and content of the clause were materially inconsistent.

In following the SBJ Stephenson and Doughty Hanson line of authority, Burton J found the heading and content of condition 8.11 were consistent. The judge further indicated that it would astonish the parties to the agreement if the heading of Condition 8.11 had to be ignored. 

Comment: The decision provides limited support for the proposition that a clause heading may be used as an interpretive aid, despite a provision precluding reliance on clause headings to aid interpretation. However, that proposition is only true so long as the heading and substantive content of the clause are consistent. 

The admissibility of a heading as an interpretive aid is less clear where the heading is inconsistent with the content of the following clause. For example, in the Gregory Products case, the relevant clause heading was "Conditionality", while the clause was unconditional. Lewison J conceded the clause dealt generally with conditionality, but Burton J's decision (that the heading cannot alter the clause's interpretation), when considered against the SBJ and Doughty Hanson decisions, means it is difficult to derive a general proposition as to when headings may impact interpretation. 

What is clear is that all four decisions (this decision and the three relied on by the judge) proceed on the basis that a heading may assist where it is consistent with the clause that follows it, and that a clause must be read in its entirety to determine its overall meaning. As such, it seems to be that where the content of a clause is inconsistent with the heading, the heading (in a document with a provision for headings to be ignored in interpreting the document) must be ignored in determining the parties' rights and obligations.