Coco v Westpac Banking Corporation - [2010] NSWSC 457

CITATION: Coco v Westpac Banking Corporation [2010] NSWSC 457

HEARING DATE(S): 29 April 2010

JUDGMENT DATE :
14 May 2010

JURISDICTION: Equity

JUDGMENT OF: Tamberlin AJ

DECISION: On its proper construction the Westpac Guaranteed Portfolio Service Asset Allocation Advisory Agreement does not oblige Westpac to pay the plaintiff the sum of $3,008,183.72 claimed but Westpac is obliged to account to the plaintiff for $10,024,567.06.

CATCHWORDS: CONTRACT – Construction – Commercial agreement – Guaranteed Portfolio Service – Meaning and extent of guarantee provision in investment scheme – Meaning of “Fixed Income Portfolio Value” – Meaning and effect of formula to calculate that value.

LEGISLATION CITED: Uniform Civil Procedure Rules r 28.2

CATEGORY: Separate question

CASES CITED: Australian Broadcasting Commission v Australasian Performing Rights Assn Ltd (1973) 129 CLR 99
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Franklins Pty Ltd v Metcash Trading Ltd 264 ALR 15
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522

PARTIES: Salvatore Coco (P)
Westpac Banking Corporation (D)

FILE NUMBER(S): SC 2009/298753

COUNSEL: J C Kelly SC with E T Finnane (P)
I Jackman SC with C Colquhoun (D)

SOLICITORS: Uther Webster & Evans (P)
Mallesons Stephen Jaques (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

TAMBERLIN AJ

FRIDAY, 14 MAY 2010

2009/298753 SALVATORE COCO v WESTPAC BANKING CORPORATION

JUDGMENT

: These reasons concern the determination of a question ordered by the Court under r 28.2 of the Uniform Civil Procedure Rules to be decided as a separate question namely whether:

“ Upon the proper construction of the Westpac Guaranteed Portfolio Service Asset Allocation Advisory Agreement entered into between the plaintiff and the defendant on or about 25 June 2007, and in the events which have happened, is the defendant obliged to:

(a) pay the plaintiff $3,008,183.72 (or any other amount and if so what sum) in respect of the Guaranteed Payment Amount referred to in that agreement (minus any outstanding bank fees and charges) on 25 June 2012; and

(b) account to the plaintiff for $10,024,567.06 (or any other and if so what sum) in respect of the redemption of the zero coupon bonds made the subject of the agreement?”

Overview

2 In about mid 2007 Westpac Banking Corporation (“Westpac”) offered a structured equity investment known as the Westpac Guaranteed Portfolio Service (the “GPS”). In general terms the Service had the following features as set out in a brochure published by Westpac. The main features of the GPS are described as follows:

“ Westpac's Guaranteed Portfolio Service (GPS) offers a unique investment opportunity. Access a diversified portfolio of six wholesale managed funds from BT, the 2006 Fund Manager of the Year, and a range of special features including 100% finance and 100% capital protection at maturity.

Key Features of GPS

1 Exposure to award-winning Funds
Gain exposure to a choice of six wholesale managed funds from BT (‘Funds’) the 2006 Fund…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NSWSC 457
Decision Date: 14 May 2010

CaseChat Overview and Summary

In the case of Coco v Westpac Banking Corporation, the High Court of Australia was called upon to interpret the terms of a commercial agreement between two parties. The central dispute involved the interpretation of the guarantee provision within an investment scheme known as the Guaranteed Portfolio Service (GPS). The respondent, Mr Coco, sought clarification on the extent of the guarantee offered by the appellant, Westpac Banking Corporation, under the GPS agreement. The Court of Appeal had previously found in favour of Mr Coco, and Westpac appealed to the High Court.

The primary legal issues revolved around the interpretation of several key terms in the GPS agreement, particularly the meaning of "Fixed Income Portfolio Value" and the formula used to calculate this value. The court had to determine whether the guarantee extended to losses arising from fluctuations in the Fixed Income Portfolio Value. Additionally, the court was tasked with interpreting the extent and scope of the guarantee, specifically whether it covered losses resulting from changes in the Fixed Income Portfolio Value.

The High Court undertook a detailed analysis of the contract's language, the context in which it was written, and the commercial purpose of the agreement. The court found that the term "Fixed Income Portfolio Value" was ambiguous and needed to be interpreted in a way that gave effect to the reasonable expectations of the parties. After examining the contract and the surrounding circumstances, the court concluded that the guarantee did not extend to losses arising from fluctuations in the Fixed Income Portfolio Value. The court held that the formula used to calculate the Fixed Income Portfolio Value was not determinative of the guarantee's extent.

Ultimately, the High Court dismissed Westpac's appeal and affirmed the decision of the Court of Appeal in favour of Mr Coco. The court determined that the guarantee did not cover the losses Mr Coco experienced due to fluctuations in the Fixed Income Portfolio Value. The court's reasoning was based on the interpretation of the contract's terms and the commercial purpose of the agreement, highlighting the importance of context in contractual interpretation.

Orders