Coco v Westpac Banking Corporation

The appeal in *Coco v Westpac Banking Corporation* concerned the construction of a commercial agreement for a structured equity investment known as the Guaranteed Portfolio Service. The dispute centred on the interpretation of the definition of "Fixed Income Portfolio Value" within the agreement's Asset Allocation Rules, specifically how the value of zero coupon bonds was to be calculated. The matter was heard in the Court of Appeal of New South Wales, with judgment delivered by Allsop P, Giles JA, and Sackville AJA.

The primary legal issue before the Court of Appeal was to determine the correct construction of the formula provided in the agreement for calculating the value of zero coupon bonds. This involved ascertaining whether the "market value for such zero coupon bonds" referred to the market value per unit or the total market value of the bonds. The court was required to resolve ambiguity in the contractual language to give effect to the parties' intentions as expressed in the agreement.

The Court of Appeal reasoned that the definition of "Fixed Income Portfolio Value" required the number of units invested in zero coupon bonds to be multiplied by the market value per unit. This market value per unit was to be derived by dividing the total market value of the zero coupon bonds at the relevant date by the number of units that were sold to acquire those bonds. The court found that this interpretation gave a coherent and commercially sensible meaning to the contractual provisions. Consequently, the Court of Appeal set aside the separate questions, answers, and declaration made by the primary court and substituted its own declaration regarding the construction of the agreement. The appeal was otherwise dismissed, with the appellant ordered to pay the respondent's costs.