Full Petential Pty Ltd v Vetzpetz Australia Pty Ltd

Full Petential Pty Ltd sought to challenge the termination of a Sub-Distribution Agreement by Vetzpetz Australia Pty Ltd. The basis for termination was a clause in the agreement that allowed Vetzpetz to terminate if there was a change in the indirect beneficial ownership or control of Full Petential. The primary issue before the court was the interpretation of the term "indirect beneficial ownership" in the context of the agreement. Specifically, whether the changes in the ownership of shares in the parent company of Full Petential, which owned all of its shares, constituted a change in indirect beneficial ownership that triggered the right to terminate.

The court held that the term "indirect beneficial ownership" should be interpreted in a way that aligns with the protective purpose of the clause. The court emphasised that the clause was intended to safeguard against changes in control that could affect the relationship between the parties. The court reasoned that a change in the ownership of shares in the parent company, which owned 100% of Full Petential, was reasonably understood as a change in indirect beneficial ownership. This interpretation prevents a party from avoiding the termination right by simply transferring shares in the parent company rather than in the subsidiary. Consequently, the court concluded that there was indeed a change in indirect beneficial ownership, and therefore, the right to terminate was validly exercised.

The court dismissed Full Petential's application and directed the parties to discuss a suitable order regarding costs. Given that Vetzpetz abandoned one of its termination bases before the hearing and that Full Petential's submissions on this point were meritorious, the court indicated that it was disinclined to order costs to follow the event. The court left it to the parties to agree on the costs order, with an option for short oral submissions if an agreement could not be reached.