FX Group Holdings Pty Ltd v Perpetual Trustee Co Ltd as trustee of the CPEC 8 Trust A (formerly the CHAMP IV Trust A) (No 3) (substantive)

In the case of FX Group Holdings Pty Ltd v Perpetual Trustee Co Ltd, the plaintiff sought to purchase the controlling interest in the foreign exchange trading and investment platform ‘Pepperstone’ from the defendant. The purchase was financed entirely by the vendor, with the agreement that profits above $25 million for four years after the vendor’s financing was repaid would be shared. The agreement was recorded in a Heads of Agreement followed by a Share Sale Agreement. When the time came to share these ‘super returns’, the plaintiff claimed that the Share Sale Agreement contained a drafting mistake, requiring the vendor’s finance to be deducted before sharing the ‘super returns’. The plaintiff argued that they had been aware of this all along. The parties presented competing declarations regarding the proper construction of the contract.

The court was required to decide several legal issues, including whether the cross-examiner was obliged to invite the witness to explain a damaging document that the plaintiff did not refer to in their witness statements, whether the cross-examiner was obliged to ask about the legal advice that was claimed to have been waived, the application of the parol evidence rule and the entire agreement clause, the interpretation of complex drafting with defined terms and embedded definitions, the attribution of knowledge and rectification in relation to the corporate trustee, and whether the plaintiff had unconscionably taken advantage of the defendant’s mistake.

The court held that the cross-examiner was not obliged to invite the witness to explain a damaging document in cross-examination, as fairness did not require this. The court also held that the onus was on the plaintiff to provide evidence as to what the legal advice was, and any inference drawn would be adverse to the plaintiff. The court considered the commercial context, including the Heads of Agreement, in construing the contract, but found that the plaintiff’s construction made the contract vulnerable to manipulation and resulted in ‘double counting’. The court also held that the trustee intended to give effect to the deal negotiated by the manager and that knowledge could be attributed to the trustee. The court found that the plaintiff had breached their contract by retaining more funds than agreed upon.

The court did not need to decide whether the solicitors had breached their duty, as it was unnecessary to do so. The court made orders for the defendant to pay the plaintiff damages for breach of contract and costs.