Super Returns And Not-so-super Drafting: FX Group Holdings Pty Ltd v Perpetual Trustee Co Ltd

In brief and key learnings

The NSW Supreme Court recently handed down the latest quantum judgment in the long running dispute between FX Group Holdings Pty Ltd and Perpetual Trustee Company Ltd, concerning the interpretation of a contingent consideration clause governing the sharing of returns in the $150 million vendor-financed sale of the foreign exchange platform Pepperstone. This follows from the earlier primary judgment, where the Court found for the Vendors, finding that their construction of the Share Sale Agreement aligned with the heads of agreement, the deal’s commercial purpose, and the parties’ shared intention at the time of contracting.

The judgment offers a number of salient points:

• Profit sharing mechanisms should be drafted in clear, unambiguous language, considered in the context of related provisions, and tested against all reasonably possible scenarios to ensure they align with the commercial purpose of the arrangement and avoid any unintended consequences or inconsistencies.
• The best approach is for parties to ensure that they share a mutually consistent understanding of the key clauses, and that these clauses accurately reflect their agreed commercial intentions.
• The Share Sale Agreement remains the primary document for determining the parties' rights and obligations. While courts may have regard to extrinsic materials — such as Heads of Agreement, term sheets and prior negotiations may inform interpretation and resolve ambiguities, they are no substitute for precise drafting. Importantly, courts will not adopt a literal construction where it produces a commercially nonsensical outcome. 
• Courts may consider surrounding terms, prior negotiations and the broader commercial context where there is ambiguity, however this cannot substitute for clear contractual drafting. That said, clear records of the specific arrangements agreed during negotiations, including term sheets, should always be kept. 
• Provisions in Share Sale Agreements governing the sharing of returns should be drafted in clear, unambiguous language. Profit sharing mechanisms should be considered in the context of related provisions, and tested against all reasonably possible scenarios to ensure they reflect the mutually intended commercial outcome.
• In cases where one party is aware of and will benefit from the other party's mistake, and unconscionably declines to notify the mistaken party, this can give rise to rectification for unilateral mistake. For the purposes of rectification, a company’s actual subjective intention is not limited to the formal signatory. The Court confirmed that where a trustee negotiates and finalises a contract through its manager or attorneys, the manager’s subjective intention can be attributed to the trustee for the purposes of rectification.

Background

In 2018, a private equity firm (the Vendor) sold its interest in Pepperstone to FX Group Holdings Pty Ltd (the FX Group), led by Ms Fiona Lock, with the $150 million purchase fully funded by vendor finance to be repaid from Pepperstone dividends over five years. The transaction included a profit‑sharing arrangement under which, once the loan was repaid, profits exceeding $25 million (‘super returns’) would be shared equally between the parties for four years. This agreement was documented in a Heads of Agreement and implemented through a Share Sale Agreement. 

Before completion, Ms Lock identified an alternative interpretation of the profit‑sharing mechanics but did not disclose it. After the loan was fully repaid on 5 May 2022, a dispute arose when Ms Lock asserted that she was entitled to deduct not only the $25 million threshold, but all principal and interest repayments (totalling nearly $210 million) before any super returns were shared.

The Court found for the Vendors, holding that their construction of the Share Sale Agreement reflected the Heads of Agreement, the deal’s commercial purpose, and the parties’ shared intention, and rejecting the FX Group’s interpretation as commercially nonsensical and involving double counting.

Key Issues and Reasoning

A central issue in dispute concerned the proper construction of the clause in the Share Sale Agreement governing the profit-sharing mechanism (or the calculation of ‘super returns’). 

FX Group contended that it was entitled to offset not only the $25 million threshold, but the total principal and interest repayments on the vendor loan (approximately $210 million) before sharing any returns with the Vendor. In contrast, the Vendor contended that all dividends, including those received both before and after the payment of the vendor loan, were captured by the definition of ‘Equity Proceeds’.

To interpret the profit-sharing clause, the Court had to determine:

1. whether ‘dividends’ in the definition of ‘Equity Proceeds’ meant only dividends received after full repayment of the vendor loan, or all dividends;
2. whether it could have regard to the Heads of Agreement and the side letter, where the parties to those documents were not identical to the parties to the Share Sale Agreement; and
3. whether it could consider the context and extrinsic material in interpreting the clause.

Proper construction of the profit-sharing clause 

The Court ultimately agreed with the Vendor's interpretation of the clause, with the Court citing the following key considerations:

1. The outcome of the clause's operation: On a first reading, the Court held that the plain text of the clause supported both the FX Group’s and the Vendor’s constructions. However, the FX Group's construction was commercially nonsensical, as it would require that the loan repayments to be double-counted by being excluded from the dividends making up the "equity proceeds" and then being deducted again in valuing the super returns. The Court observed that there was no commercial or logical basis underpinning such a construction. On the other hand, the Vendor’s construction was held to be logical and coherent, as all dividends (including those used for loan repayments) were included within the meaning of ‘Equity Proceeds’, and then the amounts paid or payable under the loan were deducted in assessing the ‘super returns’ value which could be easily halved and shared equally with the Vendor.
2. Extrinsic materials: The Court held that ambiguity in the Share Sale Agreement permitted extrinsic materials such as the Heads of Agreement and the side letter to be relied upon to construe it. Upon examination, the Court found that these documents best reflected the parties’ agreement, including their understanding of ‘super returns’. Although the Vendor’s construction of the Share Sale Agreement was held to be consistent with the extrinsic materials, the FX Group’s construction was not.
3. The ‘sense check’: The Court held it was entitled to assume that the parties intended to produce a commercial result which avoided ‘commercial nonsense or working commercial inconvenience’. Here, the Court noted that the FX Group's construction would lead to different uplift payments depending on whether the ‘Equity Proceeds’ were derived from sales proceeds or dividends. This would empower Ms Lock to manipulate the amount of profit to be shared, which would fail to serve any commercial purpose behind the agreement. The Vendor's construction was preferred as it treated all proceeds equally.
4. No avoidance clause:  The Court found that the strongly worded ‘No avoidance’ clause in the Share Sale Agreement affirmed a desire to capture all sales proceeds and dividends and ensure they are fed into the ‘super returns’ sharing arrangement. This strongly supported the Vendor's construction.

Footnote

1 .[2025] NSWSC 1055.

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