Key Insights
- The majority owners of Pepperstone have been ordered to pay almost A$100 million to former shareholder CPE Capital after a long legal battle over its 2016 sale.
- The dispute centered on profit-sharing terms and an alleged drafting error in the share sale agreement, with the court ruling in CPE’s favor.
- FX Group Holdings, led by Fiona Lock, has paid over A$77 million ahead of the court’s A$96.9 million ruling; an appeal is pending.
SYDNEY — The majority owners of Australia-based retail FX and CFDs broker Pepperstone have been ordered to pay almost A$100 million to former shareholder CPE Capital, following a protracted legal dispute over the broker’s sale nearly a decade ago.
The battle stems from a complex series of transactions that began in 2016, when CPE — then known as Champ Private Equity — acquired a 60% stake in Pepperstone for A$90 million from co-founders Joe Davenport and Owen Kerr. One of the managing directors working on the deal was Fiona Lock.
Two years later, CPE sought to exit its investment. Lock resigned from the private equity firm and moved full-time to Pepperstone as an owner. CPE agreed to sell its 60% holding to Lock’s newly formed FX Group Holdings, which also included Pepperstone chief executive Tamas Szabo and former director Andrew Defina as shareholders. The remaining 40% of the broker remained with Davenport and Kerr.
A Loan, a Profit-Sharing Clause and a Drafting Dispute
To fund the buyout, Lock borrowed A$150 million from CPE. The loan was structured to be repaid with interest within five years, bringing the total repayment obligation to A$211.6 million. Dividends from Pepperstone were earmarked to service the debt.
Lock finalised repayment of the loan and accrued interest within four years, completing the payout by 2022 as Pepperstone continued to grow under its new ownership structure.
At the heart of the subsequent dispute was a profit-sharing arrangement. CPE maintained that, under the original deal, Lock had agreed to split profits above A$25 million with CPE for four years after the loan was repaid. By late 2022, however, relations had deteriorated, and CPE and FX Group were locked in litigation before the Supreme Court of New South Wales.
CPE said it was shocked to learn that Lock contended profit sharing would not begin until Pepperstone had first earned back the A$211.6 million paid to CPE, and that no sharing would apply to profits below A$25 million. According to claims aired in court, lawyers from King & Wood Mallesons, who acted for CPE, had made a drafting mistake in the detailed share sale agreement that opened the door to this interpretation.
CPE argued that this outcome was inconsistent with the “heads of agreement” reached between the parties. Lock, however, relied on the wording of the executed share sale contract, asserting that it reflected the governing terms.
Court Sides With CPE, Appeal Pending
The case dragged on until September 2025, when Justice Kelly Rees ruled in favour of CPE, finding that it was entitled to receive returns under the deal after the loan had been repaid.
Last week, Justice Rees ordered FX Group to pay CPE A$96.9 million under the terms of the agreement, plus interest. Ahead of the ruling, FX Group had already paid more than A$77 million in December. An appeal was lodged by Lock and FX Group that same month and is yet to be heard.
In her September judgment, Rees described as “absurd” the suggestion that CPE would have agreed to a profit-sharing threshold exceeding A$200 million. She said it made no commercial sense for CPE to lend Lock funds for the acquisition and then allow her to offset the entire repayment before sharing in profits.
Rees found that even if an error had been made in drafting the legal agreement, it would not necessarily be binding if it ran contrary to what the parties had agreed at a topline level. She said Lock had “regarded herself as the beneficiary” of the drafting mistake, while CPE viewed her conduct as “commercial treachery”.
As a consequence, the vendors have yet to receive any ‘super returns’. Further, Lock asserted that she had always known that the share sale agreement operated in this way, albeit acknowledging that this did not accord with the heads of agreement nor what she knew the vendors’ intentions to be,” Rees wrote.
The judge also noted the complexity of the transaction, observing that the dispute revolved around a narrow subset of a much larger contract. She said CPE had pushed the transaction at “breakneck speed”, with law firm KWM working around the clock to meet deadlines.
The multiplicity of emails and draft documents would have presented challenges to the lawyers on both sides in keeping track of comments, proposed amendments and the implications of both for the transaction at large,” Rees said.
A Pepperstone spokeswoman said the company itself was not party to the legal action and that the dispute had no impact on its operations, clients or trading activities.
“This is a contractual dispute between current and former shareholders, relating to historical contractual matters,” she said.