BRISBANE law firm HopgoodGanim has lead what is believed to be the first claim against the National Guarantee Fund in relation to the failed share-lending firm Opes Prime.
A Queensland businessman who deposited almost $75,000 with Opes Prime just days before it collapsed in 2008 has won in a decision handed down this week by Queensland Supreme Court Justice Paul de Jersey.
The fund had previously rejected all claims for compensation by Opes Prime clients who lost money or shares after the firm’s collapse.
De Jersey last week ordered the Securities Exchange Guarantee Corporation, which oversees the fund, to pay $46,998 compensation, plus interest and costs, to Samuel Holdings, a company owned by Nicholas Mather.
The company had transferred the money to Opes Prime as collateral for an anticipated share purchase transaction in early 2008, but the transaction did not proceed and the money remained with Opes Prime when it collapsed just a week later.
The order for $46,998 represents the difference between the $74,600 that Samuel Holdings transferred to Opes Prime, and $27,602 the company received in distributions from Opes Prime’s liquidators.
According to Hopgoodganim litigation and dispute resolution partner Liam Prescott, this decision sheds some light on the interpretation of the Corporations Act provisions related to investor claims made on the National Guarantee Fund.
“The Court found that the money was impressed with a statutory trust, essentially because of the existence of a financial product and because the money was paid in connection with a financial service. The existence of that statutory trust was the basis for the claim against the fund being found to be valid," he said.
Chief Justice de Jersey found that while the funds became the property of Opes Prime once deposited, two statutory provisions of the Corporations Act, sections 1017E and 981H, operated in such a way that the money was held on trust for Mather.
Section 1017E provides that the funds are deemed to be held on trust if they are paid to the seller of a "financial product". It also must be the case that the seller does not issue the product or transfer it to the buyer. Mather's claim, then, is believed to be unusual.
“This claim involved a complex area of the law and the facts were made equally complex by the relevant terms of the Securities Lending and Borrowing Agreement that defined the parties’ legal relationship.
"The decision reflects the specific factual circumstances of this case, but it should also provide some general guidance as to the operation of the statutory provisions that regulate claims against the fund.”