ANZ may have won this skirmish, but it could still be facing a...

ANZ may have won this skirmish, but it could still be facing a long series of legal battles over the collapse of stockbroker Opes Prime.

After a long day of complex legal argument, Federal Court Justice Raymond Finkelstein dismissed an application from former Opes client CMG Equities for an injunction to prevent ANZ selling shares it has taken possession of as secured creditor of Opes.

One of the reasons given by Finkelstein was that the plaintiffs would not be disadvantaged if an injunction was not granted. If the plaintiffs can prove their case – that is, prove they, and not ANZ, were the owners of the shares involved in their Opes agreements – then the court could make orders forcing ANZ to go back into the market and re-purchase the stock in question.

It was also revealed during today’s proceedings that the total value of the shares involved is around $25 million and that the plaintiff’s portfolio contains a large number of small- and micro-cap stocks, including Goldminex Resources, Buka Gold, Compumedics, Pharmaxis and Shield Mining.

The dismissal of the injunction leaves ANZ free to continue with the “orderly” sell-down of its Opes share book.

It appears likely that the plaintiffs will now take their case to trial at some time later this year.

The success of that trial could hinge on the evidence of Paul Saliba, whose story was contained in an affidavit presented to the court today.

Saliba, the former financial services director at Melbourne-based firm Lincoln Indicators, contacted the plaintiffs’ legal team yesterday to tell of a meeting in late 2004 or early 2005 at which representatives from Opes Prime (directors Laurie Emini and Julian Smith), ANZ Bank (a man named Nick Harding), and Etrade (Malcolm Shippen and Russell Krause) met with Saliba and Lincoln Indicators managing director Tim Lincoln to discuss the possibility of a Lincoln Indicators share fund becoming involved in stock lending.

Saliba states in a letter that forms part of the affidavit: “Mr Smith discussed the process of securities lending and how the beneficial ownership would remain with [the Lincoln Indicators fund]”. Saliba’s letter also claims Emini used a section of the Tax Act as confirmation that beneficial ownership would stay with the fund.

According to the affidavit, ANZ was described in the meeting as the “custodian” of the securities in the securities lending arrangement.

When Emini and Smith were asked what would happen if Opes Prime collapsed, Saliba claims they were told that the agreement would ‘unwind’ and that the securities would be returned to the fund. The affidavit states that the ANZ’s Nick Harding was present during the making of the above representations and did not disagree or seek to comment.

During today’s proceeding, Justice Finkelstein indicated that Saliba’s evidence would be an important plank in the plaintiffs’ case in a trial, although when giving his reasons for dismissing the injunction he did point out that it was not clear whether the agreement entered into by Lincoln Indicators was the same as any agreement entered into by the plaintiffs.

Nevertheless, Saliba’s story offers a possible explanation as to how Opes clients may have been led to believe that they retained ownership of their stock.

It may also raise questions as to how Opes and indeed ANZ were representing the bank’s role in the Opes stock lending agreements.

Justice Finkelstein’s decision confirms that ANZ was always going to be the owner of Opes clients’ stock if the broker collapsed. If Saliba’s claims are right, investors will rightly ask why ANZ representatives did not speak up at a meeting at which Emini and Smith allegedly misled investors about the bank’s role as mere custodians in the event of an Opes collapse.

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