Primebroker are accusing ANZ of misleading and deceptive conduct. Photo: Rob Homer
IN THE heady days of late 2007, when Australian share prices seemed to rise relentlessly against a rising tide of naysayers, the marquees of Flemington partied like there was no tomorrow. When the talk swayed from the horses, it was to shares and margin loans and the fortunes to be made by borrowing to buy.
Among the throng at Oaks Day that year, were the principals of Primebroker Securities, Sal Catalano and Ian Pattison, who happily revelled with representatives of ANZ's equity finance division. The pair specialised in securities lending, and they were keen to ensure ANZ would stick behind their business.
A lot can be said over a champagne or three, and much that may later be regretted, but the Supreme Court of Victoria in coming months may hear a little more about representations those ANZ staff and others made to Mr Catalano and Mr Pattison.
That is because the pair allege that if ANZ staff at the races had not represented to them that ANZ was committed to its securities lending business, they would have put Primebroker into administration and proposed a deed of company arrangement with its creditors.
Instead, they continued in business as the sharemarket in 2008 staggered and slumped through one of the worst crises since the Great Depression.
This morning the Primebroker pair begin their epic lawsuit against the bank, in which they accuse ANZ of misleading and deceptive conduct.
They argue that ANZ and its agent, the insolvency specialist KordaMentha, led them to believe that the bank would support their securities lending business and that it would invest $55 million into Primebroker Securities.
It was ANZ's decision in July 2008 to retreat from a proposed $55 million capital injection at Primebroker that led to the firm closing its doors - a move Mr Catalano and Mr Pattison claim resulted in them losing a business KordaMentha had valued at $100 million. That business was called Chimaera Capital.
Mr Catalano and Mr Pattison want Justice Jennifer Davies to declare that ANZ's move to appoint receivers to Primebroker, as well as to companies the pair controlled that had indemnified Primebroker, was invalid.
They are seeking damages, interest, costs, declarations, the removal of the receivers and managers: in short, they want the whole position back where they were in mid-2008.
They argue that they relied - to their detriment - on ANZ's representations and those of Mark Mentha, of KordaMentha, which was commissioned to assess the plan to invest in Primebroker.
Needless to say, ANZ denies all the allegations the Primebroker duo has flung at it and it contends that there was never any binding obligation to invest.
The bank also denies that it improperly appointed receivers and managers or that its actions in terminating a $36 million 12-month loan with Primebroker were out of order.
But this is not a simple dispute. There are in fact six cases being heard at the same time and 38 days have been set aside for hearing, which means that, unless an armistice is declared, the warring parties will not be out of court until some time in February.
The cast of witnesses include Mr Catalano and Mr Pattison, and lawyer Nick Stretch, the former managing partner of Gadens Lawyers in Melbourne, who was chairman of Chimaera when it collapsed and who, coincidentally, has previously acted for ANZ in handling insolvencies such as Sons of Gwalia, Arthur Andersen and Evans & Tate. Now Mr Stretch is giving evidence against the bank.
Also headed for the witness box is Ben Steinberg, the head of lending services for ANZ's corporate clients, who, to say the least, was a very busy man in the first half of 2008 as share prices plunged and investors were caught with calls against their margin loans.
Not only was Mr Steinberg juggling Primebroker's issues, but he was in the thick of controversy over ANZ's role in the collapse of another second-tier securities lending firm, Opes Prime. Mr Steinberg is expected to give evidence over three days. His witness statement runs to almost 200 pages.
The court will also hear from Mr Mentha, who is a KordaMentha co-founder and principal, plus ANZ staff and expert witnesses including insolvency specialist Laurie Fitzgerald of BDO.
