Imobilari Pty Ltd v Opes Prime Stockbroking Ltd

• Jurisdiction: Australia Federal only
• Judgment Date: 17 December 2008
• Neutral Citation: [2008] FCA 1920
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920

PRACTICE AND PROCEDURE – differences between strike-out and summary judgment – test to be applied – defective pleadings – discovery in aid – whether permissible

TRUSTS AND TRUSTEES – constructive trust – Barnes v Addy knowing receipt claim – necessary elements – requisite state of knowledge – declaration of trust – whether substantial shareholder notice amounts to declaration

Corporations Act 2001 (Cth) ss 602, 671B, 671C, 672B, 672F

Federal Court of Australia Act 1976 (Cth) s 31A

Federal Court Rules O 11 r 16


Baden v Societe Generale pour Favouriser le Development du Commerce et de l’Industrie en France SA [1993] 1 WLR 509
Barnes v Addy (1874) LR 9 Ch App 244
Bell-Atlantic Corp v Twombly (2007) 550 US 544
Bioprospect 01 [2008] ATP 8
Bioprospect 02 [2008] ATP 6
Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146
Bristol and West Building Society v Mothew [1998] Ch 1
Ceneavenue Pty Ltd v Martin [2008] SASC 158
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371
Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232
Dey v Victorian Railway Commissioners (1949) 78 CLR 62
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Giumelli v Giumelli (1999) 196 CLR 101
Goldstein v MCI Worldcom 340 F3d 238 (5th Cir 2003)
Gray v Morris [2004] 2 Qd R 118
Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124
Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited (2008) 167 FCR 372
Johnson Tiles Pty Ltd v Esso Australia Ltd (No 2) (2000) 97 FCR 175
Johnson v GEICO Casualty Co 516 FSupp2d 351 (DDel 2007)
Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557
Koorootang Nominees Pty Ltd v Australia & New Zealand Banking Group Ltd [1998] 3 VR 16
Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1
Luck; Re (2003) 203 ALR 1
Muschinski v Dodds (1985) 160 CLR 583
Newton v Merrill Lynch, Pierce, Fenner & Smith 259 F3d 154 (3d Cir 2001)
O’Sullivan v Parkin (2008) 169 FCR 283
Parsons v McBain (2001) 109 FCR 120
Pascoe v Boensch [2008] FCAFC 147
Pothuwila v Minister for Immigration and Citizenship [2008] FCA 1626
Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1
Schlesinger Investment Partnership v Fluor Corporation 671 F2d 739 (2d Cir 1982)
Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201
Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285
Swain v Hillman [2001] 1 All ER 91
Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1
Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550
Weiss v Regal Collections 385 F3d 337 (3d Cir 2004)
White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298
Wickstead v Browne (1992) 30 NSWLR 1
Yorke v Lucas (1985) 158 CLR 661


7B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1785.3 (1969)

IMOBILARI PTY LIMITED (ACN 091 464 729) v OPES PRIME STOCKBROKING LIMITED (in liquidation) (RECEIVERS & MANAGERS APPOINTED) (ACN 086 294 028), AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522), ANZ NOMINEES LIMITED (ACN 005 357 568) and MERRILL LYNCH INTERNATIONAL (AUSTRALIA) LTD (ACN 002 892 846)

VID 395 of 2008

FINKELSTEIN J

17 DECEMBER 2008

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 395 of 2008

BETWEEN:	IMOBILARI PTY LIMITED (ACN 091 464 729) Applicant
AND:	OPES PRIME STOCKBROKING LIMITED (in liquidation) (RECEIVERS & MANAGERS APPOINTED) (ACN 086 294 028) First Respondent AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Second Respondent ANZ NOMINEES LIMITED (ACN 005 357 568) Third Respondent MERRILL LYNCH INTERNATIONAL (AUSTRALIA) LTD (ACN 002 892 846) Fourth Respondent

JUDGE:	FINKELSTEIN J
DATE OF ORDER:	17 DECEMBER 2008
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The second and fourth respondents bring in short minutes of orders to give effect to these reasons by 4.15 pm on 23 December 2008.

2. Any submission by any party as to costs should be in writing and filed and served by 4.15 pm on 23 December 2008.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 395 of 2008

BETWEEN:	IMOBILARI PTY LIMITED (ACN 091 464 729) Applicant
AND:	OPES PRIME STOCKBROKING LIMITED (in liquidation) (RECEIVERS & MANAGERS APPOINTED) (ACN 086 294 028) First Respondent AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Second Respondent ANZ NOMINEES LIMITED (ACN 005 357 568) Third Respondent MERRILL LYNCH INTERNATIONAL (AUSTRALIA) LTD (ACN 002 892 846) Fourth Respondent

JUDGE:	FINKELSTEIN J
DATE:	17 DECEMBER 2008
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 Imobilari Pty Limited commenced a class action on behalf of a group of investors against the failed stockbrokerage Opes Prime Stockbroking Limited and its financier banks Australia and New Zealand Banking Group Limited and Merrill Lynch International (Australia) Ltd. The basic facts are well known. The statement of claim alleges, based on various equitable, statutory and common law grounds, that the banks are legally liable for the allegedly misleading conduct engaged in by Opes in connection with share lending transactions it entered into with investors.

2 Opes itself is currently in liquidation and leave to proceed against it has not been sought. The company is plainly insolvent and the liquidator is unlikely to recover assets that will discharge any significant proportion of the company’s debts, although there are likely to be some assets that investors will wish to pursue. However, the substantive action, as a commercial reality, involves the claims against the banks.

3 The banks seek to have the claims against them either struck out pursuant to O 11 r 16 of the Federal Court Rules or summarily dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth). Both provisions are procedural vehicles for the summary resolution of claims, in the former case without a trial. Moreover, under both procedures the court may be called upon to consider and resolve questions, even important ones, of law. Nonetheless, there are significant differences between motions for strike out and summary judgment that are sometimes overlooked. It is therefore appropriate to begin with a consideration of those differences and to decide whether, in light of them, O 11 strike out or s 31A summary judgment is the proper vehicle in which to run the arguments.

4 The fundamental thing to understand about the strike-out rule, which the language of O 11 r 16 itself makes clear, is that the rule is concerned only with the adequacy of the pleading (or to be more precise, the allegations and the causes of action asserted therein) as a matter of law. The rule does not permit or allow consideration of facts or evidence outside the pleadings: Dey v Victorian Railway Commissioners (1949) 78 CLR 62, 91, 109; see also General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 129. Indeed, as counsel for ANZ, Mr Archibald QC, correctly noted in his submissions, the court must, for purposes of deciding the strike-out motion and deciding whether a pleading discloses a reasonable cause of action, assume the truth of the allegations in the statement of claim and draw all inferences in favour of the non-moving party because the question is whether those allegations, even if proved, cannot succeed as a matter of law: General Steel 112 CLR at 129.

5 The United States Supreme Court recently reexamined the standard for a strike-out motion (called a motion to dismiss in the US) in Bell-Atlantic Corp v Twombly (2007) 550 US 544. The Supreme Court reaffirmed that on a strike-out motion the court is required to assume the truth of all allegations. Proceeding on that assumption, the Supreme Court held the only question is whether the allegations are enough to raise the applicant’s right to relief above the speculative level. That is, the allegations must be plausible enough to create a reasonable expectation that discovery will reveal evidence to support the claim. This plausibility test is consistent with the strike-out test expressed by the High Court in General Steel, where Barwick CJ said (112 CLR at 129):

“The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense’…. At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or ‘so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument’; ‘so to speak apparent at a glance’.”

6 In contrast, a s 31A application not only permits, but requires, a consideration of matters outside the pleadings: Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146 at [37]. The application is, after all, a trial albeit a summary trial. In White Industries Aust Ltd...