Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479 (Judd J) and Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (No 3) [2011] VSC 182 (Judd J)

CONTRACT - Australian Master Securities Lending Agreement ('AMSLA') - Appellant 'borrowed' securities from respondent and lent funds to respondent - Appellant obliged to re-deliver equivalent securities to respondent subject to certain conditions - Respondent defaulted under contracts with appellant - Appellant sold borrowed securities to discharge respondent's debt and expenses with surplus going to respondent - Securities sold at less than market value - Whether borrowing transaction created security interest or transferred beneficial ownership of securities - Effect of custom clause inserted into AMSLA limiting obligation to re-deliver equivalent securities - Whether AMSLA netting clause operated - Calculation of market value of securities - Appeal dismissed.

1 The appellant, formerly known as Fortis Clearing Sydney Pty Ltd ('Fortis'), is a specialist securities broker. The respondent, Primebroker Securities Ltd ('Primebroker'), now in liquidation, was a securities trader and a client of Fortis. Fortis 'borrowed' certain securities from Primebroker and was required to redeliver 'equivalent securities' subject to certain conditions. Primebroker defaulted under its contracts with Fortis. Fortis then sold some of the securities for less than their market value at the time of default and applied the proceeds against Primebroker's debt to Fortis. The central question in this appeal is whether Fortis is required to account to Primebroker for the borrowed securities at market value or at sale value.

2 The learned trial judge held[1] that the contracts between the parties made Fortis the beneficial owner of the 'borrowed' securities. When Primebroker defaulted on 4 July 2008, a 'netting' clause in one of the contracts automatically converted Fortis' redelivery obligation into a dollar amount owed by Fortis to Primebroker, calculated by reference to the value of the securities on the first business day after the date of default. His Honour therefore held that Fortis was required to account to Primebroker for the value of the securities on 7 July 2008, the first business day after 4 July 2008, rather than the amount that Fortis actually realised from the sale of the securities. The appellant contends that his Honour erred in so holding.

3 The parties are also in dispute about the market value of one of the securities - notes in Octaviar Ltd ('Octaviar') - on 7 July 2008. There were no trades in Octaviar notes on that day. In valuing the notes, the learned trial judge relied on the price at which the notes were last sold before 7 July 2008. His Honour also relied on Octaviar's offer to note holders made after 7 July 2008.[2] The appellant contends that his Honour erred in relying on these two matters.

4 For reasons that follow, I consider that the learned trial judge did not err in either respect. I would therefore dismiss the appeal.

5 The contracts between the parties consisted of Fortis' Standard Client Agreement ('SCA'), executed on 19 December 2006, and additional service agreements included as schedules to the SCA. The SCA was the overall 'umbrella' agreement[3] while the service agreements dealt with specific services that Fortis offered to its clients. The clients could choose which services they subscribed to.[4] Primebroker subscribed to all of the services offered by Fortis but only two of the service agreements are presently relevant. The first is the 'Dealing Loan Facility' contained in sch 3 of the SCA. The second is the 'Australian Master Securities Lending Agreement' ('AMSLA'). It is contained in sch 11 of the SCA but was separately executed by the parties on the same day as the SCA.

6 The Dealing Loan Facility dealt with the provision of credit by Fortis to its clients. Under that agreement, Fortis provided to Primebroker a line of credit for up to $50m.[5]

7 The AMSLA is a standard form contract for securities lending developed by the Australian Securities Lending Association Ltd. The AMSLA creates a procedure whereby by one party (the 'lender') transfers securities to the other party (the 'borrower') pursuant to a 'borrowing request'. In return, the borrower transfers to the lender cash or other securities or financial instruments described as the 'collateral'.

8 The borrower has an obligation to redeliver 'equivalent securities' back to the lender upon the expiry of the term specified in the borrowing request or at call.[6] The lender in turn has to redeliver to the borrower equivalent collateral (or repay the cash collateral) at the same time as the lender is required to redeliver equivalent securities.[7] Equivalent securities are defined as securities that are equivalent in number and type to the borrowed securities, with provisions for circumstances like splits and redemptions.[8] Equivalent collateral has a similar definition.[9]

9 The AMSLA expressly provides that the borrower receives beneficial title to the 'borrowed' securities:

Notwithstanding the use of expressions such as 'borrow', 'lend', 'Collateral', 'Margin', 'redeliver', etc., which are used to reflect terminology used in the market for transactions of the kind provided for in this Agreement, all right title and interest in and to Securities 'borrowed' or 'lent' and 'Collateral' which one Party transfers to the other in accordance with this Agreement ('title') shall pass from one Party to the other free and clear of any liens, claims, charges or encumbrances or any other interest of the Transferring Party or of any third party (other than a lien routinely imposed on all securities in a relevant clearance system), the Party obtaining such title being obliged to redeliver Equivalent Securities or Equivalent Collateral, as the case may be. Each Transfer under this Agreement will be made so as to constitute or result in a valid and legally effective transfer of the Transferring Party's legal and beneficial title to the recipient.[10]

10 The AMSLA also provides for the lender to pay the borrower a fee for transactions where the collateral is cash. If the collateral is something other than cash, it is the borrower that has to pay a fee to the lender.

11 The purpose of this type of arrangement was considered by Finkelstein J in Beconwood Securities Pty Ltd v ANZ Banking Group Ltd,[11] in the context of a securities lending agreement derived from the standard AMSLA. His Honour observed that securities lending transactions fell into two categories. First, there were transactions where the borrower pays a fee to obtain specific securities; secondly, there were transactions where the lenders pays a fee to obtain access to cash:

[5] The modern securities lending market can, broadly speaking, be divided into two markets, one that is defined by the motive of the borrower (the 'securities driven' market) and the other by the motive of the lender (the 'cash driven' market). In the first category, which is the more common type of transaction, a borrower seeks access to specific securities, usually to cover exposure to a short position. In the second category, a lender of securities seeks access to cash, often for purposes of equity financing at interest rates which are better than the uncollateralised borrowing rate.

[6] ... In a securities loan transaction in the securities driven market the lender transfers specific securities to the borrower who must return 'equivalent securities' to the lender either on demand, on the occurrence of a defined event or at the end of an agreed term. The borrower: (1) obtains an outright transfer of title to the securities, which may then be sold or on-lent; (2) pays a fee for the use of the securities, calculated by reference to the value of the lent securities; and (3) provides collateral to the lender in the form of cash, other securities or other assets (eg government bonds, certificates of deposit, bank letters of credit), title to which passes to the lender. The value of the collateral exceeds the value of the borrowed securities, the difference in percentage terms being referred to as the 'margin'. At the conclusion of the transaction there is an exchange of 'equivalent securities' for 'equivalent collateral'. In the event of default provision is made for placing a money value on each party's obligations, setting one off against the other, and, if there is a net balance, for payment of the balance. A securities loan in the cash driven market follows the same structure but with important differences. First, the collateral is always provided in the form of cash. Secondly, the amount of cash collateral is less than the value of the lent securities. And thirdly, the lender pays a fee, much like interest, calculated by using a discounted interest rate. By reason of these differences commentators and securities lending participants colloquially refer to the securities rather than the cash as the collateral.

12 The AMSLA was designed to accommodate both kinds of transactions, which is why it provided for the fee to be payable by either the borrower (securities driven transaction) or the lender (cash driven transaction) depending on the nature of the collateral.

13 In this case, the ordinary operation of the standard AMSLA was, from the beginning, modified in two ways. First, sch 3 to the AMLSA provided that there was to be no collateral:

The parties acknowledge and agree that No Collateral will be delivered or deposited under this Agreement.

14 Secondly, cl 8 of the SCA, entitled 'Securities Lending', provided that Fortis did not receive a beneficial interest in the securities:

(a) The Client [ie Primebroker] acknowledges and agrees that any borrowing and lending of Securities from or to:

(i) any other clients of Fortis; and

(ii) any other entity that Fortis deal with for Securities borrowing and lending (SB&L Entity)

may be arranged by Fortis, in both cases where the other party has signed an agreement in the same or similar terms as [the AMSLA].

...

(c) The Client acknowledges that Fortis is its agent to procure arrangements for Securities lending and borrowing as set out in this clause on the terms of [the AMSLA].

(d) The Client acknowledges that Fortis might be the legal owner and counterparty to the Transaction but has no beneficial interest in the Securities borrowed or lent under this clause or [the AMSLA].

15 Counsel for Fortis explained that these modifications 'contemplated ... a state of affairs where many clients of Fortis sign an agreement in the form of [the AMSLA] and Fortis, then acting as a middle man or broker, arranges securities lending transactions between those parties'.[12] It is unnecessary to consider the effect of these modifications because the parties amended the AMSLA and the SCA by an amendment deed dated 16 April 2008.

16 On 19 April 2007 Primebroker started funding its trades using money borrowed from Fortis under the Dealing Loan Facility.[13] About a year later, the parties executed an amendment deed that amended both the SCA and the AMSLA. The amendments were exclusive to Primebroker and Chimaera Capital Pty Ltd, an entity related to Primebroker; Fortis did not enter into similar amendment deeds with any other clients.[14] It appears that Fortis was concerned about the ability of Primebroker to repay the money it had borrowed under the Dealing Loan Facility and that the purpose, or one of the purposes, of the amendment deed was to protect Fortis against the risk of insolvency by Primebroker.[15]

17 The amendment deed appears to have been hastily drafted and is therefore not as refined as the AMSLA.[16] In any event, the amendment deed deleted cl 8 of the SCA, which provided, inter alia, that Fortis does not have a beneficial interest in securities borrowed under the AMSLA.[17] The amendment deed substituted a new cl 8 that relevantly provides:

(d) The parties confirm that Fortis, as either Borrower from or Lender to, the Client under [the AMSLA], does so in its capacity as a principal to the Securities loan...

18 The amendment deed also inserted a new cl 7B into the AMSLA. That clause provides that the borrower's obligation to redeliver equivalent securities or to make a payment 'does not arise' if 'at the relevant time' certain conditions exist. These conditions include insolvency or default on the part of the lender.[18]

19 I will continue use the acronym 'AMSLA' to refer to the AMSLA after it was modified by the amending deed.

20 All securities transferred to Fortis by its clients in connection with 'third party clearing and settlement services' were held by Fortis in a dedicated 'Holder Identification Number' ('HIN') in the name of Fortis Clearing Sydney Nominees Pty Ltd. The parties referred to that HIN as the 'Settlement HIN'.[19] Under the ASX rules, Fortis was only permitted to use the Settlement HIH to hold securities held on trust for clients. Fortis was required to transfer any securities which it beneficially owned out of the Settlement HIN within three days.[20]

21 At the time the amendment deed was executed, Fortis held securities on behalf of Primebroker in the Settlement HIH. On the day the amendment deed was executed, Fortis sent a borrowing request to Primebroker, under the amended AMSLA. The request sought to borrow '[a]ll securities held in Primebroker's Portfolio held with Fortis', that is, all of the securities held in the Settlement HIN on behalf of Primebroker.[21] On the same day, Fortis transferred Primebroker's securities from the Settlement HIN to a separate HIN in Fortis' own name (the 'Fortis HIN'). Subsequently, Fortis made two further borrowing requests and, having received the sought securities from Primebroker, transferred them into the Fortis HIN.[22]

22 Fortis did not provide any collateral for any of the borrowing requests.[23] When Fortis sent its first borrowing request, a Chimaera Financial Group Ltd representative replied asking why Fortis put 'not applicable' in the 'Type of Collateral' field on the borrowing request. A Fortis representative responded saying:[24]

I confirm that this is correct.

Chimaera and PB agreed to lend the securities on the basis that Fortis continues to provide financial accommodation and services to both Chimaera and PB.

Primebroker's default and the sale of borrowed securities by Fortis

23 On 4 July 2008 a creditor appointed receivers and managers to Primebroker. The parties agree that this constituted a default under the SCA, the Dealing Loan Facility and the AMSLA.[25]

24 There is, however, some ambiguity about what is meant by an event of default under the AMSLA. The agreed summary of facts states that the appointment of receivers constituted an event of default under 'clause 12 of the AMSLA'.[26] The chapeau of cl 12 provides that each of the nine items that follow is an event of default 'for the purposes of clause 8'.[27] But it appears that the amendment deed inserted a new, tenth, item into that list. The new item states that '[f]or the purposes of clause 7B, Event of Default shall have the same meaning as in the [SCA]'.[28] So the expression 'event of default for the purposes of cl 12' is ambiguous because cl 12 appears to define an event of default differently for the purposes of cl 8 and cl 7B.

25 However, the ambiguity is resolved by the manner in which Fortis conducted its case. Primebroker's entire case depended on cl 8.2 of the AMSLA. If that clause was not triggered, Primebroker had no case. Yet Fortis did not, at any point during the appeal, suggest there had been no event of default for the purposes of cl 8.2 or that the event of default had occurred on some date other than 4 July 2008. It is apparent that Fortis accepts that the appointment of receivers constituted an event of default for the purposes of both cl 8.2 and cl 7B. It may be that this acquiescence or concession was wrongly made.[29] However, both parties conducted the trial and the appeal on that basis. Thus, I will proceed on the same basis.[30]

26 On 4 July 2008 Primebroker owed Fortis about $20.8m under the Dealing Loan Facility.[31] After being notified of the appointment of receivers to Primebroker, Fortis commenced selling securities that it had borrowed from Primebroker. It then credited Primebroker with the proceeds of the sale. In doing so, Fortis proceeded on the basis that it could fully discharge its obligations to Primebroker with respect to the borrowed securities by crediting Primebroker with the proceeds of their sale. By 17 July 2008, Fortis had generated about $21m from the sale of securities. This was sufficient to discharge Primebroker's outstanding debt together with Fortis' expenses leaving a small surplus of about $100,000.[32]

27 In February 2009 Primebroker commenced a proceeding against Fortis under s 424 of the Corporations Act 2001 (Cth) seeking directions concerning the construction of the contracts between the parties. There were no pleadings.[33] Primebroker claimed that Fortis was entitled to account to it for the market value of the borrowed securities on the day of the default rather than the amount Fortis actually realised from their sale. It was common ground that the former substantially exceeded the later.[34]

28 The learned trial judge found for Primebroker. Fortis now appeals that decision.

The issues and parties' positions in relation to the sale of the securities

29 Fortis does not dispute any of the learned trial judge's findings of fact. Rather, Fortis challenges his Honour's construction of the suite of agreements and the substance of the relationship between the parties.

30 Fortis relies on default provisions of the SCA and the Dealing Loan Facility, which entitled Fortis to sell Primebroker's assets, apply the proceeds to discharge Primebroker's obligations to Fortis and pay the balance, if any, to Primebroker. Fortis contends that the borrowed securities were an asset of Primebroker that Fortis could liquidate under these provisions.

31 Primebroker, on the other hand, contends that the borrowed securities fell to be dealt with under cl 8.2 of the AMSLA, the 'netting clause'. That clause provides that, in the event of default, the parties' obligations to each other are accelerated so as to be due on the day of default. Each party's obligations are then valued and converted into a dollar amount due from that party to the other party. The obligation to redeliver equivalent securities is valued as, effectively, the market value of the securities on the first business day after the date of default. Finally, the amounts due from one party to the other are offset against each other to produce a single net amount owed by one party to the other. Primebroker submits that the netting clause operated to convert Fortis' obligation to redeliver equivalent securities into a money sum calculated by reference to the market value of the securities on 7 July 2008. Fortis is required to credit Primebroker with that amount.

32 Primebroker contends that the default provisions of the SCA and the Dealing Loan Facility were not applicable to the securities because the securities were not an asset of Primebroker. Fortis was the beneficial owner of the borrowed securities and they were therefore an asset of Fortis. While Fortis, as the beneficial owner, was entitled to sell its securities, this could not affect Fortis' obligations to Primebroker. Fortis is not entitled to credit Primebroker with the proceeds of sale of its own assets.[35]

33 Fortis' response to Primebroker's position is threefold. First, Fortis disputes that it was the beneficial owner of the borrowed securities. It contends that that the transfer of securities was in the nature of a security for Fortis' loan to Primebroker and that Primebroker retained a beneficial interest in the securities.[36] Alternatively, Fortis submits that even if it was the beneficial owner of the securities, as a matter of construction, the securities were still an asset of Primebroker within the meaning of the default provisions of the SCA and Dealing Loan Facility. Fortis could therefore liquidate them on default by Primebroker.[37] Secondly, Fortis contends that the netting clause was not applicable due to cl 7B of the AMSLA inserted by the amending deed. Thirdly, Fortis contends that even if the netting clause were applicable, Fortis was entitled to deal with the securities under the default provisions of the SCA and the Dealing Loan Facility rather than under the netting clause.

34 Primebroker does not contend that if, contrary to its submission, it retained a beneficial interest in the borrowed securities, the netting clause could effectively convert Primebroker's proprietary rights to the securities into a money sum owed by Fortis to Primebroker.[38] Primebroker appears to accept that its case will fail if Fortis is correct about the beneficial ownership of the securities.

35 The first part of the appeal therefore gives rise to three questions. First, were the default provisions of the SCA and the Dealing Loan Facility applicable with respect to the borrowed securities? Secondly, was the netting clause of the AMSLA applicable? Thirdly, if the answer to both questions is 'yes', could Fortis choose to deal with the borrowed securities under the default provisions of the SCA and the Dealing Loan Facility rather than under the netting clause?

36 The answers to the first and second questions in turn depend on another question - was Fortis the beneficial owner of the borrowed securities?

37 For reasons that follow, I would answer these questions as follows. Fortis was the beneficial owner of the securities. The netting clause of the AMSLA was applicable. That clause had operated to require Fortis to account to Primebroker for the value of borrowed securities on 7 July 2008. Even if the default provisions of the SCA and the Dealing Loan Facility were otherwise applicable, the netting clause having already operated, Fortis could not choose to deal with the borrowed securities under these other provisions. It is therefore unnecessary to decide whether these provisions would have otherwise been applicable.

Fortis is not entitled to deny beneficial ownership of the borrowed securities

38 While Fortis now denies that it was the beneficial owner of the securities that it had borrowed from Primebroker under the AMSLA, this is a departure from its previous position. An examination of the trial materials[39] before the Court makes it clear that Fortis' position at trial was that it was the beneficial owner of the borrowed securities.

39 First, there is the affidavit of Mr Barry Neil Parker, managing director of Fortis sworn on 30 March 2009. Mr Parker deposes that from 16 April 2008

as the holder of both the legal and beneficial interest in the securities which had been transferred to it by Primebroker under the AMSLA as amended by the Amendment Deed, Fortis lodged regular notices of substantial holding with ASIC in accordance with section 671B of the Corporations Act 2001 (Cth).[40]

40 Secondly, Fortis' counsel at trial made the following submissions during the trial:

... when you look at the amending deed, ... its apparent purpose was ... to give additional protection to Fortis ... by providing, contrary to the situation that obtained previously, the securities were to be held absolutely by Fortis.[41]

...

[Clause 8(e) of the SCA provided] that Fortis takes no beneficial interest in the securities that it borrowed under [the AMSLA]. When Your Honour looks at the amending deed Your Honour will see that clause 8 is amended so as to reverse that position and to ensure that Fortis takes absolutely on the borrowing of the securities. ... So the amending deed it apparently sought to further protect its position ... by taking the securities absolutely ... [42]

...

... [Fortis power under cl 6 of the Dealing Loan Facility is] strengthened by the amending deed to the extent that shares become Fortis's' absolutely.[43]

...

[Fortis] can sell [the securities]; it can apply the proceeds of sale to Primebroker's indebtedness to it (Fortis) and then if there's anything left over after that indebtedness is satisfied then plainly there is going to be an obligation at least in equity to account for whatever is left over, be it unsold stock or the proceeds of the sale of stock because the common assumption or the conventional basis on which the parties dealt was that those stocks, although legally held absolutely by Fortis, were for the purposes of the arrangements between the parties part of the client portfolio or part of the net liquidation value and to that extent at least might be considered an asset of Primebroker for the purposes of reconciling the positions between the parties [on] determination of their relationship.[44]

...

The absolute ownership of the shares gave [Fortis] entitlement to sell quite apart from anything else.[45]

41 Thirdly, the trial judgment states that '[i]t was common ground that Fortis was entitled to deal with the securities it held as if its own, to sell or otherwise dispose of them at any time and in any manner it saw fit'.[46] The judgment also refers to 'a submission by Fortis that until 16 April 2008, when the AMSLA was amended, Primebroker retained the beneficial interest in the securities'.[47] There is no reference to any submission by Fortis to the effect that it was not the beneficial owner of the securities.

42 On appeal, Fortis did not attempt to depart from the proposition that it was the beneficial owner of the securities in any of the written materials filed before the hearing. Its notice of appeal and its written submissions do not make any suggestion that the trial judged erred by holding that Fortis was the beneficial owner of the securities. Indeed, the agreed summary of facts expressly adopts passages from Mr Parker's affidavit,[48] including:

From [the time that the borrowed securities were transferred to the Fortis NIH], as the holder of both the legal and beneficial interest in the Borrowed Securities, Fortis lodged regular notices of substantial holding with ASIC in accordance with section 671B of the Corporations Act 2001 (Cth).[49]

43 It seems that the suggestion that Primebroker retained an interest in the borrowed securities was made for the first time in the course of oral submissions at the hearing of the appeal. Primebroker's counsel did not, at the time, object to Fortis raising this issue, although he confirmed that it was common ground at trial that Primebroker was entitled, at any time, to sell, lend or otherwise deal with the securities in any way it saw fit. After the hearing, Primebroker's counsel provided to the Court, at the Court's request made during the hearing, a tagged copy of the transcript of the first day of the trial. Highlighted on the tagged page were the last two transcript excerpts just extracted, where Fortis' counsel expressly submits that Fortis had acquired absolute title to the securities.

44 In my view, even though Primebroker's counsel did not expressly raise an objection, Fortis is not entitled to raise for the first time, on appeal, a contention that is directly contrary to its position at the trial. I observe that neither of Primebroker's appeal counsel appeared at trial. Further, the issue of beneficial ownership was not flagged in the notice of appeal or the written submissions. In my view, Fortis should not be permitted to raise this issue now.[50]

45 This is sufficient to dispose of the matter. However, for the sake of completeness, I will deal with the merits of Fortis' submissions on the substantive issue.

Fortis was the beneficial owner of the borrowed securities

Title is governed by the intended legal effect of the transaction

46 Fortis submits that the AMSLA did not give it a beneficial interest in the borrowed securities but merely a security interest. Fortis' appeal counsel was somewhat schematic in describing the precise nature of this interest:

... a legal mortgage will probably not be recognised; it will be, instead, some sort of equitable charge that general equitable property will remain in the transferor, the debtor, subject to an equitable charge in favour of the security holder.[51]

...

[It was not] a legal mortgage but it was a charge, an equitable charge at the very least, and the chargeor retained the equivalent of an equity of redemption.[52]

47 The starting point for determining the issue of beneficial ownership are the express terms of the AMSLA. The AMSLA expressly provides, in two places, in clear and unambiguous terms, that the borrower of securities, here Fortis, acquires, absolute title to the borrowed securities. Clause 1.4(b) provides that 'all right title and interest in and to' the borrowed securities 'free and clear of any liens, claims, charges or encumbrances or any other interest' of the lender so that the transfer results in a 'valid and legally effective transfer of the [lender's] legal and beneficial title to the [borrower]'. Clause 10 provides that the lender warrants that 'it is absolutely entitled to pass full legal and beneficial ownership of all Securities provided by it under this Agreement to the Borrower free from all liens, charges, equities and encumbrances'.

48 Fortis submits that these express provisions are not determinative of the true nature of the parties' rights and interests in the borrowed securities. Fortis submits that 'if the parties truly intend a transaction to be by way of security, the court will treat it thus, whatever the express terms of the agreement'.[53] Applying this proposition to the facts of this case, Fortis submits that the transfer of securities, although disguised in the form of a securities lending transaction, was in truth a security transaction.[54] In substance, the borrowed securities were a security for the moneys that Primebroker had borrowed from Fortis under the Dealing Facility Loan. But 'for whatever reason', the parties did not 'intend to fully record [that] substance' in the written contract.[55] (Fortis does not, however, rely on rectification.)

49 I accept this submission up to a point. First, I accept that the express contractual provisions dealing with title to the securities are not necessarily determinative of the true position. I also accept that the borrowed securities were, in a commercial sense, an effective security for Fortis' loans to Primebroker. Primebroker itself appears to accept this proposition.[56] But it does not follow that Fortis acquired a mere security interest in the borrowed securities. As Finkelstein J observed in Beconwood, 'the character of a transaction is to be determined by reference to its legal nature, not to its economic effect'.[57] The effect of the transfer must, in my view, be determined by reference to what the parties intended its legal effect to be, not by reference to what commercial effect they sought to achieve. There are many mechanisms that parties can use to achieve the commercial object of obtaining a 'security' for a loan. A security interest is just one such mechanism. The law of equity does not preclude the parties from using other mechanisms.

50 This view is consistent with the three authorities on which Fortis relies. The first of these is The Law of Securities by Professor Sykes. Fortis relies on the following passage:

The right to redeem after default is so fundamental that when equity is once of the opinion that the transaction is in substance a loan upon security, it will imply a right to redeem always. It follows that the parties will not effectively exclude this right merely by disguising the transaction, by 'dressing it up' to look like something else. The operative maxim, for equity is annoying fond of maxims that rarely express the full truth, is 'once a mortgage, always a mortgage'. [58]

51 However, immediately after this passage Professor Sykes writes:

The court will inquire into the real substance of the transaction to determine whether the agreement is bona fide and genuine or whether it is a mere cloak or screen for a mortgage transaction. To this it will be behind the document but such an extension should be so pursued as to ignore the legal effect of the documents. ... [A] genuine transaction which is not a mortgage will not be regarded as such.[59]

52 Next, Fortis relies on a decision of the House of Lords in Salt v Marquess of Northampton.[60] Lord Compton, the son of the Marquess of Northampton, was the heir of entail, next entitled after the death of his father to certain land in Scotland. To fund himself until his father's death, when he would get possession of the land, Lord Compton borrowed £10,000. Of course, Lord Compton could only obtain his interest in the land if he was still alive at the time of his father's death. To protect the lenders against the risk that Lord Compton might predecease his father, in which case his estate may not be able to repay the loan, the loan contracts required Lord Compton to take out a £34,500 life insurance policy and to pay the insurance premiums. The insurance was payable only if Lord Compton died during his father's lifetime. The contract dealing with the initial advance on the loan provided that if Lord Compton predeceased his father, the lender could use the insurance payout to discharge Lord Compton's liabilities to the lender and must then pay any excess to Lord Compton's estate. But the parties executed a further contract which purported to alter the position with respect to the benefits of the insurance policy. The new contract recited that the original provision with respect to the policy 'does not accurately state' the terms on which the loan advance was made. Instead, the new contract provided that if Lord Compton predeceased his father while the loan remained outstanding, the insurance policy 'should belong absolutely' to the lenders. As it happened, Lord Compton predeceased his father, having made no repayments. The Marquess, as administrator of his son's estate, brought proceedings against the lenders. The Marquess claimed that the lenders were entitled to the policy only as security for the loan and sought the payment of the balance of the policy payout (after subtracting the amount due to the lenders under the loan contracts). The House of Lords, by majority, upheld the claim.

53 Earl Selbourne, with whom Lord Morris agreed, noted in his speech that 'the policy ... was certainly effected for the purpose of being made (in some sense) a security'.[61] But his Lordship did not consider this fact, which was not disputed, to be determinative of the issue before the House. Rather, the issue was whether the parties intended that 'the policy should be effected for the creditor's protection only, and for his sole benefit, subject to an option for the debtor to make it his own' by paying off the debt or whether they intended that the policy 'should belong to the debtor, subject to the security for the purpose which it was effected'.[62] The question, in other words, was about the intended legal effect of the transaction, not its commercial effect.

54 Finally, Fortis relies on the decision of the High Court in Gurfinkel v Bentley Pty Ltd.[63] Gurfinkel owned land which was mortgaged. He had defaulted under the mortgages and the mortgagees were proceeding to sell the land by public auction. Shortly before the auction, Gurfinkel sold the land to Bentley. The sale price was approximately equal to the amount required to discharge Gurfinkel's mortgages. The contract provided that, in return for a modest fee, Gurfinkel had the option of re-purchasing the land for a price that was significantly higher than the sale price. The option was exercisable within 12 months. The contract also required Bentley to carry on with the construction of a partially completed building on the land. Gurfinkel did not exercise the option within 12 months but later brought a proceeding against Bentley claiming that the sale transaction was in truth a loan and a mortgage. He alleged that the re-purchase price was made up of the purchase price, the cost of the building works and interest. The High Court held, by majority, that the arrangement was not a mortgage but a sale with an option to repurchase.

55 Fortis relies[64] on the following passages from the dissenting judgment of Barwick CJ:

The lands having been found to have been conveyed so as to form a security for money lent, the transfers, though absolute in form and though expressed to be executed for a price paid as distinct from money lent, will be regarded in equity as but mortgages of the land. Thus, though there be no contractual right to redeem at all, the borrower will have in equity a right of redemption. If in such a case there be a contractual right of repurchase, equity will none the less decree redemption, though the borrower has not met the contractual terms for repurchase.[65]

...

The critical question in the case [is] 'with what mutual intention did the parties execute the transfer' bearing in mind in deciding that question that the transferee will not be allowed to hold the transfer as absolute, if at the time of taking it he knows that the transferor intends it to be by way of security only and he allows him to execute with that understanding on his part ...[66]

56 Fortis submits that while Barwick CJ was in dissent, his Honour's statements of principle represent good law. Fortis submits that the difference between the majority and the minority was on the issue of whether the transaction was, in substance, a loan. It submits that in this case there is an undisputed loan so the difference of views between and the majority and the minority is not presently relevant.[67]

57 In my view Gurfinkel, including the extracted passages from the dissenting judgment of Barwick CJ, supports the proposition that the effect of the transaction is to be determined by reference to the parties' intentions as to its legal rather than commercial effect. In my view, when Barwick CJ referred to the transferor intending the transfer 'to be by way of security only' (emphasis added), he was not referring to security in a commercial sense. Rather, the Chief Justice meant that the transferor did not intend the transferee to obtain beneficial title. Consistently with this view, Windeyer J, who was in the majority, held:

Of course if it can be shewn by parol evidence that both parties to a document adopted the form they did as a disguise, then their true intent and not the form will prevail. Thus agreements that were in form sales have sometimes been held to be mortgages when the form of a sale had been adopted as a disguise ...[68]

Parties intended Fortis to acquire beneficial title

58 What then was the intended legal effect of the transfer of securities under the AMSLA and the SCA? Did the parties intend the AMSLA to operate according to its terms and give Fortis beneficial ownership of the securities? Or were the contracts adopted by the parties as a 'disguise' to hide the true intent of effecting a security transaction?

59 In my view, for the following five reasons, the parties intended the provisions governing title to securities to operate according to their terms.

60 First, as the starting position, parties to a commercial contract can ordinarily be taken to intend the contract to operate according to its terms rather than contrary to them.[69] If a party asserts that the contract is a disguise for the parties' true intentions, the onus is on that party to establish that this is so. Discharging this onus will be more difficult when, as in this case, the contract contains an entire agreement clause,[70] was drafted by lawyers and when both parties to the contract are large commercial entities that have access to quality legal advice.

61 Secondly, the distinctions which Fortis sought to draw between the transaction in this case and ordinary securities lending transactions are misconceived. Fortis submits that in an ordinary securities lending transaction, the lender provides collateral for the borrowed securities and one side has to pay the other a fee. Here, Fortis provided no collateral and there was no fee. Instead, Primebroker lent the securities in consideration for Fortis continuing to provide Primebroker with a line of credit. These differences show, Fortis submits, that the borrowed securities were, in truth, security for the money that Fortis had lent to Primebroker.[71]

62 I reject that submission. Even in an ordinary securities lending transaction, the lent securities effectively act as 'security', in a commercial sense, for the exchanged collateral and vice versa. As Finkelstein J explained in Beconwood, '[i]n the cash-driven market, securities lending is a means of obtaining finance and for that reason has features similar to a mortgage'.[72] Hence, in the cash-driven securities lending market, where the cash collateral is effectively a low interest loan,[73] 'commentators and securities lending participants colloquially refer to the securities rather than the cash as the collateral'.[74] Yet his Honour held that a securities lending transaction under the standard AMSLA gives the borrower absolute title to the borrowed securities.

63 So the fact that the purpose of borrowing the securities in this case was to provide a 'security' for Fortis' loan to Primebroker, far from bring a matter that distinguishes this transaction from the ordinary securities lending transaction, is in fact entirely consistent with a securities lending transaction in the cash-driven market. Once that is appreciated, the fact that in this case there was no collateral and no fee becomes a distinction of no significance. Ordinarily, the borrowed securities secure the exchanged cash collateral, which is effectively a loan, and the lender pays a fee, which is effectively interest on the loan. Here, there was no collateral or fee because the parties already had an actual loan on foot under the Credit Loan Facility. This deviation from the ordinary securities lending transaction does not in any way suggest that the parties intended the transfer of the securities to have a different effect.

64 Thirdly, contrary to Fortis' submission, the daily reports that Fortis provided for Primebroker under the SCA do not assist Fortis' case. The SCA required Primebroker to maintain a minimum 'Net Liquidation Value'. The Net Liquidation Value is defined as 'the difference between the total assets of the Client and the total liabilities of the Client to Fortis, held in any account or otherwise under this Agreement'. The definition further provides that this value includes, inter alia, 'the balance of the Client's rights and obligations with respect to Securities lent under [the AMSLA]'. Fortis sent Primebroker daily reports stating the Net Liquidation Value for that day and explaining a breakdown of how that amount was calculated. Both before and after the amendment deed, these reports counted the current value of securities borrowed from Primebroker as a credit to Primebroker for the purposes of calculating the Net Liquidation Value.

65 Fortis submits that Primebroker accepted these reports without objection and acted on them. This shows, Fortis submits, that both parties conducted their relationship on the basis that the securities remained assets of Primebroker.[75] It appears that Fortis puts its submission in two ways. First, that the parties' conduct shows that Primebroker had retained beneficial interest in the securities. Secondly and alternatively, that the conduct shows that the securities, even if beneficially owned by Fortis, were 'assets of the Client' within the meaning of the SCA.

66 The submission is not persuasive. The reports produced before the amendment do not shed light on the effect sought to be achieved by the amendment. Thus, the relevant reports are really the reports produced after the amendment. These reports represent post-contractual conduct vis-à-vis the amended contract. At trial, Fortis claimed an estoppel by convention but it was unsuccessful and it did not revive the issue on appeal. There being no estoppel claim on foot, to use the reports to construe the contract 'would be at odds with the general principle that "it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made"'.[76]

67 In any event, the reports are perfectly consistent with the parties treating the securities as assets of Fortis rather than Primebroker. Supposing that, contrary to Fortis' submission, the parties regarded Fortis as the beneficial owner of the securities and did not regard the securities as an asset of Primebroker for the purposes of the Net Liquidation Value. Even so, Fortis still owed Primebroker an obligation to redeliver equivalent securities. As a matter of logic, one would expect the value of that obligation to be accounted for when calculating the Net Liquidation Value. Indeed the redelivery obligation appears to fall squarely within the expression 'balance of the Client's rights and obligations with respect to Securities lent under [the AMSLA]', which is expressly defined to be part of the Net Liquidation Value. The current market value of the securities is a reasonable way of calculating the value of the obligation to redeliver equivalent securities. That is so even if the redelivery obligation does not arise until some point in the future because it is not possible to predict the future value of the securities on the day of redelivery, which is itself uncertain. It follows that, irrespective of whether the parties treated the borrowed securities as an asset of Primebroker or Fortis, the daily report could be expected to put the market value of the market value of the securities as a credit to Primebroker.[77] The fact that they do so is completely ambivalent as between the competing positions of the parties.

68 This raises the issue of whether the right to redelivery of equivalent securities (as distinct from the borrowed securities themselves) should be regarded an asset of Primebroker capable of being liquidated by Fortis. I will return to that issue later.[78]

69 Fourthly, the whole scheme of the AMSLA excludes any intention to create a security transaction.

70 The AMSLA sets up a scheme whereby the borrower of securities has the right to sell, lend or otherwise dispose of securities at any time. The existence of this right was a common ground at trial.[79] In any event, the right is essential to the operation of the AMSLA. The AMSLA requires the lender to redeliver to the borrower 'equivalent securities' - securities equivalent in number and type to the borrowed securities. The notion of equivalent securities is central to AMSLA and the expression is referred to scores of times. The fact that the borrower is obliged to redeliver 'equivalent securities' demonstrates that the borrower is not required to deliver back the exact same securities that were borrowed.

71 Of course, securities are fungibles. If a borrower borrows securities of the same kind from multiple lenders and 'mixes' them by holding them under the same HIH, it may be impossible to identify which securities where borrowed from which client. However, cl 4 of the AMSLA shows that the proposition that the borrower is required to redeliver equivalent securities, rather than the securities actually borrowed, is not merely a device designed to permit the borrower to 'mix' securities. Clause 4 sets up a contractual mechanism whereby 'the economic benefits of ownership are "manufactured" back to the lender'.[80] Clause 4.2 requires the borrower to pay the lender any dividends or distributions paid by the issuer of securities. The borrower is required to do so 'irrespective of whether the Borrower receive the same'. This clearly contemplates the possibility that the borrower may not actually receive the dividends or distributions on the borrowed securities because it has disposed of and is no longer holding the borrowed securities at the time the dividend or distribution is paid. Similarly, cl 4.3[81] requires the borrower to arrange for any voting rights attached to borrowed securities to be exercised according to the lender's instructions if 'it holds Securities of the same description as [the borrowed securities] at a time when [sic] right to vote arises'.[82]

72 These provisions reveal that not only is the borrower entitled to dispose of the borrowed securities at any time, but it is not even required to hold equivalent securities. The borrower is perfectly entitled to, for example, immediately dispose of all borrowed securities and later meet its redelivery obligations by buying equivalent securities on the market on the day of redelivery. The fact that the borrower has this right is, in my view, inconsistent with the proposition that the lender retains a beneficial interest in (or even a fixed charge over) the borrowed securities or that the borrower has a mere security interest in the securities.

73 One provision that may, at first blush, suggest an intention that the lender retain beneficial title is cl 7B inserted by the amendment deed. Clause 7B provides that 'an obligation on the Borrower to redeliver Equivalent Securities or to make a payment does not arise if, at the relevant time ... an Act of Insolvency has occurred or is continuing with respect to the Lender'. On a literal reading, this clause appears to provide that if the lender becomes insolvent, the borrower is not obligated to either redeliver equivalent securities or to account for the borrowed securities by making a payment. This would, of course, result in a very anomalous windfall to the borrower. Both parties agreed that this could not be the correct result and that there must be some mechanism to account for the borrowed securities.[83] Yet if the obligation to account when the lender is insolvent does not arise from the contract, the only way to explain that obligation is to find that the borrower retains equitable proprietary rights to the securities. Whilst Fortis' counsel hinted at this argument a number of times during the hearing of the appeal,[84] he did not make it in express terms.

74 In my view, this 'cl 7B argument' is only superficially attractive. While I accept that there must be some way to account for the borrowed securities even where the lender is insolvent, the most obvious way to do so would to read down cl 7B itself. It is unnecessary to consider precisely how cl 7B should be read down. It is sufficient to observe, that reading down cl 7B, even by doing violence to its words, would involve a lesser departure from the words of the AMSLA than reading down scores of other provisions to accommodate the lender retaining a beneficial interest in the securities.

75 Further, to accept the cl 7B argument would be to give the amendment deed a very unnatural construction. The amendment deed not only inserted cl 7B but also dealt expressly with the issue of title to the borrowed securities. It did so my removing cl 8(e) of the SCA, that provided that the borrower has no beneficial interest in the borrowed securities. Given that AMSLA has always provided to the contrary, the amendment deed on its face appears to reverse the position that previously existed under the SCA in favour of the position stated in the AMSLA. Clause 7B, on the other hand, does not expressly deal with the question of title. If the cl 7B argument was accepted, cl 7B would be impliedly undoing, through a complex and unobvious means, what would otherwise appear on the face of the amendment deed to be the obvious effect of removing cl 8(e) of the SCA. Further, it would mean that cl 7B which on its face appears to be restricting the borrower's rights would have the opposite effect of enlarging them. This would be a highly counter-intuitive, and therefore unlikely, construction of the amending deed. It is made even more unlikely by the fact that cl 7B is clearly a scrappily drafted provision and it seems implausible that the parties intended it to operate in a deep and complicated way.[85]

76 Finally, I reject Fortis' submission that if the AMSLA gives the borrower beneficial title to the securities this would lead to potential anomalies if the lender defaults. Fortis posits the following hypothetical. Suppose that, contrary to its submissions, the borrower is the beneficial owner of securities. Suppose also that, again contrary to Fortis' submissions, in the event of default cl 8 operates to convert the borrower's obligation to redeliver the securities into a money sum equal to the market value of the securities on the first business day after default. Suppose further that, as in this case, the value of the securities on that day exceeds the value of the lender's liabilities to the borrower. If the lender defaults, the parties' liabilities are offset against one another under cl 8 and the borrower has to pay the difference to the lender. The borrower's obligations to the lender are now fully discharged but the borrower still has the securities. If the securities subsequently go up in price, the borrower can sell the securities at the higher price and keep the profit. Fortis submits this result is anomalous: 'the notion that someone who has taken the securities to secure a pecuniary obligation can get paid more on realisation upon default than the obligation that is secured, more than the amount of the loans, is repugnant'.[86]

77 I reject this submission. The fact that the borrower can make and keep this profit only seems anomalous if one assumes that the borrower has a mere security interest in the securities. But if the borrower has beneficial title, there is nothing anomalous about the borrower being able to make a profit in this way. Fortis' submission pre-supposes that the borrower had some rights to the borrowed securities before default. But, ex hypothesi, it did not. All that the borrower had was a conditional right to get back equivalent securities on a particular day. These equivalent securities can come from any source, they need not be the borrowed securities. The borrowed securities simply become part of the borrower's portfolio upon receipt. They are no different from any other securities of the same kind that the borrower may happen to hold. The borrower can do whatever it likes with its own securities. It can trade them for profit at any time, even if there is no default. If the lender defaults at a time when the borrower still happens to hold some of the borrowed securities, the default has no effect on the borrower's rights to the securities. They belonged to the borrower all along, from the time of transfer. In Fortis' scenario, the borrower is simply making a profit by holding on to its own securities that it could have sold at any time, both before and after default. There is nothing surprising or anomalous about a person being able to make a profit by trading their own securities. [87]

78 For these reasons, I consider that the parties intended the provisions of the AMSLA dealing with title to operate according to their terms and that they did so operate. Fortis was the beneficial owner of the borrowed securities.

79 As I have explained, cl 8.2 of the AMSLA sets up a mechanism whereby in the event of default the parties' obligations to each other are reduced to a single dollar amount due from one party to the other:

8.2 [Netting following occurrence of Event of Default]

If an Event of Default occurs in relation to either Party, the Parties' delivery and payment obligations (and any other obligations they have under this Agreement) shall be accelerated so as to require performance thereof at the time such Event of Default occurs (the date of which shall be the 'Performance Date' for the purposes of this clause), and in such event:

(a) the Relevant Value of the Securities to be delivered (or payment to be made, as the case may be) by each Party shall be established in accordance with clause 8.3; and

(b) on the basis of the Relevant Values so established, an account shall be taken (as at the Performance Date) of what is due from each Party to the other and (on the basis that each Party's claim against the other in respect of delivery of Equivalent Securities or Equivalent Collateral or any cash payment equals the Relevant Value thereof) the sums due from one Party shall be set-off against the sums due from the other and only the balance of the account shall be payable (by the Party having the claim valued at the lower amount pursuant to the foregoing) and such balance shall be payable on the Performance Date.

80 Clauses 8.3 and 8.3 set up a mechanism for calculating the 'Relevant Value' of the securities by reference to trading activity on the first business day after the 'Performance Date'.

81 Fortis submits that cl 8.2 did not operate in this case because of cl 7B inserted by the amendment deed:

7B. Redelivery and Payment Obligations are Conditional

The Borrower's obligation to redeliver Equivalent Securities in accordance with clause 7 and to make any other payment required under this Agreement is conditional. Notwithstanding clause 7 or any other provision of this Agreement an obligation on the Borrower to redeliver Equivalent Securities or to make a payment does not arise if, at the relevant time, any of the following exist:

(a) an Act of Insolvency has occurred or is continuing with respect to the Lender;

(b) where the Lender is Primebroker Securities Limited, any Client Liabilities under the [SCA] are outstanding and have not been paid to the borrower and satisfied in full;

(c) where the Lender is Primebroker Securities Limited, less than 7 months has elapsed since the final payment made by the Lender to the borrower in satisfaction of all Client Liabilities;

(d) where the Lender is Primebroker Securities Limited, any Event of Default in relation to the Lender has occurred or is continuing under the [SCA]; and

(e) where the Lender is Primebroker Securities Limited, any breach by the Lender of the terms set out in paragraphs 2 and 3 of Annexure 'A' of this Deed, and this breach is not remedied within a period of 3 Business Days from the date on which the breach occurred.

82 There is no dispute that paragraphs (a) and (d) of cl 7B were satisfied on the 4 July 2012, the day of the default.

83 Fortis submits that cl 7B extinguished the payment and redelivery obligations, at least in the event of insolvency. There being no redelivery obligations, cl 8.2 had nothing to work on. It simply did not apply.[88]

84 I reject this submission. Clause 7B does not extinguish redelivery obligations but prevents them from arising if 'at the relevant time' certain conditions exist. The language of the chapeau of the clause suggests that that the clause is intended to suspend obligations while the specified conditions exist rather than to extinguish the obligations altogether. The language seems to contemplate that the obligations will revive once the conditions cease to exist.

85 True it is that many of the listed conditions are expressed in terms that, if read literally, would mean that once the condition is triggered it will remain triggered forever. Paragraph (a) is an example. If the words 'an Act of Insolvency has occurred' are read literally, the condition in paragraph (a) will remain triggered forever once an act of insolvency has occurred. Clearly, this cannot be the correct construction of paragraph (a), if only because it renders the words 'or is continuing' superfluous. To give the words 'or is continuing' work to do, the expression 'has occurred' probably has to be read as meaning occurred on the relevant date. But this does not solve all of the problems with paragraph (a). If paragraph (a) remains triggered as long as an act of insolvency is continuing on the part of the lender, the borrower would receive a windfall if a lender becomes (and remains) insolvent. The borrower would be relieved of the obligation to redeliver equivalent securities or make any cash payments. The lender would not be required to account for the borrowed securities in any way. This result is clearly absurd. It could not have been the intended effect of cl 7B. If it was, there would be a serious question as to whether cl 7B is unenforceable as a penalty. Clearly, cl 7B must be read down to require the borrower to account for the borrowed securities at some point even if the lender is insolvent.

86 But it is not necessary to consider how cl 7B should be read down. It is sufficient to observe that, on any view, cl 7B does not fully extinguish the lender's obligations. Even if the obligations do not arise at a particular date, they remain extant and therefore available to be operated on by cl 8.2.

87 Fortis also makes an alternative submission. It submits that even if cl 7B did not extinguish the redelivery obligations, no securities actually fell to be valued under cl 8.2(a). The chapeau of cl 8.2 accelerates the redelivery obligations so to be due on the date of the default. Clause 8.2(a) then provides that the 'Securities to be delivered' are valued. Fortis submits that, in this case, after the chapeau of cl 8.2 accelerated the redelivery obligations to the day of the default, cl 7B intervened to prevent the obligations from arising. There were therefore no 'Securities to be delivered' within the meaning of cl 8.2(a).[89]

88 I reject this submission. In my view, it seeks to give cll 8 and 7B an unrealistically technical construction. Plainly, the purpose of cl 8.2 is to reduce the parties' obligations to each other to a single dollar amount due from one party to the other. The acceleration of the obligations under cl 8.2 is entirely notional. There is no intention that the accelerated obligations be actually carried out on the day of default. Rather, the acceleration is merely a drafting device, a piece of machinery designed to convert the obligations into a dollar figure calculated as if the obligations were due on the day of default. To read cl 7B is interleaving itself in the middle of the operation of cl 8.2 and effectively wrecking the internal machinery of the clause would be to give the provisions a very formalistic, technical and unbusinesslike construction.

89 Such a complicated effect is particularly unlikely to have been intended given that the amendment deed is clearly a very sloppy piece of drafting. I have already referred to the fact that cl 7B needs to be read down because if read literally it would lead to an absurd windfall for Fortis. Another example of the sloppy drafting the amendment deed is the clear error in cl 3(c)(ii) of the deed. Clause 3(c) provides that cl 26 of the AMSLA - the clause defining the various defined terms used in the AMLSA - is to be amended. Sub-paragraph (ii) then provides:

the definition of Event of Default is amended by inserting the following words at the end of paragraph (i):

(j) For the purposes of clause 7B, Event of Default shall have the same meaning as in the [SCA].

90 Yet the existing definition of 'Event of Default' in cl 26 has no paragraph (i) or indeed any paragraphs at all. It simply says that 'Event of Default has the meaning given in clause 12'. Clause 12 does have paragraphs that go up to paragraph (i). Thus, cl 3(c)(ii) must have been intended to amend cl 12, not cl 26. But this is not the end of the matter because paragraph (j) does not fit in cl 12 either. The chapeau of cl 12 provides that each of the paragraphs that follow 'shall be an Event of Default for the purposes of clause 18'. The new paragraph (j) does not fit into that list because it defines what constitutes an Event of Default '[f]or the purposes of clause 7B'.

91 In the end, it is clear enough that what cl 3(c)(ii) of the amendment deed was trying to do was to amend the definition of Event of Default to provide that for the purposes of cl 7B an Event of Default has the same meaning as in the SCA rather than the meaning given by cl 12. Yet the error is significant because it illustrates the fact that the amendment deed is not a careful piece of craftsmanship. Rather, it is a very loosely drafted document that bears the hallmarks of being hastily put together and not properly thought through or proof-read. This character of the amendment deed makes it particularly unlikely that is was intended to have the kind of sophisticated, technical effect on cl 8.2 that Fortis' alternative submission seeks to ascribe to it.

92 In my view, cl 8.2 should be given a commercial construction. The effect of that clause is simply to value all extant obligations under the AMSLA as if they were on the day of the default and then offset the values against each other to produce a single amount due from one party to the other. Clause 7B, does not, in my view, interfere with this operation. It follows that cl 8.2 was applicable in this case.

93 Importantly, my construction does not render cl 7B(d) otiose. Where the lender is Primebroker, cl 7B(d) is triggered if 'any Event of Default in relation to the Lender has occurred or is continuing under the [SCA]'. In contrast, cl 8.2 is triggered by an event of default under the AMSLA. Most circumstances constituting an Event of Default under the SCA would also constitute an Event of Default under the AMSLA but only after Fortis gives a written notice under cl 12 of the AMSLA. Therefore, where there is an Event of Default under the SCA, cl 7B(d) would be immediately triggered to prevent Fortis from being required to redeliver equivalent securities. But in most cases, cl 8.2 would only be triggered later, if and when Fortis gives written notice under cl 12 of the AMSLA. Clause 7B(d) provides protection to Fortis in the intervening period.

94 On a literal reading, cl 7B provides that Fortis has no obligation to make any payments under the AMSLA if 'at the relevant time' 'an Act of Insolvency has occurred or is continuing with respect to the Lender'. This may suggest that even though cl 8.2 applied, the obligation to make a payment of the net amount produced by cl 8.2 'does not arise' because of cl 7B. I have already explained that cl 7B needs to be read down to avoid absurd results. However, I do not need consider how it should be read down because Fortis does not submit that cl 7B operates in the way I have just described to prevent Fortis from being required to pay Primebroker the amount produced by cl 8.2. Fortis accepts that that any amount produced by cl 8.2 is payable.

Fortis could not choose to deal with securities under other default provisions

95 Fortis submits that the suite of agreements between the parties contains multiple provisions for set-off and adjustment. The agreements give Fortis a variety of remedies on default. Clause 8.2 of the AMLSA is just one such remedy. Fortis was not required to use that clause. It could choose to use the default provisions of the SCA and Dealing Loan Facility instead.[90]

96 I reject this submission. Once cl 8.2 is triggered, it operates to convert the parties' respective obligations to a single dollar amount. There is no room for any choice. The clause operates automatically.

97 Clause 8.2 is triggered by an event of default under cl 12 of the AMSLA. All but one of the circumstances capable of constituting an event of default under cl 12 require Fortis to give written notice before they amount to a default. Therefore, in most circumstances Fortis seems to have a choice whether to give the notice and trigger the default. It is unnecessary to consider to consider whether that choice is subject to some implied limitations or obligations. What is clear is that once a default is triggered, there is no more choice left. Clause 8.2 operates and that is the end of the matter.

98 In this case, Fortis concedes that 4 July 2008 there was an event of default under cl 12.[91] It follows that cl 8.2 operated on that day. I accept that once cl 8.2 had operated, the net amount due under that clause became available to be set off under the default provisions of the SCA.[92] However, the amount was already fixed by cl 8.2 on 7 July 2008, the first business day after default. Fortis could not change that amount by subsequently selling the borrowed securities that it still happened to hold on 7 July 2008.

99 Fortis submits that if the borrower is the beneficial owner of securities and can sell the securities at any time, then it could have sold them before default. It would then have to account to Primebroker for the proceeds. Fortis submits that it was therefore entitled to do what it did even without having to rely on any default provisions. If it could sell the securities before default and account to Primebroker for the proceeds, it would be anomalous if it could not do so in the event default.[93]

100 I reject this submission. It is entirely misconceived. Once it is accepted that Fortis is the beneficial owner of the securities, it follows that Fortis selling its own securities before default would have nothing to do with Primebroker.[94] Primebroker would still have a (conditional) right to get back equivalent securities on a particular day. Fortis cannot extinguish that right by selling the securities. Why would Fortis have to account to Primebroker for the proceeds of the sale when the sold securities belonged to Fortis and the sale had no effect on Primebroker's right to get back equivalent securities? Leaving aside default, if the borrower sells the borrowed securities then if and when the time comes for redelivery it would have to obtain equivalent securities from somewhere. If it did not have equivalent securities in its portfolio, it would have to go to market to buy the equivalent securities. In doing so, it could make a profit or it could make a loss. If the borrower made a profit it could keep it and if it made a loss it would have to wear it. In either case, the amount the borrower realised from sale would be of no concern to the lender.

It is unnecessary to consider general applicability of other default provisions

101 For these reasons, cl 8.2 had operated on 4 July 2008 to convert Fortis' obligation to redeliver equivalent securities into a fixed dollar amount. Fortis could not change that amount by subsequently selling the borrowed securities. It is therefore unnecessary to decide whether the default provisions of the SCA and Dealing Loan Facility on which Fortis relied were generally capable of applying to the borrowed securities. That is, it is unnecessary to decide whether, had cl 8.2 not operated on 4 July 2008, Fortis would have been entitled to rely on these default provisions to account for the borrowed securities by crediting Primebroker with the proceeds of their sale. However, because much of the argument was devoted to this matter, I will briefly deal with it.

102 The relevant provisions are cll 17.1 and 17.3 of the SCA and cl 7 of the Dealing Loan Facility.

103 Clause 17.1(a) of the SCA permits Fortis, on default by the client, to:

combine, consolidate, merge or apply all or any part of any credit balance standing to any account of the Client with Fortis or any amount available to Fortis by way of set-off, lien or counterclaim in or towards satisfaction of any money due and payable by the Client to Fortis or by Fortis to the Client under this Agreement; ...

104 Similarly, cl 7 of the Dealing Loan Facility provides:

If an Event of Default occurs, Fortis may, without Notice to the Client, combine, consolidate, merge or apply all or any part of any credit balance standing to any account of the Client with Fortis or any amount available to Fortis by way of set-off, lien or counterclaim in or towards satisfaction of any money at any time due and payable or which may become due and payable by the Client to Fortis under this Agreement. Fortis may for this purpose do all or any of the following:

(a) redeem, vary the terms and conditions of, or appropriate all or any part of any account, deposit of funds or other arrangement between the Client and Fortis on or under which Fortis may be indebted to the Client, notwithstanding any prior agreement to the contrary or the fact that the respective liabilities may not be expressed in the same currency;

...

(c) in the name of the Client, do all such acts and execute and deliver all such documents as may be required to effect any combination, consolidation, merger or application under this sub-clause.

105 Fortis contends that the borrowed securities were part of the 'credit balance' standing to the account of Primebroker and could therefore be set off against the debt owed by Primebroker to Fortis.[95]

106 Fortis also relies on cl 17.1(b) which permits Fortis, on default by the client, to 'take the Liquidation Actions in clause 17.3 as if on the instructions of the Client'. The Liquidation Actions are relevantly defined as:

such actions as Fortis, where clause 17.1 applies, considers reasonable in relation to the Client Portfolio to realise any asset or to discharge any liability in the Client Portfolio; ...

107 The 'Client Portfolio' is defined as 'any of all constituents of the [Net Liquidation Value]. The Net Liquidation Value is in turn defined as the 'the difference between the total assets of the Client and the total liabilities of the Client to Fortis, held in any account or otherwise under this Agreement'. Fortis contends that the borrowed securities were assets of Primebroker within in the meaning of the Net Liquidation Value, and therefore available to be realised under cl 17.3 and then set off against Primebroker's debt.[96]

108 Fortis submits that these provisions should be given a liberal construction. It submits that the borrowed securities fell within these provisions event Fortis was the beneficial owner of securities.[97]

109 I reject the submission that the borrowed securities were an 'asset' of Primebroker or part of the 'credit balance' standing to the account of Primebroker within the meaning of these provisions. Once it is accepted that Fortis was the beneficial owner of the securities, the suggestion that they can somehow be characterised as an asset of Primebroker simply cannot be sustained. It is difficult to comprehend why the provisions should be construed as treating Fortis' own assets as assets of Primebroker. Fortis was entitled to sell the securities at any time even before the default and that had it done so it would not have been required to account to Primebroker for the proceeds of sale.[98] This makes it clear that the securities could not be regarded as an asset of Primebroker.

110 However, what was arguably an asset of Primebroker was the right to redelivery of equivalent securities. Had cl 8.2 not operated, the right would have remained extant. It is arguable that this right was something that could be liquidated under the default provisions of the SCA and the Dealing Loan Facility. If so, it is perhaps arguable that the right could be liquidated by simply selling equivalent securities to a buyer and then accounting to Primebroker for the proceeds. However, at no point during the appeal did Fortis present its case on this basis. It is unnecessary to consider whether this analysis is correct because the right to redelivery was extinguished by the operation of cl 8.2.

Fortis must account to Primebroker for the value of the securities on 7 July 2008

111 For these reasons, Fortis is required to account to Primebroker for the value of the borrowed securities on 7 July 2008, the first business day after default, calculated in accordance with cll 8.3 and 8.4.

The trial judge did not err in valuing the Octaviar notes

112 Lastly, there is the matter of the valuation of the notes in Octaviar Ltd that Fortis had borrowed from Primebroker. Fortis submits that the trial judge erred in finding that the market value of the notes was $24.50 per note.

113 As of 7 July 2008,[99] trading in the notes on the ASX had been suspended for about six months. There was no evidence of any off-market trades in the notes on 7 July 2008. However, there was a great deal of evidence about activities in relation to the notes at other times, both and after 7 July 2008.

114 Evidence of activities before 7 July 2008 included evidence of the following purchases of the notes by Deutsche Bank:

(a) 21 540 notes at $30.00 each on or about 18 June 2008.

(b) Unknown number of notes at $26.50 each on 23 June 2008.

(d) Unknown number of notes at $27.00 each at an unknown date in June.

115 Evidence of activities after 7 July 2008 included evidence that:

(a) In a Proposal to Noteholders dated 17 July 2008 Octaviar offered to pay noteholders $22.50 per note for parcels of 500+ notes. Smaller noteholders were offered higher amounts. The Proposal was supported by a unanimous recommendation of directors but did not ultimately proceed, presumably due to the failure of one or more conditions in the Proposal.

(b) On 25 July 2008 Deutsche Bank purchased 28,500 notes at effectively $13.26 each (the transaction was settled on 8 August 2008).

(c) As at 14 August 2008, notes were being offered for sale to Deutsche Bank at $55.00 per note.

116 The learned trial judge held that the Deutsche Bank purchase on 23 June 2008 at $26.50 and the offer to noteholders on 17 July 2008 at $22.50 'provided useful outer limits to an assessment'.[100] His Honour simply averaged the two figures to arrive at a value of $24.50.

117 Fortis submits that his Honour erred in relying on the offer to note holders because it was not a transaction. It further submits that his Honour erred in relying on the 23 June 2008 purchase because it predates the relevant date and the value of the notes was declining. Fortis submits that 'the only' relevant evidence was the first sale after 7 July 2008, which was at $13.26 per note.[101] Alternatively, it submits that his Honour should have at least disregarded the offer to note holders and averaged the 23 June purchase at $26.50 with the 7 July 2008 purchase at $13.26.[102]

118 I reject these submissions. First, even though the value of the notes was declining, transactions occurring before 7 July are obviously still probative of the value on 7 July in the same way that transactions after 7 July are probative.

119 Secondly, the offer to note holders is also probative. As his Honour pointed out, 'the directors might seem well-placed to form an opinion as to a value that would be attractive to Noteholders'.[103] Further,

[e]vidence of what Octavia was willing to pay in mid-July 2008, in a falling market, established a floor price at that time. Noteholders were not obliged to accept less than the offer of $22.50, assuming the offer conditions were satisfied, but might hold out for more. The fact that the proposal failed to achieve a sufficient response would tend to suggest that a significant number of Noteholders considered that the Notes were worth more than what was on offer.[104]

120 There is no reason to disregard the offer merely because it is not a transaction. The market value of a security is determined by what the market participants perceive that value to be. Evidence of market participants' assessment of the value of the security is therefore highly probative of that value. The offer to noteholders is such evidence. Further, the offer to note holders is a more reliable guide to the value of the notes on 7 July than the purchase at $13.26 on which Fortis relies. The offer is dated 17 July and is therefore closer to the relevant date than the purchase on 25 July.

121 Fortis has not advanced any other arguments to challenge his Honour's valuation. I therefore reject the challenge to the valuation.

123 To the limited extent that this appeal raises issues of general importance, it

concerns the application of the law relating to securities lending - that is, the law which governs 'the temporary transfer of securities, usually on a collateralised basis'.[105] More precisely, securities lending is the practice by which securities are transferred temporarily from one party (the lender) to another (the borrower), with the borrower contractually obliged to return them (or equivalent securities) either on demand or at the end of an agreed term.[106] According to An Introduction to Securities Lending (Australia), a work commissioned for the Australian Securities Lending Association, securities lending 'is a major and growing activity, providing significant benefits for issuers, investors and traders alike', in a market in which 'the value of securities on loan globally exceeds £1 trillion.'[107]

124 It is important that the courts intervene in the securities lending market to the extent, and only to the extent, that the law and legitimate commercial interests require. In other words, the courts should, so far as is possible consistently with the law, allow the market to develop as the market itself determines. The market will necessarily know far more about the practicalities and the problems of securities lending, and the most efficacious means of advancing its interests, than the courts; and when 'standard documentation has been developed by leading trade associations',[108] that documentation should be construed so far as possible in ways which advance the aim and object of its creation. Of course, 'leading trade associations' will not necessarily have the broader public interests at the forefront of their concerns, or reflect those interests even when attempting to do so. But, generally speaking, it is for parliaments rather than the courts to correct any imbalance between the private and the public good.

125 In April 1997, the Australian Securities Lending Association released an Australian adaptation of a standard form of documentation, the 'Global Masters Securities Lending Agency'. This had been prepared by the International Stock Lenders Association, and was intended to govern all securities loan transactions.[109] The Australian version is known as the Australian Masters Securities Lending Agreement, or 'AMSLA'. Its proper construction, in its particular context in the present case as one of a number of relevant contractual documents, is the principal subject of this litigation. A complicating factor is that, on this occasion, the role and function of one of the parties to these proceedings has not precisely coincided with that of either a borrower or a lender in the securities lending market. No question of legitimacy or bad faith arises; but, in this case, a standard form agreement - AMSLA - is part of a suite of documents called upon to govern what has not been the standard form of inter-party dealing which AMSLA is designed to regulate. A further complication is that the relevant documents are not entirely consistent one with the other.

126 The inter-party dealing with which AMSLA is concerned - the modern securities lending market - has been helpfully described by Finkelstein J in Beconwood.[110] The relevant passage has been quoted at [11] of the judgment of the Chief Justice in this appeal, a draft of which judgement I have had the benefit of reading. I will therefore not fully repeat Finkelstein J's description here, but instead record my respectful agreement with it. As his Honour there says, that market 'can, broadly speaking, be divided into two, one that is defined by the motive of the borrower (the 'securities driven' market) and the other by the motive of the lender (the 'cash driven' mar[111]).'111

127 We are here only concerned with the second category, the cash driven market, in which 'a lender of securities seeks access to cash, often for the purposes of equity financing at interest rates which are better than the uncollateralised borrowing rate.'[112] In return for the cash provided by the borrower to the lender (the cash being generally referred to as 'collateral'), the borrower obtains an outright transfer of title to the securities the subject of the 'loan', and is paid 'a fee, much like interest, calculated by using a discounted interest rate.'[113]

128 In this case, the relationship of lender and borrower in the AMSLA sense did not initially exist between the respondent and the appellant. The respondent, Primebroker Securities Ltd ('PSL'), was a share trader and securities lender. The appellant, ABN Amro Clearing Sydney Pty Ltd (to which, given its former name of Fortis Clearing Sydney Pty Ltd, I shall refer as 'Fortis') was a specialist broker offering a range of services to its clients, one of whom was PSL.

129 Fortis did not - at least initially - play the part of borrower, opposite PSL's role as lender, of securities. Rather, one of the most important aspects of Fortis' business was that of an agent, engaged by its clients to bring them into the lender/borrower relationship, governed by AMSLA, with others among its clients. Another significant service was the provision of such financial accommodation as was sought by Fortis' clients for the facilitation of the clients' trading activities. Yet another was to hold clients' securities as custodian, pending the disposition of those securities in the securities lending market. Fortis also provided dealing, clearing and ancillary services.

130 In the first period of their relationship, PSL took advantage of the full gamut of the services offered by Fortis. This had the consequence that that relationship initially extended beyond that for which AMSLA provided. It was for this reason, perhaps among others, that the parties entered into an agreement, known as the Fortis Standard Client Agreement, or 'SCA', to which AMSLA was merely a schedule - albeit a schedule (schedule 11) which was separately executed by Fortis and PSL on the occasion of their execution of the SCA. The 'schedule 11' version of AMSLA acted as a reference point for the terms which Fortis would negotiate on behalf of those clients which, acting in its capacity as agent, Fortis would endeavour to join in the lender/borrower relationship. AMSLA, as reproduced in schedule 11 to the SCA, otherwise purported to be the instrument by which would be effected all of those transactions between Fortis and PSL as would thereafter be carried out under it - albeit that those transactions would also be conducted in accordance with the rules of the Australian Stock Exchange and (so far as they are not inconsistent with schedule 11) the practices, customs and conventions of the modern securities lending market.[114]

131 There were nevertheless two important points at which the schedule 11 version of AMSLA diverged from the standard agreement described by Finkelstein J in Beconwood. The Chief Justice refers to both in her judgment. First, schedule 3 to the 'schedule 11' version of AMSLA provided that no collateral was to be delivered or deposited under it. Secondly, under the heading of 'Securities Lending', and in direct contra-distinction to the standard AMSLA provision as described by Finkelstein J at [25] of his Honour's judgment in Beconwood, cl 8 of the SCA provided that:

(a) [PSL] acknowledges and agrees that any borrowing and lending of securities from or to:

(i) any other clients of Fortis; and

(ii) any other entity that Fortis deals with for securities borrowing and lending,

may be arranged by Fortis, in both cases where the other party has signed an agreement in the same or similar terms as set out in [the] schedule 11 [version of AMSLA].

...

(c) [PSL]:

(i) appoints Fortis as its agent for the purpose of signing an agreement in the same or similar terms as set out in schedule 11 with any other client of Fortis ...; and

(ii) acknowledges that Fortis signs schedule 11 as agent for all of Fortis' other clients ... that have entered into an agreement in the same or similar terms as set out in schedule 11;

(d) [PSL] acknowledges that Fortis is its agent to procure arrangements for securities lending and borrowing as set out in this clause on the terms of schedule 11;

(e) [PSL] acknowledges that Fortis might be the legal owner and counter party to the transaction but has no beneficial interest in the securities borrowed or lent under this clause or schedule 11;

...

132 Clause cl 8 of the SCA is not only a marked departure from the standard AMSLA agreement; it also stands in direct contrast to cl 4.1(b) of the 'schedule 11' version of that agreement. The latter clause is an almost exact replica of the clause examined at [25] of Beconwood, and is to precisely the same effect. It takes the following form:

Notwithstanding the use of expressions such as 'borrow', 'lend', 'collateral' 'margin', 'redeliver' etc., which are used to reflect terminology used in the market for transactions of the kind provided for in this agreement, all right, title and interest in and to securities 'borrowed' or 'lent' and 'collateral' which one party transfers to the other in accordance with this agreement ('title') shall pass from one party to the other free and clear of any liens, claims, charges or encumbrances or any other interest of the transferring party or of any third party ... , the party obtaining such title being obliged to redeliver equivalent securities or equivalent collateral as the case may be. Each transfer under this agreement will be made so as to constitute or result in a valid and legally effective transfer of the transferring party's legal and beneficial title to the recipient.

133 This clause prompted the observation of Finkelstein J in Beconwood that the term 'securities lending' under AMSLA:

... is factually incorrect. The transaction that is referred to as 'lending' is in terms an outright disposal of the securities lent, linked to a subsequent acquisition of equivalent security. In other words the agreements provide that title to the securities on loan, as well as to any collateral that is received by the lender, passes from one party to the other. On the other hand, the economic benefits of ownership are 'manufactured' back to the lender by the terms of the securities loan agreements.

134 Despite the anomalous inclusion, in the one suite of contractual documents, of two conflicting provisions, the SCA (as might be expected) otherwise describes not only that which Fortis was engaged by PSL to perform, but also the obligations placed upon PSL in return. Provision is made in cl 16 for default on the part of either party. PSL commits a default under the SCA if (among other things) it fails to perform an obligation placed upon it by that agreement, and that failure is either incapable of remedy or is not remedied within five business days after notice. Equally, PSL commits a default under the SCA if a provisional liquidator or analogous person is appointed to take possession of any PSL property.

135 A PSL default would of course arise were PSL, in breach of the SCA, to fail to repay when due any part of the financial accommodation provided to it by Fortis pursuant to the SCA. Another default would be committed were PSL to fail to pay to Fortis any monies payable to it for its services as PSL's agent in arranging:

... any borrowing or lending of securities from or to:

(i) any other clients of Fortis; and

(ii) any other entity that Fortis deals with for securities borrowing and lending.[115]

136 The consequences of default by PSL are set out in cl 17 of the SCA. Fortis may take one or more of a number of steps. Relevantly for present purposes, cl 17.1 provides that it may:

(a) combine, consolidate, merge or apply all or any part of any credit balance standing to the account of [PSL] with Fortis or any amount available to Fortis by way of set-off, lien or counterclaim in or towards satisfaction of any money due and payable by [PSL] to Fortis or by Fortis to [PSL] under this agreement;

(b) take the liquidation actions in clause 17.3 as if on the instructions of [PSL].

137 The expression 'liquidation actions' is defined in cl 17.3. Those actions include any which, following a default by PSL, Fortis considers reasonable in relation to the PSL portfolio 'to realise any asset or to discharge any liability in [that] portfolio'. In turn, the expression 'client portfolio' is defined to mean 'any or all constituents of' PSL's net liquidation values - that is, 'the difference between the total assets of [PSL] and the total liabilities of [PSL] to Fortis held in any account or otherwise under [the SCA] as determined by Fortis on any business day.'[116]

138 By April 2008, Fortis was becoming apprehensive about PSL's ability to service what was by then a debt to Fortis of over $20,000,000. As a means of providing itself with additional protection, over and above that for which the SCA and AMSLA provided in the event of a PSL default, Fortis negotiated amendments to not only the SCA but to also the version of AMSLA which was to be found as schedule 11 to that agreement.

139 Fortis' purpose in having PSL join with it in the deed of 16 April 2008 which gave effect to these amendments is revealed in the recitals to that deed. As Davies AJA has noted in her judgment, which I have also had the advantage of reading in draft, the recitals record 'the basis upon which the parties agree to co-operate for the mutual advantage of each and to manage the exposure of [PSL] and Fortis to each other under the SCA and the AMSLA'.[117] They then acknowledge 'that Fortis continues to provide financial accommodation and services to [PSL] under the SCA on the basis of the terms set out in this deed',[118] and that:

in consideration of Fortis continuing to provide financial accommodation and services under the terms of the SCA, the parties have agreed to enter into this deed in good faith to:

(a) amend the SCA and the AMSLA in the manner set out in this Deed;

(b) confirm the application of a new clause 8 of the SCA ...; and

(c) confirm arrangements to manage the exposures of [PSL] and Fortis to each other under the SCA and the AMSLA ... .[119]

140 I agree with Davies AJA that, as the recitals reveal, the parties entered into the amendment deed in consideration of Fortis continuing to provide financial accommodation to PSL under the terms of the SCA. An important element of the context in which the new arrangements were to operate is the presence in the amending deed of cl 7, which is in the following terms:

Except as specifically amended by this deed, all terms and conditions of the SCA and the Australian Master Securities Lending Agreement remain in full force and effect. With effect from [16 April 2008] the SCA and the AMSLA as amended by this deed is to be read as a single integrated document incorporating the amendments effected by this deed.

141 This itself significantly alters the centre of gravity of the contractual suite of documents with which we are concerned. No longer is the SCA the dominant instrument, with multiple schedules making up the whole. No longer is the role of the 'schedule 11' version of AMSLA predominantly that of a yardstick against which Fortis, in its capacity as agent, is to negotiate the basis upon which its clients will deal with each other in the securities lending market. Henceforth, as will be outlined below, AMSLA was to govern, as an equal partner with the SCA, the newly created principal-to-principal relationship between Fortis and PSL. Indeed, it seems to me that, in the lending and borrowing aspects of that relationship, AMSLA would following the amendments serve as the first point of reference, because that relationship is at the heart of AMSLA's raison d'être.

142 In my opinion, the fact that SCA and AMSLA are to be read as a single integrated document precludes the conclusion that the 'loan' of the relevant securities was intended to secure the repayment of the monies that Fortis had advanced to PSL under the SCA. Rather, Fortis wished to secure its position by removing from PSL to itself the beneficial title to those securities. The acquisition, under AMSLA, of the protection of their full legal and beneficial ownership was the means by which this was to be achieved.

143 Consistently with this, the amending deed promoted Fortis in its dealings with PSL from an agent to a principal. First, and of particular importance, the deed deleted cl 8 of the SCA and substituted a new cl 8. The effect was that, amongst other things, Fortis henceforth no longer acted as agent for PSL in effecting trades with other participants in the securities lending market. Rather, as from 16 April 2008, Fortis borrowed securities from PSL 'in its capacity as a principal to the securities loan'.[120] Insofar as is presently relevant, the change made it clear that AMSLA would thereafter apply without equivocation so as to remove any restrictions upon Fortis' title to any securities borrowed by it from PSL; indeed (to refer again to cl 1.4(b) of AMSLA, which was not the subject of any amendment) Fortis would have conferred upon it, unequivocally, 'all right, title and interest in the securities "borrowed" or "lent" ... free and clear of any liens, claims, charges or encumbrances or any other interest of [PSL as] the transferring party'.

144 The amending deed also deleted cl 14 of the 'schedule 11' version of AMSLA, which had provided that either Fortis or PSL could, as lender, enter into loans as agent for a third person.

145 The amending deed went even further in its protection of Fortis. It inserted a new clause, cl 7B, into the 'schedule 11' version of AMSLA. The position of cl 7B between cll 7 and 8 of that agreement is significant. By cl 7.1 of schedule 11, Fortis as borrower undertook to redeliver to PSL equivalent securities to those borrowed, and to do so in accordance with 'this agreement and the terms of the relevant borrowing request.' Clause 7.2 expanded upon this to provide, amongst other things, that - subject to cl 8 and the terms of that request - PSL may at any time call for the redelivery of all or any equivalent securities by giving the requisite notice. Fortis, therefore, thus became obliged to redeliver borrowed securities at call or at the expiration of the loan by effluxion of time.

146 In the original form of the 'schedule 11' version of AMSLA, cl 7 was followed immediately by cl 8. PSL was required by cl 8.1 to repay to Fortis any 'cash collateral' held in respect of the equivalent securities which Fortis was required to redeliver; and to do so simultaneously with Fortis' redelivery of the securities. The clause also provided that neither party was obliged to make delivery or make a payment unless satisfied that the other party would reciprocate. Then, importantly, cl 8.2 provided that:

If an event of default occurs in relation to either party, the parties' delivery and payment obligations (and any other obligations they have under this agreement) shall be accelerated so as to require performance thereof at the time such event of default occurs.

147 In such an event, the relevant value of the securities to be delivered by Fortis shall be established in accordance with cl 8.3 and, on the basis of the values so established, an account shall be taken as at the date of default of:

what is due from each party to the other and ... the sums due from one party shall be set off against the sums due from the other and only the balance of the account shall be payable (by the party having the claim valued at the lower amount pursuant to the forgoing)'.[121]

148 Following the amendments, and in particular following the unequivocal conferral upon Fortis of the legal and beneficial title to securities borrowed from PSL, Fortis was placed in a position from which, because after the netting process it retained the securities, it could benefit from that retention. This, it seems to me, is a further motive for Fortis' involvement in effecting the amendments. The benefits thus realised were, it seems to me, arguably at least as desirable as any which would flow from that which, as Fortis submitted, was the true nature of the securities loan transactions - that is, as security for PSL's liabilities under the SCA.

149 Clause 7B is by the amending deed inserted between these provisions (cll 7 and 8) which - as explained above - deal, respectively, with the obligation to redeliver and the acceleration of that obligation. Clause 7B reads, so far as is presently relevant:

Redelivery and Payment Obligations are Conditional

[Fortis'] obligation to redeliver equivalent securities in accordance with clause 7 and to make any other payment required under this agreement is conditional. Notwithstanding clause 7 or any other provision of this agreement an obligation on [Fortis] to redeliver equivalent securities or to make a payment does not arise if, at the relevant time, any of the following exist:

(a) an act of insolvency has occurred or is continuing with respect to [PSL];

(b) where ... any [PSL] liabilities under the standard client agreement are outstanding and have not been paid to [Fortis] and satisfied in full;

...

(d) where ... any event of default in relation to [PSL] has occurred or is continuing under the standard client agreement.

150 Clause 7B protects Fortis against the possibility that PSL, when not in default but when it has outstanding liabilities under the SCA, might call for delivery of the equivalent securities to which PSL is then otherwise entitled. In the absence of cl 7B, Fortis would be obliged to redeliver within the contractually-determined settlement time.

151 It seems to me, that, by this means, cl 7B effects a major advance, in the mantle of protection provided to Fortis. Clause 7B, therefore, has important work to do. But the clause goes further. Between the call and the effluxion of the period within which Fortis is required to answer the call, PSL might default. Clause 7B makes it explicitly clear that, in these circumstances, Fortis is not obliged to redeliver. Nor is redelivery required if a default occurs shortly before the end of the period of the relevant loan.

152 It will have been noted that the words 'at the relevant time' appear in cl 7B. The relevant time is necessarily the time at which the obligation to redeliver arises; it is not a reference to the time of occurrence of a circumstance to which cl 7B refers as 'any of the following'. Fortis nevertheless submitted that, since its conditional redelivery obligation did not arise if at the relevant time PSL was in default, and since a default would automatically trigger acceleration pursuant to cl 8.2, there would at the time at which the acceleration occurred (the 'relevant time') be no obligation to redeliver. And if there were no obligation to redeliver, there could be no securities to value, and hence no basis for the operation of the netting provisions of cl 8.2.

153 This construction would have cl 8.2 operate so as to cause an acceleration while, at the instant that that acceleration occurs, the netting provisions which are an essential part of that clause would be rendered nugatory. In other words, the operation of part of the clause would render the other part inoperative.

154 This seems to me to be an unwarranted result. It would also render cl 8.2 otiose, or at least almost so, although by cl 7 of the amending deed AMSLA and the

SCA are to be read as a single integrated document.

155 For these reasons, and for those given by the Chief Justice, with which I respectfully agree, I am of the opinion that Fortis is required to account to PSL, as of 7 July 2008, for the value of the borrowed securities, calculated in accordance with cll 8.3 and 8.4 of AMSLA. I would also, for the reasons given by the Chief Justice and Davies AJA, reject Fortis' challenge to the valuation of the Octaviar notes.

157 The respondent ('PSL') was a share trader and in the business of securities lending. PSL was a client of the appellant ('Fortis'), a specialist broker and third party clearer that offered a bundle of services to the professional market, including arranging securities lending from or to its clients, finance for trading activity and custody services. Fortis provided all those services to PSL on the terms of its Standard Client Agreement ('SCA'), executed by the parties on 19 December 2006. Schedule 3 to the SCA contained a 'Dealing Loan Facility' which enabled PSL to draw down on a line of credit of up to $50 million that Fortis made available to PSL for its share trading and securities lending activities, which was used by PSL from April 2007. Schedule 4 detailed the terms on which Fortis supplied custody services to PSL and schedule 11 contained an 'Australian Master Securities Lending Agreement' ('AMSLA'), which was to govern all securities lending arranged by Fortis on standard contractual terms applying to securities lending in Australia.[122] Although the AMSLA was separately executed as an agreement between PSL and Fortis, cl 8 of the SCA provided that Fortis contracted in its capacity as agent

procuring securities lending to, or from, PSL on the terms set out in that agreement.

158 On 16 April 2008, PSL's relationship with Fortis changed when the SCA was amended to provide that Fortis transacted as principal in securities lending transactions with PSL under the AMSLA.[123] At the same time the parties modified the standard form contractual requirement[124] contained in cl 7 of the AMSLA for the borrower to redeliver equivalent securities upon the termination of the loan, by adding a new cl 7B. The new cl 7B provided that the borrower's obligation to redeliver equivalent securities in accordance with cl 7 was 'conditional' and that an obligation '[did] not arise' if certain specified events existed. Those events included:

• an 'Act of Insolvency' (as defined in the AMSLA) occurring with respect to the lender;[125] and
• if the lender was PSL, where any 'Client Liabilities' under the SCA were outstanding or any 'Event of Default' in relation to PSL under the SCA occurred.[126]

The changes to the SCA and the AMSLA were said to be made 'in consideration of Fortis continuing to provide financial accommodation and services under the terms of the SCA.'[127]

159 On the same day, Fortis made two borrowing requests to PSL under the AMSLA for some securities that Fortis was holding as custodian on behalf of PSL in an account called the 'Settlement HIN' in which Fortis held client shares. Two further borrowing requests were made by Fortis, one on 28 May 2008 and the other on 30 June 2008, again for securities that Fortis held as custodian for PSL in the Settlement HIN.

160 Upon PSL accepting the borrowing requests, Fortis transferred the relevant shares out of the Settlement HIN to an account called the 'Fortis HIN', used only to hold those shares. The evidence was that Fortis, from that time, regarded itself as the holder of both the legal and beneficial interest in the securities transferred to it by PSL under the AMSLA and that the transfer was necessary because Australian Stock Exchange Rules did not permit Fortis to hold its own securities in the Settlement HIN.

161 Receivers were appointed to PSL's property on 4 July 2008. The appointment of the receivers was an Event of Default by PSL under both the SCA and the AMSLA and Fortis gave PSL notice in writing of the default and terminated the SCA. Fortis then proceeded to realise the securities that it held in the Fortis HIN until it had sold sufficient shares to set-off the proceeds against an amount of $20,811,364.62 that PSL had drawn down under the facility. Fortis relied on its rights of set-off under cl 17 of the SCA and cl 7 of the facility to apply those proceeds in discharge of PSL's liability to it and claimed that it was only required to account to PSL for the surplus proceeds of approximately $100,000 and the remaining unsold securities in discharge of its obligations to PSL under the SCA.

162 PSL disputed that Fortis had the right to apply the proceeds from the sale of the securities in discharge of PSL's indebtedness. PSL claimed that the event of default triggered cl 8.2 of the AMSLA and that cl 8.2 automatically operated to require Fortis to bring to account, against PSL's debt, the monetary value of Fortis' conditional obligation to redeliver equivalent securities to PSL. On PSL's calculations, the value of Fortis' conditional obligation to redeliver equivalent securities to PSL exceeded PSL's debt to Fortis under the facility so that Fortis was required to account to PSL for approximately $4 million more than the value that Fortis had realised for the securities sold down. Fortis' position was that cl 8.2 of the AMSLA had no operation because of cl 7B and, in any event, that it was entitled to exercise its rights under cl 17 of the SCA and cl 7 of the facility independently of cl 8.2 of the AMSLA.

163 PSL applied to the Court under s 424 of the Corporations Act 2001 (Cth) for directions on the proper construction of the agreements. The application was heard by Judd J who found in PSL's favour. Fortis has appealed that decision ('the primary appeal') and has also appealed a related decision of Judd J ('the related appeal') on the value to be attributed under cl 8.2 to securities in Octaviar Ltd ('Octaviar') that Fortis 'borrowed' from PSL but which were suspended from quotation by the Australian Stock Exchange at the time that PSL went into receivership.[128]

164 This appeal does not turn on the correctness of the decision in Beconwood Securities Pty Ltd & Anor v Australia and New Zealand Banking Group Ltd & Ors[129] in which Finkelstein J analysed the contractual terms of the standard form AMSLA, as the parties were not in dispute about the legal nature of securities lending under the AMSLA as a stand alone agreement. This appeal turns on the legal nature of the securities loan transactions under the particular contractual arrangements entered into, about which the parties were in dispute.

165 It was uncontroversial both below and on appeal that on transfer of the securities, ownership in the securities passed from PSL to Fortis by and under the terms of cl 4 of the AMSLA. Clause 4 of the AMSLA contained the standard AMSLA contractual term that all right, title and interest in any securities 'lent' passed absolutely from one party to the other, free from all liens, charges, equities and encumbrances, on delivery.[130] The transfer of title is an ordinary feature of securities lending. In Beconwood Securities Pty Ltd & Anor v Australia and New Zealand Banking Group Ltd & Ors[131] Finkelstein J observed that the term 'securities lending' is factually incorrect as the 'lending' is an outright disposal of the securities.[132] His Honour explained:

The transaction that is referred to as 'lending' is in terms an outright disposal of the securities lent, linked to a subsequent acquisition of equivalent securities. In other words the agreements provide that title to the securities on loan, as well as to any collateral that is received by the lender, passes from one party to the other. On the other hand, the economic benefits of ownership are 'manufactured' back to the lender by the terms of the securities loan agreements.[133]

The securities loan transactions thus took the legal form of an absolute transfer of ownership.

166 Fortis nonetheless argued that the securities loan transactions were effected by way of security for the discharge of PSL's indebtedness to it and that Fortis only took a security interest in the securities that were transferred to it, not the interest of an outright owner free to deal with those securities as its own assets. PSL argued, on the other hand, that Fortis merely converted its own assets into money and that nothing in the terms of the SCA authorised Fortis to mitigate its risk on an event of default by PSL under the SCA by selling its own assets to eliminate PSL's debt to it. PSL argued that the trial judge correctly held that the legal nature of the securities loan transactions was governed by the AMSLA[134] and that by and under the express terms of the AMSLA, there had been an outright transfer of the securities to Fortis for Fortis to deal with as its own.[135]

167 It is settled law that the legal nature of the securities loans transactions must be determined by the legal rights and obligations of the parties governing the transactions.[136] It is also settled law that those legal rights and obligations must be ascertained from an analysis of the particular legal context in which the transactions occurred, requiring consideration of the complete and overall contractual relations between the parties.[137] In the present case, the contractual context includes the Amendment Deed executed by the parties on 16 April 2008, as that deed amended both the SCA and the AMSLA and so an understanding and analysis of the amendments effected by that deed is required.

168 The reasons for amendments to the SCA and AMSLA can be discerned from

the Recitals to the Amendment Deed.[138] Recital C provided that the deed recorded the basis on which the parties had agreed 'to co-operate for the mutual advantage of each other and to manage the[ir] exposure ... to each other under the SCA and the AMSLA'. Recital D contained an acknowledgment that Fortis continued to provide financial accommodation to PSL under the SCA 'on the basis of the terms set out in [the] Deed' and Recital E provided that the parties had agreed to enter into the Deed in good faith 'to amend the SCA and the AMSLA in the manner set out in [the] Deed' 'in consideration of Fortis continuing to provide financial accommodation and services to PSL under the SCA on the basis of the terms of the SCA'. Those Recitals can be taken as statements of fact and statements of the parties' mutual intention in entering into the Deed.[139] As the evidence showed, these amendments were exclusive to PSL and a related company.

169 The actual amendments were as earlier stated but should be set out in greater detail.

170 Clause 8 of the SCA was amended by deleting cl 8(c) to (f) which had contained 'acknowledgments' by PSL that:

• Fortis was its agent to procure arrangements for security lending on the terms of the AMSLA;

• in signing the AMSLA Fortis did so as agent for all its other clients that had entered into an AMSLA in the same or similar terms; and

• that 'Fortis might be the legal owner and counterparty to the [securities lending] Transaction but has no beneficial interest in the Securities borrowed or lent under [clause 8] or Schedule 11 [of the AMSLA]'.

171 In the place of cll 8(c) to (f), a new cl 8(d) was inserted to provide that the parties confirmed that Fortis, either as borrower from, or lender to PSL under the AMSLA, did so in its capacity as principal to the securities loan and a new cl 8(c) declared that cl 14 of the AMSLA did not apply. Clause 14 had made provision for a lender to enter into loans of securities in its capacity as agent for a third party principal.

172 The trial judge held that the effect of the amendment was to eliminate 'pre existing inconsistencies or irregularities in the documents in relation to the capacity in which Fortis held and might deal with the securities,'[140] on the basis that that the notion of Fortis acting as agent for PSL was inconsistent with its absolute title to the securities and that 'very likely ... one purpose of the Amendment Deed was to remedy that anomaly'.[141] The trial judge's attention appears not to have been drawn to the Recitals, as no reference was made to them in the judgment. In my view, the Recitals evidence a very different complexion on the purpose of the amendment. The purpose appears and is reflected in the clear, unambiguous expression of the parties' intention in entering into the deed, which was to give effect to the basis on which Fortis had agreed to continue to provide financial accommodation and services to PSL under the SCA. Relevantly, the change in status from agent to principal was made in the context of the parties' mutual agreement to manage their exposure to each other. The parties, in that context, entered into the deed to amend the AMSLA and the SCA in the manner set out in the Amendment Deed. They entered into the deed in consideration of Fortis continuing to provide financial accommodation and services to PSL under the terms of the SCA. In that context of a creditor and debtor relationship, the change in the contractual relationship converted the legal rights of Fortis in respect of securities lending with PSL from that of agent for the beneficial owners of the securities lent to, or borrowed from, PSL (according to the terms of cl 8(e) of the SCA before amendment) to that of principal, holding both the legal and beneficial title to securities that it borrowed from PSL.

173 The materiality of the change in status to the present question of characterisation must be considered in conjunction with the insertion of cl 7B into the AMSLA.

174 Clause 7B was inserted into the AMSLA as a new provision modifying cl 7 of the AMSLA. Clause 7 of the AMSLA contained the standard counterparty undertaking on the part of the borrower in a securities lending transaction to redeliver equivalent securities to the lender. Clause 7B provided that the borrower's obligation to redeliver equivalent securities to the lender was conditional and that:

[n]otwithstanding clause 7 or any other provision [in the AMSLA] an obligation on the Borrower to redeliver Equivalent Securities or to make a payment [did] not arise if, at the relevant time, any of the following exist ...

175 The 'following' specified circumstances, apart from one, were all expressed as 'where [PSL was] the lender', namely:

• if any 'client liabilities' (as defined) under the SCA were outstanding and not paid to Fortis and satisfied in full;
• if less than 7 months had elapsed since the final payment made by PSL to Fortis in satisfaction of all client liabilities;[142]
• if any Event of Default in relation to PSL had occurred or was continuing under the SCA; and
• if (amongst other things) PSL breached a requirement to reduce its credit line utilisation in illiquid securities to a total value of $18 million by 31 July 2008 and the breach was not remedied within three business days.

The other specified circumstance was an 'Act of Insolvency' (as defined in the AMSLA) with respect to the Lender.

176 The trial judge held that the purpose of cl 7B was to make the act of performance conditional should any of the relevant circumstances exist. His Honour reasoned:

1. Clause 7B of the Amendment Deed was directed primarily to the obligation to deliver Equivalent Securities on request under cl 7 of the AMSLA. The conditional nature of the obligation extended to 'any other provision of this Agreement'. Those extending words are capable of applying to the agreed outer limit delivery obligation found in each Borrowing Request. In my view, however, cl 7B was only intended to relieve Fortis from the obligation to actually deliver Equivalent Securities at the 'relevant time'. The 'relevant time' is the time for performance of the act of delivery or payment. Upon a request under cl 7, the relevant time is the date for delivery specified in cl 7.2. Under the outer limit obligations in each of the Borrowing Requests, the relevant time is 11 months and 20 days after delivery under the requests.
2. Clause 7B did not purport to limit the right to make a request under cl 7 of the AMSLA, nor did it entirely eliminate the delivery or payment obligation. It made the act of performance conditional. Thus, Fortis was not required to actually deliver securities or to actually make a payment should any of the circumstances described in paragraph (a) to (e) exist.

I disagree that cl 7B only made actual performance conditional as distinct from the existence of the obligation itself.

177 First, the obligation to redeliver equivalent securities provided for in cl 7 was not only an obligation to redeliver at call but also an obligation to redeliver equivalent securities 'in accordance with ... the terms of a borrowing request'. The distinction that the trial judge appears to have drawn between the obligation to deliver equivalent securities on request and the obligation to deliver equivalent securities provided for in a borrowing request is not warranted by the language of cl 7B. Secondly, cl 7B on its terms made the obligation to deliver equivalent securities conditional, not the act of performance. This appears from the express language of cl 7B, which provided that 'the obligation' did not arise 'notwithstanding clause 7' if the provision was triggered. There is no warrant for not giving cl 7B a construction that accords with the syntax and plain and ordinary meaning of the language used.

178 The standard legal requirement in any securities lending transaction is for the borrower to return equivalent securities to the lender either at call at the end of the loan (if a loan period is specified) and this standard legal requirement appeared in cl 7.1 of the AMSLA. It is therefore readily apparent that the insertion of cl 7B into the AMSLA was intended to alter the standard terms applicable to securities lending. It is also readily apparent that the alteration was not intended by the parties as a stand alone amendment to the AMSLA confined to the performance of PSL's obligations under that agreement. Fortis had the legal right to borrow securities from PSL under the AMSLA against a conditional obligation to return equivalent securities to PSL. The parties' intention, as a matter of construction of cl 7B, was that Fortis would not be subject to the obligation to redeliver equivalent securities, if PSL was then in default under the SCA or any amount was then owed by PSL to Fortis under the facility (being a 'client liability' as defined in the SCA).[143] The obligation to redeliver such securities would only arise absent those events. This was the 'basis' on which Fortis agreed to continue to provide financial accommodation to PSL and the basis on which Fortis made the borrowing request to PSL and PSL lent the securities in question.

179 The Amendment Deed also included a cl 7 which provided that:

Except as specifically amended by this Deed, all terms and conditions of the SCA and the [AMSLA] remain in full force and effect. With effect from the Effective Date [16 April 2008], the SCA and the AMSLA as amended by this Deed is to be read as a single integrated document incorporating the amendments effected by this Deed.

Clause 7 puts beyond any doubt that the SCA and AMSLA after amendment must be read as a single integrated document.

Nature of transactions under the AMSLA after the Amendment Deed

180 In my view, these amendments secured a significant change to the nature of the commercial and legal arrangements between the parties. First, the facility was continued on the basis of the terms set out in the Amendment Deed. Secondly, the parties intended the securities loan transactions to be the means by which Fortis managed its exposure to PSL, as confirmed by the express terms of cl 7 of the Amendment Deed. The determination of the legal nature of the securities loan transactions cannot be made without regard to the change in the nature of the commercial and legal arrangements between the parties and the interconnected legal rights and obligations of the parties flowing from the SCA and the AMSLA as amended and read as a single integrated document.

181 The legal form of the transactions as absolute transfers of ownership is not determinative of their character as the authorities show that an absolute transfer of ownership can be characterised as security if, on the proper construction of the contract documents, that was the mutual intention of the parties.[144] The question is the intention of the parties in effecting that transfer.[145]

182 Here, the amendments were made in consideration of Fortis continuing the provision of financial accommodation and other services under the SCA against the background that PSL was accruing a significant debt to Fortis under the facility. Furthermore, the securities were 'lent' on the basis of a conditional counter party obligation to redeliver equivalent securities, where the obligation did not arise if PSL had outstanding liabilities to Fortis under the facility. In my view, the legal nature of the securities loan transactions, viewed in the context of the SCA, the AMSLA and the Amendment Deed, construed as an integrated suite of contract documents, is properly characterised as a form of security for PSL's liabilities under the SCA. To put it another way, the 'loan' of the securities was intended by the parties to secure the repayment of the moneys that Fortis had advanced to PSL under the facility. This construction gives effect to the mutual intention of the parties 'to manage the exposure of PSL ... to [Fortis]' against a continuing debtor/creditor relationship and gives the SCA and AMSLA after amendment a sensible commercial operation.[146] I agree with Fortis' submissions that the true nature of the securities loan transactions was as security for PSL's liabilities under the SCA.

183 If, as I have concluded, the securities loan transactions were, in substance, security transactions, Fortis had the right to realise the securities in discharge of PSL's liabilities, and the commensurate obligation to account to PSL for the balance of proceeds after discharge of PSL's liabilities. The relevant general law principles were summarised by Stone J in FCT v R&D Holdings Pty Ltd:[147]

184 The fundamental character of a mortgage is that it provides security for the moneys advanced by the mortgagee. It has been long accepted that whether the mortgage takes the form of ownership, possession or charge, its substance as a security provides the context in which the rights of the parties are determined: Salt & Tyler v Marquess of Northampton [1892] AC 1 (Salt & Tyler); compare Gurfinkel v Bentley Pty Ltd [1966] HCA 75; (1966) 116 CLR 98. The mortgagee is entitled to the benefit of the security and, subject to the specific terms of the agreement between the parties, it is entitled to give primacy to this interest in exercising its rights under the mortgage whether in relation to possession or sale. Nevertheless, the ambit of these rights is circumscribed by the fact that the mortgagee's rights are limited to the vindication of its security. Consistent with this principle it is well established that the mortgagee is not a trustee for the mortgagor: Kennedy v De Trafford;[148] Deputy Commissioner of Taxation (Vic) v General Credits Ltd.[149] Nevertheless, it is also well established that the mortgagee is not entitled to ignore the mortgagor's interest where protection of that interest is compatible with its right to protect or realise its security. The principle has been vindicated in a wide variety of cases including those dealing with the mortgagee's right to possession (Quennell v Maltby),[150] the mortgagee's exercise of the power of sale (Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq)),[151] Forsyth v Blundell,[152] and the mortgagor's right to redeem (Salt & Tyler,[153] Stern v McArthur).[154]

185 It follows that Fortis was justified in selling the securities and applying the proceeds against PSL's debt in discharge of PSL's liability, both as a matter of general law and also as a matter of contract, having regard to the terms of cl 17 of the SCA and cl 7 of the facility. It follows also that as a matter of general law and as a matter of contract that PSL is entitled to get back the unsold securities and the surplus of the sale proceeds.

186 The next issue is whether the trial judge was correct to hold that the value of the equivalent securities that Fortis was conditionally obliged to redeliver under cl 7B had to be offset against PSL's liabilities under the SCA. The determination of this issue requires a consideration of cl 8.2 of the AMSLA. Clause 8.2 provided:

8.2 [Netting following occurrence of Event of Default] If an Event of Default occurs in relation to either Party, the Parties' delivery and payment obligations (and any other obligations they have under this Agreement) shall be accelerated so as to require performance thereof at the time such Event of Default occurs (the date of which shall be the 'Performance Date' for the purposes of this clause), and in such event:

(a) the Relevant Value of the Securities to be delivered (or payment to be made, as the case may be) by each Party shall be established in accordance with clause 8.3; and

(b) on the basis of the Relevant Values so established, an account shall be taken (as at the Performance Date) of what is due from each Party to the other and (on the basis that each Party's claim against the other in respect of delivery of Equivalent Securities or Equivalent Collateral or any cash payment equals the Relevant Value thereof) the sums due from one Party shall be set-off against the sums due from the other and only the balance of the account shall be payable (by the Party having the claim valued at the lower amount pursuant to the foregoing) and such balance shall be payable on the Performance Date.

187 The application of cl 8.2 was not made to depend on action taken by the non-defaulting party, as in the case of cl 17 of the SCA. Clause 8.2 was triggered automatically on the appointment of the receivers because an event of default had occurred. The clause operated on its terms to close out the security lending transactions between the parties by accelerating the performance of the parties' counter-party obligations under the loan transactions to 4 July 2008. But instead of requiring actual performance as at that date, the clause required those obligations to be valued at current market value and for the values then to be set-off to produce a single net balance owed by the party with the lower valued obligations.[155]

188 Accordingly, contrary to Fortis' submissions, Fortis could not avoid the operation of cl 8.2 of the AMSLA by exercising its set-off rights under the SCA. However that does not answer the question whether Fortis had a re-delivery obligation, the value of which was required to be brought to account under cl 8.2. Fortis argued that cl 7B, in any event, entirely eliminated any redelivery obligations on its part once the event of default had occurred, so that Fortis had no counter-party obligation to deliver equivalent securities that fell to be valued under cl 8.2 of the AMSLA.

189 The trial judge held that cl 7B, properly construed, only relieved Fortis from actual performance of the obligation to deliver equivalent securities at the relevant time[156] and that actual delivery of securities was not required for the purposes of the calculation under cl 8.2, which still required a value to be attributed to the conditional obligation on Fortis to redeliver equivalent securities.[157] I disagree.

190 By cl 8.2, the Event of Default had the consequence of accelerating Fortis' delivery obligations under cl 7.1 'so as to require performance thereof at the time {that the] Event of Default occurs', namely 4 July 2008. But Fortis' delivery obligations under cl 7.1 were conditional and, by the express terms of cl 7B, did not arise 'if, at the relevant time' any 'Client Liabilities' under the SCA were outstanding or 'any Event of Default in relation to [PSL] has occurred'. The 'relevant time' for these purposes was the date on which the parties were required to perform their respective obligations under the ASMLA. In this case, the performance date was accelerated to 4 July 2008 in consequence of the Event of Default and cl 8.2 coming into effect. As at 4 July 2008, moneys were owed by PSL to Fortis under the facility. Clause 7B(b) and (d) applied and hence, no delivery obligation on the part of Fortis arose.

191 The trial judge reasoned that cl 8.2 was the only mechanism under which the value of the conditional right to receive equivalent securities can be reflected in a netting or set-off against advances. His Honour was of the view that to adopt the interpretation of cl 7B advanced by Fortis would leave PSL without opportunity to receive credit for the value of the Fortis obligation to deliver equivalent securities and that for the purpose of adjusting rights in the Event of Default the conditional obligation to deliver equivalent securities would be worthless.[158] However, it is not the conditional obligation to deliver securities that is required to be valued under cl 8.2. Clause 8.2 requires 'the Securities to be delivered' to be valued in accordance with cl 8.3 and 8.4.[159] If no securities are required to be delivered there is nothing to value. As I have found, the contractual arrangements between the parties were such that no obligation arose on the part of Fortis to return Equivalent Securities to PSL at the end of the loans, if PSL owed any money under the facility or was then in default under the SCA or an Act of Insolvency in relation to PSL had occurred.

192 Clause 7B, properly construed, was not about not requiring actual performance. If that was its intended purpose there was no need for cl 7B as cl 8.2 on its own terms did not require actual performance. The language of cl 7B should be given its plain meaning.

193 Accordingly, I have concluded that the primary appeal should be allowed.

194 The issue in the related appeal is premised on the correctness of the trial judge's finding that a value must be attributed under cl 8.2 to the conditional obligation on Fortis to redeliver equivalent securities.

195 The securities that PSL lent to Fortis included securities held in Octaviar. Those shares were suspended from trading as at 4 July 2008. Clause 7A.1 of the AMSLA provided a mechanism for the determination of value in that instance. Under cl 7A.3, the parties were obliged to negotiate in good faith with a view to agreeing the market value of the shares and the agreed market value then applied to the securities. The parties attempted to reach agreement on market value but were unable to do so and approached the Court for a determination on market value, if the market value was ascertainable. The trial judge, after a consideration of the evidence and the authorities[160] on the approach of the Court to the question of valuation concluded:

1. While the absence of transactions on 4 July 2008 makes it difficult to arrive at a market value for the Notes on that day, a significant transaction in the Notes about a week earlier, and the offer to pay $22.50 about two weeks later, provided useful outer limits to an assessment. Doing the best I can, with the evidence that is available, I have approached the assessment on the basis that there was a falling market, so that the high point on 4 July 2008 was the price of the last substantial sale - $26.50; and the low point was the offer by Octavia[r] in mid-July to pay $22.50. While the process is imprecise, the best assessment of the market value on 4 July 2008 is the mid-point between $26.50 and $22.50, namely $24.50. I so find that to be the market value on that day.

196 Fortis has appealed that finding contending that in the circumstance where there was no on-market lending in the Octaviar securities from January 2008, and comparisons could not be made between recorded offers and bids, the only evidence which could reliably have informed an estimate of the 'market value' of the securities as at 4 July 2008 was the first sale thereafter which was at a price of $13.26 per security, alternatively, the difference between the last sale before 4 July 2012 and the first sale thereafter, calculated at $19.88 per share. It was argued that the finding that the security had a value of $24.50 was inconsistent with the weight of the evidence and failed to reflect what the trial judge correctly referred to as a distressed product in substantial decline. It was further argued that the trial judge, in reaching his valuation, wrongly took into account a conditional offer of $22.50 per note made by Octaviar to its note-holders on 17 July 2012 that some note-holders by 28 August 2012 had accepted but which never became unconditional. The trial judge had reasoned:

1. On 25 July 2008, Deutsche Bank acquired a parcel of 28,500 Notes at $13.26. There was evidence that by 28 August 2008 some Noteholders had accepted the cash offer of $22.50 per Note, while some had rejected the offer. That evidence, together with the transaction that took place on 25 July ($13.26), and offers to sell Notes on 14 August 2008 at $55 per Note, points to some volatility in the market for the Notes in July and August 2008. Fortis submitted that the only piece of evidence which, on a rational commercial basis, informed an estimate of the market value of the Notes as at 4 July 2008, in a declining market, was the price at which they were first sold after that date - $13.26 on 25 July 2008.
2. The offer by Octavia[r] to acquire large holdings of the Notes at $22.50 is not evidence of a market value, although it assisted in arriving at a market value. Evidence of what Octavia[r] was willing to pay in mid-July 2008, in a falling market, established a floor price at that time. Noteholders were not obliged to accept less than the offer of $22.50, assuming the offer conditions were satisfied, but might hold out for more. The fact that the proposal failed to achieve a sufficient response would tend to suggest that a significant number of Noteholders considered that the Notes were worth more than what was on offer.

The argument was that this was not a market transaction and did not proceed.

197 In my view the trial judge correctly stated and applied the applicable principles. The trial judge was not bound to conclude on the evidence before him that the best evidence of market value as at 4 July 2008 was the transaction that took place on 25 July 2008. Furthermore, it was open to the trial judge on the evidence to take into account the conditional offer of $22.50 per note that some note-holders had accepted, not as evidence of market value but as evidence that assisted in arriving at a market value as His Honour so found. No legal error in His Honour's reasoning has been shown.

198 Accordingly I would dismiss the related appeal.

[1] Primebrokers Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479 ('Main Trial Judgment').

[2] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (No 3) [2011] VSC 182 ('Valuation Judgment').

[5] Agreed Summary (24 February 2012) [7].

[11] [2008] FCA 594; (2008) 246 ALR 361 ('Beconwood').

[13] Affidavit of Barry Neil Parker (30 March 2009) [20].

[15] The trial judgement notes that Primebroker did not provide any reason for the amendment while Fortis only provided an incomplete explanation: at [42]. But in my view, one can infer the purpose from the deed itself. The deed recites that the amendments are effected '[i]n consideration of Fortis continuing to provide financial accommodation and other services under the terms of the SCA'. The deed then inserts into the AMSLA a new provision (cl 7B) that, on its terms, protects Fortis in the event of insolvency or default by Primebroker. I discuss cl 7B later in my reasons. During the hearing of the appeal, senior counsel for Fortis suggested that the obvious explanation for the amendment was that Fortis wanted to obtain as much security as possible for its loans to Primebroker because it thought that it needed the security: Appeal Transcript 39-40, 147. Primebroker's counsel appeared to agree with this explanation: Appeal Transcript 95-96. See also Trial Transcript 33.

[16] See [89]-[91] of these reasons.

[17] See the extract at [14].

[18] See [81] et seq.

[19] Affidavit of Barry Neil Parker (30 March 2009) [8]; Agreed Summary (24 February 2012) [40].

[20] Affidavit of Barry Neil Parker (30 March 2009) [9]; Agreed Summary (24 February 2012) [42].

[21] Affidavit of Barry Neil Parker (30 March 2009) [23] and exhibit BNP2.

[22] Affidavit of Barry Neil Parker (30 March 2009) [27].

[23] Affidavit of Barry Neil Parker (30 March 2009)

[24] Affidavit of Barry Neil Parker (30 March 2009) [46] and Exhibit PNB5.

[25] Agreed Summary (24 February 2012) [51].

[26] Ibid. During the hearing of the appeal Primebroker's counsel referred to a what he considered to be a suggestion by Fortis' counsel that there had not been a 'default under the AMSLA'. The Court informed him that, as far the Court understood, there had been no such suggestion and that the Court's understanding was that this issue was not in dispute: Appeal Transcript [137]. When the time came for Fortis' reply, Fortis' counsel said nothing about this issue. Presumably he accepted that there was no issue about default.

[28] Emphasis added. See [81], [90]-[91] of these reasons.

[29] The appointment of receivers was an 'act of insolvency' under the AMSLA. Clause 12 provides that an act of insolvency is an event of default for the purposes of cl 12 if 'the Non-Defaulting Party serves written notice on the Default Party', 'except in the case of an Act of Insolvency which is the presentation of a petition for winding up or any analogous proceeding or the appointment of a liquidator or analogous officer of the Default Party in which case no such notice shall be required'.

In Beconwood [2008] FCA 594; (2008) 246 ALR 361, in the context of a relevantly identical clause, Finkelstein J held that receivers are not officers analogous to a liquidator: at [60]. If that is correct, it follows that the appointment of receivers and managers is an act of default for the purposes of cl 8.2 only if and when Fortis gives written notice. While Fortis did give Primebroker a written default notice on 4 July 2008, the notice stated that Primebroker was in default under the SCA and made no reference to the AMSLA: Affidavit of Paul Kirk (3 February 2009) [14] and exhibit PK5. It there seems arguable that this notice did not satisfy the requirements of cl 12 of the AMSLA.

[30] Cf Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 200 ALR 447.

[31] Agreed Summary (24 February 2012) [49].

[35] Respondent's Outline of Submissions (31 October 2011) [13]-[14], [26].

[38] Cf Beconwood [2008] FCA 594 [50].

[39] There were no pleadings at the trial.

[44] Ibid. It seems clear from the context that the reference in this passage to the securities being 'legally held absolutely by Fortis' (emphasis added) was not drawing a distinction between the position at law and in equity but rather between the actual property rights with respect to the securities and the way in which the securities were treated by the parties and the contract.

[45] Trial Transcript 43-44. (Emphasis added)

[46] Main Trial Judgment [60]. During the hearing of the appeal, senior counsel for Fortis, who did not appear at the trial, expressed uncertainty about whether that was indeed the common position: Appeal Transcript 66. In response, Primebroker's counsel provided the court with the transcript of the first day of the trial. The extracted passages from that transcript show that this was indeed the common position.

[47] Main Trial Judgment [35] (emphasis added).

[48] See [39] above.

[50] Multicon Engineering Pty Ltd v Federal Airports Corp (1997) 47 NSWLR 631, 645, cited with approval in Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 200 ALR 447 [51] (Gleeson CJ, McHugh and Gummow JJ). See also University of Wollongong v Metwally (No 2) (1985) 60 ALR 6, 71; Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1, 7 (Gibbs CJ, Wilson, Brennan and Dawson JJ).

[53] Appeal Transcript 60; see also Appeal Transcript 14.

[57] Beconwood [2008] FCA 594; 246 ALR 361 [49].

[58] Edward I Sykes, The Law of Securities (4th ed, 1986) 58.

[60] [1892] AC 1 ('Marquess of Northampton').

[61] Marquess of Northampton [1892] AC 1, 15. (Emphasis added)

[63] [1966] HCA 75; (1966) 116 CLR 98 ('Gurfinkel').

[65] Gurfinkel [1966] HCA 75; (1966) 116 CLR 98, 107.

[68] Gurfinkel [1966] HCA 75; (1966) 116 CLR 98, 114. See also Radio Frequency Systems Pty Ltd v Noel Guthrie as the Liquidator of Ult Ltd (Receiver Appointed) (In Liq) [2001] WASCA 195 [13] (Steytler J, Miller J and Pidgeon AUJ agreeing).

[69] Cf Gurfinkel [1966] HCA 75; (1966) 116 CLR 98 where Windeyer held, 114, that '[a] court will now ordinarily take at their word persons who execute agreements for sale at a price with an option of repurchase within a stipulated time'.

[72] Beconwood [2008] FCA 594; 246 ALR 361 [53].

[76] Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 [35] (Gummow, Hayne and Kiefel JJ).

[77] Had Fortis sold some of the securities before default, the daily reports would have been able to shed light on whether the parties treated the securities as an asset of Primebroker. If they did, one would expect the reports to credit Primebroker with the amount for which the securities were actually sold rather than the market value of the securities for that day. But Fortis submits that there was no evidence that it had sold any of the borrowed securities: Appeal Transcript 64.

[78] See [110] of these reasons.

[79] See excerpts extracted, [40].

[80] Beconwood [2008] FCA 594; 246 ALR 361 [14].

[81] Clause 4.3 provides that it may be excluded by paragraph 4 of sch 1 to the AMSLA, which states 'Clause 4.3 does/does not* apply'. A note at the bottom of the page reads '* DELETE ONE ALTERNATIVE'. But no alternative is actually crossed out. This apparent error in filling out sch 1 is not presently significant. What matters is that, whether or not this provision is excluded by sch 1, it contemplates that the borrower may dispose of the borrowed securities.

[85] See [89]-[91] of these reasons.

[86] Appeal Transcript 49. See also Appeal Transcript 145.

[87] See also [99]-[100].

[88] Appellant's Outline of Submissions (24 February 2012) [8], [19], [20]; Appeal Transcript 30-31.

[90] Appeal Transcript 20, 56, 147; Appellant's Outline of Submissions (24 February 2012) [2]-[3], [20]-[21], [23].

[91] See [23]-[25] of these reasons.

[92] I note that the parties proceeded on the basis that if cl 8.2 had operated, the net amount produced by that clause was the difference between the value of the securities the amounts Primebroker owed to Fortis: Primebroker Securities Ltd (recs & mgrs apptd) (in liq) v Fortis Clearing Sydney Pty Ltd (No 2) [2010] VSC 358 (a decision not appealed by Fortis). This does not seem to me to be the correct construction of cl 8.2. On its terms, the operation of cl 8.2 is confined to obligations arising under the AMSLA. Primebroker's debt to Fortis arises under the Dealing Loan Facility, not the AMSLA. The better view therefore seems to be that the amount due from Fortis to Primebroker under cl 8.2 is simply the value of the securities, Primebroker seemingly having no outstanding obligations to Fortis under the AMSLA. That amount then stands to be set-off against Primebroker's debt to Fortis under the default provisions of the SCA. But in any event, this does not seem to make a difference to the final figure.

[93] Appeal Transcript 6, 8, 46, 48-49, 51.

[94] Except that the lender may lose its voting rights: see [71].

[95] Appellant's Outline of Submissions (24 February 2012) [11]-[14].

[96] Ibid [15]; Appeal Transcript 20-22.

[97] Appellant's Outline of Submissions (24 February 2012) [15]; Appeal Transcript 8, 22.

[99] The trial judge seems to have treated the relevant date as being 4 July 2008 (the date of the default) rather than 7 July 2008 (the first business day after default). Clause 8.3 sets up a mechanism whereby securities are valued by reference to the cheapest price at which they could be bought on the first business day after default. This suggests that the relevant date is 7 July rather than 4 July. However, nothing turns on this.

[101] Appellant's Outline of Submissions (24 February 2012) [27].

[105] Mark C Faulkner and John C King An Introduction to Securities Lending (Australia) (August 2005), 8.

[106] See Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd [2008] FCA 594; (2008) 246 ALR 361, 363 [4] (Beconwood).

[107] An Introduction to Securities Lending (Australia), 8.

[115] SCA, cl 16.2(f) when read with cl 8(a).

[120] Clause 8(d) of the SCA (as amended).

[122] Save that Schedule 3 to the AMSLA amended the standard terms by providing that the parties agreed that no collateral will be delivered or deposited under the AMSLA. See Beconwood Securities Pty Ltd & Anor v Australia and New Zealand Banking Group Ltd & Ors [2008] FCA 594; (2008) 246 ALR 361 for an analysis of the standard contractual terms.

[123] Amendment Deed (16 April 2008.), cl 2.

[124] Beconwood Securities Pty Ltd & Anor v Australia and New Zealand Banking Group Ltd & Ors [2008] FCA 594; (2008) 246 ALR 361, [14], [28], [44], [56], [57].

[125] Amendment Deed (16 April 2008), cl 7B(a).

[128] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (No 3) [2011] VSC 182.

[129] [2008] FCA 594; (2008) 246 ALR 361.

[130] See also Australian Master Securities Lending Agreement, cl 1.4.

[131] [2008] FCA 594; (2008) 246 ALR 361.

[132] [2008] FCA 594; (2008) 246 ALR 361, [14].

[133] [2008] FCA 594; (2008) 246 ALR 361, [14].

[134] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [59].

[135] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [60]-[62].

1. [136] St George Bank Ltd v Commissioner of Taxation [2008] FCA 453; The Commissioner of Taxation v South Australian Battery Makers Pty Ltd [1978] HCA 32; (1978) 140 CLR 645, 659-660 and 662; CityLink Melbourne Ltd v Commissioner of Taxation [2004] FCAFC 272; (2004) 141 FCR 69, [40]-[45] and Australia & New Zealand Savings Bank v Commissioner of Taxation [1993] FCA 282; (1993) 42 FCR 535, 560.

[137] Beconwood Securities Pty Ltd & Anor v Australia and New Zealand Banking Group Ltd & Ors [2008] FCA 594; (2008) 246 ALR 361, 371; Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 350-352; Byrnes v Kendle [2011] 243 CLR 253; [2011] HCA 26, 34-35; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 461-462; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors [2004] 219 CLR 165; [2004] HCA 52, 179.

[138] Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407, [29], [379]-[390].

[139] Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407, [29], [379]- [390]; Inland Revenue Commissioners v Raphael [1935] AC 96, 143; Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114, [77]-[78]; Greer v Kettle [1938] AC 156, 170-171; Ansett Transport Industries Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54, 72.

[140] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [60].

[141] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [61].

[142] It may be inferred that this was to do with the preference provisions under the Corporations Act 2001 (Cth).

[143] Definition of 'Client Liabilities' and 'Principal Outstanding' cl 2.2 Schedule 1 Standard Client Agreement; see also cl 3 of the Amendment Deed which amended cl 26 of the AMSLA to incorporate a definition of 'client liabilities' to have the same meaning as in the SCA 'where the Client is [PSL]': ie to include the advances outstanding under the facility.

[144] Salt v Marquess of Northampton [1892] AC 1; Gurfinkel v Bentley Pty Ltd [1966] HCA 75; [1966] 116 CLR 98; Douglas v Culverwell [1862] EngR 500; (1862) 4 De GF & J 20; Re Duke of Marlborough; Davis v Whitehead [1894] 2 CH 133; Grangeside Properties Ltd v Collingwood Securities Ltd [1964] 1 All ER 143; Commissioner of Taxation v R & D Holdings Pty Ltd [2007] FCAFC 107; (2007) 160 FCR 248; (2007) 240 ALR 653, and Commissioner of Taxation v Clark (2011) 190 FCR 206. See also Sykes and Walker, The Law of Securities (5th ed, 1993); Ramsbotham, Coote on Mortgages (9th ed, 1927) and Tyler, Young and Croft, Fisher & Lightwood's Law of Mortgage (2nd ed, 2005).

[145] Gurfinkel v Bentley Pty Ltd [1966] HCA 75; [1966] 116 CLR 98.

[146] Upper Hunter District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429; Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114

[147] [2007] FCAFC 107; (2007) 160 FCR 248; (2007) 240 ALR 653.

[148] [1897] AC 180.

[149] [1988] VicRp 61; (1988) 82 ALR 101; [1988] VR 571.

[150] [1978] EWCA Civ 1; [1979] 1 WLR 318).

[151] ([1965] HCA 17; 1965) 113 CLR 265.

[152] [1973] HCA 20; (1973) 129 CLR 477.

[153] [1988] HCA 51; (1988) 165 CLR 489.

[154] [2007] FCAFC 107; (2007) 160 FCR 248; (2007) 240 ALR 653, 670-671, [96].

[155] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [50].

[156] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [64].

[157] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [78].

[158] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd (2009) 28 VR 479, [67].

[159] Standard Client Agreement (19 December 2006), cl 8.2 and 8.3.

[160] Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494, 514 [49]; Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418, 432 and 440-441; MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451, [55]-[57].