Melewar Steel Ventures Limited v ANZ Nominees Limited; Terpu v ANZ Nominees Limited

LEGISLATION CITED: Australian Securities & Investment Commission Act s12DA, s12GD

Barnes v Addy (1874) LR 9 Ch App 244 CASES CITED: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 House v The King (1936) 155 CLR 499

MELEWAR STEEL VENTURES LIMITED (Applicant in 40089/08) John Sotirious TERPU (First Applicant in 40090/08) VALLEYBROOK INVESTMENTS PTY LTD (Second Applicant in 40090/08) PARTIES: ANZ NOMINEES LIMITED (First Respondent in both matters) OPES PRIME STOCKBROKING LIMITED (Receivers and Managers appointed) (Administrators Appointed) (Second Respondent in 40089/08 and Fourth Respondent in 40090/08) ANZ BANKING GROUP LIMITED (Third Respondent in 40089/08 and Second Respondent in 40090/08) SOUTHEASTERN CAPITAL LIMITED (formerly called OPES PRIME SECURITIES LIMITED) (Third Respondent in 40090/08) LEVERAGED CAPITAL PTY LTD (Receivers and Managers Appointed) Administrators Appointed) (Fifth Respondent in 40090/08)

F M DOUGLAS QC/ V R W GRAY/ D R SULAN (Applicants in both matters) COUNSEL: B WALKER SC/ C R C NEWLINDS SC/ G LUCARELLI (ANZ Nominees Limited and ANZ Banking Group Limited) A M MATHAS (Sol.) (consenting appearance) (Opes Prime Stockbroking Limited and Leveraged Capital Pty Limited)

Slater and Gordon Lawyers (Applicants in both matters) SOLICITORS: Minter Ellison (ANZ Nominees Limited and ANZ Banking Group Limited) Deacons (Opes Prime Stockbroking Limited and Leveraged Capital Pty Limited) No appearance (Southeastern Capital Limited)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 2149/08; 2204/08

LOWER COURT DATE OF DECISION: 16 April 2008

LOWER COURT MEDIUM NEUTRAL CITATION: Melewar Steel Ventures Limited v ANZ Nominees Limited; Terpu v ANZ Nominees Limited [2008] NSWSC 345

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40089/08 CA 40090/08 SC 2149/08 SC 2204/08

SPIGELMAN CJ MASON P HODGSON JA

21 APRIL 2008 MELEWAR STEEL VENTURES LIMITED v ANZ NOMINEES LIMITED and 2 Ors; John Sotirious TERPU and Anor v ANZ NOMINEES LIMITED and 4 Ors Judgment 1 SPIGELMAN CJ: I invite Justice Mason to deliver the first judgment. 2 MASON P: At the conclusion of the hearing on Friday last the Court announced that leave to appeal was refused. In each matter, the Summons was dismissed with costs and the interim injunctions that were in place to maintain the status quo were dissolved. 3 These are my reasons for joining in the making of those orders. 4 In 2005 Mr Terpu and his company Valleybrook Investments Pty Limited, through a process of assignment, entered into a contractual relationship with Opes Prime Stockbroking Limited (the broker). The relevant contract is called a Securities Lending and Borrowing Agreement. It is a detailed document containing 24 clauses contained within a larger document called Opes' Services and Financial Services Guide. Mr Terpu signed a written application form on his and his company's behalf. 5 The other applicant, Melewar Steel Ventures Pty Limited entered into its written agreement with Opes Prime in 2007. It contains 28 detailed clauses. The contract is called a Global Masters Securities Lending Agreement and it was executed by Melewar under its common seal. Melewar is a Malaysian company apparently controlled by Mr Kim Chuan Lim. 6 Each Agreement contains many detailed conditions that enable and regulate the practice of securities lending in the sense that the client or its nominee could be the lender of securities in one transaction to the broker or its nominee; and the broker or its nominee might be the lender to the client or its nominee in another. The two Agreements are not identical, but their substantive terms appear to be similar in effect. 7 If a lending and borrowing of securities occurred, the Agreements stipulated that title to those securities would pass absolutely from one party to the other free and clear of any liens, claims, charges or encumbrances or any other interest of the transferring party (see the Terpu Agreement at cls 3.1 and 3.4 and the Melewar Agreement at cl 4.2). The Agreements conferred on each party conditional rights to terminate a security loan in which event, and subject to compliance with various financial obligations, the so-called borrower of the securities was obliged to "redeliver Equivalent Securities". 8 Quite apart from the inability to earmark particular securities listed on the Australian Stock Exchange under the CHESS system, the Agreements were quite explicit that the term "Equivalent Securities" meant, in effect, securities of an identical type, nominal value, description and amount to those previously "lent", but not the very securities that had been lent. On the contrary, the Agreements contemplated that the "borrower" of securities could trade in them in the exercise of the right to deal as legal owner of those securities. 9 In other words, the Agreements imposed personal obligations to deliver up an equivalent number of securities when obliged to do so under the Agreements as distinct from any obligation to preserve the "lent" securities in the meantime or anything in the nature of a mortgage or charge of or over the "lent" securities. 10 In accordance with the Terpu Agreement, Mr Terpu caused his company to transfer to the broker in September 2007 a parcel of shares in Conquest Mining Limited that represented about 5% of the issued capital of that listed company. 11 In accordance with the Melewar Agreement, Melewar caused a parcel of 35 million shares in Gindalbie Metals Limited to be transferred to the broker in October 2007. The parcel represented about 7.25% of the issued capital of that listed public company. 12 On 27 March 2008 the ANZ Banking Group Limited appointed Receivers and Managers over the assets of the broker. For present purposes it may be taken that the broker is insolvent. It is unable to perform its obligation to redeliver "Equivalent Securities" to its former clients. 13 The two sets of applicants have commenced proceedings in the Equity Division. Their claims are at an early stage in their formulation, but the nub of them is to assert some form of equitable proprietary claim as against the ANZ interests with respect to those parcels of shares in Conquest and Gindalbie respectively that passed from the applicants to the broker under the Agreements and subsequently from the broker to the Bank's nominee. 14 The Bank has, in the name of ANZ Nominees, acquired parcels of shares in the respective listed companies from the broker under separate securities lending arrangements in which the broker was the lender of the securities and the Bank their borrower. Some of the shares thus acquired by the Bank have already been disposed of. Others are still held by the Bank and these are the focus of the present interlocutory proceedings that seek to restrain the Bank and its nominee from selling or disposing of the shares in Conquest and Gindalbie that are still retained by the Bank. The Bank is the legal owner of these securities and naturally wishes to maintain the benefits of ownership including the power to sell or otherwise dispose of those shares. 15 The interlocutory proceedings that were heard and dismissed by Windeyer J on 16 April 2008 and by this Court on 18 April 2008 involve claims asserted by the applicants against the Bank which may turn out ultimately to be different from those pressed at a final hearing. But we, like Windeyer J, are concerned only with the claims that find support in the evidence tendered in the interlocutory proceedings and that were pressed in argument in those proceedings. 16 In the form that the claims have been formulated at the interlocutory stage, they involve a primary allegation that the broker misrepresented the legal effect of the respective Agreements. Attention has been focussed upon a statement appearing on the fourth page of the brochure or guide that was given to Mr Terpu and that included the application form and detailed agreement that established the relevant facility. Part of the statement refers to the investor retaining beneficial and economic ownership of the lent stock. 17 Mr Terpu and Mr Lim respectively claim that this statement misled them into thinking that they would retain beneficial ownership in any securities lent and that they would be entitled to redeem those very securities upon repayment of the outstanding balance of any money owing by their companies to the broker. Mr Terpu relies on the brochure he received. Mr Lim relies on a statement in an Opes Prime website that he claims was similar in effect. There is also evidence of oral representations on behalf of the broker in each case. 18 When addressing the claims for interlocutory injunctions to restrain the Bank and its nominee from dealing with those parcels of Conquest and Gindalbie shares still under the control of the Bank, Windeyer J held that there was a serious issue to be tried on the question whether the statement in the brochure and website entailed misleading and deceptive conduct; in short, a misrepresentation as to the true effect of the written contract, that operated in the minds of the respective applicants. 19 His Honour detected no evidence of fraudulent intent on the part of those responsible for the brochure and website and I indicate that I am of similar view. 20 The interlocutory claim propounded by the respective applicants involves them asserting rights to trace and follow "their" original shares in Conquest and Gindalbie respectively. The word "their" is in quotations because it can be seen at once that the applicants have to establish some basis for disregarding what in my view is the clear language of the respective Agreements stipulating that any of the shares that were "lent" to the broker became the property of the broker. If the applicants are left with personal claims against the broker to redeliver "Equivalent Securities" upon tendering the moneys due under the respective Agreements, then this will be poor comfort having regard to the present indications as to the broker's financial position. Standing alone, it will certainly provide no avenue of recourse against the Bank, let alone recourse that would give the applicants priority over the Bank's interests over the shares it acquired from the broker under its own separate securities lending arrangements with the broker. 21 Having listened carefully to Mr Douglas QC's submissions on behalf of the applicants, I was unpersuaded by the contention that his clients' claims of an equitable proprietary nature against the Bank are strong ones or that Windeyer J erred adversely to the applicants in his assessment of their strength. 22 I observe that Melewar never suggested that the relationship between it and Opes Prime was a fiduciary relationship based, for example, upon Melewar depending on the broker for advice referable to the nature of the Securities Lending Agreement entered into with the broker. Windeyer J also rejected an argument that there was a fiduciary relationship as between the broker and the Terpu interests and that argument was not re-agitated in this Court. 23 Accordingly, the claims to trace and follow the Conquest and Gindalbie shares through Opes Prime and into the hands of the Bank rests upon an allegation of misrepresentation by the broker as to the effect of the respective Securities Lending Agreements, and nothing more. 24 Furthermore the claim in misrepresentation has been framed as one under the general law. If it extends to an allegation of breach of s12DA of the Australian Securities & Investment Commission Act, it does not encompass any allegation that the Bank is liable as an aider and abetter or under any other form of complicity envisaged by s12GD of that Act. 25 There was and remains a limited allegation against the Bank that is said to assist the Terpu interests in the contention that the Bank cannot show that it is a bona fide purchaser of value without notice of the Conquest mining shares that it acquired from the broker. This argument is said to stem from the fact that the Bank is listed on the back page of the brochure or guide as "Bankers and Custodian Bank" along with a print of the Bank's logo. The Terpu interests invited the Court to infer that the Bank would not have allowed itself to be associated with the business that was offered through the guide had not it and/or its lawyers closely investigated the brochure as a whole. The next step in the argument was that the Court should therefore infer that the Bank was on notice that the brochure contains what is said to be the misleading statement about investors retaining beneficial and economic ownership of lent stock. 26 Windeyer J concluded that the Terpu argument that the Bank was on notice of the misleading and deceptive nature of the brochure was "not a strong case, but it could succeed" (para 24 of the Judgment). I incline to the view that this was a generous assessment, especially since Mr Terpu and his company will have to establish much more than the terms of the brochure to make good any claim to rescind the signed agreement on the basis of misrepresentation as to its effect. 27 In the Melewar case there was nothing on the material on the website that was inspected by Mr Lim equivalent to the reference to the ANZ Bank or its logo found in the brochure. Melewar also signed a contract different in form to that signed by the Terpu interests and there was nothing in the Melewar contract to indicate any involvement on the part of the ANZ Bank. 28 In any event, I perceive the applicants to have very substantial difficulties as regards their claims to trace and follow the shares that they lent to the broker under the respective facilities. It is the applicants who have to establish some viable claim against the Bank as distinct from one against the broker. Alternatively, they would need to show that they are entitled to rescind their Agreements and effectively revest title in what they claim to be "their" shares notwithstanding the intervention of the interests of the Bank as a third party. Rescission of a contract will usually be refused if a third party acquires rights under the contract for valuable consideration and without notice of the vitiating factor. 29 The applicant referred to passages in s8-300 of the 4th edition of Meagher Gummow & Lehane's Equity Doctrines & Remedies about the onus of proof in establishing the applicability of the doctrine of bona fide purchaser for value without notice. The Bank has asserted that it stands in that position but led no evidence on the point. The cases cited in the text referred to appear to deal with competition between a party having a full equitable interest and a party claiming to have later acquired a legal interest, bona fide for value and without notice of antecedent breach of trust or the like. None of these cases deals with an equitable claim to rescind for innocent misrepresentation. But whether or not this is a critical distinction, I do not place the present claimants in a strong position, on the evidence before me, to show that (even in the Terpu matter) the Bank took with notice of a prior actionable misrepresentation, regardless of where the onus of proof lies at the end of the day. 30 I am unaware of any authority that would support an argument that an innocent misrepresentation made by a non-fiduciary as to the effect of an overarching contract could lead to an equitable right to trace and follow property transferred in accordance with the terms of that contract, albeit misrepresented, into the hands of a third party recipient. Such a claim would involve a wholly new category of recipient liability. The recent decision of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 suggests that the times are not propitious for extending the principles in Barnes v Addy (1874) LR 9 Ch App 244. 31 These in brief are my reasons for being unpersuaded as to the prospects of success in foreshadowed appeals that sought to show that the applicants had a more strongly arguable case against the Bank than that assumed by the learned primary judge. 32 An alternative cause of action was foreshadowed in this Court. There is a dispute as to whether or not it was abandoned during the hearing before Windeyer J. I find it unnecessary to address that dispute because I see no merit in the point in any event. The argument is that the applicants are in a position to assert, as against the Bank, rights equivalent to those vested in a mortgagor seeking to redeem. The applicants state that they are in a position to repay Opes Prime the moneys presently due under their respective facilities. Being in that situation they demand redemption of their security or at the very least an interlocutory order as against the Bank that proceeds on the back of them having an equitable interest equivalent to the right of a mortgagor as against Opes Prime being, it is contended, one that takes priority over any claim by the Bank. 33 The problem with this argument is that the terms of the securities lending agreements to which I have briefly adverted provide no support to the argument, indeed are destructive of it. As indicated, the respective Agreements stipulate that the securities in Conquest and Gindalbie that were "lent" by the clients to the broker became the property of the broker or its nominee. The clients cannot foreswear the effect of the Agreements that they signed by pointing to their subjective belief to the contrary. Those Agreements conferred personal rights against the broker to have the broker deliver up an equivalent number of securities to those lent upon satisfaction of the monetary obligation as between client and broker. But this is quite different to, indeed the antithesis of, a continuing interest, legal or equitable in favour of the client with reference to the lent securities. 34 I do not see how the putative misrepresentation of the effect of the Agreements could have the effect of conferring on the clients some interest in the lent securities that is denied by the terms of those Agreements. There is no support for a case of fundamental mistake or non est factum. The clients' rights, if any, are to rescind the Agreements that were entered into in consequence of innocent misrepresentation. That right cannot, by reference to some principles of estoppel, be converted into something equivalent to a mortgage. If there is no mortgage or its equivalent then I fail to see how reference to the equitable principle that "once a mortgage always a mortgage" can avail the applicants. 35 I have endeavoured to explain why, in my view, Windeyer J did not err in his approach to the question whether the applicants had a prima facie case. If there was any error it was that of generosity in the applicants' favour. 36 The essential reason why his Honour refused interlocutory relief and dissolved the holding injunction that was in place up until 16 April was his Honour's assessment that damages would be an adequate remedy and his conclusion that the balance of convenience did not lie in favour of granting injunctive relief. 37 The applicants foreshadowed in their draft notices of appeal that they challenge these conclusions. 38 Windeyer J explained at s27 of his judgment that his reasoning on balance of convenience proceeded, in part, from the fact that not all of the Gindalbie shares transferred by the broker to the Bank came from Melewar. From this, he concluded (at J27): Under the present CHESS system operating on the stock exchange it is not possible to identify particular shares. A number of people may be able to trace into shares now held by the ANZ Bank or Nominees and may possibly be able to establish a right to trace to a proportionate number of those shares. There is no way that this can be established at the present time based on the claim of deceptive conduct. Thus as a matter of convenience, the more convenient course would be to allow the ANZ Bank to exercise its right to sell those shares with any proportionate interest being determined in a claim for damages particularly in light of my conclusion that the cases of the plaintiffs are not strong. In the Terpu action there may be no other claimants but the position of the ANZ Bank is that it is under no obligation to Mr Terpu but rather under an obligation to Opes if the full amount of pooled cash collateral is repaid. 39 The problem here adverted to may well touch the viability of the basic claim to trace and follow that is agitated by these two clients of Opes Prime. In other words, it may go deeper than a matter of balance of convenience. But even on the latter score, Windeyer J's conclusion is one in which I detect no error of the requisite kind, as required by House v The King (1936) 155 CLR 499, before an essentially evaluative judgment on balance of convenience could be successfully revisited by an appellate court. 40 Mr Douglas effectively invited this Court to determine afresh the matter of balance of convenience. That is not the correct approach. In any event, I was unpersuaded by his arguments. It is to be borne in mind that the Bank is a solvent would-be debtor. Its security and other interests qua the shares in question over against Opes Prime are not in dispute in the present proceedings. An interim injunction of the type sought would tie up smallish parcels of shares in listed companies for a considerable period during a time of considerable volatility in the market. Subject only to the arguments about damages being an adequate remedy, to which I now turn, I can see nothing to weigh the balance of convenience in favour of the relief claimed by the applicants in their respective notices of motion. 41 Windeyer J concluded that, for each applicant, damages would be an adequate remedy to satisfy whatever claims are presently seen to be viable against the Bank. I agree with this conclusion and with his Honour's reasons. 42 The subject matter of the injunction in each case is a parcel of shares in a listed public company. The stock market is the normal place to set a value on a parcel of listed shares. In neither of the present situations is the parcel a controlling or strategic one, on the evidence. In any event, it is not beyond the capacity of any informed valuer to factor in such considerations to determine the monetary value of the putative loss if and when its availability and date are determined in the ultimate wash-up of the proceedings. 43 The evidence suggested that the Bank now holds only 2% of Gindalbie shares derived from the broker and that Melewar owes the broker about $11million. The evidence does not suggest that Melewar would be unable, if it wished, to purchase a further 2% of Gindalbie for substantially less than $11million. 44 In the case of Mr Terpu, there are possible grounds for arguing that damages are not an adequate remedy:

(1) A takeover of Conquest by Goldfields is suggested to be undesirable for Mr Terpu, at least unless the price is reasonable; and the possibility that Goldfields would acquire 5% of Conquest cheaply would make a takeover for a low price more likely.

(2) Mr Terpu owes Opes less than $500,000 and he stands to lose his 5% of Conquest (worth about $7 million) and could not afford to buy an equivalent quantity (even if this could be done without inflating the price).

(3) Mr Terpu's loss of those shares could prejudice his position as managing director and Conquest's position in its joint venture with Goldfields.

(4) Having regard to these considerations, damages would be difficult to assess if Mr Terpu won his case against ANZ. 45 I would stress that these are arguments, but I accept that some of the points have some force. However, Goldfields could in any event acquire equivalent shares progressively in the widely dispersed market, and point (3) is speculative. In my opinion these points are not sufficient to show that Windeyer J's assessment that damages were an adequate remedy was appealably wrong, or that this Court should overturn his discretionary decision not to grant an interlocutory injunction. 46 SPIGELMAN CJ: I invite Justice Hodgson to deliver the next judgment. 47 HODGSON JA: Subject to what I say below, I agree with the reasons given by Justice Mason. 48 In my opinion there is a serious question to be tried against ANZ in both cases. In each case it is arguable that Opes Prime, in substance, represented the transaction of one in which finance would be provided on that security of shares, whereas the documents signed were in effect outright transfers of shares for money plus certain unsecured rights against Opes Prime, including a right to have equivalent shares transferred back in return for repayment of money. 49 I also think the material is sufficient to raise a serious question to be tried as to whether ANZ was sufficiently aware of the content of the documents and the need to convey clearly to clients the true nature of the transactions, to put it on enquiry (in both the Melewar and the Terpu cases) and also to put it on notice that the nature of the transaction was being misrepresented by the brochure provided (in the case of Terpu). 50 There is, for reasons given by Justice Mason, substantial doubt whether this would be enough to make ANZ liable but, in my view, this doubt is not sufficient to prevent the finding of a serious question to be tried as against ANZ. However, the doubt is sufficient to show that Justice Windeyer was not wrong in his assessment that Mr Terpu's case was not a strong one, or in the assumption he made about Melewar's case on the basis of which he assessed the balance of convenience. 51 I agree with what Justice Mason has said about balance of convenience.

52 SPIGELMAN CJ: Subject to the following observations, I also agree with Justice Mason. 53 With respect to the issue of whether or not the evidence before the Court, limited as it understandably is in the context of an urgent interlocutory application, satisfies the substantial question to be tried test in the case of Melewar I agree with the remarks that have just been made by Justice Hodgson. Nevertheless, for the reasons given by Justice Mason, there are very significant legal and factual hurdles which must be overcome, with respect to the claim against the ANZ Bank, for any kind of equitable interest that could establish a proprietorial right in the shares in either Gindalbie or Conquest. 54 I also agree with Justice Hodgson that Justice Windeyer was correct in assessing the case of Terpu, on the admittedly limited evidence now available to the court, as not being a strong case. Similarly, the approach that Justice Windeyer plainly adopted on the second issue to be determined, namely the balance of convenience, was that if contrary to his view there was a substantial question to be tried in the case of Melewar, then that also would not be a strong case. That is how Justice Windeyer approached the formulation of the judgment required on the balance of convenience test. I see no error in his Honour's approach. 55 I would, however, wish to elaborate on the comparative detriments to the applicants and to the respondents in the application of the balance of convenience test. 56 The detriment to the ANZ Bank is clearly the detriment to a financial institution which, an event of default having occurred under a loan agreement, is seeking to realise its securities. Any interference by a court with the process of realisation constitutes, in and of itself, a significant detriment to a financial institution. Liquidity is always of significance to such an institution. The court is entitled to take judicial notice of the fact that in the current state of the credit markets liquidity is, if anything, even more significant than usual. 57 Each of the securities, on the evidence before the court, has been subject to considerable volatility over recent months. Therefore any interference with the ability to realise those securities is itself also a significant detriment in the current context. An undertaking as to damages is not equivalent to liquidity for a financial institution. 58 The commercial substance of an order by this Court, from the perspective of a financial institution, would have the following characteristics: first, there is a forced loan to each applicant by the bank. Secondly, the amount of that "loan" is the current realisable value of the shares. Thirdly, the "loan" will be advanced on terms and conditions determined by the Court, rather than by any form of commercial bargaining. Finally, the security of the "loan" is, in each case, a single mining share with, in effect, a one hundred percent loan to valuation ratio. One only has to state this commercial reality on the impact of a financial institution of an order of the character sought to realise that the detriment to the bank is substantial. 59 This has to be balanced, as Justice Windeyer did, with the effect on the applicants. If each applicant is correct, then they are entitled to a certain number of shares, their entitlement being of a proprietorial nature. On the materials before the Court, this would amount to five percent of the shares issued in Conquest. As Justice Mason has pointed out, of the original thirty-four million or so shares in Gindalbie, made subject to the agreement with Opes by Melewar, the ANZ Bank is now only in custody of 8.5 million shares, constituting some two percent of Gindalbie. The actual interest of the applicant is probably something less than two percent if, as seems likely, some other shareholder in Gindalbie may also have a right to trace, on the assumption that Melewar has a right to trace. In any event, I will proceed on the basis that what is in issue in the current interlocutory proceedings is five percent of Conquest and two percent of Gindalbie. 60 It is relevant to note that these are publicly listed securities with a widely dispersed shareholding. On the evidence before the court, in Gindalbie some 60 percent of the total shareholding is held by shareholders who each have less than 0.3 percent of the capital. In the case of Conquest, some 50 percent of all shares are held by shareholders with less than one percent of the capital. 61 There would be no difficulty in either applicant acquiring the claimed number of shares at a price, if damages were eventually awarded. This is a typical example of why, as a final order in final proceedings, the Court would probably conclude damages to be an adequate remedy. It would award the applicant, assuming it was successful, a sum of money that would enable it to acquire the shareholding in which it claimed a proprietorial interest. Damages would clearly be adequate, even on a final hearing, because of the fact that we are dealing in each case with a listed company with a widely dispersed shareholding. The point applies with greater force in the context of an interlocutory order where the balance of convenience, rather than legal right, is to be determined. 62 Nevertheless, there are advanced certain special reasons in each case why damages would not be an adequate remedy. There may of course be circumstances in which a special value attaches to a shareholding. That would be the case for example where a shareholder has a strategic shareholding, as Melewar originally had in the amount of 14.5 percent in Gindalbie. That kind of level of strategic shareholding may not be readily replicable and it may be that damages would not be an adequate remedy in the case of such a strategic shareholding. However, as I have pointed out, only 7.25 percent or so of the total shares, being half the holding of Melewar in Gindalbie, were the subject of the arrangements with Opes and only some two percent is still held by the ANZ Bank. 63 Because what is in issue here is only, at most, two percent of the shareholding in Gindalbie, in a context where the applicant retains 7.25 percent or so, this is not a large enough parcel to be given significant weight in the balancing exercise. It does appear that the Melewar's strategic holding, by reason of the events associated with the arrangements with Opes, has now been reduced from the largest single shareholding to the second largest shareholding. If it is the case that the two percent now in issue in these proceedings can make a difference in the comparative influence of the two strategic shareholders, then Melewar can readily acquire that shareholding. This element is not entitled to any significant weight in assessing the balance of convenience. 64 As Justice Mason has already pointed out, the case of Terpu is somewhat stronger but, in my opinion, it is not enough to change the balance. On the materials before Windeyer J, and on the submissions in this Court, something like five percent of the shares in Conquest is involved. The largest shareholder, indeed it appears the only other sizeable shareholder, is a subsidiary of the Goldfields Group which is a co-venturer of Conquest. As Justice Mason has pointed out, it is the apprehension by the applicants in the Terpu matter about the future intentions of Goldfields, both with respect to the joint venture and the control exercised by Mr Terpu of the affairs of Conquest, that gives rise to the possibility of some kind of adverse consequence for which damages would not be adequate. 65 Goldfields had about 9 percent of Conquest, but it has since announced that it has acquired about a further five percent bringing it up to 14 percent. Whether that is as a result of an acquisition of an interest in the applicants' shares, or is some other process of acquisition, does not appear with clarity on the evidence before the court. Mr Terpu is concerned that there may be a change of control to Goldfields, particularly if it were to acquire further shares up to 20 percent, which it could acquire without triggering the threshold for a takeover offer for the whole shareholding. 66 The difficulty here is that the widely dispersed nature of small shareholdings is such that, as one would expect, they are unlikely to vote. The affidavit evidence before the Court indicates that a very small proportion of shareholders has in fact turned up to vote in past annual general meetings. It may be the case that, given the wide dispersion of the shareholding, the absence of the significant block of some five percent, that was originally held by the applicants and which is now in dispute, could make a difference. In this respect I attach some significance that in the period between the present proceedings and the final disposition of the proceedings, the applicants' shares probably do constitute the only substantial voting block other than Goldfields. This could be of significance if Goldfields were to seek to take steps contrary to the applicants' interests. 67 The ANZ Opes agreement makes it clear that Opes can direct ANZ as to how the shares should be voted. If it were the case that the applicants, particularly in the case of Terpu, could direct Opes as to how those shares should be voted, that would be an element that was entitled to some weight, although not in my opinion determinative weight, in deciding the balance of convenience. It is, however, clear on a reading of the contractual provisions to which our attention was drawn, that neither Melewar nor Terpu have a contractual right to direct Opes. It is Opes rather than the lenders that exercises the voting rights upon the transfer for which the agreements provide. 68 It does appear on a number of pieces of the evidence to which our attention was drawn by Mr F Douglas QC, that Opes has proceeded on the basis that it will vote in accordance with a lender's wishes. There may be some basis, when all of the evidence is taken, to assert an estoppel or some other relief available against Opes with respect to the voting rights issue. However, the materials before the Court do not enable it to proceed on any such basis. The evidence is not sufficient to establish any kind of a significant capability on the part of Mr Terpu to direct the voting of the five percent to which he claims to be entitled in the present proceedings. 69 Accordingly, with respect to the factors to which I have referred in addition to the factors identified by both Justice Mason and Justice Hodgson, the formulation of the judgment as to where the balance of convenience lies by Justice Windeyer was correct. At least at the level appropriate for determination in this Court, no error has been identified in his Honour's analysis. Indeed, none was suggested in any pointed manner in the submissions to this Court. Rather, it was submitted that his Honour ought to have reached a different conclusion. I am not satisfied that his Honour erred in any respect and, on the principles applicable to an appeal from a judgment of this character, this Court should refuse leave to appeal. 70 Accordingly, for those reasons, I joined in the orders made last Friday.

02/05/2008 - deletion of words "Commercial List of the" immediately before the words "Equity Division" - Paragraph(s) 13 20/05/2008 - Gindalbie omitted, "assess" changed to "conclude", "were" changed to "are" - Paragraph(s) 59, 61, 66

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.