In Beconwood Securities Pty Ltd v Australia
and New Zealand Banking Group Limited [2008] FCA 594 the Federal Court had to decide on the competing rights of a lender (Beconwood) and a borrower (Green Frog, a part of the now insolvent Opes Prime Stockbroking group) under a Securities Lending Agreement. The lender had loaned its shares in return for a loan from the borrower Opes Prime. Opes Prime had obtained its funds from ANZ on the security of the shares it borrowed from Beconwood; ANZ wanted to sell those shares upon default by Opes Prime. ANZ could not sell the shares unless they had been transferred by Beconwood to Opes Prime so that it had the right to mortgage them to ANZ.

The lender Beconwood wanted its shares back upon payment of its debt to Green Frog. Otherwise its shares would be pooled with all the other Green Frog assets and it would become a mere creditor and lose its rights over those specific shares.

After a detailed analysis of the Agreement, including reference to US cases, the Court rejected the Lender’s (Beconwood’s) claim over the shares. The Court decided that Beconwood had legally transferred the shares to Green Frog (despite use of the lender/borrower terms).

The decision did not deal with claims over representations made to Beconwood about the effect of the agreement.