Primebroker liquidator sues ANZ

The liquidator of Primebroker Securities has launched a A$97.7 million (NZ$127 million) legal action against ANZ on behalf of creditors.

As revealed by BusinessDay on Monday, liquidators Michael Humphris and Laurence Fitzgerald of BDO lodged a statement under the Federal Court's Fast Track application process claiming the return of A$86.2 million repaid to the bank in the six months before the securities lending business was put into receivership.

That action seeks an order for the charge under which PricewaterhouseCoopers' were appointed receivers of Primebroker to be set aside under Section 588FJ of the Corporations Act, and ANZ's floating charge over Primebroker's assets declared void.

The liquidators also want a further the A$11.5 million recovered by the receivers to be returned.

In order to defend the action, it is believed that ANZ will need to demonstrate that Primebroker was solvent immediately after the charge was granted to the ANZ.

The liquidators allege "ANZ sought and received substantial preferential payments and significant commercial advantages at the expense of the unsecured creditors".

ANZ appointed receivers to Primebroker Securities in July 2008, and Primebroker's directors appointed administrators in the same month.

In October 2008, the administrators were appointed as liquidators.

According to BDO, "under the Corporations Act, if a company goes into liquidation, any transactions that take place within six months prior may be challenged by a liquidator. In particular, monies paid can be considered as preferential payments and therefore claimed by the liquidator".

According to BDO, if successful, "the action would enable the liquidators to continue the process of assessing all claims and determining a return to all creditors".

Wednesday's action by BDO is the precursor to a second A$200 million damages claim by Chimaera Capital, which operated Primebroker.

Both cases will be financed by Special Situations LFF, a litigation funding vehicle consisting of Primebroker principals Ian Pattison and Sal Catalano and former clients.

That second action is expected to highlight flaws in ANZ's custodial services division, which allegedly failed to clear and settle various share trades for Primebroker before the firm collapsed. The failed trades are alleged to have sparked a "run" on the company by stockbrokers.

ANZ has indicated that is is aware of the pending legal action and will fight the matter in court.

The bank has also indicated it previously made provision for the matter.

Earlier this week ANZ spokesman Paul Edwards said the bank was aware of the accusations being made by Primebroker and its liquidator.

"There have been threats of legal action by the Primebroker liquidator and the Primebroker principals for many months now," Mr Edwards said.

"This is nothing new and in the event any actions materialise, ANZ will defend them appropriately. The matters associated with securities lending including the Primebroker receivership are now two years old and ANZ is completely covered in terms of the provisions that are necessary in relation to those matters."

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