Contract - Where plaintiff agreed to provide guarantee and shares as security for loan agreement in name of fifth defendant - Where second defendant agreed that shares would be returned in six weeks - Where second defendant agreed to not trade on account while shares were held as security - Whether second defendant breached agreement by trading and by failure to return shares
Equity - Fiduciary duties - Where second defendant is broker for the plaintiff - Where plaintiff and second defendant entered personal agreement for shares to be provided as security on account of fifth defendant - Whether second defendant in breach of fiduciary duty to plaintiff
Misleading and deceptive conduct - Where second defendant made false representations to the plaintiff regarding agreement to provide guarantee and shares as security - Where plaintiff pleads multiple alternative statutory causes of action
Equity - Where plaintiff provided guarantee for margin lending account of fifth defendant with first defendant - Where first defendant knew guarantee arranged by second defendant - Whether first defendant received guarantee and security knowing of breach of fiduciary duty
Misleading and deceptive conduct - Where first defendant entered guarantee and mortgage with plaintiff in relation to fifth defendant's margin lending account - Whether implied representation regarding absence of unusual features of account
Unconscionable conduct - Where first defendant entered guarantee and mortgage with plaintiff in relation to fifth defendant's margin lending account - Whether unconscionable for first defendant to accept guarantee and shares as security without disclosing features of operation of account
Misleading and deceptive conduct - Where plaintiff entered guarantee and mortgage by reason of second defendant's misleading and deceptive conduct - Where second defendant later transferred further shares into account by forged authorities - Whether losses caused by later transfer - Whether losses by reason of the misleading and deceptive conduct
Unjust enrichment - Where second defendant transferred shares as security for account of fifth defendant with first defendant - Where authority to transfer forged - Where first defendant became aware authorities forged - Where return of shares would result in margin call and sale of other shares held as security - Where plaintiff discharges fifth defendant's debt for return of shares - Whether first defendant unjustly enriched
Corporations Act - Financial services - Where second defendant authorised representative of fourth defendant - Whether conduct of second defendant related to provision of financial services
Subrogation - Where plaintiff discharged debt of fifth defendant to first defendant
Turns on own facts
Legislation:
Australian Consumer…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
Continue reading Smith v Leveraged Equities Ltd [No 3]
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Details
AGLC
Smith v Leveraged Equities Ltd [No 3] [2018] WASC 84
Case
[2018] WASC 84
Decision Date
CaseChat Overview and Summary
The case of Smith v Leveraged Equities Ltd [No 3] involved the plaintiff, Smith, who had provided a guarantee and shares as security for a loan agreement in the name of the fifth defendant, Leveraged Equities Ltd, through the first defendant, a financial institution. The second defendant, who was both a broker for Smith and an authorised representative of Leveraged Equities Ltd, had agreed that the shares would be returned within six weeks and that no trading would occur on the account while the shares were held as security. Smith alleged that the second defendant breached the agreement by trading on the account and failing to return the shares within the stipulated timeframe. Smith also claimed that the second defendant breached fiduciary duties owed to Smith, misled Smith about the terms of the agreement, and engaged in unconscionable conduct. The plaintiff further contended that the first defendant received the guarantee and security knowing of the second defendant's breaches of fiduciary duty and misleading conduct.
The court had to determine whether the second defendant breached the agreement by trading on the account and failing to return the shares within the agreed period. The court also considered whether the second defendant breached fiduciary duties, engaged in misleading and deceptive conduct, and acted unconscionably. Furthermore, the court examined whether the first defendant received the guarantee and security knowing of the breaches of fiduciary duty and misleading conduct, and whether it was unconscionable for the first defendant to accept the guarantee and security without disclosing the features of the account's operation. Additionally, the court had to decide if the plaintiff was entitled to recover losses caused by the second defendant's later transfer of further shares into the account using forged authorities. The court also considered if the first defendant was unjustly enriched by retaining the shares as security, and whether the second defendant's conduct related to the provision of financial services under the Corporations Act.
The court found that the second defendant did breach the agreement by trading on the account and failing to return the shares within the agreed period. The second defendant was also found to have breached fiduciary duties, engaged in misleading and deceptive conduct, and acted unconscionably. The first defendant was held to have received the guarantee and security knowing of the second defendant's breaches of fiduciary duty and misleading conduct, and it was unconscionable for the first defendant to accept the guarantee and security without disclosing the features of the account's operation. The court held that the plaintiff was entitled to recover losses caused by the second defendant's later transfer of shares using forged authorities. The first defendant was found to be unjustly enriched by retaining the shares as security, and the second defendant's conduct was found to relate to the provision of financial services under the Corporations Act. The court ordered the second defendant to return the shares to Smith, and the first defendant to compensate Smith for the losses incurred due to the second defendant's breaches.