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Banks facing further court action over Opes c -

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Banks facing further court action over Opes collapse

The World Today - Friday, 24 October , 2008 12:18:00

Reporter: Rachael Brown

ELEANOR HALL: The liquidator of the failed stockbroking firm, Opes Prime, is taking the ANZ bank
and investment bank Merrill Lynch to court.

Settlement talks between the banks and the liquidator Ferrier Hodgson broke down last night. The
liquidator says it will now pursue large compensation sums in court and Opes Prime creditors are
also taking their own case against the banks with a class action in the Federal Court .

In Melbourne, Rachael Brown reports.

RACHAEL BROWN: It's been seven months since the collapse of Opes Prime but it could be years before
creditors recoup any of their lost shares.

DOUGALL DONALDSON: I was hoping for some sort of financial restitution either in cash or the
reinstatement of the securities that I owned.

RACHAEL BROWN: Unsecured creditor Dougall Donaldson lost his $112,000 investment in the collapse.
There are 1200 others like him who had their hopes pinned on liquidator John Lindholm, who was
trying to mediate a $300-million compromise with the banks. But talks broke down last night, the
banks describing the sum as exorbitant and unrealistic.

Mr Donaldson says creditors now face a long wait.

DOUGALL DONALDSON: I was hoping to see the end of this in the short term but now I think it's going
to be a long, drawn out process for all of us.

RACHAEL BROWN: How long are you tipping?

DOUGALL DONALDSON: You know, three, four, five years. It could drag on for that long I guess. The
court process is pretty detailed and pretty time consuming.

RACHAEL BROWN: Mr Lindholm won't be speaking until a creditors' meeting next week. His legal
advisor is quoted in today's Financial Review, describing the outlook as an "Armageddon scenario of
three to five years of litigation".

ANZ has declined an interview but released a statement saying it participated in the mediation in
good faith, hoping to achieving a sensible outcome, but that it couldn't be reached.

And Merrill Lynch says it won't be making any comment.

The courts will now decide whether the banks entered into uncommercial deals with Opes Prime in the
days before it collapsed but the liquidator first has some ground work to do.

DAVID ANDREWS: And I would expect that to include an examination of the directors and officers of
the banks concerned.

RACHAEL BROWN: David Andrews from law firm Slater and Gordon explains creditors will fight the
banks from another angle.

DAVID ANDREWS: Misrepresentations made by Opes Prime and the knowledge of the ANZ and Merrill Lynch
about those misrepresentations.

RACHAEL BROWN: Mr Andrews' firm has reopened its class action against the banks for alleged
deception and expects more interest in the wake of the failed mediation.

DAVID ANDREWS: I believe a lot of people were holding back from getting involved in legal
proceedings whilst the mediation continued because they were hopeful that the mediation process
would be a able to deliver a result which they would regard as being as favourable or if not as
favourable, not much less favourable than they could get out of litigation. The benefit of a
successful mediation would have been certainty and speed whereas litigation is notoriously
difficult to predict and can be a long and arduous process.

RACHAEL BROWN: He says while creditors won't be able to double dip, the separate liquidator
litigation will have an effect on their class action.

DAVID ANDREWS: Say for example if a dividend from a liquidator or creditor was able to get 20 cents
but wanted to claim 100 cents in the dollar then we would be pursuing the balance of the 80 cents.

RACHAEL BROWN: Creditor Mr Donaldson says he hopes a wider class action will strengthen his case.

DOUGALL DONALDSON: I mean it's just horrendous. I was told by the Opus Prime representative that
these shares were to be transferred to ANZ as a custodian on behalf of Opes and that I remained the
beneficial owner of those shares. And how the devil ANZ just come in and take all the shares and
flog them on us just left me absolutely bewildered.

ELEANOR HALL: That's Opes Prime creditor Dougall Donaldson ending that report from Rachael Brown.