Economic reality and meaning of 'on behalf of' considered in compensation claim

A recent Queensland Court of Appeal decision has considered a claim for compensation under the National Guarantee Fund in connection with the collapse of Opes Prime. The decision demonstrates that courts will look beyond the terms of an agreement to consider the 'economic reality' of the transaction when determining the nature of a transaction. In addition, in relation to claims under the National Guarantee Fund, a broad meaning will be given to the phrase 'on behalf of' as contained in the Corporations Regulations.

In Securities Exchange Guarantee Corporation Ltd v Samuel Holdings Pty Ltd [2011] QCA 228, a holder of a margin lending account with Opes Prime claimed compensation in respect of money which remained in the account at the time Opes Prime became insolvent. The court held that the account holder was entitled to compensation under the Fund because Opes Prime had received the money in the course of its securities business as demonstrated by the 'economic reality' of the transaction. The court also held that Opes Prime was holding the money 'on behalf of' the account holder at the time of its insolvency. The phrase 'on behalf of' was given a broad meaning such that it would 'extend to all situations in which a dealer receives property from a client which the dealer is not entitled to apply for its own purposes'.