Lighter Note

Court out

The Federal Court judgement knocking back car dealer Bruce Drummond’s appeal over the loss of his initial case against broking house Euroz Securities – over his investment through failed margin lender Opes Prime – makes interesting reading.

The justices involved backed up the original Federal Court judgement, which had rejected Mr Drummond’s version of events as a witness for his own company Eric Preston Pty Ltd.

What was most interesting to The Note was the fact that Mr Drummond appeared to have made the decision to shift to Opes from another margin lender, Leveraged Equities, because it declined to advance funds to purchase shares in Sundance Resources.

According to the judgement, Mr Drummond held more than 5 million Sundance shares and bought up more immediately upon entry into the Opes Prime facility, which was some time in May 2007, taking his stake in the company above 5 per cent.

Clearly Mr Drummond saw something in Sundance that his previous margin lender did not.

He was right, albeit briefly. Sundance climbed from under 10 cents a share to more than 20 cents in May, but that was nothing compared to the trajectory from June till September when it climbed to well over 80 cents – its peak for the period before Opes collapsed.

When Opes administrators moved in, Mr Drummond had 11.4 million Sundance shares worth nearly $2.5 million, from a total portfolio of more than $7.8 million as security for a loan of around $3 million.

In summary, The Note particularly loves the email from Euroz director Russell Kane to his colleagues after Opes crashed.

“How the f#$#$K can we have a client with $5-6m exposure to OPES Prime,” Mr Kane wrote.

“I am sorry but that is dumb.”

The judgement lays the blame with the client in this instance.