Case Summary - Qintex (1990) 5ea46

CASE SUMMARY Qintex Australia Finance Ltd v Schroders Australia Ltd (1990) 3 ACSR 267 Court: NSW Supreme Court – Commercial Division

Judge/s: Rogers CJ

Judgment Date: 27/11/1990 Plaintiff: Qintex Australia Finance Ltd (QAFL) Defendant: Schroders Australia Ltd (Schroders) This case involves the channelling of funds between a group of companies. Facts: 1. Schroders offered to conduct foreign currency transactions for the Qintex group. 2. On 1 August 1989 on behalf of a member of Qintex, the defendant sold 1.2 billion Japanese yen for proceeds of A$11,560,693.64 payable to Qintex Television Ltd (QTL). Instead, the proceeds were incorrectly paid to Qintex Australia Finance Ltd (QAFL). 3. At the same time, the defendant was told to buy a futures contract for 1.2 billion Japanese yen at the prevailing exchange rate on 4 December 1989. However, on 4 December 1989 the contract was closed on a loss of $1.377 million approximately. 4. This amount became payable to the defendant. To cover the loss, the defendant used funds already held by it on behalf of the plaintiff (QAFL). 5. The plaintiff sued. It argued that another Qintex group entity was responsible for the loss. Issue: Here the issue was whether Schroders could offset the loss using the funds from the Qintex subsidiary, which would depend on whether Schroders was acting for that subsidiary while the loss was incurred. Therefore, was the defendant permitted to ignore their separate legal identities, treating all of the group’s companies as a single business enterprise and consequently their debts as well? Held: The plaintiff was not a contracting party (either principle or agent). Usage of its funds by the defendant to offset the loss was not justifiable. Rogers CJ: -

The fact that the defendant could not produce evidence pointing to the plaintiff’s involvement as a principle contracting party was persuasive. What evidence there was, indicated Schroder’s business control measures were lax and that there were no measures taken to designate a contracting party. o Instructions on the transactions were received solely from treasurers in the Qintex group (referred to only as ‘Qintex’) and not a specific entity of the group. Deal slips filled out by employees of the defendant show this. Furthermore, none of the entities had individual client codes, and only a general one was used by the defendant.

In this case the court recognised the difficulty in applying the law which specified strict boundaries between entities in a corporate group because the commercial reality was such that those same corporate groups did not maintain those boundaries in practice.