THE $200 million-plus settlement deal between the Commonwealth Bank and clients of the collapsed Storm Financial failed to address crucial legal issues, according to a litigation specialist preparing to sue the bank.

Stewart Levitt -- whose law firm Levitt Robinson represents about 75 Storm clients -- said the settlement deal brokered by rival firm Slater & Gordon had failed investors by not examining key allegations such as ``misleading and deceptive conduct'' by the bank.

``I find it extraordinary that you approach a negotiation by letting your opponent throw legal liability concepts to the wind and make hardship the central issue,'' Mr Levitt said. ``The whole concept is misconceived from the start.''

Slater & Gordon, which represents about 2000 Storm clients, on Tuesday announced it had reached an out-of-court settlement with CBA.

CBA had bankrolled loans to Storm clients, many of whom were wiped out in the stockmarket crash of late 2008.

Many of the investors took out loans they could not afford, using their family homes as security.

Under the settlement CBA agreed to refund investors in cases where it was found the bank lent them money ``imprudently'' by inflating the value of their homes or by overstating their ability to make loan repayments.

Mr Levitt said the relationship between Storm and the CBA had not been addressed by the Slater & Gordon settlement and the amounts offered to investors were at the very lowest end of what would likely be decided by courts.

``Crucially, the bank didn't tell investors that if they made a margin call it could grossly affect their ability to keep their homes,'' he said.

Slater & Gordon has said its clients are free to accept the CBA offer or to pursue separate legal action. The CBA and Slater & Gordon ran six test cases with an independent panel to determine the level of payouts investors might expect. Mr Levitt said his firm was ``formally denied'' the opportunity to attend those cases.