Third Information Bulletin for former Storm clients

CLIENT INFORMATION BULLETIN NO. 3

The CBA Storm Resolution Scheme Panel, in a press release by Slater & Gordon, is quoted as attempting to compartmentalise the decision of Rares J. in Goodridge v Macquarie Bank et Anor, on the basis that in Goodridge’s Case, the Bank was concerned with the exercise of a “non-existent power of sale”.

It is difficult to see how CGI clients could be worse off than Macquarie clients.  By analogy, the CBA sold down assets without have a lawful Power of Sale, as well, without making a margin call.

Applying the logic of Mr Justice Rares and also, my strong opinion, the Bank had a non-assignable obligation to make a margin call.

The interlocutory finding of Justice Greenwood is to a similar effect in the matter of Cassimatis v CGI, reported in the Federal Court in December, 2008 (para. 49 of Judgment, No. QUD421/2008, 24 December, 2008).

The majority of CBA clients in the Resolution Scheme are being represented by those whose public statements could be characterised more by advocacy of the Bank’s position rather than of their clients’.

That is not the way to conduct negotiations to extract the optimum benefit for a client or to exert maximum pressure – or any pressure – on the Bank.

The CBA Resolution Scheme is not the only possible route to settling with the CBA.

1. There have been settlements achieved with the Bank before the Settlement Scheme was conceived of, and furthermore, in litigation historically, matters most often settle after proceedings have been commenced but before coming to trial.

2. At the moment, the Bank is taking a position to extend a Moratorium to Participants in the Storm Resolution Scheme, while they remain Participants in the Scheme.  That participation does not prevent Participants in the Scheme from changing their lawyer, while remaining in the Scheme, to receive independent legal advice on the proposed resolutions negotiated between Slater & Gordon and CBA and recommend by both of them.

3. If you choose not to be represented by Slater & Gordon, you have to be represented by another Borrower Lawyer in order to continue to participate in the Scheme.  Levitt Robinson is another Borrower Lawyer, participating in the Scheme.

4. Under the rules of the Scheme, the Bank has to pay the Borrower Lawyer.  Where there are serial Borrower Lawyers (ie. where you change your lawyer), the Bank has not limited its obligation to pay the Borrower Lawyer, whoever that Borrower Lawyer might be, other than as to the amount(s) prescribed in the Deed Scheme and Rules.

5. I reiterate, as I stated at the Redcliffe meeting on Saturday, 6 March, 2010, the payment of Levitt Robinson’s fees for representing CBA clients in the Resolution Scheme is a matter between Levitt Robinson and the CBA.  We will be relying upon the Borrower’s Deed to which we have become party.

6. The fact that a Moratorium is being extended to Participants in the Scheme is a form of latent pressure on Participants in that, as soon as the Participants elect to reject any offer, the Bank could seek to enforce such rights as it may have against Borrowers.

   1. It is our position that the Bank’s position is flawed and we will be challenging the Bank’s right to exercise any power of sale or to enforce loan instruments which are under challenge, while they are the subject of Court proceedings.

7. We are very close to being in a position to file an action in the Federal Court on behalf of all the clients of the CBA who have not settled with the CBA through the Resolution Scheme or otherwise.

8. To the extent that some CBA clients who have participated in the Resolution Scheme may arguably have been subject to unconscionable conduct, including coercion or duress, or may not have received truly independent legal advice, or if the Resolution Scheme is challenged for infringing the Trace Practices Act (as constituting exclusive dealing and involving key Participants in restrictive trade practices), such settlement agreements as may be entered into with the CBA through the Scheme could possibly be subject to later challenge.

9. The CBA has spent a great deal of time, money and energy in portraying itself as reasonable and compassionate and as such, the Bank would be most unlikely to “put people out of their houses”, pending a Court resolution.

   1. Should the Bank prove to be insensitive and contrary to expectations, harsh and if it shows itself to be hypocritical (given that it has already apologised for inappropriate lending practices) then we would seek to obtain Orders (injunctions) from the Court, restraining the Bank from executing against customers’ property, while proceedings reviewing and challenging its conduct are under review by the Court. We believe such an application for injunctions would have sound prospects of success.

10. Finally, all Borrower’s Lawyers have access to their clients’ Bank documents, not simply those Borrower’s Lawyers who happen to be Slater & Gordon.  Whoever is the Borrower’s Lawyer, including Levitt Robinson, will have access to relevant Bank documents to the extent that such access to any Borrower’s Lawyer is authorised by the Borrower’s Deed.

11. Such access would be available in Court proceedings in any event and also, could be secured by a Freedom of Information request.

Dated:  15 March, 2010

With compliments

LEVITT ROBINSON

STEWART A. LEVITT

Principal Solicitor & Advocate