Fourth Information Bulletin for former Storm clients

FOURTH INFORMATION BULLETIN

Storm Financial Update on Offers – 24 March, 2010 –

from Storm Financial Information Bulletin

We have now considered the latest Slater and Gordon Storm Financial Information Bulletin, which has been forwarded to us by our clients, who continue to receive material from Slater & Gordon, notwithstanding that they have ceased to engage the services of Slater & Gordon.

It encloses a copy of former Justice Callinan’s Opinion on the likely effects of the decision in Goodridge v Macquarie Bank Limited [2010] FCA 67, delivered 12 February, 2010, by Justice Rares in the Federal Court at Sydney, on claims by Storm investors.

For reasons best known to Slater & Gordon, they have characterised Mr Callinan’s opinion in a way which focuses on its more negative aspects, rather than on the parts of his opinion which in fact, ought to be given emphasis for the purpose of improving the position of Storm investors in negotiating with the CBA.

Mr Callinan at paragraphs 12 and 13 commented that while the High Court has not yet determined the matter, other Courts have found that “unconscionability may arise, simply out of serious misconduct or unfairness and unreasonableness from a moral perspective, or systemic conduct, focussed on vulnerable persons”.

We would have thought that the “churning” of increasing borrowings, double-gearing, excessive valuations, relative disregard for serviceability considerations, the failure to draw borrower’s attention to the risks of their high gearing, including to their non-Storm assets, the mismanagement of Storm accounts throughout most of 2008, and the Bank’s profligate lending policy towards Storm investors, even while it was exercising prudence towards other non-Storm customers, during the period of the onset and deepening of the Global Financial Crisis, could all amount to unconscionable conduct – which facts were not available to be pleaded in the Goodridge case.

These are additional facts which favour Storm CBA customers (and other Storm investors too, to a greater or larger extent) that were not present in the Goodridge claim.

Additionally, with the CBA, there were no margin calls, not just an invalid one, as in the Goodridge case.

At paragraph 15 of his Opinion, MR Callinan, QC wrote in relation to the application of the CBA Resolution Scheme Proposal Framework:

“If the Framework does result in offers which are considered by a particular claimant in his or her case to be unfair, or not to recognise features of the persons’ case which are thought to give particular strength to a claim of unconscionability (especially perhaps, some disabling condition or circumstance), then he or she will be free to reject the offer and proceed to evaluation and determination under the Resolution Scheme or to pursue the claim in the Courts.”

(Again the emphasis is on hardship rather than legal entitlement).

Levitt Robinson, with respect to its clients, would seek an assurance from the Independent Panel that an evaluation or determination under the Resolution Scheme, based on additional legal grounds including unconscionability, would be considered, not just on the basis of the investor’s hardship but rather, would reflect the Bank’s full legal liability, perhaps discounted for early settlement.

We have already written to the Bank and offered to run as a test case, our proposed Class Action against the CBA before the Independent Panel, reserving our right in the event that we are unhappy with the outcome, to run the Class Action in the Federal Court.

We have also requested that the Bank subsidise the running of the Class Action test case, to the extent of $350,000.00 (plus GST), having regard to the intended participation of at least three (3) Counsel, including Senior Counsel, in its presentation.

To-date, the Bank has not responded to our offer.

We would wish to have such test case take place in public, at least to the extent that any participant in the Scheme should be free to witness it in progress.

We are particularly surprised that given the significance of Mr Callinan’s remarks in paragraph 15 of his opinion of 19 March, 2010, that it was not featured in the Slater & Gordon Storm Financial Information Bulletin, “Update on Offers” of 24 March, 2010.

The mere fact of an appeal having been lodged against the Goodridge decision does not in anyway mean that it is likely that the appeal will succeed - and it should be borne in mind that many of the findings of Mr Justice Rares in Goodridge were based upon his acceptance of the credit of Mr Goodridge as a witness, which is a finding which any appellate Court is stuck with.

We do not agree with the practice of any lawyer in publicly hosing down his client’s expectations, which in this instance, could only serve to strengthen the resistance of the Bank to recognising its full legal obligations and to relieve the Bank of pressure to acknowledge the full extent of those liabilities.

We believe that the Statement of Mr Callinan of 19 March, 2010 at p.15, is in response to the public campaign which we have been waging, which is impinging upon the viability of the CBA Resolution Scheme as a “catchall solution” for the Bank, as participants begin to recognise that the law is not against them and they should not sell themselves short.

With compliments,

Dated:  25 March, 2010

With compliments

LEVITT ROBINSON

STEWART A. LEVITT

Principal Solicitor & Advocate