Eighth Information Bulletin

URGENT

[CORRECTED]

INFORMATION BULLETIN NUMBER 8

TO ALL LEVITT ROBINSON (STORM VICTIM)

RE:      STORM FINANCIAL LIMITED AND THE BANKS

TERMINATION: BLESSING IN DISGUISE FOR SCHEME BORROWERS

The purported expulsion of Levitt Robinson, Solicitors & Attorneys, from the CBA Resolution Scheme could prove to be a blessing in disguise for all remaining Borrowers in the Scheme, and including for Borrowers who have already settled with the CBA and harbour regrets.

We are currently challenging the purported termination of our involvement through the Dispute Resolution Process provide for in Rule 24 of the Scheme Rules; however, the CBA has opposed Counsel Assisting the Independent Panel in the CBA Resolution Scheme from deciding whether the termination of Levitt Robinson’s involvement by CBA occurred validly and according to law.  We say that it did not.

FURTHER COURT ACTION SOON

If Counsel Assisting does not determine that he has jurisdiction to decide this, and also, that CBA was not entitled to terminate Levitt Robinson’s participation in the CBA Resolution Scheme, then we will challenge the matter in the Courts, particularly if, in the meantime, a freeze is not imposed on the termination and Borrowers’ suspensions.

Levitt Robinson’s intention has always been to seek revision of the Scheme Rules and to reform the CBA’s approach to settlement to make it fairer, more equitable, and to give more weight to what we consider to be CBA’s legal liability to Borrowers, in arriving at  the amounts for which CBA should offer to settle with Borrowers in the Scheme.

Our decision to file the Class Action was only taken with our clients, once we considered that all avenues to achieving this revision and reform had been exhausted, a point which we were persuaded had arrived when, without reference to, or consultation with us, and contrary to clause 4.4 of the Borrower Deed, Dr Brendan French on behalf of CBA, issued a press release, of which we first learned from Tony Raggatt of the Townsville Bulletin on 9 June 2010, a copy of which you already have (attached again). 

The CBA press release effectively pulled the rug out from under the “good faith” negotiations in which he had been engaged on behalf of all of you, with CBA.

In that press release, which was styled by CBA as an Information Bulletin for Borrowers, CBA in effect announced that there would be no reform, no revision and no change to what we regarded as being its heavy-handed approach to Borrowers in the Scheme.

If we are forced to challenge the CBA’s recent actions against Levitt Robinson and the Borrowers whom we represent through the Courts, which we will indeed do next week, if there is no resolution of our current disputes with the Bank concerning our continued right to represent our Borrower clients in the CBA Resolution Scheme  - then the opportunity will be afforded to us and to you, to ventilate our manifold concerns regarding the Scheme’s management and implementation:

SCHEME DEFICIENCIES, DEFECTS, BREACHES AND MISREPRESENTATIONS

1. We consider aspects of the Scheme as presently constituted,

to contravene the Trade Practices Act 1974.

1. We are aware of a significant number of Borrowers who have already accepted offers from the Bank and have signed Deeds of Settlement and Release with the Bank, who feel that they did not have any option but to do so and had been subjected to undue pressure to accept what was on offer, without the opportunity to obtain what they consider to have been adequate or truly independent legal advice.  Some of these “settlers” have approached us to seek to set aside their settlements.  In our view, the way in which the Scheme has been managed and implemented has throughout produced a real risk that there would be frequent incidents of pressure being brought to bear and a lack of informed consent by Borrowers, to reaching agreements with the Bank.

1. We do not believe that the way in which the Scheme has been managed and conducted has been “transparent” contrary to Recital E of the Borrower Deed, which sets “transparency” in the operation of the Scheme as one of the principal aims of the Scheme.

1. We consider that people have been induced to participate in the Scheme, including ourselves, in reliance upon representations by CBA concerning the Bank’s responsibility for the payment of Participation Costs, including to subsequent Borrower Lawyers, the assurance of transparency and the opportunity to conduct meaningful negotiations with the Bank.  Those representations have not been borne out by our collective experience.

1. The CBA Resolution Scheme, as managed and conducted, has not incorporated sufficient mechanisms to protect Borrowers from the inequality of bargaining power inherent in a situation where, in most instances, whatever the historical rights or wrongs of the matter, the Bank holds their security in the form of a mortgage over their property and the Borrowers, by definition, find themselves in greatly reduced financial circumstances and are considerably weakened by their experiences through the Storm Financial Collapse and CBA’s management of their loan portfolios.

1. Borrowers have been discriminated against by CBA in the Scheme according to the identity of their Borrower Lawyer in terms of the order in which they have received their offers and the willingness of CBA to meet their Participation Costs in the Scheme.

This is both a contractual and a Trade Practices Act issue.

The real benefit which will flow to all participants in the Storm Resolution Scheme, including to those whom we represent, will be the opportunity to have all of these matters brought before a Court and considered by a wise and independent judge, unconstrained by Scheme Rules,  if the Bank persists in trying to lock us out of participating in the CBA Resolution Scheme, as our Borrower clients’ duly appointed legal representative.

1. The criticisms which we have made of the Scheme, which have been generally along the lines of the matters which I have identified above, were not aimed at destroying the Scheme but at having it revised and reformed, so that it could truly reflect its stated aims as set forth in the Borrower Deed, of being transparent, expeditious and cost-effective, with the emphasis on fairness and transparency.  We wanted to put flesh on the public apology made by CBA’s CEO, Ralph Norris on 27 October 2009, quoted in the Brisbane Courier Mail on 28 October 2009:

“I am not proud of the relationship that we had with Storm”, he told the Parliamentary Inquiry.

“To those of our customers who have been impacted by shortcomings on our part, I am sorry and apologise to them on behalf of the Commonwealth Bank”.

Just what those shortcomings have been, needs to be meaningfully particularised and highlighted, unless they are to be fully recognised throughout the CBA Resolution Scheme. 

While we recognise that any resolution scheme must involve the willingness of claimants to compromise in exchange for achieving early finalisation and closure and removing the risks inherent in court proceedings, the extent of such discount needs to be realistic, having regard to the scope of each individual’s grievances.

(a)   In clause 14.2 of the Scheme Rules, CBA promised to “develop an individually-tailored Proposal to put to each Borrower”, and clearly has not done so;

(b)   Hundreds of Borrowers are yet to receive offers eleven (11) months after the Scheme started (the case of Goodridge v. Macquarie Bank and Leveraged Equities in the Federal Court at Sydney, took only 12 months to run from the time the Statement of Claim was filed until the time when judgment was delivered after a full hearing).

These are both matters with contractual and Trade Practices Act implications for CBA:  So much for expedition.

1. I attach a copy of an article by Emma Chalmers which appeared in the October 28, 2009 edition of the Courier Mail and of a statement by Dr Brendan French made 28th October, 2009 re: transparency and legal representation in the Scheme.

1. If CBA sticks to its guns in seeking to exclude Levitt Robinson from representing Borrowers in the CBA Resolution Scheme, it will present you with a golden opportunity to have these issues canvassed and arguments concerning all aspects of the Scheme and its lawful operation – or otherwise - determined in a Superior Court.

1. We remain ready to work with CBA both within and outside the CBA Resolution Scheme but will not be deterred from providing vigorous and fearless representation to our clients in whichever forum that we act for them.

With Compliments,

LEVITT ROBINSON

STEWART A. LEVITT

Principal Solicitor & Advocate