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Storm Financial Group

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Dock,
I was still composing my reply when you posted yours, so did not see your post until after I sent mine. I chose the word "rogue" as that is what had been used in the media adnausium. As I stated that response was to Doobsy and nothing to do with your post.

Requested links etc are not at my fingertips and I really can't be bothered..... just what I have read, heard and been told by those that should know. Ralph has already been subpoenaed and there is no way he will allow his sorry **** to be hauled before the court....IMHO.

Yes it is hopeful that the mediation will be the end ...... but what's wrong with having hope?
 

OK, I made a wrong assumption there - it was the wording that misled me, I guess.


Fair enough, but if you do ever have the motivation I'd appreciate any links. My understanding must remain that whether or not the CEO and board of the CBA were aware of the actions of their Tvle branch as yet remains unanswered. Heresay evidence doesn't count for much in the legal system, so in the absence of proof I'm left wondering who to believe. I'd prefer to believe Norris is lying through his teeth, (and this is my inclination) but being able to prove this is another matter entirely, and I'm willing to give him the benefit of the doubt in the meantime.

Yes it is hopeful that the mediation will be the end ...... but what's wrong with having hope?
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Absolutely nothing! Hope for the future is what's keeping a lot of us going on a daily basis. I guess I'm more of a pessimist/realist by nature and prefer to expect the worst and experience the pleasure of being wrong, as opposed to those like my husband who prefer to always expect something better must be just around the corner and sometimes be disappointed when it's not.

I do wish you luck in the coming legal proceedings.
 
I do find it strange that Mark Weir, self appointed founder of SICAG, has the same lawyers (Russells Lawyers of Brisbane ) representing him as do Emmanuel and Julie Cassimatis - just out in latest notification from Levitt. . . .who is in whose pockets?
 

Was he originally in the Levitt action? I must admit I'm not clear on the details of who is involved in which action - I thought there were only two: Levitt's and ASIC's. What is the difference between Levitt's and Russell's, apart from the litigants of course. Is the basis of each claim similar? I'm not a member os SICAG.
 

Apologies in advance Smiley....

"Mark Weir, self appointed founder of SICAG" ???

Can you substantiate this quote?

To my own personal memory, when I attended the meeting at the Ox in Margate, when the original SICAG committee were put forward and seconded, Mark Weir did not appoint himself as the founder of SICAG.

Maybe you were at a different meeting?

MS
 
Hi Mindstorm, you missed the point - you used quotes " " I did not. Who founded SICAG? Mark and Neil and possibly Cassimatis in the background? . . . Weir seemed to always support the Storm approach; but then he did state publicly that he did not read relevant criticisms of Storm - e.g. parliamentary submissions. My point is about who is close to whom and why?
 

Smiley!

Firstly, Mark Weir is a properly elected co-chairman of SICAG. He is HIGHLY respected within our organisation and continually lives and relives and relives this revolting mess for every waking minute. He is constantly supporting people in their extremely personal struggles and it is a job that I can't do so he has my complete support and respect.

Secondly, who he is or is not using for legal advice is absolutely NONE of anyone's business except him, his wife and his legal team.

Thirdly, just because he is using the same legal team (which I have absolutely no idea about) it doesn't mean he is using the same case. Even if he is then again it is nobody else's business.

I can't speak for Mark and I can't speak for others but I can speak for myself. I do not appreciate you using a public forum to cast aspersions/rumour/gossip on another person.

Maccka
 
DocK said:
I'm not bothered by posts directed at me personally, but I'm quite disgusted by some of the venom and condescension shown towards some posters who are obviously still hurting quite badly.
Click to expand...

I would have thought it has gone both ways on this forum DocK to be honest. I guess people see what they want to see.

DocK said:
Why would any ex-storm client reading this thread feel that their story or opinions would be met with an understanding or sympathetic attitude?
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That probably depends on what their story is in a way. If it is the same story we have heard ad nauseum around here, the likes of “I didn’t know borrowing against my house was risky”….”I didn’t know double gearing was risky”….”I only wanted to protect my money”….”I thought it was a conservative strategy”….”the banks screwed me”….”I paid massive fees just expecting to get financial advice”…”borrowing against my home served no benefit but I did it anyway”…blah blah blah then if they aren’t able or prepared to answer questions about these claims, then that sympathy starts to erode, particularly if they react in the way many posters have around here when questioned on those very points.

Unfortunately, we have seen many who not only can’t explain, or don’t want to, but then to borrow your words show “venom and condescension” towards those asking for answers. Perhaps go back and see who has been subjected to the most venom around here….I think you will find that those people aren’t Storm victims. Again, people see what they want to see.



Unfortunately the people in the position to teach the lessons (the victims themselves) aren’t prepared to be open about the mistakes they made which should be avoided by others in the future. I am not sure how the unravelling of the banks’ relationship with Storm, which seems to have completely taken over this thread, will help educate the next 60 year old who walks into a financial planner’s office seeking advice.

The only thing I am learning from this site is that the banks are crooks and not to trust them, financial advisers, the FPA or the government.

I guess the lesson is don’t trust anyone and put your money under the bed.
 
Smiley you are like too many anti stormies who make uneducated assumptions. Mark Weir never was the self appointed chairman of SICAG.

Mark and his family, are, like the rest of us devastated by the collapse of storm, and he was appointed to that position by the SICAG members.

He has done, and is continuing to do, a wonderful job and I personally admire his commitment to SICAG and Sicaggers. His legal team is nobody else's business.

SICAG was formed primarily as a support group when we all needed support and lots of it. There are a lot of so called 'facts' put on this forum by people like you.

Take your own, and those of your supporters, and do your research.
 

HQ, Smiley IS a stormie. S/he has provided a few interesting viewpoints including those from early on in this saga.
 
The CBA and Storm - Part 3

Contractual considerations!

Setting the question of UMIS aside because Corporation Law and interpretation will decide the issues there, the CBA (and the other Banks for that matter) will rely heavily on its conditions of contract with its Storm customers. “Our customers knew what they were doing when they signed the margin loan contracts and signed off on the housing loans! Further, they were notified of our trading terms and conditions at the time!”

This is fair comment because contract law is based on offer and acceptance for a consideration. Our lawyers will therefore have to prove (among other things) that the CBA-Storm customers’ rights under these contracts have been violated, and that the CBA has failed to meet its obligations under these contracts.

I have covered the contractual issues in depth on my website “Storming on Banks” so I will not be repeating the exercise here because space for one is somewhat limited. I will merely cover the matters that will play a part in the forthcoming trials.

Frankly, it seems strange to me that the Court has decided to run the case for UMIS and some test cases based on contractual breach concurrently because I would have thought that if UMIS is proven, contractual breach would become irrelevant for those that fell under this scheme. “How can one decide on breach if the original contracts are declared invalid?” It’s a bit like putting the cart before the horse to my mind. They, the legal experts, would probably retort, “We know best!” We ‘Stormies’ certainly hope so!

I will deal with the housing loans that were extended by the banks for investment purposes when I deal with the matter of “imprudent lending” in a later posting. Today, I will concentrate on margin loans and margin calls including contractual rights and obligations.

Even though contracts such as margin loan agreements are based on the conditions set down by the Banks, it doesn’t necessarily follow that all those conditions will stand up in a court of law. Conditions in a contract must be fair and equitable to both parties, and protect both parties' rights Further, it also doesn’t follow either that these conditions are always framed efficiently. For instance in “Goodrich v Macquarie Bank (Leverage Equities)”, on appeal it was found that the Macquarie Bank’s conditions were in part poorly drafted and led to some ambiguity even for the Appeal Judges.

The 'Goodrich v Macquarie Bank (Leverage Equities)' case was an interesting one because the Appeal Document overturning a number of the primary judge's decisions gives clarity to such matters as “novation” and “assignment”.

“A basic principle of contract law is that a ‘novation’ of obligations under a loan contract without the consent of the borrower will be ineffective – irrespective of whether the terms of the underlying loan agreement purport to permit such a dealing. Novation’ is the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party”

The burning question then becomes “Who was responsible for making margin calls to the CBA’s Storm customers – the CBA or Storm?” I personally have no doubt that the Court will find that the CBA was responsible for any margin calls to its customers, not Storm. For one, Storm was never a party to any of the margin loan contracts between the CBA and its Storm customers. Therefore, was the CBA entitled to assign its responsibilities over to Storm in this regard?

The 'Goodridge v Macquarie Bank (Leverage Equities)' Appeal Document goes some way to answering this question even though it was found that the Macquarie Bank was entitled in this instance to assign such obligations without prior approval. However, this is the exception rather than the rule and it was only permitted because Leverage Equities was a manager of a securitisation programme.

“323. The question which arises in the present case is whether the terms of the relevant clauses contain a consent by the borrower to the introduction of a new lender to assume the rights and obligations of Macquarie as well as to the release of Macquarie from its rights and obligations under the LSA. “

The Appeal Judges Jacobson, Finkelstein and Stone found that “Without limiting the previous provisions of Clause 21, Macquarie Bank is entitled to assign its rights and novate its obligations to any trustee or manager of any securitisation programme.”

“The role of the Trustee is to act on behalf of investors while also facilitating the complex nature of securitisation funding and financial transaction flows has given it a position that can be seen to act as providing a fiduciary duty while being commercially successful at the same time. The Trustee needs to balance its fiduciary obligations, to meet the commercial demands that will exist.”

“325. I also consider that cl 21.2 and cl 21.4 make it sufficiently clear that the borrower gave prospective consent to the novation of the LSA to any third party who was prepared to assume the obligations of the lender."

Bearing the aforementioned in mind, could Storm by any stretch of the imagination be considered a trustee or manager of a securitisation programme?

For one there are certain conditions and formalities that need to be met first in order to be a trustee or manager of such a programme. For another financial advisers for the most part do not have a fiduciary duty. When the Ripoll enquiry findings were released, a key recommendation was the introduction of a statutory fiduciary duty for financial planners to act in the best interests of clients. This means an obligation to place a client’s interests ahead of their own.

Certainly, Storm was never in a position to “assume the obligations of the lender” in the same way Leverage Equities were. Therefore, I believe that the CBA or any other Bank for that matter will find it difficult to prove that they had the right to assign their obligations under these margin loan contracts.

If this should prove to be the case, then the Banks’ responsibility for making margin calls directly on their customers lies solely with those Banks no matter what arrangements they make with any third party such as Storm.

The 'Goodridge v Macquarie Bank (Leverage Equities) /I]case is also interesting for another reason. The primary Judge (J Rares) made the following observations that were not challenged on appeal. He found that the word "MAY" used by Macquarie Bank in its margin loan conditions in effect means "SHALL", when it comes to making a margin call in terms of the loan agreement.

"Otherwise the client would simply not know what were the actions which should be taken to satisfy the margin call. Nor would the client know, in the absence of knowing a margin call existed, that actions were required to be taken in the first place." (per: Santow JA, with whom Gyles and McCole JJA, agreed).

A similar clause occurred in the later version of the CGI Margin Call Agreement.

In view of this, can the timeframes be deemed as "reasonable" in the circumstances? The time that elapsed of some 10 to 11 weeks in the case of the CBA and some 3 to 4 weeks in the case of Macquarie Bank before they proceeded to effect margin calls directly on their customers cannot be justified by any banking institution! Therefore, I cannot see how they are going to defend themselves if they cannot prove that they were entitled to assign their responsibilities to Storm. The blame must fall back on them. Personally, I don’t believe the Banks can justify their actions, and I suspect that was one of the reasons why the CBA early on came up with a “resolution scheme” to cut its losses. By introducing this Scheme, the CBA hoped that it was able to give authority to a 90 per cent margin loan ratio and bury its own misdeeds along the way.

There is, of course, another path that the Banks may go down and that is the one of ‘Agency’. The CBA resolution scheme put forth by the CBA is based on the premise that "Storm was our agent" and therefore had an implied authority to act on our behalf when dealing with banks in such matters as margin loans. This is the thrust of the legal arguments outlined in Slater & Gordon's booklet pertaining to this scheme where 'agency' was clearly assumed to have existed. The fact that the CBA made this assumption and 'The Panel' and Slater & Gordon went along with the notion speaks volumes for this Scheme's validity.

This 'Agency' claim is a two-edged sword for the Banks because it can also be argued by our side that the banks were closely allied with Storm and allowed that firm to carry out duties that were rightfully the Bank's to perform. In so doing, the CBA was itself employing Storm in a de-facto agency role.

This will be for the courts to decide. I have no doubt that the banks will throw this "Agency" issue into the ring sooner rather than later because it believes by so doing that this will mitigate its esponsibility to a large extent where contractual breaches are concerned.

I will deal with this question of “Agency” in my next posting.
 

More by Elisabeth Sexton @ smh.com.au
 
The CBA and Storm (Part 4)

Agency considerations.

I have already stated that the ‘CBA Resolution Scheme’ was based for the most part on the assumption that Storm was acting as an agent for the CBA’s Storm customers, and those customers gave Storm the authority to do so.

It needs to be understood that because the CBA’s Storm margin loan customers authorised Storm to act for them on any margin loans, this does not automatically give Storm the right to act for them in an agency capacity and all that implies. Nor does it give the CBA the right to make this assumption.

Legally, an agent is someone who has authority to create legal relations between a person known as a 'principal' and others. Put simply, this means letting someone act for you.

“Agency is a consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party. An agency relationship is fiduciary in nature, and the actions and words of an agent exchanged with a third party bind the principal. An agreement creating an agency relationship may be express or implied, and both the agent and principal may be either an individual or an entity, such as a corporation or partnership.”

In Slater & Gordon’s Booklet entitled, “PROPOSAL FRAMEWORK & ADVICE BOOKLET” hereafter referred to as S & G’s Booklet, it outlined the legal arguments involved, basing many of its assumptions on the fact that Storm acted as an agent for its CBA-Storm clients. I will now concentrate on some of those aspects of the S & G Booklet that relate to ‘Agency’.

“10.2 The other document that forms part of the margin loan contract is an agreement reached between Storm and the Bank in May 2007, which provided that the Bank would effectively increase the margin call loan-to-security ratios (MCLSR) for Storm clients' margin loans that were secured by Storm-badged index funds up to 90% (see below at paragraph 13 for further details). The effect of this agreement was to vary the terms of the existing margin loan contracts to allow for, among other things, the increased margin call loan-to-security ratios. It's common for parties to a contract to vary its terms by agreement in this way. Although you weren't involved in the May 2007 agreement personally, it's likely that a court would find that Storm was acting as your agent in entering into this agreement with the Bank, so it could agree to the variation on behalf of its clients (see below at paragraph 12). From May 2007 onwards, therefore, this agreement would form a part of the margin loan contract.”

In the wording above it states, “Although you weren't involved in the May 2007 agreement personally, it's likely that a court would find that Storm was acting as your agent in entering into this agreement with the Bank.” I doubt it! The May 2007 agreement was not an extension of any CBA Storm customers’ margin loan contracts with the banks as this Scheme would have you believe because any amendments or alterations to the margin loan contracts needed the approval of CBA’s Storm margin loan customers. I believe it is therefore wrong of anyone to make this assumption.

In contract there is something called the doctrine of privity. The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it." (GH Treitel, The Law of Contract)

"In Common Law it is reasoned that:

1. Only a promisee may enforce the promise meaning that if the third party is not a promisee he is not privy to the contract.
2. There is also the principle that consideration must move from the promisee.

The two principles of privity and consideration have become entwined but are still distinct. If the doctrine of privity was inflexibly applied it would cause considerable injustice and inconvenience. Many exceptions to it have therefore been developed. One is in relation to “Agency.”

The concept of agency is an exception to the doctrine of privity in that an agent may contract on behalf of his principal with a third party and form a binding contract between the principal and third party.

Generally an agency may be created by written or oral agreement, or may be implied by the conduct of the parties – both the agent and the principal. For an implied agency, the law will look at the actions of the parties to determine objectively if an agency exists – that is, have you acted in a way that reasonably implies your intention to have someone act as your agent."

Did an agency agreement exist between us and Storm, expressed or implied? The fact of the matter is that we paid Storm Financial for financial advice. That was Storm’s role. We then followed that advice as outlined in Storm’s SOA. Part of this advice for many of us was to take out a housing loan for investment purposes and a margin loan. Storm was never a party to either our house loan or our margin loan with the CBA or anyone else for that matter. The May 2007 was a separate agreement between Storm and the CBA to which the CBA-Storm’s margin loan customers were not a party. How could they be when their approval was not sought beforehand?

There was no mention in the Storm SOA that Storm would operate in an agent capacity as far as we and banks were concerned. A "go-between", yes, but no more! Certainly, we did not give Storm any authority to re-negotiate any contracts we had with those Banks on our behalf. Storm’s prime duty was to give us sound advice and then liase with any third-party providers, putting any arrangements in place that were required.

12. Was Storm a party to the margin loan contract? What was its role in the contract?

12.1 Although it was Storm that had most or all of the dealings with Colonial relating to your margin loan, Storm was not a party to the margin loan contract. The contract was an agreement specifically between you and Colonial. In the "small print" of your margin loan application, you authorised Storm to act on your behalf in relation to your financial dealings, and the margin loan contract provided that your authorised financial representatives could deal with Colonial on your behalf. Technically, Storm was acting as your agent when it communicated with Colonial on your behalf, and specifically when it negotiated the May 2007 variation to the contract that permitted the higher margin call LSR - that is, it acted on your behalf, and with your consent to enter into certain legal or financial arrangements for you.

In the wording above it states “Storm was not a party to the margin loan contract” and then it goes on to state, “In the small print of your margin loan application, you authorised Storm to act on your behalf in relation to your financial dealings" This is a far cry from giving Storm the authority to act as our agent with all the powers such entails.

It also states, “…specifically when it negotiated the May 2007 variation to the contract…” At no time did CBA’s Storm customers give consent for Storm to enter into any legal arrangements on their behalf. Therefore, the May 2007 agreement should not be held up by Slater & Gordon as a yardstick because this was a separate agreement between Storm and the CBA that has no legal implications for any CBA-Storm customers. How could the May 2007 have when those CBA-Storm customers were not a party to this agreement? For that matter, how could they be a party when most CBA-Storm’s margin loan customers were never notified of its existence to start with? It could have legal implications for the CBA though where contractual breach is concerned because it created a situation where the CBA relied on Storm to act. In so doing, the CBA assigned its responsibilities and obligations under its margin loan agreements with its Storm margin loan customers to Storm.

15. Should Colonial have allowed me to have an LSR as high as 90%7

15.1 Parties to a contract are entitled to vary the contract terms, if each of the parties agrees. The agreement between Storm and Colonial to effectively increase the MCLSR up to or beyond 90% is an example of such a change - Storm sought and agreed to this variation on your behalf, and Colonial was entitled to agree to the change.

The CBA, I believe, based on the principle of contract law was not entitled to agree to any changes relating to the margin loan agreements it had with its CBA-Storm margin loan customers without their prior approval! It matters little that the CBA’s lawyers will argue that it was for the benefit of Storm’s CBA clients (or should I say, it was perceived to be) because it needed the CBA’s Storm customers’ approval for it to be validated. If that approval had been obtained, THEN, it certainly would have been an extension of the original margin loan contracts!

The S & G Booklet is replete with assumptions and was designed, I believe, to give credence to the CBA’s position rather than defending the position of the CBA’s Storm customers who engaged S &G to act on their behalf in the first place. I told S & G as much in March of 2010. They responded by sacking Helen and me as clients! I lodged a complaint and we got the bullet! No explanation or response to the various legal points I had raised - just "Goodbye!" We are now with Levitt-Robinson and are very glad to be so.

If ‘agency’ cannot be proven by the CBA, it must surely bring into question ‘CBA’s Resolution Scheme’ because it has been constructed on a false premise and cannot therefore be truly equitable.
 

The defence said the pair did not breach their duties as directors ''as they conducted the affairs of a solvent company in good faith and in accordance with the informed wishes of its shareholders - themselves''.
Click to expand...
>>>>>> <<<<<<
 
Frank

I am sorry but I still do not agree.

It was from the very start in all margin loan contracts that they had the ability to adjust the level they are willing to lend on any individual stock or fund as they see fit. This is up and down.

Throughout the crisis every margin lender was reviewing it's approved list and making adjustments where it saw need. If a stock like ABC learning was in trouble they reduced the amount clients could borrow using that stock as equity. In some cases they reduced it to 0. Clients were then required to either reduce the loan balance to keep the LVR the same or add another stock as collaterol.

Quite often a stock will be added to a ML list of approved holdings with a lending ratio of 30-50%. As it matures / grows then they are more comfortable lending against it and the lending ratio might be increased. No notification is required.

Banks used to lend 80% on residential housing. Over time they became more and more comfortable with this lending and you can now access up to 100% on a residential property under the right conditions. Should all existing mortgage holders have been advised the bank was now lending more against homes?

If Storm pushed for a higher LVR and got it then good for them, but the action of changing the lending ration on an index fund was and still is not outside the normal scope of operations for any margin lender.

If a certain margin lender has better knowledge of a sector they might feel more comfortable lending in that area.

I honestly don't think the increased LVR argument will hold up in any way shape or form when arguing that reflects them working together. The bank will simply show 50 examples of increases and decreases that were made around the same time.

As agreed upon previously, the mishandling of the margin call will and should be addressed but I believe the LVR issue will not assist clients in any way.

To quote Morgan Stanley Smith Barney - Securities noted on the approved list are subject to change without notice.

Inclusion, removal or changes to securities on the approved list is not a recommendation to buy, sell or trade in those securities.

The banks have always had this ability to make changes without notice. They will simply say you should have read your statements.
 
Found this in the Colonial Margin Lending Terms and Conditions booklet from 2006.

Notice of Margin Call
4.3 (a) You agree that we may provide notice of margin call by any
or all of the following ways to you or your Client Adviser:
• In writing (including by fax, email or other electronic
means)
• Orally, including by telephone
• Updating the Colonial Geared Investments website.
Page 4 Need help? Contact us on 1800 252 351
(b) It is your obligation to keep your or your Client Adviser’s
contact details up to date.
4.4 You are responsible for:
(a) monitoring your portfolio and determining when your loan is
subject to a margin call; and
(b) being in a position to receive any communications from us
in relation to this clause and to act within the time limits
specified in this clause; and
(c) ensuring that a margin call does not occur.

Declarations
5.6 You and the Guarantor declare that:
(a) you and the Guarantor solely own the secured property held
by you, or by another for you; and
(b) you and the Guarantor have told us about all rights affecting
the secured property (such as other mortgages or the rights
of a beneficiary under a trust); and
(c) all the information you and the Guarantor have given us is
correct and not misleading; and
(d) you and the Guarantor have not withheld any information
which might have caused us not to enter into this
agreement;
 

Hi Doobsy,

I'm not sure what you are disagreeing with in the context of what I have written? Please quote the remarks you disagree with in relation to the margin loan ratio! Thks.
 
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