Storm Financial Group

[Frank Ainslie]

Hi Frank,

I too look forward to the Directions Hearings. Yes, it has been a long road, you mention Slater & Gordon, I couldn't help but think of Damian Scattini. I find it interesting that he fails to mention his success with the "Resoloution Scheme" in his current online biography with his current tenure;
http://www.mauriceblackburnnsw.com.au/our-people/professional/damian-scattini.aspx

S

Hi Solly,

Just a quick few words to keep in touch!

Four years ago, almost to the day, I was sunning myself on a beach in Fiji wondering what the poor people were doing? As it turned out I didn’t have long to wait before finding out the hard way!

To the young, time is no big deal. However, to the elderly it is everything because they start to run out of time fast. The miscreants, be they with Storm or the Banks involved with that firm, that mishandled our money and abused our trust for their own nefarious ends continue to remain untouched by this financial disaster. Why? Largely because our judiciary system is unwieldily, ponderous and designed for the most part to make those operating within it richer rather than focussing on establishing swift and deserving justice. Basically, it is all about making money and the law comes a poor second. Nowhere was this more apparent than in the last Court session I attended.

Unfortunately, I was only able to attend on the Monday but I gather from my brother-in-law that I missed little on the Tuesday and Wednesday because in the context of the forthcoming trial these are merely the preliminaries where everyone on both sides is vying or manoeuvring for a legal advantage. A bit like a battle if you like where the generals are seeking out the best ground.


As I have already stated, much of what was discussed in Court to my mind results from a legal system designed to make money rather than seek out justice for those that have been wronged. If we all start from that premise, we are inclined to become less disillusioned about it all.


It was mentioned that some 96 witnesses would be called? "Sleepy time and the living is easy!" Combine that with countless numbers of documents that will be produced and points of law argued and you have what threatens to be a case that will drag on for ever!


For what it is worth, the day commenced with the ASIC lawyer outlining ASIC's charges against the Banks in relation to UMIS. The BOQ lawyer basically had 4 objections to this and had documented these to the Judge.The Judge, however, upon reading such stated that he was unable to actually define what the BOQ's lawyer was actually objecting to, which given the track record of these jokers should come as no surprise to any of us. The BOQ lawyer said he would clarify such at the next meet.


The lawyer for the CBA (a pugnacious little fellow that was probably an ankle biter when he was a nipper) then got into a running argument with Tony Morrison (acting for our side) over our pleadings asserting that their should be greater clarity as to what was actually being alleged. Lees (also on our side) then took up the reins suggesting that his particular brief could be used as the framework for how these proceedings should be conducted.


You will gather from all this that confusion still reigns supreme within the Court because not only are legal arguments complex, but a number of different legal issues are being considered at the same time; legal issues, incidentally that may conflict with one another. For instance, if UMIS is found, it must have an impact on the cases before the Court which hinge on contractual breach etc. To my mind, running UMIS and these cases at the same time rather than establishing the question of UMIS' first is a bit like putting the cart before the horse but what do I know? Whatever, I do know that the waters have been muddied considerably and this is slowing down the process!


In the latter part of the day, Lees and the Macquarie Bank's lawyer were arguing to and fro about the witnesses that our side intended to call that would include among them employees from the Mac Bank. Mac's lawyer seemed anxious to limit or have some of these witnesses barred for reasons which I was not able to discern at that time because I had to catch a train home. By this time I was past caring anyway.

Trying to apply commonsense to the way our court system works is somewhat difficult. It seems to me that it is designed primarily to churn money out of people (victims) in much the same way as the banks do. Most of the matters now being discussed to my mind could have been clarified outside a court room between the lawyers and the judge to save time and money. However, that's not, it would seem, the object of the exercise but rather the reverse.

The law has always fascinated me but from what I have seen of it in action these past few years, I would never survive in such a system which is staid, stodgy, lumbering and somewhat out of date in a modern world. Let's at least hope that this farcical system can eventually lead those that operate within it to a fair and equitable solution for us all. Hope springs eternal!


For those of us that will be sitting through most of these proceedings, let's hope that we not only obtain justice but also keep our sanity. Quite frankly, to date, these proceedings have been as boring as all Hell! What happened to Perry Mason? Can someone put a call in!

Apparently, there's another session today but I got the message too late to put in an appearance. No doubt my brother-inlaw will let me know what transpired if anything!


Frank

 

[Glen48]

Feel for you Frank and others, the legal system is nothing more than a boys club who have some secret code to make money and commonsense is not an issue as it will destroy their income.
I often wonder how many sit over beers discussing a case and who will win after all they are all from the same mold.
They must be the only profession who do not produce any thing good for society like Doctors, engineers etc do.

When it is all boiled down there is not much that two people could not settle between themselves and many do out side the courts every day with a handshake.

They need all these points of law to justify their existence and make them sound important.
The main victims in any court are the true facts.
One thing a lot will be worse off once the depression hits and would have lost it all regardless of Storm or not.
Need to press on and accept you and other were dealt a bad hand.
Good luck

 

[Judd]

Actually, most law (>90%) is about property (who owns/owes what) and not about people. Don't know where you folks get the silly idea that justice comes into it except, possibly, from the concept of "to act or treat justly or fairly" but that can only apply within the principles of law. Which is why there are lawyers.

 

[bunyip]

Since the inception of this thread a number of us have said that the Storm case will drag out for years and the big winners will be the law firms.

 

[Solly]

"Low-doc fraud rampant in boom

THE practice of mortgage brokers and others fraudulently filling out personal financial information on behalf of low-doc loan borrowers was rampant in the years leading up the financial crisis, according to legal experts"

More by Anthony Klan @ theaustralian.com.au

 

[Solly]

Storm Financial clients urged to reject pre-trial cash

From ABC AM @ www.abc.net.au/am

 

[Frank Ainslie]

Hi All,

This forum has been a little quite of late but then so have I for that matter. It is not a case so much of running out of steam as taking time out to smell the poppies! It's amazing how psychedelic the world can look after doing so! "LSD induces extreme sensory distortions, altered perceptions of reality, and intense emotional states, that may also produce delusions or paranoia, and that may sometimes cause panic reactions in response to the effects experienced." Sounds about right although in our case LSD stands for 'Lost Savings Disaster' and we still owe the dealer. The fact that we can still laugh provides hope for us yet!

To more serious matter now. In a short while we, some of the former investors of Storm Financial, will be locking horns in Court with the CBA, the Macquarie Bank and the Bank of Queensland. Four years will have passed by then and possibly one or two more will transpire by the time all this is settled.

Much debate has occurred both in the Media and among the general public as to who the guilty parties are and the measure of their involvement. From this certain factions have arisen that either lay the blame at Storm’s doorstep, blame the Banks that were involved with that company entirely or have decided that both Storm and the Banks are equally at fault.

For my part, I cannot see how Storm or the Banks involved with that firm can claim to have acted honestly in their dealings with their clients/customers because the facts tell us otherwise. In the last few years prior to the GFC the Banks lent imprudently and to excess. The many media articles that have appeared since lend substance to this. Storm who acted as the catalyst for this financial disaster is no more so the investors involved (of which Helen and I are two) cannot seek recompense from that company. However, their partners in crime, namely the Banks still survive and continue to grow and they are now very much in the firing line.

So, how strong is our case and what can we expect when the legal fireworks start? Frankly, if I hadn’t made a point of investigating for myself during the time that has passed, I would be little the wiser because our legal team has not divulged what evidence it has or its forthcoming ‘modus operandi’. Whilst I can appreciate our solicitors’ reasons for secrecy bearing in mind that the Banks would love to be forewarned, it does reflect the disadvantage of those involved in a class action of this nature because we are left guessing. In such circumstances, people’s individual cases are offshoots of the collective whole where the focus is on the test cases that have been chosen to test the legal principles involved. My forthcoming comments regarding the legal issues that will arise should therefore be considered in isolation because they are my own personal views that have not been endorsed by our lawyers or for that matter anyone else in the legal profession. Further, I do not have access to the hard evidence and can therefore only use conjecture and Media comment backed up by known principles of Law without the benefit of access to legal precedents. However, for those that are interested and for those that are directly involved, I will now try in the forthcoming weeks to outline the legal issues involved and the possible arguments that the Banks will use in their defence.

 

[Frank Ainslie]

“Let justice be done, though the heavens fall.” - (Fiat justitia, ruat coelum.) (Part 1)

Time can be a balm that assuages the senses and dilutes even the most heinous acts. It can dim recollection and caste shadows over our memories to the point where past wrongs against us can lose their impact and our natural instincts for revenge are dulled as a consequence.

I think it would be fair to say that for most of us that had the misfortune to invest using the services of Storm Financial we now just want an end to all this! If the Law fails us in the same way that this Government and the Regulator has then so be it

So what of this Law that we all hold so dear? Where do we stand and what are our chances? This is the burning question that dominates our thoughts as we approach the trial date. As I have recently stated, we have little idea of the hard evidence to hand because our lawyers are playing everything close to their chests. We do, however, have a notion of the charges being laid, and I will now endeavour to discuss these various accusations with a view to putting them in context and give them some clarity. When so doing, I do not profess to be a lawyer although I have studied commercial law both in the UK and here in Australia. I have also spent the last four years delving through various aspects of this case. I doubt that many lawyers now involved can lay the same claim? Whatever, the reader will be the ultimate judge of my competency in this regard. I think that in the end, you will not find my conclusions too short of the mark!

Before stating our case, let’s consider what possible defence the Banks can offer. The Banks know that UMIS aside, which is a matter that will be settled under the existing Corporate Law, they must deflect their portion of the blame by laying the fault fully at Storm’s doorstep. In other words, they were innocent parties that did everything by the book and were aghast when they found out what Storm had done to its clients. “We gave the bullets to Storm but thought they were blanks!”

This sounds perfectly feasible to me but then I believe everything the Banks say! This seems at odds though with the CBA’s later actions in confessing that they had been at fault and offered their Storm customers a ‘resolution scheme’ that was worth about one tenth of what they had filched out of their customers to start with? This would have to be the first time in history that any Bank offered its customers some of their money back without being taken to court. But then I forget – the CBA cares!

“We had separate contracts with Storm’s clients and what Storm did had nothing to do with us!”

“We left it to Storm to issue margin calls (even though the margin loan contracts were solely between the CBA and its customers) because Storm was an agent for its clients!”

The CBA have opted for more positions on this matter than those outlined in the ‘Karma Sutra’. In the end though they will have to adopt one position only. Were they operating in close co-operation with Storm or were they operating at arms length? Either way, their position is tenuous and they and the other Banks know it. Make no mistake! The CBA, the Macquarie Bank, the Bank of Queensland and all those other banks involved in this sorry mess are fully aware of their culpability and have been bunkered down until now hoping that the bombs are not going to drop on them. For the three banks in question, the bombs are already on the way and its now merely a question of hitting the target. How much actual damage that will be caused when they do is anyone’s guess at this stage.

So, what can the Banks do in their defense? In my opinion the banks have nowhere to go other than to fall back on their contractual conditions and contend that Storm had the permission of its clients to act fully on their behalf in any dealings with the banks. Indeed, the CBA’s Resolution Scheme is founded on this premise with the blessing of Slater and Gordon and ‘The Panel’ who saw fit to agree with this contention. Time and again in S & G’s Booklet which explains the RS, it expounds on this theme. For example:

“CLAUSE 10: 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 APART OF THE MARGIN LOAN CONTRACT.”

This clause alone is one of the worst perversions of contractual law I have had the misfortune to witness and speaks volumes for the law firm that went along with this premise and ‘The Panel’ that endorsed it. To my mind, this is a complete and deliberate misrepresentation of the tenets of commercial law designed to mislead CBA’s Storm customers in order to persuade them that their legal position was weak. I implied as much in my complaint to ‘THE LEGAL COMMISSION’ but that body is about as weak as ASIC and as irrelevant.

The banks can argue all they want that we, Storm’s clients, gave the banks permission to act on our behalf but this is a long way from appointing Storm as our agent in all dealings with the banks (particularly contractual ones) because ‘AGENCY’ in and of itself imposes conditions on anyone that adopts such a position. For one ‘fiduciary responsibility’ figures prominently where agency is concerned and financial advisers do not have a fiduciary responsibility. Our ‘intention’ when appointing Storm to act on our behalf will also be examined. It is one thing to give Storm permission to liaise for us with Banks but quite another to allow Storm to intercede where contractual matters were concerned. Of course, the Banks lawyers will be fully aware of this and know they will have a hard time in a court of law trying to make this stick. Good luck is all I can say!

Why S & G and ‘The Panel’ of judges, no less went along with such a notion is beyond my comprehension bearing in mind that the predominant theme in the CBA resolution scheme was the one of ‘agency’ – something that was assumed and presented without a modicum of evidence to support this contention. Makes one wonder sometimes whether the contagion that affected those financial advisers in Storm filtered through to some within our legal ranks as well?

Switching now to the conditions of contract that existed between us and the Banks in the form of housing and margin loans, it must be remembered that although statute law has some bearing, the principles of such agreements are enshrined in contract law. The foundations of contract are ‘offer’ ‘acceptance’ and ‘consideration’. However, this does not mean that once someone has accepted the conditions outlined in an agreement that is the end of the matter. The conditions imposed must stand up in Law because both parties to the agreement must not be disadvantaged as far as their right are concerned. Therefore if you introduce ambiguity into a contract such as in the ‘Goodridge’ case where the word “May’"used in the agreement left some doubt in the mind, the Judge ruled that the word "Shall" be substituted. ‘Intent’ is invariably the key issue in such matters and equity is foremost.

The Banks however do not have to merely contend with contractual issues but also the banking codes they have adopted that are contractually binding. This is going to be a major issue for the Banks because it is clear that for some time leading up to the GFC the Banks totally ignored their responsibilities in this regard and lent money willy-nilly to anyone. The Courts have now started reversing some of these loans that were in many cases ‘low-doc’. Therefore, anyone in Storm with a ‘low-doc housing loan’ backed up by few assets and no real income at the time the loan was taken out can in my opinion feel confident that such loans will eventually be quashed. I will elaborate on banking codes in more detail when outlining our case against the Banks.

There is no question to my mind that the Banks in law have a shaky defense. Further, there are millions of documents, rogue employees, internal bank reports and the like that will expose their involvement with Storm and prove that the relationships they all enjoyed with that advisory firm went way beyond a normal commercial arms length venture. Indeed, it could be argued at times that Storm acted as an agent for the Banks by seemingly taking on many of the responsibilities that the Banks had to their Storm customers. One aspect namely “linked creditor” may be upheld when these relationships have been fully explored in Court.

In my next posting, I will deal briefly with the issues from our side of the fence. For a fuller explanation of all the legal matters that I will be outlining in these postings, you are referred to my website:
https://sites.google.com/site/stormingonbanks/home

 

[Solly]

"Commonwealth Bank 'knew of Storm losses'

LAWYERS say they have uncovered new information which proves the Commonwealth Bank knew Storm Financial investors would likely lose their money during the global economic meltdown."

Source : theaustralian.com.au

 

[bunyip]

Source : theaustralian.com.au

In this article we see yet another attempt to blame CBA for not doing for Storm investors what Storm investors should have done for themselves.....namely, to assess the risk of their proposed investment before committing their own funds plus lots of borrowed money.

The banks are lenders, not business consultants. They have neither the time, the resources, nor the expertise to assess every business or investment proposal which they’re asked to finance.

It was within the capacity of every Storm investor to understand that if you mortgage your home to borrow heavily for stock market investment, and there’s a global economic meltdown, the stock market is going to take a heavy hit which will obviously put you in a perilous financial situation.
Why investors would need a bank to point this out to them is a mystery to me. To suggest that banks kept this information 'secret' is nothing more than the legal eagles clutching at any straw in an attempt to smear mud on the banks.
Investors need to take responsibility for researching their own investment proposals.

 

[sailteam30]

You play your games, the banks play their games and the lawyers play their games - but hey its good "bank bashing" material a month out of court.

A friend of mine went to court many years ago and his summation of it all - they lied but we lied the BEST.

What does that say of our justice system!

 

[Frank Ainslie]

Source : theaustralian.com.au

Hi Solly,

This is most encouraging! Just another nail in the CBA's coffin. With the money Norris has now got, perhaps a pyramid for him would be more in order! His barn is certainly the biggest around!

As for the CBA, I can see them settling before this trial runs its course.

Frank

 

[Solly]

Hi Solly,

This is most encouraging! Just another nail in the CBA's coffin. With the money Norris has now got, perhaps a pyramid for him would be more in order! His barn is certainly the biggest around!

As for the CBA, I can see them settling before this trial runs its course.

Frank

Hi Frank

Yes, I can see that there are very interesting times ahead. I share your view that some participants may be eager to settle before a long and protracted public trial eventuates. Maybe it is better to keep some matters off the public record, not to have the body of evidence displayed and then have determinations made for others to scrutinise.

I again find Bunyip's view interesting. I understand that the matters before the bench make no reference of the failure of any actions that investors were bound to have performed.

I hope that the pending outcomes are beneficial to those affected.

S

 

[Ijustnewit]

Hi Frank

Yes, I can see that there are very interesting times ahead. I share your view that some participants may be eager to settle before a long and protracted public trial eventuates. Maybe it is better to keep some matters off the public record, not to have the body of evidence displayed and then have determinations made for others to scrutinise.

I again find Bunyip's view interesting. I understand that the matters before the bench make no reference of the failure of any actions that investors were bound to have performed.
I hope that the pending outcomes are beneficial to those affected.

S

+ 1

 

[doobsy]

Might as well dive back in.

I am with bunyip. I read that story and this is what I take from it:

1. "Keeping secret the impending risk of economic meltdown" - No storm investor was paying any bank for advice. They were paying Storm. Not like Storm clients were excluded and all other investors were told of the "impending risk". Does that make them liable for every client who had invested through them or one of their subsidiaries? Pretty sure if there was no loan involved they are still invested. What if the "impending meltdown" did not eventuate and they were all told and all sold out. Would they then be liable for lost opportunity? Bunyip is correct. It is the investors money - take advice from whereever you like but the decision is yours.

Google search "economists predictions all ordinaries 2008" and see the smattering of predictions from markets heading to 7000 points to the smarties who got it right but underestimated and thought we might be about where we are now. NO ONE said 3100 lows.

2. Even if you prove UMIS then the argument has to be had as to who was in charge of the investment strategy for the UMIS. I cannot see how ANYONE can possibly pass the buck from storm to the banks on this count.

 

[doobsy]

Oh, just an example of how stupid the argument really is.

I have a client with over $4M in his SMSF. You will all be happy to know he pays me less than $3,000 for purely technical and strategic advice. Why, because he has 90% in the market in top 200 stocks. This generates an income of around $200,000. He and his wife spend about $120,000 per annum.

His portfolio value during the crisis dropped to about $2.7M at the worst time. His income at it's worst was $180,000.

Even assuming some expert knew of the "impending meltdown" and how nasty it would be is it good advice or bad advice to tell him to ride it out?

My advice - ride it out - the portfolio is designed up to provide income (tick) and growth over time (still waiting) but in retirement 90% of the focus is income. He did not have to sell a single share. He actually used the $60-80K extra to buy more shares through the process. That is a portfolio that is doing exactly what it should do in all conditions. If the income suddenly dropped by a half then you may need to re-consider but even then how much of the capital are you eating into and for how long?

Storm portfolios were designed to be sustainable in markets going north. When they went south or sideways the costs build in (advice, borrowing) made them too expensive. Trying to say they should have been told to sell by the people who never ever ever offered them investment advice is dumb.

The banks will laugh and should point straight to the defense that EC, JC and the other advisers are using - look at the SOA, look at the review meeting notes - we showed them projections that included what would happen if markets dropped and how far they would have to drop before a margin call would be placed. Clients were aware at all times.

 

[Frank Ainslie]

Oh, just an example of how stupid the argument really is.

I have a client with over $4M in his SMSF. You will all be happy to know he pays me less than $3,000 for purely technical and strategic advice. Why, because he has 90% in the market in top 200 stocks. This generates an income of around $200,000. He and his wife spend about $120,000 per annum.

His portfolio value during the crisis dropped to about $2.7M at the worst time. His income at it's worst was $180,000.

Even assuming some expert knew of the "impending meltdown" and how nasty it would be is it good advice or bad advice to tell him to ride it out?

My advice - ride it out - the portfolio is designed up to provide income (tick) and growth over time (still waiting) but in retirement 90% of the focus is income. He did not have to sell a single share. He actually used the $60-80K extra to buy more shares through the process. That is a portfolio that is doing exactly what it should do in all conditions. If the income suddenly dropped by a half then you may need to re-consider but even then how much of the capital are you eating into and for how long?

Storm portfolios were designed to be sustainable in markets going north. When they went south or sideways the costs build in (advice, borrowing) made them too expensive. Trying to say they should have been told to sell by the people who never ever ever offered them investment advice is dumb.

The banks will laugh and should point straight to the defense that EC, JC and the other advisers are using - look at the SOA, look at the review meeting notes - we showed them projections that included what would happen if markets dropped and how far they would have to drop before a margin call would be placed. Clients were aware at all times.

Doobsy & Bunyip

If “The banks will laugh…” as you say and they have nothing to answer for, why is it that:

1. The CBA offered a $200 million dollar settlement to its Storm customers in 2009?
2. ASIC (the appointed Regulator in Australia) is litigating against them for UMIS, breach of contract (banking codes) linked creditor and breaches of the Trade Practices Act?
3. The Law firm representing us have employed some of the best legal minds in this country who have advised them that our case is solid?

What some doom and gloom merchants on this Forum think about our chances “doesn’t amount to a hill of beans” quite frankly. It is not a question of whether we have a case but rather what wrongdoings will be proven, and the compensation that will be forthcoming as a consequence. To suggest that the Banks do not have a case to answer knowing what has transpired and the evidence on hand is somewhat puzzling? Let's see what plays out in Court! I think you scoffers will be in for a bit of a shock.

Bunyip has said, “The banks are lenders, not business consultants. They have neither the time, the resources, nor the expertise to assess every business or investment proposal which they’re asked to finance.” That may well be but banks are expected to conduct their business in a professional and honest way. They have adopted banking codes to ensure that their approach to their customers is ethical and above board. There was nothing ethical or honest about the way the banks in conjunction with Storm went about their business with their Storm customers.

If people were to transact their business dealings in our society without the protection of the law as Bunyip seems to suggest commercial anarchy would reign supreme. “Let the buyer beware!” is okay as long as the buyer is fully aware of all the facts and knows exactly what he or she is buying. Once “misrepresentation” enters the equation, then this simplistic attitude is no longer applicable. Further, it should never be condoned by our acceptance of such behavior.

Bunyip has also said, “To suggest that banks kept this information 'secret' is nothing more than the legal eagles clutching at any straw in an attempt to smear mud on the banks.” No, my friend, it is not! Acting in an unfair, unreasonable, harsh or oppressive way, or a way that is contrary to the concepts of fair dealing, fair-trading, fair play, good faith and good conscience is termed “unconscionable behaviour”. Anyone that suggests otherwise is either completely out of touch or is trying to introduce polemics to try and stir the pot? I thought by now we had all progressed beyond this point? Let’s try and deal now with the facts instead of making unsubstantiated statements that are clearly intended to bait rather than produce anything meaningful!

Yes, you are all entitled to your opinions but let’s get beyond arguing about the righteousness of banks. The world is a financial basket case today because of banks. If you don’t get it now you never will.

 

[pilots]

Dodosh, 100PC correct, the only people making money out of this now is the lawyers, what happened the storm holders is still going on today, you will all ways get suckers, and you will ALLWAYS get people who will milk the suckers. The storm holders have no hope of getting any money back from the big 4.

 

[doobsy]

Wow - the Frank of old back in full force. Not actually reading what people say just jumping up onto that high horse without thought.

The article is about whether CBA knew the markets were going to tank and the impacts that would have on Storm customers knowing how highly geared they were.

So the argument is:

1. Just how much did they know? Based on Comsec (CBA) Cheif Economist Craig James' track record (there is even a spoof website on how badly he gets it wrong) they didn't know squat. My old boss was talking it down more than any bank was (it is in their interests to talk it up so people invest and they make fees) - does that make him liable in some way? There may have been some in the CBA who were nervouse but I bet not a single person thought markets would correct by 50%.

2. Even if they did think markets would correct by 50% - so what!!!

They did not offer the advice. They had nothing to do with the investments put together. As I mentioned in my example is it their responsibility to tell EVERY person who was invested that they thought markets would correct and they should sell?

What about other investments? If they lent money to a business to start a restaurant on the Cairns Esplanade and it had been going well for 2 years from 2005-2007 is it the banks responsiblity to tell them we might have a financial crisis in 2008 and the AUD was going to climb from $0.70 to $1.10US to make the impact twice as bad?

The banks will laugh because they had NOTHING to do with the investments. You could have been advised by Storm to puchase Australian Corporate Bonds with the monies lent to you by the banks. That would have resulted in small losses initially followed by a bull run. Is it up to the bank to tell you not to invest in bonds? Shares? an Investment property? your best mates business enterprise?

The lawyer in question has a snowballs chance in hell of making this stick as what the bank thought of markets is immaterial unless they are the contracted adviser to the client. They weren't, Storm were.

Frank your talk of 1,2,3 and settlements all is based around the agreed screw ups with margin calls and dodgey lending, nothing to do with the investment. And don't let ANY storm investor tell me they didn't know they were in 100% Aussie Shares as that was the whole sales pitch from wo to go. So I am pretty sure they all "knew all the facts" on that point.

The article is interesting but will be a dud argument.

 

[Frank Ainslie]

“Let justice be done, though the heavens fall.” - (Fiat justitia, ruat coelum.) (Part 2)

Rather than get into a series of pointless arguments about the rights and wrongs of those banks involved with Storm which seems to be the direction certain people on this forum are leading us in, I will state as I see the issues that have been established to date. But before I do, let me say this!

Doobsy! With respect you may be well versed in financial matters but you know very little about the Law it would seem. You have made some really wild statements in your recent postings that have no bearing on our case. They are based solely on investment principles which if the banks use your arguments will be laughed out of Court. For goodness sake, get off the “investment bandwagon”. This case has nothing to do with investment principles but rather with legal tenets enshrined in commercial and statute law and the wrongdoings that will be identified by our lawyers that relate to such. If it were about investment as you suggest and the merits of such, we wouldn’t have a case and the Banks wouldn’t be before the Court!

To consider our case objectively, you and others need to consider the known facts to date? Not something plucked out of the air but rather things we have all come to learn these past four years. I will state them now for those that missed them the first time around or those that have failed to understand what the principles are and for that matter what really is at stake.

Argue them by all means when replying but do so within the boundaries the laws of the land impose - not based on your own personal feelings dictated by some mysterious notion of right and wrong that has no place in any legal discussion of the issues involved. In other words, set aside your bias of all things ‘Storm’ including its clients’ lack of investment forethought for the moment and focus only on the facts in relation to the Banks' wrongdoings.

I also respectfully suggest that you look up the finer points of the law both statute and common because any defense of the banks’ positions demand such! Frankly, “you don’t have a snowballs chance in hell” of understanding the legal points involved until you do! .

Here are some matters for your consideration that are simple enough. You will note by the way that they have nothing to do with investing but everything to do with the law. The Banks guilt or innocence will be based on the law alone and that's how it should be.

1. Contractual breach
The CBA resolution scheme alone is an admission by that Bank of its guilt. Indeed, it has admitted as much so where you get your 'holier than thou" view of banks from is beyond me? This should, of course, have been a beacon for the other banks to follow suit. I hasten to add however that the CBA's resolution scheme was such a dull beacon that the other banks missed it!

I now going to examine the legal issues (from our prospective) that relate to those Banks that were heavily involved with Storm Financial. In this posting I am going to consider contractual breach without boring everyone with the nitty-gritty. Consider it an overview at best! If you don’t agree with it, so be it but present a cogent argument rather than a personal opinion based on nothing substantive in law.

The banks have to my mind breached our contracts with them in a number of ways. In other words they have not met their obligations to us under such contracts and by so doing they have violated our contractual rights. No matter how much the banks will protest (and those within our ranks that have decided that the banks do not have a case to answer) there is no escaping the fact that the banks involved with Storm have for the most part done the wrong thing by their Storm customers. The fact that only three of these banks are now currently being sued hinges more on expediency than it does on other banks’ wrongdoings. As they say in the Classics, “Their turn will come!”

Much of what I have written about in relation to all the parties involved relates to the law of contract. This is an aspect of the law that I am most familiar with having had a grounding in commercial law early on in my career. Having said that, anything I say is merely here say based on my understanding of the principles enshrined in contractual law. Certainly, they are not espoused by anyone to my knowledge other than myself and should therefore be consider as my personal opinion only, although I will preface that by saying that such opinion is informed! I would ask your replies to be likewise.

It should also be borne in mind that I have no access to the evidence other than that discussed in the public domain or for that matter the legal precedents and statutory laws that may well apply. Therefore, this overview will be no more than a superficial one and should be treated as such. Now that I have got this out of the way, let’s begin.

Contractual issues (breaches) form an important part of our claim against the banks. However, they are only one element of our case against the Banks because ‘UMIS’, ‘unlinked creditor’ and breaches of the ‘Trade Practices ACT’ also form a part of the total brief.

A breach of contract is defined in Law as a breach of a legal duty or failure to do something that is required in a contract. Breaches to be considered in relation to our agreements with the Banks will probably fall into the following:

* Breach’ - a failure to perform some promised act or obligation
* ‘Breach of trust’ - violation (either through fraud or negligence) by a trustee of a duty that equity requires of him
* ‘Material breach’ - a breach serious enough to destroy the value of the contract and to give a basis for an action for breach of contract
* Partial breach’ - a breach that does not destroy the value of the contract but can give rise to a claim for damages

Casting a giant shadow over all contractual issues will be the ‘Banking Codes’ adopted by Banks that form an integral part of any contract between Banks and its customers. Why? Because customers rely on both the conditions of contract and the Bank’s conduct which banking codes govern. These two aspects cannot in Law be isolated from one another as the Banks will shortly find out! Mind you, they have tried long enough to convince us otherwise.

There are two types of contracts or agreements in the frame. One is the ‘housing loan’ (low doc or mortgage) and the other is the ‘margin loan’. I will now discuss these separately:

Housing Loans

Statutory laws aside, a housing loan is a legal contract between the Bank (the Lender) and its customer (the Borrower) and it carries the same rights and obligations as any other contract. The Banks are particular vulnerable by their very nature when making such loans because their banking codes dictate that they must use due prudence when lending so that the borrower involved is not financially compromised. Indeed, any prudent Banker should not lend money to anyone that is a credit risk because it could cause a loss for its shareholders. However, we all know now that attitudes changed within the banking circles some years back when the financial markets were booming and Banks, throwing caution to the wind, jumped on the gravy train. The sub-prime fiasco is proof enough of this!

If anyone wants further proof of this, go to my website https://sites.google.com/site/boqnorthward/ which outlines the wrongdoings of the owner managers in the BOQ North Ward, Townsville. The CBA through its Colonial Home outlet was no different.

I would also ask them to read the comments that have been made in the Media recently about low-doc loans and how they were used by Banks to circumvent their own lending requirements. Again, the BOQ led the way. Paperwork was altered (a criminal offence under The Crimes Act) so that internal credit “checks and balances” could be by-passed, incomes over estimated, liabilities understated and assets inflated. Indeed, in a number of cases, staff at the Bank just made it up as they went along.

Some think that it is up to the Banks to lend money because it is theirs to lend, and if they lose on the deal so be it! This is an erroneous argument because its not their money to lose and their own banking codes prohibit such an approach anyway. Of course, the Banks thought they were not really running any risk because they always had the borrowers’ houses to fall back on. Such items made a nice provision on their Balance Sheets under ‘Assets” until the market started falling out of the housing market and housing prices plummeted. Repossessed properties then quickly went from being assets to liabilities. We are now up to our armpits in the financial mess the Banks have created around the world because Governments have little control over them and they went on a rampage of greed. They make Cassimatis and company seem like rank amateurs.

When considering housing loans that were made to Storm’s clients or more to the point, the Banks’ customers, the relationship between Storm and these Banks will be thoroughly examined by the Court. It certainly was no “arms length” relationship as the Banks would have everyone believe. Its influence in persuading Storm’s clients to take out these loans will be a major consideration as will the promotion of Storm’s services by these banks. This should not be taken lightly because if pooling is proven for mutual gain, then UMIS will be a given.

Then you have the small matter of the Banks not sitting down with the borrowers when making such loans but rather leaving it to Storm to do their work for them. Contractual obligations will figure prominently here! Need I go on or are you now getting the picture?

2. Margin Loans
The relationship between these Banks and Storm will also figure in contractual breach where margin loans are concerned because it is obvious even to the most one-eyed among us that the Banks and Storm colluded in October and November 2008 to delay notifying their customers/clients (issuing margin calls) because they thought they could ride out the crisis. They (Storm and the Banks) basically gambled with our money! How can any bank justify issuing margin calls so many weeks after such should have been made in the first place? - (Macquarie Bank – 3 to 4 weeks and the CBA 10 to 11 weeks) It will be interesting to see what the Court makes of that! “Fair and reasonable! Give me a break!”

The agreements between the CBA and Storm and the Macquarie Bank and Storm will also receive some scrutiny in order to gauge whether such affected the terms of the margin loan contracts between the margin loan borrowers and the Banks. Did these separate agreements (that were never part of the original margin loan contracts between the Banks and their margin loan borrowers) impact on the conduct of the banks and Storm in October and November 2008? I personally believe that they did by blurring the areas of responsibility and causing confusion. I also believe that the Banks could not assign their obligations over to Storm in this way (novation) without consulting with and obtaining the permission of the Banks’ Storm customers’ beforehand. The CBA's 18th May 2005 agreement between Storm and the CBA and the one between the Macquarie Bank that goes back even further will, I believe, form the basis of an unregistered managed investment scheme because its purpose was to pool for a common purpose. Whatever, these agreements are damaging pieces of evidence that will be discussed at length in Court and should have a marked bearing on any judgments made.

Then there is the little matter of the Banks selling out some margin loan customers that were not even in margin call or those that could have met a margin call if such had been made.

There is no doubt that margin loans issued by banks have been an untouchable area to date. The Law has been uncertain and banks have played on this. However, the banks forget that margin loans are legal agreements and sooner or later someone was going to challenge the margin loan concept. We now have! The banks have relied on the inability of most borrowers to fight them under the Law because of the prohibitive costs involved so they haven’t worried until now. “We have the deal so you can take it or shove it!” In fact this remains the banks’ attitude to most things when they are dealing with the public. Therefore, why people on this forum are still defending them is beyond me? Every day some bank or other is screwing someone. Don’t take my word for it. Read your newspapers or surf the Internet. I can give you a pile of cases if you want?

In my next posting, I will deal with the subject of unconscionability and how it may have implications for our case against the Banks.

You know the one thing that worries me. It's not winning but how long and how much it's going to cost just listing and broaching so many transgressions in a court of law. Schindler would have his work cut out matching such!