“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!