By Stuart Washington
Commonwealth Bank partnered Storm Financial in an unlawful managed investment scheme and was therefore responsible for its losses, a statement of claim has alleged today.
No amount of damages sought has been specified on behalf of four former Storm Financial investors chosen as representatives, which includes a vigorous Commonwealth Bank critic Sean McArdle.
The class action filed in the Federal Court this morning alleges the Commonwealth Bank and Storm Financial breached the Corporations Act by failing to register an investment scheme.
It also alleges the Commonwealth Bank failed in its responsibility to contact Storm clients when margin loans provided by a bank subsidiary fell into margin call in September and October 2008.
The representative investors fell to what is called ‘‘negative equity’’ on their margin loans, in which they owed the bank money.
The statement of claim alleges Storm and Commonwealth Bank operated the scheme by procuring investors who borrowed margin loans through Colonial Geared Investments and invested the funds in Colonial First State. The latter two companies are subsidiaries of Commonwealth Bank.
The argument about an unregistered investment scheme mirrors the focus of investigations by ASIC, reported on by BusinessDay in October last year.
To successfully argue Storm was an unregistered MIS would rely on Storm and Commonwealth Bank playing a role as an “operator” raising money for an unregistered scheme.
To succeed on such an argument the court would have be convinced there was a “pooling” or “common enterprise” – defining characteristics of a managed investment scheme.
‘‘There was a common enterprise between CBA, Storm and the (class action) group members,’’ the statement of claim says.
Alternatively, it argues the class action members’ money was ‘‘pooled’’ in the Colonial First State funds.
The statement of claim represents the first court action against Commonwealth Bank after Storm Financial’s collapse in early 2009, and has been brought by Levitt Robinson solicitor Stewart Levitt on behalf of his clients.
The bank has previously entered into a settlement process with its Storm-affected clients, which was engineered by Slater & Gordon.
swashington@smh.com.au