The Commonwealth Bank of Australia (CBA) will defend accusations it breached sections of the Corporations Act, as new claims of its involvement with Storm Financial emerge.
Former Queensland-based clients of the failed advisory group, Leslie Sherwood, Julianne Sherwood, Sean McArdle and Paula McArdle, have accused the CBA and its margin lending business, Colonial Geared Investments (CGI), of breaching at least five sections of the act.
The clients, who are seeking compensation for loss of millions of dollars in personal investments, have also accused the banking giant of operating an unregistered managed investment scheme (MIS), the clients' statement of claim said.
The CBA is also accused of breaching the Sherwood Margin Loan agreement, the McArdle Margin Loan agreement and the group margin loan agreements by not giving any notice of margin call or that the clients' loan-to-security ratio of their loans were equal to or exceeded the agreed margin call loan-to-security ratios.
The clients claim that on 18 May 2007, CBA and Storm agreed that a global loan-to-security ratio of 80 per cent would be located by the CBA to select clients who invested in 10 investment options known as the special funds.
In another claim, the clients allege that prior to October 2008 Storm advised them to borrow money from CBA under new or existing CGI margin loans and to invest the money borrowed, together with their own equity, to acquire units in funds or other securities nominated or approved by CBA.
The clients claim the terms and conditions under which they borrowed money from CBA to CGI Margin Loans comprised the same or substantially the same terms and conditions as those contained in the Sherwood Margin Loan agreement, or the McArdle Margin Loan Agreement.
CBA has described the class action against them as premature and disappointing, stating it potentially denies people covered by the class action a certain and more timely resolution.
The bank will contest the claim in full and regrets said customers who pursue this litigation face considerable uncertainty, a CBA spokesperson said.
"Today's announcement by Levitt Robinson presents two very stark alternatives. The Commonwealth Bank Storm Resolution Scheme, in place since June 2009, offers a fast, fair and certain outcome. Litigation, on the other hand, offers no certainty of a better result through the action undertaken by Levitt Robinson," the spokesperson said.
The CBA has settled the outcomes for more than 1000 customers so far, the spokesperson said.
"Under the resolution scheme, the bank has paid the legal costs for its customers to be represented by more than 40 independent law firms. Only one firm, Levitt Robinson, has taken the litigation route," the spokesperson added.
Last Friday, litigation firm Levitt Robinson lodged the clients' statement of claim in the Federal Court.
Storm Financial collapsed in January 2009.
