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Wednesday 29 May 2013

13-122MR ASIC settles in Storm Financial proceedings

ASIC has settled legal proceedings arising out of its investigation into the collapse of Storm Financial Limited (in liquidation) (receivers and managers appointed) (Storm).

The proceedings were commenced against Bank of Queensland Limited (BoQ), Senrac Pty Limited (Senrac) and Macquarie Bank Limited (Macquarie) on behalf of two former Storm investors (Barry and Deanna Doyle).

Without admission, BOQ, Senrac and Macquarie have agreed to pay $1,100,000, which will fully compensate Barry and Deanna Doyle for their financial loss arising from their Storm investments, as calculated by independent experts retained for the proceedings and as calculated by ASIC under the compensation model it has developed in connection with Storm.

A three week trial was due to commence on 3 June 2013 in the Federal Court of Australia.

ASIC Chairman Greg Medcraft said ASIC is pleased to have achieved this outcome for Mr and Mrs Doyle.

‘The proceedings, which ASIC commenced in December 2010, were brought to hold the banks accountable for their role in the losses suffered by those who invested through Storm and to establish a basis upon which the Doyles, and ultimately other Storm investors, could achieve fair and adequate compensation.

‘I am pleased that ASIC has been able to achieve this result and that the allegations against BoQ and Macquarie of breach of contract, unconscionable conduct and liability as linked credit providers of Storm, which were first raised in these proceedings, have provided a template for similar allegations that have been raised in class actions brought on behalf of investors against BoQ, Macquarie and CBA.

‘ASIC will continue its efforts to achieve fair compensation for all former Storm investors’, Mr Medcraft said.

Claims similar to those made in the Doyle proceedings were made in the Richards class action against Macquarie.

Under the class action settlement negotiated by solicitors Levitt Robinson and Macquarie, approximately 70% of class action members would recover about 18% of their lost ‘net equity’ (as estimated by Levitt Robinson).

The remaining class action members, who contributed in varying amounts to the funding of the class action, would be reimbursed their legal costs and also compensated for approximately 42% of their lost ‘net equity’ (as estimated by Levitt Robinson). In return for receiving this compensation, members of the Richards class action would be required to give up any further claims against Macquarie in respect of Storm.

ASIC has appealed the Federal Court's approval of the Richards class action settlement. ASIC’s appeal raises the question whether the class action settlement was unfair to the 70% of class action members who did not, or were unable to, contribute to the funding of the action.

The Federal Court is yet to set a date for delivery of its judgment in ASIC's unregistered managed investment scheme action against Storm, BoQ and Macquarie.

Background

ASIC commenced legal proceedings in the Federal Court of Australia on 22 December 2010 in ASIC's name and in the name of and on behalf of two former Storm Financial investors (Barry and Deanna Doyle) against BOQ, Senrac and Macquarie in relation to alleged breach of contract, contravention of statutory prohibitions against unconscionable conduct and the banks' liability as linked credit providers of Storm under section 73 of the Trade Practices Act 1974 (Federal Court Proceedings: NSD 1797 of 2010).

ASIC’s dedicated Storm website details the numerous actions undertaken in recent years.

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Last updated: 29/05/2013 12:00