ASIC settles in Storm Financial class action case

by AB30 May 2013

ASIC has settled legal proceedings arising out of its investigation into the collapse of Storm Financial Ltd, more than two years after proceedings commenced in December 2010.

Without admission, BoQ, Senrac and Macquarie have agreed to pay $1,100,000, which will fully compensate former Storm investors, Barry and Deanna Doyle, for their financial loss arising from their 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 begin on June 3 in the Federal Court of Australia.

ASIC chairman, Greg Medcraft, says ASIC is pleased to have achieved this outcome for the Doyles.

“The proceedings… 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,” says Medcraft.

“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.”

Medcraft also confirms that ASIC will continue its efforts to achieve ‘fair compensation’ for all former Storm investors’.

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.