Landmark settlement reached in Storm fallout

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ASIC has settled legal proceedings against Bank of Queensland (BoQ), Senrac and Macquarie Bank 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.

A three-week trial was due to commence on 3 June, 2013, in the Federal Court of Australia, “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,” said ASIC Chairman Greg Medcraft.

Allegations against BoQ and Macquarie were for breach of contract, unconscionable conduct and liability as linked credit providers of Storm. Medcraft said the allegations had 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,” 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 of 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.