The Commonwealth Bank of Australia (CBA) may not have acted lawfully in winding up its Storm Financial (Storm) badged index funds, Sydney barrister Ross Goodridge has claimed.
Goodridge made the claim in a letter to the joint chairman and members of the Storm Investors Consumer Action Group (SICAG).
“My investigations to date leave me to conclude that CBA may not have acted in accordance with the law in winding up the funds,” the letter said.
“I am informed that the funds were solvent and Challenger Financial were prepared to become the responsible entity even if CBA did not wish to continue as the responsible entity. I am further informed that this was notified to CBA however, it proceeded to wind up the funds. The question that then presents itself is, why?
“If the funds were wound up for an improper purpose or without power and/or unconscionably any person who suffered harm may be entitled to redress.”
Goodridge claims that in late 2008, before the collapse of the advisory group, CBA wished to reduce its exposure to the commercial risk it had to margin loans secured by the badged index funds.
He claims in order to decrease its exposure the bank reduced the loan value ratio (LVR).
“The reduction of the LVR in the way it occurred and when it occurred may have been a breach of contract as it is alleged that there were certain agreements between CBA and Storm to prevent such a reduction in the LVR,” the letter said.
“It appears arguable that the reduction of the LVR in all the circumstances was also unconscionable. Shortly after the reduction of the LVR, CBA wound up the Storm badged index funds.”
Commenting on Goodridge’s allegations, a CBA spokesperson said: “Commonwealth Bank committed to put things right where we had done wrong and we will continue to work directly with our customers regarding resolution that is fair, equitable and transparent.”
Storm Financial collapsed in January 2009.
