The liquidator of Storm Financial (Storm) has labelled attempts to recover $1.8 million worth of negative equity lost in the collapse of the advice firm as a futile exercise.
A representative of Worrells Solvency & Forensic Accountants (Worrells) made the admission in an email to an unnamed Storm creditor.
In the email, which has been obtained by InvestorDaily, the Worrells representative claimed the recovery would be futile as any funds recovered by the firm would first be payable to the Commonwealth Bank of Australia (CBA).
“In relation to the recovery of the ‘negative equity’ Storm’s position differed from that of its clients in a number of respects,” the email said.
“However, even if a recovery was able to be achieved, the recovery would be ‘property’ subject to the bank’s charge and would therefore be payable to the bank. In short, this would be a futile exercise.”
The Worrells representative also said the information available to the liquidators indicates the CBA will not fully recover the funds that it advanced to Storm.
As well as raising concerns over fund recoveries, the unnamed creditor also questioned Worrells’s reasons why it had ceased its litigation against the CBA.
“The decision whether to proceed against the CBA is one properly taken by the liquidators. There is no requirement for the liquidators to consult the creditors in decisions of this nature,” the email said.
“The liquidator’s decision to discontinue the action was taken in light of the costs involved and an assessment of the difficulties faced in proving the case and in identifying damages that may have been incurred by Storm.
“Further, it should be noted that the action can be re-enlivened in the future if our conclusions change.”
Worrells expects to release an updated report to creditors this month.
Storm Financial collapsed in January 2009.
