The Federal Court of Australia’s decision to approve the $82.5 million settlement between 1050 former Storm Financial clients and Macquarie Bank has been appealed by ASIC.
ASIC is appealing the decision on the grounds of fairness, with around 735 Macquarie borrowers only getting back about 18% of their losses.
In September last year the Commonwealth Bank settled its Storm Financial dispute with ASIC agreeing to pay about $270 million to investors, equating to repayment of about 55% of their losses.
The Macquarie Bank settlement, announced in March and approved by Justice Logan on May 3, followed a class action brought against the bank by Sydney law firm Levitt Robinson.
The settlement will see Macquarie Bank pay $82.5 million (inclusive of legal and administrative costs) in final settlement of the claims of 1,050 Storm clients who took out margin loans with the bank.
Under the settlement, around 315 investors who funded the class action will be reimbursed their legal costs and also compensated for approximately 42% of their losses (as estimated by Levitt Robinson) while around 735 Macquarie borrowers will only get back about 18% of their losses (as estimated by Levitt Robinson).
During Federal Court proceedings on May 2 to approve the settlement, ASIC intervened to express concerns about matters affecting the fairness of the deal.
ASIC’s appeal relates to:
- the distribution of the money, which is not in proportion to losses suffered
- whether a funders’ premium for class action members who funded the action amounts to an unfair advantage for those members at the expense of the remaining 70% of class action members, and
- whether inadequate notice was given to class action members of the prospect of payment of a funders’ premium.
“Settlement of a class action should be undertaken in the interests of the class action group as a whole. ASIC’s appeal raises the question whether this settlement was unfair to the 70% of class action members who did not, or were unable to, contribute to the funding of the action,” says ASIC deputy chairman Peter Kell.
ASIC is involved in various actions in connection with the collapse of Storm in 2009.
It has brought proceeding (brought in part on behalf of two former Storm investors) against Macquarie Bank, Bank of Queensland Limited, and Senrac Pty Limited, with ASIC alleging unconscionable conduct in connection with their dealings with Storm investors.
The trial is scheduled to start on June 3, 2013.
This article first appeared on Property Observer.