ASIC clear to pursue banks over Storm

THE corporate regulator's damages case against Macquarie Bank and the Bank of Queensland on behalf of victims of Storm Financial will continue, after the Federal Court yesterday rejected the banks' bid to have the case thrown out.

Justice Lindsay Foster said he had not upheld the banks' main challenges to the Australian Securities and Investments Commission's power to bring the action under both the ASIC Act and the Trades Practices Act. However, he said ASIC would have to amend its pleadings in the case to conform with his judgment.

ASIC brought the proceedings on behalf of former Storm clients Barry and Deanna Doyle, ''financially naive retirees''. The Queensland couple approached Storm Financial in 2006 for advice as to how they should invest their assets for retirement.

Storm advised them to cash in their $650,000 in superannuation, borrow from the Bank of Queensland by way of an investment home loan, and borrow from Macquarie through a margin loan. The Doyles invested $2.26 million in a number of Storm indexed trusts. They lost all their superannuation and cash, and owed the Bank of Queensland $456,000, which equalled the value of their home.

In 2010, as a result of its investigations into Storm, ASIC resolved to bring proceedings against the banks, with the Doyles as the second and third applicants in the case. Storm Financial collapsed in 2008, costing its clients $3 billion in lost investments.

In dealing with arguments from ASIC and the banks about some of the provisions of the Trade Practices Act, Justice Foster noted: ''The ultimate issue here is whether the [banks] in the present proceeding can be made liable through the strict liability pathway ? for the alleged misrepresentations.''