A CASE brought by the corporate regulator over the collapse of Storm Financial is shaping up as a battle over how far consumer laws protect bank customers.
In defence documents filed in the Federal Court last week the Bank of Queensland and Macquarie Bank challenge whether people who borrow to invest qualify as consumers.
Macquarie Bank's defence also argues that margin loans are not covered by the Code of Banking Practice.
On March 1, a judge ordered the Australian Securities and Investments Commission to provide further details of its claims that a Townsville couple, Barry and Deanna Doyle, were eligible to claim under consumer laws such as the prohibition on unconscionable conduct in the ASIC Act.
"This is a particularly contentious issue and [the banks] are entitled to know precisely how the applicants propose to put their case on the point," Justice Lindsay Foster said.
ASIC's action on behalf of the Doyles is intended to set a template for further individual compensation suits over the $3 billion Storm collapse if it succeeds.
Before the Doyles became clients of Storm in 2006, when both were 62, they owned their home, worth $450,000, had $640,000 in superannuation and no debts.
They borrowed from Bank of Queensland against their house and took out margin loans with Macquarie to invest $2.2 million in trusts linked to the sharemarket.
When the global financial crisis hit, their investments were sold for $1.7 million, leaving them with a mortgage on their home of $456,000.
In the statement of claim, ASIC said in 2006 Mr Doyle was working as a part-time council librarian earning $17,540 a year.
His wife had retired from her job in a bakery and was receiving benefits of $7000 a year.
The defences from the two banks say the Doyles signed declarations between 2006 and 2008 that their loans were "to be applied wholly or predominantly for business or investment purposes".
This precluded them from claiming as consumers under the then Trade Practices Act or the ASIC Act, they say.
Macquarie says neither of the Doyles fitted the definition of "customer" under the Code of Banking Practice, namely an individual who "acquires a banking service which is wholly and exclusively for his or her private or domestic use".
Both banks say the Doyles were acting under the advice of Storm, a licensed financial adviser.
The Bank of Queensland denies "that either of the Doyles were in a position of special disadvantage and could not judge or defend their own interests as alleged".
It had no duty to warn or monitor the risks associated with the home loans, it says.
Macquarie says the Doyles signed acknowledgments that they had read and understood the risks of margin lending set out in a booklet containing their application forms.
The bank was not obliged to advise them of any other risks, it says.
No date for the trial, to be heard in Sydney, has been set.