Business loan to Storm Financial director not a margin call

Last week, Chief Justice Tim Carmody of the Supreme Court of Queensland ruled in favour of the Commonwealth Bank of Australia, finding that husband and wife investors Gildo and Antonetta Dalle Cort owed the bank $143,401 after failing to repay a loan taken out in 2007.

Nonetheless, the Dalle Corts have been given leave to re-plead limited aspects of their case. They are required to file their counterclaims by 15 January 2015, arguing that the CBA either provided erroneous or inaccurate data to them in relation to their margin loan with the bank; or the CBA failed to give them a notice of margin call in relation to their margin loan before closing out their positions.

"Before granting summary judgment the court must be reasonably sure that depriving a defendant of the forensic advantages of disclosure and a full benefit of the adversarial method will not lead to injustice," Chief Justice Carmody said.

At issue is a $100,000 three-year interest only business loan facility with the CBA, originally taken out by the Dalle Corts to fund the purchase of shares in the planned initial public offering of Storm Financial. The offering did not, in the end,  occur, and Storm went into liquidation on 26 March 2009.

ASIC, which has been drawn into the case by being named in Court commenced a prosecution in 2010 against Storm and the CBA in the Federal Court for Corporations offences.

In September 2012, CBA agreed to pay an extra $136 million to customers who borrowed money from the bank to invest in Storm to be discharged from the Federal Court's proceedings. However, the Dalle Cort's debt was excluded from the resolution scheme reached in 2012 because Gildo Dalle Cort was a Storm director.

In the meantime, the Dalle Corts joined ASIC as a party to the action and filed a $150 million counterclaim for damages against CBA and ASIC.

In this most recent decision, the Chief Justice looked at four arguments raised by the Dalle Corts.

First, they contended that they never received a copy of the UTC (as the bank claims) either at the advance date, when the UTC documents were signed or any time since. "There is uncontested evidence that the Dalle Corts accepted the loan on the UTC terms by their conduct in signing the document and making interest payments," Chief Justice Carmody said.

The second ground, that there had been no default by the Dalle Corts on the basis that they did not breach the UTC is untenable: that is, it has no real prospect of successfully being defended.

The third ground was that the CBA had a habit of writing off "near identical" loans (presumably in the sense of forgiving default) to former Storm staff like them - although the previous "write offs" related to margin loan (not business loan) claims against other customers which, the judge said, "have no logical connection with the Dalle Corts' liability to repay their loan".

The fourth ground of defence appears to suggest that the business loan "was impliedly extended by CBA's conduct in not requesting repayment or commencing recovery action at or near the time of expiry." However, the chief justice said, there is nothing in the CBA's conduct to suggest an intention to waive the Dalle Corts' default or to extend the obligation to repay to some indefinite time in the future

A further ground was added, amounting to what the court called "the conspiracy claim" that the resolution scheme entered into by CBA and ASIC consisted of two separate agreements: one allocating the $136 million to customers, and the second excluding particular classes of customers.

They argued that the latter agreement "could only have been for the purpose of harm." The judge ruled that the pleading was defective because there was no assertion that "the sole, true or dominant purpose" of the ASIC-CBA settlement agreement was to injure the Dalle Corts.

The case will restart on 15 January 2015 if the Dalle Corts submissions are accepted as arguable.