Customer sues CBA over failure to sell out of margin loan at a profit

The fallout from "market corrections" that preceded the financial crisis has seen a disappointed investor returning to court to seek damages from the Commonwealth Bank for the actions (or more accurately, the failure to act) of one of its wealth management arms, Colonial First State.

The appeal by Simon Anish Chand of a decision in June 2014 by Justice Robb of the NSW Supreme Court was heard last week by Court of Appeal of the New South Wales Supreme Court.

Chand is suing the bank over the loss of over A$1 million of his own savings, plus interest, invested in a leveraged product. The amount was wiped out when CBA made a margin call, leading Chand angry at a loss that he sees as the result of the bank failing to implement a request he made to redeem investments on 25 September 2007.

On the first day of a scheduled two-day appeal CBA accepted that it did receive his request  and failed to act upon it.  

But the bank argued, as it had done in the lower courts, that Chand's loss was not caused by their breach.  The bank claimed the loss he suffered was caused by the conduct of Chand himself.

"He was the author of his own misfortune," was how the bank's silk described the situation.

As the arguments unrolled, it emerged that at the time the CBA considered Chand to have purposely ignored one practical, cheap, quick and easy solution - once he had doubt he could have picked up the phone and called the bank, and then resubmitted his request to the bank.

Chand instead continued to hold his investments and to re-start monitoring the market from about 5 November 2007. He could have submitted a new request in which he would have been able to redeem his investments at the same or greater amount as on 25 September 2007.  

"Once somebody facing substantial loss calculates to takes no steps to avoid the loss that breaks the chain of causation," CBA argued.

The original trial heard that, at the time the bank  failed  to  implement  his  request,  Chand had  not  suffered  loss.  Rather, it was a  potential  loss,  as  the  value  of  his investments  could  drop -  as  indeed  they  did.  The bank argues that Chand had the opportunity to avoid this prospective loss becoming actual loss, but he did not.

The court has reserved judgment.