Slater & Gordon in conjunction with litigation funder, IMF Australia are conducting due diligence with respect to a potential class action for aggrieved borrowers/mortgagors against Bank of Western Australia (“Bankwest”) and Commonwealth Bank of Australia (“CBA”).
Background
In the last months of 2007 the financial affairs of Bank of Western Australia Limited were inextricably attached to the future prospects of its parent company HBOS PLC in the United Kingdom. HBOS PLC depended, to a very large extent, on the wholesale market for its funding and Bankwest, in turn, relied for its funding upon HBOS to which, at the end of 2007, it owed some $8.7bn.
As HBOS foundered throughout 2008 and almost collapsed in September of that year, so too did Bankwest meander towards its own collapse.
At the moment, it is only possible to divine what happened to HBOS and Bankwest by reference to media documents. A detailed timeline relating to those published documents is available here.
It will take the power and reach of a Senate inquiry to reveal the full picture.
As part of its purchase arrangements for Bankwest, CBA extracted from the seller a warranty
which enabled CBA to claw back part of the purchase price depending upon whether the
assets of Bankwest had been accurately disclosed to CBA in the accounts of Bankwest.
Little is known about that warranty. In particular it is not known:
- If there was a time limit by which CBA had to make a claim under the warranty;
- What categories of loan were covered by the warranty (were they just commercial property loans?)
- What steps needed to be taken by CBA before a claim could be made under the warranty — was it sufficient for there to be a new valuation of outstanding loans or did CBA need to take enforcement proceedings i.e. call up the loans, appoint receivers and/or dispose of the security property?
- Whether there was a cap on the amount that could be claimed by CBA?
What is clear is that CBA called upon the warranty and was paid some $200m.
At the same time some commercial developer clients of Bankwest believe they were hard done by when Bankwest revalued their security and called up their loans in the period after CBA took control of Bankwest..
If there was a time limit and if CBA had to call up the loans or take some enforcement action within that limited time in order to get the advantage of the warranty and if that warranty was unlimited then there is some risk that the CBA has been enthusiastic in its quest to have Bankwest identify and take action against commercial property developers whose loans were within the categories set out in the warranty.
If you have any queries or wish to register your interest in the class action, please send us an email at bankwest@slatergordon.com.au or call 1800 555 777.