Lawyers' representing up to 300,000 litigants are planning an $80 billion action against mortgage lenders, mortgage brokers and financial regulators in a class action that would dwarf previs. Sydney-based Chamberlains has been appointed counsel for the action that is expected to commence preliminary proceedings by November and could run for several years.
Roger Brown, a former Lloyds of London insurance broker, said he already has about 200,000 borrowers ready to join the action and has $75 million backing from UK and European investors.
Mr Brown, 77, is confident he will be able to raise another $25 million.
"There has been a scam," he said about mortgage lending to Australian property buyers. "But the train has hit the buffers and there needs to be recompense," he said.
Stipe Vuleta, a partner with Chamberlains, said the law firm has extensive experience handling big, complex class actions involving large numbers of parties and claims involving several hundred million dollars.
But the mortgage claim, if successful, would be 160-times more than the $500 million paid out by SPAusNet following the 2009 bushfires in which 119 people died and more than 100,000 homes were destroyed.
It would be more than eight-times payments to investors in failed US telecom's giant Enron.
Mr Brown, who said he has spent six years researching the action, claims borrowers have been mis-sold mortgage products during the property boom, particularly interest-only loans that allow borrowers to postpone repaying principal.
Tougher lending standards, falling property prices and out-of-cycle rate increases are increasing borrower stress, particularly in Melbourne and Sydney were growth has been the highest.
He said the scale of the problem is being highlighted by the current banking royal commission.
"Banks and other lenders are running for cover," he said. "Regulators who should have been responsible for prudent lending practices were asleep at the wheel."
Mr Brown, who has been generating interest on mortgagedeception.com, said he is a share holder in the company created to bring the action.
Other class actions are being planned by other law firms on issues ranging from the performance of AMP, the nation's largest diversified financial services conglomerate, through to negligence claims for cladding againsts developers, planners and builders.
For example, a $4.2 billion class action on behalf of about 250,000 owners and residents of about 1400 apartments is being planned in Victoria as the first stage in a national campaign against construction companies to compensate for the costs of replacing combustible cladding.
Law firm Adley Burstyner and Roscon Property Services is preparing the first round of legal actions on behalf of Victorian owners, which is expected to roll on to NSW, non-residential buildings, then other states and territories.
The law firm is seeking registrations of interest to establish whether there is enough backing to make the case worthwhile.This article was first published by https://www.afr.com/
Author: Duncan Hughes