An Overturned on Appeal over Margin Loans
A margin-loan case has been overturned on appeal in Sydney after three Federal Court judges ruled that banks have wide rights when prices fall. The appeal was about that Macquarie Bank’s standard margin loan agreement which gave its discretion to reduce the time for its client to meet margin calls from three days to one.
This case was brought by Ross Goodridge after being given twenty four hours in February 2009 to meet two margin calls with total of $190, 201. Unfortunately, he didn’t meet the calls so his entire holding was sold for $647,121 over a week.
This case and the appeal might have been avoided if the obscure and ambiguous contract had been competently drafted. The agreement was said not containing the clarity of language which ought to expect from such a document.
The global financial crisis last year which increases the rate of quick cash loans in Australia such as cash advance loan, cash advance payday loans, payday cash advance, payday advance loan etc. was hailed as a potential precedent for others whose investment were sold by margin lenders. The said Macquarie’s margin loan agreement should be read in the context of its special purpose and it was not like the traditional relationship of banker and customer.
The loan should be repaid in full despite the volatility and unpredictability of markets for listed securities is a clause on the bank’s rights to make margin calls which intended to give protection and assurance to the lender.
Canadian ruling has been favorable for all in which the obligation is to make a demand and give reasonable time before acting. These are typically imposed on a creditor in this type of relationship. Its unique circumstances associated with the margin accounts is publicly traded securities with the borrower.
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Link source : “http://www.watoday.com.au/business/appeal-win-gives-hope-to-banks-over-margin-loans-20110118-19v92.html”
