In a complex case which has drawn comparison to the interminable Jarndyce and Jarndyce in Dickens's Bleak House, Banksia Securities Ltd collapsed in 2012 owing its investors $660 million, despite having issued financial reports stating the company was capitally sound only weeks before.

Since then investors have been involved in complex and lengthy litigation, attempting to recoup as much of their lost money as possible.

Banksia was the largest mortgage debenture company in Australia before it folded, collecting money from investors and lending for residential and commercial property loans.

The company issued debentures to investors supposedly similar to bonds, offering the company's clients a fixed return over a set term. Banksia used the clients' money to offer loans to developers.

Some 1450 investors in Ballarat and around 16,000 in regional Victoria overall discovered the directors and auditors of Banksia were required to hold just $10 million each in insurance, imperilling their chances of retrieving investments after the collapse.

In 2016 Kyabram Debenture Holders Action Group co-founder Don McKenzie said the legally-mandated level was ludicrous.

"They were required to hold just $10 million each," said Mr McKenzie.

"It's just ridiculous. You'd insure your home for more."

At the time, the Baillieu state government appointed a working group to assist regional centres affected by the collapse, in which 50 workers also lost their jobs.

Yesterday senior Melbourne lawyer Norman O'Bryan SC, who had been part of a team representing Banksia debenture holders in a class action against the company and was accused of ripping them off through false accounting, overpriced legal fees and charging exorbitant funding commissions, agreed to cease defending his position and apologised to both to the court in which he was appearing in a civil action against him, and to his former clients.

READ MORE:

The civil case stemmed from a $64 million settlement negotiated with Banksia's trust company in 2017. Australian Funding Partners Limited (AFPL), a firm comprised of Mr O'Bryan, barrister Michael Symons and the late class action lawyer and funder Mark Elliott, had represented Banksia's debenture holders - but were then accused of overcharging for their representation to the tune of around $20 million.

AFPL was incorporated to fund a class action against the trustee of Banksia in order to recover losses from debentures held by investors when Banksia collapsed.

A single Banksia investor agreed to lead the challenge to the fees, represented by Peter Jopling QC. As contradictor, Mr Jopling said the three principals of AFPL "misled the court in ways that would shock courts, all legal practitioners, the lay public, and most particularly in that group of lay public, the 16,000 or so debenture holders".

Mr O'Bryan, whose father and grandfather sat as Supreme Court judges, has a brother is a Federal Court judge and another who founded Victoria's IBAC as its first commissioner, agreed with Supreme Court Justice Dixon who last week said, "One thing that has troubled me in listening to all of this is the question of whether certain parties are fit and proper persons to remain on the roll of practitioners in this court."

Mr O'Bryan had been a principal lawyer for ASIC, which had faced critics of its own over allowing high-risk financial products such as Banksia's to exist. Banksia had been on an ASIC watchlist since 2007.

Mark Elliott died in a farm vehicle accident in February of this year. Investigators are still trying to recover his Blackberry phone, which they believe has vital information stored on it.

Banksia advocate Keith Pitman has been at the forefront of attempts to recover investor monies in Ballarat, appearing in the Court of Appeal in 2018 to argue the settlement costs. He says returns to debenture holders now total 89.5 cents in the dollar, with about 6 cents in interest as well.

"The contradictor has put in a claim for $10 million in damages, and there is $22 million held in trust that should be refunded," he says.

The civil trial continues.

If you are seeing this message you are a loyal digital subscriber to The Courier, as we made this story available only to subscribers. Thank you very much for your support and allowing us to continue telling Ballarat's story. We appreciate your support of journalism in our great city.