Councils have won in the High Court in a case over their right to pursue claims against the collapsed bank Lehman Brothers, both in Australia and overseas.
The High Court ruling opens the way to a $1.2 billion class action lawsuit from councils and rejects the deal that had previously been recommended by Lehman Brothers Australia, which would have seen the councils paid between 2.4c and 10c on each dollar held with the failed investment company, despite other Lehman Brothers companies potentially getting all their money returned.
Importantly the High Court decision means the councils are free to sue Lehman Brothers in the US to recover their investments, not limiting them to the Australian arm of the company.
Piper Alderman, the law firm representing the councils in the case against Lehman Brothers Australia argued the original deed was unfair, and prejudicial to the interests of many smaller investors in Lehman Australia.
“The decision of the High Court not only achieves clarity for our clients but it allows them to pursue claims against other Lehman Brothers companies,” said the partner leading the litigation, Amanda Barton, in a statement.
“If the DOCA (deed of company arrangement) hadn’t been set aside, they would not have been able to make further claims and potentially share in any improved returns from the assets of Lehman Australia.” Said Amanda Barton.
“Although it won’t be a quick process, liquidation will achieve a better return for our clients than they would have received under the DOCA,” she added.
The ABC reports that Parkes Local Council was one of the councils represented in the court case against Lehman Brothers Australia. With the general manager of Parkes Shire, Alan McCormack happy with the result, but realistic about the path that lay ahead of the councils in their fight against Lehman
“This decision means that we will certainly do a lot better than we originally thought we would, substantially better than that,” Mr McCormack said.
“We’ve just got to wait and see how well we fare out of the liquidation before we take our next steps.”
“We will now go to the liquidator for Lehman Brothers Australia and cut a better deal.” Mr McCormack said.
“If we can’t get a better deal then we will look to, in concert with quite a few other councils, we will look to Lehman Brothers incorporated and try and get recovery from that American arm.”