Local councils, church groups and charities around Australia have reached a conditional settlement of their claim for roughly $180 million in damages lost on investments sold to them by Lehman Brothers Australia.
Local councils, church groups and charities around Australia, including the City of Swan, have reached a conditional settlement of their claim for roughly $180 million in damages lost on investments sold by Lehman Brothers Australia.
The 69 claimants have been embroiled in a five-year legal battle since they purchased complex financial derivatives known as ‘collateralised debt obligations’ from Lehman prior to 2007 that collapsed in value the following year.
The announcement comes more than a year after the Federal Court ruled in favour of lead claimants Wingecarribee and Parkes shire councils in NSW, and the City of Swan; this was subsequently appealed by Lehman’s liquidators.
Under this latest settlement, it is proposed the appeal will be discontinued.
Litigation funder Bentham IMF (formerly IMF Australia) said the settlement would provide the claimants getting back 50 cents in the dollar.
Final settlement is conditional on the Federal Court approving separate applications from IMF clients for approval of the class action and from Lehman’s liquidators for the court to approve their entry into the settlement.
The applications are due to be heard in December and, if successful, distributions to Lehman creditors, including the 69 class action members, are expected to commence in April 2014.
“Today’s announcement finally puts the claimants within sight of financial relief. It has been a marathon battle and they should be commended for their patience and tenacity in pursuing a just outcome,” Bentham IMF executive director John Walker said.
“They are now closer to receiving compensation for their losses, which is good news for hundreds of thousands of Australians who rely on their services.”
In the Federal Court in September last year, a judgement found Lehman Australia had engaged in misleading conduct, breached fiduciary duties, breached contracts and been negligent in marketing the CDOs to the claimants.
“Our clients were conservative investors who should never have been approached to buy these CDOs in the first place,” Piper Alderman partner Amanda Banton said.
“They were simply not in a position to understand the risks involved, including that of losing all of their money.
“It’s very pleasing today to have passed this major hurdle in having our clients’ claims resolved.”