Wingecarribee Shire Council has welcomed the decision from the Federal Court of Australia last Friday ruling that investment company Lehman Brothers Australia is liable for millions of dollars lost by Councils via failed investments.
Wingecarribee Shire Council – along with City of Swan and Parkes Shire councils – led the class action case, which involved a total of 72 plaintiffs. Wingecarribee Shire Council was seeking to recover approximately $20million in potential losses.
The court found that Council was misled by negligent advice and that the Australian arm of Lehman Brothers – previously known as Grange Securities – had engaged in deceptive conduct, breach of contract and a breach of its fiduciary duties.
Newly elected Mayor, and Chair of Council’s Finance Committee, Councillor Juliet Arkwright said the decision vindicated Council’s decision to instigate legal action against Lehman Brothers in a bid to recoup funds lost in financial products known as collaterised debt obligations (CDOs).
“This case has been an ongoing process, and we are very pleased with the result. We can now attempt to recoup funds,” Councillor Arkwright said.
“However the ruling does not stipulate how much, or indeed when we can expect to see monies returned,” she said. “And whilst we may never receive all of our funds invested, any money recovered will have an enormous benefit for the community as it will be fed back into Council services and community assets.”
Wingecarribee Shire Council has already recovered $8.6 million from CDO investments, and still holds $11.6 million.
Council now awaits a court date in November when Justice Steven Rares will give final orders that will confirm details of the compensation that Lehman Brothers Australia will be liable for.
“I also thank and congratulate the staff of Council for their diligence, who as primary witnesses, were responsible for key evidence in the action which resulted in a world-first ruling against the investment bank.”