The High Court of Australia has dismissed an appeal by Lehman Brothers Australia (LBA) against a decision of the Federal Court, thus paving the way for creditors to make claims to recover $600 million in losses.
The High Court upheld the Federal Court's 2009 decision which found void and of no effect a Deed of Company Arrangement (DOCA) which was approved by creditors of Lehman Brothers Australia (LBA).
The appeal was brought by LBA and Lehman Brothers Asia Holdings Ltd after a coalition of 90 local councils - which had purchased a large amount of financial products from LBA prior to their voluntary administration - argued successfully in the Federal Court that the DOCA was unfair and prejudicial to their interests.
Under the DOCA, the councils would be forbidden from taking any further legal action against LBA or associated companies.
The DOCA was only narrowly accepted by creditors, primarily due to the votes of overseas Lehman Brothers entities, and most local councils voted against it.
Acting for the local councils was a team from Piper Alderman, led by partner Amanda Banton.
"The decision confirms that the DOCA is ineffective and that Lehman Australia remains in liquidation," said Banton in a statement released today.
"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. We're looking forward to working closely with the liquidator to make sure our clients' claims are assessed as quickly as possible."
According to Banton, the High Court's decision is a welcome one which will now pave the way for creditors to get their due.
"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 Banton.
"If the DOCA 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."