THE Federal Court has opened the door for legal action against collapsed US investment bank Lehman Brothers.
Local governments can pursue financial claims against the former firm in Australia and elsewhere, a firm that is funding the litigation announced yesterday.
IMF Australia has confirmed the Federal Court ruling on Friday, which ruled in favour of town councils and others that have lost money in collateralised debt obligations marketed and issued by Lehman. The decision opens the door to legal claims to recover their money.
The Federal Court has found that a Deed of Company Arrangement (DOCA), which had prevented such legal action by the councils and other parties, was not valid.
The DOCA had prevented the councils and others from pursuing claims against various Lehman entities both in Australia and overseas, as well as preventing them from pursuing payment under various insurance policies, according to a statement from IMF Australia.
“IMF will now fund those councils and other parties in litigation to recover monies lost when they invested in collateralised debt obligations arranged, issued and promoted by those Lehman entities,” the group’s statement to the Australian Securities Exchange said.
But the ruling does not have implications beyond AUstralian law, and it is not going to be a precedent for creditors to other Lehman entities, numerous commentators have said in newspaper reports.