LIQUIDATORS of Lehman Brothers in Australia have filed an application to appeal part of a landmark liability case, which could delay returning $200 million to councils, charities and church groups.
The liquidators, PPB Advisory, want to appeal some of the findings by Justice Steven Rares of the NSW Federal Court on a class action brought by Wingecarribee Shire Council, Parkes Shire Council and the City of Swan.
Justice Rares found that the Australian arm of Lehman Brothers, previously called Grange Securities, was liable for the misleading of investors in breach of its fiduciary duties. His final judgment is due in March and is expected to outline how much investors should receive from liquidators.
PPB was also putting together a scheme of arrangement that could settle the liquidation faster than the legal action, PPB's chairman, Stephen Parbery, said. Such an arrangement would require court and regulator approval, and approval by all creditors.
"What would normally happen in a liquidation is that creditors of any type would submit their application. What is difficult about this case is that it is uncharted waters. It is uncharted claims," Mr Parbery said.
"If the appeal is not allowed, the liquidation will just proceed based on the findings of the judge. But with the proviso that a scheme of agreement will still be proposed."
The fresh appeal centres around whether any other parties contributed to the negligence that saw dozens of councils and charities invest in what turned out to be toxic assets.
However, if the court accepts the appeal it could delay disbursements by one to two years, according to John Walker, executive director of IMF, which funded the class action
"If there is not a scheme of arrangement that is agreed to by creditors in the meantime, this will cause greater delays and cost to the administration [process]."
The court was not likely to decide whether to hear the appeal until after Justice Rares delivers his final decision in March, Mr Walker said.
The September ruling found in favour of a 72-member class action and opened way for PPB to return about $200 million to councils, charities and church groups that purchased synthetic collateralised debt obligations, or SCDOs, from Lehman Brothers Australia.