Appeal may delay Lehman payouts
The liquidators, PPB Advisory, want to appeal some of the findings by Justice Steven Rares, of the New South Wales Federal Court, on a class action brought by Wingecarribee Shire Council and Parkes Shire Council in New South Wales and the City of Swan in Western Australia.
Justice Rares found that the Australian arm of Lehman Brothers, previously called Grange Securities, was liable for misleading investors in breach of its fiduciary duties. His final judgment, due in March, is expected to outline how much investors should receive from liquidators.
PPB chairman Stephen Parbery said PPB was also putting together a scheme of arrangement that could settle the liquidation faster than the legal action.
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," 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 is based on whether any other parties contributed to the negligence that led to dozens of councils and charities investing in what turned out to be toxic assets.
But if the court accepts the appeal it could delay disbursements by one to two years, said John Walker, executive director of IMF, which funded the class action.
He said the court was not likely to decide whether to hear the appeal until after Justice Rares delivered his final decision in March.
The September ruling found in favour of a 72-member class action and opened the way for PPB to return about $200 million to councils, charities and church groups that bought synthetic collateralised debt obligations, or SCDOs, from Lehman Brothers Australia.
Justice Rares said the councils were entitled to damages to cover their losses, including the capital they invested in the securities.
Frequently Asked Questions about this Article…
The liquidators of Lehman Brothers in Australia, PPB Advisory, have applied to appeal parts of a landmark liability ruling by Justice Steven Rares. The appeal challenges some findings from a class action brought by several councils and aims to review whether other parties contributed to the negligence that led to losses.
If the court accepts the appeal, it could delay disbursements of about $200 million back to councils, charities and church groups by roughly one to two years, according to John Walker of IMF, which funded the class action.
Justice Rares found that Lehman Brothers Australia (formerly Grange Securities) was liable for misleading investors and breaching its fiduciary duties. His September ruling favoured a 72-member class action and opened the way for PPB to return about $200 million to affected investors. A final judgment due in March is expected to specify how much investors should receive from the liquidators.
The class action was brought by Wingecarribee Shire Council, Parkes Shire Council and the City of Swan, representing a 72-member class. PPB Advisory are the liquidators, and IMF funded the class action.
SCDOs are synthetic collateralised debt obligations. Dozens of councils, charities and church groups bought SCDOs from Lehman Brothers Australia and suffered losses when those assets turned out to be toxic — these investments are central to the class action and the $200 million return being discussed.
PPB said it is preparing a scheme of arrangement that could settle the liquidation faster than lengthy court action. Such a scheme would still need court and regulator approval and approval by all creditors, but if agreed it might provide a quicker route to distributing funds.
If the appeal is refused, the liquidation will proceed based on Justice Rares' findings. PPB has said it will still propose a scheme of arrangement, and the final March judgment should outline how much each investor is entitled to receive from the liquidators.
Justice Rares was expected to deliver a final judgment in March that would outline how much investors should receive. However, whether the appeal is heard could affect timing — a successful appeal application could postpone disbursements by one to two years.
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