LIQUIDATORS of Lehman Brothers in Australia have filed an application to appeal part of a landmark liability case - a move that 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 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.