The Federal Court of Australia has approved a settlement, effectively resolving one of the most complex corporate insolvencies in Australian history. On 18 December 2015 the Federal Court of Australia approved a settlement relating to inter-company loans and disputed assets between the liquidators of Lehman Brothers Australia Ltd (LBA) and American parent company Lehman Brothers Holdings Inc.
Creditors may receive a dividend of potentially 80 cents in the dollar. This is likely to provide significant relief to the 72 major investors in financial products, many of whom had sustained losses in the 10’s of millions, including institutional investors, private wealth individuals, councils across Australia and significant charitable organisations and churches which had surplus funds invested in a range of financial products, including the collateralised debt obligations or CDOs that they acquired through LBA.
This will see a number of investors, many of whom are not-for-profits and community based organisations receive much needed funds for their operations. This settlement is an important step for investors who have been involved in this seven year-long process, which began when they purchased a number of complex financial instruments from LBA, prior to the collapse of its US parent on September 15 2008.
Squire Patton Boggs Sydney partner Amanda Banton and her team acted for client creditors in a class action in 2012 in which the Federal Court of Australia found that LBA had engaged in misleading and deceptive conduct, negligence, breach of fiduciary duties and breach of contract. The client creditors were required to lodge proofs of debt in the liquidation of LBA following the successful class action. This involved preparing over 85 proofs with a claim value of approx AUD $225 million.
In 2014, Amanda Banton and her team led a successful High Court action where they were able to have the original Deed of Company Arrangement that was entered into by LBA earlier in the liquidation, overturned. Without this successful High Court action, this potential dividend which will be a substantial result for client creditors, would never have been possible.
