Australian Associated Press Financial News Wire: Lehman's victims seek damages following High Court decision

LEHMAN MELBOURNE, March 30 AAP - Local councils and other investors who suffered losses of over $600 million from Lehman Brothers Australia Ltd's liquidation can still seek damages following a decision by the High Court of Australia.

The High Court on Tuesday dismissed two appeals against a judgment of the Federal Court of Australia which found that a deed of company arrangement approved by Lehman Australia's creditors on June 12, 2009, was void and of no effect.

Reasons for the decision will be delivered at a later date, the Court said in a statement.

The decision against Lehman Brothers Asia Holdings and Lehman Brothers Holdings Inc means investors in Lehman Australia and other companies in the Lehman Group can commence litigation to recover hundreds of millions of dollars in losses.

The investors, including about 90 local councils, are owed over $600 million in investments that went bad following Lehman Brothers' collapse in New York in September 2008 under debts of $613 billion.

Lehman's collapse was the the biggest US bankruptcy in history, and subsidiaries around the world followed suit as their source of funding disappeared during the credit crisis of September 2008.

Listed litigation funder IMF (Australia) Ltd on Tuesday said claims made by 70 of its clients against Lehman Australia now would proceed following the High Court's decision.

The decision confirms that the deed is ineffective and Lehman Australia will remain in liquidation, IMF said in a statement.

The deed was proposed in early 2009 by Lehman Brothers Asia Holdings, Lehman Australia's single biggest creditor, which itself went into liquidation. The deed was recommended by Lehman's administrators, Stephen Parbery and Neil Singleton of liquidation firm PPB.

Wingecarribee council and others had begun legal action against the investment bank, arguing Lehman Australia engaged in misleading and deceptive conduct.

Wingecarribee council crystallised its losses of $4 million by selling its soured investment products.

At the time, Mr Singleton told AAP that the deed should bring litigation to an end.

"The benefit of that is it enables us to pay the employees and general creditors in full, early, and it provides a very reasonable return to the contingent creditors (the former investors including councils and charities)," he said on May 28, 2009.

But several creditors of Lehman Australia later later brought proceedings before the Federal Court claiming they were not bound by the deed and that it would extinguish their rights to sue other companies in the Lehman Group.

On September 25, 2009, the Federal Court found that the deed was void and of no effect, before ordering that Lehman Australia be wound up by the Court.

Lehman Asia and Lehman Brothers Holdings Inc then appealed the decision in the High Court.