Wingecarribee Shire Council in New South Wales has won Federal Court approval to uncover Lehman Brothers’ insurance policies in its battle to recover and protect around $30 million worth of complex investments.
The failed investment bank will now be required to show details of its insurances, including personal indemnity insurance.
Lehman Brothers has a short time period in which to appeal the decision.
Wingecarribee general manager Mike Hyde said the court decision was the best news the municipality has had all week.
Details of the policies will take a short amount of time to understand and the council will know its options very soon, he said.
Some avenues could include the pursuit of a legal claim.
Wingecarribee took legal action against Lehman Brothers’ Australian unit, formerly known as Grange Securities, over collateralised debt obligations (CDOs) it bought because of the investment bank’s financial advice.
“We allege that advice was misleading and deceptive,” Hyde said.
The council incurred $2.55 million in losses over its $3 million investment in Federation CDOs in January 2008. Wingecarribee still holds $26 million worth of CDOs with different names, many of which have lost value.
“We’re fighting to get a number of cents in the dollar and that number of cents is what this fight is all about,” Hyde said.
Complications in the case arose after Lehman Brothers Australia was placed in administration and its parent filed for Chapter 11 bankruptcy protection in the US in September 2008.
Insurance policies are considered confidential but could be crucial to a creditor considering legal action, as they could reveal whether a legal claim is able to be pursued.
Many other councils are reportedly watching Wingecarribee’s case to decide if they should also pursue Lehman Brothers.
