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IMF (Australia) Ltd says Federal Court ruling opens door to Lehman claims

By Amarendra Bhushan for CEOWORLD Magazine Updated:September 28, 2009

The Federal Court has ruled that local councils can pursue the recovery of money lost through the collapse of investment bank Lehman Brothers.

IMF (Australia) Ltd., a litigation funder, will pay for lawsuits by town councils against Lehman Brothers Holdings Inc’s Australian unit after a court ruled that an agreement preventing them from pursuing Lehman was invalid.

The councils and other parties which invested in collateralized debt obligations are free to pursue claims against various Lehman entities in Australia and elsewhere after a ruling by Australia’s Federal Court on Sept. 25, IMF said in a statement to the stock exchange today, Bloomberg reported.

On Friday, the Federal Court found against the validity of a deed of company arrangement, which had prevented the investors from pursuing claims against various Lehman entities in Australia.

However, the judgment does not set a precedent for the many other Lehman investors and creditors worldwide who are seeking hundreds of millions of dollars from the bankrupt bank’s estate, said Susanna Khouri, investment manager at IMF.

“This does not have implications beyond Australian law. It is not going to be a precedent for creditors to other Lehman entities around the world,” Khouri told Reuters.

The firm said in a short statement to the stock exchange that the court had found against the validity of a Deed of Company Arrangement which had prevented the councils and others from pursuing claims against Lehman entities and from pursuing payment under various insurance policies.

“IMF will now fund those councils and other parties in litigation to recover monies lost when they invested in collateralised debt obligations arranged, issued and promoted by those Lehman entities,” the statement said.

IMF is representing about 60 clients.

IMF (Australia) Ltd is a publicly listed company providing funding of legal claims and other related services where the claim size is over $2 million. IMF has brought together the major participants in the litigation funding market in Australia to become the largest litigation funder in Australia and the first to be listed on the Australian Stock Exchange.

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