The High Court has dismissed an appeal against the judgment of the Federal Court that found the deed of company arrangement (DOCA) approved by creditors of Lehman Brothers Australia (LBA) was void and of no effect.
In 2009, the Federal Court had ruled that the DOCA was void but its decision was appealed by LBA and its related companies.
"The decision confirms that the DOCA is ineffective and that Lehman Australia remains in liquidation," Piper Alderman partner Amanda Banton said.
"Although it won't be a quick process, liquidation will achieve a better return for our clients than they would have received under the DOCA. We are looking forward to working closely with the liquidator to make sure our clients' claims are assessed as quickly as possible.
"The decision of the High Court not only achieves clarity for our clients but it allows them to pursue claims against other Lehman Brothers companies."
In May 2009, LBA's administrator PPB and one of LBA's largest creditors, Lehman Brothers Asia Holdings, proposed the DOCA whereby LBA creditors, including a large group of councils, would receive between 2 and 13 cents in the dollar on their collateralised debt obligation (CDO) claims.
Related entities of Lehman Australia were to receive returns estimated between 47 and 100 cents in the dollar.
Most creditors voted to accept the DOCA, with the vote being carried by the overseas Lehman entities. But the vast majority of councils voted against it.
The councils argued the DOCA was unfair and particularly prejudicial to the interests of many LBA creditors, principally the local councils, charities and other investors in CDOs marketed by LBA.
The DOCA would have also prevented the local councils and other creditors from taking any further legal action against LBA and associated companies.
"If the DOCA hadn't been set aside, they would not have been able to make further claims and potentially share in any improved returns from the assets of Lehman Australia," Banton said.
The matter is being funded by IMF Australia. Lehman Brothers collapsed in 2008.
