The City of Swan has reached a settlement agreement in its class action against collapsed American investment bank Lehman Brothers, paving the way for eight other WA councils to seek damages of almost $50 million.
The city, along with Parkes and Wingecarribee shire councils in NSW, were the lead claimants in the class action that involved 72 councils, charities and churches.
The organisations sued Lehman Brothers Australia for $248 million, claiming the bank had failed to warn of risks in complex financial derivatives, known as collateralised debt obligations.
Yesterday, a conditional settlement was reached, establishing that company liquidators PPB Advisory distribute more than 50ï¿½ in the dollar to claimants.
The other WA councils - Melville, Albany, Geraldton-Greenough, Kwinana, Augusta-Margaret River, Coolgardie and Ravensthorpe and the Southern Metropolitan Regional Council - will now begin a claims-resolution process for payouts.
City of Swan executive manager corporate Colin Cameron said the council could receive up to $2.5 million from the settlement.
"We welcome the settlement and are relieved that the action has finally come to resolution," he said. "We have worked very hard since this began in July 2007 to ensure that we get as much compensation as possible, not just for our council but all councils and organisations involved across Australia."
Mr Cameron said there was one outstanding legal action the council would pursue against rating agency Standard & Poor's.
PPB Advisory said they were hopeful of paying creditors in or around the first quarter of next year. "This will bring total recoveries to more than $550 million, which is an excellent outcome for local creditors caught up in what has been the largest corporate collapse in history," it said.
The settlement will go to the Federal Court for ratification.
'We welcome the settlement and are relieved that the action has finally come to resolution.' " City of Swan's *Colin Cameron *