This matter involved numerous claims arising from the rating, sale and purchase of a structured financial product known as a constant proportion debt obligation or CPDO. The claims were made by a number of NSW Councils against a financial advising company (LGFS) which had recommended that the Councils invest in the CPDO which were found to be a form of a highly leveraged hedged derivative. Claims were also made by those Councils against the bank that had invented the CPDO (ABN Amro) and the company (S&P) that rated the CPDO, “AAA”. Questions of duty of care, breach of contract, breach of fiduciary duty, breach of statutory provisions including the Corporations Act as well as the extent of any damages were raised. Further, issues of proportionate liability between LGFS, ABN Amro and S&P were dealt with as well as the question of whether LGFS was entitled to equitable contribution from ABN Amro and S&P and whether LGFS could obtain indemnity under a contract of insurance from an insurer.
The Outcome
The Court ordered that the Councils were each entitled to succeed in their various claims for damages against LGFS, ABN Amro and S&P and that, other than in respect of claims for breach of fiduciary duty, the Councils’ damages claims against LGFS, ABN Amro and S&P attracted the various proportionate liability provisions and liability for the Councils’ damages should be apportioned as between LGFS, ABN Amro and S&P . Further, the Court was satisfied that claims made by LGFS for damages or equitable contribution against ABN Amro and S&P be apportioned between ABN Amro and S&P. The claim for indemnity under the policy of insurance was allowed. Appeals against the first instance decision were dealt with in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65. The relevant insurance issues were dealt with in Part 14 of the judgment beginning at [1618].
