Council's four-year legal challenge nets $1.5 million refund on investment

Orange City Council will recoup $1.5 million after the Federal Court upheld  a ruling againts ratings agency Standard and Poor's on Friday.

Orange City Council will recoup $1.5 million after the Federal Court upheld a ruling againts ratings agency Standard and Poor's on Friday.

ORANGE ratepayers will recover $1.5 million plus costs following a Federal Court decision on Friday.

Orange City Council was one of 13 councils to mount a legal challenge against credit ratings agency Standard & Poor’s, investment bank ABN Amro and Local Government Financial Services (LGFC) after constant proportion debt obligation notes, or Rembrandt notes, plunged in value during the global financial crisis.

Standard & Poor’s gave the investment a AAA rating and LGFS promoted the product as tailor-made for councils.

Orange City Council invested $1.5 million in 2006, but stood to recover only $100,161 of its initial investment after the Rembrandt notes turned sour.

In 2012, Justice Jayne Jagot found councils had been misled about the security of the investments, however Standard & Poor’s, ABN Amro and LGFS appealed the decision.

On Friday, the court upheld its earlier ruling and LGFC will be liable for Orange City Council’s losses.

Orange mayor John Davis welcomed the development.

“Anything in regard to securing monies to council, I think, is a great win,” he said.

“It’s been a  long, drawn-out effort and the council’s had to really hold its nerve to come up with a result.”

Cr Davis said no investment was invincible to risk, but the council trusted the advice it was given and hoped the parties would review the way they delivered future advice.

The decision ended a four-year legal battle.

danielle.cetinski@fairfaxmedia.com.au

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