ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65

ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65

S&P, ABN AMRO, and LGFS were jointly and severally liable for losses suffered by the Councils as a result of publishing and deploying a flawed AAA rating which was misleading and deceptive and not based on reasonable grounds. S&P owed a duty of care to investors even if they were not known personally, given the rating's purpose and use; ABN AMRO knowingly participated in and promoted the rating without correction. LGFS breached its duty to council clients (fiduciary in some cases, advisory in others) by failing to disclose conflicts and by promoting an unsuitable product without proper risk warnings. Damages are not reduced for contributory negligence, since the Councils and LGFS acted...

Jurisdiction
Australia
Judgment Date
06 June 2014
Procedural Posture
Appeal and Cross Appeal From Federal Court (general Division, NSW District Registry) / Final Appellate Judgment, Judgment After Hearing, Reasons and Directions for Final Orders
Outcome
Appeals and cross-appeals largely dismissed; primary judge's orders substantially affirmed, except for adjustment to apportionment of damages on certain statutory claims. Insurance appeal by AHAC dismissed.
Legal Topics
['breach of Contract' 'misleading and Deceptive Conduct' 'asic Act 2001 (cth)' 'corporations Act 2001 (cth)' 'proportionate Liability' 'damages' 'fiduciary Duty' 'negligent Misstatement' 'contributory Negligence' 'insurance Exclusion' 'rescission' 'authorised Investments Under Local Government Act 1993 (nsw)']
['contract Law' 'corporations Law' 'torts (negligence/misstatement)' 'equity (fiduciary Obligations)' 'insurance Law' 'statutory Interpretation' 'practice and Procedure'] ['breach of Contract' 'misleading and Deceptive Conduct' 'asic Act 2001 (cth)' 'corporations Act 2001 (cth)' 'proportionate Liability' 'damages' 'fiduciary Duty' 'negligent Misstatement' 'contributory Negligence' 'insurance Exclusion' 'rescission' 'authorised Investments Under Local Government Act 1993 (nsw)']

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Procedural Posture

Appeal and Cross Appeal From Federal Court (general Division, NSW District Registry) / Final Appellate Judgment, Judgment After Hearing, Reasons and Directions for Final Orders

Legal Issues

  1. 1 ['Were the ratings assigned to the Rembrandt notes by S&P misleading or deceptive and without reasonable grounds?' 'Did ABN AMRO and LGFS engage in misleading and deceptive conduct and/or negligently misrepresent the nature, security, and risk of the financial products to LGFS and to the Councils?' 'Did LGFS breach its fiduciary duties to local councils?' 'Were LGFS and/or the councils contributorily negligent?' 'Was there liability for damages and if so, what was the proper measure and apportionment under proportionate liability provisions of the Corporations Act and ASIC Act?' "Were the Rembrandt notes 'debentures', 'securities' or 'derivatives' under the Corporations Act and Ministerial Orders?" "Did the insurance policy (AHAC) respond to LGFS's claims and settlement exposures?"]

Ratio Decidendi

S&P, ABN AMRO, and LGFS were jointly and severally liable for losses suffered by the Councils as a result of publishing and deploying a flawed AAA rating which was misleading and deceptive and not based on reasonable grounds. S&P owed a duty of care to investors even if they were not known personally, given the rating's purpose and use; ABN AMRO knowingly participated in and promoted the rating without correction. LGFS breached its duty to council clients (fiduciary in some cases, advisory in others) by failing to disclose conflicts and by promoting an unsuitable product without proper risk warnings. Damages are not reduced for contributory negligence, since the Councils and LGFS acted...

Court Disposition

Appeals and cross-appeals largely dismissed; primary judge's orders substantially affirmed, except for adjustment to apportionment of damages on certain statutory claims. Insurance appeal by AHAC dismissed.

Orders

  • ['Parties directed to confer and bring in agreed orders to give effect to these reasons for judgment including costs by deadline.' 'If not agreed, to file joint document identifying areas of agreement and disagreement and reasons by deadline.' 'Apportionment removed for claims under s1041E Corporations Act;...