Case Note Duty of Care, Rating Agencies and the 'Grotesquely Complicated' Rembrandt: Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5)

摘要

In Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) (Bathurst), the Federal Court of Australia considered the liability of rating agencies for the rating, sale and purchase of a structured financial product called a 'constant proportion debt obligation' (CPDO). A number of Australian local councils lost money through their investments in the CPDOs. Justice Jayne Jagot determined that the rating given to these 'grotesquely complicated' financial instruments was negligent, and that the rating agency Standard & Poor's (S&P) had engaged in misleading and deceptive conduct in giving the CPDO a AAA rating. Further, the bank that had created the CPDOs (ABN AMRO Bank NV (ABN AMRO)) and the agent through which the investors purchased the CPDOs (Local Government Financial Services (LGFS)) were also liable for the losses of the local councils.