The apex court in America, The Supreme Court of the United States has ruled in favour of Australian banking Major, National Australia Bank, and said the foreign investors could not continue with their lawsuit in that country, which seeks to obtain damages from NAB over the Homeside case.

The investors alleged in their law suit that NAB and its Florida subsidiary had conducted international securities fraud.

The case was keenly followed because it served as a test on whether international investors had the ability to engage in class action law suits of foreign companies in US courts.

In its verdict, through Justice Antonin Scalia, the court ruled that the plantiffs could not expect to obtain damages in a US court, because the suit was filed by Australian shareholders who had bought their NAB shares on an Australian stock exchange.

The issue at the heart of the law suit was the allegation that HomeSide Lending, NAB’s former mortgage lending unit based in Jackson Florida deliberately over inflated the value of its mortgage portfolio in order to meet ambitious earnings targets.

Once the sixth largest mortgage servicing company NAB claims HomeSide had used the wrong mathematical model, which was responsible for the overvaluation of its mortgage servicing rights.

The bank announced in July 2001 that it would incur a $US450 million write-down on the value of the HomeSide rights. It also said in September 2001 that it would incur a second write-down of $US1.75 billion.

The announcement was met with disbelief in Australia, and the lenders shares plunged on the back of the news.

The plaintiff shareholders argued the lawsuit should proceed in the US because the HomeSide executives who committed the alleged fraud were based in this country.

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