The Federal Court has found that the Australian arm of failed Wall Street bank Lehman Brothers breached its fiduciary duty advising a group of local councils and charities, ordering millions of dollars in compensation be paid.

In a landmark decision, the Federal Court found the Australian arm of Lehman - previously called Grange Securities was conflicted in its duty to give sound financial to the councils ‘‘and its own interest in earning very large fees or profits’’ in its sales of investments known as synthetic collateralised debt obligations.

Grange did not disclose to any of the councils, judge Steven Rares found this afternoon.

‘‘Grange is liable to compensate the councils for their losses incurred as a result of their investments,’’ Justice Rares said in his findings.