Standard & Poor\'s lost a landmark case in Australia Monday over top-flight ratings given to financial products that collapsed in the build-up to the 2008 global economic crisis. The Federal Court of Australia ruled that S&P\'s AAA rating of constant proportion debt obligation notes created by banking giant ABN AMRO and sold to the councils of 13 Australian towns, had been \"misleading and deceptive\". It is the first time a ratings agency has faced trial over synthetic derivatives and the case could set an important precedent for future litigation. Within months of the councils buying the CPDOs from Australian firm Local Government Financial Services (LGFS) in late 2006, assured they had a less than one percent chance of failing, the notes defaulted. The councils lost Aus$16 million (US$16.5 million) on the so-called \"Rembrandt notes\", more than 90 percent of the capital invested. Judge Jayne Jagot said S&P\'s assessment of the products as \"extremely strong\" had been central to the loss. \"S&P\'s rating of AAA of the Rembrandt 2006-2 and 2006-3 CPDO notes was misleading and deceptive and involved the publication of information or statements false in material particulars, and otherwise involved negligent misrepresentations to the class of potential investors in Australia,\" Jagot said. Jagot said S&P had claimed to have reached its opinion \"based on reasonable grounds and as the result of an exercise of reasonable care when neither was true and S&P also knew not to be true at the time made\". The judge ruled that ABN AMRO had also been \"knowingly concerned in S&P\'s contraventions of the various statutory provisions proscribing such misleading and deceptive conduct\" and had engaged in such conduct itself. She made a similar ruling on LGFS and rejected the financial agencies\' arguments that the councils should bear a part of the blame due to to their \"contributory negligence\". Jagot ordered S&P, ABN AMRO and LGFS to each pay one-third of the small mostly mining and farming councils\' losses plus interest. The sale of risky investments such as mortgage-backed securities contributed to the worldwide financial meltdown in late 2008.