In the Federal Court yesterday in Sydney, an application by Fitch Ratings to have summary dismissal of a case brought against it by Gloucester Shire Council failed. Instead, Justice Michael Wigney not only dismissed Fitch's request, he granted the Shire Council's lawyers their wish to file an amended statement of claim with further information.The proceedings, which have been under way since October 2014, had their beginnings when Gloucester Shire Council invested in sophisticated new financial instruments - synthetic collateralised debt obligations - relying, it says, on credit ratings Fitch assigned to the products.Fitch had assigned AA and AAA ratings to the financial products - SCDOs called Helidon portfolio notes - in mid-2007. The Council alleges that, in doing so, Fitch communicated to investors or potential investors that it had concluded the capacity to pay coupons and a principal amount at the end of the term was "exceptionally strong" and "very strong", respectively.Gloucester's argues that the Fitch ratings of AAA and AA were "inappropriate" as Fitch's modelling failed to test the performance of the securities in severe or extreme stress and there were other shortcomings among the assumptions used.But a timeline shows that Gloucester's decision to invest was made before Fitch assigned its ratings for the notes, with the Council relying instead on marketing brochures and statements by CBA that Fitch was "expected to" assign these ratings.The arranger of the notes was Merrill Lynch and CBA was the distributor in Australia. The allegation that Merrill Lynch was able to structure the Paladin notes to achieve the intended or expected AAA and AA ratings is important to the viability of Gloucester's amended pleading.The case is at a very early stage, although, as Justice Wigney pointed out, both sides have caused "significant delays both in the commencement and the prosecution of the proceeding".The court is yet to test the arguments raised by Gloucester Shire Council.