The Joint Administrators of Lehman Brothers Holdings Plc v Lehman Crothers Holdings Inc & Ors
[2023] EWHC 3317 (Ch)
The Joint Administrators of Lehman Brothers Holdings Plc v LB GP No 1 Limited & Ors
29 November 2023
[2023] EWHC 3056 (Ch)
High Court
Imagine a line of people waiting for money. A court already said one group (D) was ahead of another (C) in line for their main share. This decision says group D also gets their interest payments before group C gets their main share. The court decided this by looking closely at the original agreements and past court cases, rejecting arguments that this issue should have been settled earlier.
Key Facts
- •Lehman Brothers Holdings Plc (PLC) is in a distributing administration with a surplus exceeding unsubordinated creditor claims.
- •The surplus is insufficient to satisfy all subordinated creditors.
- •The dispute concerns priority between subordinated creditors: LBHI (holding PLC Sub-Debt, Claim C) and GP1/DB (holding PLC Sub-Notes, Claim D).
- •The Court of Appeal in ECAPS1 proceedings previously determined Claim D's priority over Claim C for principal repayment.
- •The present application concerns priority between Claim D's statutory interest and Claim C's principal repayment.
Legal Principles
Priority between subordinated creditors is determined by contractual interpretation of the relevant instruments.
ECAPS1 Court of Appeal judgment
Insolvency Rules (IR), particularly IR 14.23, govern payment of interest in administration.
Insolvency (England and Wales) Rules 2016
Waterfall I establishes statutory interest and non-provable liabilities' priority over subordinated debt.
In re Lehman Brothers International (Europe) (in administration) (No 4)
Res judicata, issue estoppel, and abuse of process principles may bar relitigation of issues.
Johnson v Gore-Wood & Co; Henderson v Henderson; Aldi Stores Ltd v WSP Group Plc; Clutterbuck v Cleghorn
Outcomes
Statutory interest on Claim D takes priority over principal repayment on Claim C.
Contractual interpretation of Claim C and Claim D subordination provisions, informed by Waterfall I and ECAPS1, indicates Claim C ceded priority to Claim D for statutory interest as well as principal.
Application of res judicata, issue estoppel, and abuse of process principles rejected.
The issue of priority between statutory interest on Claim D and principal on Claim C was not directly decided in previous proceedings. While the issue could have been raised earlier, the circumstances (uncertainty of funds, complexity of the case) did not make it an abuse of process to raise it now.
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