Ongoing Litigation

As reported in the LBHI2 Administrators’ previous update, in November 2021 SLP3 and LBHI filed an application to the UK Supreme Court seeking permission to appeal certain aspects of the Court of Appeal’s ruling.

On 8 August 2022, following the Supreme Court’s consideration of the SLP3 and LBHI application on the papers, the parties to the Priority Applications were informed that the Supreme Court has refused SLP3 and LBHI permission to appeal. The Supreme Court also ordered that SLP3 and LBHI pay the costs of the unsuccessful permission application incurred by the LBH Administrators, Deutsche Bank and LB GP No1. A copy of the Order dated 8 August 2022 made by the Supreme Court can be found here.

Further to our update dated 2 November 2021 following the recent Court of Appeal judgment in the Priority Applications, SLP3 and LBHI have filed an application to the UK Supreme Court seeking permission to appeal certain aspects of the Court of Appeal’s ruling.

The application was filed by SLP3 and LBHI on 17 November 2021. The Supreme Court rules permit respondent parties to file notices of objection, which can include brief reasons as to why a respondent party says that permission to appeal should not be given. LBH (in respect of permission on the LBHI2 Appeal), Deutsche Bank (in respect of permission on the LBHI2 Appeal and the PLC Appeal) and LB GP No1 (in respect of permission on the PLC Appeal) have filed such notices of objection. Copies of these documents can be found on the Lehman Brothers Holdings Plc website

The LBHI2 Administrators’ previous update dated 20 October 2021 briefly summarised the outcome of the recent appeal hearing which took place before the Court of Appeal from 4-8 October 2021. As foreshadowed in that update, a copy of the sealed Order dated 21 October 2021 made by the Court of Appeal can be found here.

Any party wishing to understand the Court of Appeal’s Order should read the Order in full. However, in case it is of assistance and without prejudice to the full terms of the Order, certain points emerging from the Order are as follows:

The LBHI2 Appeal - which sought to appeal paragraph 1 of the first instance Order concerning LBH’s priority over SLP3 in the LBHI2 estate - has been dismissed;
The PLC Appeals - which sought to appeal paragraphs 6 and 7 of the first instance Order concerning priority ranking in the LBH estate, and concerning whether LBHI’s claim in the LBH estate fell to be reduced by virtue of certain other payments - have been allowed, and those paragraphs of the first instance Order have been replaced with new paragraphs reflecting the Court of Appeal’s decision;
SLP3 and LBHI’s requests for permission to bring a further appeal to the UK Supreme Court have been refused; and
The Court of Appeal has made various directions as to liability for costs.

It should also be noted that although permission to appeal was refused by the Court of Appeal, the unsuccessful parties on the appeal have a further window in which to apply directly to the UK Supreme Court for permission to appeal.

As reported in recent updates, the appeal hearing in respect of the Priority Applications recently took place in the Court of Appeal.

On 20 October 2021, the Court of Appeal delivered its judgment on those appeals. A copy of that judgment is available here.

Any party wishing to understand the Court of Appeal’s ruling should read the judgment in full. However, in case it is of assistance and without prejudice to the full terms of the judgment, certain points emerging from the ruling are as follows:

In respect of the LBHI2 Application concerning the manner in which funds are or may be distributed from the LBHI2 estate, the Court of Appeal dismissed SLP3’s appeal against aspects of Mr Justice Marcus Smith’s ruling at first instance. The Court of Appeal has therefore upheld the first instance ruling that the sub-debt claim held by PLC (that is, Lehman Brothers Holdings PLC) has priority to the sub-notes claim held by SLP3, and that the sub-notes held by SLP3 do not fall to be rectified in any way.
In respect of the PLC Application (sometimes referred to as the LBH Application) concerning the manner in which funds are or may be distributed from the PLC estate, the Court of Appeal has allowed the appeals of LB GP No1 and Deutsche Bank. The Court of Appeal had held that:
- the sub-notes claim against PLC held by LB GP No1 as general partner of certain limited partnerships has priority to the sub-debt claim held by LBHI (whereas at first instance, these claims had been held to rank pari passu); and
- the quantum of LBHI’s sub-debt claim against PLC falls to be reduced by virtue of of certain previous guarantee payments made in respect of that claim (whereas at first instance it had been held that there should be no such reduction).

It is anticipated that the Court of Appeal will issue a sealed Order in respect of its ruling in due course.

This high-level summary has been prepared in the hope that it is of assistance to creditors. It is not, and is not intended to be, a detailed summary of the arguments which were deployed or the approach taken by the Court of Appeal at the recent hearing, and does not constitute any form of advice.

The appeal hearing in the Priority Applications commenced today, Monday 4 October 2021. The hearing is anticipated to last 5 days, expecting to finish on Friday, 8 October 2021. It is anticipated that the Court of Appeal will deliver judgment at a later date.

Further information concerning the appeal hearing, including skeleton arguments filed in respect of the hearing, and a link to the livestream broadcast of the hearing, can be found on the Lehman Brothers Holdings Plc website.

By Orders dated 14 December 2020, the Court of Appeal has determined the permission to appeal applications which were referred to in our previous update on the Priority Applications.

Within the LBHI2 Application, the Court of Appeal has granted SLP3 permission to appeal the Judge’s conclusion that there was no basis for rectification of the terms of the LBHI2 Sub-Notes. A copy of the Court of Appeal’s Order is available here.

Within the LBH Application, the Court of Appeal had granted Deutsche Bank permission to appeal the Judge’s conclusion that LBHI’s claim on the PLC Sub-Debt has not been reduced, discharged or diminished by virtue of the interaction of LBHI's claims under the PLC Sub Debt Agreements with certain other instruments. However, the Court of Appeal has refused Deutsche Bank permission to appeal the Judge’s conclusions that (a) LBHI’s claim on the PLC Sub-Debt was not released by an earlier Settlement Agreement and (b) LB GP No1’s claims on the PLC Sub-Notes fall to be discounted under Rule 14.44 of the Insolvency (England and Wales) Rules 2016. A copy of the Court of Appeal’s Order is available here.

No date has yet been set for the appeal hearing.

We refer to the previous updates in respect of the Applications. As foreshadowed in our update dated 13 October 2020, on 26 October 2020:

SLP3 filed an Appellant’s Notice with accompanying documents in respect of the High Court’s finding that the LBHI2 Sub-Debt ranks ahead of the LBHI2 Sub-Notes, but only on grounds of construction for which permission to appeal had been granted (“SLP3 Appeal”);

Deutsche Bank and GP No 1 filed Appellants’ Notices with accompanying documents in respect of the High Court’s finding that the PLC Sub-Debt ranks pari passu with the PLC Sub-Notes, but only on grounds of construction for which permission to appeal had been granted (“DB and GP No 1 Appeal”); and

SLP3 and Deutsche Bank filed separate applications seeking permission from the Court of Appeal to appeal additional findings within the judgment which the High Court initially refused at the Consequentials Hearing (the “Permission Applications”).

On 23 November 2020, the LBH Administrators filed a Respondent’s Notice in respect of the SLP3 Appeal and LBHI filed a Respondent’s Notice in respect of the DB and GP No 1 Appeal.

Both Deutsche Bank and the LBH Administrators have filed a short response opposing SLP3’s Permission Application. LBHI has filed a short response opposing Deutsche Bank’s Permission Application. The substantive appeal proceedings, being the SLP3 Appeal and the DB and GP No 1 Appeal, are stayed until the determination of the Permission Applications.

We expect the Court of Appeal to determine the Permission Applications on the papers. No hearing date has yet been set for the appeals.

We refer to the previous updates in respect of the Applications, in particular to our update dated 30 July 2020. That update related to the Court's decision on certain consequential matters following the delivery of judgment on 3 July 2020. The Court has now approved formal Orders in the LBHI2 Application and in the LBH Application which reflect the rulings made in the judgment and in the Consequentials Hearing which took place on 24 July 2020. See copy of orders for CR-2008-000026 and for CR-2009-000052.

As part of those Orders and as previously reported, the Court has granted permission to appeal in respect of certain aspects of the judgment. As part of the appeal steps, by an earlier Order the Court has also extended time for Appellant's Notices (one of the appeal steps) until 21 days after the date of sealing of the Orders made following the Consequentials Hearing (ie the Orders to which links are provided above).

We anticipate providing further updates as regards the likely appeal timetable when that process has progressed further.

This high-level summary has been prepared in the hope that it is of assistance to creditors. Creditors should, however, refer to the full terms of the judgment, and the Orders which are linked to this update.

As foreshadowed in our previous announcement, on Friday 24 July 2020 there was a further hearing (conducted remotely) before Mr Justice Marcus Smith to address certain consequential issues arising from the Judgment delivered on 3 July 2020. At the hearing, the Court heard submissions from the parties on (i) costs and (ii) permission to appeal. The Court's rulings on these matters, together with its rulings arising from the Judgment, will be the subject of an Order of the Court which is in the process of being prepared for the Judge's consideration.

A high level summary only, and without prejudice to the Judgment and the terms of the Judge's Order which, when approved, will govern the position, can be found on the Lehman Brothers Holdings Plc website.

Following a 2 week hearing before Mr Justice Marcus Smith in November 2019 a Judgment running to over 150 pages was handed down on 3 July 2020. The Judgment is attached. A short summary of the Judgment has been prepared for Lehman Brothers Holdings Plc and this can be accessed on the Lehman Brothers Holdings Plc website at www.pwc.co.uk/services/business-recovery/administrations/non-lbie-companies/lbh-plc-in-administration.html. There will be a further hearing on 24 July 2020 to address consequential issues arising from the Judgment.

Court Judgment

The parties have engaged a transcriber to produce daily transcripts of the LBH and LBHI2 Applications. The transcripts produced so far can be found below. Moving forward, the LBHI2 administrators intend to post each daily transcript on the LBHI2 website the following business day.

Please note that:

The transcript is published in the form received from the transcriber (i.e. prior to review by any party to the Applications and without corrections);
The parties reserve the right to post amended versions of the transcript should they consider it necessary, but accept no responsibility for doing so; and
The LBHI2 administrators are posting such transcript solely for the convenience of interested third parties and neither they nor any other party to the Applications makes any representation as to the accuracy of such transcript nor accepts any responsibility for any inaccuracies contained within it.

We refer to various previous updates which the LBHI2 Administrators have published in respect of the LBHI2 Application and the LBH Application.

As noted in our update of 15 October 2019, the combined trial of the LBHI2 Application and the LBH Application commenced today, 11 November 2019. In the lead-up to the trial's commencement, the parties to the Applications exchanged their Skeleton Arguments, copies of which appear below:

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBHI2 will continue to communicate with you through this website on relevant matters relating to the LBHI2 Application.

We refer to various previous updates which the LBHI2 Administrators have published in respect of the LBHI2 Application and the LBH Application.

In our update of 2 August 2019, we noted that a pre-trial review hearing was anticipated to be held during the week of 14 October 2019. In the lead up to that scheduled hearing, the parties to the Applications reached substantive agreement as to the matters that would have been considered at the pre-trial review hearing, such that they agreed that the hearing was no longer required. The pre-trial review hearing was therefore cancelled.

The combined trial of the LBHI2 Application and the LBH Application will commence in the week of 11 November 2019, with pre-trial reading days scheduled to be held on 7 and 8 November. The trial, including the pre-trial reading, is expected to last up to 12 days. We currently expect the timetable to be broadly as follows:

Day 1 - 2: Pre trial reading - 7 and 8 November
Day 3 - 4: Openings by LBHI2, LBH, LBHI/SLP3, Deutsche Bank A.G. (London Branch)
Day 4 - 7: Key witnesses
Day 8: Break
Day 9 - 12: Closings

The LBHI2 Administrators will continue to publish updates on the progress of the litigation as appropriate.

We refer to various previous updates which the LBHI2 Administrators have published in respect of the LBHI2 Application and the LBH Application.

In our update of 6 August 2018, we noted that a further procedural hearing was scheduled to take place on 20, 21 or 22 May 2019. In the lead up to that hearing, the parties to the Applications reached substantive agreement as to the further procedural directions which they considered would be appropriate, such that they did not consider that a hearing was required. Instead, Mr Justice Hildyard was invited to consider the proposed further directions on paper. Having done so, Mr Justice Hildyard has made an Order in respect of various further procedural matters.

Since our previous update, the parties to the Applications have been taking various steps required to prepare the Applications for trial, including the exchange of witness statements and, in respect of certain parties to the LBH Application, expert's reports. The LBHI2 Administrators will not be publishing copies of such documents at this time as not all parties agree to such publication.

Consistent with previous updates, it remains anticipated that there will be a pre-trial review hearing in the week of 14 October 2019, and that the combined trial of the LBHI2 Application and the LBH Application will commence in the week of 11 November 2019.

The LBHI2 Administrators will continue to publish updates on the progress of the litigation as appropriate.

As referenced in the LBHI2 Administrators' previous update on 22 February 2019, LBHI and SLP3 served a joint reply position paper in the LBHI2 and LBH Applications on 22 March 2019, a copy of which is now available here.

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBHI2 will continue to communicate with you through this website on relevant matters relating to the LBHI2 Application.

The LBHI2 Administrators' previous updates on this topic have set out the key procedural steps in the LBHI2 and LBH Applications through to the trial (which is listed to commence during the week of 11 November 2019).

In accordance with Mr Justice Mann's Order dated 24 July 2018, the parties have now exchanged position papers summarising their respective positions on the applications in which they are participating. LBHI and SLP3 served a joint position paper on 11 January 2019 relating to both the LBHI2 Application and the LBH Application, and a copy now appears here. On 22 February 2019, the following parties also served their position papers:

LBHI2 served its position paper in the LBHI2 Application, and a copy now appears here;
LBH served its position paper in the LBHI2 Application, and a copy now appears here;
LB GP No 1 Limited (In Liquidation) served its position paper in the LBH Application, and a copy now appears here; and
Deutsche Bank A.G. (London Branch) served its position paper in the LBHI2 and LBH Applications, and a copy now appears here.

LBHI and SLP3 have permission to file a reply position paper in the LBHI2 and LBH Applications by 22 March 2019.

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBHI2 will continue to communicate with you through this website on relevant matters relating to the LBHI2 Application.

The LBHI2 Administrators' previous update on this topic summarised the outcome of the recent procedural hearing in this application, which took place before Mr Justice Mann on 23 and 24 July 2018. As foreshadowed in that update, a copy of the sealed Order made by Mr Justice Mann at that hearing now appears here. Amongst other things, the Order sets out the procedural steps which the parties are to take over the coming months, and the dates by which those various steps are to be achieved.

In addition, Mr Justice Mann's approved judgment, delivered at the hearing on 24 July 2018, is now available and a copy appears here.

The Order also provided for the parties to take steps to list certain future Court hearings in respect of the application. These steps have now been taken in conjunction with the Court's listing office, such that the following future hearings have now been listed:

A second procedural hearing is listed to take place on 20, 21 or 22 May 2019;
A "Pre-Trial Review" hearing is listed to take place during the week of 14 October 2019; and
The Trial (encompassing both the LBH Application and the LBHI2 Application) is listed to take place over 6-8 days (plus 2 days of judicial pre-reading), beginning at some point during the week of 11 November 2019.

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBHI2 will continue to communicate with you through this website on all substantive matters relating to the LBHI2 Application.

As reported in our announcement of 3 April 2018, on 16 March 2018 the Joint Administrators of LBHI2 made an application to Court (the "LBHI2 Application") to seek the Court's determination on issues of priority in respect of potential distributions to holders of LBHI2's subordinated debts. Concurrent with the LBHI2 Application, the Joint Administrators of Lehman Brothers Holdings Plc ("LBH") issued a separate application to the Court on 16 March 2018 for directions as to the priority in which the holders of LBH's subordinated debts (namely, LBHI, LB GP No 1 and the LBH Guarantee Claims) should receive any distributions from the LBH estate (the "LBH Application"). We previously reported that an initial hearing to address matters of case management in respect of both applications was listed in a floating three-day window beginning on 23 July 2018.

That initial hearing to consider matters of case management took place on 23 and 24 July 2018, before Mr Justice Mann (as Mr Justice Hildyard was unavailable). By way of brief update as to the outcome of that hearing:

The Judge directed that both the LBHI2 and LBH Applications should be case-managed and tried together. Given the overlapping nature of the issues raised by the Applications, the Judge agreed that they should move forward together as part of a joined-up process.
The Judge ordered that Deutsche Bank AG should be joined as a further respondent party to the LBHI2 Application. Deutsche Bank AG are already a respondent party to the LBH Application, and the Judge considered that in all the circumstances, it was appropriate that they also be joined as a party to the LBHI2 Application on condition that they bear their own costs of such participation, and that they do not duplicate the submissions of the LBH Administrators on the LBHI2 Application.
The Judge declined to order that Lehman Brothers Limited (In Administration)("LBL") should be joined as a further respondent party to the LBHI2 Application. Although recognising LBL's financial interest as a substantial unsubordinated creditor of LBH, the Judge considered that in all the circumstances it was not appropriate for LBL to be joined as a further party to the LBHI2 Application.
The Judge gave various procedural directions as to how the Applications should now move forward over the coming months, including for the parties to disclose relevant documents to one another, to exchange position papers setting out their competing arguments on the issues, and to take various other procedural steps. A copy of the Court's Order, setting out all of the various steps and the dates by which they are to be achieved, will be placed on this website when settled and approved by the Judge.
The Court's directions also provide for there to be a further procedural hearing on the first date reasonably convenient to the parties after 10 May 2019, and for there to be a trial of the Applications on a date not before 1 October 2019. When there is further clarity as to the likely dates of future Court hearings in respect of the Applications, this website will be updated accordingly.

A copy of the unedited, uncorrected transcript of proceedings at the hearing on 23 July 2018 is available through the following link.

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBHI2 will continue to communicate with you through this website on all substantive matters relating to the LBHI2 Application.

On 16 March 2018, the Joint Administrators of LBHI2 made an application to Court to seek its determination on issues of priority in respect of potential distributions to holders of its subordinated debts.

The Joint Administrators of LBHI2 have issued an application to the Court for directions, pursuant to paragraph 63 of Schedule B1 to the Insolvency Act 1986, as to the priority in which the holders of LBHI2's subordinated debts should receive any distributions from the LBHI2 estate (the "Application").

There are two respondents to the Application:

Lehman Brothers Holdings Scottish LP3 ("SLP3"); and
Lehman Brothers Holdings plc (In Administration) ("LBH").

The Application seeks the Court's guidance in relation to whether the claims of LBH under certain subordinated loan agreements rank for distribution before, after, or pari passu with the claims of SLP3 under certain floating rate subordinated notes issued by LBHI2.

The application notice and accompanying witness statement in support of the Application (the second witness statement of Derek Anthony Howell) are available through the following links on this page. The witness statement provides further information as to the factual background to, and issues addressed by, the Application.

Concurrent with the Application, the Joint Administrators of LBH issued a separate application to the Court on 16 March 2018 for directions as to the priority in which the holders of LBH's subordinated debts should receive any distributions from the LBH estate.

An initial hearing to address matters of case management in respect of both the Application and LBH's application has been listed for 1½ days in a floating three-day window beginning on 23 July 2018 before Mr Justice Hildyard.

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com. The Joint Administrators of LBHI2 will continue to communicate with you through this website on all substantive matters relating to the Application.

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