Ongoing litigation

As referenced in previous updates, an appeal hearing in respect of Priority Legal Issue 1 (which has been described in earlier updates) was listed to begin in the Court of Appeal on Thursday 3 October 2024 (the “Appeal”).

However, the LBH Administrators are pleased to report that agreement has been reached yesterday as to the terms of a settlement which will save costs and resolve further outstanding areas of dispute within the estate of Lehman Brothers Holdings Plc ("LBH"), including the Appeal.

In high level summary:

• the parties to the Appeal have agreed a settlement in respect of Priority Legal Issue 1. The settlement includes provisions whereby (subject to the Court of Appeal’s approval) the Appeal is to be dismissed, such that the forthcoming hearing at the Court of Appeal will no longer be required. The parties to the Appeal have signed a Consent Order reflecting that agreement which the Court of Appeal will be invited to approve;
• the parties to the settlement agreement which was previously entered into on 8 October 2023 (which resolved Priority Legal Issues 2 to 5, amongst other things) have agreed to make certain amendments to that previous settlement agreement; and
• the LBH Administrators have reached a settlement agreement with relevant parties to settle and resolve the Partial Discharge Issue (which has been described in previous Progress Reports), on terms which involve a final distribution being made in an agreed amount to one creditor and the relevant parties agreeing that they will not in the future bring any claims or complaints arising from the Partial Discharge Issue.

The LBH Administrators will continue to provide updates as may be appropriate in relation to the implementation of the above settlement. Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com.

We refer to our previous updates in relation to the current Court application process, most recently the update dated 23 April 2024. As reported in that previous update, an appeal process is currently underway in relation to Priority Legal Issue 1 (which has been described in earlier updates).

The Court of Appeal has listed the appeal hearing to begin on Thursday 3 October 2024, with a time estimate of 2 days. It is anticipated that the Court of Appeal will reserve its judgment following that hearing, such that the judgment will follow at some point thereafter.

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

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com.

We refer to previous updates in relation to the current Court application process, most recently the update dated 29 November 2023.

The previous update addressed the judgment which was handed down by Mr Justice Hildyard on 29 November 2023 (the "Judgment") in relation to Priority Legal Issue 1 (which has been described in previous updates).

Consequential Matters at First Instance

Following the Judgment, the parties made written submissions on certain consequential matters arising from it in December 2023. Mr Justice Hildyard addressed those consequential matters in a further short judgment which was handed down on 21 December 2023 (the "Consequentials Judgment"). We include at the following links:

• A copy of the Consequentials Judgment
• Order of Mr Justice Hildyard dated 21 December 2023

Any party wishing to understand Mr Justice Hildyard’s further ruling should read the judgment in full. However, in case it is of assistance and without prejudice to the full terms of the judgment, in high-level summary only, the Consequentials Judgment provided as follows:

• Mr Justice Hildyard refused LBHI’s application for permission to appeal (although in this respect please see the further update below)
• Mr Justice Hildyard ordered that LBHI pay the application costs of LBGP1 and DB in so far as they relate to Priority Legal Issue 1
• Mr Justice Hildyard ordered that DB pay the application costs of LBHI in so far as they relate to the Strike-Out Application (as described in previous updates) in relation to Priority Legal Issue 1
• Mr Justice Hildyard ordered that the application costs of the LBH Administrators be paid as an expense of the LBH administration

Permission to appeal granted by Court of Appeal

Following the steps described above, LBHI made a further application for permission to appeal the Judgment which Mr Justice Hildyard had handed down on 29 November 2023 directly to the Court of Appeal.

On 23 April 2024, the Court of Appeal granted LBHI permission to appeal the Judgment. A copy of the Court of Appeal Order granting permission appears at the following link:

• Order of the Court of Appeal dated 23 April 2024

The Court of Appeal’s decision means that an appeal hearing in respect of Priority Legal Issue 1 will take place in due course.

The LBH Administrators will continue to provide updates as may be appropriate in relation to the appeal.

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com.  

We refer to previous updates in relation to the current Court application process, most recently the update dated 18 October 2023.

As explained in previous updates, the Court hearing which was to – and did – commence on 9 October 2023 proceeded for the purpose of determining (i) the application issued by the LBH Administrators on 14 March 2023 (the “Application”) and (ii) the application issued by Deutsche Bank AG (London Branch) on 27 April 2023 (the “Strike-Out Application”), in each case in respect of Priority Legal Issue 1 (as described in previous updates) only.

Following that hearing which took place on 9 October 2023 and 10 October 2023 before Mr Justice Hildyard, the Court’s judgment on the application has been handed down today, 29 November 2023.

• A copy of the judgment
• The sealed order of Mr Justice Hildyard

Any party wishing to understand Mr Justice Hildyard’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, in high-level summary only, the Court found as follows:

• In respect of the Application, that statutory interest payable on the subordinated claim against PLC on the PLC Sub-Notes (“Claim D” as defined in paragraph 18 of Mr Justice Marcus Smith's judgment of 3 July 2020) falls to be paid in priority to the principal amount of the subordinated claim against PLC on the PLC Sub-Debt ("Claim C" as defined in paragraph 15 of Mr Justice Marcus Smith's judgment of 3 July 2020).
• In respect of the Strike-Out Application, that the bringing or pursuing of argument on Priority Legal Issue 1 was not precluded by the doctrines of cause of action estoppel, issue estoppel or abuse of process. Accordingly, the Strike-Out Application was dismissed.
  

In accordance with the order of today’s date, consequential matters arising from the judgment will be determined by the Court following the filing of further written submissions which are due by 13 December 2023.

The LBH Administrators are pleased to report that the parties to the applications listed to be heard by the Court in the week commencing 9 October 2023 have today, 8 October 2023, agreed the terms of a settlement which substantially narrows the outstanding areas of dispute within the estate of Lehman Brothers Holdings Plc ("LBH"). The settlement will save costs and resolve a variety of issues within the estate, and will accelerate the making of distributions to subordinated creditors of LBH.

In high level summary only:

• The agreement which has been reached provides (subject to the Court’s approval) for a substantial narrowing of the scope of the forthcoming Court hearing which begins on 9 October 2023. In particular, whereas the application issued by the LBH Administrators on 14 March 2023 (the "Application") asked the Court to determine five Priority Legal Issues (numbered 1 to 5, and as described in previous updates), the settlement involves the withdrawal of four of those issues such that the forthcoming hearing will proceed for the purposes of determining Priority Legal Issue 1 only.
• Similarly, in so far as the application issued by Deutsche Bank AG (London Branch) on 27 April 2023 (the "Strike-Out Application") related to any issues other than Priority Legal Issue 1, that application is similarly withdrawn so as now to be limited only to Priority Legal Issue 1.
• Further, the application issued by the LBH Administrators on 25 April 2023 (the "Distribution Application") is withdrawn in its entirety.
• The agreement also makes provision for distributions of approximately £187 million to be made in respect of LBH’s subordinated liabilities in the near future, allowing for such time as is reasonably required to take necessary administrative and practical steps to effect such distributions; and also makes provision for subsequent distributions against subordinated liabilities in due course to the extent that funds become available for that purpose.
• The settlement also contains release provisions whereby the parties have agreed not only to withdraw aspects of the existing Court applications as mentioned above, but have agreed not subsequently to bring claims or complaints against one another and to resolve the issues between them save in respect of certain limited issues where the parties’ rights have been preserved, such as in respect of Priority Legal Issue 1 which, as noted above, will still fall to be determined by the Court.

For those issues which have not been resolved as part of the present settlement agreement, the parties will continue to explore the possibility of resolving those remaining issues too with a view to any further saving of costs and progressing of the administration in the interests of all creditors.

As noted above, Priority Legal Issue 1 remains to be determined by the Court, and the forthcoming hearing will therefore still commence on 9 October 2023 although its scope will now be confined (subject to the Court’s approval) to that issue. The LBH Administrators will continue to provide updates as may be appropriate in relation to the progress of that remaining application.

Should you have any queries regarding this update, please contact uk_lehmanaffiliates@pwc.com.

As creditors will be aware from our previous update following the procedural hearing which took place on 4 May 2023, the Applications (as such term is defined in the Order of Mr Justice Hildyard dated 4 May 2023 (the “Order”)) are to be heard at a Court hearing in the week commencing 9 October 2023.

In accordance with the Order, the parties have now exchanged Position Papers and Reply Position Papers summarising their respective positions on the Applications ahead of the hearing. Copies of those documents can be accessed below:

Position Papers exchanged on 30 June 2023:

• LBH Administrators’ Position Paper;
• LBHI Position Paper;
• LB GP No1 Limited (In Liquidation) Position Paper;
• Deutsche Bank AG (London Branch) Position Paper.

Reply Position Papers exchanged on 28 July 2023:

• LBH Administrators’ Reply Position Paper;
• LBHI Reply Position Paper;
• LB GP No1 Limited (In Liquidation) Reply Position Paper;
• Deutsche Bank AG (London Branch) Reply Position Paper.

Please note that the Court has indicated that the one day of judicial pre-reading for the hearing in October 2023 will take place on 6 October 2023, with the four sitting days taking place between 9 and 12 October 2023.

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

As reported in our previous update on 29 March 2023, an Application was issued by the LBH Administrators on 14 March 2023 seeking further directions from the Court in relation to certain matters. Our previous update summarised those matters and indicated that a procedural Court hearing was listed to take place in the first week of May 2023. That hearing took place on 4 May 2023 before Mr Justice Hildyard.

In advance of that hearing, two further applications to the Court were also issued, and were also considered by Mr Justice Hildyard at that hearing. In high level summary:

On 27 April 2023, Deutsche Bank AG (London Branch) issued an application (the “Strike-Out Application”) seeking an order under CPR 3.4(2)(b) striking out certain of the issues raised in the LBH Administrators’ Application of 14 March 2023. In summary, the Strike-Out Application argues that certain of the issues raised by the LBH Administrators’ Application either have been resolved by the directions already given by the Court in the previous directions application issued on 16 March 2018, or could have been addressed in that previous application, and so ought not now to be pursued. It is understood that Lehman Brothers Holdings Inc opposes the Strike-Out Application. 

On 25 April 2023, the LBH Administrators issued a further application (the “Distribution Application”) under paragraph 63 of Schedule B1 to the Insolvency Act 1986 and Rule 14.3 and/or Rule 14.34 of the Insolvency (England and Wales) Rules 2016 in relation to certain points relevant to the timing of any distribution which may be made by the LBH Administrators on the PLC Sub-Notes. Again in summary, it is understood that LB GP No1 Limited (In Liquidation), as the entity representing the interests in the PLC Sub-Notes, opposes aspects of the Distribution Application at least in so far as it contemplates that a distribution might be made on the PLC Sub-Notes before certain aspects of the Application issued by the LBH Administrators on 14 March 2023 have been resolved.

At the procedural hearing on 4 May 2023, the Court determined the procedural timetable for the Application itself, and also for the Strike-Out Application and the Distribution Application. A copy of the sealed Order made by Mr Justice Hildyard setting out the procedural directions given now appears here.

The Order provides that the Application is to be heard together with the Distribution Application and the Strike-Out Application (together, the “Applications”) at a further Court hearing in the week commencing 9 October 2023, with a time estimate of 5 days including 1 day of judicial pre-reading. The Order also provides a timetable for position papers and any further relevant evidence to be exchanged by the parties ahead of that hearing, as well as procedural directions in relation to the preparation for the hearing itself.

As creditors will be aware from our previous announcement, on 31 March 2023 the LBH Administrators issued a Notice of Intention to pay an Eighth Interim Dividend (the “Dividend”) to all known creditors stating a last date for proving of 28 April 2023. In light of the Court’s procedural directions at the recent hearing and the fact that the matters described above including the Distribution Application will be considered by the Court at a hearing in October 2023, the LBH Administrators have postponed that Dividend pursuant to rule 14.34(1) of the Insolvency (England and Wales) Rules 2016 on the basis that there is cause to do so to allow that hearing to take place. This has been recorded in the Order. Accordingly, a further Dividend will not now be declared (nor paid) within 2 months of the last date for proving specified in the Notice. The LBH Administrators will continue to keep creditors updated appropriately in respect of this matter and any future distributions.

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

On 14 March 2023, the Joint Administrators of Lehman Brothers Holdings Plc (“PLC”) issued an application to Court for directions (the "Application"), pursuant to paragraph 63 of Schedule B1 to the Insolvency Act 1986, on certain legal issues which are relevant to the priority and payment of future distributions to holders of its subordinated debts (the "Priority Legal Issues").

The Court has indicated that the procedural hearing is listed to take place during the first week of May 2023, date to be confirmed.

There are three respondents to the Application:

• LB GP No.1 Limited (In Liquidation) ("LB GP No1");
• Lehman Brothers Holdings Inc ("LBHI"); and
• Deutsche Bank A.G. (London Branch) ("Deutsche").

Any distributions to PLC's subordinated creditors will be paid in accordance with the priority ruling of the Court of Appeal in its judgment of October 2021, which determined that the subordinated claim against PLC on the PLC Sub-Notes ("Claim D" as defined in paragraph 18 of Mr Justice Marcus Smith's judgment of 3 July 2020) takes priority over the subordinated claim against PLC on the PLC Sub-Debt ("Claim C" as defined in paragraph 15 of Mr Justice Marcus Smith's judgment). The Priority Legal Issues on which directions are now sought concern further aspects of subordinated creditor entitlements, and how distributions to them ought properly to be approached.

Priority Legal Issues as regards statutory interest

The first three Priority Legal Issues arise in relation to the correct approach to any payment of statutory interest on the PLC Sub-Notes (Claim D), and are as follows:

(1) Whether the principal amount of the PLC Sub-Debt (Claim C) falls to be paid in priority to statutory interest payable on the claim in respect of the PLC Sub-Notes (Claim D), or whether statutory interest payable on the PLC Sub-Notes falls to be paid in priority to the principal amount of the PLC Sub-Debt.

(2) Whether statutory interest payable on the claim in respect of the PLC Sub-Notes falls to be calculated by reference to the face amount of the PLC Sub-Notes, or by reference to the discounted sum payable on that claim in accordance with Rule 14.44 of the Insolvency (England and Wales) Rules 2016.

(3) Whether the applicable period for the purposes of the calculation of statutory interest on the claim in respect of the PLC Sub-Notes begins with the date on which PLC entered administration, or on the date on which, in accordance with the subordination provisions of the PLC Sub-Notes, the holder of the PLC Sub-Notes became entitled to submit proofs of debt in PLC's administration in respect of that claim (and, if so, what that date is).

Priority Legal Issues as regards the ECAPS Guarantees

Clause 2.11 of each Deed of Guarantee in favour of "Holders" (as defined in each Deed of Guarantee) (each one, an "ECAPS Holder") of certain preferred securities issued by each of Lehman Brothers UK Capital Funding LP, Lehman Brothers UK Capital Funding II LP and Lehman Brothers UK Capital Funding Ill LP (the "ECAPS Guarantees") provides:

“In the event of the winding-up of the Guarantor [i.e. PLC] if any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Guarantor being subordinated to the payment of amounts owing under this Subordinated Guarantee, shall be received by any Holders, before the claims of Senior Creditors have been paid in full, such payment or distribution shall be held in trust by the Holder, as applicable, and shall be immediately returned by it to the liquidator of the Guarantor and in that event the receipt by the liquidator shall be a good discharge to the relevant Holder. Thereupon, such payment or distribution will be deemed not to have been made or received."

By order dated 24 July 2020 in the previous Court directions application, Mr Justice Marcus Smith declared by consent that any liability of PLC under the ECAPS Guarantees (referred to as "Claim E") ranked for distribution after Claim D and Claim C.

The further Priority Legal Issues are as follows:

(4) Whether clause 2.11 of the ECAPS Guarantees imposes upon the Holder (as defined therein) a trust in respect of any proceeds which have been distributed by PLC, which takes effect on receipt of those proceeds and requires such proceeds to be turned over to PLC. If so, what are the circumstances in which such trust arises and in respect of what proceeds.

(5) If PLC makes distributions on the PLC Sub-Notes but proceeds are thereafter turned over to PLC by the Holder pursuant to clause 2.11 of the ECAPS Guarantees, what is the resultant order of priority, as between the PLC Sub-Debt (Claim C) and the PLC Sub-Notes (Claim D), in respect of such sums received by PLC?

The application notice and accompanying witness statement in support of the Application (the sixth witness statement of Edward John Macnamara) 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.

• The Application Notice dated 14 March 2023
• Sixth Witness statement of Edward John Macnamara dated 14 March 2023

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

As reported in the LBH 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.

Further to our update dated 29 October 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 below:

• SLP3 and LBHI’s Application for Permission to Appeal
• LBH’s Notice of Objections
• Deutsche Bank’s Notice of Objections
• LB GP No1’s Notice of Objections

We expect the Supreme Court to determine the applications for permission to appeal on the papers.

The LBH 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).

The Administrators continue to consider the judgment, but welcome the Court of Appeal’s confirmation that PLC’s subordinated claim in the LBHI2 estate ranks ahead of the subordinated claim of SLP3.

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.

As reported in our previous update, the appeal hearing in the Priority Applications commenced on Monday 4 October 2021. In keeping with the parties’ approach at the High Court hearing, the parties have engaged a transcriber to produce daily transcripts of the appeal hearing. In this respect, the following can be found below.

Daily Transcript – 4 October 2021
Daily Transcript – 5 October 2021
Daily Transcript – 6 October 2021
Daily Transcript – 7 October 2021
Daily Transcript – 8 October 2021

Please note that:

• The transcript is published in the form received from the transcriber (i.e. prior to review by any party to the Priority Applications and without corrections);
• If an amended version of the transcript is subsequently agreed between the parties that will be posted on the website in due course; and
• The LBH administrators are posting such transcript solely for the convenience of interested third parties and neither they nor any other party makes any representation as to the accuracy of such transcript nor accepts any responsibility for any inaccuracies contained within it.

As reported in our previous update on 24 February 2021, 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.

Subject to any directions which the Court may make, we anticipate that the timetable for the hearing will be as follows:

• Days 1 - 3: LBHI2 Application appeal; and
• Days 3 - 5: PLC Application appeal.

We understand that the Court intends to make a live-streamed broadcast of the appeal hearing accessible from the judiciary’s website. We understand that a recording may also be accessible from this website after the hearing.

As part of this update, we set out below links to the following skeleton arguments filed in respect of the appeal hearing which were not made available in our last update of 24 February 2021:

• Lehman Brothers Holdings Scottish LP 3 skeleton argument dated 18 January 2021 in the LBHI2 Application appeal is available here.
• PLC skeleton argument dated 1 March 2021 in the LBHI2 Application appeal is available here.
• Deutsche Bank A.G. skeleton argument dated 1 March 2021 in the LBHI2 Application appeal is available here.
• LBHI2 skeleton argument dated 1 March 2021 in the LBHI2 Application appeal is available here.
• Lehman Brothers Holdings Inc. skeleton argument dated 1 March 2021 in the PLC Application appeal is available here.
• PLC skeleton argument dated 1 March 2021 in the PLC Application appeal is available here.

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

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

As reported in previous updates, an appeal process is underway in the Priority Applications. The Court of Appeal has listed the appeal hearing to take place beginning on Monday 4 October 2021, with a time estimate of 5 days.

The parties will be taking procedural steps to prepare for that hearing in accordance with a timetable approved by the Court, including the exchange of skeletons arguments. Certain skeleton arguments have been served to date, with others to follow in accordance with the procedural timetable.

As part of this update, we set out below links to the following skeleton arguments:

• The Deutsche Bank A.G. (London Branch) skeleton argument dated 18 January 2021 in the PLC Application appeal is available here.
• The LB GP No1 Limited skeleton argument dated 18 January 2021 in the PLC Application appeal is available here.

It is important to note that the above skeleton arguments are not all of those which have been served so far on the appeals, nor are they all that will be served as part of this process. Not all parties to the appeal process have consented to their skeleton arguments being posted to this website in advance of the appeal hearing itself. As such, the two skeleton arguments referenced above do not reflect the full extent of the argument between the relevant parties to the appeals.

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

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. Copies of those Orders are available here and here.

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.

In 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:

• the Judge granted SLP3 permission to appeal the finding that the LBHI2 Sub-Debt ranks ahead of the LBHI2 Sub-Notes, but only on grounds of construction and not on grounds of rectification;
• the Judge granted Deutsche Bank and GP No1 permission to appeal the finding that the PLC Sub-Debt ranks pari passu with the PLC Sub-Notes, but only on grounds of construction;
• the Judge refused all other applications for permission to appeal;
• subject to certain points, the Judge ordered SLP3 to pay the PLC Administrators' costs of the LBHI2 Application;
• the Judge ordered Deutsche Bank to pay the majority of LBHI's costs of the PLC Application; and
• the Judge confirmed that the LBHI2 Administrators' and the PLC Administrators' costs are expenses of the respective administrations.

A further update will be published following the Judge's approval of the Order in respect of these matters.

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 Judge at the recent hearing, and does not constitute any form of advice.

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. Attached is the Judgment, together with a short summary prepared by Hogan Lovells who act for the LBH administrators in the proceedings. There will be a further hearing on 24 July 2020 to address consequential issues arising from the Judgment.

• Summary of Lehman Brothers Court Judgment regarding priority of holders of subordinated claims
• 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 LBH administrators intend to post each daily transcript on the LBH website the following business day.

• Daily Transcript - 11 November 2019
• Daily Transcript - 12 November 2019
• Daily Transcript - 13 November 2019
• Daily Transcript - 14 November 2019
• Daily Transcript - 15 November 2019
• Daily Transcript - 19 November 2019
• Daily Transcript - 20 November 2019
• Daily Transcript - 21 November 2019
• Daily Transcript - 22 November 2019
  

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 LBH 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 LBH Administrators have published in respect of the LBH Application and the LBHI2 Application.

As noted in our update of 15 October 2019, the combined trial of the LBH Application and the LBHI2 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:

• LBH Skeleton Argument;
• LBHI2 Skeleton Argument;
• LB GP No 1 Limited Skeleton Argument;
• Deutsche Bank A.G. (London Branch) Skeleton Argument;
  
• LBHI and SLP3 combined Skeleton Argument;
• Appendix A to the LBHI and SLP3 combined Skeleton Argument; and
  
• Appendix B to the LBHI and SLP3 combined Skeleton Argument.

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

We refer to various previous updates which the LBH Administrators have published in respect of the LBH Application and the LBHI2 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 LBH Application and the LBHI2 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 LBH Administrators will continue to publish updates on the progress of the litigation as appropriate.

We refer to various previous updates which the LBH Administrators have published in respect of the LBH Application and the LBHI2 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 LBH 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 LBH Application and the LBHI2 Application will commence in the week of 11 November 2019.

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

As referenced in the LBH 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 LBH will continue to communicate with you through this website on relevant matters relating to the LBH Application.

The LBH 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:

• LBH served its position paper in the LBHI2 Application, and a copy now appears here;
• LBHI2 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 LBHApplication, and a copy now appears here; and
• Deutsche Bank A.G. (London Branch) served its position paper in the LBHI2 andLBH Applications, and a copy now appears here.

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

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

The LBH 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 LBH will continue to communicate with you through this website on all substantive matters relating to the LBH Application.

As reported in our announcement of 3 April 2018, on 16 March 2018 the Joint Administrators of LBH made an application to Court (the "LBH Application") to seek the Court's determination on issues of priority in respect of potential distributions to holders of LBH's subordinated debts. Concurrent with the LBH Application, the Joint Administrators of LB Holdings Intermediate 2 Limited ("LBHI2") issued a separate application to the Court on 16 March 2018 for directions as to the priority in which the holders of LBHI2's subordinated debts (namely, LBH and Lehman Brothers Holdings Scottish LP 3) should receive any distributions from the LBHI2 estate (the "LBHI2 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 LBH and LBHI2 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 LBH will continue to communicate with you through this website on all substantive matters relating to the LBH Application.

On 16 March 2018, the Joint Administrators of LBH 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 LBH 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 LBH's subordinated debts should receive any distributions from the LBH estate (the "Application").

There are three respondents to the Application: 

• Lehman Brothers Holdings Inc ("LBHI"); 
• the Joint Liquidators of LB GP No.1 Limited (In Liquidation) ("LB GP No1"); and;
• Deutsche Bank A.G. (London Branch) ("Deutsche"). 

The Application seeks the Court's guidance in relation to the following issues:

• whether the claims of LBHI under three subordinated loan facility agreements (the "Sub-Debt") have been released pursuant to a settlement agreement entered into as of 24 October 2011 between, amongst others, LBH and LBHI; 
• if not, whether LBHI's claims in respect of the Sub-Debt rank for distribution before, after or pari passu with any of the claims of LB GP No1 under certain fixed-rate subordinated notes issued by LBH (the "Sub-Notes"); 
• whether any liability of LBH which might be established under certain guarantees given by LBH in favour of holders (including Deutsche) of preferred securities issued by three Lehman Brothers limited partnerships in the context of the Sub-Notes transactions ranks for distribution before, after or pari passu with each of the Sub-Debt and the Sub-Notes; and
• whether or not the quantum of LBH's liability under the Sub-Notes for distribution purposes falls to be discounted under Rule 14.44 of the Insolvency (England and Wales) Rules 2016, or by reference to some other method and, if so, which method.

The application notice and accompanying witness statement in support of the Application (the third witness statement of Gillian Eleanor Bruce) 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.

• The Application
• Witness statement of Gillian Eleanor Bruce

Concurrent with the Application, the Joint Administrators of LB Holdings Intermediate 2 Limited ("LBHI2") issued a separate application to the Court on 16 March 2018 for directions as to the priority in which the holders of LBHI2's subordinated debts (namely, LBH and Lehman Brothers Holdings Scottish LP 3) should receive any distributions from the LBHI2 estate.

An initial hearing to address matters of case management in respect of both the Application and LBHI2'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 LBH will continue to communicate with you through this website on all substantive matters relating to the Application.