In the much anticipated decision of Belmont Park Investments PTY Limited v BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc [2011] UKSC 38 the Supreme Court has unanimously dismissed the appeal of Lehman Brothers Special Financing Inc (“LBSF”) and in so doing provided clarification as to the scope and application of the anti-deprivation rule (the “Rule”).

Over the past five years, courts have issued rulings of potential concern to buyers of distressed debt. Courts have addressed, among other things, “loan to own” acquisition strategies resulting in vote designation; equitable subordination, disallowance, and other lender liability exposure based upon the claim seller’s misconduct; disclosure requirements for ad hoc committees of debtholders; the adequacy of standardized claims-trading agreements; and claim-filing requirements in the era of computerized records.

Rehabilitating a debtor’s business and maximizing the value of its estate for the benefit of its various stakeholders through the confirmation of a chapter 11 plan is the ultimate goal in most chapter 11 cases. Achievement of that goal, however, typically requires resolution of disagreements among various parties in interest regarding the composition of the chapter 11 plan and the form and manner of the distributions to be provided thereunder.

The Court of Appeal1 has ruled that foreign judgments in insolvency proceedings may be enforced by the English courts at common law, and that the ordinary principles which may prevent the enforcement of foreign judgments do not apply to insolvency judgments where the action from which the foreign judgment arises is integral to the collective nature of the insolvency proceedings.

Facts

In a recent case1 the High Court held that the purported out of court appointment of administrators over a Guernsey registered limited partnership was void because the appointor used the incorrect form when giving notice of its intention to appoint.

Background