On 17 May 2017, the UK Supreme Court handed down judgment in proceedings - commonly known as the Waterfall I litigation - to determine claims with regard to the estimated £8 billion surplus arising in the estate of Lehman Brothers International (Europe) (LBIE).

Background

Under the Pensions Act 2004 the Pensions Regulator (tPR) has the power to impose a financial support direction (FSD) requiring a company “connected or associated” with the sponsoring employer of a UK pension fund to provide financial support to the pension fund. To date tPR has used the power in insolvencies.

The administrators of Lehman Brothers International Europe (LBIE) have announced that, following a ruling in the Frankfurt Regional Court, LBIE’s client money claim against Lehman Brothers Bankhaus AG (Bankhaus) is to be included in the insolvency claims of Bankhaus as an ordinary creditor. The judgment should result in a higher payout for LBIE’s client money claimants.(Source: Update on Client Money Held at Lehman Bankhaus)

The Supreme Court recently considered the scope of the anti-deprivation principle, in Belmont Park Investments PTY Limited (respondent) v. BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc (appellant) [2011] UKSC 38 (Belmont). Understanding the scope of this principle is important for anyone entering a contract where the parties’ rights and obligations change if one of them enters an insolvency procedure. Robert Spedding explains how the courts applied the principle in Belmont and makes some practical suggestions for avoiding problems.

Administrators will note with concern the decision of the East London Employment Tribunal in Spencer v Lehman Brothers (in administration) and Others, which suggests that administrators can be held to be personally liable for the discrimination of employees of the business in administration.

The Determinations Panel gave its reasons for imposing financial support directions (FSDs) on six Lehman Brothers companies on 29 September 2009. SNR Denton represented 22 of the 44 companies targeted for FSDs. The Determinations Panel accepted our submission that it would not be reasonable to impose an FSD on any of the companies we represented because of the Pensions Regulator's failure to particularise its case against them.

Background

I. Introduction

The Court of Appeal has published its decision on Lehman Brothers International Europe Limited's (LBIE) position in relation to client money it held at the time it went into administration. It:

FSA has published the statement it made to the US bankruptcy court examiner on the collapse of Lehman Brothers Holdings Inc. It has published the statement in the public interest, although it contains information that would otherwise have been confidential. The statement explains FSA’s actions and conversations in respect of the potential purchase by Barclays of the company in September 2008.

FSA has announced a range of measures to help investors who got unsuitable advice or misleading materials relating to Lehman-backed structured products. It has found significant failings and the actions it is taking will apply to all structured products in future: