The Court of Appeal in London today gave judgment in the Waterfall I Appeal, a dispute as to the distribution of the estimated £7 billion surplus of assets in the main Lehman operating company in Europe, Lehman Brothers International (Europe) (LBIE).

LBIE entered administration on 15 September 2008 and has now paid its unsecured creditors 100p for every £1 owed.  The Waterfall I Appeal addressed some of the key issues as to who should receive the surplus, which we discuss below.

Currency Conversion Claims

The recent decision of the Supreme Court of the United Kingdom in Jetivia S.A. and Another v Bilta (UK) Limited (in liquidation) and Ors should make it easier to pursue claims against rogue directors. The Supreme Court held that, in instances where a company has suffered as a result of the unlawful behaviour of its directors, that behaviour cannot be attributed to the company to disallow the company, or its liquidators, from raising claims against directors for breach of their duties.

Background

A recent English High Court decision has held that prospective Administrators do not need to look behind the directors’ motives in appointing them; they need to look ahead as to what might happen in the administration and consider whether the statutory purpose of the administration can be achieved.

On 26 March 2015, the Deregulation Bill and the Small Business, Enterprise and Employment Bill received Royal Assent.  These Acts make a number of important changes to the law affecting directors, insolvency law and regulation. 

The changes affect (among other things) directors’ liabilities, the powers of administrators and the rights of creditors. While some changes are relevant to all those advising companies and directors, others are of interest principally to insolvency officeholders.

The trustees of the Olympic Airlines SA Pension and Life Assurance Scheme -v- Olympic Airlines SA

On 29 April 2015, the Supreme Court handed down its judgment in relation to the trustees’ appeal. The unanimous decision was in favour of Olympic Airlines SA (the respondent). The Supreme Court agreed with the Court of Appeal that the High Court was wrong and confirmed that in order for there to be an ‘establishment’ there must be some business dealings with third parties. The trustees’ appeal was therefore dismissed.

Key Point

A distressed debt purchaser may be able to rely on misrepresentations made by the borrower to the original lender in published documents to recover loss.

The Facts

An Irish investment company ("Taberna") claimed damages for misrepresentations made by or on behalf of a large Danish bank ("Roskilde"), in investor presentation documents and annual results, which induced Taberna to enter into a secondary market purchase of subordinated notes originally issued by Roskilde.

The Decision

Key Points

• A company in liquidation will not be stopped, on the basis that it was a party to wrongdoing complained of, from bringing claims against directors and other parties for wrongdoing, where the company can be said to be a victim of the wrongdoing.
• Section 213 Insolvency Act 1986 (fraudulent trading) has extraterritorial effect.

The Facts

Key Point

An "establishment" requires business and business activity to be carried out involving dealings with third parties and not simply acts of internal administration.

Facts

The Insolvency Service has published its insolvency statistics for Q1 2015 which show that personal insolvencies were at the lowest level since Q4 2005.  In the 12 months ending Q1 2015, 1 in 478 adults (just over 0.2% of the adult population) became insolvent.  This was the lowest rate since the 12 months ending Q1 2006.

On 27 April 2015, the English High Court sanctioned a scheme of arrangement (the “Scheme”) for the US$200 million 9.5% senior notes due 2015 (the “2015 Notes”) issued by DTEK Finance B.V. (the “Issuer”), a Dutch finance subsidiary of the Ukraine’s largest privately owned energy group (“DTEK”). The Scheme was approved by 91.1% of noteholders.