Extended lien Application - 09/01/2013

The trial of this Application was heard over six days from 27 September 2012 to 4 October 2012. Mr Justice Briggs handed down judgment on 2 November 2012. A copy of the judgment is available here, and those interested in its conclusions should read the judgment in full.

The judgment considers the meaning and effect of the lien provisions in the Master Custody Agreement (MCA) and Standard Terms of Business (STB) between LBIE and Lehman Brothers Finance S.A. (“LBF”). The Court found that both cl.13 of the MCA and cl. 3(D)(c) of the STB comprise floating charges in respect of LBF debts to LBIE and to other Lehman Brothers entities. The MCA charge was not superseded by the STB charge, and its enforceability against the LBF liquidator is not affected by the various grounds of potential challenge considered by the Court.

The Court found that the MCA charge is capable of applying to both pre- and post-administration client money entitlements. The Court did not otherwise address the applicability of the MCA charge.

Finally, the Court found that LBIE is entitled to enforce the MCA charge in respect of LBF debts not only to LBIE but also to other Lehman Brothers entities. However, LBIE is not obliged to do so, and owes no duty to Lehman Brothers Entities concerning the enforcement of the charge.

The Joint Administrators’ ability to rely upon this judgment to resolve the remaining extended liens questions and to progress the distribution of assets has been affected by the application lodged on 23 November 2012 by 314 Commonwealth Avenue Inc. for permission to appeal the judgment. The Court of Appeal is expected to decide in January 2013 whether the appeal should be allowed to progress. If it does, the substantive appeal hearing is likely to take place later in the year.