Client Assets Update - Scheme of Arrangement - Court of Appeal Jurisdiction Judgment - 6 November 2009

This update relates to the Joint Administrators' appeal to the Court of Appeal concerning the jurisdiction of the court to sanction a scheme of arrangement with respect to certain client assets held by LBIE (the "Appeal "). Further background to the Appeal is set out in our updates of 14 September 2009 and 26 October 2009.  We have also posted a series of Questions and Answers regarding the High Court's 21 August 2009 judgment on jurisdiction (which is the subject of the Appeal).

As stated in our update of 26 October 2009, a public hearing of the Appeal took place on that date before Lord Neuberger M.R. and Lord Justices Longmore and Patten. Counsel for LBIE and the Joint Administrators made representations in support of the Appeal. GLG Partners LP, as representatives of the creditors' working group, filed written submissions in support of the Appeal, but did not appear. Counsel for the London Investment Banking Association made representations in opposition to the Appeal. 

At the conclusion of the hearing, Lord Neuberger M.R. and Lord Justices Longmore and Patten deferred giving judgment. Their Lordships today handed down their judgment (a copy of which can be accessed here ), dismissing the Appeal.   As matters currently stand, the Court of Appeal's ruling means that the proposed scheme of arrangement cannot be implemented in its current form.

Whether or not they appeal, the Joint Administrators will continue to develop alternative proposals that would also assist with the return of client assets. In that regard, work on the "Contractual Solution" detailed in our update of 5 October 2009 continues and further updates will be posted to this website in due course. It remains the intention of the Joint Administrators to put a contractual solution to creditors by the end of November 2009.

Steven Pearson, Joint Administrator, commented:

"I am disappointed by this ruling as it restricts the options available to the Administrators for the return of client assets and, in particular, the degree of protection afforded to clients who receive assets back from the Company.  However, following the original judgment we recognised that the proposed scheme was at risk and in the meantime have worked with the creditors' committee of LBIE to develop a credible alternative approach in order to return assets to clients using approximately the same framework of rules and timeline as was contained in the proposed scheme.  These alternative proposals were outlined to affected clients during October and will be formally launched in an offer circular in the coming weeks."

Pearson cautioned, "Unlike the proposed scheme, the alternative arrangements will only bind those clients who positively elect to sign-up. In order to benefit from these arrangements it is vital that affected clients take the time to understand what is now being are proposed and, by the end of the year, sign up to their terms." 

In order to keep all options open, the Joint Administrators and LBIE have made an application to the Court of Appeal for permission to appeal to the Supreme Court of the United Kingdom.

The Joint Administrators will continue to communicate with you through this website regarding their progress in seeking to facilitate the return of client assets.  Please continue to check the website for information on this and other matters relating to the administration of LBIE.