Client Money Update - Client Money Application: Supplementary Judgment and Sealed Order - 21/01/10

This update concerns the application issued by the Joint Administrators on 1 May 2009 seeking directions from the Court concerning LBIE's obligations in relation to the handling of client money received prior to the time of administration (the "Client Money Application"). Further background to the Client Money Application can be found in earlier updates posted on the PwC Client Money website here.

Judgment on the Client Money Application was handed down on 15 December 2009. Further information on the judgment can be found in the Client Money Update of 15 December 2009.  As noted in the Client Money Update of 13 January 2010, the order made by Mr Justice Briggs following the handing of the judgment on 15 December 2009 provided for parties to file written submissions by 21 December 2009 on certain further issues relating to depot breaks and unapplied credits.

Written submissions were filed on behalf of the Joint Administrators, Paragon Capital Management Fund Limited and GLG Investments plc sub-fund: European Equity Fund (two of the representative respondents for segregated clients) and Hong Leong Bank Berhad (the representative respondent for the general estate). 

A supplementary judgment on these further issues was handed down by Mr Justice Briggs on 20 January 2010 and a copy is available here .

In summary, the court decided that:

1. Where LBIE had, at the time of administration (7.56am on 15 September 2008, the "PPE"), segregated client money in its client money accounts in respect of a depot break or depot breaks on a stock line basis and it is possible to identify from LBIE's books and records (and/or from information provided by the relevant client(s)) client(s) whom LBIE intended to protect by segregating that client money, the client money entitlement of those clients is calculated by reference to an appropriate portion of the amount segregated (even though LBIE had not at the time of segregation specifically identified the particular clients for whom that client money was held).

2. In such circumstances, the relevant client's client money entitlement will be reduced or extinguished upon the securities in question (or part thereof) being delivered to the client.

3. Clients for whom client money was paid to LBIE (whether by the clients themselves or by a third party on their behalf) in the three business days ending at the close of business on 11 September 2008, which client money was not specifically segregated by LBIE, have client money entitlements to the extent that LBIE is able to allocate to those clients an appropriate portion of the amount which LBIE had segregated as at the PPE by way of buffer in respect of unapplied credits.

4. Clients for whom client money was paid to LBIE (whether by the clients themselves or by a third party on their behalf) more than three business days prior to the close of business on 11 September 2008, which client money was segregated by LBIE as an unapplied credit, have client money entitlements to the extent that LBIE is able now to identify the clients to whom those credits relate.

The court order made by Mr Justice Briggs relating to the issues addressed in the supplementary judgment is available here.

Please direct any questions you may have with respect to the above to clientpositionresponses@lbia-eu.com.