Update – Waterfall II Application (the “Application”) – Agreed Positions – 4 February 2015

The LBIE Administrators’ position paper filed on 10 October 2014 noted that there appeared to be issues in the Application on which all parties to the Application were in agreement. The Administrators indicated that they intended to invite the Court to give directions in accordance with those agreed positions, subject to giving LBIE creditors notice of that intention, so that any creditor that disagrees with the relevant position would have the opportunity to make an application to intervene if it wished to do so.

Further, on 4 November 2014, the LBIE Administrators invited creditors to contact them if they considered that there were relevant positions or arguments not adopted by any party to the Application.

The purpose of this update is to confirm, ahead of the hearing commencing on 16 February 2015 (the “Hearing”), the issues to be addressed at the Hearing on which the parties are in agreement and in respect of which the LBIE Administrators intend to invite the Court to give directions. Those agreed positions are:

• In respect of Issue 1, that statutory interest payable pursuant to Rule 2.88(7) of the Insolvency Rules 1986 (the “Rules”) at the rate of 8% per annum provided for by section 17 of the Judgments Act 1838 accrues only at a simple (and not compounding) rate.
• In respect of Issue 3, that the words “the rate applicable to the debt apart from the administration” in Rule 2.88(9) of the Rules refers to any mode of calculating the rate at which interest accrues on a debt, including compounding of interest, rather than only to a numerical rate of interest, such that where a creditor has a right (beyond any right contained in Rule 2.88) to be paid compound interest, the creditor is entitled to compound interest under Rule 2.88(7). The Fourth Respondent took the contrary position in its position paper, but no longer intends to argue for that position at the Hearing.
• In respect of Issue 5, that for the purposes of establishing, as required under Rule 2.88(9) of the Rules “whichever is the greater of the rate specified under paragraph (6) and the rate applicable to the debt apart from the administration”, the comparison required is of the total amounts of interest that would be payable under Rule 2.88(7) based on each method of calculation, rather than only the numerical rates themselves. The Fourth Respondent took the contrary position in its position paper, but no longer intends to argue for that position at the Hearing.
• In respect of Issue 30, that a creditor has a non-provable claim akin to a currency conversion claim where the creditor’s provable claim has been converted from a foreign currency into sterling as at the date of administration as required by Rule 2.86(1) of Rules, and the amount of statutory interest the creditor receives from applying a “rate applicable to the debt apart from the administration” to the sterling admitted claim amount is less than the amount of statutory interest the creditor would have received had the “rate applicable to the debt apart from the administration” been applied to the debt in the underlying foreign currency.

Any creditor which disagrees with any of the above positions agreed between the parties to the Application should contact the LBIE Administrators at unsecuredcreditors@lbia-eu.com by no later than Wednesday 11 February 2015.