Court of Appeal ruling in £1bn Lehman insolvency subordinated debt dispute

Adrian Beltrami QC and Adam Kramer QC, acting for the Administrators of Lehman Brothers Holdings PLC, were successful in resisting an appeal against Mr Justice Marcus Smith’s ruling at first instance that the sub-debt claim held by their clients has priority over the sub-notes claim held by Lehman Brothers Holdings Scottish LP 3 in the distribution of potentially as much as £800m to £1bn out of the LB Holdings Intermediate 2 Ltd estate. The alternative appeal ground that the sub-notes held by Lehman Brothers Holdings Scottish LP 3 fell to be rectified was also dismissed. The Court of Appeal, the main judgment being written by Lewison LJ after a five day hearing, also allowed a conjoined appeal in relation to the priority dispute between creditors of Lehman Brothers Holdings PLC, in which secondary dispute Adrian and Adam’s clients as administrators were neutral. That dispute raised issues as to the effect of a partial payment by a surety on the right of the creditor to prove for the full value of the debt.

Adrian and Adam were instructed by John Tillman and Crispin Rapinet of Hogan Lovells International LLP.

The Court of Appeal’s judgment can be found here.