Vol 15 (2018) - Issue 6

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Proving for Foreign Currency Debts in an Insolvency

Lehman Brothers International (Europe) ('Lehman Brothers') was an unlimited company, with two members, Lehman Brothers Holdings Intermediate 2 Ltd ('LBHI2') and Lehman Brothers Ltd ('LBL'), both of which were unsecured creditors of Lehman Brothers. In 2008 Lehman Brothers went into administration, as did LBHI2 and LBL. LBHI2 had made subordinated loans to Lehman Brothers, repayment of which was conditional on Lehman Brothers being able to pay its 'liabilities'. Obligations which were 'not payable or capable of being established in the insolvency [of Lehman Brothers]' were to be disregarded. Lehman Brothers also had many other creditors owed unsecured debts payable in foreign currencies. Although, rather unexpectedly, Lehman Brothers had a surplus in its administration, LBHI2 and LBL were unlikely to be able to repay their creditors. The Court was required to determine certain issues concerning the validity and ranking of various claims on the surplus for the purposes of the distribution to creditors in the administration. The Supreme Court1 allowed a number of appeals and cross-appeals from the decision of the Court of Appeal (which had for the most part upheld the decisions of David Richards J at first instance).