Lehman Brothers Australia Ltd v Lomas & Ors [2018] EWHC 2783 (Ch)

Case No 7492 OF 2008[2018] EWHC 2783 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue 7 Rolls Building Fetter LaneDate 24/10/2018
EC4A 1NL
Before
MR JUSTICE HILDYARD
Between
LEHMAN BROTHERS AUSTRALIA LIMITEDApplicantANTHONY VICTOR LOMASRespondentsSTEVEN ANTHONY PEARSONRespondentRUSSELL DOWNSRespondentJULIAN GUY PARRRespondent
Philip Gillyon (instructed by Norton Rose Fulbright LLP) for ApplicantDaniel Bayfield QC, Ryan Perkins (instructed by Linklaters LLP) for Respondents
Judgment

The issue for adjudication

[1]The issue raised by this application is as to the ambit of(1) the Court’s jurisdiction to prevent unfair harm pursuant to paragraph 74 of Schedule B1 to the Insolvency Act 1986 (“the Act”) and(2) the rule in Ex Parte James (1873-74) LR 9 Ch App 609.[2]The issue arises in the context of the continuing process of the administration of Lehman Brothers International (Europe) (“LBIE”), and relates to a dispute between LBIE’s administrators (“the LBIE Administrators”) and another body corporate in the worldwide Lehman Group, namely Lehman Brothers Australia Limited (“LBA”) acting through its joint liquidators (“the LBA Liquidators”). LBA is an unsecured net creditor of LBIE. Prior to their collapse, both companies were ultimately controlled by Lehman Brothers Holdings Inc. LBIE entered administration in England on 15 September 2008, and LBA entered liquidation in Australia on 2 October 2009.[3]The particular question for determination is whether the LBIE Administrators should be directed to admit a claim by LBA in a greater sum than that which LBIE and LBA (acting through their respective office-holders) contractually agreed should be admitted for dividend in a Claims Determination Deed (“the LBA CDD”) dated 12 March 2014.[4]Put shortly, LBA (the Applicant) contends that the sum stated in the LBA CDD (which is £23,355,508) was erroneously calculated and that LBA’s claim, properly calculated, is £25,028,091.44. The error did not come to light until discovered by a prospective assignee of the claim following an auction process; but now that it has done so, and it being undisputed that it was the product of simple arithmetic miscalculation, LBA submits that it would be unfair for the LBIE Administrators to take advantage of it. LBA does not found its argument on the general principles of contract law and mistake: only on the statutory jurisdiction and judge-made rule above identified.[5]The issue thus raises in acute form whether, and if so in what circumstances, the Court may direct its officers not to enforce contractual commitments freely entered into, requiring consideration of a number of authorities, including (in addition to ex parte James itself) Re Wigzell [1921] 2 KB 835, Re Clark [1975] 1 WLR 559, Re T.H. Knitwear (Wholesale) Ltd [1988] Ch 275 and most recently, Re Nortel GmbH [2014] AC 209 and Re LBIE (Waterfall IIB) [2015] BPIR 1162 (“Waterfall IIB”), as well as a decision of my own in Heis v Financial Services Compensation Scheme Ltd [2018] EWHC 1372 (Ch).

Relevant background facts

[6]The relevant facts have helpfully been set out in a Statement of Agreed Facts. I can take a summary of the most salient for present purposes very largely from that and from summaries in the Skeleton Arguments lodged on behalf of the parties.[7]There were significant intercompany dealings between affiliates in the Lehman Group. LBA and LBIE held securities on trust for each other, and engaged in various derivatives trades in a variety of different currencies. By the time of LBIE’s administration the securities it held for LBA had been liquidated through clearing systems such as Euroclear and Clearstream, giving LBA a claim against LBIE for their value. Conversely, LBIE retained claims against LBA in respect of securities held by LBA on its behalf.[8]On 25 March 2009, LBIE, acting through the LBIE Administrators, submitted a proof of debt in LBA’s liquidation claiming some 109,904,780 Australian Dollars (“AUD”). The claim extended to certain intercompany balances and liabilities arising from certain failed trades, pending trades as well as securities held on its behalf by LBA.[9]On 31 July 2012, LBA, acting through the LBA Liquidators, submitted a proof of debt in LBIE’s administration via an online “Affiliates Portal” established by the LBIE Administrators for the submission of proof of debts by other companies in the Lehman Group.[10]There were certain other claims between LBA and LBIE which have been resolved separately.[11]The cross-claims between LBIE and LBA gave rise to complex questions of valuation, requiring agreement as regards relevant valuation dates, principles and the pricing sources to be applied.[12]The LBIE Administrators and the LBA Liquidators sought to agree the claims arising between their respective estates. The office-holders also discussed claims relating to other Lehman Group companies, including Lehman Brothers Australia Finance Pty (“LBAF”). These claims are irrelevant for present purposes. This required the office-holders to carry out an accounting reconciliation exercise. The process began in June 2013, and involved a number of emails and telephone calls between the office-holders.[13]As part of this process, in October 2013, the LBIE Administrators created an Excel spreadsheet (“the Model”) containing their suggested valuations of the parties’ cross-claims. The currency of each claim is specifically identified in the Model, together with various valuation dates. The Model showed how claims denominated in a foreign currency would be converted into Sterling (pursuant to rule 2.86 of the Insolvency Rules 1986).[14]The Model was a “dynamic working document that was shared between the parties over a period of time from June to October 2013”. The LBA Liquidators reviewed the Model but did not suggest any changes to it so far as relevant for present purposes.[15]The figures in the agreed Model can be summarised as follows:(1) The LBA Shortfall Claim was quantified in the sum of £28,881,600. This figure represents the value of securities which should have been held by LBIE on trust for LBA.(2) The LBIE Unsecured Claims were quantified in the sum of £5,526,092.(3) Accordingly, the Model calculated that LBA had a net unsecured provable claim against LBIE for £23,355,508. (There were separate calculations for certain other claims but these are not presently relevant.)[16]On 30 October 2013, the LBA Liquidators confirmed (by e-mail) their agreement to the value of the unsecured claim to be filed in LBIE’s administration, as generated by the Model, with the reservation that the LBA Liquidators were taking legal advice, and would need to seek the approval of their creditors’ committee before signing a settlement agreement.[17]The next step was to agree the formal terms of the settlement. It was agreed that the parties would enter into two settlement agreements known as Claims Determination Deeds (“CDDs”): one to deal with the LBA Shortfall Claims and the LBIE Unsecured Claims on a net basis (the LBA CDD); and one to deal with another claim called the LBA Grange Claim. The settlement of LBIE’s proprietary claims was documented separately. For present purposes, the LBA CDD is the critical document.[18]The LBA CDD was based on a standard form known as the Admitted Claims CDD. The Admitted Claims CDD fixes the “Agreed Claim Amount”, which is admitted for dividend upon the execution of the deed (and described as an “Admitted Claim”). Although the LBA CDD was based on a standard form, it was capable of being (and in fact was) negotiated between the parties. The LBA Liquidators have described the negotiation of the LBA CDD as a “collaborative” process, involving “several rounds of comments by the parties” and discussions with the LBA Liquidators’ “legal advisers”.[19]CDDs have been used extensively in LBIE’s administration in order to settle claims with creditors: see Waterfall IIB at [39] ff (David Richards J), which summarises the forms of CDDs used in the LBIE administration. Over 2,300 CDDs have been executed in total.[20]CDDs were developed to “provide finality and certainty … [CDDs] allow creditors to agree, at this juncture, their total net claim against LBIE without the need for further substantial evidentiary documentation and interaction in support of their claim or to enter into what could become a protracted claims agreement process, especially with regard to the more complex claims.”[21]Further, “in recognition of creditors’ desire for flexibility”, CDDs contain a mechanism whereby the creditor can transfer its claim to a third party without the need for LBIE’s consent. Although LBIE’s consent is not required, the LBIE Administrators do acknowledge the transfer using a stipulated form of Transfer Notice. Once the Transfer Notice is completed, the transfer is then recognised by LBIE and recorded in LBIE’s records for dividend purposes. This has contributed to the creation of an active secondary market in LBIE debt trading. Of course, transferees will (at least ordinarily) acquire and pay for the transferred entitlement by reference to the amounts and terms as stated in the relevant CDD.[22]Anthony Lomas, one of the LBIE Administrators, explained to the Court in Waterfall IIB that:
“The purpose of the CDDs was to provide an efficient process for agreeing the amount of a creditor’s claim. The Joint Administrators also wanted to ensure that, once a claim amount had been agreed, it could not subsequently be reopened by the creditor. From a creditor’s perspective, entering into a CDD gave it certainty as to the amount of its claim and, upon the claim becoming an Admitted Claim pursuant to the terms of the CDD, an entitlement to participate in such dividends as would be paid in the Administration. In addition, if the creditor wished to sell its claim, the transfer notice mechanism ensured that both the creditor and the Joint Administrators had a defined process by which the claim assignment would be acknowledged by LBIE, which was regarded as beneficial in the claims trading market.”
[23]LBIE and LBA entered into the LBA CDD on 12 March 2014. On the same date, LBIE and LBA also entered into an Asset Return Deed (“ARD”) pursuant to which certain cash assets derived from securities which had been held on trust by LBA on behalf of LBIE were to be paid by LBA to LBIE. There is no dispute between the parties in respect of the ARD.

Relevant terms of the LBA CDD

[24]The relevant terms of the LBA CDD are set out below:(1) The “Company” is LBIE and the “Creditor” is LBA. The “Agreed Claim Amount” is stated to be £23,355,508. An “Admitted Claim” is defined as “an unsecured Claim of a creditor of the Company which qualifies for dividends from the estate of the Company available to its unsecured creditors pursuant to the Insolvency Rules and the Insolvency Act”.(2) Recital (B) provides: “In consideration of the Company and the Creditor agreeing that the Creditor’s Agreed Claim shall be limited to, and the Creditor shall have an Admitted Claim against the Company in an amount equal to, the Agreed Claim Amount (being an amount calculated by reference to the agreed value of the Creditor’s Claims against the Company less the agreed value of the Company’s Claims against the Creditor), the Company and the Creditor wish to release and discharge each other in respect of any and all other Claims (including Client Money Claims and Trust Asset Claims), losses, costs, charges, expenses, demands, actions, causes of action, liabilities, rights and obligations to or against each other and howsoever arising, but excluding the LBIE Trust Asset Claims and any Claims of the Creditor only in its capacity as trustee or fiduciary on behalf of another person.”(3) Clause 2.1 provides: “The Company and the Creditor irrevocably and unconditionally agree that, notwithstanding the terms of any contract …2.1.1 Save for any Claims of the Creditor only in its capacity as trustee or fiduciary on behalf of another person, the Agreed Claim shall be limited to, and in an amount equal to, the Agreed Claim Amount and shall constitute the Creditor’s entire Claim against the Company;2.1.2 the Agreed Claim in an amount equal to the Agreed Claim Amount shall be accepted as an Admitted Claim;2.1.3 save solely for the Agreed Claim and subject to Clause 2.6, the LBIE Trust Asset Claims and any Claims of the Creditor only in its capacity as trustee or fiduciary on behalf of another person, and subject to Clause 2.3, the Creditor and (i) the Company and (ii) the [LBIE] Administrators and (iii) the [LBA] Liquidators, are hereby each irrevocably and unconditionally released and forever discharged from any and all losses, costs, charges, expenses, Claims (including all Claims for interest, costs and orders for costs, any Client Money Claims and any Trust Asset Claims), demands, actions, causes of action, liabilities, rights and obligations (including those which arise hereafter upon a change in the relevant law) to or against each other and howsoever arising, whether known or unknown, whether arising in equity or under common law or statute or by reason of breach of contract or in respect of any tortious or negligent act or omission (whether or not loss or damage caused thereby has yet been suffered) or otherwise, whether arising under the Creditor Agreements or not, whether in existence now or coming into existence at some time in the future, and whether or not in the contemplation of the Creditor and/or the Company and/or the Administrators on the date hereof; and2.1.4 save for the Agreed Claim and any Claims of the Creditor only in its capacity as trustee or fiduciary on behalf of another person, the Creditor will not take any steps to prove for, or to Claim for, any debt in the Administration (or other insolvency process) of the Company, or otherwise bring any Claim, action, demand or issue (or continue) any Proceedings against the Company and/or the Administrators (or any of them) in any jurisdiction in respect of any and all Claims and matters as are referred to in Clause 2.1.3 above.”(4) There is no mechanism in the LBA CDD by which the value of LBA’s claim can be revised upwards. LBA’s Agreed Claim is its only claim. All other claims have been released, “whether or not in the contemplation of the Creditor and/or the Company and/or the Administrators on the date hereof”.(5) Clause 3 contains the standard transfer mechanism (whereby LBA can transfer its Agreed Claim to a third party), and the Appendix contains the prescribed form of transfer notice.(6) Clause 8.2 provides: “The Creditor has made its own independent decision to enter into this Deed and as to whether this Deed is appropriate or proper for it based upon its own judgment and upon advice from its own independent advisers, as it has deemed necessary. The Creditor is not relying on any communication and/or announcement (written or oral) of or from any Relevant Person “Relevant Person” means LBIE, the LBIE Administrators and their firm, members, partners, directors, officers, employees, agents, advisers and representatives. as a recommendation or an inducement to enter into this Deed, it being understood that information and explanations relating to this Deed in any communication and/or announcement will not be relied upon or treated as a recommendation or an inducement to enter into this Deed.”(7) By clause 21, the LBA CDD is governed by English law and subject to exclusive English jurisdiction.

Distributions in discharge of the LBA CDD

[25]On 30 April 2014, the LBIE Administrators made a distribution to LBA in the sum of £23,355,508 (equal to 100p in the £ of the Agreed Claim Amount). LBA accepted the payment.[26]On 27 March 2015, the parties executed a further CDD, in respect of another claim (the Grange CDD): but no issue arises in respect of it.

Discovery of the error

[27]In August 2016, the LBA Liquidators sought to sell LBA’s residual claims against LBIE (comprising claims to statutory interest and purported “currency conversion claims”) through an auction process.[28]A prospective purchaser noticed, in the course of conducting due diligence, that the LBA Shortfall Claim had been undervalued in the Model. Thus, the error was discovered over two years after the LBA CDD was executed, and was discovered by a third party rather than LBA itself.[29]The LBA Liquidators informed the LBIE Administrators of the error thus discovered by email dated 12 August 2016. The LBIE Administrators accepted that the Model contained an error: they did not at that time, nor do they now, dispute this.[30]The error arose as follows:(1) The final version of the Model listed five securities which should have been held on trust by LBIE for LBA. One such security was a bond issued by Macquarie Bank (“the Bond”). The Bond was recorded as having a value of AUD 4,891,381.(2) However, the contractual currency of the Bond was Euros rather than Australian Dollars. That being so, the value of the Bond should have been recorded as EUR 4,891,381 rather than AUD 4,891,381.(3) Had the Bond been valued in Euros, the Model would have calculated LBA’s net unsecured claim as £25,028,091.44 rather than £23,355,508 (representing a difference of £1,672,583.44).[31]LBA accepts that the mistake was “innocently made”, and recognises that the error was “entirely understandable in the circumstances of LBIE’s administration”. Although LBIE created the original version of the Model, it is not suggested that LBIE has any greater responsibility than LBA for the error. The reality is that both parties failed to spot the error between June and October 2013 (when the Model was drafted, circulated and modified in various respects).[32]On 15 August 2016, Dominic Gibb (on behalf of the LBIE Administrators) explained that the LBA CDD had already been executed and could not properly be amended:
“I haven’t reviewed all the correspondence leading up to the agreement of the numbers but I agree that the end result looks as though the position has been valued in the wrong currency. As we have signed a deed with mutual releases in it the admitted claim would not get amended for such an error irrespective of which direction it was in – this is why we finalise admitted claims with a deed otherwise we wouldn’t be sure which of our 1200 or so claims were final and which weren’t.”
[33]On 2 September 2016, the LBA Liquidators formally requested on behalf of LBA that the LBIE Administrators should agree to vary the amount of LBA’s provable claim, in accordance with Rule 2.79. The request was declined on behalf of the LBIE Administrators (by e-mail dated 15 August 2016) on the basis that the LBA CDD had already been executed and could not properly be amended “for such an error irrespective of which direction it was”.[34]By letter dated 27 September 2016 from its solicitors (Norton Rose Fulbright) to the LBIE Administrators, LBA invited reconsideration of the latter’s stated intention to rely on the release provision in the LBA CDD, and indicated that otherwise, LBA would make “an application to court seeking, amongst other things, a direction that the Joint Administrators shall not enforce the releases on which they claim to be entitled to rely.” On behalf of the LBIE Administrators, Linklaters LLP responded by letter dated 14 December 2016 confirming their intention to rely on the release provision and emphasising that “the very purpose of the parties entering into the CDD was to finally settle the claim amount.” LBA issued the present Application on 20 December 2016.

Relevant legal principles

[35]LBA accepts that the LBA CDD was contractually binding; and that the wide release provision in clause 2.1.3 (“the Release”) was contractually effective to prevent LBA from asserting anything other than the Agreed Claim (in the Agreed Claim Amount).[36]The LBA Liquidators maintain that the error referred to above and which they desire to be corrected was the consequence of a common mistake as to the correct value to be used for the Bond when applying the agreed methodology. They stress that this is not a case of LBA seeking to re-open or alter a concluded compromise where an element of its claim was foregone to the knowledge of both parties; but that, on the contrary, they seek to ensure that the Agreed Claim Amount reflects the true agreement of the parties and what they intended to be the product of the Model and thereafter incorporated into the LBA CDD.[37]They also maintain that “the facts would justify a claim by LBA for rectification of the CDD on the ground of common mistake.” However, they have not applied for rectification: instead they urge that “the common mistake can conveniently be corrected by the court making the directions sought…” Thus, the focus is exclusively on the Court’s jurisdiction to prevent unfair harm pursuant to paragraph 74 of Schedule B1 to the Act and the rule in ex Parte James. Apart from a brief submission in the LBIE Administrators’ main skeleton argument to the effect that the error in the LBA CDD was not such as to render its subject matter “essentially and radically different from what it actually was” (the test in the leading case of Kyle Bay Ltd v Underwriters Subscribing Under Policy No. 01905057/08/01 [2007] 1 CLC 164 at [20]-[26]), and that therefore “it is unsurprising that LBA does not seek to rely on the doctrine of common mistake”, I was not invited to consider further any question of rectification. Indeed, I understood LBA’s position before me to be (as clarified by Mr Gillyon) that I should proceed on the basis that rectification would not be available, and that the LBA CDD was not capable of being impugned under the general law of contract.

The rule in Ex Parte James

[38]In its Skeleton Argument, LBA based its case principally on the rule in Ex Parte James: and I turn to that first.[39]At its inception the rule in Ex Parte James was an expression in the law of bankruptcy/insolvency of the Court’s insistence that in the exercise of their special powers its officers should not retain money or benefits if and when its retention would be against all conscience, even if there was no remedy against them for its recovery at law. The classic example, and the seed-bed for the development of the rule, was the case of money paid under a mistake of law.[40]In the decision of the Divisional Court from which the rule has taken its name, Sir W. M. James LJ (with whom Sir George Mellish LJ agreed), in language echoing equity’s distaste for the curious anomaly, said this (at page 614):
“…I think that the principle that money paid under a mistake of law cannot be recovered must not be pressed too far, and there are several cases in which the Court of Chancery has held itself not strictly bound by it. I am of opinion that a trustee in bankruptcy is an officer of the Court. He has inquisitorial powers given him by the Court, and the Court regards him as its officer, and he is to hold money in his hands upon trust for its equitable distribution among the creditors. The Court, then, finding that he has in his hands money which in equity belongs to someone else, ought to set an example to the world by paying it to the person really entitled to it. In my opinion, the Court of Bankruptcy ought to be as honest as other people.”
[41]From its origin as an equitable answer to a legal anomaly, the principle came both to be treated as established in general and to be expanded in its application by stages.[42]The development of the rule by a variety of decisions (including such cases as In re Tyler, Ex parte Official Receiver [1907] 1 KB 865 and In re Thelluson [1919] 2 KB 735, both in the Court of Appeal) was chronicled (not without some reservations as to the wisdom of calling upon the court to administer, not the law, but its own sense of “ethical propriety”) in In re Wigzell [supra].[43]The judgment of Scrutton LJ in In re Wigzell, in particular, explains how from the foundation of the jurisdiction as a means of providing recovery of payments made in mistake of law, for which the law itself provided no recourse, it was enlarged in In re Tyler [1907] 1 KB 865 and In re Hall [1907] 1 KB 875 to cover “the case of taking advantage of payments made by a third person and not giving credit for them” (see page 859), for which again the law itself provided no remedy.[44]The question in In re Wigzell itself was whether a trustee in bankruptcy, though he had a clear legal right to certain money, should nevertheless be directed not to enforce it on the footing that it would not be equitable. The judge in the County Court declined to give such a direction; and the Divisional Court upheld that decision. Salter J, sitting with Horridge J, acknowledged that the discretionary jurisdiction of the Court “to disregard legal right…wherever the exercise of legal right would, in the opinion of the Court, be contrary to natural justice”; however, he struck a cautionary note (at page 845):
“Legal rights can be determined with precision by authority, but questions of ethical propriety have always been, and will always be, the subject of honest difference among honest men…I feel sure that such a power should not be used unless the result of enforcing the law is such that, in the opinion of the Court, it would be pronounced to be obviously unjust by all right-minded men.”
[45]This cautionary note was then strongly endorsed in the Court of Appeal by Lord Sterndale MR and by Scrutton LJ (of whom the latter expressed some concern about the latitude of the jurisdiction and, given that honest men may differ, its inherent uncertainty, at least unless confined to clear cases where the enforcement of legal right would by any measure be dishonourable). Younger LJ also agreed, whilst nevertheless commending “the most salutary principle of Ex Parte James”.[46]The jurisdiction was reviewed again by Walton J in In re Clark (a Bankrupt) [1972] 1 WLR 559. By this time, the judge felt able to summarise the rule in the following expansive terms (at page 563), whilst emphasising also certain conditions required to be present (including that there must be some form of enrichment of the assets of the bankrupt by the person seeking to have the rule applied):
“Stating the matter in very broad terms indeed for the moment, and deliberately using for the purpose “unemotive language”, the rule provides that where it would be unfair for a trustee to take full advantage of his legal rights as such, the court will order him not to do so, and, indeed, will order him to return money which he may have collected.”
[47]The rule, and in particular this touchstone or test of “unfairness”, was further examined, and in the event adopted, by David Richards J (as he then was) in Waterfall IIB. In paragraphs [174] to [180] of his judgment in that case, the judge summarised the development of the rule by reference to the cases I have also referred to; for present purposes the passages in paragraphs [178] to [180], which focus on the test of unfairness, are of particular importance:
“178 Walton J reviewed the authorities in Re Clark [1975] 1 WLR 559 . He repeatedly in his judgment expressed the relevant test as one of unfairness. So, for example, at p.563, he said: “Stating the matter in very broad terms indeed for the moment, and deliberately using for the purpose “unemotive language”, the rule provides that where it would be unfair for a trustee to take full advantage of his legal rights as such, the court will order him not to do so …” 179 When applying the principle to the facts of the case before him, namely whether the trustee should recover the amount of two cheques paid to a supplier to the bankrupt, he said at p.567: “The question as I feel it ought to be posed is simply: “Is it fair that the trustee should recover the amount of these two cheques from Texaco?”
He said that he had no hesitation in answering that it was not. 180 It might be said that Walton J used the word “unfair” as synonymous with dishonourable or even dishonest, but I very much doubt it. Walton J was not a judge known for a lack of precision in his use of language and his repeated use of the word unfair in his judgment demonstrates in my view the concept which he had in mind.” “Stating the matter in very broad terms indeed for the moment, and deliberately using for the purpose “unemotive language”, the rule provides that where it would be unfair for a trustee to take full advantage of his legal rights as such, the court will order him not to do so …” “The question as I feel it ought to be posed is simply:
“Is it fair that the trustee should recover the amount of these two cheques from Texaco?”
[48]David Richards J went on to cite the summary offered by Lord Neuberger in Re Nortel GmbH [2013] UKSC 52, [2014] AC209 at [122]:
“a principle has been developed and applied to the effect that “where it would be unfair” for a trustee in bankruptcy “to take full advantage of his legal rights as such, the court will order him not to do so”, to quote Walton J in In re Clark (a bankrupt), Ex p The Trustee v Texaco Ltd [1975] 1 WLR 559, 563. The same point was made by Slade LJ in In re TH Knitwear (Wholesale) Ltd [1988] Ch 275, 287, quoting Salter J in In re Wigzell, Ex p Hart [1921] 2 KB 835, 845: “where a bankrupt's estate is being administered … under the supervision of a court, that court has a discretionary jurisdiction to disregard legal right”, which “should be exercised wherever the enforcement of legal right would … be contrary to natural justice”
. The principle obviously applies to administrators and liquidators: see In re Lune Metal Products Ltd [2007] Bus LR 589, para 34.”[49]It is to be noted, however, that in Re Nortel, where the question was whether the power of the Court extended to directing an administrator to accord to a potential liability a higher ranking than it would be given under the scheme of the Insolvency Act 1986 and the Insolvency Rules, the Supreme Court disavowed such jurisdiction; and the citation of the test of ‘unfairness’ with apparent approval was (as Mr Bayfield QC for the LBIE Administrators described it) only in passing, and not part of the ratio decidendi.[50]Further, in Waterfall IIB, David Richards J decided the issues raised without having to resort to the rule in Ex Parte James, and he expressed his views on the question as to its scope only because the issue had been fully argued (see [171]). Thus, though obviously of interest and, indeed, as the views of a highly experienced judge with particular renown in the field of Company and Insolvency law, persuasive, the views expressed were strictly obiter.[51]Indeed, I do not think there has been any reported decision (though see one unreported decision referred to in paragraph [55] below) since In re Clark where the rule in Ex Parte James was applied to determine the result, though they do illustrate the fluctuations of judicial views as to its scope. Thus:[52]In In re T.H. Knitwear (Wholesale) Ltd, which concerned whether a liquidator should take into account, in determining a distribution, a claim by the Commissioners for Customs & Excise for which there was no legally enforceable basis, the Court of Appeal considered the rule but held that it did not have any application since it(a) could not be extended to persons other than the Court’s officers, and the liquidator in a voluntary liquidation was not such an officer and(b) the liquidator would not be acting to any degree inappropriately in proceeding to distribute assets in accordance with the ordinary rules without regard to the Commissioner’s claim. The conclusion that the rule could have no application is unsurprising, though it might be noted that Slade LJ (at page 290G) put the relevant question as being “whether it would or should affect his [the Liquidator’s] conscience if he were now to reject the commissioners’ claim”: a formulation which reflects the root of the rule in equity, and echoes a test stricter, perhaps, than ‘unfairness’.[53]In Walker v Hocking and Stansil [1998] BPIR 789, the ratio was that even if, as the plaintiff asserted, an obligation should be implied in respect of a sealed bid procedure requiring the relevant trustee in bankruptcy to consider the plaintiff’s tender, such obligation had in fact been complied with. There was no call therefore for the rule in ex parte James, which the plaintiff sought to pray in aid. However, the following obiter dictum from Harman J’s ex tempore judgment may be noticed: “As to the rule in ex parte James, that is frequently expressed as being that it is the trustees’ duty to act, if I may put it positively rather than negatively, as a gentleman, a person of high standards, of moral probity and propriety. I cannot see how it can be said that to act in accordance with your expressly reserved and communicated right can be said to be acting unfairly, inequitably or oppressively. I cannot see that any adjective is properly applicable to such conduct of the trustees except ‘justifiable, acting in accordance with their express and communicated rights’. That being so, I cannot see that the rule in ex parte James can play any part in this matter at all, even on the illicit extension suggested by Sir John Vinelott in Re Edennote Ltd [1995] 2 BCLC 248 where he imported the Wednesbury test into liquidations and insolvencies. The Court of Appeal, fortunately for all of us, took the view that that extension was perhaps unnecessary, and that the classic rule, exemplified in the cases Being cases, I should clarify, not on the rule but as to the circumstances in which the Court will interfere in the exercise of a liquidator’s discretion starting with Re Peters, ex parte Lloyd (1882) 47 LT 64 and ending with Harold M. Pitman and Co v Top Business Systems (Nottingham) Ltd [1984] BCLC 593, all cited by Nourse LJ in the judgment of which I have a transcript, concluding the matter by saying that the test is, has the liquidator acted in a way which can be seen to be so: ‘utterly unreasonable and absurd that no reasonable man would have done it.’ ‘utterly unreasonable and absurd that no reasonable man would have done it.’[54]The Supreme Court briefly referred to the Ex Parte James rule in Bloom v Pensions Regulator [2014] AC 209, but only to conclude that the rule had no application whatever in that case: see the judgment at [122]- [123] (Lord Neuberger).[55]As indicated in paragraph [51] above, however, there is one (albeit unreported) decision where the rule in ex parte James was applied as the means of determining the matter. Mr Gillyon, Counsel for LBA, cited a transcript of the decision of Mr Registrar Baister in re Young [unreported, 27 March 2017] as an example where the Court had applied the rule to prevent an officer of the Court, “in the interests of fairness”, from insisting on his strict legal rights under the terms of a contract freely entered into by the parties, relying (after extensive and careful consideration of the authority also cited above) on Re Nortel and Waterfall IIB. Mr Registrar Baister, observing that in his view the rule “far from being vague or elusive…seems straightforward to me” (see [43]), rejected the submission that the rule should not be used to avoid the contract in question since that would “work injustice by subverting the general law” (see [36]).[56]That case (re Young) was not cited to me in TOC Investments Corporation v Beppler & Jacobson and Ors [2016] EWHC 20 (Ch) in which I very much doubted that the rule in ex parte James would assist if I was wrong on the primary issues (as indeed the Court of Appeal concluded I was). But the issue was not revisited by the Court of Appeal and my own brief analysis takes the matter no further.[57]However, another case which came before me earlier this year during the long period of the gestation of this present judgment may be of more materiality: that is, Heis and Ors v Financial Services Compensation Scheme Limited and Anr [2018] EWHC 1372 (Ch). In that case, once again, my conclusion on the primary point, an issue of the true construction of a Company Voluntary Arrangement (“CVA”), was reversed on appeal, and my secondary conclusion that the rule in ex parte James was not pursued and became otiose. However, my conclusions do have some bearing on this matter.[58]In Heis, after detailed consideration of Waterfall IIB and the preceding case law, I said this as regards both paragraph 74 and the rule in ex parte James:
“(1) As a general matter, a jurisdiction based on fairness (what Mr Allison described in the context of Paragraph 74 as “a free-standing fairness jurisdiction”) said to be capable of subjecting the exercise of legal right to an ultimately subjective standard, rather like one based on public policy, may become an unruly horse. Its application must be cautious for its own protection and safe development. (2) The past reluctance of the Court to deploy Paragraph 74 outside the context of the exercise by an office holder of his or her powers in a discriminatory manner thereby liable to be productive of objective unfairness (see In re Coniston Hotel (Kent) LLP [supra] at para. 36) may be based on such considerations. Paragraph 74 seems to me to be focusing on the case where an office-holder’s conduct or proposed conduct discriminates against the applicant, and it tempers or qualifies the Administrator’s powers to act in the interests of the creditors generally by proving a protection against such discrimination. I would, with respect to the learned Deputy Judge in that case, be wary of intervening on the potentially much broader basis of “a lack of commercial justification for a decision” (cf Hockin and others v Marsden and another [supra] at [19]) at least in the absence of actual perversity). (3) Although, as acknowledged previously, the two overlap, there are distinctions between Paragraph 74 and the common law principle established in Ex parte James. The principle in Ex parte James focuses at least primarily on the restriction of legal rights conferred on an office-holder by virtue of that office where such restriction is necessary to prevent the unjust enrichment thereby of the estate. Without such a principle, such an office-holder might, after all, be bound to secure the unfair advantage for the estate which those legal rights enable. (4) I would not question the correctness of the view expressed in the Lehman Waterfall IIB Litigation [supra] that the principle would extend to preventing the waiver or release of the currency conversion claims concerned by (in effect) a sidewind. I also accept of course (as I am bound to do) that the principle has come to be capable of also extending more generally to preventing the exercise of the legal rights vested in an office-holder by statute in a manner plainly contrary to natural justice (see Re Nortel GmbH [supra at [140]]) I have, with all respect, become less convinced that “unfairness” is a sufficient test (cf David Richards J’s obiter statement in that regard at [183] in the Lehman case). (5) Further, there is a difference between, on the one hand, controlling by reference to the Court’s view of fairness the exercise of a right or discretion vested in an office holder as such, and, on the other hand, intervening in the exercise of contractual rights or obligations derived from a contract to which the office holder may be a party, but which confers and regulates contractually the rights and obligations of all the parties to it in accordance with the terms they have willingly agreed. (6) The Court should be especially reluctant (and I should have thought usually abstain even if it has the power) to direct or re-direct an office holder on the basis of fairness in a way or context which will affect and potentially undermine or unbalance bilateral (or multilateral) rights or obligations enjoyed under a contract freely entered into. (7) There is danger also in extending Paragraph 74 and/or the principle in ex parte James as a catch-allto cover complaints where the law has already provided a remedy, even if that remedy is subject to restrictions (of time, for example) which cannot by the time of the complaint any longer be fulfilled.”
[59]In supplemental written submissions, the LBIE Administrators sought to rely on Heis as providing them with “clear support”; whilst of course LBA sought to marginalise it as resting on very different facts. LBA pointed out also that in Heis, there was no question of any unjust enrichment, and the issue (which was whether the administrators should be directed to release one group of creditors from the obligation to fund exit payments to another group of creditors in return for other prospective advantages) arose essentially between the creditors of one company, whereas in the present case the issue is essentially between an office holder and creditors. As to the latter, it was submitted on behalf of LBA as follows:
“The reluctance of the court to intervene in contractual arrangements is explicable where what is sought is to adjust the rights between creditors which have been freely agreed between them (or on their behalf); but it should have no application in relation to the adjustment of legal rights between a single creditor and the officeholder which has no effect on other creditors.”
[60]It was further submitted on its behalf, and against my reservations as to the deployment of a test of “unfairness”, that(a) “unfairness” is synonymous with “contrary to natural justice”: and I had accepted the latter test as sufficient;(b) in any event, the court is familiar and used in a variety of contexts to applying both concepts;(c) paragraph 74(1) of Schedule B1 to the Act itself (and see further below) expressly adopts the test of “unfair harm”; so that(d) if the Court must overcome its reservation as to the test in one context so it should in the other. There is some force in all these points.[61]However, I do not accept them, for the following reasons:(1) Whilst in certain contexts, especially with regard to fair process, ‘natural justice’ may be synonymous with fairness (or nearly so), in other contexts it is not. In the cases following ex parte James, at least until Re Clark, the discretionary jurisdiction which the rule expresses to prevent the enforcement of legal right when it would be contrary to ‘natural justice’ was not to be used (in the words of Salter J in Re Wigzell) “unless the result of enforcing the law is such that, in the opinion of the Court, it would be pronounced to be obviously unjust by all right-minded men.” In other words, in the context the phrase ‘contrary to natural justice’ connotes more than subjective unfairness: it connotes that what is proposed would be such that undoubtedly a “high-minded” and “honourable” man (per Lord Sterndale MR and Scrutton LJ in Re Wigzell at pages 851 and 862 respectively) would not do it because it would be “dishonourable and not high-minded” (ibid.)(2) It is to be noted that whilst in Waterfall II David Richards J made clear that he, and he supposed Walton J in Re Clark, would not treat the word ‘unfair’ as synonymous with ‘dishonourable’ (still less, ‘dishonest’), in then adopting the test of ‘unfairness’ David Richards J was departing from Re Wigzell, as also had Walton J, though as Court of Appeal authority it was binding on them both.(3) David Richards J had earlier adopted a more orthodox position, in line with that Court of Appeal authority, in In re T&N Ltd [2004] IDS Pension Law Reports 352. There, quoting Slade LJ in another Court of Appeal case above cited, namely Re TH Knitwear (Wholesale) Ltd, he said that “For the principle to apply there must be dishonourable behaviour or a threat of dishonourable behaviour on the part of the court officer, by taking unfair advantage of someone”.(4) Indeed, I think it clear that the test in Re Wigzell was stricter still in the sense that insofar as the jurisdiction calls upon the court to follow, not the law, but its sense of “ethical propriety [which] will always be the subject of honest differences among honest men” (see per Lord Sterndale, quoting, with approval, Salter J in the same case) the court should be particularly careful in its exercise. The test which I think emerges is not unfairness, but the test already quoted, that is whether what is proposed would be “pronounced to be obviously unjust by all right-minded men.”(5) The control of power vested in a person by statute or convention is one thing; the overriding of contractual rights otherwise enforceable at law is quite another. There is a clear distinction between subjecting the exercise of power or legal right to equitable constraints, on the one hand, and, on the other hand, deploying a discretionary jurisdiction to alter or undo a contractual bargain.(6) Thus, in Heis, I accepted that the exercise of legal rights vested by statute in an office-holder (being an officer of the Court) may be prevented or controlled if otherwise that exercise would be contrary to natural justice: that is very different, as I see it, from extending that control to the case of the exercise of legal rights and obligations conferred and engaged by contract, which would negate or at least alter the parties’ bargain by reference to some free-standing and subjective notion of fairness or propriety.(7) The occasions when the exercise of or reliance on such a legal right would be pronounced to be obviously unjust by all right-minded men are few and far between and in my view probably confined to circumstances where any honest man would disclaim any such right or consider it dishonourable to assert it but there is a gap in the law and the law itself provides no recourse against its assertion. The obvious examples being mistake of law and receipts from third parties: hence the development of the jurisdiction in the first place.(8) As a corollary of the same point, where the law itself provides a remedy or recourse it is difficult to see any room for a free-ranging alternative jurisdiction.(9) I do not consider that paragraph 74 of Schedule B1 justifies any broader approach to the rule in Ex Parte James. I accept that there is some overlap between the two bases of jurisdiction to control administrators as officers of the court. But to my mind they are differently focused. Paragraph 74 concerns the misuse or abuse of the powers vested in an administrator for the purpose of conducting the administration: it provides for the intervention of the Court to control or prevent the exercise of the powers so vested. It is not intended as a procedure or mechanism for the imposition of overriding moral constraints on the exercise of legally enforceable contractual rights nor to prevent the unjust enrichment of the estate: and see the view which I expressed in Heis (at paragraph [143(2)]). Further, and in any event, like Blackburne J in Re Lehman Brothers International (Europe) (in administration), Four Private Investment Funds v Lomas [2008] EWHC 2869 (Ch), I do not consider that the test in paragraph 74 is synonymous with unfairness: it connotes differential or discriminatory conduct of power such as to disadvantage the complainant: again, see Heis [ibid.]. The rule in ex parte James, on the other hand, focuses at least primarily on the restriction of legal rights where their assertion by the office-holder would result in the unjust enrichment of the estate (Heis at [143(3)]).(10) More generally, I also adhere to the view I expressed in Heis (at [143(5) (6) and (7)] that (a) “…there is a difference between, on the one hand, controlling….the exercise of a right or discretion vested in an office holder as such, and, on the other hand, intervening in the exercise of contractual rights or obligations derived from a contract to which the office holder may be a party, but which confers and regulates contractually the rights and obligations of all the parties to it in accordance with the terms they have willingly agreed”. (b) “The Court should be especially reluctant (and I should have thought usually abstain even if it has the power) to direct or re-direct an office-holder on the basis of fairness in a way or context which will affect and potentially undermine or unbalance bilateral (or multilateral) rights or obligations enjoyed under a contract freely entered into.” (c) There is danger also in extending Paragraph 74 and/or the principle in ex parte James as a catch-all to cover complaints where the law has already provided a remedy, even if that remedy is subject to restrictions (of time, for example) which cannot by the time of the complaint any longer be fulfilled.”[62]With regard to the last point, Mr Gillyon, in his clear submissions on behalf of LBA, submitted (in a Note dated 18 June 2018 addressing Heis, which post-dated the hearing in this matter) that the reluctance of the court to intervene in contractual arrangements “is explicable where what is sought is to adjust the rights between creditors which have been freely agreed between them (or on their behalf); but it should have no application in relation to the adjustment of legal rights between a single creditor and the officeholder which has no effect on other creditors.” In this case, he submits, there would be no adverse impact on any equivalent creditor (since all are being paid in full).[63]In a further Note dated 26 June 2018 (in reply to Further Written Submissions dated 21 June 2018 provided to me on behalf of the LBIE Administrators to answer his first Note), Mr Gillyon went on to submit that, in the events that have happened since the hearing, which include the sanctioning of a scheme of arrangement (“the Lehman Scheme”) which does not apply to this application (which is expressly excluded) but which (it is common ground) precludes other “Scheme Parties” from challenging the LBIE Administrators’ decision in relation to any proof of debt admitted prior to the Record Date (as defined), any objection that the direction sought by LBA would “open the floodgates” to other creditors seeking to challenge their CDDs “has fallen away”.[64]I do not consider that either point should substantially affect my analysis. I do not accept the distinction which Mr Gillyon has sought to draw either in principle or in point of fact. In my view, the fact that the exercise of jurisdiction would do no demonstrable harm does not confer or justify it; and the reluctance of the Court to which I referred is based on principle (that the Court should not undermine or unbalance contractual relationships) rather than mere expediency.[65]Further, though I accept (and the LBIE Administrators concede) that as a result of the Lehman Scheme (sanctioned on 18 June 2018) there is no longer the risk perceived and emphasised on behalf of the LBIE Administrators at the hearing that the outcome of the present Application could set a precedent which would enable and might encourage other creditors to challenge their proofs as LBA has sought to do, again it does not follow that there is jurisdiction or that it should be exercised. In other cases, just such encouragement might be given: the importance of restricting a jurisdiction which could threaten the stability and reliability of contracts intended to define the parties’ rights and ensure finality transcends this particular case.[66]Conscious of and responsive to my uneasiness, at the hearing and well before Heis, with the “unfairness test” Mr Gillyon urged me nevertheless that modern authority was clearly in favour of it; and in particular, that there was no sufficient reason to depart from David Richard J’s decision in Waterfall IIB which embraced it. In addition to the respect appropriate for a carefully reasoned judgment by such an experienced judge with especial expertise in the fields of insolvency and company law, he submitted that there was no sufficiently “powerful reason” for departing from it, even if it is not strictly binding upon me.[67]In this connection, Mr Gillyon drew to my attention (in his Note dated 18 June 2018) the decision of Teare J in Tonicstar Ltd v Allianz Insurance Plc & Ors [2017] EWHC 2753 (Comm), a case concerning a question of construction of standard terms in a contract of reinsurance. Teare J stated that a first instance judge should generally follow the decision of another first instance judge “unless there is a powerful reason for not doing so.”[68]That I readily accept, where the cases are not properly distinguishable and the point in the second case can be determined on the basis of the ratio of the first. Indeed, I would not wish to depart without considerable reason and after anxious thought from the detailed analysis of a judge of co-ordinate jurisdiction, especially a judge such as David Richards J, even if the case were not on all fours and the analysis in the first case were obiter.[69]However, in this case:(1) David Richards J’s comments, though carefully reasoned, were obiter;(2) Waterfall IIB is distinguishable for a variety of reasons, in that (I agree with Counsel for the LBIE Administrators) none of the principal reasons set out in his judgment at [184] applies here, and most especially whereas the release of currency conversion claims with which David Richards J was concerned was entirely irrelevant to the form of compromise agreement (called a Claims Resolution Agreement) there in issue, and any release would have been an “entirely unintended effect”, in this case the final and conclusive determination of the Agreed Claim Amount is the most fundamental purpose of the LBA CDD.(3) Whereas in Waterfall IIB, the enforcement of any releases of currency conversion claims “would involve significant and unintended discrimination between different creditors”, here limiting LBA’s claim to the amount it is due under the contract comprised in the LBA CDD is not in any way discriminatory.[70]In any event, I have concluded, after careful review and anxious thought, as I did in Heis also, that(a) the “unfairness test” is not consistent with earlier Court of Appeal authority (in Re Wigzell and Re TH Knitwear (Wholesale) Ltd) which mandates a stricter unconscionability test;(b) the “unfairness test”, with its ultimately subjective standard, would (as I put it in Heis at [143(1)]), become “an unruly horse”; and(c) an expansion of the rule in ex parte James to enable the Court to modify, control or remove contractual rights, and/or to provide a discretionary remedy where the law has already provided one (being rectification in this case, subject of course to satisfaction of its established conditions) is not necessary and likely to be unwise.[71]Lastly under this heading, I should record that Mr Gillyon suggested such a restrictive interpretation of the rule would also run contrary to the test advanced to the New South Wales Supreme Court in Presbyterian Church (NSW) v Scots Church Development Ltd [2007] NSWC 676, apparently in reliance on Re Tyler; this was (see [181]) that the test should simply be not “unconscionable as matter of settled principles of equity, but rather, just and fair in the mind of the person on the Bondi bus”. At one time I understood Mr Gillyon was suggesting that Young J might have approved this test; but I do not think that is right. I think he was simply recording, at that point in his judgment, the submissions of Counsel. In any event, the following parts of his judgment go against both that test and indeed this application:(1) At paragraph [197] Young J gave as his sixth reason for refusing the application that “there is no unconscionable conduct in the traditional sense of that term”.(2) In that same paragraph [197] Young J also stated, “ex parte James only comes into play where the plaintiff has no other legal or equitable claim against the liquidator”, citing Re Clark at page 564.(3) Earlier, at paragraph [185], Young J had also said this:
“At the core of the principle is that money had been paid under a mistake or that someone else’s money or property has contributed to the company’s wealth in circumstances where that was never intended and where that somebody else has no legal or equitable claim against the company that can be the subject of a proof of debt.”
[72]It thus seems to me that the Presbyterian Church case in New South Wales, which is not of course binding in this jurisdiction anyway, tends to support and not to be contrary to my restrictive analysis of the rule.

Paragraph 74 of Schedule B1 to the Act

[73]Before summarising my conclusions, I return briefly to Paragraph 74, on which LBA also relied, albeit with perhaps less enthusiasm.[74]Paragraph 74 empowers the Court to grant relief where:
“(a) the administrator is acting or has acted so as to unfairly harm the interests of the applicant (whether alone or in common with some or all other members or creditors), or (b) the administrator proposes to act in a way which would unfairly harm the interests of the applicant (whether alone or in common with some or all other members or creditors).”
[75]LBA’s case was necessarily based on sub-paragraph (b) rather than sub-paragraph (a), since it did not and could not suggest that it was unfair for the parties, both with the benefit of legal advice, to enter into the LBA CDD, and it was not disputed that the parties are equally responsible for the error in the Model, which neither of them spotted. Rather, LBA suggests that it would be unfair for the LBIE Administrators to enforce the terms of the LBA CDD whereby to limit LBA to the amount stated therein. This is a forward-looking allegation which is intended to engage sub-paragraph (b).[76]Paragraph 74 requires two elements to be satisfied if it is to be applied:(1) The applicant must show that the action complained of is or will be causative of harm to its interests;(2) The causing of harm must be shown to be unfair to the applicant in the relevant sense.[77]The first is self-explanatory. The second element was discussed by Blackburne J in Re Lehman Brothers International (Europe) (in administration), Four Private Investment Funds v Lomas [supra]. He noted that the concept of unfairness under paragraph 74 should not be equated with the concept of unfairness under section 994 of the Companies Act 2006, and stated (at [38]- [39]):
“The context of an administration is, however, different. By Sch.B1 para.3(1) the administrator is obliged to perform his functions with the object of achieving the purpose of the administration. In the present case that is to achieve a better result for LBIE’s creditors as a whole than would be likely if LBIE were wound up without first being in administration. By para.3(2) the administrator is obliged to perform his functions in the interests of the company’s creditors as a whole. By para.4 he must perform his functions as quickly and efficiently as is reasonably practicable. By para.59(1) he may do anything necessary or expedient for the management of the affairs, business and property of the company. By para.68(1) he must manage the affairs, business and property of the company in accordance with any proposals approved by the creditors under para.53, subject to any directions which the court may give under para.68(2) … If, as they assert and their evidence strongly suggests, the administrators are seeking in good faith to carry out their functions in the interests of LBIE’s creditors and asset claimants … as a whole and are endeavouring to avoid being deflected from this course by devoting what they fairly regard as a disproportionate amount of time and resources to dealing with requests for information from a particular group of former clients, such as the applicants, I feel quite unable to conclude that any case of unfair harm is established within the meaning of para.74(1).”
[78]This seems to me to support the view that what is meant in the context by conduct such as “unfairly to harm” a creditor, is the exercise of the office-holder’s powers in a manner which(a) causes or would cause disadvantage to that creditor;(b) cannot be justified by reference to the interests of the creditors as a whole or to achieving the objective of the relevant insolvency process; and/or which(c) is discriminatory in such effect. The test in paragraph 74 focuses on the conduct (past or proposed) of an office-holder in the exercise of his powers as such.[79]I appreciate in relation to (c) that (as appears from [137] in my judgment in Heis) there is recent authority to the effect that it may be that the Court’s ability to intervene may also apply where there has been “a lack of commercial justification for a decision causing harm to the creditors as a whole”, on which I have not had full argument. However, it does not seem to me to explore these boundaries in any depth for the purpose of this case. For it seems to me that if that ground is additional to “perversity” it is not engaged in this case: and nor are any of (a), (b) and (c) above either.[80]In short, I do not think that Paragraph 74 provides a basis for the Court’s intervention in this case any more than does the rule in Ex Parte James.[81]For comprehensiveness, and also since the contrary was put forward on behalf of LBA (especially in its Note dated 18 June 2018), it does not seem to me that the short reference to the test of ‘unfairness’ in Lord Neuberger’s judgment in re Nortel compels or even materially supports the intervention of the Court in this case. I agree with Mr Bayfield (for the LBIE Administrators) that the reference was in passing only; the same passage appeared also to connote agreement with both re Wigzell and In re TH Knitwear (Wholesale) Ltd which import a stricter test; and in any event, there is no foundation or any suggestion that the dicta overrule those cases and bind me to a test of ‘unfairness’. Relief was refused in re Nortel both under paragraph 74 and Ex Parte James on the basis (see [123]) that “none of these cases begins to justify the contention that an administrator can be ordered to change the ranking of a particular debt simply because the statutory ranking appears unattractive…” That case was a long way from this: and Lord Neuberger’s further approval of the observation in In re Lune Metal Products Ltd [2007] Bus LR 589, at [34] to the effect that the court “cannot sanction a course which would be outside an administrator’s statutory powers” has no direct application or corollary to the present position. But the recognition that there are limits to the Court’s discretionary power tends to support in general terms the not dissimilar notion, with which I agree, that neither paragraph 74 nor the rule in Ex Parte James should be treated as a magic wand, and that outside the context of obviously unjust reliance on defects or gaps in the law and/or the abuse or perverse use of power both must be deployed with caution, insofar as available at all.

Conclusion

[82]In all the circumstances, therefore, I have concluded that there is no basis for the Court’s intervention in the manner sought by LBA.[83]I do not accept the siren call to exercise jurisdiction on the footing that the mistake and its source are not disputed and its correction would not, in the events that have happened (and especially the sanction of the Lehman Scheme), ‘open the floodgates’ to other creditors to undo their CDDs, or otherwise undo the general benefit of the finality brought by the CDDs. It is not satisfactory for the assertion and exercise of jurisdiction that there are special circumstances such that, this time, no harm may be caused by its exercise.[84]In point of principle, there is no reason or justification for not giving effect to contractual obligations freely entered into, unless under the existing law the contract can and should be reformed or rectified or otherwise invalidated. As I put it in the course of argument, it seems to me that this was always a case of “rectification or bust”. No application for rectification was brought; and, as previously noted, Mr Gillyon confirmed that I should proceed on the basis that it was not available. I say nothing, therefore, in that regard, whether generally or (more particularly) as to whether the remedy would be available after the satisfaction of the LBA CDD by distribution in accordance with its terms and the receipt in full of the monies payable under it; nor as to whether and in what circumstances it might be possible in a clear case to grant such relief in the context of an application such as this.[85]However, even if (contrary to my view) the rule in Ex Parte James, or Paragraph 74, does enable the Court to intervene to override a contractual commitment, or impose equitable constraints on the exercise of a contractual right derived from a freely-entered bargain, simply on the ground of ‘unfairness’, I would not consider it right to exercise such jurisdiction in this case. The LBA CDD was entered into in order to define the Agreed Claim Amount with certainty and finality. It was drafted in a way and with terms specifically designed to prevent the Agreed Claim Amount from being reopened and expressly released any other or further claim. It provided for transferability of the Admitted Claim in the agreed amount upon that basis. It is one of some 2,300 CDDs drafted with the same objectives. Even if, as a result of the Lehman Scheme, there is no longer a risk that the outcome of this application could set a precedent which would enable other creditors of LBIE otherwise bound by a CDD to re-open their entitlement, that was not so when this application was brought, and in any event does not justify a single erosion of the finality intended. Lastly, the Agreed Claim Amount was admitted to proof and paid in full (on 30 April 2014). The account was agreed and settled. Assuming that the contract cannot be reformed or rectified, there is no unfairness in enforcing it in accordance with its terms.[86]I dismiss LBA’s application accordingly.[87]Finally, I should like to record my regret and apologies for my long delay in providing this judgment, and my thanks to all Counsel and their teams for the clarity of their submissions and their assistance and patience throughout.