Lehman Brothers International (Europe) (in administration) & Ors, Re [2025] EWHC 2871 (Ch)

[2025] EWHC 2871 (Ch)

Case No CR-2008-000012

Case No CR-2008-000017

Case No CR-2008-000026

Case No CR-2009-000052

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

INSOLVENCY AND COMPANIES COURT (ChD)

Venue The Rolls Building, 7 Rolls Buildings, Fetter Lane

London

EC41 1NL

Date of hearing: Wednesday, 8 October 2025

Before

MR JUSTICE HILDYARD

IN THE MATTER OF LEHMAN BROTHERS INTERNATIONAL (EUROPE) (IN ADMINISTRATION)

AND IN THE MATTER OF LEHMAN BROTHERS HOLDINGS PLC (IN ADMINISTRATION)

AND IN THE MATTER OF LEHMAN BROTHERS LIMITED (IN ADMINISTRATION)

AND IN THE MATTER OF LB HOLDINGS INTERMEDIATE 2 LIMITED (IN ADMINISTRATION)

AND IN THE MATTER OF THE INSOLVENCY ACT 1986

MR RYAN PERKINS (instructed by Linklaters LLP) appeared on behalf of the Administrators

APPROVED JUDGMENT

Digital Transcription by Epiq Europe Ltd,

Lower Ground, 46 Chancery Lane, London WC2A 1JE

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Date 2025-10-08

[1]The joint administrators of four companies within the Lehman Brothers group of companies which I shall call "the Lehman Group" have made separate applications in the case of each relevant company for relief as follows. In the case of Lehman Brothers International (Europe) (“LBIE”), the rFelief sought is an order terminating the administrators' appointments under paragraph 79(4) Schedule B1 of the Insolvency Act 1986, together with an order fixing the time of the administrators' discharge from liability under paragraph 98(1) of the same Schedule B1. In the case of the other three companies, their respective Administrators have applied for extensions of the administrations. In the case of Lehman Brothers Holdings Plc (“LBH”), an extension of time is sought until 30 November 2027. In the case of both Lehman Brothers Limited (“LBL”), and LB Holdings Intermediate 2 Limited (“LBHI2”), extensions of time for a year until 30 November 2026 are sought.

[2]The application in respect of LBIE is rather a different animal than the other applications, and I propose, as did Mr Ryan Perkins of counsel, who has, with customary clarity, presented all the matters to me, to focus on that first.

[3]LBIE went into administration on 15 September 2008 by order of the court in the wake of the global banking crisis and the collapse of the Lehman group as a whole. The Lehman Brothers administrations are, by any standards, of long standing, rather reminiscent of The Mousetrap. In terms of the recoveries effected, the Lehman administrations, especially of LBIE, have been remarkably successful. I am told that as at 14 September 2025, LBIE had received some £27.8 billion, enabling all credit claims to be paid in full together with statutory interest and, furthermore, for all LBIE's subordinated creditors also to be paid in full together with statutory interest. Statutory interest is at the rate of 8 percent simple per annum and the sums involved therefore are very large indeed.

[4]The success of this administration process as regards LBIE has occasioned a number of very unusual and complex legal disputes. Difficult issues have arisen as regards priorities between creditors (often known as the Lehman Waterfall proceedings) and as to the ambit of, in particular, Schedule B1 as regards what is to be done with surplus assets over and above amounts payable to creditors of all description. One of the consequences has been that in July 2020, the administrators of LBIE sought and obtained the court's permission to pursue the statutory objective of rescuing LBIE as a going concern and, in that context, to consent to the making of equity distributions from the surplus in LBIE's estate to its sole shareholder, that is to say LBHI2. That unusual circumstance was described and adjudicated by Sir Geoffrey Vos, Chancellor, as then was, in ReLehman Brothers International (Europe) [2020] Bus LR 1875. Mr Perkins, in response to a question from me, explained that in the particular context, the objective of carrying on LBIE as a going concern does not connote that it would have any active trading. In fact, it has not undertaken such trading for a very long time. What it connotes is simply that the administrators are pursuing the objectives of the administration on the footing that LBIE is not a failing concern and is able, as is patently obvious it can, to sustain its residual activities as a holding company with a view to the distribution of the vast assets which are still in the process of being recovered.

[5]The sums recovered by LBIE are to be distributed first, as I say now, to its holding company LBHI2 and thence, by a complex onward distribution flow, to various other parties. The other parties include LBH, which is also, it will be remembered, one of the parties who has made an application before me and which has its own creditors, and to what are known as the Wentworth Joint Venture parties which acquire the benefit of a proportion of LBIH2's recoveries from LBIE. An admirably simplified Funds Flow Chart has been exhibited to the eighth witness statement of Mr MacNamara in support of all the applications and should be annexed to this judgment since it provides a clear depiction in readily understandable terms of the complex flow of funds which start at LBIE and trickle through what might be called the waterfall down to the various other interested entities.

[6]As I have already intimated, LBIE's administration has been extended on a number of occasions under paragraph 76(2)(a) of Schedule B1. Obviously in this case, as in the case of all the Lehman's administrations, the statutory assumption that a year would suffice has not proved realistic. The most recent extension to LBIE's administration was an order made in November 2022 when I extended their term of office to 30 November 2025. In a detailed judgment dated 25 November 2022, for which the neutral citation number is

[2022] EWHC 2995 (Ch)

, I set out my understanding of the principles to be applied to applications to extend an administration, and to applications for the discharge of administrators

[7]The basis on which I then extended LBIE's administration was the continued requirement to recover outstanding assets and, in particular, the key driver was the then outstanding US litigation between LBIE and a company called AG Financial Products Inc. The litigation concerned a dispute over the correct termination value of a series of credit default swaps governed by the 1992 ISDA Master Agreement. In the event, those proceedings had been concluded. Other proceedings included a dispute with companies in the Firth Rixson group, my judgment in which is reported at

[2022] EWHC 2532 (Ch)

(and which was to be the subject of an appeal which was settled shortly before the Court of Appeal was due to hear the case). There have been additional disputes which have occupied the administrators of LBIE with, of course, an intervening period since November 2022.

[8]Now, happily, and of great importance in terms of the history of these companies, the administrators of LBIE consider that they have achieved the purposes of the administration and there therefore arises the question of what should be done in those circumstances. Given that I extended the LBIE administration to 30 November 2025, the first part of the application is for an order bringing the administration to an end and the second part, which has occasioned more questioning than might otherwise be thought, is what should be done thereafter in terms of three available options, one of which is not expressly provided for in the Insolvency Act.

[9]The three available options are a creditors' voluntary liquidation, which would be inapposite as there are no creditors extant in LBIE; a dissolution, which is not thought to be appropriate, given that there remain small matters outstanding which would be cut off by that process; and the third, which, as I say, is not statutorily provided for expressly, is a members' voluntary liquidation. It is that third option which is sought in this case.

[10]I understood Mr Perkins to acknowledge that in his experience, there was no case in which this had been done and the principal question to be addressed is, in effect, whether it is an available process, given that it is not an approved process under the architecture of Schedule B1. Put another way, the issue is whether the provision in the statutory architecture for two available solutions excludes this third.

[11]Mr Perkins submitted that there was no reason to suppose that such an exclusive construction should be the correct one. Furthermore, he made the practical point that it would be rather bizarre if it was, since it would be perfectly permissible for the company to be returned to its directors with a direction for them to recommend, and with the consent of the shareholder, to approve a members' voluntary liquidation. He submitted to me that what the application proposed was a plainer and more transparent way of achieving the desirable result, that is to say that there should be an open mechanism whereby the administration would be concluded, the company will, for an instant, be returned to its directors, the only remaining shareholder or the only shareholder of LBIE will undertake to place LBIE into a members' voluntary liquidation forthwith upon the making of the order and thereby the desired result should be achieved.

[12]Although initially I had some theoretical concern in this regard, Mr Perkins has persuaded me that this is an available and appropriate course, provided that the expense of entering into this further insolvency process would not be greater than another option, which I have not mentioned which would also be available, which is the continuation of the administration until it can finally be completed in every respect.

[13]In that regard, there was provided in the declaration of solvency a useful description both of the assets and of the liabilities accrued and prospective, of LBIE. In that description, estimated costs of the winding up and other expenses a relatively large figure, just over £3 million, was entered which has caused me some concern lest that indicated that the move to this further process would occasion more expense rather than saving any.

[14]After taking instructions, Mr Perkins provided to me a very helpful schedule explaining quite how that figure had been derived. It is plain from that schedule that the description given in the declaration of solvency is not misleading in the sense that it covers costs up to 2 October already accrued and only leaves a much lesser amount to cater for prospective costs, including a contingency. The prospective costs of the proposed liquidation are in the region of £77,000 together with an additional provision of £50,000: in other words, very much reduced figures.

[15]I have asked, and Mr Perkins on instruction has agreed, that this schedule be exhibited to a further witness statement from Mr MacNamara. On the basis of that evidence, and on the basis of that assurance, I am satisfied that this course of a members' voluntary liquidation should be simpler and less unwieldy and cheaper than the alternative of continuing the administration. Being satisfied, as I have explained, that this is an available option, it seems to me to be the best option and I therefore propose to accede to the application to bring an end to the administration, to bring into effect through the mechanism, which is relatively simple in this case because LBIE only has one shareholder who is already committed to the resolution for a members' voluntary liquidation which is required.

[16]In the case of the application relating to LBIE, therefore, there only remains the question as to the timing of the discharge which follows automatically upon the administration leaving office, which concludes the administration process.

[17]In that regard, the usual order, as I understand it, is sought. The administrators have formally confirmed that they know of no proceedings or complaints against them, which is always required, the administrators being fully aware in that context, that paragraph 75 of Schedule B1 does provide an exception in case of some later emerging claim.

[18]In the round, I accede to the application in respect of LBIE in both its aspects and I am grateful for the very helpful illustration of a novel circumstance and, as I say, note what is a seminal event in this long running but successful administration process.

[19]I turn, therefore, to the three extension applications. I should deal with each company in turn. I should indicate that the legal position is altogether clearer in this context, not least because the basis on which the court's discretion under paragraph 76(2)(a) to extend the administration process has been explained in the decision of Snowden J, as he then was, in Re Nortel Networks UK Limitedand others [2017] EWCH 3299 (Ch) ("Re Nortel") and elaborated in a decision of my own which I have already referred to, in November 2022 which, with some regret, I noted has not been reported although with some diffidence, I suggest that it may be of some use in case a similar situation were to result in future. The reference for that is Re Lehman Brothers (International) Europe(in administration) and other companies

[2022] EWHC 2995 (Ch)

. I very briefly summarised the legal principles as they seemed to me to apply in paragraph [88] of that judgment.

[20]The point emphasised by Snowden J in Re Nortel was as to the width of the court's discretion, it being emphasised that this is not circumscribed in any express way but it is readily apparent, quoting from that judgment at [22] that:

"The Court’s discretion under paragraph 76(2)(a) is not circumscribed in any expressway, but it is readily apparent that it should be exercised in the interests of the creditors of the company as a whole, and that the Court should have regard to all the circumstances, including (i) whether the purpose of the administration remains reasonably likely to be achieved, (ii) whether any prejudice would be caused to creditors by the extension, and (iii) any views expressed by the creditors. In that regard, where a company is making distributions to its unsecured creditors within the administration process, it is likely to be appropriate that the administrator’s term of office should be extended to allow the distributions to be made, rather than to require the company to go into liquidation, which might well increase the costs or delay the distribution process with no countervailing benefit."

[21]In this case, as I noted in November 2022, there is an additional subtler reason why conversion to liquidation might very well be an unfortunate course in that the decision of the House of Lords in Lehman Brothers International (Europe) (No 9)

[2018] AC 465

is a statutory gap or lacunawhich might result in the loss of statutory interests in respect of creditors' claims. I made this point at [17] in my November 2022 judgment.

[22]Suffice it to say that I am satisfied that provided there are useful things necessary and capable of being done in the administration of these three companies which necessitate an extension of time for, broadly, the length of time sought, that that is the most appropriate course to take.

[23]In the case of the administration of LBL, the proposal is that the administration be extended for a further one year. The reason why that year is thought to be potentially necessary relates to ongoing inquiries made by HMRC in relation to LBL's tax liabilities. I note with some concern that as regards one of two aspects that these inquiries date back to 2022. That is of concern, but also is perhaps an indication that the suggestion which might otherwise be questioned as to the need for one year could well be realistic.

[24]I consider that I should extend the administration, it is hoped for a final time, for one year in order to ensure that these issues with HMRC should finally be brought to an end. It is anticipated that following that, the administrators will bring an end, if it has not automatically been brought to an end by effluxion of time, to the administration, seek their discharge at the usual appointed time and allow the course of dissolution then to wrap matters up finally.

[25]Similarly, in the case of LBHI2, it is proposed that there be an extension for a further year. The reason for that is to allow time for LBHI2 to deal with the proceeds of final recoveries from LBIE of which, it will be remembered, it is the holding company. Most especially and most complicatedly, a portion of its recoveries from LBIE will be passed on to participants in the Wentworth structure. The Wentworth structure has its own complexities and the Wentworth creditors have been heavily engaged previously in a number of the proceedings which have taken place over the last 17 years or so.

[26]The remaining recoveries from LBIE will be distributed to LBHI2's remaining subordinated debt holder, which is the third company, LBH. Once these steps, which may take some time as I can readily understand, have been concluded, LBHI2 and the participants in the Wentworth structure propose to take steps to liquidate the various overseas Wentworth entities. £7 million recovery is expected from the liquidation of those entities and those will be distributed to LBH. Once that has all been concluded, LBHI2's administrators will apply to the court for their offices to be terminated, if they have not already done so by effluxion of time, whereupon LBHI2 will dissolve and the usual application as to the timing of the administrators' discharge will also be sought.

[27]I am satisfied that the extension is necessary in the case of LBHI2, as I am in the case of LBL.

[28]The remaining application is for an extension of time for a further two years in the case of the LBH administration, although I understand that there are two other remaining entities, Eldon Street and PTG, which I am not concerned with today. Subject to those entities within this particular flow of funds architecture, LBH will be left, as it were, as residually the last man standing.

[29]The greater time period of two years is thought to be required to allow final distributions to be made to LBH in its capacity as the subordinated creditor of LBHI2 and also to enable LBH to collect any assets to which it is entitled from LBIE. As I mentioned previously, LBH has its own set of creditors who will receive the proceeds of any assets realised by LBH. It is submitted that a two year extension would be prudent, given that LBH's assets must first be distributed to it by other entities, such as LBHI2, before they can be distributed on to LBH's own creditors.

[30]It is proposed that once the administrators of LBH have made final distributions to its creditors and are in a position to conclude the administration, they too can return to the court for an order that they be discharged from liability as administrators of LBH following which LBH would follow LBL and LBHI2 into dissolution.

[31]Thus, I am satisfied in the case of each application that although it is disappointing that a further such long extension should be required (which will, incidentally, carry the matter over the period when I shall no longer be sitting as a judge).

[32]One point that I have borne in mind and should earlier have mentioned is this. It is a relevant consideration in all these cases for the court to be satisfied that the proposed applications have been duly notified to the persons interested and to consider any objection which results. Amongst the persons interested may be the FCA and, in this case, HMRC. All relevant constituencies have, in my judgment, been sufficiently notified in the usual way by the administrators. None has suggested any objection to the process. Those persons not objecting include Wentworth who, as Mr Perkins aptly mentioned, are very alive to any available point which may be to their commercial advantage and HMRC and FCA are, to the extent that they are interested, also in apparent agreement or in a position of non-objection.

[33]In these circumstances, therefore, I accede to all the applications before me with thanks to all concerned for admirably organised bundles, two excellent flow charts and the concise and helpful submissions of Mr Perkins. Annex 1: Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof. Lower Ground, 46 Chancery Lane, London WC2A 1JE Email: civil@epiqglobal.co.uk This transcript has been approved by the Judge