Lehman Waterfall Litigation and U.K. Insolvency Rules: Unattractive and Quite Possibly Unintended?

• Published in: American Bankruptcy Institute journal Vol. 36; no. 10; p. 20
• Main Authors: Gallagher, Adam, Baird, Ken, Jones, Adam
• Format: Journal Article
• Language: English
• Published: Alexandria American Bankruptcy Institute 01.10.2017
• Subjects: Bankruptcy laws; Court hearings & proceedings; Currency; Debt; Economic crisis; Financial services; Insolvency; Judges & magistrates; Late charges; Legislation; Loan agreements; Stockholders; Supreme Court decisions; United Kingdom > UK; Europe
• ISSN: 1931-7522

Courts are obliged to arrive at coherent interpretations of legislation, paying regard to the language used in the legislation. [...]while the conclusion might be unattractive and quite possibly unintended, it produced the only coherent outcome. To allow administrators to call for a contribution would be inconsistent with the legislation's purpose (which should be limited to circumstances where a liquidator is unable meet all claims). Since LBIE was not in liquidation, there was no fund of contributions under § 74 in existence, nor a present creditor - only a potential future creditor (who would, in any event, be the possible future liquidator, not the administrators or LBIE itself). [...]as LBIE cannot prove for the contributions in the administrations of LBHI2 and LBL (as previously discussed), could it instead set them offagainst claims made by LBHI2 and LBL as creditors in LBIE's own administration? [...]if LBIE could not set offthe liabilities of LBHI2 and LBL as contributories, could it invoke the so-called "contributory rule" in the administration?