It is reported in the press that the PWC administrators of Lehman Brothers International (Europe) Limited (LBIE), the London-based arm of the Lehman bank, are to appeal the recent Court of Appeal ruling relating to the distribution of segregated client funds. The first instance judge held that those clients of LBIE whose funds should have been segregated, but were not, were not entitled to share in the pot of client money. This follows normal trust law. The Court of Appeal reversed this ruling, on the basis of its construction of the client money rules.

Significant sums are at stake for all parties. It is reported that the pot of segregated funds amounted to $2billion and that the payout to clients will be significantly reduced if the Court of Appeal ruling stands.

The statement that the ruling would give "unsecured" creditors the right to share in the cash is somewhat tendentious, as the whole issue is whether the clients concerned are secured or unsecured creditors.

The Court of Appeal, having considered written submissions, refused applications for permission to appeal but did acknowledge that the questions concerned are of great importance and public interest. It is therefore open to the PWC administrators to apply to the Supreme Court for permission to appeal.

For previous blogs on this subject, click here.