Key Point

The High Court decided how the expected surplus assets of Lehman Brothers International Europe (LBIE) should be distributed between a number of creditors whose claims include subordinated loans, statutory interest and foreign currency conversion losses.

The Facts

LBIE, an unlimited company, went into administration in 2008. A surplus of assets once unsubordinated creditors had been paid in full existed. LBIE shareholders were LBL and LBHI2. LBHI2 had made billions of dollars available to LBIE by way of subordinated loans. Directions on how the expected surplus should be distributed and the status of LBHI2's claim for the subordinated loans were sought.

The Decision

The Court decided that LBHI2's claims as a subordinated lender ranked behind all the other claims even though these were technically not provable in LBIE's insolvency. The Court also held that because LBIE was an unlimited company both its shareholders were liable for both provable and unprovable claims. Those claims by LBIE in any insolvency process of its shareholders were capable of set off.


It is unusual for there to be a surplus worth fighting over in most insolvencies. The area has been something of a legal black box for that reason. This decision sets out a concise statement of the principles to apply to determine who gets paid and in what order and rewards careful study if anyone has an interest in such a surplus.

In the matter of Lehman Brothers International Europe (in administration)