Key points

  • The Court of Appeal confirmed that there is a complete statutory code for the payment of interest.

  • Statutory interest represents compensation for dividends paid after the administration, and does not depend on any right to interest under the underlying claim.

  • Regard can be had, however, to the rate at which interest would have been paid to the creditor after the administration.

The facts

Representative creditors of Lehman Brothers International (Europe) (in administration) (the “Creditors”) appealed against decisions made in applications for directions by the joint administrators, in an attempt to receive as great a share of the £7.39 billion surplus from the administration as possible.


The Court held that, as per the Supreme Court decision in Waterfall I [2014] EWHC 704 (Ch), there is a complete statutory code for interest recovery on proved debts in administrations and liquidations. The payment in full of a proved claim in an insolvency extinguishes a creditor’s underlying contractual debt and replaces it with this statutory code. For the purposes of calculating the rate of statutory interest, however, contractual rights can be taken into account.

Interpreting rule 2.88 of the Insolvency Rules 1986 the court held, inter alia, that (1) statutory interest is calculated on the basis that dividends were first allocated to the payment of principal and then the payment of statutory interest and (2) in the absence of a legal wrong giving rise to a cause of action, there is no common law liability for the late payment of statutory interest.

Burlington Loan Management Limited v Lomas [2017] EWCA Civ 1462