Lehman Brothers International (Europe), Re Extended Liens Application V

Disclosure will not be ordered merely to help a potential party decide which side of an adversarial application to support. Where the information is unnecessary for the court to determine the legal issues, there is no sufficient countervailing public interest to justify overriding fiduciary confidentiality. A potential security-interest claimant does not, without more, have the status of a beneficiary entitled to disclosure. Disclosure sought to assist foreign insolvency office-holders remains discretionary and may be refused where its cost is unjustified or reciprocal disclosure negotiations provide a realistic alternative.

Lehman Brothers International (Europe) was in administration and held securities on trust for Lehman affiliates under agreements containing provisions which might permit, or require, it to exercise liens securing debts owed to other group companies. The Administrators sought directions concerning the validity, enforceability and priority of those extended liens.

Lehman Brothers Holdings Inc. and Lehman Brothers Inc. sought wider disclosure concerning securities held for other affiliates and security-interest claims. They relied on the need for fair determination of the application, their alleged status as trust beneficiaries, and the court’s discretionary power under section 236 of the Insolvency Act 1986.

1. Applications refused. The disclosure applications by Lehman Brothers Holdings Inc. and Lehman Brothers Inc. were refused.
2. The purpose of the Extended Lien application was to establish the applicable legal principles, not to identify every security or affiliate potentially affected. Effective determination required parties able to present opposing arguments, rather than joinder of every possibly affected affiliate. Disclosure was therefore unnecessary to constitute the proceedings properly.
3. Because the requested information was unnecessary for full adversarial determination, no countervailing public interest justified overriding the confidentiality owed by Lehman Brothers International (Europe) to its Ownership Affiliates.
4. The applicants’ asserted status as potential Security Interest Claimants did not come close to establishing, beyond argument, that they were beneficiaries under the trusts of securities held by Lehman Brothers International (Europe). Although disclosure to a claimant asserting a security interest was discretionary, the interests of the trusts favoured making no order at least until the alleged security interests had been established as proprietary claims.
5. The power under section 236 of the Insolvency Act 1986 was also discretionary. The cost and expense of the requested disclosure did not justify an order at that stage, particularly given the realistic prospect of mutual disclosure within the group. If those negotiations failed, a further application could be considered.