Lehman Brothers Europe Ltd v Re Insolvency Act

Under paragraph 98(2)(c) of Schedule B1 to the Insolvency Act 1986, the court may specify when an administrator’s discharge from liability takes effect, including after the administration has ended and the administrator has ceased to hold office. The application may be made by a person with a sufficient interest, including the former administrator. The power is not excluded because the company has entered liquidation. Where the circumstances justify discharge and no objection or arguable claim is raised, the court may grant the order. The usual timing is 28 days after the relevant final report, but the preferable approach is to make the discharge effective by reference to the statutory termination process, so that the administrator has first ceased to be in office.

Lehman Brothers Europe Limited had entered liquidation after a lengthy administration in which all creditors were paid in full and the surplus was distributed to the shareholder. Its former administrators sought orders under paragraph 98(2)(c) of Schedule B1 to the Insolvency Act 1986 fixing the date on which their statutory discharge from liability would take effect.

The discharge had not been addressed by the creditors’ committee or creditors before the committee was automatically disbanded when there were no longer any creditors. The issues were whether the court retained power to act, whether the former administrators had standing after liquidation, whether liquidation affected the exercise of the power, and what timing and costs order were appropriate.

1. The application was granted and the order was approved. The court was satisfied that the matter could properly be dealt with on the papers because notice had been given, no creditor or HMRC objection had been received, the creditors had been paid in full, and an oral hearing would serve no real purpose in the circumstances.

2. Paragraph 98(2)(c) of Schedule B1 to the Insolvency Act 1986 confers a general power on the court to specify when the discharge takes effect. The power is not confined by the terms of the administrators’ appointments or by the fact that the creditors’ committee had ceased to exist. The automatic termination of committee membership under rule 17.11(e) of the Insolvency (England and Wales) Rules 2016 did not prevent the court from acting.

3. A former administrator has standing to apply where he or she has a sufficient interest in the discharge. The former administrators plainly satisfied that requirement. Nothing in paragraph 98 prevents an application after the company has entered liquidation. The reference in paragraph 98(2)(c) to a discharge taking effect “in any case” supports that conclusion, including cases in which the administrator has already ceased to hold office.

4. The court accepted that the power should be exercised where that is appropriate and expedient. In the circumstances, the absence of objections, payment of all creditors, confirmation that no claims were known, and completion of the administration justified the order. The statutory discharge remains subject to the court’s powers under paragraph 75 of Schedule B1.

5. The court followed the approach concerning timing adopted in Re Lehman Brothers Holdings UK Limited (in administration) [2016] EWHC 3552 (Ch), and previously followed in Re Nortel Networks [2018] EWHC 2266 (Ch) and Re Nortel Networks [2019] EWHC 1182 (Ch). The order should reflect the statutory sequence, with the discharge taking effect only after the administrator has ceased to hold office. No departure from the usual costs order was justified.