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

The court exercised its discretion under Paragraph 76(2)(a) of Schedule B1 to the Insolvency Act 1986 to extend the administrations of seven companies within the Lehman group and dealt with applications fixing the time of discharge under Paragraph 98 of Schedule B1. The primary legal principles applied were that extensions should be granted in the interests of creditors where the purpose of the administration remains reasonably likely to be achieved, that liquidation would not be a preferable alternative, and that the court will ordinarily fix a discharge date 28 days after filing of the administrators' final report.

Material grounds for the decision included (i) the practical need to await the outcome of litigation in New York (the AGFP Action) which could affect creditor entitlements and inter-company distributions, (ii) the risk of prejudice to prospective creditors (including statutory interest issues under rule 14.23(7) Insolvency Rules 2016 and the described "lacuna"), (iii) the complex intercompany cashflows among the Lehman entities, and (iv) lack of objection from notified creditors. The court granted the extensions sought for LBIE, Mable, LBL, LBHI2, Eldon and LBH until 30 November 2025, and for LBUKRE until 31 May 2023; it fixed the discharge timing for Storm but adjourned the discharge application in respect of LBUKRE for paper determination later.

Background and parties: This was an application by the current joint administrators of eight Lehman group companies asking the High Court to extend their terms of office under Paragraph 76 of Schedule B1 to the Insolvency Act 1986 and, in two cases, to fix the time of their discharge under Paragraph 98. The companies have been in administration since 2008 and are in distributing administrations. The applications arose in the context of substantial prior realisations and ongoing intercompany claims and litigation.

Nature of relief sought:

• Extension of administrators' terms: generally for three years (LBIE, Mable, LBL, LBHI2, Eldon, LBH) and a shorter extension to 31 May 2023 (LBUKRE); Storm was not to be extended.
• Fixing time of discharge: applications under Paragraph 98(2)(c) for LBUKRE and Storm (proposed to take effect 28 days after filing of final progress reports, save for notified claims).

Issues framed by the court:

• Whether extensions under Paragraph 76(2)(a) were appropriate in the interests of creditors, applying the test in Re Nortel Networks UK Ltd: whether the administration purpose remained reasonably likely to be achieved, potential prejudice to creditors, and creditors' views.
• Whether alternatives, particularly liquidation or returning companies to directors, were preferable.
• Whether the court should fix discharge times under Paragraph 98 and, if so, when (ordinarily 28 days after final report), and whether it was appropriate to fix an unusually remote discharge date for LBUKRE.

Reasoning and findings:

• LBIE: the court accepted that remaining in administration was appropriate because of the pending AGFP Action in New York (a trial judgment expected and possible appeals) whose outcome could create creditor claims affecting distributions; returning LBIE to directors before resolution risked prejudice (including uncertainty over entitlement to statutory interest under rule 14.23(7)) and would not achieve cost or practical advantages.
• Other companies (Mable, LBL, LBHI2, Eldon, LBH): because of complex intercompany flows and dependence on LBIE realisations, the court accepted tying their extension periods to LBIE's extension.
• LBUKRE: the administration was substantially complete and a short extension to 31 May 2023 was granted, but the court declined to fix an unusually distant discharge time at the hearing and directed the discharge application to be stood over to be dealt with on the papers later.
• Storm: the administration was to terminate imminently; the court fixed the discharge timing (subject to a technical drafting preference to link to Registrar of Companies filing) in line with ordinary practice.

Wider context: the court noted the exceptional length of these administrations but accepted that extended distributing administrations can be appropriate where they best protect creditors' interests. The court followed established authorities on the exercise of the Paragraph 76 and Paragraph 98 discretions and on the usual practice of fixing discharge dates 28 days after final reports.

This first-instance judgment granted the administrators' applications for further extensions under Paragraph 76(2)(a) in respect of LBIE, Mable, LBL, LBHI2, Eldon and LBH until 30 November 2025 and granted a shorter extension for LBUKRE until 31 May 2023, on the basis that the administration purpose remained likely to be achieved, liquidation was not preferable, and there was a real prospect that New York litigation (the AGFP Action) and intercompany distributions would affect creditor entitlements. The court fixed the time of discharge for Storm in the usual manner (28 days after the final report/linked to Registrar filing) but adjourned the LBUKRE discharge application to be determined on the papers, citing caution given recent delays with HMRC and the limited cost-saving justification for an unusually remote discharge order.