In a judgment handed down last week, the Court of Appeal upheld the decision of Mr Justice Blackburne (previously reported here) that the English courts have no jurisdiction to sanction the proposed scheme of arrangement for Lehman Brothers International Europe (LBIE) insofar as it purports to extinguish rights of beneficiaries under trusts. The Court of Appeal held that the proposed scheme of arrangement did not affect the rights of clients of LBIE in their capacity as creditors of the company, but rather it sought to affect their rights over their own property, which was held on trust by LBIE. As such, the proposed scheme did not fall within Part 26 Companies Act 2006 and the appeal was dismissed.

Unless the decision is appealed to the Supreme Court, today’s ruling will preclude the administrators of LBIE from distributing the assets it holds on trust by means of a scheme of arrangement. It remains to be seen what action will now be taken by the administrators of LBIE in order to distribute the assets as quickly and efficiently as possible.”