19/11/2010

Members of chambers involved in the latest development in the administration of Lehman Brothers

In the latest chapter in the administration of Lehman Brothers, Iain Milligan QC, Guy Morpuss QC and Socrates Papadopoulos acting for Lehman Brothers International (Europe) (LBIE) today received Briggs J’s judgment in the proceedings known as “RASCALS”.

RASCALS is a dispute between the principal London based Lehman entity (“LBIE”) and various Lehman affiliates worldwide, as to the ownership of securities which were subject to Lehman inter-company repurchase agreements and stock loans (known as the “RASCALS” process).

The court decided that: (i) after initial acquisition of the securities from the street they were beneficially owned by the affiliates, and not by LBIE; (ii) however, the effect of the RASCALS process was to transfer the beneficial title in the securities to LBIE; and (iii) therefore, upon the collapse of the group, the securities that had been made subject to RASCALS were beneficially vested in LBIE, and not the affiliates.

In deciding whether, after the initial acquisition, securities held in LBIE’s unsegregated house depots were held on trust for the affiliates, Briggs J reviewed the law on certainty of trusts, ultimately applying the much debated decision of the Court of Appeal in Hunter v. Moss [1994] 1 WLR 452.