The parties had entered into complicated financial arrangements effectively providing credit insurance. On the insolvency of Lehman brothers, a claim was made.
Held: The contractual provisions were effective as a matter of English law and, in particular, did not offend the anti-deprivation rule. The Collateral was bought by the Issuer with the money subscribed by the Noteholders. It was not derived directly or indirectly from LBSF. The court should not be astute to interpret commercial transactions so as to invalidate them, particularly when doubt might be cast on other long-standing commercial arrangements. As long as the Swap Agreement was being performed it was appropriate for LBSF to have security for the obligations of the Issuer in priority to security in respect of the Issuer’s obligations to the Noteholders, but the intention of all parties was that the priority afforded to LBSF was conditional on LBSF continuing to perform the Swap Agreement.
If, alternatively, the provisions were capable of offending the anti-deprivation rule, the rule was not engaged because an alternative Event of Default (the Chapter 11 filing by LBHI) had occurred prior to the Chapter 11 filing by LBSF, and consequently the Chapter 11 filing did not deprive LBSF of any property.
Judges:
Sir Andrew Morritt Ch
Citations:
[2009] 2 BCLC 400, [2009] BPIR 1093, [2009] EWHC 1912 (Ch)
Links:
Jurisdiction:
England and Wales
Cited by:
Cited – Butters and Others v BBC Worldwide Ltd and Others ChD 20-Aug-2009
In the insolvency of Woolworths plc, a subsidiary sought to have valued its shareholding in a company in which the defendants were co-shareholders. It was argued that an earlier agreement between them had not be fully superceded by a subsequent one. . .
Appeal from – Perpetual Trustee Company Ltd and Another v BNY Corporate Trustee Services Ltd and Others CA 6-Nov-2009
The court considered the extent of the so-called anti-deprivation rule which would avoid a contract designed to deprive creditors of an asset on the insolvency of a party to the contract. The claimant appealed a finding that the rule did not apply . .
At First Instance – Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd and Another SC 27-Jul-2011
Complex financial instruments insured the indebtedness of Lehman Brothers. On that company’s insolvency a claim was made. It was said that provisions in the documents offended the rule against the anti-deprivation rule. The courts below had upheld . .
Lists of cited by and citing cases may be incomplete.
Banking, Insolvency
Updated: 30 July 2022; Ref: scu.368645