Wentworth Sons Sub-Debt SARL v Lomas & Ors

This is another episode in the saga of the Lehman administrations, reflecting continuing disputes between rival creditors in the multitude of companies still in administration as they seek to obtain for themselves a greater share of the considerable surpluses which have been collected.

By an application notice dated 19 September 2017 (the “Application”) Wentworth Sons Sub-Debt S.Á R.L (“Wentworth”) has applied in the administration proceedings relating to Lehman Brothers International (Europe) (“LBIE”) to challenge the decision of the LBIE Administrators in relation to a proof of debt filed in LBIE’s administration by Olivant Investments Switzerland S.A. (“Olivant” or “OISSA”).

Olivant was a prime brokerage client of LBIE and its relationship with LBIE was governed by a standard form Prime Brokerage Agreement (“the Olivant PBA”). It appears that Olivant was using LBIE, as a prime broker, to build up a substantial shareholding in the shares in the Swiss Bank, UBS AG (“UBS”).

The Olivant PBA contained a ‘right to use’ clause on the part of LBIE, the effect of which was in due course disputed by Olivant. LBIE claimed that the clause enabled it, amongst other things, to use, lend and re-hypothecate securities purchased by LBIE for OISSA. At the time of LBIE’s administration, LBIE had lent Olivant’s shares in UBS to a third party, purportedly pursuant to the ‘right to use’ clause. Some five months after LBIE’s administration, Olivant served a notice of default on LBIE under the Olivant PBA and terminated the agreement.

On 24 July 2012, Olivant asserted claims in respect of alleged losses in relation to the UBS shares. It advanced and calculated its claims on alternative bases: one in the form of a number of proprietary (or related) claims and alternatively as an unsecured claim. These claims ranged in amount from £835,835,748.10 (the highest proprietary claim) to £661,629,793.04 (the unsecured claim).

That unsecured claim of £661,629,793.04 appears to have been based on the value of the UBS shares at the contractual valuation date (24 February 2009), adjusted for the “market impact of [LBIE’s] default”. In that respect Olivant’s position appears to have been that 82% of the fall in the share price of UBS in the period after LBIE’s administration (i.e. between 15 September 2008 and 22 February 2009) was solely due to the failure of LBIE (rather than, for example, the global financial crisis). It treated this as being the “market impact of [LBIE’s] default” within the meaning of the Olivant PBA; as such, it adjusted the stock market price of the UBS shares at the contractual valuation date of CHF 9.85 upwards to reverse the alleged 82% fall, and put forward an adjusted price of CHF 21.06 (which was more than double the actual traded price of the UBS shares on that date).

On 2 November 2012, the LBIE Administrators agreed to compromise all of Olivant’s claims in the sum of £555,250,000; and further to a settlement agreement by way of a Claims Determination Deed (“the Olivant CDD”) the Olivant Proof was partially admitted in that agreed amount (“the Agreed Claim Amount”).

Since then, the Olivant Proof in the Agreed Claim Amount has been traded in the secondary market for LBIE debt. Four funds affiliated with CarVal Investors LLC (“the CarVal Funds”) now have the ultimate economic interest in the Olivant Proof. For present purposes one of the fund entities represents them all: that is, CVI GVF (Lux) Master S.a.r.l. (“CVI”). CVI is a member of the Senior Creditor Group (“the SCG”); and the LBIE Administrators suggest that this application can be viewed as the “latest salvo in the long-running battle between Wentworth and the SCG…to maximise their respective recoveries in the administration of LBIE”.

Wentworth’s application to challenge the decision to admit the Olivant Proof in the Agreed Claim Amount comes almost five years after the execution of the Olivant CDD.

During those five years, there have been a number of developments:

On 30 November 2012, the Administrators paid a first dividend of £139,923,000 to Olivant.

In January 2013, Olivant notified the Administrators that it was seeking to sell its claim to a purchaser in the secondary market for LBIE debt.

On 12 February 2013, Olivant transferred the Olivant CDD and the Olivant Proof to Credit Suisse Loan Funding, LLC (“CSLF”).

On 26 February 2013, CSLF transferred the Olivant CDD and the Olivant Proof to Credit Suisse International (“CSI”).

On 28 June 2013, the Administrators paid a second dividend of £240,423,250 to CSI. On 29 November 2013, the Administrators paid a third dividend of £131,594,250 to CSI.

On 30 April 2014, the Administrators paid a fourth and final dividend of £43,309,500 to CSI.

On 5 December 2016, CSI transferred the Olivant CDD and the Olivant Proof back to CSLF. CSLF remains the legal owner of the relevant claims at the present date.

At some point, the CarVal Funds acquired the ultimate economic interest in the Olivant CDD and the Olivant Proof pursuant to sub-participation agreements governed by New York law.

Wentworth’s application is (as presently framed) made pursuant to Rule 14.8(3) of the Insolvency Rules 2016 (“the Rules”). That, in material part, provides for third party creditors to challenge an office-holder’s decision to admit or reject a proof of debt, in the following terms:

Put shortly, Wentworth’s challenge is based on its perception that (a) Olivant’s proprietary claim for alleged violation of its ownership rights in respect of the UBS shares was misconceived since LBIE was contractually entitled to use the shares; (b) Olivant’s claim for breach of fiduciary duty or care was similarly without foundation because LBIE’s duties were exclusively defined by the relevant agreement; and that (c) the only arguable claim was a ‘close-out claim’ based on the contractual mechanism for valuing claims where the agreement had been terminated (“the Close-Out basis of claim”) so that the level at which the LBIE Administrators had admitted Olivant’s claim was excessively high.

Wentworth contends in that context of the Close-Out basis of claim that:

the fall in the UBS share price in the period following LBIE’s administration was due to the global financial crisis, and certainly not the failure of the Lehman Brothers Group of Companies; in essence, it is contended that, the collapse of the Lehman Group was a symptom of the financial crisis not the cause. There were numerous other major banking and corporate failures at this time;

in any event, the OISSA PBA requires the adjustment (if any) to be limited to the “impact of [LBIE’s] default”, not the impact of the collapse of the wider Lehman Brothers Group of Companies.

Wentworth’s Application seeks a reversal of the decision of the LBIE Administrators pursuant to r.14.8; a revaluation by the Court de novo of the Olivant Proof; a direction to the LBIE Administrators to admit the Olivant Proof for the revalued amount; or such other relief as the Court thinks fit.

It is common ground between the main parties that the Application raises issues of some novelty. It does not appear that the Court has ever determined what approach should be adopted on a third-party challenge against the admission of a proof under Rule 14.8(3) in circumstances where the proof was admitted pursuant to a settlement agreement entered into between the creditor and the company after the commencement of the relevant insolvency proceeding.

Moreover, it does not appear that the Court has ever needed to determine a dispute as to the meaning of the 21-day time limit for bringing an application under Rule 14.8(3), which starts to run from the date when the applicant “[became] aware of the office-holder’s decision”. Since the present Application has been brought almost five years after the execution of the Olivant CDD and the admission of the Olivant Proof in the Agreed Claim Amount, that time limit is of obvious importance. That is particularly so given that in the period of some five years, not only has the Olivant Proof in the Agreed Claim Amount been traded (as previously mentioned) but four dividends in considerable aggregate amounts (more that £550,000,000) have been paid, calibrated by reference to the Agreed Claim Amount.

Thus, as the LBIE Administrators say, the relief sought by Wentworth has the potential to disturb the rights of a number of third parties, several years after the event.

Furthermore, the Application raises inevitably the status and effect, not only of the Olivant CDD, but potentially of all Claims Determination Deeds entered into by LBIE, of which there have been many, in aggregate of very considerable value. To some of these Wentworth and/or members of the SCG are party. In such circumstances, the Administrators are concerned that this Application could merely be the first in a series of similar challenges under Rule 14.8(3). The outcome of this Application therefore has, at least potentially, broader ramifications for the administration of LBIE.

In this regard, the main protagonists are not the only persons interested; and one of the matters before me to consider is the joinder of various other such persons.

Although initially opposed by Wentworth, at the hearing before me it was no longer disputed that CVI, on behalf of all the CarVal Funds, though not legal owners, should be joined as respondents in light of their economic interest in the outcome. It no longer being opposed, I accede to a joinder application dated 23 November 2017 made by CVI. CVI and Olivant (together “the CVI Entities”) support the LBIE Administrators’ position.

Until recently, it had been common ground that CSLF, as the current legal owner of the Olivant Proof, should be joined as a respondent to the Application. The joinder of CSLF was originally proposed by the Administrators, and had been agreed by the CVI Entities and Wentworth.

It had also been common ground that CSI, as the former legal owner of the Olivant Proof, should be joined as a respondent to the Application. As explained above, CSI has received substantial dividends on the Olivant Proof (amounting to approximately £415 million). If the Application is successful and the LBIE Administrators are directed to admit the Olivant Proof for less than the Agreed Claim Amount, then CSI may be liable to repay some of the dividends which it received. This follows from Rule 14.40(4), which provides:

It follows that CSI has a clear interest in the outcome of the Application. The joinder of CSI was originally proposed by the LBIE Administrators, and had been agreed by Olivant and Wentworth. However, CSLF and CSI then indicated that they do not consent to being joined to the Application. In summary, CSI and CSLF contend that it is not necessary for them to be joined as parties at the present time (given the early stage of the proceedings and the possibility of the Application being dismissed as a result of the Court’s determination of certain preliminary issues to which I shall turn shortly), although they expressly reserved the right to be joined in the future. Suffice it to say for the present that the eventual outcome to all this is that CSLF and CSI have agreed by letter, clarified by further discussions to be recorded formally, that they will be bound by the result in relation to the preliminary issues. I am content with that.

The parties represented before me have thus been (1) Wentworth, represented by Mr David Allison QC and Mr Sharif Shivji of Counsel, instructed by Kirkland & Ellis International LLP (“Kirkland”); (2) the LBIE Administrators, represented by Mr Daniel Bayfield QC and Mr Ryan Perkins of Counsel, instructed by Linklaters LLP (“Linklaters”); and (3) Olivant and the CarVal Funds represented by Ms Sonia Tolaney QC and Mr Richard Fisher of Counsel, instructed by Boies Schiller Flexner (UK) LLP (“Boies Schiller”). Their respective arguments, written and oral, have been of great assistance. In this judgment I focus on the arguments of the main protagonists: but this does not signify that I have not taken into account also the helpful arguments advanced on behalf of Olivant and CVI.

In addition, another person allegedly interested, namely Lehman Brothers Opportunity Holdings Inc (“Opportunity Holdings”), which purports to have an admitted claim of £2,128,045 has, very belatedly, also sought to be joined. I shall return later to that joinder application, which was not made until 26 November 2017 and thus on short notice, and has been contested.

The hearing to which this Judgment relates was the first Case Management Conference in the matter. I should make clear that the resolution of Wentworth’s substantive challenge was not a matter for this hearing. The matter is only at an early stage of directions; and the issues presently for determination are essentially case management issues raised in the course of a full day’s Case Management Conference. I have set out the background at some length because it is of relevance to the issues I now have to determine; but I emphasise that the substantive issues remain for future resolution.

What I am concerned with now is the question raised as to what is likely to be the most efficient manner of their resolution in all the circumstances I have described. More particularly, the principal issue now in dispute is whether the Court should (as the Administrators propose, and as Olivant and the CarVal Funds agree, but Wentworth opposes) direct the trial of certain preliminary issues (the “Preliminary Issues”), or whether (as Wentworth proposes) the Application should instead be determined at a single trial of all issues.

The Court’s power to order the trial of distinct preliminary issues is undoubted. CPR r.3.1 expressly provides that “Except where these Rules provide otherwise, the court may … (i) direct a separate trial of any issue.”

But it is, I think, appropriate to acknowledge at the outset that preliminary issues often look more appealing and definitive in the early days of a case than when they come on later to be adjudicated. That which appeared to be conclusive, when a preliminary issue was directed, is not infrequently subsequently revealed to raise further questions; and that which appeared to be capable of discrete determination is often found later to be inextricably linked to issues whether of fact or law or both which cannot safely and satisfactorily be summarily determined.

Furthermore, where the issues are of both novelty and importance, the prospect of appeals is real; and a bifurcated process may result, with the preliminary issues on appeal and the trial which may or may not become necessary, being stalled in the meantime. It is a truism that preliminary issues are often a source of regret, as being an apparent short cut to what turns out to be a longer journey in the end.

The authorities are replete with such experiences, and with warnings in consequence at the highest level as to the need for exercising the power to order preliminary issues “with caution” and “sparingly” (see, for example, Wrottesley v HMRC[2015] UKUT 637 (TCC) at [28]). In Tilling v Whiteman [1980] A.C. 1, Lords Wilberforce and Scarman joined in the following statement:

In Steele v Steele [2001] C.P. Rep. 106, Neuberger J (as he then was) examined in detail the questions which must necessarily arise in considering whether the determination of a preliminary issue is appropriate. In summary, these were:

First, would the determination of the preliminary issue dispose of the case or at least one aspect of it?

Second, would the determination of the preliminary issue significantly cut down the cost and time involved in pre-trial preparation or in connection with the trial itself?

Third, where as here the preliminary issue was one of law the Court should ask itself how much effort would be involved in identifying the relevant facts.

Fourth, if the preliminary issue was one of law to what extent was it to be determined on agreed facts?

Fifth, where the facts were not agreed the Court should ask itself to what extent that impinged on the value of a preliminary issue.

Sixth, would determination of the preliminary issue unreasonably fetter the parties or the Court in achieving a just result?

Seventh, was there a risk of the determination of the preliminary issue increasing costs and/or delaying the trial?

Eighth, the Court should ask itself to what extent the determination of the preliminary issue may turn out to be irrelevant.

Ninth, was there a risk that the determination of the preliminary issue could lead to an application for the pleadings to be amended so as to avoid the consequences of the determination?

Tenth, taking into account the previous points, was it just to order a preliminary issue?

Although when in passing at the hearing I referred to these guidelines as the “Ten Commandments”, Counsel for the LBIE Administrators understandably and correctly warned against treating them as written in stone. That said, the ten points provide useful criteria and a useful reminder of the caution and care to be exercised.

However, the caution required should not be such as to oust the use and utility of preliminary issues where, on the best judgment that can be made at the time, their direction appears appropriate. Especially, as it seems to me, where there are limitation or other time bars potentially in issue, the purposes of the time bar may only really be fulfilled by early determination of its application; and/or where there are points of law which it does appear could, if determined, determine the case, with considerable saving of time and cost, the machinery available is salutary.

Moreover, other more amorphous considerations may militate in favour of seeking early determination, even at some risk that it may not in the end achieve the result envisaged. For example, where there are real signs that the case may be being deployed as a means of introducing a multi-year period of uncertainty to put commercial pressure on those denied their entitlements in the meantime, or where there are quasi-systemic issues which will generate uncertainty and possible dislocation until their determination.

In the present case, there is a time bar; there is a commercial imperative for speedy resolution if practicable, fair and satisfactory as a means of lifting the pall of uncertainty which litigation brings; and the LBIE Administrators have identified apparently discrete issues of law which could be decisive and could make unnecessary a very considerable factual enquiry and contest. Against that, the issues are agreed to be novel, raising the spectre of appeals; and the preliminary issues are not clean points of law, and cannot be said to require no evidence for their adjudication. In other words, and not exceptionally, there is a balance to be struck; and caution may be the tie-breaker.

In striking the balance, I turn more precisely to identify and then to address the preliminary issues proposed under two main headings: (1) what the LBIE Administrators describe as “the CDD Issues” and (2) what they describe as “the Timing Issues”. As their descriptions suggest, these two categories refer respectively to the issues as to (1) the effect of the fact that the Olivant Claims were compromised in the Olivant CDD and the Olivant Proof was partially admitted on the basis of that compromise and (2) whether the time bar in Rule 14.8(3) precludes the pursuit of Wentworth’s claim.

Two preliminary issues are proposed by the LBIE Administrators in relation to the Timing Issues (numbered one and two, since they are both, being time bar matters, the threshold questions) and three in relation to the CDD Issues (numbered three, four and five). For reasons which will emerge, I think it is most convenient to deal with the CDD issues first.

The Olivant CDD appears on its face to be a binding agreement between Olivant and LBIE, apparently comprising a final compromise of Olivant’s claims and Olivant’s agreement not to pursue a proof otherwise than in accordance with it.

The Olivant CDD is not exceptional. CDDs have been used extensively in the LBIE administration. As in the case of the other CDDs, LBIE entered into the Olivant CDD through the agency of the LBIE Administrators, in the exercise of their statutory powers under paragraph 18 of Schedule 1 to the Insolvency Act 1986 (which empowers the LBIE Administrators to “make any arrangement or compromise on behalf of the company”).

In his 14^th witness statement, one of the LBIE Administrators, Mr Russell Downs (“Mr Downs”), explains that there are approximately 1,800 CDDs with an aggregate quantum of approximately £10.9 billion. Mr Downs explains further that:

The Olivant CDD (like other CDDs) contains provisions apparently designed to this end. Thus, Clause 2.1 of the Olivant CDD provides:

It is on that footing the LBIE Administrators submit that whatever claims Olivant may have had prior to the execution of the CDD, the only claim which Olivant had after the execution of the Olivant CDD was for the Agreed Claim Amount.

It is the LBIE Administrators’ case that the proposition on which Wentworth’s application is founded, to the effect that the Olivant Proof was admitted in the wrong amount, is fatally flawed, for the simple reason that since the Agreed Claim Amount is the contractually agreed sum for which Olivant had compromised its claims against LBIE pursuant to the Olivant CDD, once the Olivant CDD was executed, the Administrators did not have any discretion to admit the Olivant Proof for a lesser (or greater) amount. The LBIE Administrators submit that they were required to admit the Olivant Proof for precisely the amount to which Olivant was contractually entitled under the CDD: nothing more, and nothing less. There being no challenge to the Olivant CDD, the LBIE Administrators go on, there can be no challenge to the Olivant Proof for the Agreed Claim Amount.

On that footing the LBIE Administrators seek a negative answer to the following proposed preliminary issue (numbered three for reasons which will emerge later) as a means of exposing, both in this particular case and for the purposes of any other similar challenges, what they contend is the fundamental legal flaw in Wentworth’s application:

If the answer is “no”, as the LBIE Administrators urge it should be, Wentworth’s application must fail. But Wentworth argues for a “yes” answer. Briefly put, it contends that the existence of the Olivant CDD does not preclude the Court from directing the Administrators to admit the Olivant Proof for a sum less than the Agreed Claim Amount. It submits that (1) the true characterisation of the Olivant CDD is that it comprises in effect a determination of Olivant’s proof rather than a compromise of its claims; and even if it is to be characterised as a compromise (2) the LBIE Administrators cannot contract out of the proof regime contained in the Rules and the Olivant CDD cannot deprive a creditor such as Wentworth of its right to challenge the proofs of other creditors under Rule 14.8(3).

Further, in what Wentworth depict as “the unlikely event that the OISSA CDD is found to represent an effective contracting out by the Administrators of the proof regime including the power to challenge the admission of a proof under r.14.8”, Wentworth submit in the alternative that the Court would still be able to review the Administrators’ decision to enter the OISSA CDD and unwind it if appropriate; whether under r.14.11 of the Rules, or para 74 of Schedule B1, or (as a last resort) the Court’s inherent jurisdiction. Wentworth conceded that none of these avenues had been pleaded or relied on by it previously; but (especially given the ninth criteria in the Steele case (supra)) it foreshadowed that it could wish to amend in the future, and the Court had to bear the substance of the points made in mind in assessing the conclusiveness of the preliminary issue in question.

Wentworth also submit that in none of the alternative avenues of challenge would it be necessary for them to overcome the high hurdle of establishing irrationality or perversity on the LBIE Administrators’ part: for the purposes of rule 14.11, it submits, relying on Re Global Legal Services Ltd [2002] BCC 858 at 862, the test is whether the proof has been “improperly admitted”, which does not connote opprobrium and should not be glossed to require further proof than error; and for the purposes of para 74 of Schedule B1 the test is “unfair harm”, which likewise (citing Hockin and others v Marsden and anr [2014] Bus LR 441 at paras. 15 and 16) is not to be read as requiring proof of irrationality or perversity either. As to the inherent jurisdiction of the court as asserted by Wentworth (though without citation of precedent), that was at large.

Accordingly, Wentworth submits, its challenge could be mounted on the same factual basis on three alternative grounds, even if rule 14.8(3) was not available, thus nullifying the utility of the Preliminary Issue proposed.

Whilst rejecting the availability of these alternative avenues or ways around any unavailability of rule 14.8(3), both on the ground that they had so far not been pleaded and on the ground that rule 14.8(3) should be regarded as the designated and exclusive means of challenge to a decision on a proof, Mr Bayfield also made the point on behalf of the LBIE Administrators that it is inconceivable that if the Court were to determine that the criteria of the dedicated rule (rule 14.8(3)) were not satisfied so that the application failed by reference to that rule, nevertheless the Court would rescue the applicant by deploying the less obvious rule (rule 14.11) and determining the admission of the proof at the value stated to be improper. That was particularly so given the express time bar in rule 14.8(3) which would be rendered nugatory if rule 14.11, which contains no such bar, were available in the alternative in any event.

As to the second alternative, posited by Mr Allison but not pleaded, of reliance on paragraph 74 of Schedule B1, Mr Bayfield made the additional point that Wentworth would only have occasion to resort to that if neither of the rules relating to proofs was available; that paragraph relates to some act of the administrator (past, present or proposed) and the act which would have to be impugned under that paragraph would be the LBIE Administrators’ act in entering into the Olivant CDD which bound them into acceptance of the partial proof. Mr Bayfield did not, for the present at any rate, feel the need to question the authority of Hockin v Marsden (supra) or more particularly the decision of Nicholas le Poidevin QC in that case that the test of “unfair harm” laid down in the paragraph is “to be applied without further gloss” and is not to be read as subject to a test of perversity or the like. Put shortly, Mr Bayfield’s point, was that it is not “unfair” for an administrator to exercise his undoubted power of compromise, provided he does not trespass outside the confines of that power: and it is well established that the confines of the power is that it must be exercised for proper purposes and not utterly unreasonably or perversely (see Re Edennote Ltd [1996] BCC 718 at 722). No such perversity or unreasonableness was pleaded, nor was there any potentially sustainable ground put forward for such a plea.

Lastly in this context, Mr Bayfield rejected as without any foundation in principle or precedent the suggestion of some overriding inherent jurisdiction, enabling the Court to fly free of any impediments express or implied in the statutory rules primarily relied upon.

Accordingly, Mr Bayfield commended Issue 3 as having, despite Wentworth’s unpleaded and unparticularised attempts to suggest it could be finessed, a real and solid likelihood of enabling the substantive application to be adjudicated fairly without a full trial of the substantial evidence which would otherwise be required. Its determination would also provide guidance, perhaps conclusive guidance, to other creditors who might be thinking of challenging other CDDs. That, in my view, is not unimportant: such challenges could destabilise and delay the administration processes.

Recognising, however, that the Court is likely to be wary of deciding that point now in the course of a case management hearing, and in case for that or some other reason the LBIE Administrators were not to get the negative answer to Issue 3 which they confidently expect, they have proposed the fall back of Issue 4.

Issue 4 is proposed to be stated as follows:

As explained on behalf of the LBIE Administrators, unlike Issue 3, Issue 4 is not capable of disposing of the Application. However, if Issue 3 does not dispose of the Application, the LBIE Administrators propose and commend Issue 4 as being calculated to assist in the fair, orderly and efficient determination of the dispute, providing necessary guidance as to the approach to be taken by the Court at the final hearing, which will inform the parties’ evidence and submissions.

Again, Wentworth reject the issue as having no utility, and in any event as being premature in the absence of a defence and the pleaded articulation of the LBIE Administrators’ position. It would be (though I should acknowledge that this is my somewhat colloquial depiction and not theirs) to set the ground rules before identifying the game. Mr Allison described the question raised as “entirely abstract” and “not true preliminary issues (since they do not dispose of the case or any aspect of it)”, raising (he suggested) “the obvious risk that the Court would have to litigate the issues twice, once in the abstract and again on the facts.”

Mr Allison raised the same objections to the last of the CDD Issues, numbered five.

The LBIE Administrators proposed the following issue:

Like Issue 4, Issue 5 is ancillary to Issue 3, and its adjudication would only be necessary if the answer to Issue 3 is “yes”, contrary to the LBIE Administrators’ submissions. They explain its intention as being to provide clarification on the type of relief which the Court is able to award, and also to shine a light on the repercussions of the answer to Issues 3 and 4 on which Issue 5 is premised.

The LBIE Administrators presented the significance of Issue 5 as twofold. If a challenge under Rule 14.8(3) can be used as a mechanism to re-examine the true value of a claim which has already been compromised under a binding settlement agreement, then the true amount of the creditor’s claim could theoretically be found to be more or less than the settlement amount. Taking these possibilities in turn:

If the Court concludes that Olivant’s claim is worth less than the Agreed Claim Amount in the CDD, the question arises whether the Court should direct the LBIE Administrators to admit the claim for that lesser amount. Given that clause 2 of the CDD (quoted in paragraph [42] above) requires Olivant’s claim to be admitted for the Agreed Claim Amount, it could be argued that the Court should not direct the LBIE Administrators to reduce the admitted amount of the Olivant Proof.

If the Court concludes that Olivant’s claim is worth more than the Agreed Claim Amount in the CDD, the question arises whether the Court should direct the LBIE Administrators to admit the claim for that greater amount. Once again, given that clause 2 of the CDD (quoted above) requires Olivant’s claim to be admitted for the Agreed Claim Amount, it could be argued that the Court should not direct the LBIE Administrators to increase the admitted amount of the Olivant Proof.

The Court would then have to compare the two positions, asking itself, for example, whether it can be right that Olivant’s Proof can only be revised downwards, but not upwards, on a challenge under Rule 14.8(3).

If it is possible that the LBIE Administrators could be directed to admit the Olivant Proof for more than the Agreed Claim Amount, this may have wider implications regarding whether and how the LBIE Administrators can reserve for such increased claims.

More generally, the LBIE Administrators suggest and no doubt intend that Issue 5 may assist the Court in determining whether the Application is bound to fail by reason of the Olivant CDD by drawing attention to the issues which arise if the Court goes behind the terms of the settlement reached between LBIE and Olivant.

As briefly indicated above, Wentworth sought to dismiss the utility and appropriateness of Issue 5, as (a) not involving pure law but rather, being likely to involve factual exegesis that had as yet not even been described and could not presently fairly be confined; (b) involving both substantial duplication for the Court and inappropriate fettering of the parties, especially if the Court was asked to consider those questions in the abstract; and (c) by its nature not being capable of determining the matter, but instead envisaging findings on the law before the facts are established, which would be unwise and carry “the serious risk of imposing an inappropriate fetter on the parties”.

Counsel for Wentworth and Counsel for the LBIE Administrators then sought to apply to the three CDD Issues the criteria set out in Steele v Steele from their different perspectives. They urged opposite conclusions on every one of them.

Thus, as to the first criterion, the LBIE Administrators submitted that Issue 3 was a discrete point of law plainly capable of having a dispositive effect (if the answer is “No”), and Issues 4 and 5 (if they arise) though not having a dispositive effect, would have to be determined sometime and could helpfully determine the proper scope of any future trial. Wentworth, on the other hand, submitted that Issue 3 would require an investigation into and consideration of the nature of Olivant’s claims and whether they were compromised and on what basis, so that “it is doubtful that the enquiry into Issue 3 would offer any shortcut to a full hearing…”; and dismissed Issues 4 and 5 as abstract questions, and not proper preliminary issues at all.

As to the second criterion, the LBIE Administrators submitted that the determination of the CDD Issues would significantly cut down the cost and time involved in connection with the final trial. A single trial of the Application (without preliminary issues) would be a very complex, time consuming and expensive exercise. In addition to determining all of the issues which the LBIE Administrators suggest should be determined as preliminary issues (but not on a preliminary basis), the parties would need to prepare for a trial involving the Court determining both the reasonableness of the LBIE Administrators’ decision and the value of Olivant’s claim de novo, so as to cater for the possibility that each of those alternatives is the right approach under Rule 14.8(3).

As to the second (de novo) approach alone, given the value of Olivant’s claim (on any view, hundreds of millions of pounds) and its obvious complexity, they suggested that many days of Court time would be required. In that regard they referred me particularly to the following extract from the evidence of Mr Kon Asimacopoulos (“Mr Asimacopoulos), the partner at Kirkland & Ellis having (as I understand it) conduct of the matter for Wentworth: (Footnote: ¹)

The assertions made by Mr Asimacopoulos seem to raise fundamental questions of macroeconomics, which could in effect require the Court to determine the cause of the global financial crisis, and the extent to which particular events (including the insolvency of LBIE, the insolvency of the Lehman Group generally, the collapse of various Icelandic banks and even the collapse of the US automobile industry) contributed to a decline in the value of shares issued by a Swiss bank. The LBIE Administrators submitted that it is hard to conceive of a more factually complex inquiry, which raised difficulties likely to be compounded by the unclear language of the IPBA itself, which provides for the Default Market Value to be “adjusted for the market impact of such default by LBIE acting in its absolute discretion”, words which are open to a number of possible interpretations, and the correct construction has not previously been determined by the Court.

In the round, the LBIE Administrators estimated that a full trial would be likely to take up to 13 to 14 days, and possibly longer, to be compared to an estimate for all the Preliminary Issues (one to five) of 3 to 5 days.

Wentworth, on the other hand, submitted that the “issues arising on the Application are focused and narrow in nature”, the determination of which would revolve around expert evidence focused on “the impact of LBIE’s default” on the market for UBS shares. Notwithstanding Mr Asimacopoulos’s evidence, Wentworth insisted that it did “not consider that the resolution of that question will involve extensive Court time”, though Mr Allison did concede it might be appropriate to add a further few days (5 was suggested) to their initial estimate of just three to four days.

Wentworth also submitted that what the LBIE administrators proposed, and the bifurcation of issues it entails, would create additional work, for example, in seeking to isolate the facts relevant to the Preliminary Issues and agreeing those facts.

The third, fourth and fifth criteria all relate to whether the preliminary issue concerned is one of law, and if so how much effort would be required to identify the relevant factual matrix in which it is to be decided (criterion 3); whether any factual context can be agreed (criterion 4); and if not, whether the disagreement or extent of the factual issues in dispute are such as to impinge on the value of the preliminary issue and the wisdom of seeking to determine it (criterion 5). On each there was, yet again, a complete difference of view between the main parties.

The LBIE Administrators presented the CDD Issues as pure matters of law in which little or no effort would be involved in identifying the relevant facts. They submitted that the only relevant fact is that Olivant and LBIE entered into a CDD, which is common ground between the parties: and that all of the evidence relating to the function of CDDs has already been produced by the LBIE Administrators in previous proceedings before the Court. They dismissed as a bad point Wentworth’s suggestion that there may be a factual dispute as to whether the Olivant CDD is in fact a binding compromise agreement, there being no room for serious doubt that the Olivant CDD, which was executed as a deed, includes a number of mutual releases in the usual way, and was negotiated through a process of give-and-take, is a binding compromise agreement, constituting a “compromise or arrangement” within paragraph 18 of Schedule 1 to the Insolvency Act 1986. (They cited as to the meaning of that phrase under the companies legislation NFU Development Trust Ltd[1972] 1 WLR 1548.) In any event, as to the fourth criterion, they further submitted that it should be possible to determine the CDD Issues on the basis of agreed facts, assuming constructive engagement such as the Court was entitled to expect, especially from its own officers. Accordingly, they submitted, the fifth criterion did not arise: any issue as to whether the Olivant CDD constitutes a “compromise” would be discrete and swiftly determined according to its terms, there being no fact-based suggestion of sham or that the document is other than it purports to be.

Wentworth disagreed. It portrayed the CDD issues as plainly involving mixed fact and law of a nature “rarely suitable for preliminary determination” (citing Wrottesley (supra) at [28]). Their elaboration of the factual issues said to be in dispute and incapable of sensible agreement was, however, slim: in their long skeleton argument they confined themselves to the suggestion that “Issues 4 and 5 may also involve factual elements”, and that since the LBIE Administrators had not yet identified which facts are common ground and which in dispute, the Court could not sensibly determine the appropriateness of directing any preliminary issues at all.

The sixth criterion is intended to direct the Court’s attention to whether the direction and determination of a preliminary issue might cut down the flexibility at trial and unreasonably fetter either of the parties, or indeed the court, in identifying a way of putting the case which fits the more complex and nuanced concatenation of facts which can be revealed after evidence at trial and in thereby achieving a just result.

The LBIE Administrators submitted that there is no such risk in the context of Issues 3, 4 and 5. Unlike the issues which Neuberger J felt might arise in Steele, and in particular the possibility of a different characterisation of the cause of action becoming appropriate according to the facts when fully unveiled, the issues are discrete and admit of no alternative characterisation.

Wentworth, on the other hand, suggested that it was simply too early to tell, and submitted that there was inherently a serious risk of duplication and/or inappropriate fettering in circumstances (such as they say obtain presently) where the issues have not yet been defined. Mr Allison again cited Wrottesley at [28]. Wentworth contended also that Issues 4 and 5 would at once not be determinative and yet potentially introduce, in effect, a straight-jacket revealed by fuller facts to be inappropriate and potentially unjust.

The parties were in disagreement as regards criterion 7 also. The LBIE Administrators urged that it is not likely that the determination of the CDD Issues would increase the overall costs of the dispute or materially delay the trial date: On the contrary, the determination of the CDD Issues might avoid the costs of the underlying dispute in their entirety and, even if they do not achieve this, the answer to Issue 4 will ensure that the parties take the correct approach to contesting the underlying dispute, which is likely to lead to a net saving in costs. In any event, they suggested, the costs of determining the CDD Issues will have to be incurred, regardless of whether they are determined as preliminary issues or as part of a single trial.

Wentworth urged the opposite: it submitted that there is clearly a serious risk that a separate trial of Preliminary Issues would lead to a substantial expansion of the timetable, delay for all involved and an increase in costs, both at first instance and in light of the real possibility of appeals. Wentworth pointed out that the LBIE Administrators envisage at least two CMCs before the hearing of the Preliminary Issues as well as at least one round of position papers. Wentworth seemed to suggest that the need for multiple CMCs would be avoided if there was a single trial; and it originally (in its Skeleton Argument) posited that such a composite trial “could be heard before the end of summer term 2018”, though this was always unlikely, and confirmed on inquiry of Listing to be impossible, especially in light of Wentworth’s concession that its time estimate was considerably too short.

As to the real possibility of appeals, that too could lead to further delay, especially if Wentworth succeeds ultimately and a further trial becomes necessary. Once more, Wentworth stressed the warning in Wrottesley (at [28])against this risk of separate appeal on a preliminary issue, leading to interruption of the trial process and delay in the round.

The eighth criterion is whether the determination of the preliminary issue may afterwards be demonstrated to have been unnecessary or even irrelevant. As will already be apparent, the LBIE Administrators submitted that there was no realistic danger of this, since all three proposed issues would have to be addressed in any event, even if Wentworth were to be permitted to amend to seek to finesse the Application by relying on Rule 14.11 or paragraph 74 of Schedule B1 (or for that matter, the inherent jurisdiction of the Court). Wentworth submitted to the contrary, intimating that it would indeed seek to rely on these provisions in the alternative, by amendment.

That leads to the ninth criterion, and an assessment of the risk that the parties could apply to amend their pleadings in order to avoid the consequences of a determination of a preliminary issue.

The LBIE Administrators submitted initially that this did not arise; but they acknowledged that by letter from Kirkland dated 24 November 2017 (the Friday before the hearing on Tuesday 27 November) Wentworth had indicated as follows:

I have already addressed these other provisions. No amendment has yet been sought; and the precise circumstances in which it is suggested the alternative routes round rule 14.8(3) suggested might be available has not been fully explained. However, it is accepted that I cannot, here and now, rule out the possibility of such amendments (see per Neuberger J in Steele at page 13); nor can I determine definitively whether any of these other alternative routes might be available on the facts as they are developed. In some ways, this appeared to me to be Wentworth’s strongest point, though its prospective and undefined quality did not assist it.

Last of the criteria, criterion 10, requires the Court to stand back and consider whether, taking all the circumstances into account, it is just and appropriate for the CDD Issues to be determined as preliminary issues. Predictably, the LBIE Administrators submitted it was, Wentworth submitted that it was not.

I turn to my assessment of these competing submissions as regards Issues 3, 4 and 5, using the Steele criteria as my reference point.

Plainly, Issues 4 and 5 are dependent on Issue 3: neither could be justified as a self-standing preliminary issue, but both may be usefully determined at the same time as Issue 3. Accordingly, the real question is whether Issue 3 should be approved for preliminary determination.

There seems to be no doubt that, if answered in the negative, Issue 3 would be dispositive of the entire claim (criterion 1), subject only to the possibility of the answer being finessed by resort (by amendment, or further to some other claim by another creditor) to Rule 14.11 and/or paragraph 74 of Schedule B1 and/or the inherent jurisdiction of the Court.

The possibility of such amendment or further claim has concerned me: I have described it (albeit in the context of criterion 9, though Neuberger J himself recognised the criteria do overlap) as perhaps Wentworth’s strongest point, even though the alterations to the basis of Wentworth’s application are as yet only intimated and inchoate.

However, without pre-judging any application to amend or further claim when made, there is no doubt to my mind that the Court would think long and hard about permitting such an amendment, given the effluxion of time, and the (albeit) rebuttable presumption that the specific Rule is that which should exclusively be applied. In this regard, Mr Bayfield referred me to a decision of David Richards J (as he then was, and when he was the designated Lehman judge) in another Lehman matter concerning an applicant called Contrarian Funds LLC (“the Contrarian case”) [2014] EWHC 1687 (Ch). In the Contrarian case, the judge especially emphasised (at [42-43]) that “it is vitally important to the conduct of the administration that the momentum in dealing with claims is maintained” and that the Court would be likely to adopt a strict approach to late claims accordingly.

Further, and in any event, I agree with the LBIE Administrators that the question raised by Issue 3 as to the effect of the Olivant CDD and whether the compromise on its face appears to represent can nevertheless be set aside under Rule 14.8(3) on the footing that such a compromise cannot oust a challenge to a proof is an important one which will require adjudication in any event. The adjudication of the issue at a preliminary stage will be conclusive as to an important element of the claim (and the only one presently advanced); and it is potentially decisive (the test in McCloughlin v Jones [2001] EWCA Civ 1743 at [66]).

I mentioned also the possibility of introducing a further Preliminary Issue to determine the availability or not of what I have described as other Insolvency Act (Rule 14.11 and paragraph 74 of Schedule B1) ways round Rule 14.8(3). Counsel for the LBIE Administrators appeared receptive in principle, whilst correctly cautioning that the possibility of even these ways being end-run by a claim to unsettle the decision to enter the CDDs themselves as perverse or wholly unreasonable cannot be catered for. I have taken some account of the possibility, but it has weighed only very lightly in my assessment since it is premature to reach a view before any amendment (which might only be permitted on terms as to summary adjudication).

The second criterion involves a comparison of the time to be taken on the adjudication of the preliminary issue(s) and the realistic time estimate for any composite trial, as well as an assessment as to the utility of any determination of the preliminary issue(s) in terms of there being, if not conclusive of the whole claim, likely to cut down the scope of any further trial.

I am in little doubt that a composite trial would be a long and complex one. Despite the efforts of Counsel to draw back from Mr Asimacopoulos’s description of the fascinating, but extremely wide-ranging and complex questions of macro-economics which he considered would need assessment, I think I must proceed on the footing that the need for such an assessment is by no means unlikely. That is so, especially, in light of the curious wording and effect of the language in relevant part of the Olivant PBA.

I agree with the LBIE Administrators that it is hard to conceive of a more multi-layered and factually complex inquiry than to determine the cause of the devastating financial crisis of 2008 and its impact on particular investments and instruments. The expense, and investment of professional and court time, would be very considerable indeed (the LBIE Administrators’ estimate of 13 to 14 days seems to me if anything optimistic); and if it eventuates will cause the already record-breaking length of the Lehman administrations to be extended yet further.

The determination of Issue 3 in the negative could avoid the need for any such inquiry. And if the answer is otherwise, the determination of Issues 4 and 5, though not of themselves determinative of the claim, would be likely at least to define and confine the areas of evidential dispute.

Furthermore, my own enquiries confirm the indications provided by the parties that a 4 to 5-day hearing of all five preliminary issues before me (as the designated judge for issues arising in the Lehman administrations) could take place at any time between June and October 2018, whereas I could not myself hear a composite trial of 13 days or more until mid-2020, and there are difficulties and disadvantages of introducing another Judge (any earlier date not being guaranteed even if they may be overcome or accepted as necessary).

As regards the third criterion, in its application to the three CDD issues proposed, I accept (subject to paragraph 102 below) the LBIE Administrators’ analysis and conclusion that the CDD issues are matters of law requiring little or no evidence and justifying little if any dispute as to the factual context in which they are to be decided. I would not expect there to be any real difficulty, if a constructive approach is adopted as I would require, in agreeing a short statement of agreed facts. If, despite best efforts, that confidence is misplaced on concrete grounds, I can always hear further argument on the point and assist in its resolution.

Whether Issue 3 can provide a “succinct, knockout point” (as was thought necessary in Wrottesley) is a matter of impression and degree. The general consensus that all five issues could be determined in 4 days tells in favour. My own assessment presently is that, by comparison with the alternative it is succinct and it is capable at least of resulting in a knock out.

Similarly, I accept the LBIE Administrators’ analysis and conclusions in relation to criteria three, four and five. I consider the difficulties and complexities envisaged and then espoused on behalf of Wentworth to be likely to be more imagined than real if every reasonable effort to overcome them is deployed, as it must be.

I consider the likelihood of the preliminary determination of the CDD Issues resulting in substantial duplication for the Court and inappropriate fettering of the parties fairly remote. The findings of law on the basis of fact that I consider should be capable of agreement would be salutary not dangerous. The difficulties with which Neuberger J was contingently confronted in Steele seem to me unlikely to arise: the CDD Issues are not susceptible to the sort of re-characterisation Neuberger J felt bound to take into account. I do not think adjudication by way of preliminary issue of Issues 3 to 5 carries a real risk of an unjust result, even if Issue 3 is answered in the negative. Accordingly, I do not consider that criteria five and six, which seem to me ordinarily to be twinned, militate against directing their preliminary determination.

I have asked myself, in accordance with criterion seven, whether the determination of the preliminary CDD issues might be a short cut leading to a longer journey in the end and increased costs. I do not think this likely. Indeed, it seems to me to be unlikely that the second trial, even if it becomes necessary would be much delayed, or the total costs to be prohibitively greater (though I accept that two trials will almost always be more expensive than one). On the other hand, early resolution or exposure of some flaw in the approach of either side may well encourage early settlement, particularly given the professional and statutory responsibilities of the LBIE Administrators concerned. That could substantially cut costs and delay, and is a factor which Neuberger J suggested might also be taken into account, as I do; and it is a factor which does something to address the risk of appeals, which has weighed with me, but which I consider to be outweighed by the other advantages, especially give the likely delay before a second trial.

As to the ninth criterion, I agree with the LBIE Administrators also that the adjudication of CDD Issue 3 is unlikely to be irrelevant: it will almost certainly have to be determined in any event. Wentworth advanced no argument against that, though (as previously considered) it did intimate it might deploy other routes around any negative answer to the Issue as proposed.

Lastly, I have sought to stand back from the individual criteria, reminding myself that they are not written in stone and provide guidance not mandatory application and that in the end, there can be no absolute certainties and the ultimate balance is between competing risks and potential advantages. Having done so, I am satisfied that the balance is clearly in favour of directing the CDD Issues to be heard as preliminary issues.

I provisionally consider that (so far at least as they relate to the CDD Issues) the directions proposed by the LBIE Administrators, and, in particular, the provision for the exchange of position papers as in other Lehman matters, will facilitate that task, but will hear argument if there is a dispute.

I must turn now to Issues I and 2, the “Timing Issues”, which raise somewhat different considerations.

The two Timing Issues proposed for preliminary determination arise out of the fact that some five years have elapsed since the LBIE Administrators concluded the Olivant CDD, but Wentworth’s case is that it did not become aware of the LBIE Administrators’ decision to admit the Olivant Proof for the Agreed Claim Amount until 30 August this year: and “awareness” of the relevant decision is the test prescribed by Rule 14.8(3).

Wentworth’s case is disputed by the LBIE Administrators. They have advanced a number of reasons which might lead to the conclusion that Wentworth was “aware” of the decision, or should be treated as having been so, at a much earlier stage. Amongst other things (and I have taken their adumbration from their Skeleton Argument) the LBIE Administrators rely on the following:

Wentworth is a vehicle for a joint venture between King Street and Elliott, both of which are well-known specialist distressed debt investors. Lehman Brothers Holdings Inc (“LBHI”) is also involved in the Wentworth joint venture: see below.

Two of Wentworth’s directors appear to be nominees appointed by Elliott and King Street respectively.

Elliott and King Street were active in the secondary market for LBIE debt trading at the time when the Olivant Proof and CDD were being marketed for sale (in late 2012 to early 2013). (Footnote: ²)

Accordingly, “the Administrators consider it highly likely that King Street and/or Elliott would have become aware of the Administrators’ decision to admit the Olivant Proof at that time”.

These suppositions or concerns have not been dispelled by clear answers on behalf of Wentworth to the questions they appear to raise. The LBIE Administrators rely in that context on the following:

They have attempted to seek further information from Wentworth as to whether anyone involved in the Wentworth joint venture (“Joint Venture Personnel”) had knowledge of relevant facts relating to the Olivant Proof, and when such knowledge arose (by Linklaters’ letter to Kirkland dated 13 October 2017).

Kirkland responded on 3 November 2017 [1/4B/220-229]. The LBIE Administrators suggest that the response can fairly be described as evasive. Kirkland asserted that “Wentworth acts through its board of directors”, and stated:

What the LBIE Administrators consider to be a similarly evasive answer was put forward in Kirkland’s letter dated 24 November 2017.

The LBIE Administrators contend that given that Wentworth is a vehicle for a joint venture between King Street and Elliott, it is highly likely that Kirkland is in regular contact with senior executives from those organisations. They rely on the fact that senior executives from Elliott and King Street have previously given evidence on behalf of Wentworth in the Waterfall II litigation. The evidence refers to “regular discussions” between Elliott, King Street and the LBIE Administrators.

The LBIE Administrators submit that in those circumstances, it appears and is of concern that Wentworth may now be seeking to hide behind its somewhat opaque corporate structure; and that at the very least, it should have been able to procure and file evidence from individuals at Elliott and King Street where it wished to do so; it has given no reason why its access has diminished.

Wentworth, in answer, submits that

In circumstances where it is common ground that at no point during the course of the administration have the LBIE Administrators announced to the body of creditors their decision in relation to Olivant’s Proof, and given further that in correspondence between Wentworth’s solicitors and the Administrators’ solicitors in 2014, the Administrators admitted that, at that stage, time had not started running for the purposes of r.14.8 challenge, it is not for it, but for the LBIE Administrators to point to some particular facts, specific to Wentworth, which would establish Wentworth’s awareness.

Further, since Wentworth is a Luxembourg entity, the Administrators would need to adduce evidence on Luxembourgish law of attribution and demonstrate that those facts meant that, as a matter of Luxembourgish law, Wentworth was deemed to be aware of the LBIE Administrators’ decision.

Thus far, the LBIE Administrators have identified no such facts and cannot identify any officer of Wentworth who is said to have held such knowledge. At best, Wentworth contends, the LBIE Administrators’ case appears to be based on the allegation that certain employees of entities which were part owners of Wentworth were aware of the LBIE Administrators’ decision. However, Wentworth submits that there is no principle of English or Luxembourgish law that knowledge of a part owner of a company constitutes knowledge of the company.

In these circumstances, Wentworth goes on to submit that

The Timing Issues are plainly not pure issues of law: their factual context is complex, unclear, and, thus far, not supportive of the LBIE Administrators’ case.

The Timing Defence which the Timing Issues are intended to determine is thus not a serious answer to Wentworth’s application, and certainly not, applying the Steele criteria, appropriate for preliminary determination.

The Timing Defence may not be an issue at all if the Court considers that the Wentworth’s challenge falls outside the r.14.8 regime and is governed by some other provision (such as r.14.11 or para 74 of Schedule B1 or the inherent jurisdiction of the Court). None of these matters has a time limit (as made clear in relation to r.14.11 by Re Globe Legal Services [2002] BCC 858, at 865G) and the Timing Defence would not arise.

Even if it were a potential answer, there is no suggestion that another party that (as previously foreshadowed) seeks joinder, namely Lehman Brothers Opportunity Holdings Inc (which is incorporated in the Cayman Islands), would be out of time.

In any event, as the LBIE Administrators appear to concede, the Court has the power to extend time for a challenge under r.14.8. Whether to grant an extension is a factual question which must be assessed according to all the circumstances of the case and again does not lend itself to determination as a preliminary issue.

Wentworth’s points plainly carry at least prospective weight; and even the LBIE Administrators have accepted that, for the present at least, “it is difficult to predict how much evidence will be required in order to determine the Timing Issues as preliminary issues”. I think on the present state of evidence it would not be right or consistent with the Steele criteria to direct, here and now, a trial of Issues 1 and 2 as preliminary issues.

However, as previously indicated, there is something unsatisfactory, almost perverse, in delaying adjudication of the applicability of a time bar to the full trial which the bar, if applicable, was meant to preclude. I consider that it is necessary to get behind the curtain of present factual uncertainty and seek to assess, by reference to the real issues raised, whether there is any real reason why the underlying facts (apart from evidence of Luxembourg law) should not be capable of being agreed.

I agree with the LBIE Administrators that, leaving aside for the moment the issue as to other ways round the time bar, the real issues requiring factual illumination are (a) whether those using Wentworth as a vehicle for their joint venture (“the Joint Venture Personnel”) did become “aware” of the relevant decision; (b) whether if so their “awareness” should be attributed to Wentworth under the applicable legal principles; and (c) whether and when the 21-day limit under Rule 14.8 was thereby triggered and Wentworth’s application made out of time in consequence.

That raises the question whether the factual enquiry required is (a) capable of being sufficiently defined and confined so that (b) an agreed statement of facts to enable resolution of the Timing Issues is a realistic and legitimate expectation.

Then the question is whether the other claims intimated, and the other Claimant proposed, would render irrelevant any determination of the Timing Issues proposed.

I address first that latter question as summarised in paragraph 117, notwithstanding that (a) no other claim has yet been advanced (as opposed to intimated) by Wentworth and (b) the joinder Application is not properly before me, for want of adequate notice of it. In light of those caveats, my views are necessarily preliminary, since their application assumes that which has not yet been actioned.

In my view, the intimated availability of different claims on the part of Wentworth is not sufficient, of itself, to militate conclusively against the determination of the Timing Issues as Preliminary Issues. Broadly, the same reasons apply in this regard as to the same or similar points when raised in the context of the CDD Issues. I should confess, even at this early stage, to some scepticism whether the careful provision of a time bar in Rule 14.8 is rendered futile because other provisions said to be capable of applying contain no such bar; but even leaving that aside for the present, I consider that the application or not of the time bar would be usefully determined earlier than later, on agreed facts, or failing that substantially agreed facts leaving only a narrow compass of disputed fact.

As to Opportunity Holdings late application for joinder, notified by email from its solicitors (Weil, Gotshal & Manges (London) LLP, “Weil”) to Linklaters on Saturday 25 November 2017, and its premise, apparent purpose, and justification to the effect that no time bar can apply to its claim since there is no basis on which it could be said to have been “aware” at a time such as to prevent its claim now, I should also confess to some surprise and concern.

The manner in which it has been advanced, and its timing, has exacerbated both. For example, it is not even yet clear whether it is in law a creditor of LBIE at all, there being contradictory references to the identity of the assignee in the Transfer Notice on the basis of which it claims its interest; and the LBIE Administrators have not had time to establish who actually are the individuals which have responsibility for its management on behalf of its owners, and have not had therefore any basis yet for assessing whether it can be said to have been “aware” at a time which would trigger the time bar in its case.

Mr William Willson of Counsel on its behalf pursued orally, and with some persistence, his submission that the joinder application should nevertheless be heard and determined now: and he seemed unconvinced by the obvious difficulty of doing so fairly without affording the LBIE Administrators some opportunity for verification and any evidential response. It seems to me plain and obvious that the substance of the application, if pursued, must be dealt with on another day, though I propose to treat it ex post facto as before me on short notice to enable me to give directions, a course to which no objection is made by the LBIE Administrators.

However, and more substantively, I cannot help a feeling of surprise and concern that the application should be considered to be appropriate, in light of the disparity between its costs and any likely direct benefit. That is especially so if it becomes necessary for it to replace Wentworth if Wentworth’s own claim is time-barred (which is its ultimate purpose): for in that event, all the costs risk would fall upon it.

The balance of risk and reward in such circumstances would be awkward to say the least. Even if established to be the creditor, and taking its claim at its own valuation, Opportunity Holdings holds an unsecured claim of just over £2 million. By reducing the Olivant claim from its current agreed level of £555.25 million to £223.2 million Opportunity Holdings, assuming it is a creditor, might benefit by an increasing amount of statutory interest: but, the LBIE Administrators have calculated, only by about £49,000, and even that limited ‘benefit’ would only arise in the event of a shortfall for statutory interest, which at present appears unlikely. It seems surprising, baffling even, that Opportunity Holdings would expose itself to the risks of this claim, and the expense of a full Trial, for such a relatively small and uncertain benefit.

Mr Willson, though giving the initial impression of not being disturbed by this analysis and calculation (provided after the short adjournment on the day of the hearing), did seem to me ultimately to acknowledge that the viability and good sense of the joinder application might need further reconsideration.

In any event, as it seems to me, these factors do give rise to a question as to the long term sustainability of the claim. Further, the fact that it has been pursued at all does give rise to questions as to its true motivation. In this regard the LBIE Administrators have explained in their Skeleton Argument and Opportunity Holdings has explained in its Skeleton Argument and evidence that Opportunity Holdings is an indirect wholly-owned subsidiary of LBHI (which is a member of the Wentworth joint venture). Weil has acted for LBHI and 22 of its affiliates since 2008, as is a matter of public record. The LBIE Administrators submitted as follows (quoting from their Skeleton Argument):

They then submitted as follows (again quoting their Skeleton Argument):

That is not all: further or alternatively, the LBIE Administrators reserve the right to argue that (1) the knowledge of LBHI should be attributed to Opportunity Holdings, by reason of the parent/subsidiary relationship between those companies; (2) the knowledge of Wentworth itself (or other any person interested in or connected to Wentworth) is to be attributed to Opportunity Holdings, so that the same time limits apply to both entities under Rule 14.8(3); (3) that the knowledge of any entity which formerly owned the claim now held by Opportunity Holdings should be attributed to Opportunity Holdings, by reason of the rule of law that an assignee cannot be in a better position than the assignor; and (4) that Opportunity Holdings had constructive knowledge of the Administrators’ decision to admit the Olivant Proof by no later than 10 October 2017 (when the Administrators’ most recent progress report was released, which refers to both the Application and the admitted amount of the Olivant Proof), and that such constructive knowledge is sufficient as a matter of law to start the 21-day time limit under Rule 14.8(3).

These are matters for a future occasion: I make no finding; but I have indicated my interest, surprise and concern. That stressed, however, these curiosities have persuaded me that, in determining any application for joinder, and before finally determining whether to order Preliminary Issues (1) and (2), the Court would be assisted by provision in early course of the information set out in a schedule to Linklaters’ letter to Weil dated 27 November 2017.

As I say, I consider that information necessary for the informed adjudication of Opportunity Holdings’ joinder application, and thus also of the decision whether to order preliminary determination of Issues 1 and 2.

It follows that a determination now of the LBIE Administrators’ application for Preliminary Issues 1 and 2 would be premature and unwise. Further, I consider that there is good sense in deferring a final decision until after the provision of position papers that address the factual issues directly affecting Wentworth’s own state of “awareness”.

Accordingly, I am minded to agree to the LBIE Administrators’ proposed directions with the qualifications that follow:

I shall defer a final decision on Issues 1 and 2 and I shall review the state of the evidence in relation to Issues 3, 4 and 5 at a further directions hearing.

In the meantime, however, I shall direct that a hearing date or window be reserved for a four-day hearing sufficient to enable all five proposed Preliminary Issues to be heard, before October 2018, my preference being some time in June if that can be accommodated by the Court and is not seriously inconvenient for Counsel and their respective teams.

I shall, subject to any objection to this course by the LBIE Administrators, treat Opportunity Holdings’ joinder application as before me on short notice. Unless within 7 days that application is withdrawn (in which case the Court must be informed immediately) I propose to direct that evidence in further support of the application be filed within (say) 21 days having regard to the information requested by Linklaters in the schedule to their letter of 27 November 2017. I do not direct that such further evidence must deal with each item in that schedule; but I shall expect it to do so or explain why it is not appropriate that it should not; and the Court may draw adverse inferences if items which could usefully have been addressed have not been so.

The LBIE Administrators must have time to respond, and Opportunity Holdings must have time for any reply it is advised is appropriate. Those parties should discuss this, and then inform my clerk as soon as possible what they would propose.

According to what time-table is agreed, the adjourned hearing of Opportunity Holdings’ application must be fixed to come on before me (unless supervening events require me to nominate another Judge). The timing of this has not been addressed in argument yet: I shall consider argument whether that hearing should be before the next directions hearing relating to the Preliminary Issues or whether a single hearing should deal with both.

I am minded to direct the exchange of position papers in the sequence proposed by the LBIE Administrators in their draft Order; but if there are objections I shall hear those after handing down this judgment. It may be that provision should be made to enable Opportunity Holdings to provide a position paper also if it is joined.

I suggest that any other matters or alterations be addressed at or at some convenient time soon after the hand-down hearing.