The High Court today decided that it did not have the power to sanction the proposed scheme of arrangement proposed by PwC in relation to the recovery of assets held by Lehman Brothers’ European operation.
PwC recently informed creditors that: “the current process for returns of client assets is lengthy and onerous as well as lacking in finality regarding dealings between Lehman Brothers and its customers.”
Therefore its scheme sought to modify certain rights of clients whose property is held on trust by Lehman’s European operations, whereby 1,000 clients owed £5.47bn would have been put into three classes, allowing PwC to deal with each class rather than each individual case.
But the judge held that the court has no jurisdiction to sanction a scheme that modifies affected clients in this manner.
PwC joint administrator Steven Pearson says this decision will delay the recovery of assets.
He says: “The proposed scheme sought to significantly reduce the period clients have to wait before they get their assets back. This judgement is disappointing, but together with our legal advisors and creditor working group we will carefully analyse this judgement to assess whether to make an appeal. We will also be considering the extent to which the structure of the scheme can be modified to address the issues highlighted by the ruling.
“While this is a setback, I am determined to find a way to get these assets back to clients as soon as possible.”
In July this year PwC advised clients that in the absence of a scheme it could take some years to return all assets. Over the past nine months some £7.9bn of assets has already been returned, but the remaining £5.47bn is still tied up under Lehman Brothers’ control.