Lehman Brothers Holdings Inc v City of Swan

The High Court of Australia considered appeals concerning a Deed of Company Arrangement (DOCA) entered into by Lehman Australia. The dispute arose because the DOCA purported to bind creditors of Lehman Australia in relation to claims they might have against parties other than Lehman Australia itself, specifically in the context of collateralised debt obligation (CDO) investments. Investors in these CDOs, who had made claims against Lehman Australia and other Lehman entities alleging negligence and misleading or deceptive conduct, were affected by these provisions.

The central legal issue before the High Court was whether the provisions of the DOCA, which sought to impose a moratorium on and release claims that creditors might have against persons other than Lehman Australia, were binding on those creditors. This question turned on the interpretation of section 444D(1) of the *Corporations Act 2001* (Cth), which states that a DOCA binds all creditors of the company "so far as concerns claims arising on or before the day specified in the deed." The Court also had to determine whether, if these provisions were beyond the scope of section 444D(1), the entire DOCA was void.

The High Court reasoned that the phrase "so far as concerns claims" in section 444D(1) limits the binding effect of a DOCA to claims against the company itself. The Court held that the DOCA's provisions attempting to release or impose a moratorium on claims against third parties were not binding on creditors. This was because such claims did not arise "so far as concerns" Lehman Australia in the manner contemplated by the statutory provision. Consequently, the Court found that the DOCA was void to the extent that it purported to bind creditors in relation to claims against third parties.

The appeals were dismissed, and the appellant was ordered to pay the costs of the respondents.