The Problem of “Identification” – CASS7 and Lehman Brothers International (Europe) (In Administration) v CRC Credit Fund Limited & Others [2010] EWCA Civ 917
August 2010
David Barwise, Ingrid York
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In the recent decision Lehman Brothers International (Europe) (In Administration) v CRC Credit Fund Limited & Others [2010] EWCA Civ 917, the Court of Appeal considered the ownership attaching to client funds held by Lehman Brothers International (Europe) ("LBIE") following the decision of Briggs J in Lehman Brothers International (Europe) v CRC Credit Fund & Ors [2009] EWHC 3228 (Ch).
At the centre of the decision was the determination of the point in time when the statutory trust imposed by Chapter 7 of the Client Asset Sourcebook (known as "CASS7") arose.
The facts arising out of the administration of LBIE most relevant to the judgment were simply that LBIE operated an "alternative approach" pursuant to CASS7 which meant client money when received by LBIE was not paid directly into segregated client accounts but rather paid into and held by LBIE in its account(s). Such monies were only segregated into client accounts at the end of each day following account reconciliations required as at the close of the previous business day. There were various discrepancies relating to LBIE's movement of client money, resulting in both the over-segregation and under-segregation of client monies.
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