Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd
Facts. Lehman Brothers, prior to its 2008 filing for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, created a package of 19 special purpose vehicles (including Lehman Brothers Special Financing Inc) known as the "Dante Programme." They issued 180 series of notes with an aggregate principal amount of $12.5 billion. The complex documentation relating to the series of transactions included provisions relating to: A group of 29 Australian investors, headed by Belmont, instructed BNY Corporate Trustee Services Ltd, the trustee for several of the notes  in question, to have the issuer of the notes cancel the swap agreement. The Belmont group, together with Perpetual Trustee Co Ltd (another noteholder) launched claims against BNY to realise upon the collateral over any priority held by LBSF under the agreement. LBSF was joined as a party to the action. The courts below. In July 2009, the Chancery Division of the High Court of Justice found that: The ruling was upheld by the Court of Appeal of England and Wales in August 2009. In discussing the nature of the anti-deprivation rule, Neuberger MR (as he then was) observed : The Supreme Court granted permission to appeal. At the Supreme Court. The Court of Appeal's decision was upheld by the Supreme Court. In so doing, Lord Collins in his speech discussed how the anti-deprivation and "pari passu" rules were designed to address different mischiefs, and how the first rule does possess limits in its application: While all justices agreed that the appeal should be dismissed, Lord Mance did not rely on the "flawed asset" theory, instead finding that, prior to an event of default under the swap, neither the Noteholders nor LBSF had priority over the collateral proceeds . Once the event occurred, the priority would be determined under the swap's terms, and the Flip did not contravene the rule. In discussing applicable principles, Lord Mance observed that the "pari passu" rule addresses what happens "in" bankruptcy, and the anti-deprivation rule addresses what happens "on" bankruptcy. While conceptually distinct, they are quite closely allied. He also provided a three-part test in order to determine what might constitute deprivation: Impact. The Court of Appeal believed that the current statutory régime embodied in the 1986 Act provided a comprehensive scheme, and the purpose of the common law could  only be to reinforce and back up the statutory rules. The Supreme Court disagreed, holding that the anti-deprivation rule still had a valid place in English jurisprudence. As Lord Collins noted: The Court also expressed its preference for objective analysis of what is the actual content of commercial arrangements that have been entered into: The point that commercially sensible transactions entered into in good faith should not be lightly set aside is consistent with recent decisions of the Supreme Court and its predecessor the House of Lords concerning taking a purposive interpretation of contracts in order to uphold the  parties’ intentions as far as possible. Other notable cases in that regard include "Chartbrook Ltd v Persimmon Homes Ltd" and "Re Sigma Finance Corporation". "Belmont Park" was closely watched by The Football League, as it had great implications concerning the validity of its football creditors rule which requires that debts to other clubs or players are prioritised and must be paid in full before the club is eligible to compete again in the League. The Football Association Premier League Limited intervened in the "Belmont Park" appeal for that reason, and had postponed its own litigation in that regard until the  disposition of that case. In 2012, the Chancery Division ruled that the football creditor rule was valid, and did not violate either the anti-deprivation rule or the "pari passu" rule. In his judgment, Richards J, relying on "Belmont Park", declared: