FEDERAL COURT OF AUSTRALIA Lehman Bros Australia Ltd v Lehman Bros Special Financing Inc [2015] FCA 1529 Citation: Lehman Bros Australia Ltd v Lehman Bros Special Financing Inc [2015] FCA 1529 Parties: LEHMAN BROTHERS AUSTRALIA LIMITED (IN LIQUIDATION) (SCHEME ADMINISTRATORS APPOINTED) ACN 066 797 760 AND OTHERS (AS PER THE SCHEDULE) v LEHMAN BROTHERS SPECIAL FINANCING INC File number: NSD 697 of 2015 Judge: RARES J Date of judgment: 18 December 2015 Catchwords: CORPORATIONS – INSOLVENCY – Corporations Act 2001 (Cth) – approval of entry into a settlement deed between liquidator and creditors under ss 477(2A), 477(2B) and 479 – consideration of relevant factors to the compromise with and interests of creditors – Court does not review commercial judgment of liquidator under ss 477(2A) and 477(2B) – character of liquidator's application under s 479(3) – protection of each of liquidator and interests of creditors – whether open to liquidator to conclude proposed settlement to be in interests of creditors Legislation: Corporations Act 2001 (Cth) Cases cited: Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383 City of Swan v Lehman Bros Australia Ltd (2009) 179 FCR 243 Fortress Credit Corporation (Australia) II Pty Limited v Fletcher and Barnet (2015) 89 NSWLR 110 Lehman Bros Australia Ltd (In Liq) v Lehman Bros Special Financing Inc [2015] FCA 779 Lehman Bros Holdings Inc v City of Swan (2010) 240 CLR 509 Lehman Bros Special Financing Inc v BNY Corporate Trustee Services Ltd (2010) 422 BR 407 Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 Re Spedley Securities Limited (1992) 9 ACSR 83 Wingecarribee Shire Council v Lehman Bros Australia Ltd (In Liq) (2013) 95 ACSR 685 Wingecarribee Shire Council v Lehman Bros Australia Ltd (In Liq) (No 8) [2013] FCA 411 Wingecarribee Shire Council v Lehman Brothers Australia Limited (In Liq) (2012) 301 ALR 1 Date of hearing: 18 December 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 39 Counsel for the Applicant: R McHugh SC with S Nixon Solicitor for the Applicant: Clayton Utz Counsel for the Respondent: EAJ Hyde Solicitor for the Respondent: Jones Day IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 697 of 2015 BETWEEN: LEHMAN BROTHERS AUSTRALIA LIMITED (IN LIQUIDATION) (SCHEME ADMINISTRATORS APPOINTED) ACN 066 797 760 AND OTHERS (AS PER THE SCHEDULE) Applicant AND: LEHMAN BROTHERS SPECIAL FINANCING INC Respondent JUDGE: RARES J DATE OF ORDER: 18 DECEMBER 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Corporations Act), the second and third applicants' entry on 17 December 2015, on behalf of Lehman Brothers Australia Limited (In Liquidation) (Scheme Administrators Appointed) (LBA), into the settlement deed dated 16 December 2015 (annexed as "MWA-6" to the fifth affidavit of Marcus William Ayres sworn 17 December 2015) (Federation settlement deed) with Lehman Brothers Special Financing Inc. and Lehman Brothers Holding Inc. (Lehman US Parties) be approved nunc pro tunc. 2. Pursuant to s 479(3) of the Corporations Act, the second and third applicants are justified in: (a) resolving the dispute, the subject of these proceedings, on the terms of the Federation settlement deed; and (b) consenting to the dismissal of these proceedings. 3. Pursuant to ss 477(2A) and 477(2B) of the Corporations Act, the second and third applicants entry on 17 December 2015, on behalf of LBA, into the claims settlement agreement dated 16 December 2015 (exhibited at Tab 2 of "MWA-5" to the fourth affidavit of Marcus William Ayres sworn 17 December 2015) (claims settlement agreement) with, amongst others, the Lehman US Parties, be approved nunc pro tunc. 4. A suppression and non-publication order, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), be made in respect of: (a) annexure "MWA-6" to the fifth affidavit of Marcus William Ayres sworn on 17 December 2015; (b) paragraphs 5, 6 and 7 of the sixth affidavit of Marcus William Ayres sworn on 17 December 2015 (sixth Ayres affidavit); (c) annexure "MWA-7" to the sixth Ayres affidavit; (d) annexure "MWA-8" to the sixth Ayres affidavit; and (e) annexure "MES-1" to the affidavit of Martha Solinger affirmed on 16 December 2015. 5. Pursuant to s 37AJ(3) of the Federal Court Act, the suppression and non-publication order made pursuant to paragraph 4 above shall operate until further order by this Court. 6. The applicants' costs of this application and of these proceedings be costs in the liquidation of LBA. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 697 of 2015 BETWEEN: LEHMAN BROTHERS AUSTRALIA LIMITED (IN LIQUIDATION) (SCHEME ADMINISTRATORS APPOINTED) ACN 066 797 760 AND OTHERS (AS PER THE SCHEDULE) Applicant AND: LEHMAN BROTHERS SPECIAL FINANCING INC Respondent JUDGE: RARES J DATE: 18 DECEMBER 2015 PLACE: SYDNEY REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 This is an application by the liquidators of Lehman Brothers Australia Limited (In Liq) (LBA) for orders under ss 477(2A), 477(2B) and 479(3) of the Corporations Act 2001 (Cth) seeking the Court's approval and directions nunc pro tunc in relation to their actions in entering into agreements that, among other things, will resolve these proceedings. The orders sought relate to a significant milestone that, subject to the Court making those orders, the liquidators have achieved in progressing the liquidation of LBA. This milestone marks the resolution of most of the substantive disputes that are necessary to enable the liquidators to pay dividends to LBA's unsecured creditors and bring the winding up to an end. 2 The liquidators sought relief in these proceedings against Lehman Brothers Special Financing Inc (LBSF) in respect of claims that LBSF made against them, arising out of the payment to LBA in late October 2008 by the collateral holder, Bank of New York Mellon (BNY), of the sums payable under the flip clause in respect of the Federation notes. I described the issues in my reasons for ordering that LBSF could be served out of the jurisdiction: Lehman Bros Australia Ltd (In Liq) v Lehman Bros Special Financing Inc [2015] FCA 779. 3 Yesterday the liquidators entered into a settlement deed on behalf of LBA with, among others, LBSF, and its parent, Lehman Brothers Holdings Inc (LBHI), in its own capacity and as a plan administrator of the Ch 11 bankruptcy administration of it and certain of its affiliates, to resolve not only the claims arising out of the payment of the collateral for the Federation notes, but also a number of previously controversial inter-company debts. Until this occurred, those issues had bedevilled the orderly resolution of outstanding matters in the liquidation of LBA and, no doubt, in the Ch 11 and other insolvent administrations of Lehman Brothers companies in the United States of America Australia and elsewhere in the world. That aspect of the settlement has been achieved, in part in a claims settlement agreement that the parties also entered into yesterday. 4 The relevant provisions of the Act under which the liquidators seek relief today are: 477(2A) Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not compromise a debt to the company if the amount claimed by the company is more than: (a) if an amount greater than $20,000 is prescribed – the prescribed amount; or (b) otherwise – $20,000. (2B) Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company's behalf (for example, but without limitation, a lease or a an agreement under which a security interest arises or is created) if: (a) without limiting paragraph (b), the term of the agreement may end; or (b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance; more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months. 479(3) The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up. Background 5 I ordered that LBA be wound up on 2 October 2009. That followed the decision of the Full Court to set aside the deed of company arrangement that had been proposed, a decision which the High Court subsequently upheld: City of Swan v Lehman Bros Australia Ltd (2009) 179 FCR 243; Lehman Bros Holdings Inc v City of Swan (2010) 240 CLR 509. 6 In support of the present orders, one of the liquidators, Marcus Ayres, swore three affidavits on 17 December 2015, in which he explained the circumstances and rationale that he and Stephen Parbery, the other current liquidator, adopted in pursuing and achieving these compromises. The liquidators also relied on the written advice of senior and junior counsel, and the informal opinion of the only member of LBA's committee of inspection, David Proudman, with whom they can consult. The other members of the committee are persons who are affected by the compromises and so are in a position of conflict. 7 I have made non-publication and suppression orders in respect of counsels' advice, the communications with Mr Proudman of 17 December 2015, certain portions of the settlement deed identifying sums the subject of the compromises reached in respect of the Federation notes' payment by BNY, and some of the considerations that the liquidators took into account, which, because of their commercial sensitivity, cannot be revealed at this time. 8 The liquidators have not been in a position to pay any dividend to creditors until now, apart from a relatively modest sum paid to some of LBA's clients who were in the class action proceedings that I decided in Wingecarribee Shire Council v Lehman Brothers Australia Limited (In Liq) (2012) 301 ALR 1. Mr Ayres estimated that if the settlements became effective, the liquidators would be in a position to pay a first interim dividend to all LBA's unsecured creditors who have been admitted to proof, that, with some qualifications, will amount to approximately $230 million. 9 The estimate of $230 million is based on a number of assumptions, including that: (1) proofs of debt lodged on 28 August 2014 by McGraw-Hill Financial Inc and its subsidiary, Standard & Poor's International LLC, commonly known as "Standard & Poor's", are withdrawn prior to the date of the anticipated distribution in February 2016. Those claims are, I infer, related to another class action proceeding against Standard & Poor's that is currently listed to be heard before me in August 2016; (2) the liquidators will be free to distribute a sum of $63.75 million that they currently cannot pay out because of a deed poll dated 26 August 2015 that Standard & Poor's executed for the benefit of LBA and the liquidators. 10 Those proposed distributions if made in February 2016, will yield a return to LBA's unsecured creditors entitled to participate in the scheme fund totalling 69.21 cents in the dollar for their admitted claims, that will include 13.28 cents from the scheme fund. The other unsecured creditors of LBA will receive 55.93 cents in the dollar on their admitted claims. 11 In addition, and independently of whether the settlement is effected and the orders sought made, the liquidators will make a second and final distribution from the scheme fund created under cl 6 of the scheme of arrangement between LBA and certain of its creditors that Jacobson J approved by orders made on 31 October 2013: see Wingecarribee Shire Council v Lehman Bros Australia Ltd (In Liq) (2013) 95 ACSR 685. 12 If the Standard & Poor's claimants do not withdraw their proofs of debt before the February 2016 distribution, and LBA is required to hold back from distributions the $63.75 million to which I have referred, then the liquidators will only be able to pay about $166 million from LBA's general estate, or 40.43 cents in the dollar, to all of the unsecured creditors. The scheme creditors still will receive an additional 13.28 cents in the dollar. 13 Mr Ayres estimated that by the conclusion of the winding up, LBA's client creditors will receive a total of 80.29 cents in the dollar and the other unsecured creditors will receive a total of 67.01 cents in the dollar on their admitted claims. He made that estimate based on the assumption that Standard & Poor's ultimately withdraw their proofs of debt and that other sums being held back by the liquidators to deal with other matters that are still current in the liquidation become available for distribution. 14 Mr Ayres deposed to the difficulties that have bedevilled the administration and subsequent liquidation of LBA because of the complex internal group relationships of the world wide group of Lehman Bros companies and the nature of their obligations, together with the claims of LBA's external unsecured creditors. The work that the liquidators have performed to enable them to make such significant payments, in what has been a very complex and difficult liquidation, has achieved a substantial benefit for LBA's unsecured creditors generally. 15 The proposed resolution of these proceedings seeks to avoid a fully contested final hearing about complex issues arising under the Corporations Act and the United States Bankruptcy Code as well as difficult questions flowing from the conflict of laws of both jurisdictions. 16 The liquidators have also had to engage in complex litigation in order to ascertain LBA's rights and liabilities. A major part of this process was the class action in respect of LBA's sale to its clients of synthetic collateralised debt obligations (SCDOs) and other exotic financing instruments that I considered in Wingecarribee 301 ALR 1. I also briefly described some other aspects of the complexity in my reasons for allowing LBSF to be served in the United States: Lehman [2015] FCA 779. The liquidators had earlier sought to mediate with LBSF the dispute over the Federation notes in May 2014, but the parties were unable to resolve it. I discussed some of the difficulties arising in relation to that dispute in Wingecarribee 301 ALR at 220-224 [820]-[841]. These difficulties arose from Judge Peck's decision in the Bankruptcy Court of the Southern District of New York, in which he held that payments made under the flip clause were, ipso facto, invalid and so impugned the liquidators' title to retain the payment of the Federation note collateral that they received in late October 2008 from BNY Mellon: Lehman Bros Special Financing Inc v BNY Corporate Trustee Services Ltd (2010) 422 BR 407. 17 After I had decided Wingecarribee 301 ALR, the liquidators initially proposed a scheme of arrangement in May 2013 as a means of ascertaining the amounts for which they would admit LBA's client creditors to proof. Ultimately, that scheme could not proceed because it was opposed by LBHI and related entities: see Wingecarribee Shire Council v Lehman Bros Australia Ltd (In Liq) (No 8) [2013] FCA 411. The proposed settlement 18 However, in November 2015 Mr Parbery and Mr Ayres attended a meeting in New York with representatives of LBSF. They achieved an agreement in principle on 9 November 2015, resolving the Federation notes dispute and, significantly, the inter-company positions between the Lehman Australia group companies and the Lehman US group companies. Those in principle agreements are now reflected in the settlement deed and claims settlement agreement. Those two documents are dated 16 December 2015, the time in New York at which they were entered, being 17 December in Sydney. 19 Pursuant to the settlement deed, LBA will pay a confidential settlement sum and will apply for these proceedings to be dismissed or otherwise disposed. In exchange, each of LBHI and LBSF, among other things, agreed to use its best efforts to reduce the amount of claims asserted in what is known as the "adversary proceedings" that they commenced in the United States Bankruptcy Court for the Southern District of New York. Those proceedings relate to payments made by BNY under the "flip clause". The settlement deed proposes that the United States based Lehman Bros parties will exclude from the adversary proceedings issues relating to the $22.4 million face value of the collateral for the Federation notes, that BNY paid to the then-administrators in October 2008. 20 The settlement deed will release, first, the liquidators and their associates from all claims by the Lehman Bros United States companies arising from that payment, and secondly, the issuers, note trustee, custodian and securities intermediary, and any paying agent and registrar of the Federation notes, as well as Citibank N.A. and any of its subsidiaries that acted as custodian for LBA in respect of that payment (transaction parties). In addition, the LBHI and LBSF will indemnify LBA and the liquidators against any costs and expenses incurred in, and any judgment resulting from, any action taken by any one of the transaction parties against LBA or the liquidators in respect of claims relating to either the Federation Notes generally, the Federation note payment in October 2008 or the negotiation or consummation of the settlement deed. 21 The liquidators sought to achieve protection for LBA in the settlement deed from the risks of LBSF pursuing claims against LBA, the liquidators or their associates in relation to the Federation notes by, among other means, including covenants that LBSF, first, will reduce its claims in the adversary proceedings and, secondly, will grant LBA and the liquidators a release and covenants not to sue them in respect of that subject matter. In addition LBSF has agreed not to pursue any of the transaction parties involved in respect of that payment or the Federation Notes held by LBA. Consequentially, those other parties probably will then have significantly less, if any, basis on which to make any claim against LBA or the liquidators. The settlement deed also includes an indemnity in favour of LBA and liquidators in support of the release and covenant not to sue. 22 There are some other risks to which the liquidators and LBA are still exposed that have not been eliminated by the settlement deed. Mr Ayres referred to those risks in confidential sections of his affidavits. He said that in entering into the settlement deed he considered the matters to which senior and junior counsel referred in their opinion as being relevant to him and Mr Parbery making their decision to do so. Those matters included the earlier unsuccessful attempts over many years to reach a settlement with LBSF in connection with the Federation notes dispute prior to the current agreement, the uncertainties and litigation risks associated with the ongoing prosecution of these proceedings in respect of which, among others, counsel and the liquidators, Australian solicitors gave advice to the liquidators, including the prospect that if the liquidators and LBA were unsuccessful in these proceedings, they would be liable to pay LBSF not only the principal sum of the collateral but statutory interest under the law of New York that was accruing at 9% per annum from 30 October 2008. That interest to date, exceeds, AUD19 million. 23 The liquidators considered that the proposed settlement of the Federation notes dispute would crystallise LBA's position and remove the uncertainties for it and them that are associated with this litigation and the adversary proceedings in the Bankruptcy Court. They also considered that there was another risk associated with the present proceedings, namely in respect of LBSF's application for a stay and leave to proceed against LBA in the adversary proceedings. They were concerned that if LBSF were successful in these proceedings, that could expose them and LBA, first, to becoming involved with hundreds of other parties in the adversary proceedings and, secondly, to the risks of incurring very significant legal costs and a finding of liability. Mr Ayres also took account of advice received from United States lawyers both as to the uncertainties and litigation risks if it were to be joined in the adversary proceedings. 24 As Mr Ayers explained in detail in his affidavit, the liquidators considered that the proposed settlement will achieve, first, a more expeditious resolution of the Federation notes dispute than would otherwise occur, irrespective of whichever court ultimately came to decide it, and, secondly, certainty in respect of LBA's intra-group debt position that will bring in a net amount of about $22.2 million to LBA's estate, and, thirdly, mitigate risks associated with continuing litigation, in both Australian and US proceedings. 25 The liquidators were also aware, from numerous communications with LBA's creditors in the more than seven years since the original appointment of the administrators, that the creditors are highly desirous of receiving a substantial dividend in the short-term. The proposed settlement will achieve that end. Consideration 26 The principles are well established on which the Court acts in respect of considering applications under ss 477(2A), (2B) and 479(3). Each section involves slightly different considerations. Importantly, it is not generally the function of the Court, in granting approval under s 477(2B), to review a liquidator's commercial judgment or to second guess his or her decision. Ordinarily, the Court generally will not interfere unless there seems to be some lack of good faith, some error of law or principle or a real or substantial ground for doubting the prudence of the liquidator's conduct: Fortress Credit Corporation (Australia) II Pty Limited v Fletcher and Barnet (2015) 89 NSWLR 110 at 129 [125] per Bathurst CJ with whom Beazley P, Macfarlan, Meagher and Barrett JJA agreed. As Bathurst CJ said, the Court does not act as a mere rubber stamp and will confer the power only when it is satisfied that, in the particular circumstances, a case for its exercise has been shown. 27 Earlier, Giles J considered the principles applicable in such cases in a judgment that frequently has been followed since: Re Spedley Securities Limited (1992) 9 ACSR 83, especially at 85-88. He pointed out that the purpose of requiring the Court's approval (that the earlier analogues of ss 477(2A) and (2B) sought to achieve) was the efficient winding up of the company (9 ACSR at 85). That involves the collection and distribution of the company's assets for the general benefit of creditors. Thus, where a compromise is proposed, the Court looks at the interests of the creditors and ascertains whether the proposal is, or appears to be, in the interests of those concerned in the winding up. 28 On the other hand, as Giles J also noted (9 ACSR at 85), directions given to a liquidator under the analogue of s 479(3) have the different function of guiding the liquidator in the conduct of liquidation and protecting him or her against allegations of breach of duty, without the Court embarking, once again, on a consideration of the merits of the liquidator's commercial decision. 29 Nonetheless, I am of opinion that the application for directions under s 479(3) is analogous to an application by a trustee for judicial advice and raises considerations of the kind discussed by Gummow ACJ, Kirby, Hayne and Heydon JJ in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 94 [72]-[74]. They said that proceedings for judicial advice had two important purposes, first, the personal protection of the trustee or, in this case, the liquidator and, secondly, the protection of the interests of the trust or, in this case, the interests of the creditors of the company in liquidation. They also noted that there may not be contradictors on such an application who could protect the interests of the trust. Hence, in an application under s 479(3) the Court must be satisfied that, not only is the liquidator's decision is one which will be open to the liquidator having regard to the considerations relevant to applications under ss 477(2A) and (2B), but also, the proposal must be in the interests of the creditors generally. Consideration – s 477(2A) 30 I accept Mr Ayres' opinion that the settlement as documented in the settlement deed is the best resolution that the liquidators can achieve for the creditors of LBA in respect of the Federation notes dispute at this time and that it is in the interest of LBA's creditors as a whole for the company to enter into and perform the settlement deed. The formation of such an opinion, of course, is a matter of the liquidators' commercial judgment for which they have sole responsibility. 31 As I have noted, the proposed settlement involves a highly complex series of nettings out and crystallisations of positions in the intra-group position. Mr Ayres explained those matters and the basis of the liquidators' commercial decision-making in detail in his affidavits. Those considerations reflect, in part, the complexity of the liquidation of LBA and the activities that Mr Parbery and Mr Ayers, and their predecessors, have had to undertake initially as deed administrators and later liquidators of LBA and other companies in the Australia Lehman Bros group in respect of their relationships with the wider Lehman Bros group of companies. 32 The issues that arose for consideration in these proceedings between LBA and the liquidators on the one hand and LBSF on the other were highly complex. They involved considerations of law and the application of the Corporations Act that do not appear to have been the subject of authoritative decision beforehand, and raised very difficult questions of private international law, some of which had already been decided differently by Judge Peck in Lehman 422 BR 407 and the Supreme Court of the United Kingdom in Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383, which led to the twist, as I mentioned in the reasons for granting service out of the jurisdiction, that in Belmont Park the applicable law of the instrument under consideration was English law, while in the Federation notes case it will be United States law: Lehman [2015] FCA 779. 33 The adversary proceedings in the Bankruptcy Court involve hundreds of parties. The likelihood is that their resolution will occur only after a lengthy trial and the finalisation of the United States appellate processes. These matters suggest that the achievement of certainty, through a commercially principled consideration of an appropriate settlement, is a factor properly taken into account by liquidators in entering the settlement deed and claims settlement agreement. 34 The sums involved in the compromise reflected in the settlement deed are very large and greatly exceed the $100,000 threshold prescribed for the purposes of s 477(2A). I accept the evidence of Mr Ayres. There is no reason to think that the liquidators have not exercised their commercial judgment appropriately and in good faith. 35 I am of opinion that the compromises should be approved, as a package. In any settlement of litigation, particularly litigation with the difficulty and complexity that the liquidators have sought to settle in the settlement deed and claims settlement agreement, there will need to be areas of give and take. The nature of the compromises necessary to strike the final agreements reflected in those two documents are such that there will be aspects about which minds may differ as to how much or how little of particular sums in dispute ought be compromised. However, there is nothing before me to suggest that the compromises reached are other than entirely sensible and appropriate. Consideration – s 477(2B) 36 Likewise, for the purposes of s 477(2B), the compromises involve elements that require ongoing obligations to give indemnities: e.g. those in cll 6(a) and (b) in the settlement deed, the need to maintain confidentiality in cl 14, and the possibility that it will be necessary for the liquidators or others to perform obligations under cll 6(a), (c) and cl 7 of the claim settlement agreement, perhaps if there are waivers or the like, after three months from today. 37 For those reasons and for the reasons I have given in approving the entry into the settlement deed under s 477(2A), I am of opinion that I should grant approval to those parts of the settlement deed and claims settlement agreement, under which obligations may or should be performed by LBA more than three months after each agreement has been entered into under s 477(2B). Consideration – s 479(3) 38 As is apparent, I am satisfied for the purposes of s 479(3) that the liquidators' commercial judgment that the settlement, as documented in the settlement deed and the claims settlement agreement, is the best resolution that they can achieve, at this time, for the creditors of LBA in respect of the Federation notes and other disputes. I am of opinion that it was open to the liquidators to decide that was in the interests of LBA's creditors as a whole for the liquidators to enter, and to cause LBA to enter into and perform, those instruments. Those reasons justified them entering into the settlement deed and claims settlement agreement. The authorities indicate that the Court can give approval nunc pro tunc to the earlier entry into these instruments, although it may not be necessary to do so in this case because each is conditional on the prior approval of the Court before the substantively operative terms can take effect. Conclusion 39 For these reasons I will make the orders that the liquidators seek. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 1 April 2016 SCHEDULE NSD 696 of 2015 STEPHEN JAMES PARBERY IN HIS CAPACITY AS LIQUIDATOR OF LEHMAN BROTHERS AUSTRALIA (IN LIQUIDATION) (SCHEME ADMINISTRATORS APPOINTED) Second Plaintiff MARCUS WILLIAM AYRES IN HIS CAPACITY AS LIQUIDATOR OF LEHMAN BROTHERS AUSTRALIA LIMITED (IN LIQUIDATION) (SCHEME ADMINISTRATORS APPOINTED) Third Plaintiff