The next stage in the battle to recoup client money from Lehman Brothers began today (November 9) in London’s High Court.

Lawyers for the CRC Credit Fund and Claren Road Credit Master Fund will argue before Mr Justice Briggs that funds should have been segregated as client money when Lehman Brothers International Europe (LBIE) went into administration on September 15, 2008.

Standing as representative respondents for LBIE clients that did have money segregated are GLG European Equity Fund, Paragon Capital Management Fund and Goldman Sachs GSIP Master Company (Ireland). The Hong Leong Bank Berhard is joined as a representative of unsecured creditors.

The unsegregated clients will try and overturn the decision made by Sir Andrew Park in the  'Global Trader' case in March this year. The case dealt with the administration of a London-based spread betting firm and was the first to test the correct interpretation of the UK Financial Services Authority's (FSA) client money rules.

Justice Park ruled that money which was in open accounts when Global Trader went into administration, and profits made when those accounts were closed post-administration, could not be segregated as client money.

He said FSA rules did not oblige the administrators to segregate money on post-administration closings, adding: "They would be exercising management powers in such a way as to cause a change in the respective entitlements of the different classes of persons claiming entitlements of one sort or another in the insolvency of the company."

If Justice Briggs agrees with Justice Park, CRC, Claren Road and other un-segregated clients of LBIE will be treated as unsecured creditors. However if he disagrees, the funds concerned will be segregated and put in the separate client money pool.

The hearing, expected to last for three to four weeks, follows Justice Briggs's October 21 judgment deciding on the status of post-administration money. The judge decided that that cash and securities received by LBIE after it went into administration should be returned to clients.

Simmons & Simmons is acting for the un-segregated funds. Allen & Overy represents GLG and Goldman Sachs and ELS International Lawyers represents Paragon Capital. Baker & McKenzie is acting for Hong Leong Bank and Linklaters continues to provide legal advice to LBIE's administrators PricewaterhouseCoopers.