Nortel Companies & Ors, Re

Summary

Trinty Term
[2013] UKSC 52
On appeal from: [2011] EWCA Civ 1124

LORD NEUBERGER (with whom Lord Mance, Lord Clarke and Lord Toulson agree)

Introductory

i. Many UK registered members of the Lehman group of companies, and all the UK registered members of the Nortel group of companies, have gone into insolvent administration;

ii. (a) One of those Lehman group companies entered into service contracts with, and ran a pension scheme for the benefit of, employees who worked for other group members;

(b) The Nortel group included a company which had a pension scheme, and which was insufficiently resourced to fund that scheme;

iii. The pension scheme ("the Scheme") in each case was a final salary scheme, which appears to be, and to have been for some time, in substantial deficit;

iv. The Pensions Regulator subsequently initiated machinery under the Pensions Act 2004 to require certain other group members ("the Target companies") to provide financial support for the Scheme;

v. That machinery has been held up so it can be decided whether the liability under such a requirement would rank (a) as an expense of the Target companies' administrations, (b) pari passu with the Target companies' other unsecured creditors, or (c) as neither;

vi. Under option (a) the liability would rank ahead of the unsecured creditors, and may well be paid in full; under option (b) it would rank equally with those creditors; under option (c) it would rank behind them, and would probably be worthless;

vii. Briggs J and the Court of Appeal (in a judgment given by Lloyd LJ) concluded that option (b) was not open to them, and preferred option (a) to option (c);

viii. The issue now comes before the Supreme Court.