Pension scheme liabilities ‘super-priority’ in court
The Court of Appeal today heard the final day of argument in the case between the administrators of Nortel and Lehmans and the Pensions Regulator that could decide whether pension scheme members should be given priority over all other creditors in the insolvency of companies. In December 2010 a ruling said that pension scheme members should be paid before everyone else but the administrators of Nortel Networks and Lehman Brothers have challenged that in a test case that has been heard this week.
Nick Moser, head of restructuring and corporate recovery at law firm Taylor Wessing said the case had significance for the economy as a whole.
“If the administrators lose again, banks will continue to have no certainty that they will be repaid anything out of a borrower’s insolvency when there is an underfunded pension scheme that has been associated with its borrower. This has a direct impact on the cost of credit,” he said.
“Whoever loses in the Court of Appeal is likely to take the case all the way to the Supreme Court, meaning the uncertainty might well continue for months if not years.”
The Nortel/Lehmans case centres on whether pension scheme liabilities should have ‘super-priority’ in corporate insolvencies. In the High Court in December, the Pensions Regulator was victorious.
The Nortel Networks and Lehmans administrators have appealed on the basis that the pension scheme liabilities, which potentially run into hundreds of millions of pounds, should rank as unsecured claims alongside other creditors.