Bloom & Ors v The Pensions Regulator (Nortel, Re)

Bloom & Ors v The Pensions Regulator (Nortel, Re)

Liabilities arising from Financial Support Directions or Contribution Notices issued after the commencement of administration or liquidation are not provable debts under Rule 13.12 of the Insolvency Rules 1986, as they depend on discretionary statutory powers and lack a pre-insolvency legal obligation. Consequently, such liabilities are treated as administration or liquidation expenses under the Toshoku principle, unless issued in a subsequent liquidation following administration, in which case a CN may be a provable debt. The FSD regime applies to insolvent companies, and the court may make prospective orders to manage expense priorities to protect the rescue culture.

Parties
Applicant: Alan Robert Bloom; Applicant: Alan Michael Hudson; Applicant: Christopher John Wilkinson Hill; Applicant: Stephen John Harris; Applicant: David Martin Hughes; Applicant: Anthony Victor Lomas; Applicant: Steven Anthony Pearson; Applicant: Michael John Andrew Jervis; Applicant: Dan Yoram Schwarzmann; Applicant: Derek Anthony Howell; Respondent: The Pensions Regulator; Respondent: Board of the Pension Protection Fund; Respondent: Nortel Networks UK Pension Trust Limited; Respondent: Peter Anthony Gamester; Respondent: Brian Seward; Respondent: Peter Sherratt; Respondent: Thomas Paul Bolland; Respondent: Lehman Brothers Holdings Incorporated; Respondent: Neuberger Berman Europe Limited
Jurisdiction
England and Wales
Judgment Date
10 December 2010
Procedural Posture
Applications for Directions in Insolvency Proceedings / High Court Judgment
Outcome
Applications for directions answered; liabilities from FSDs/CNs issued post-insolvency are administration or liquidation expenses, not provable debts.
Legal Topics
Financial Support Directions, Contribution Notices, Priority of Claims in Insolvency, Administration Expenses, Provable Debts, Pension Scheme Deficits
Insolvency Pensions Company Law Financial Support Directions Contribution Notices Priority of Claims in Insolvency Administration Expenses Provable Debts +1 more

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Parties

Alan Robert Bloom

Applicant

Alan Michael Hudson

Applicant

Christopher John Wilkinson Hill

Applicant

Stephen John Harris

Applicant

David Martin Hughes

Applicant

Anthony Victor Lomas

Applicant

Steven Anthony Pearson

Applicant

Michael John Andrew Jervis

Applicant

Dan Yoram Schwarzmann

Applicant

Derek Anthony Howell

Applicant

The Pensions Regulator

Respondent

Board of the Pension Protection Fund

Respondent

Nortel Networks UK Pension Trust Limited

Respondent

Peter Anthony Gamester

Respondent

Brian Seward

Respondent

Peter Sherratt

Respondent

Thomas Paul Bolland

Respondent

Lehman Brothers Holdings Incorporated

Respondent

Neuberger Berman Europe Limited

Respondent

Procedural Posture

Applications for Directions in Insolvency Proceedings / High Court Judgment

Legal Issues

  1. 1 Whether liabilities arising from Financial Support Directions (FSDs) and Contribution Notices (CNs) issued after insolvency are provable debts, expenses, or neither
  2. 2 Interaction between the Pensions Act 2004 and Insolvency Act 1986 regarding priority of pension-related liabilities
  3. 3 Applicability of FSD regime to companies in administration or liquidation

Ratio Decidendi

Liabilities arising from Financial Support Directions or Contribution Notices issued after the commencement of administration or liquidation are not provable debts under Rule 13.12 of the Insolvency Rules 1986, as they depend on discretionary statutory powers and lack a pre-insolvency legal obligation. Consequently, such liabilities are treated as administration or liquidation expenses under the Toshoku principle, unless issued in a subsequent liquidation following administration, in which case a CN may be a provable debt. The FSD regime applies to insolvent companies, and the court may make prospective orders to manage expense priorities to protect the rescue culture.

Court Disposition

Applications for directions answered; liabilities from FSDs/CNs issued post-insolvency are administration or liquidation expenses, not provable debts.

Orders

  • Court declares that FSD/CN liabilities issued after insolvency are expenses, not provable debts, except where a CN follows an FSD issued in administration and liquidation commences before CN issuance.
  • Administrators may seek prospective priority orders to protect administration process.