City analysis: pensions

Bloom & Ors v The Pensions Regulator & Ors, Re: the Nortel Networks UK Pension Plan; Lomas & Ors v The Pensions Regulator & Ors, Re: the Lehman Brothers Pension Scheme

Richard Sheldon QC
Richard Sheldon QC

This long-running battle will have ramifications for the way the Pensions Regulator takes action against insolvent companies and how companies structure their pension schemes.

The CoA ruled in October 2011 that contribution notices (CNs) rank as expenses of an administration or liquidation, meaning they must be honoured ahead of payments to the insolvent companies’ unsecured creditors.

From the perspective of the pensions industry, the regulator’s teeth will be blunted if the Financial Support Directions (FSDs) prove to be valueless within insolvency, leaving schemes unfunded and the Pensions Protection Fund much more exposed.

From the perspective of the insolvency industry, there is an alleged threat that insolvency practitioners will decline to accept appointments to insolvent estates such as Nortel, where the potential pensions liability is over £2.1bn and, if given priority over the insolvency practitioners’ fees, may prevent the insolvency practitioners getting paid in full.

For the appellants Nortel Administrators: South Square’s William Trower QC, Wilberforce Chambers’ Andrew Mold and South Square’s Tom Smith, instructed by Herbert Smith Freehills partner Stephen Gale

For the appellants Lehman Brothers Administrators: South Square’s Robin Dicker QC, Wilberforce Chambers’ Paul Newman QC leading South Square’s Daniel Bayfield instructed by Linklaters partner Euan Clarke

For the respondent in both appeals Pensions Regulator: 11 Stone Buildings’ Raquel Agnello QC leading Wilberforce Chambers’ Jonathan Hilliard and 11 Stone Buildings’ Thomas Robinson, instructed directly

For the respondents Nortel Networks UK Pension Trust and for the Board of the Pension Protection Fund: South Square’s Richard Sheldon QC, Felicity Toube QC and Wilberforce Chambers’ Michael Tennet QC, instructed by Hogan Lovells partner Joe Bannister

For the respondents Lehman pension fund trustees and for the board of the Pension Protection Fund: South Square’s Gabriel Moss QC, Outer Temple’s Nicolas Stallworthy QC and South Square’s David Allison, instructed by Travers Smith partners Peter Esam and Susie Daykin

For the interveners Lehman Brothers Holdings and Neuberger Berman Europe: South Square’s Barry Isaacs QC, instructed by Weil Gotshal & Manges partner Joanne Etherton

When? 14-16 May

Judges: A panel of seven, to be confirmed