Court decides Pensions Regulator has no priority on insolvency

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The much-anticipated judgment in Nortel Companies and others, Re [2013] UKSC 52 (24 July 2013) (often referred to as the Bloom case or the Nortel/Lehmans case) was delivered by the Supreme Court on 24 July. The case concerned what priority was to be given under the Insolvency Rules to a financial support direction (FSD) and/or contribution notice (CN) issued against a company by the Pensions Regulator after that company has suffered an insolvency event (in this case administration). The Supreme Court ruled on that point that FSDs and CNs rank as provable debts alongside other general creditors. They are neither administration expenses of the insolvency, so ranking ahead of general unsecured creditors (as had been decided in the earlier High Court and Court of Appeal decisions), nor did they have no standing at all in the insolvency, so falling into the so-called ‘black hole’ and therefore least likely to be satisfied on an insolvency.

The regulator has powers under the Pensions Act 2004 in certain prescribed circumstances to make an FSD or a CN ordering group companies to (respectively) put in place financial support in relation to, or make an actual contribution to, an underfunded defined-benefit pension scheme within the group…

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