UK/CANADA/US - The Court of Appeal today heard the final day of argument in the case between the administrators of Nortel and Lehmans and the UK Pensions Regulator.
The case over whether pension scheme members should be given priority over all other creditors in the insolvency of companies comes after a court ruling in December said that pension scheme members should have "super priority" and be paid before everyone else. (Global Pensions: 10 December 2010)
The administrators of Nortel Networks and Lehman Brothers have challenged that in a test case heard this week.
They claim that in order to be provable, a liability or claim has to exist as at the date of insolvency and until the regulator exercises a discretion to impose an FSD, no liability exists.
However, the appeal before three Lord Justices of Appeal could uphold Mr Justice Briggs' original decision that the liabilities are an expense of the administration and the trustees retain their super priority status as creditors above other unsecured claims.
Nick Moser, head of restructuring & corporate recovery at international law firm Taylor Wessing said the case is of "real significance" for the entire economy.
He added: "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. If that happens, with bank lending to small and medium sized businesses continuing to fall year on year, it will be more difficult for corporate Britain to get the finance it needs to enable Britain to trade out of this recession.
"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. In the meantime, whilst the government could always intervene and pass a law to sort out the mess, it seems that it is not prepared to risk negative headlines about pensioners losing out and so is content for the case to take its time working through the court system."
The People's Pension, Atlas Master Trust and The Cheviot Trust have been granted authorisation from The Pensions Regulator (TPR), taking the total number of authorised master trusts to 18.
Pension schemes have been warned they may now face a more challenging legal test if they wish to fix drafting errors.
The Greene King Pension Scheme has appointed XPS Pensions as its actuarial and investment adviser following a competitive tender process.
Professional Pensions has compiled a list charting the progress of master trust authorisation. View our list in full here...