Supreme Court overturns Court of Appeal in Nortel/Lehman cases

Supreme Court overturns Court of Appeal in Nortel/Lehman cases

In the matter of the Nortel Companies On appeal from the Court of Appeal Civil Division (England and Wales)


Whether, in circumstances where a Financial Support Direction (“FSD”) or a contribution notice (“CN”) under the Pensions Act 2004 is issued after a company has gone into administration or insolvent liquidation, it imposes any, and if so what, obligation on the company and its office-holders.

The cases consider the way Parliament intended the pensions and insolvency statutory regimes should interact.

In Liquidation and Administration (where there is no possibility of rescue) the insolvency legislation specifies the order of priority of the insolvency (Insolvency Act sections107, 115, 143, 175, 176ZA, 189 and paras 99 and 66 of schedule B1 and Insolvency Rules 2.67, 2.88, 4.181 and 4.218) as:

  1. Fixed charge creditors
  2. Expenses of the insolvency proceedings
  3. Preferential creditors
  4. Floating charge creditors
  5. Unsecured provable debts
  6. Statutory interest
  7. Non-provable liabilities
  8. Shareholders


The administrators of 20 companies in two groups made court applications for directions as to the effect of the FSD regime created by the Pensions Act 2004 upon companies in administration or insolvent liquidation. At first instance, Briggs J held that (a) the liability arising under a CN to a company in administration will rank as an administration expense, (b) the liability arising under a CN issued to a company in a liquidation following an administration will rank as a liquidation expense if the FSD preceding it was issued while the company was in liquidation, although if the FSD preceding it was issued while the company was in liquidation any liability arising under the CN will be a provable debt in the liquidation, and (c) an FSD, whether issued to a company in administration or in a subsequent liquidation, imposes an obligation on the company, to be performed by the administrator or liquidator, to comply with the FSD by putting in place reasonable financial support for the scheme within the period specified in the direction. The Court of Appeal upheld the order of Briggs J.

The question was, specifically, would the liability under such a requirement rank (a) as an expense of the targets’ administration, (b) pari passu (i.e. equally) with the target companies’ other unsecured creditors, or

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About the author:

Frances gained her LLB (Hons) at Kings’ College, London University in 1983. She then attended Chester College of Law to take what were then the Solicitors’ Final Examinations. She has been at Moon Beever since 1984 where she trained, qualifying in 1986, and a partner since 1988 becoming Managing Partner in 2000. She is also a founder partner of ShawnCoulson, an international association, of which Moon Beever is the London office. She is Head of Insolvency and Business Recovery at Moon Beever running a substantial team of insolvency specialists. She undertakes most areas of personal and corporate insolvency, specialising in contentious insolvency especially cases involving fraud, as well as provisional liquidations and injunctive work generally.

She is Chairman of the Appeal Committee at ACCA and a member of the Insolvency Law Evaluation Panel at the Insolvency Service, and CBI Insolvency Panel as well as a member of Insol, and the IBA and, veering towards the personal, of the NFU, and the Carlton Club.

Frances is a regular speaker in the UK and abroad on insolvency and practice management.

Frances was formerly Chairman of the SPG Committee of R3, the Insolvency trade body representing 97% of licensed insolvency practitioners. She is President of R3 for 2011-2012, and remains a member of its R3 Policy Group.

She is interested in all things equestrian as are her three daughters and her husband, and spends her free time (such as it is) with her family and other animals, riding and trying to improve her strokes at Real Tennis.