Contributed by Christy Kailis
Published in the March edition of the Journal of International Banking and Financial Law.
Christy Kailis has published an article in the UK journal, Butterworth’s Journal of International Banking and Finance Law entitled ‘Moral hazard for officeholders? The Lehman Brothers/Nortel Networks decision’ – (2011) 3 JIBFL 138 in which the author discusses the consequences of a recent decision by Mr Justice Briggs in the High Court of England in December 2010 – Re Nortel GmbH and other companies; Re Lehman Brothers International (Europe) (in administration) and other companies [2010] EWHC 3010 (Ch).
Briggs J held that a financial support direction (“FSD“) or a contribution notice (“CN“) (specific pension liabilities arising under the Pensions Act 2004 in the UK) issued against a company in UK administration will be ranked as an expense of that administration. If these liabilities had been issued before the target company had gone into administration they would have ranked on an unsecured basis. The impact of this decision is significant for English insolvency officeholders given that their remuneration will rank to be paid as an expense only after any FSD/CN liability has been met, unless the Court agrees to vary the statutory order of payment of expenses. The decision is currently being appealed to the Court of Appeal, to be heard in mid-July 2011. Depending on the outcome of that decision, there is a possibility of a subsequent appeal to the Supreme Court. The decision is being closely watched by insolvency and pension professionals as well as the market in general given its ramifications.
To read the article follow this link.