CASE SNAPSHOT
In the matter of the Nortel Companies, the UK Supreme Court found that pension liabilities attributed to a company that arose prior to the occurrence of an insolvency event were not entitled to priority treatment, even if the first demand for payment was only made after the insolvency event occurred.
FACTUAL BACKGROUND
The Pension Act
BNY Corporate trustee Services Ltd & Ors v Neuberger[2013]UKSC 28
The UK Supreme Court in BNY Corporate trustee Services Ltd & Ors v Neuberger clarified the ambit of the “cash–flow insolvency” test under section 123 (1)(e) of the English Insolvency Act 1986 ("the "Insolvency Act") and the "balance-sheet insolvency" test under section 123(2) of the Insolvency Act.
In our December 2010 and April 2011 insolvency updates, we reported on the UK High Court and Court of Appeal decisions in BNY Corporate Trustee Services Limited v Eurosail. The issue before both Courts was whether Eurosail was insolvent by virtue of being unable to pay its debts under the balance sheet limb of the solvency test in section 123 of the UK Insolvency Act 1986. The Court of Appeal upheld the High Court decision that Eurosail was solvent, noting that it had not reached the "point of no return".
High Court holds that reports used by the Serious Fraud Office to obtain search and arrest warrants are not subject to litigation privilege in subsequent civil proceedings.
Summary
On 24 July 2013, the Supreme Court handed down its long-awaited judgment in the Nortel/Lehman case: Re Nortel Companies [2013] UKSC 52. The Court looked at the position where a contribution notice (CN) or financial support direction (FSD) was issued by the Pensions Regulator (TPR) on a company that is already in insolvency proceedings in England (eg administration). How does the relevant obligation rank in the order of priority of payment?
Relief for lenders and administrators as UK Supreme Court reverses “super-priority” status of pensions liabilities in insolvency ranking.
Odd as it may seem, you have to plough through 122 sections of the UK Insolvency Act 1986 (the “Act”) before you finally reach the section that sets out the criteria for establishing insolvency. Section 123 of the Act lists a series of circumstances under which a company may be deemed insolvent. Some of these circumstances are factual—for example, owing a debt of more than £750 for more than 21 days after a demand for payment—but two rely on a legal test of company insolvency.
Introduction
The UK Supreme Court judgment in BNY Corporate Trustee Services Limited and others v Eurosail-UK 2007-3BL PLC [2013] UKSC 28 was handed down on 9 May 2013. It considered: (a) the meaning of the balance sheet insolvency test as laid out in section 123(2) of the UK Insolvency Act 1986 (the "Act"); and (b) the legal effect of a post-enforcement call option ("PECO") and, in particular, whether the existence of a PECO is relevant to an assessment of balance sheet insolvency.
The Supreme Court has delivered a judgment providing welcome clarification on the construction and effect of section 123(2) of the Insolvency Act 1986 (the "balance-sheet" insolvency test) and its interaction with section 123(1)(e) of the Act (the "cash flow" insolvency test).
UK Supreme Court decision confirms traditional rules on enforcement of all US judgments in England and reverses a significant liberalisation of cross-border bankruptcy law.