A recent overruling by the Supreme Court has revoked the
priority status of pension schemes issued with a Financial Support
Direction (FSD) or Contribution Notice (CN) by the Pensions
Regulator, following an insolvency event. Whilst the decision
largely affects companies operating within England and Wales,
Scottish Courts are expected to be guided by the ruling.
Previous decisions of both the High Court and Court of Appeal
afforded a special 'super priority' status to pension
schemes that were the subject of an FSD or CN. This 'super
priority' status granted preferential creditor status (and
protection) to pension schemes during the insolvency process
– a position that would normally only be assigned to
administrators for their fees.
The new ruling
Following the Supreme Court's ruling, FSDs and CNs will no
longer be treated as a priority. Instead they will be
reclassified as 'provable debt' – and will rank
alongside general unsecured claims during insolvency
The Supreme Court has stated that much of the reasoning behind
its decision lies within specific provisions, relating to
'provable debt', within the Insolvency Rules
1986. In Scotland, however, companies are governed by
the provisions of the Insolvency (Scotland) Rules 1986
and, although expected to be directed by this ruling, can proceed
upon a very different basis.
The material contained in this article is of the nature of
general comment only and does not give advice on any particular
matter. Recipients should not act on the basis of the information
in this e-update without taking appropriate professional advice
upon their own particular circumstances.
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The High Court has provided further guidance on when a guarantor may use its right of subrogation to recover monies paid under a guarantee, which will be useful to bankers providing and seeking guarantees and to insolvency practitioners interested in their implications.
Two key bar dates have now been set in the administration of Lehman Brothers International (Europe) ("LBIE"). The English High Court has made an order setting a bar date of 19 March 2010 for clients of LBIE to make claims in relation to trust assets held by LBIE.
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