As reported in our August e-alert, between 26 and 29 July 2011 the Court of Appeal heard the joint appeal by the administrators of certain companies in the Nortel and Lehman estates of the decision of Mr Justice Briggs regarding the status of any financial support direction (FSD) or contribution notice (CN) issued to the companies in administration or any subsequent liquidation.

On 14 October 2011, the Court of Appeal dismissed this appeal (Bloom v The Pensions Regulator [2011] EWCA Civ 1124). Agreeing with the first instance decision, Lord Justice Lloyd concluded that a liability arising from a FSD or CN issued to a company in administration or liquidation will, save in very limited circumstances, amount to an expense of that administration or liquidation.

The ability of the Pensions Regulator to impose significant liabilities on companies in administration or liquidation and the uncertainty over how the Pensions Regulator will exercise its powers is likely to have significant implications for groups of companies which contain a defined benefit pension scheme in deficit, lenders to such groups (as the liability under a FSD or CN will rank ahead of floating charge realisations) and on the ability to restructure groups with any such pension deficit.

Both the Nortel and the Lehman administrators have requested permission to appeal to the Supreme Court.