Clifford Chance

Moral dilemma in Court of Appeal Pension case

14 October 2011

On 14 October, the Court of Appeal decided unanimously that pension liabilities arising post insolvency as a result of the Pensions Regulator's moral hazard powers were to maintain their super priority ahead of all creditors other than those with a fixed charge. Whilst the decision comes as no surprise, it is still of great concern to those involved in these cases and other insolvencies where there is a defined benefit pension scheme with a deficit. It will cause further delay to the ongoing administration proceedings for Lehman Brothers International (Europe) and the Nortel Networks Group, including any distributions to creditors. It was recognised by the Appeal judges that the decision may have a serious impact on the rescue culture itself.

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