In re Nortel Companies and Others: SC 24 Jul 2013

The court was asked as to the interrelationship of the statutory schemes relating to the protection of employees’ pensions and to corporate insolvency.
Held: Liabilities which arose from financial support directions or contribution notices issued by the Pensions Regulator under the 2004 Act after the company had gone into administration, which required the company to put in place financial support for an occupational pension scheme, did not rank as an expense of the administration under rule 2.67(1)(f) of the 1986 Rules, but if by the time it went into administration it had for the preceding two years been vulnerable to a liability under a pension scheme, that liability remained an obligation which ranked in the administration and was provable as debt of the company.
By participating in litigation, a party submitted himself to a liability to pay costs in accordance with rules of court, contingently upon an order for costs being made against him. It followed that where proceedings were begun by or against a company before it went into liquidation, a liability for costs under an order made after it went into liquidation was provable as a contingent debt.
‘In a liquidation of a company and in an administration (where there is no question of trying to save the company or its business), the effect of insolvency legislation . . , as interpreted and extended by the courts, is that the order of priority for payment out of the company’s assets is, in summary terms, as follows:
(1) Fixed charge creditors;
(2) Expenses of the insolvency proceedings;
(3) Preferential creditors;
(4) Floating charge creditors;
(5) Unsecured provable debts;
(6) Statutory interest;
(7) Non-provable liabilities; and
(8) Shareholders.’


Lord Neuberger, President, Lord Mance, Lord Clarke, Lord Sumption, Lord Toulson


[2013] UKSC 52, [2013] 4 All ER 887, [2013] Bus LR 1056, [2013] 2 BCLC 135, [2013] Pens LR 299, [2013] BCC 624, [2013] BPIR 866, [2013] WLR(D) 300, [2014] 1 AC 209, UKSC 2011/0259, [2013] 3 WLR 504


Bailii, WLRD, Bailii Summary, SC Summary, SC


Insolvency Rules 1986 2.67(1)(f), Insolvency (Amendment) Rules 2006, Insolvency (Amendment) Rules 2003, Pensions Act 2004 43


England and Wales


At first instance (disapproved)Bloom and Others v The Pensions Regulator (Nortel, Re) ChD 10-Dec-2010
Applications for directions by the administrators of twenty companies in two groups, all raising the same common questions as to the effect of the Financial Support Direction regime created by the Pensions Act 2004 upon companies in administration . .
Appeal fromBloom and Others v The Pensions Regulator and Others; In re Nortel GMBH (in administration CA 14-Oct-2011
‘These appeals raise important and difficult questions posed by the impact of legislation for the protection of pension funds upon companies which are undergoing an insolvency process.’ . .
CitedIn re Sutherland, dec’d; Winter v Inland Revenue Commissioners HL 1963
The concept of a contingent liability was considered.
Held: In Scots law, a contingent liability is a liability which, by reason of something done by the person bound, may or may not arise depending on the happening of a future event.
CitedIn re SBA Properties Ltd ChD 1967
A court action had been raised in the name of a company without authority, giving rise to a possible liability in expenses to the defendants. One of the defendants claimed that, in the event that the company’s liquidator ratified the action, that . .
CitedIn re ABC Coupler and Engineering Co Ltd (No 3) ChD 1970
The liquidator when appointed closed down the business which had been conducted on the premises, had the company’s plant and machinery valued and thought about what he should do.
Held: The rent did not become a liquidation expense until some . .
CitedKahn and Another v Commissioners of Inland Revenue; In re Toshoku Finance plc HL 20-Feb-2002
A company went into liquidation, being owed substantial sums by another company in the same group, but itself insolvent. A settlement did not include accrued interest, but was claimed to be taxed as if it had, and on an accruals basis. If so, was . .
CitedSecretary of State for Trade and Industry v Frid HL 13-May-2004
The company went into insolvent liquidation. The secretary of state was to make payments to employees and there were other state preferential creditors. At the same time a refund of VAT was due from the Commissioners of customs and Excise.
CitedSteele, Regina (on the Application of) v Birmingham City Council and The Secretary of State for Work and Pensions CA 16-Dec-2005
The claimant had received an overpayment of benefits (Job seeker’s allowance), but then was made bankrupt. He now said that this was a debt in the bankruptcy.
Held: It was not. At the date of the bankruptcy order, the possible reclaim was not . .
CitedIn re T and N Ltd and Others (No 3) ChD 16-Jun-2006
The court considered the application of ‘the bankruptcy template of section 382 to the rules governing the winding up of companies’.
Held: The phrase ‘obligation incurred’ in Rule 13.2(1)(b) was inapt to describe a common law duty of care in . .
CitedIn re Bluck, Ex parte Bluck 1887
The discretionary character of a costs order meant that it was not even a contingent liability until the order had actually been made . .
CitedIn re A Debtor (No 68 of 1911) 1911
. .
CitedIn re Pitchford 11-Jan-1924
. .
CitedIn re Smith ex parte Edwards 1886
The parties to an arbitration agreement had agreed to pay whatever costs the arbitrator decided in his discretion to award. The losing party then went bankrupt.
Held: His bankruptcy did not relieve him of his liability for the costs. The . .
CitedIn re British Gold Fields of West Africa 1899
An order for costs could be proved where the action was in respect of a provable debt or liability. In such a case they were regarded as an addition to the sum recovered. . .
ApprovedHaine v Secretary of State for Business Enterprise and Regulatory Reform and Another; Day v Haine CA 11-Jun-2008
Former employees had obtained a protective award against the company for failing to consult on the impending redundancies and submitted proofs of debt to the liquidator who sought guidance from the court. The judge had held that since the Act . .
DisapprovedGlenister v Rowe CA 21-Apr-1999
The claimant sued for breach of trust. The action was re-instated after being struck out for want of prosecution, but in the meantime the defendant had been made bankrupt and then discharged from bankruptcy. An order for costs was then made which . .
DisapprovedSteele v Mooney and others CA 8-Feb-2005
The claimant had sought an extension of time for service of her claim form in her action for personal injury. The solicitors in error did not include the words ‘claim form’ in their request. The judge had initially held the error was one of drafting . .
CitedThe Carron Iron Company Proprietors v Maclaren, Dawson, Stainton PC 23-Jul-1855
If the circumstances of a case are such as would make it the duty of one court in this country to restrain a party from instituting proceedings in another court here, they will also warrant it in imposing on him a similar restraint with regard to . .
CitedEx parte Llynvi Coal and Iron Co; In re Hide 1871
The trustee in bankruptcy disclaimed an agreement for a lease under Section 23. The landlord claimed to prove as creditor under the section.
Held: Where one party has repudiated a contract and the other party has accepted that repudiation as . .
CitedIn re Trent and Humber Shipbuilding Co; Bailey and Leetham’s Case 1869
The court was asked whether costs awarded against a company were costs in the winding up.
Held: Where a creditor has obtained leave of the court to bring proceedings against a company in liquidation, any costs to which the creditor would . .
CitedIn re International Marine Hydropathic Co CA 1884
Where rates become due in respect of land occupied by a liquidator for the purpose of the winding up, the liquidator is liable to meet those rates. . .
CitedIn re National Arms and Ammunition Co CA 1885
‘If the company retains the possession of property which would be rateable in the hands of anyone else, it is only reasonable that it should be rateable in the hands of the company . . the true test is whether there has been a beneficial occupation . .
CitedIn re Blazer Fire Lighter Ltd 1895
The liquidator had closed the business and done nothing on the premises except to instal a caretaker to protect them from vandalism. That was sufficient to continue the company in rateable occupation. So the rates were an expense of the liquidation. . .
CitedIn re Wenborn and Co 1905
Buckley J held: ‘When the voluntary liquidator, or the liquidator in a compulsory winding up, comes to the Court for leave to bring or defend an action by or against the company, and obtains this leave, the judge in effect pledges the assets of the . .
CitedIn re Beni-Felkai Mining Co Ltd 1933
A liquidator’s remuneration is not encompassed by the word ‘expenses’. The term ‘expenses’ is not a term of art. It may include any expenses which the liquidator may be compelled to pay in respect of his acts in the course of a proper liquidation of . .
CitedIn re Mesco Properties Ltd CA 1980
Tax legislation provided that the company was chargeable to corporation tax on a capital gain arising in the winding up.
Held: The appeal failed. It was a tax which the liquidator was bound to discharge by payment, and the payment was a . .
CitedExeter City Council v Bairstow and others; Re Trident Fashions plc CA 10-Mar-2006
. .
CitedBurton, Re Direction of Assets; In re Thomas v Burton, liquidator of Ben Line Steamers Ltd SCS 24-Dec-2010
Outer House, Court of Session . .
CitedIn re Condon, Ex parte James 1874
The Trustee in bankruptcy has relevant duties as the Trustee as an officer of the Court. Such a Trustee would not engage in conduct which could be seen to involve an unfair use of that position, and ‘where it would be unfair’ for a trustee in . .
CitedIn Re Kentish Homes Ltd ChD 31-Mar-1993
The question was whether a post-liquidation liability to community charge on empty flats was an expense of the liquidation.
Held: The company was the chargeable person in respect of the flats for the relevant periods, but the liability was . .
CitedRe T H Knitwear (Wholesale) Ltd CA 1988
Subrogation is a remedy, not a cause of action. Subrogation of Customs and Excise to a creditor’s right of proof in the winding up of a supplier was refused as it would have been contrary to the statutory scheme for the administration of VAT. . .
CitedIn Re Oriental Inland Steam Company ex parte Scinde Railway Company CA 1874
The liquidator obtained an order requiring a creditor who had attached assets in India to return them to the company in liquidation.
Sir W M James LJ said: ‘The winding-up is necessarily confined to this country. It is not immaterial to . .
CitedIn re Clark (a bankrupt); ex parte the Trustee v Texaco Ltd ChD 1975
Walton J restated the rule in In re James: ‘the rule provides that where it would be unfair for a trustee to take full advantage of his legal rights as such, the court will order him not to do so, and, indeed, will order him to return money which he . .
CitedIn re UCT (UK) Ltd ChD 2001
Arden J was asked to approve aproposal that the company should go into voluntary liquidation, on the basis that, prior to that happening, the administrators would pay into a trust account in their own name a sum equal to the total amount owing to . .
CitedGetliffe and Another, Re Lune Metal Products Ltd CA 14-Dec-2006
. .

Cited by:

CitedBPE Solicitors and Another v Gabriel SC 17-Jun-2015
Application for directions in a pending appeal. The claimant alleged negligence against his former solicitors. After his successful claim was substantially overturned on appeal, he was made bankrupt.
Held: If the trustee adopted and pursued . .
CitedLB Holdings Intermediate 2 Ltd, The Joint Administrators of v Lehman Brothers International (Europe), The Joint Administrators of and Others SC 17-May-2017
In the course of the insolvent administration of the bank, substantial additional sums were received. Parties appealed against some orders made on the application to court for directions as to what was to be done with the surplus.
Held: The . .
Lists of cited by and citing cases may be incomplete.

Insolvency, Employment, Company

Updated: 07 August 2022; Ref: scu.513677