CASE MOTES Contingent Liabilities Revisited: In Re Nortel; In Re Lehman

摘要

When do you incur an obligation: when you see a watch in a shop window and think of buying it, or when you decide to do so? The House of Lords, in In re Sutherland dec'd, ruled that it is when you commit yourself to a certain course of action. But can you commit yourself other than by entering into a contract? Yes, said the Supreme Court in In re Nortel, you can do so by subjecting yourself to a statutory regime, under which there is a real prospect of incurring liability. That is why targets that, prior to the onset of formal insolvency, are already vulnerable to potential liability under the moral hazard provisions of the Pensions Act 2004 become subject to contingent liabilities to the pension fund and, in turn, why such contingent liabilities are provable as ordinary unsecured debts in the administrations or liquidations of those targets.