Last Autumn, the Pensions Regulator (TPR) issued a determination that six companies within the Lehman Brothers corporate group should provide financial support to the Lehman Brothers Pension Scheme. TPR therefore sought financial support directions (FSDs) against those companies.

Jointly, Lehmans and Nortel (in respect of which FSDs were issued against 25 group companies in July 2010) challenged TPR's power to issue an FSD against a company which was in administration or under insolvency protection. Judgment was handed down on 10 December 2010.

The claimants had asked the Court to rule on the validity of an FSD issued after insolvency. The High Court reluctantly gave super priority to such claims by holding that they should be treated as expenses of an administration or liquidation. They will therefore be paid out of the assets of the insolvent companies prior to any distributions to unsecured creditors.

Although TPR's counsel suggested that an associated company would not be required to meet a scheme's entire deficit, the contribution level is determined by TPR and could be substantial. The decision will undoubtedly cause alarm to lenders to groups with large occupational pension schemes.

The case is expected to be taken to appeal and, if the decision is not reversed, there is clearly a case for legislation to follow to put the employer and target companies back on a level playing field.

In the interim, it leaves rescues of businesses by way of the administration procedure a less attractive option for any company within a group where there is an occupational pension scheme with any form of substantial deficit.