Trustees of the Nortel UK Pension Scheme secured £340m (€430m) in deficit funding from its now-defunct Canadian sponsor but failed in a bid to force through a financial support directive (FSD) for greater funding.In a case argued in the province of Ontario, trustees, supported by the UK Pension Protection Fund (PPF), challenged Canadian company Nortel Networks Limited (NNL) for funding to repair a deficit after Nortel’s insolvency in 2009.The UK arm of Nortel supported a 40,000 member defined benefit (DB) scheme, which had a £2bn deficit at the time of insolvency.The Canadian communications business triggered one of the world’s largest insolvencies in 2009, sending all global subsidiaries into administration, chiefly in Canada, the US and Europe. Trustees, the UK pensions regulator (TPR) and the PPF launched a legal case against administrators of the US and Canadian businesses to secure funding for the UK DB scheme and avoid its entering the lifeboat fund.Legal proceedings over the distribution of monies created by the sale of NNL’s assets are ongoing, with JP Morgan holding a $7bn (€5.6bn) sum as US and Canadian courts decide how to distribute assets to creditors.In the latest case in Ontario, trustees and the PPF challenged NNL’s administrators, looking to secure two separate levels of funding based on written guarantees from NNL to its UK DB scheme.They also made a financial claim based on TPR’s ability to issue an FSD – a UK legal claim on assets to support underfunded pension schemes – against NNL.The Ontario Superior Court of Justice ruled that one of the guarantees, valued at £340m, could be upheld but ruled out a smaller $150m guarantee and gave no credence to the trustees’ claims based on the FSD.Judge Justice Newbould said issuing the FSD against NNL would be unreasonable but did not venture whether a court of appeal would agree with his judgment.However, the Court acknowledged FSDs should be treated as appropriate claims in Canadian insolvency proceedings, after local administrators argued against this.The value of the FSD was unquantifiable at the time of the ruling given the implications of outstanding cases in the US and Canada over the distribution of assets.The FSD claim value would depend on the distribution of the $7bn in assets to claimants in Europe, compared with those in the US and Canada.Should European claimants fare well in any future decision, the value of the FSD would decrease, and vice versa.Lawyers representing trustees and the PPF welcomed the clarity of the secured funding and the credibility of FSDs in Canadian insolvency practices.Angela Dimsdale Gill, Hogan Lovells partner and lead litigator for the PPF and trustees, said her clients would carefully consider the next steps on the matters lost in the case.“The trustee and PPF have reluctantly but determinedly been part of [Nortel litigation] and continue to do their best to represent the interests of UK pensioners,” she said.“It is important not to have knee-jerked reactions, but, of course, there are some aspects of the judgment we find disappointing.”A spokesman for the PFF added: “[The] judgment provided greater clarity for the amounts being pursued by the scheme. We continue to consider the judgment and the next steps available to us and the trustees.”The remainder of the case now rests on judgments from US and Canadian courts, expected next year.Complications have arisen over conflicting challenges from Europe, the US and Canada, including pension schemes and bondholders, for the $7bn of assets.US and Canadian courts are now sitting simultaneously, but not conjointly, to reach a ruling based on two sovereign laws – an unprecedented legal situation.Gill said: “The critical decision on allocation will come next year. The claims process is inter-linked with the allocation dispute, and we will not really know where the scheme has ended up until it is all over.”The original article was amended to correct the currency for the smaller claim from £150m to $150m. Apologies for the mistake.