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Budget 2007 Home Page Budget Economic and Fiscal Update [2007]

Contingent Liabilities

Contingent liabilities are costs that the Crown will have to face if a particular event occurs. Typically, contingent liabilities consist of guarantees and indemnities, legal disputes and claims, and uncalled capital. The contingent liabilities facing the Crown are a mixture of operating and balance sheet risks, and they can vary greatly in magnitude and likelihood of realisation. In general, if a contingent liability were realised it would reduce the operating balance and net worth, and increase Crown debt. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to Crown debt.

Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount shown is the amount claimed and thus the maximum potential cost. It does not represent either an admission that the claim is valid or an estimation of the possible amount of any award against the Crown.

Only contingent liabilities involving amounts of over $10 million are separately disclosed. Contingent liabilities below $10 million are included in the “other quantifiable contingent liabilities” total. Comparatives have been adjusted where appropriate to align with the disclosure of new “material” contingent liabilities. The total amount of prior years’ contingent liabilities remains unchanged.

Contingent liabilities have been stated as at 31 March 2007, being the latest set of published contingent liabilities.

Details of each of the following contingent liabilities can be accessed from the Treasury website at www.treasury.govt.nz/forecasts/befu/2007/.

Quantifiable Contingent Liabilities

Quantifiable Contingent Liabilities
Guarantees and indemnities Status [10] ($ million)
Cook Islands – Asian Development Bank loansChanged13
Indemnification of receivers and managers – Terralink LimitedUnchanged10
Indemnification of touring exhibitionsUnchanged349
Ministry of Justice – Treaty settlement, tax liabilitiesUnchanged105
Ministry of Transport – funding guaranteeUnchanged10
Post Office Bank – guaranteed depositsUnchanged10

Guarantees and indemnities of SOEs and Crown entities
Unchanged19
Other guarantees and indemnitiesChanged5
  521
Uncalled capital   
Asian Development BankChanged1,039
European Bank for Reconstruction and DevelopmentUnchanged13
International Bank for Reconstruction and DevelopmentChanged1,151
  2,203
Legal proceedings and disputes   
Health – legal claimsUnchanged90
Tax in disputeChanged715
Other legal claims against SOEs and Crown entitiesUnchanged25
Other legal claimsUnchanged101
  931

Other quantifiable contingent liabilities
  
International finance organisationsChanged1,749
Reserve Bank – demonetised currencyUnchanged22
Social Development – claim for judicial reviewChanged93
Transpower New Zealand LimitedUnchanged98
Other quantifiable contingent liabilities of SOEs and Crown entitiesUnchanged37
Other quantifiable contingent liabilitiesChanged20
  2,019
Total quantifiable contingent liabilities  5,674

Unquantifiable Contingent Liabilities

Unquantifiable Contingent Liabilities
Guarantees and indemnities Status
Asure New Zealand LimitedUnchanged
At Work Insurance LimitedUnchanged
Auckland Rail leaseUnchanged
Bona Vacantia propertyUnchanged
Building Industry AuthorityUnchanged
Contact Energy LimitedUnchanged
Crown Research Institutes (CRIs)Unchanged
District Court Judges, Justices of the Peace, Coroners and
Disputes Tribunal
Changed
District Health Boards – director indemnity – (DHBs)Unchanged
Earthquake Commission (EQC)Unchanged
Electricity Corporation of New Zealand Limited (ECNZ)Unchanged
Ministry of Fisheries – indemnity provided for delivery of registry servicesUnchanged
Genesis Power Ltd (Genesis Energy)Unchanged
Geothermal carbon tax indemnityUnchanged
Housing New Zealand Corporation (HNZC)Unchanged
Indemnities against acts of war and terrorismUnchanged
Maui PartnersUnchanged
National Provident FundUnchanged
New Zealand Railways CorporationUnchanged
Persons exercising investigating powersUnchanged
Ports of AucklandUnchanged
Public TrustUnchanged
Purchasers of Crown operationsUnchanged
State Insurance and Rural Bank – tax liabilitiesUnchanged
Synfuels-Waitara Outfall IndemnityUnchanged
Tainui CorporationUnchanged
Toll NZ Ltd – purchase of rail network assetsUnchanged
Works Civil ConstructionUnchanged
Works Consultancy ServicesUnchanged
Other unquantifiable contingent liabilities  
Abuse claimsUnchanged
Accident Compensation Corporation (ACC) litigationsUnchanged
Environmental liabilitiesUnchanged
Rugby World Cup 2011Unchanged
Sale of Crown assetsUnchanged
Treaty of Waitangi claimsUnchanged
Treaty of Waitangi claims – settlement relativity paymentsUnchanged
Other contingencies  
Foreshore and seabedUnchanged

 

Notes

  • [10]Relative to reporting in the 31 December 2006 Financial Statements of the Government of New Zealand.
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