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Budget 2008 Home Page Budget Economic and Fiscal Update 2008

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 gross sovereign issued debt. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to gross sovereign issued debt.

Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount shown is the estimation of the possible amount of any award against the Crown. It does not represent either an admission that the claim is valid or an estimation of the 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 2008, being the latest set of published contingent liabilities.

Details of each of the following contingent liabilities can be accessed from the Treasury website at http://www.treasury.govt.nz/budget/forecasts/befu2008.

Quantifiable Contingent Liabilities

Quantifiable Contingent Liabilities
Guarantees and indemnities Status [6] ($ million)
Cook Islands – Asian Development Bank loans Unchanged 14
Indemnification of receivers and managers – Terralink Limited Unchanged 10
Ministry of Justice – Treaty settlement, tax liabilities Unchanged 105
Ministry of Transport – funding guarantee Unchanged 10
Guarantees and indemnities of SOEs and Crown entities Unchanged 18
Other guarantees and indemnities Changed 10
    167
Uncalled capital    
Asian Development Bank Changed 1,005
Bank for International Settlements Unchanged 25
European Bank for Reconstruction and Development Changed 14
International Bank for Reconstruction and Development Changed 1,036
    2,080
Legal proceedings and disputes    
Health – legal claims Changed 39
Tax in dispute Changed 220
Other legal claims against SOEs and Crown entities Changed 3
Other legal claims Changed 87
    349
Other quantifiable contingent liabilities    
International finance organisations Changed 1,647
New Zealand Export Credit Office – export guarantees Changed 33
Reserve Bank – demonetised currency Unchanged 23
Social Development – claim for judicial review Changed 88
Transpower New Zealand Limited Changed 37
Other quantifiable contingent liabilities of SOEs and Crown entities Changed 85
Other quantifiable contingent liabilities Changed 71
    1,984
Total quantifiable contingent liabilities   4,580

Unquantifiable Contingent Liabilities

Unquantifiable Contingent Liabilities
Guarantees and indemnities Status
AgriQuality Limited (formerly Asure New Zealand Limited) Unchanged
At Work Insurance Limited Unchanged
Auckland Rail lease Unchanged
Bona Vacantia property Unchanged
Building Industry Authority Unchanged
District Court Judges, Justices of the Peace, Coroners and
Disputes Tribunal
Unchanged
Earthquake Commission (EQC) Unchanged
Electricity Corporation of New Zealand Limited (ECNZ) Changed
Ministry of Fisheries – indemnity provided for delivery of registry services Unchanged
Genesis Power Ltd (Genesis Energy) Unchanged
Geothermal carbon tax indemnity Unchanged
Housing New Zealand Corporation (HNZC) Unchanged
Indemnities against acts of war and terrorism Unchanged
Maui Partners Unchanged
National Provident Fund Unchanged
New Zealand Railways Corporation Unchanged
Persons exercising investigating powers Unchanged
Ports of Auckland Unchanged
Public Trust Unchanged
State Insurance and Rural Bank – Tax liabilities Unchanged
Synfuels-Waitara Outfall Indemnity Unchanged
Tainui Corporation Unchanged
Toll NZ Ltd – purchase of rail network assets Unchanged
Other unquantifiable contingent liabilities  
Abuse claims Unchanged
Accident Compensation Corporation (ACC) litigations Unchanged
Environmental liabilities Unchanged
Rugby World Cup 2011 – joint venture arrangements Unchanged
Treaty of Waitangi claims Unchanged
Treaty of Waitangi claims – settlement relativity payments Unchanged
Other contingencies  
Foreshore and seabed Unchanged

Notes

  • [6]Relative to reporting in the Half Year Economic and Fiscal Update 2007.
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