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 $10 million are included in the “other quantifiable contingent liabilities” total. Comparatives have been adjusted where appropriate to align with the disclosure of new “material” contingent liabilities. The total amount of prior years’ contingent liabilities remains unchanged.
Contingent liabilities have been stated as at 31 October 2005, being the last set of published contingent liabilities.
Details of each of the following contingent liabilities can be accessed from the Treasury website at http://www.treasury.govt.nz/forecasts/hyefu/2005/.
Quantifiable Contingent Liabilities
| Status [4] | ($ million) | |
|---|---|---|
| Guarantees and indemnities | ||
| Cook Islands – Asian Development Bank loans | Unchanged | 16 |
| Indemnification of receivers and managers – Terralink Limited | Unchanged | 10 |
| Ministry of Justice – Treaty settlement, tax liabilities | Changed | 82 |
| Ministry of Transport – funding guarantee | Unchanged | 10 |
| Post Office Bank – guaranteed deposits | Unchanged | 11 |
Guarantees and indemnities of SOEs and Crown entities |
Unchanged | 16 |
| 145 | ||
| Uncalled capital | ||
| Asian Development Bank | Changed | 1,047 |
| European Bank for Reconstruction and Development | Unchanged | 12 |
| International Bank for Reconstruction and Development | Changed | 1,168 |
| 2,227 | ||
| Legal proceedings and disputes | ||
| Health – legal claims | Unchanged | 88 |
| Tax in dispute | Changed | 475 |
| Other legal claims | Changed | 117 |
| 680 | ||
Other quantifiable contingent liabilities |
||
| International finance organisations | Changed | 1,343 |
| Reserve Bank – demonetised currency | Unchanged | 24 |
| Social Development – claim for judicial review | Changed | 60 |
| Transpower New Zealand Limited | Changed | 99 |
| Other quantifiable contingent liabilities of SOEs and Crown entities | Changed | 14 |
| Other quantifiable contingent liabilities | Changed | 30 |
| 1,570 | ||
| Total quantifiable contingent liabilities | 4,622 |
Notes
- [4]Relative to reporting in the 30 June 2005 Crown Financial Statements.
