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Budget 2006 Home Page Half Year Economic & Fiscal Update 2006

Contingent Liabilities

Contingent liabilities are costs 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 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 2006, 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/forecasts/hyefu/2006.

Quantifiable Contingent Liabilities

Guarantees and indemnities Status [6] ($million)
Cook Islands – Asian Development Bank loans Changed 16
Indemnification of receivers and managers – Terralink Limited Unchanged 10
Indemnification of touring exhibitions Unchanged 250
Ministry of Justice – Treaty settlement, tax liabilities Changed 105
Ministry of Transport – funding guarantee Unchanged 10
Post Office Bank – guaranteed deposits Unchanged 11
Guarantees and indemnities of SOEs and Crown entities Unchanged 19
Other guarantees and indemnities Unchanged 1
    422
Uncalled capital    
Asian Development Bank Changed 1,116
European Bank for Reconstruction and Development Changed 14
International Bank for Reconstruction and Development Changed 1,235
    2,365
Legal proceedings and disputes    
Health – legal claims Unchanged 90
Tax in dispute Changed 827
Other legal claims against SOEs and Crown entities Changed 3
Other legal claims Changed 93
    1,013
Other quantifiable contingent liabilities    
International finance organisations Changed 1,860
Reserve Bank – demonetised currency Unchanged 23
Social Development – claim for judicial review Changed 71
Transpower New Zealand Limited Changed 98
Other quantifiable contingent liabilities of SOEs and Crown entities Changed 37
Other quantifiable contingent liabilities Changed 22
    2,111
Total quantifiable contingent liabilities   5,911

Unquantifiable Contingent Liabilities

Guarantees and indemnities Status
Asure New Zealand Limited Unchanged
At Work Insurance Limited Unchanged
Auckland Rail lease Unchanged
Bona Vacantia property Unchanged
Building Industry Authority Unchanged
Crown Research Institutes (CRIs) Unchanged
District Court Judges, Justices of the Peace, Coroners and
Disputes Tribunal
Unchanged
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 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
Purchasers of Crown operations Unchanged
Reserve Bank of New Zealand (the Reserve Bank) 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
Works Civil Construction Unchanged
Works Consultancy Services Unchanged
Other unquantifiable contingent liabilities  
Abuse claims Unchanged
Accident Compensation Corporation (ACC) litigations Unchanged
Environmental liabilities Unchanged
Foreshore and seabed Unchanged
Sale of Crown assets Unchanged
Treaty of Waitangi claims Unchanged
Treaty of Waitangi claims – settlement relativity payments Unchanged
Other contingencies  
Foreshore and seabed Unchanged
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