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Budget 2007 Home Page Half Year Economic & 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 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 October 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 [http://www.treasury.govt.nz/budget/forecasts/hyefu2007]

Quantifiable Contingent Liabilities

  Status [7] ($ million)
Guarantees and indemnities    
Cook Islands – Asian Development Bank loans Changed 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 14
    171
Uncalled capital    
Asian Development Bank Changed 1,002
Bank for International Settlements New 25
European Bank for Reconstruction and Development Changed 13
International Bank for Reconstruction and Development Changed 1,074
    2,114
Legal proceedings and disputes    
Health – legal claims Changed 53
Tax in dispute Changed 322
Other legal claims against SOEs and Crown entities Unchanged 33
Other legal claims Unchanged 76
    484

Other quantifiable contingent liabilities
   
International finance organisations Changed 1,531
Ministry of Economic Development – 2011 Rugby World Cup, Eden Park Upgrade Unchanged 146
New Zealand Export Credit Office – export guarantees New 29
Reserve Bank – demonetised currency Unchanged 23
Social Development – claim for judicial review Changed 83
Transpower New Zealand Limited Unchanged 98
Other quantifiable contingent liabilities of SOEs and Crown entities Changed 50
Other quantifiable contingent liabilities Changed 54
    2,014
Total quantifiable contingent liabilities   4,783

Unquantifiable Contingent Liabilities

Guarantees and indemnities Status
AgriQuality Limited (formerly Asure New Zealand Limited) Changed
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) 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
State Insurance and Rural Bank – Tax liabilities Unchanged
Synfuels-Waitara Outfall Indemnity Unchanged
Tainui Corporation Unchanged
Toll NZ Ltd – purchase of rail network assets Changed
Other unquantifiable contingent liabilities  
Abuse claims Unchanged
Accident Compensation Corporation (ACC) litigations Changed
Environmental liabilities Changed
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

  • [7]Relative to reporting in the 30 June 2007 Financial Statements of the Government of New Zealand.
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