T&N Ltd & Ors, In the matter of the Insolvency Act 1986

Declaratory relief may properly determine whether a proposed commercial agreement will breach existing contractual rights where there is a real dispute between the parties. The court should not give an advisory opinion or decide hypothetical disputes, but those limitations do not prevent a declaration concerning an agreement about to be entered into.

On construction, a settlement agreement could give a third party the benefit of rights arising from reinsurers’ exercise of their exclusive rights without transferring or duplicating those exclusive rights. Whether later disclosure of documents breached the reinsurance agreement depended on the document and the circumstances. A requirement restricting disclosure had to be reasonable, having regard to the legitimate interests of both parties.

T&N Limited and its subsidiaries were in administration following substantial asbestos-related claims. Curzon Insurance Limited sought declarations concerning settlement agreements relating to an asbestos liability policy, a reinsurance agreement and related litigation.

The reinsurers, Centre Re and Munich Re, contended that entering into or performing the settlement agreements would breach their contractual rights. They also raised concerns about declaratory relief, disclosure rights and possible regulatory consequences under the Financial Services and Markets Act 2000. The principal issue was whether entering into the settlement agreements would itself breach the reinsurance agreement.

1. The court granted a declaration that Curzon would not breach the reinsurance agreement merely by entering into the settlement agreements.

2. Declaratory relief was appropriate. There was an existing dispute because the reinsurers had asserted that entry into the collateral settlement agreement would breach identified contractual provisions. The declaration determined contested rights between the parties and was not an advisory opinion on the law generally.

3. Clause 4.5.1 of the collateral settlement agreement did not confer on Sedgwick rights which, by express terms or necessary implication, could be exercised only by the reinsurers. The reinsurers’ exclusive claims-handling rights were preserved. Sedgwick could nevertheless obtain the benefit of rights flowing from the reinsurers’ exercise of those rights. Its right to dispute claims was coextensive with its own several liability and did not interfere with the reinsurers’ rights.

4. Clause 4.7 did not itself breach the reinsurance agreement. Claims-handling rights did not include a general right to control disclosure of documents belonging to T&N or Curzon. However, particular disclosure might later breach the agreement. Under article 8.1(f), any requirement not to disclose documents had to be reasonable, balancing the legitimate interests of the reinsurers and Curzon. A blanket prohibition would not be reasonable.

5. The court declined to rule on whether Sedgwick had contravened section 19 of the Financial Services and Markets Act 2000 because Sedgwick was not before the court. The suggested consequences for Curzon under the reinsurance agreement had no substance. Any implied term preventing Curzon from entering into the settlement agreement failed the requirements of necessity and obviousness.

First-instance decision. No appellate history was stated in the judgment.