T & N Ltd & Ors, Re Companies Act 1985

A scheme of arrangement under section 425 of the Companies Act 1985 need not alter creditors’ existing rights against the company. It is sufficient that its context and content properly constitute an arrangement with them in their capacity as creditors, including a tripartite settlement affecting rights against insurers.

Actual and contingent asbestos claimants may be creditors. Contribution claimants qualify once the facts creating a contingent entitlement exist. Current dependants may qualify, but unidentified future dependants cannot be bound.

Classes depend on rights rather than interests. Differences require separate meetings only where the rights are so dissimilar that creditors cannot consult together. A genuine compromise of a genuine employers’ liability insurance dispute after the policy period is not prohibited by compulsory-insurance legislation.

The administrators of T&N Limited and 57 associated companies applied for leave under section 425 of the Companies Act 1985 to convene meetings concerning schemes for asbestos-related employers’ liability claims. The schemes formed part of a settlement with employers’ liability insurers. They would assign claimants’ insurance rights to trustees, establish a £36.74 million trust fund for present and future claims, and prevent further claims against the insurers.

The court determined preliminary questions concerning statutory transfers of insurance rights, the meaning of an arrangement, the creditor status of contingent contribution claimants and dependants, class composition, compulsory insurance, future amendment of the distribution procedures, and meeting directions.

1. The application to convene meetings was granted and directions were given. Claimants whose rights under employers’ liability policies had transferred under section 1 of the Third Parties (Rights Against Insurers) Act 1930 remained at least contingent creditors of the insured companies. Where the underlying cause of action existed at the commencement of administration, transfer occurred then. Otherwise it occurred when the cause of action accrued.

2. Section 3 of the 1930 Act did not invalidate the schemes. They were arrangements with the claimants, not agreements between insurer and insured. The assignments and waivers would be made by claimants through the statutory scheme machinery, rather than by the insured company. An amendment concerning unidentified future dependants was also outside section 3 because no liability had yet been incurred to them.

3. An arrangement under section 425 need not alter existing rights between the company and its creditors. It must concern persons in their capacity as creditors and contain an element of give and take. The proposed settlement was an integral, tripartite arrangement involving the companies, claimants and insurers. Its impact on disputed insurance rights and the companies’ liabilities brought it within section 425.

4. A contribution claimant is a creditor, at the latest, when its right to contribution has accrued. Section 1 of the Civil Liability (Contribution) Act 1978 creates the entitlement; section 2 determines its amount. A contingent creditor also exists where an employee has been wrongfully exposed by two potential defendants, even before actionable disease develops. A possible future employer which has neither employed nor exposed the person is not a creditor.

5. Current dependants of an exposed employee were contingent creditors, whether or not disease had developed. Unidentified future dependants were not creditors and could not be bound through an employee’s approval. Their statutory claims were personal to them.

6. One class meeting was appropriate. Classes are determined by rights, not divergent interests. Present and future claimants, judgment creditors, unliquidated claimants and contribution claimants shared materially similar disputed rights against the insurers and common rights under the run-off scheme.

7. The Employers’ Liability (Compulsory Insurance) Act 1969 did not prohibit a genuine compromise of a genuine coverage and avoidance dispute after expiry of the policy periods, including the proposed amendment for future dependants. The companies were not thereby obliged to obtain retrospective replacement insurance.

8. The court had jurisdiction to sanction a scheme containing a controlled power to amend integral distribution procedures. Notice, advertising and meeting directions were ordered to address the practical impossibility of identifying every former employee and dependant.

not stated in the judgment.