Equitas Ltd, Re

The court granted an application for waivers of certain publicity requirements under the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001, specifically in relation to regulation 3(2)(a)(ii) (publication in two national newspapers) and regulation 3(2)(b) (service on every policyholder). The judge held that he had jurisdiction to make the order even though the Part VII scheme report required by section 109(1) of the Act was not yet before the court when the originating process was issued.

The key legal principles were that the word "application" in section 109(1) may be read broadly so that the requirement that an application be "accompanied by" a scheme report need not be satisfied at the precise moment of issuance of the originating process, and that the purpose of section 109 is to ensure the report is available well before the court sanctions the scheme rather than to mandate attachment at the date of issue. The judge emphasised that, although better practice is to seek such waivers when the scheme report and full scheme are available, it would be a rare case to refuse sensible waivers where the applicants undertake extensive alternative publicity and the waivers are made subject to conditions.

Background and parties: Equitas Limited, representing the Names at Lloyd's in respect of 1992 and prior years of account, and Speyford Limited sought a transfer of insurance business under Part VII of the Financial Services and Markets Act 2000. The transfer (the "Scheme") would move the liabilities of the Names to a new company, with protection by reinsurance, and thereby provide legal finality to the Names.

Nature of the application: The applicants applied for court waivers under regulation 4(2) of the 2001 Regulations of requirements in regulation 3 to publish notice in two national newspapers and to send a notice to every policyholder. The applicants sought to substitute a business paper for one national newspaper and to adopt extensive alternative steps to publicise the Scheme where service on every policyholder is impracticable because of the age and condition of Lloyd's records. The scheme report required by section 109 was in preparation and neither it nor the full scheme was yet before the court; the applicants proposed to file those documents before a directions hearing in March 2009.

Issues framed: (i) Whether the court had jurisdiction to grant the waivers at the stage when the scheme report was not yet before the court, given the wording of section 109(1) that an application must be "accompanied by" a scheme report; (ii) whether, on the merits, sensible waivers should be granted in the particular circumstances and subject to conditions.

Court's reasoning: The judge concluded that the court did have jurisdiction. The word "application" in section 109(1) was read in context and not confined to the originating process at the moment of issue; it can refer to the proceedings as a whole. Thus the requirement that an application be "accompanied by" a scheme report need not be construed as requiring annexation to the claim form at the date of issue. Analogies were drawn with Civil Procedure Rules requirements that certain applications be "supported by evidence", noting that the precise timing requirement should not be over-technical where the purpose is satisfied: the report must be available when it is needed and in any event well before the court sanctions the Scheme. On the merits, the judge accepted that better practice was to consider waivers once the report and scheme are available, but concluded that where applicants undertake all practicable steps to notify and publicise the Scheme, sensible waivers subject to conditions should rarely be refused. The waivers were granted, subject to conditions requiring specified alternative publicity steps and provision of the scheme report at the appropriate stage. The judge also emphasised that the availability of waivers does not affect the court's overall discretion at the sanction hearing to assess adequacy of notification.

The court granted the applicants' application for waivers of the publicity requirements in regulation 3(2)(a)(ii) and 3(2)(b) of the 2001 Regulations. The judge held that he had jurisdiction to make the order despite the scheme report required by section 109(1) not being before the court at the date of issue, because "application" may be read broadly and the requirement to be "accompanied by" does not require attachment at the moment of issue. The waivers were granted in the exercise of the court's discretion as the applicants would undertake extensive alternative publicity and the waivers were made subject to conditions; the court retained its discretion at the sanction stage to assess adequacy of notification.