National Westminster Bank Plc v Lucas & Ors

A court supervising a compensation scheme need not scrutinise every settlement individually. It is sufficient to establish appropriate procedures, including independent professional advice, which are likely to produce settlements on proper terms. Once liability within an agreed tariff is justified, the court should ordinarily approve the tariff amount unless very special circumstances exist. A court may approve distribution of an insolvent estate even though potential claims will thereby become irrecoverable. Claimants who knew of their claims and had an opportunity to sue cannot require assets to be retained indefinitely, particularly where limitation issues arise under the Limitation Act 1980. An insolvent estate may be administered out of court and out of bankruptcy without an insolvency administration order.

The claimant, as executor of Jimmy Savile’s estate, applied for approval of the final distribution under a court-approved compensation scheme and for ratification of dispositions under section 284(1) of the Insolvency Act 1986. The scheme had previously been approved by Sales J, and the Trust’s challenge had been dismissed by the Court of Appeal. The estate was insolvent. The issues were whether the settlements and costs should be approved, whether assets should be retained for rejected or late claims, whether an insolvency administration order was required, and whether the Trust had standing to challenge costs.

1. Approval of settlements. The application was granted. The court was not required to examine each settlement on its individual merits. It was enough that claims had been scrutinised under appropriate procedures, with professional advice obtained and followed, and that the arrangements could be expected to produce settlements on proper terms.
2. Tariff settlements and costs. Once the court was satisfied that liability fell within a category in the scheme tariff, it should not ordinarily go behind the tariff amount absent very special circumstances. The same approach applied to the scheme’s costs tariff. No such circumstances existed.
3. Distribution and potential claims. The court could approve distribution notwithstanding that rejected, out-of-time and as-yet-unintimated claims might become irrecoverable. A line had to be drawn. The estate could not retain assets indefinitely against the possibility of proceedings, especially where claimants had known of their claims, had been able to sue, and might seek an extension under section 33 of the Limitation Act 1980. The position was stronger in relation to claims never intimated, given the publicity and formal advertisement.
4. Administration of the insolvent estate. The law did not require an insolvency administration order. Article 4 of the Administration of Insolvent Estates of Deceased Persons Order 1986 contemplated administration otherwise than in bankruptcy. Administration out of court and out of bankruptcy was available, with the scheme operating under the court’s supervision.
5. Ratification and costs. The court ratified the relevant past and anticipated dispositions under section 284(1) of the Insolvency Act 1986, subject to the existing without-prejudice proviso, and authorised payment of the approved settlements and costs. The Trust had no financial interest sufficient to challenge the costs and was ordered to bear its own costs. No adverse costs order was made against it.

The scheme was approved by Sales J on 1 April 2014. The Trust’s appeal was dismissed by the Court of Appeal on 16 December 2014. The present application concerned the final distribution and ratification of dispositions under the scheme.