Canada Life Ltd v Scottish Friendly Assurance Society Ltd

Under section 111(3) of the Financial Services and Markets Act 2000, the court must decide whether, in all the circumstances, it is appropriate to sanction an insurance business transfer scheme. The court should consider whether the scheme may materially adversely affect relevant persons, whether it would be unfair, and whether there is any reason to withhold sanction. A finding that policyholders will benefit is not essential. The court may sanction a scheme where the statutory safeguards, independent expert’s assessment, regulatory review and evidence establish that no material adverse impact, unfairness or other sufficient objection exists.

Canada Life Limited and Scottish Friendly Assurance Society Limited applied under Part VII of the Financial Services and Markets Act 2000 for sanction of a scheme transferring about 127,000 long-term insurance contracts from Canada Life to Scottish Friendly. The transfer involved unit-linked, non-profit and with-profits business and would materially expand Scottish Friendly’s assets and liabilities.

A policyholder objected, principally on the basis that the transfer was against his wishes and that he had not been given sufficient reason to trust the proposed transferee. The Prudential Regulation Authority, the Financial Conduct Authority and the independent expert raised no sufficient concern. The central issue was whether the statutory conditions for sanction were satisfied and whether the scheme was appropriate in all the circumstances.

1. Statutory approach. The court applied section 111 of the Financial Services and Markets Act 2000. The prescribed certificates, authorisation and other regulatory requirements were satisfied. The governing question under section 111(3) was whether, in all the circumstances, it was appropriate to sanction the scheme.
2. Questions for determination. The court directed itself to ask: whether the scheme had the potential to cause a material adverse impact on relevant persons; whether it would be unfair to any relevant person; and whether, in light of those answers, sanction should be granted or withheld.
3. Assessment of the evidence. The independent expert concluded that the transfer would not materially adversely affect transferring policyholders, non-transferring Canada Life policyholders or Scottish Friendly policyholders in relation to security of benefits, benefit expectations, risk profile, service standards or governance. He also considered the transfer equitable. The court accepted that assessment. The regulators had conducted sufficient reviews and raised no objection.
4. Objections and consent. Individual policyholder consent was not a prerequisite to the scheme taking effect. Objections nevertheless required proper consideration. The statutory safeguards included disclosure to policyholders, independent expert scrutiny, regulatory involvement and judicial consideration of the scheme and objections.
5. Benefit and outcome. A finding of benefit to policyholders was not necessary before sanction could be granted, although the court considered that the transfer was likely to benefit policyholders because their business would become core to Scottish Friendly rather than part of Canada Life’s legacy business. There was no material adverse impact, unfairness or other reason to withhold sanction.
6. Earlier decision. The court distinguished Re The Prudential Assurance Company Ltd and Re Rothesay Life plc [2019] EWHC 2245 (Ch), because the present scheme lacked the features which had led Snowden J to withhold sanction.
7. Order. The transfer scheme was sanctioned in the form sought.

not stated in the judgment.