Legal and General Assurance Society Ltd, Re

When deciding whether to sanction a Part VII insurance-business transfer, the court must assess whether sanction is appropriate in all the circumstances existing when the sanction application is decided. The court must weigh all relevant factors in exercising its discretion. A material change in circumstances, including changes affecting the businesses or policyholders, may alter the overall balance. The court should not issue an interim judgment that effectively pre-approves the scheme while postponing the ultimate decision, because the circumstances at the eventual hearing may differ.

Legal and General Assurance Society Limited applied under Part VII of the Financial Services and Markets Act 2000 for sanction of a scheme transferring insurance business to ReAssure Limited. The court heard objections from policyholders and received submissions from the FCA, PRA and an independent expert.

After the hearing, the COVID-19 pandemic created substantial operational and economic uncertainty. The applicants sought an adjournment and asked the court to give an interim judgment indicating that it would otherwise have sanctioned the scheme. The central issue was whether the court should determine the objections at that stage or reserve the sanction decision until the adjourned hearing.

1. The application for sanction was adjourned. The court declined to give an interim judgment indicating that the Scheme would otherwise have been sanctioned.
2. Under s.111(3) of the Financial Services and Markets Act 2000, the ultimate question is whether, in all the circumstances of the case, it is appropriate to sanction the scheme.
3. The relevant circumstances are those existing at the date when the court is asked to sanction the scheme, namely the date of the adjourned hearing. The court must exercise its discretion by weighing all relevant factors in the balance. A change in one area may alter the overall result even if most circumstances remain unchanged.
4. The COVID-19 consequences could affect more than the mechanics of migration. The economic impact on the respective businesses was uncertain and might bear directly on the appropriateness of sanctioning the Scheme.
5. An interim judgment would risk creating an artificial baseline and requiring later comparisons between materially different circumstances. It could also be perceived as fettering the court’s discretion at the adjourned hearing. The FCA’s position correctly recognised that any later decision must be made by reference to the circumstances as they then exist.
6. The court therefore reserved the substantive sanction decision. The matter was to remain, if possible, with the same judge, and issues unaffected by changed circumstances might not require repeated submissions.