In the Matter of the Royal London Mutual Insurance Society Limited (convening judgment)

This is an application under Part 26 of the Companies Act 2006 for permission to convene a meeting of a defined class of policyholders to vote on a scheme of arrangement consolidating the Liver Sub-Fund into the Royal London Open Fund. The court limited its role at this convening stage to jurisdictional and procedural matters rather than the merits or fairness of the Scheme.

The judge concluded that a single class meeting of eligible RLMIS Liver policyholders was appropriate because the rights to be varied (entitlement to distributions from the Liver Sub-Fund estate) were sufficiently similar across the included categories (with-profits and contingent bonus policies and various sub-types) and differences identified were differences of interest or outcome rather than differences of right, applying the test in Sovereign Life Assurance Company v Dodd and related authority.

On the reattribution issue, the court accepted that the Scheme Contribution did not amount to a redefinition of policyholders' rights under Chapter 20 of the FCA's Conduct of Business Sourcebook, and therefore did not trigger the reattribution procedures. The court also found no jurisdictional roadblock in prior instruments (the 2011 Instrument of Transfer, Part VII arrangements and the reinsurance arrangements with RLI DAC) that would prevent convening meetings. Finally the court was satisfied that Royal London had taken adequate steps to notify and consult policyholders, that the explanatory materials were appropriate for the convening stage, and that practical arrangements for the meeting were proportionate.

Background and parties: Royal London seeks permission to convene meetings of eligible RLMIS Liver policyholders to approve a scheme of arrangement under Part 26 CA which would consolidate the Liver Sub-Fund into the Royal London Open Fund. The policyholders were originally transferred into the Liver Sub-Fund by an Instrument of Transfer in 2011. The Scheme is interdependent with a proposed Irish scheme in respect of Royal London Insurance DAC and with other legacy simplification steps including a merger of the PLAL Fund. Royal London is represented by counsel and has appointed an independent actuary and peer reviewer; the PRA and FCA have been involved and raise no objection to convening.

Nature of application (relief sought): permission to convene a meeting (a single class meeting) of eligible RLMIS Liver policyholders to consider and, if thought fit, approve the Scheme under Part 26 CA.

Key facts of the proposal:

• The Scheme would transfer the Liver Sub-Fund estate and included policies to the Royal London Open Fund and provide a fixed uplift of 23.1% to included policies, calculated as at 31 December 2022.
• The uplift is in exchange for a Scheme Contribution from the Liver Sub-Fund comprising a closed fund contribution (£43.2m), a project cost allowance (£7.2m) and a payment uplift contribution (£3.3m).
• Some categories of policies are excluded (notably those described as "heavily in the money", Friends Provident origin policies and certain non‑with‑profits policies other than CB policies).

Issues framed by the court: (i) whether a single class meeting is appropriate; (ii) whether the Scheme constitutes a reattribution under COBS Chapter 20 requiring reattribution procedures; (iii) whether prior instruments or the Part VII arrangements create a jurisdictional roadblock; (iv) whether the convening and conduct arrangements (including notification) are appropriate; and (v) adequacy of explanatory materials.

Court's reasoning and conclusions: The court applied established tests on class composition (rights not interests; Re Hawk; Dodd; Telewest) and held that the rights to be varied were sufficiently similar across the included policies because the Scheme operates by the same fixed percentage uplift applied consistently to asset shares and CB claim values. Demographic and commercial differences were characterised as differences of interest/outcome rather than differences of right and so did not require separate classes. On reattribution, having examined legal advice, the independent actuary's analysis and the FCA's view, the court accepted that the Scheme did not redefine policyholders' rights over the inherited estate and therefore did not engage Chapter 20 reattribution procedures. The judge found no insuperable obstacle posed by prior instruments or reinsurance/Part VII arrangements to convening the meeting, observing that those matters are more properly tested at the sanction hearing. The court was satisfied that Royal London had complied with the Practice Statement and had taken reasonable and proportionate steps to notify and engage policyholders; it approved practical arrangements for voting, venue and timetable for the convening process.

Procedural posture: This is a convening hearing at first instance; the court granted directions to convene a single class meeting and to proceed with the proposed notification and meeting arrangements. The judge emphasised that substantive fairness issues will be reserved for the sanction hearing.

The court granted permission to convene a single class meeting of eligible RLMIS Liver policyholders and made directions for the convening and conduct of that meeting. The judge held that (i) the rights to be varied are sufficiently similar to justify a single class meeting because differences identified were differences of interest or outcome rather than of right, (ii) the Scheme Contribution does not amount to a reattribution under COBS Chapter 20, (iii) the prior instruments and Part VII/reinsurance arrangements do not constitute a jurisdictional roadblock to convening, and (iv) Royal London’s notification and meeting arrangements (including excluding sending packs to putative policyholders aged 105 or over) were reasonable and proportionate. The court left substantive fairness matters for the future sanction hearing.