Reliance National Insurance Company (Europe), Re

The court sanctioned a scheme of arrangement under Part 26 of the Companies Act 2006 proposed by Reliance National Insurance Company (Europe) Limited to determine policyholder claims without recourse to the court. Key legal questions were (i) whether the court had jurisdiction to sanction a scheme with policyholders as the single class of creditors, which required that the Part VII transfer of policies from QBE had been effective; (ii) whether it was fair to proceed given complaints about notice, timing and access to voting valuations; and (iii) whether the voting and valuation process (in particular the role of the Independent Vote Assessor) produced a reliable result.

The judge found on the balance of probabilities that the Part VII transfer was likely effective under Italian law so that policyholders were creditors for the purposes of s895 of the Companies Act 2006, and therefore the court's jurisdiction was engaged. The court held that the Independent Vote Assessor’s methodology and conclusions were neither perverse nor irrational, that statutory requirements and the Convening Order had been complied with, and that the procedure and class composition were fair. The court also concluded that there was credible evidence (CPR 35 opinions) that a sanction would have substantial effect and was likely to be recognised in Italy and Spain, so the court would not be acting in vain. Consequently the Scheme was sanctioned.

Background and parties

The application was brought by Reliance National Insurance Company (Europe) Limited for sanction of a scheme of arrangement under Part 26 of the Companies Act 2006 to determine and settle liabilities to holders of certain Spanish and Italian law insurance policies acquired from QBE in 2018 by a Part VII transfer. The scheme is designed to estimate policyholder liabilities and, where disputes exist, resolve them by reference to an independent scheme adjudicator rather than through court litigation. Two policyholders, Calabria and ASL, opposed sanction on multiple grounds but did not appear by counsel at the sanction hearing.

Procedural posture

• The Convening Order was made by Sir Anthony Mann on 13 May 2024 and a Scheme Meeting opened on 28 June 2024 and was successively adjourned, with the Company asserting that the requisite majority approved the Scheme on 4 March 2025; the existence of that majority was disputed by Calabria and ASL.

Nature of relief sought

• Sanction of a Part 26 scheme limited to policyholders that would (i) require notification of claims by a Bar Date, (ii) require the Company to make initial determinations using a prescribed Claims Methodology, and (iii) provide for determination by an independent adjudicator if disagreement persisted, together with releases and preclusion of litigation by policyholders after the Effective Date.

Issues framed by the court

• Threshold issues: fairness to proceed without adjournment given allegations about notice and access to voting information; and whether policyholders are creditors of the Company because the Part VII transfer was effective under Italian law.
• Substantive issues: compliance with statutory requirements and the Convening Order; whether the class was fairly represented and the majority acted bona fide; whether an intelligent and honest person might reasonably approve the Scheme; whether any 'blot' or defect meant the court would be acting in vain, including the likelihood of recognition in Italy and Spain.

Court’s reasoning

• Fairness and adjournment: the opponents did not apply for an adjournment and had chosen not to instruct counsel; the court concluded there was no proper basis to adjourn and that the opponents had had ample time to 'step up' and adduce evidence.
• Effectiveness of the Part VII transfer: the court had company evidence (Professor Cananea) and other factual pointers (including an Italian Court of Appeal judgment) and no expert evidence from the opponents; on the balance of probabilities the Part VII transfer was likely effective under Italian law, so policyholders are creditors for the purposes of Part 26.
• Valuation and voting: the Convening Order and explanatory statement empowered an Independent Vote Assessor (Derek Newton) to assess claim values for voting. The judge found the assessor independent, expert, and that his probabilistic and aggregated methodology was reasonable for the voting purpose; there was no perversity, dishonesty, or irrationality justifying rejection of his valuations.
• Comparative outcome and alternative: the court accepted the Company’s evidence and third-party analyses (Ernst & Young; Interpath) that the Scheme offers a materially better prospect for policyholders than insolvent administration, and did not accept unsupported assertions that administration might produce a superior result.
• Recognition and 'acting in vain': CPR 35 opinions from Professor Cavallini (Italy) and Dr Garrido (Spain) provided credible evidence that a sanction is likely to be recognised; even absent recognition the Scheme would have substantial practical effect because most assets are in the United Kingdom.

Disposition

For these reasons the court exercised its discretion to sanction the Scheme. The judge noted the usual position that the order should take effect notwithstanding any appeal unless a successful application for a stay is made.

The Scheme is sanctioned. The court concluded that the Part VII transfer was likely effective so that the Company was proposing a compromise or arrangement with its creditors; statutory requirements and the Convening Order had been complied with; the Independent Vote Assessor’s valuation methodology was reasonable and not perverse; policyholders were fairly represented; and there was credible evidence that a sanction would have substantial effect and be likely to be recognised in Italy and Spain. The court therefore exercised its discretion to grant sanction.