Reliance National Insurance Company (Europe), Re

When sanctioning a scheme of arrangement, the court must first establish that the statutory and procedural requirements have been met. It must then consider whether the class was fairly represented, whether the majority acted bona fide, whether an intelligent and honest creditor could reasonably approve the scheme, and whether any other defect prevents sanction.

For voting purposes, a court-appointed independent assessor may use a realistic professional valuation rather than a detailed determination of each claim. The court should intervene only for perversity, dishonesty, irrationality or substantial non-compliance with the prescribed procedure. In an international scheme, certainty of recognition abroad is unnecessary, provided there is credible evidence that the scheme will have substantial effect and the court will not act in vain.

Reliance National Insurance Company (Europe) Limited applied for sanction of a scheme under Part 26 of the Companies Act 2006. The scheme concerned policyholders holding claims under Italian- and Spanish-law medical-negligence insurance policies acquired from QBE under a Part VII transfer.

The scheme meeting was adjourned several times. The chair ultimately determined, following an independent valuation exercise, that the scheme had been approved by the statutory majority. Two creditors, Calabria and ASL, objected on procedural, valuation, Italian-law and recognition grounds, but did not attend the sanction hearing or apply for an adjournment.

The central questions were whether it was fair to proceed, whether the policyholders were creditors capable of entering the scheme, whether the statutory majority and other requirements had been satisfied, and whether the scheme was fair and would have substantial effect in Italy and Spain.

1. Threshold issues. It was fair to proceed with the sanction hearing. Calabria and ASL had long been aware of the relevant issues, made no application for an adjournment, and chose not to attend through counsel. A creditor wishing to challenge complex valuation evidence should obtain evidence, make timely disclosure applications where necessary, attend the hearing and assist the court with substantive argument.
2. Jurisdiction and creditor status. On the evidence available, the Part VII transfer was, on the balance of probabilities, effective under Italian law. The policyholders were therefore creditors for the purposes of section 895 of the Companies Act 2006, and the court’s jurisdiction to sanction the scheme was engaged. The court could not conclusively resolve the Italian-law dispute without competing expert evidence, but the company’s evidence was persuasive.
3. Voting and statutory compliance. Section 897 required approval by a majority in number representing 75 per cent in value of the claims voted. The court-appointed independent assessor was entitled to make realistic, probabilistic assessments using professional judgment. The valuation process was intended to determine voting outcomes, not to produce final claim valuations. There was no perversity, irrationality, dishonesty or substantial non-compliance with the prescribed methodology or voting process. The statutory majority was achieved.
4. Sanction discretion. Applying the approach summarised in Re KCA Deutag UK Finance plc [2020] EWHC 2977 (Ch), the class had been fairly represented, the majority had acted bona fide, and an intelligent and honest policyholder could reasonably prefer the scheme to the relevant alternative of insolvent administration. The objections concerning the possible recovery of a dividend, the valuation of claims, employers’ liability policies and the QBE indemnity did not displace that conclusion.
5. International effectiveness. The court would not be acting in vain. Almost all relevant assets were in the United Kingdom, so sanction would provide a defence to enforcement against those assets even if recognition abroad were disputed. In any event, cogent expert evidence showed that the order was likely to be recognised in Italy and Spain. The scheme was sanctioned.

First-instance decision. The court sanctioned the scheme and declined to stay the sanctioning order pending any application for permission to appeal.