Centre Reinsurance International Company and Another v Curzon Insurance Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blackburne,MR JUSTICE DAVID RICHARDS,Mr Justice David Richards |
| Judgment Date | 21 December 2005 |
| Neutral Citation | [2005] EWHC 2990 (Ch),[2004] EWHC 200 (Ch) |
| Docket Number | Case No: 5798 and others of 2001,Case No: HC02CO3744 |
| Court | Chancery Division |
| Date | 21 December 2005 |
[2004] EWHC 200 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF T&N LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF T&N LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
The Honourable Mr Justice Blackburne
Case No: HC02CO3744
Case No: 8246 of 2002
Case No: 5798 (& ors) of 2001
Iain Milligan QC, Gabriel Moss QC and David Edwards (instructed by Denton Wilde Sapte) for Messrs Freakley, Gleave and Squires
Elizabeth Gloster QC, Christopher Butcher QC and David Lord (instructed by Kendall Freeman) for Centre Reinsurance International Company and Muenchener Rueckversicherungs-Gesellschaft
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Hon Mr Justice Blackburne
Introduction
This is a hearing to determine a number of issues which have arisen in the administration of T&N Ltd ("T&N") and which I directed to be determined by an order dated 2 October 2003. Since I made that order, the parties have agreed to expand certain of the issues so that the number has now increased from six to fifteen. I have been content to proceed by reference to those fifteen issues.
The background to the issues, which is complex and which I confine to the essentials necessary to an understanding of the matters that I have to determine, is that in March 1998 T&N (then a Plc and previously Turner & Newall Ltd) had, with its subsidiaries, been acquired by the Federal-Mogul Group ("the F M Group"), a worldwide group of companies – manufacturers and distributors of automotive parts – ultimately owned by Federal-Mogul Corporation ("FMC"), a Delaware corporation. The acquisition was pursuant to a public offer made in November 1997.
At 8.32 am (London time) on 1 October 2001, FMC and certain of its US and UK subsidiaries (including T&N) filed for protection in the US Bankruptcy Court for the district of Delaware under Chapter 11 of the US Bankruptcy Code. At approximately 9.15 am (London time) that same day, 1 October 2001, Hart J, in the High Court in this country, made administration orders in respect of one hundred and thirty-three UK companies within the F M Group, including T&N and a large number of its subsidiaries. The orders were made in anticipation of the presentation later that day of administration petitions in respect of the companies in question. Later that same day, the administration petitions were duly presented. In April 2002 an administration order was made by the Court of Session in Scotland in respect of a Scottish subsidiary of T&N.
The bankruptcy and administration proceedings were prompted by the fact that the F M Group in general and T&N in particular have faced a huge quantity of personal injury claims arising from exposure to asbestos, both in the UK and in the US, in products manufactured or distributed by the Group. The Chapter 11 filings and the administrations have been sought to obtain the benefit of statutory stays while a plan of re-organisation under Chapter 11 and, possibly, a section 425 scheme of arrangement in the UK are formulated. A Cross-Border Insolvency Protocol, dated as of 1 October 2001, has been entered into with a view to co-ordinating the US and UK insolvency proceedings and assisting towards the development of an integrated re-organisation plan for all of the companies involved. The overall objective is to ring-fence the liabilities for the claims and the assets available to meet them so that solvency can be established and the Group can continue to trade. In the course of argument, I was told that, prior to any statutory stays coming into effect, payments totalling between £350 and £370 million had been made in satisfaction of claims.
A very substantial asset potentially available to meet the claims is an Asbestos Liability Policy (reference CZ7/96, ASB/096) dated 30 December 1996 ("the Policy") underwritten by Curzon Insurance Ltd ("Curzon") which is a captive insurance company within the F M Group. Curzon is registered in Guernsey and is not subject to any insolvency proceedings. By the Policy —I do no more than summarise at this stage —Curzon agreed to indemnify T&N for any Ultimate Net Loss in excess of a so-called Retained Limit of £690 million in connection with Asbestos Claims, up to a limit of £500 million. I will come later to the precise terms of the Policy, so far as material to the issues, and, in particular, to the meanings of the expressions "Ultimate Net Loss", "Retained Limit" and "Asbestos Claims". The premium paid for the Policy was £92,046,000.
Pursuant to a Reinsurance Agreement dated 27 December 1996 and executed on 30 December 1996 ("the Reinsurance Agreement"), Curzon's liability under the Policy was wholly reinsured by three reinsurers, Centre Reinsurance International Company ("Centre Re"), Münchener Rückversicherungs-Gesellschaft ("Munich Re") and European International Reinsurance Company Ltd ("EIRC"). The premium paid (divisible equally between the three reinsurers) was £92 million. Under the Reinsurance Agreement the three reinsurers agreed severally to reinsure 33? of the Ultimate Net Loss in excess of the Retained Limit payable from time to time by Curzon to T&N pursuant to the terms and conditions of the Policy. EIRC has purported to avoid its participation. It has brought proceedings against Curzon in the Commercial Court seeking a declaration that it has validly avoided the Reinsurance Agreement. At the time of preparing this judgment, the outcome of those proceedings is unknown.
In passing I note, but nothing I think turns on this except to emphasise the close interrelationship of the Policy and the Reinsurance Agreement, that at the time those two instruments were entered into T&N gave an indemnity to the reinsurers (by letter also dated 30 December 1996) against any loss, damage or liability suffered or incurred by them as a result of Curzon failing fully and punctually to perform and discharge all of the obligations and liabilities assumed by Curzon under the Reinsurance Agreement whether or not enforceable against it.
There are currently three sets of proceedings on foot between the parties in this Division concerned with the meaning and effect of the Policy and the Reinsurance Agreement in the events that happened. First in time are two sets of proceedings brought by Centre Re and Munich Re, each commenced on 13 December 2002, one set against Curzon seeking certain declaratory relief and the other set, raised by way of originating application, in the Companies Court seeking orders and directions against the joint administrators of T&N and of the other companies in administration in this country. Second in time are proceedings, by way of ordinary application, brought by the joint administrators of T&N (and issued on 8 August 2003) against Centre Re, Munich Re, EIRC and Curzon, seeking various directions.
My order dated 2 October 2003 directing the determination of the six (now expanded to fifteen) issues was made in all three proceedings. The intention has been to raise a series of discrete questions, the outcome of which turns on the true construction of the Policy and, to a lesser extent, the Reinsurance Agreement and on issues of law rather than on the investigation and determination of disputed issues of fact. Their determination, I am told, is material to the carrying forward of the proposed re-organisation plan for the F M Group. The issues can be grouped under four main headings: (1) those concerned with the impact of the Third Parties (Rights Against Insurers) Act 1930 (as amended) ("the 1930 Act") on the provisions of the Policy relating to the transfer of claims handling rights (issues 1 to 9); (2) those concerned with the party on whom the cost of claims handling falls after any transfer of claims handling rights (issues 10 to 13); (3) the priority in its administration of any liability of T&N for the cost of claims handling after any transfer of claims handling rights (issue 14); and (4) whether a contribution claim falls within the Policy (issue 15).
Mr Iain Milligan QC, Mr Gabriel Moss QC and Mr David Edwards have appeared for the joint administrators. Miss Elizabeth Gloster QC, Mr Christopher Butcher QC and Mr David Lord have appeared for Centre Re and Munich Re. EIRC, in view of its claim to have avoided the Reinsurance Agreement, has not been represented. In referring in this judgment to contentions (or the like) advanced by the reinsurers, I am referring to Centre Re and Munich Re. Otherwise references to the reinsurers include EIRC.
The Policy
I begin with some of the definitions set out in section IV of the Policy.
"Asbestos Claim" is defined as:
"Any written demand or civil proceeding with respect to which the Policyholder or any Subsidiary is alleged to be or may be responsible (whether or not the demand or civil proceeding in question is made or brought, or could be made or...
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