Re Beloit Walmsley
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Pelling QC |
| Judgment Date | 31 July 2008 |
| Neutral Citation | [2008] EWHC 1888 (Ch) |
| Docket Number | Case No:1607 of 1999 |
| Court | Chancery Division |
| Date | 31 July 2008 |
[2008] EWHC 1888 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Civil Justice Centre
1 Bridge Street West
Manchester
His Honour Judge Pelling Qc
(Sitting as a Judge of The High Court)
Case No:1607 of 1999
Mr Giles Maynard-Connor (instructed by Addleshaw Goddard) for the Supervisors and Administrators of Beloit Walmsley Limited
Ms Laura John (instructed by the Senior Counsel of Financial Services Compensation Scheme Limited) for Financial Services Compensation Scheme Limited
Approved Judgment
Hearing date: 8th July 2008
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
Introduction:
Beloit Walmsley Limited ( the Company) entered administration on the 22 nd November 1999 and a Company Voluntary Arrangement ( CVA) was approved on 17 th April 2001. The joint administrators of the administration are also the joint supervisors of the CVA. By this application the joint administrators and supervisors ( JAS) seek directions as to their entitlement as supervisors of the CVA to distribute funds in their hands as such and also funds in their hands as Administrators exclusively to the CVA creditors notwithstanding that there may be contingent creditors of the Company who are not party to or bound by the CVA and/or creditors of the Company who would not have been entitled to prove as unsecured creditors of the Company had it entered into liquidation on 22 November 1999 and for a declaration that the trust alleged to have been created by the CVA remains in place until the Scheme assets have been either distributed by the supervisors or paid into court pursuant to the terms of the CVA. These applications are opposed by Financial Services Compensation Scheme Limited ( FSCS) on the ground that what is proposed does not represent the effect of the CVA on its true construction and/or on the basis that the court has jurisdiction by direction to authorise the JAS to distribute otherwise than in accordance with the strict terms of the CVA or in any event can give directions to the JAS as administrators to distribute the sums remaining in their hands to creditors generally rather than merely to the CVA creditors. In the alternative, an application has been made by FSCS for relief pursuant to Section 6(1) of the Insolvency Act 1986 ( IA) and for an extension of time in which to make that application, it being common ground that the application has been brought outside the time limits that are fixed for the making of such an application by IA, Section 6(2).
In addition, the JAS apply for directions in relation to 6 potential creditors who were included in the directors' statement of affairs but who have not submitted proofs despite having been invited to do so. FSCS did not have any interest in this application which I dealt with separately after the conclusion of the submissions in relation to the applications referred to in paragraph 1 above. This judgment is concerned solely with the applications referred to in paragraph 1 above.
Background
None of the essential background to which I now refer is in dispute. Prior to its collapse, the Company was a well established company whose business was the manufacture of machines for the processing of pulp paper and paper board. These processes brought employees into contact with asbestos. Between 1920 – 1988, the Company was insured in respect of employee liabilities by Chester Street Holdings Limited ( Chester Street) the successor to the well known Iron Trades insurer. Chester Street is now insolvent and is subject to a scheme of arrangement. FSCS is the Scheme Manager of the FSA's statutory fund of last resort for customers of financial services organisations established pursuant to Section 213(1) of the Financial Services and Markets Act 2000 and as such has been required to meet a number of personal injury claims made by former employees of the Company or the estates of such former employees for personal injury or death caused by the inhalation of asbestos dust in the course of their employment by the Company. Where this has occurred, in accordance with its usual practice, FSCS has taken an assignment of the rights of the employee or employee's estate against the Company. To date FSCS has paid out or anticipates paying out in excess of £240,000 in respect of relevant claims in respect of which FSCS seeks to make a recovery from the Company.
As is now well known, the diseases that are caused by exposure to Asbestos dust do not manifest themselves in the form of physically identifiable symptoms for many years after exposure occurs. As David Richards J observed in Re T & N Limited [2005] EWHC 2870 (Ch) [2006] 1 WLR 1728 ( T&N) at paragraph 102 of his judgment: “Since the Limitation Act 1963, the important question for limitation purposes has been the claimant's knowledge of his condition.”. In the nature of things, it is likely therefore that claims may be commenced by relevant employees many years after they ceased to be employees of the Company.
It is common ground that such an employee could commence proceedings based both on contract and tort for as David Richards J said in T&N“… a former employee … who was exposed to asbestos during his employment and who develops a compensatable disease or condition … will unquestionably be entitled to prove for an unliquidated claim for his loss on the basis of breach of a contractual duty owed to him …”
On 22 nd November 1999 an Administration Order was made in respect of the Company and the JAS were appointed its Administrators. The purposes for which the Administration Order was made were those set out in s.8(3)(a)(b) and (d) IA86, namely:
'(a) the survival of the company, and the whole or part of its undertaking, as a going concern;
(b) the approval of a voluntary arrangement under Part I; …
(d) a more advantageous realisation of the company's assets than would be effected on a winding up.'
On 17 th April 2001 the Company's creditors approved the CVA which had been proposed by the JAS then acting as the Company's Administrators. The CVA was approved as the mechanism for enabling the proceeds of assets realised in the course of the Administration to be distributed. During the course of the Administration the business and assets of the Company have been disposed of and total asset realisations amount to £32,647,551. Creditor claims received (not all of which have been agreed or admitted) total £48,281,405. To date sums totalling £21,940,795 have been received into the CVA. There remains in the CVA account the sum of £6,205,536.82 which means that interim dividends totalling in excess of £15 million have been paid out to date.
The CVA was approved prior to the amendment of IA Section 5 by the Insolvency Act 2000. As it is now formulated, IA Section 5(2(b) provides that a CVA binds not merely those who would have been entitled to vote at the meeting at which it was approved but also those who would have been entitled to vote at such a meeting if they had received notice of it. However, the latter category was added by the Insolvency Act 2000 and the relevant provision took effect only from 1 st January 2003 – see Insolvency Act 2000 (Commencement No.3 and Transitional Provisions) Order 2002. In its un-amended form, IA Section 5, provided that a CVA would bind only those “… who in accordance with the rules had notice of and [were] entitled to vote at …” the meeting at which the CVA was approved. It follows that someone who was a creditor at the time but who did not receive notice of the meeting would not be bound by the CVA and would therefore not be a CVA creditor. It was common ground for the purposes of the present application that T&N decides that those who had been carelessly exposed to asbestos with exclusively tortious claims were contingent creditors and thus creditors for the purpose of IA Section 3. Such persons would therefore technically be entitled to receive notice of a meeting at which a CVA proposal was to be considered in accordance with IA Section 3(3). However, since such persons would probably not know they were contingent creditors and that fact was probably not known to those issuing the notices, it follows that some at least of such persons did not receive notices and so technically are not CVA creditors even though they have subsequently developed or may in the future develop compensatable diseases attributable to their employment by the Company.
The JAS intend to exercise what they contend to be the limited discretion afforded to them by Regulation 7.1.2 of the CVA (see paragraph 9.25 below) and admit to the CVA those creditors who would have been entitled to participate in the CVA but for the fact they did not receive notice of the meeting providing they had suffered an injury as at 22 nd November 1999.The reason for this last qualification is that the structure of the CVA was to equate (as closely as possible) the claims of creditors in the CVA with the position which would have existed had the Company entered liquidation on 22 November 1999 ('the Relevant Date'). That being so, it is said that someone who had not suffered an injury on that date would not have had a provable claim in tort had the company been placed in liquidation as at that date. This will not be relevant to those who have concurrent claims in tort and contract (because the cause of action accrued at the point when exposure to asbestos in breach of duty occurred) but will have an impact on those who have only a tortious claim since by Rule 13.12 of the Insolvency Rules ( IR) as it was formulated at the date when the CVA was approved, a cause of action in...
To continue reading
Request your trial
-
Gabriel Politakis Against John Despenser Spencely And James Scott Limited
...purposes of the CVA. In addition to the authorities to which Mr Manson referred, Mr Ellis also referred to Re Beloit Walmsley Limited [2008] EWHC 1888, and in particular passages from paragraphs [21] and [22] of the opinion of Judge Pelling, QC where he said: “[21]…The correct approach is t......