T & N Ltd v Royal & Sun Alliance Plc (Curzon Insurance Ltd, Part 20 defendant)
| Jurisdiction | England & Wales |
| Judge | (Mr Justice Lawrence Collins),Mr Justice Lawrence Collins |
| Judgment Date | 09 May 2003 |
| Neutral Citation | [2003] EWHC 1016 (Ch) |
| Date | 09 May 2003 |
| Docket Number | HC 02 C 01451 |
| Court | Chancery Division |
[2003] EWHC 1016 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Lawrence Collins
HC 02 C 01451
Mr Colin Edelman QC and Mr Colin Wynter (instructed by Denton Wilde Sapte) for the Claimants
Mr Christopher Moger QC, Mr Jeffrey Terry and Mr David Hoffman (instructed by Davies Wallis Foyster) for the First Defendant
Mr Ronald Walker QC and Mrs Elspeth Talbot Rice (instructed by DLA) for the Second Defendant
Mr Stephen Davies (instructed by Davies Wallis Foyster) for the Fifth Defendant
Ms Sue Prevezer QC (instructed by CMS Cameron McKenna) for Curzon Insurance Ltd (Part 20 defendant)
Hearing dates: January 27,28,29,30 and 31; February 3,4,17,18 and 19, 2003
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
I Introduction
Turner & Newall Ltd. was established in 1920 by the merger of Turner Brothers Asbestos Co. Ltd., Washington Chemical Co. Ltd., Newalls Insulation Co. Ltd. and JW Roberts Ltd., each of which was involved in the asbestos industry. In the 1970s as Turner & Newall Plc it had a workforce in excess of 20,000. In September 1987 it became T&N Ltd. For convenience I will refer to it and its associated companies throughout as "T&N."
T&N is part of the Federal-Mogul Group ("the FM Group"), the ultimate parent of which is Federal-Mogul Corporation. The FM Group is a leading global manufacturer and distributor of parts for automobiles, light commercial vehicles, heavy duty trucks, farm and construction vehicles and industrial products.
Administration orders were made in respect of T&N and approximately 130 other companies in the T&N group on October 1, 2001. On the same date that the administration orders were made, the T&N companies filed for protection under Chapter 11 of the United States Bankruptcy Code.
The predominant cause of the administration/Chapter 11 proceedings was the asbestos related claims pending in the United States against companies within the FM Group, particularly against T&N. Some 92,000 claims were pending at the date of the administration orders. The purpose of the administration/Chapter 11 proceedings is to provide a breathing space to the FM Group to enable it to put in place a global reorganisation plan for the benefit of creditors, including commercial creditors and asbestos claimants.
There are a substantial number of asbestos related claims pending against T&N in England. Most of the claims pending against T&N in England are by former employees or dependants of former employees of T&N. Most of the claims pending in the United States are public liability cases.
A number of former employees, or dependants of former employees who have asbestos related claims, have made, or have threatened to make, applications under section 11 of the Insolvency Act 1986 for leave to commence or continue proceedings against T&N.
The position taken by the administrators has been that because the central purpose of the administration is to enable a plan to be developed to enable T&N to deal with the weight of claims made against it, leave should be refused unless it is clear that there is available insurance to cover the relevant claim.
Where such insurance exists, then the burden of defending and meeting the claim will be borne by the insurer, and the continuation of the claim would not be inconsistent with achieving the purposes for which the administration order was made. By reason of the Third Party (Rights Against Insurers) Act 1930 ("the 1930 Act"), any claimant who was able to establish a claim against T&N would be entitled to recover from any available liability insurance directly from the relevant insurer. In the absence of such insurance, however, the granting of leave to proceed against T&N would, the administrators say, cut directly across the purpose of the administration orders.
T&N had for the period October 1, 1969 to March 31, 1977 employer's liability ("EL") cover with the first defendant, Royal and Sun Alliance Insurance Plc, formerly known as Royal Insurance Company Limited ("the Royal"). The head office of the Royal was in Liverpool, and the cover was arranged with one of its two branches in Manchester, the Manchester Exchange branch. I shall refer to them, where it is necessary to distinguish between them, as "head office" and "the Manchester branch."
The second defendant, Brian Smith ("Mr Smith") was a Name on, and the active underwriter of, Syndicate 45/177 at Lloyd's ("the Syndicate"). The Syndicate provided EL insurance to T&N for the period April 1, 1977 to April 30, 1995. Mr Smith is sued in a representative capacity on his own behalf and on behalf of all other underwriting members of the Syndicate in each of the years 1977 to 1995.
The third defendants are companies which are insured by either or both of the Royal and the Syndicate but which are not currently in administration.
The fourth defendant was employed by Newalls Insulation Co. Ltd., a member of the T&N group, between 1946 and 1985. He brought proceedings and obtained judgment against Newalls, and became entitled to pursue that judgment against Newalls' EL insurers under the 1930 Act. He was joined as a representative defendant on his own behalf and on behalf of all other persons who have brought or may bring claims against T&N and its associated companies, in their capacity as employers. He has since died and has been replaced by his personal representative.
Marine Insurance Co. Ltd. ("Marine"), the fifth defendant, is an insurance company in which the Royal has a shareholding, and which was named in a 1997 Settlement Agreement between T&N and various "London Market Insurers", as an insurer which was released, pursuant to the Agreement, from liability to T&N under certain insurance policies. It seeks to enforce the Agreement as against T&N on the basis that the effect of the Agreement is that T&N agreed to release the Royal by virtue of a reference in the release to members and shareholders of the parties.
Curzon Insurance Ltd. ("Curzon"), the Part 20 defendant, is a captive insurance company established by T&N, which agreed to indemnify T&N in respect of payments T&N might become liable to make to the Syndicate under the payment and reimbursement provisions in the policy conditions. The Syndicate seeks declarations that it is entitled to sums payable by Curzon to T&N.
As the result of a ruling by the Court of Appeal on December 30, 2002, the trial excluded all issues in the action which concern the avoidance defences of the Royal and the Syndicate, including issues of non-disclosure, misrepresentation and associated issues.
The Royal policy included the following provision:
"The insurance by this Policy does not apply to or include liability in respect of pneumoconiosis or pneumoconiosis accompanied by tubercolosis [sic].
In this Endorsement the expression 'pneumoconiosis' means fibrosis of the lungs due to asbestos dust and includes the condition of the lungs known as dust reticulation."
The Schedule in the Syndicate EL policies contained the following provision:
"It is a condition of this insurance that: -
(1) The Assured undertakes: -
a) to pay the full cost and expense of handling and disposing of all claims based upon the allegation that employees or former employees of the Company or its Associated Companies contracted asbestosis or mesothelioma as a result of exposure to asbestos dust in the course of their employment with the Company or its Associated Companies.
…."
II Asbestos related diseases
Dr RM Rudd, a consultant physician, was instructed as a single joint medical expert. The effect of the medical evidence is as follows. Pneumoconiosis is fibrosis (a condition where fibrous tissue spreads and causes breathing difficulties) of the lungs caused by inhalation of dust, and pneumoconiosis caused by asbestos dust is asbestosis. Pneumoconiosis was first recognised in the medical literature in 1796 and the risk of development and severity of the disease increases in relation to the amount of dust inhaled, and if the disease is sufficiently extensive, breathlessness, respiratory failure and finally death may ensue. Pneumoconiosis caused by asbestos dust falls within the diseases of pneumoconiosis and asbestosis, but not mesothelioma. The most widely accepted definition of asbestosis is that proposed by the Advisory Committee on Asbestos (Health and Safety Commission, 1979): "Fibrosis of the lungs caused by asbestos dust which may or may not be associated with fibrosis of the parietal or pulmonary layer of the pleura." Asbestosis seldom appears less than 20 years after first exposure to asbestos, and tends to worsen with time and may cause death from respiratory failure although this is much less common than previously, reflecting lower levels of exposure and hence less severe disease. Dust reticulation has features which are those of mild pneumoconiosis.
Mesothelioma is a tumour which arises from mesothelial cells, i.e. cells forming membranes lining body cavities, and occurs most commonly in the pleura (the lining of the chest cavity) but also in the peritoneum (the lining of the abdominal cavity). From 1960 its existence and the fact that it was caused by asbestos was widely accepted, and it became a prescribed disease rendering the sufferer eligible for...
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