The Federal Mogul Asbestos Personal Injury Trust v Federal-Mogul Ltd (formerly T&N Plc) and Others

JurisdictionEngland & Wales
JudgeMr Justice Eder
Judgment Date27 June 2014
Neutral Citation[2014] EWHC 2002 (Comm)
Docket NumberCase No: 2012 Folio 1093
CourtQueen's Bench Division (Commercial Court)
Date27 June 2014

[2014] EWHC 2002 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

Mr Justice Eder

Case No: 2012 Folio 1093

Between:
The Federal Mogul Asbestos Personal Injury Trust
Claimant
and
(1) Federal-Mogul Ltd (formerly T&N plc)
(2) Curzon Insurance Ltd
(3) Centre Reinsurance International Company
(4) Muenchener Rueckversicherungs-Gesellschaft
(5) European International Reinsurance Company Ltd
Defendants

Iain Milligan QC and Richard Fisher (instructed by Hogan Lovells International LLP) for the Claimant

Paul Stanley QC (instructed by Sidley Austin LLP) for the First Defendant

Peter Ratcliffe (instructed by CMS Cameron McKenna LLP) for the Second Defendant

Christopher Butcher QC and Jawdat Khurshid (instructed by Edwards Wildman Palmer UK LLP) for the Third, Fourth and Fifth Defendants

Hearing dates: 17–20, 24–26, 31 March, 1–3 April 2014

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.

Mr Justice Eder Mr Justice Eder

I. Introduction

1

The claimant in these proceedings is a Trust (the "Trust") established in circumstances described more fully below by an order of the US Bankruptcy Court on 8 November 2007 and in accordance with the terms of a Joint Plan of Re-Organisation (specifically the Fourth Joint Plan of Re-organization for Debtors and Debtors in Possession (as Modified)) (the "Plan") and a Trust Agreement.

2

Pursuant to the Plan, the Trust is, in effect, authorised to bring claims on behalf of a very large number of individuals in the US who have allegedly suffered injury as a result of exposure to asbestos and asbestos related products supplied and/or distributed over a lengthy period by the first defendant ("T&N") and its subsidiaries (the "Asbestos Claims"). For convenience and unless otherwise stated, references to T&N in this Judgment include T&N's subsidiaries.

3

The second defendant ("Curzon") was and is T&N's captive insurer under the terms of an Asbestos Liability Policy ("ALP"). In summary, the ALP provided cover of £500 million in excess of £690 million with effect from 1 July 1996 against T&N's liabilities for personal injury claims caused by asbestos anywhere in the world arising from their activities prior to the policy inception date. In its turn, Curzon ceded its liabilities under the ALP in equal shares to the 3 rd, 4 th and 5 th Defendants (respectively "Centre Re", an Irish subsidiary of Zurich Re, "Munich Re" and "EIRC", a Barbadian subsidiary of Swiss Re – collectively referred to as the "Reinsurers") under a Reinsurance Agreement (the "Reinsurance") although, as referred to below, EIRC's share was subsequently reduced by virtue of a settlement made in the context of separate Court proceedings. The ALP and the Reinsurance are often referred to as the "Hercules Programme".

4

In very broad terms, the main issues concern the ability of the Trust to obtain certain declarations with regard to the obligations of the Reinsurers relating to the handling and settlement of any Asbestos Claims which the Trust wishes to advance against T&N. In essence, the Trust says that pursuant to the Plan, it has itself established an appropriate mechanism for valuing individual Asbestos Claims in accordance with what are called Trust Distribution Procedures ("TDPs"); that the TDP value ascribed to individual Asbestos Claims is considerably lower than the likely settlement or award value for such claims if litigated in the US tort system, certainly if the costs of defending the claims are taken into account; that putting on one side any question of time-bar, handling claims in such manner is an economic "no-brainer"; and that the only businesslike approach is for the Reinsurers to settle them in accordance with an administrative process reflected in the TDP standard i.e. without resort to the US litigation process. On this basis, the Trust now seeks various declarations as set out below.

5

On the main issues, both T&N (represented by Mr Stanley QC and his team) and Curzon (represented by Mr Ratcliffe and his team) are broadly neutral. The main battle lies between the Trust (represented by Mr Milligan QC and his team) and the Reinsurers (represented by Mr Butcher QC and his team). In essence, on the main issues, it is the Reinsurers' case that the Trust has no standing to seek any declaratory relief; alternatively that such relief should be refused on various grounds. In particular, the Reinsurers say that there is no obligation on them to handle or to settle the Asbestos Claims by reference simply to the value ascribed to them by the TDPs; that the Reinsurers will consider any such claims as may be presented by the Trust in good faith; and that unless otherwise settled by agreement, any Asbestos Claims should, if necessary, be pursued by the Trust in the US tort system in the usual way. In response, the Trust says that although such an approach might, in the long run, lead to certain claims being defeated, it will do so at a price that will exceed the cost of settling such cases at TDP value.

6

In addition, there are other ancillary issues in relation to which one or more of the parties seek declaratory relief as referred to below.

II. Background

7

T&N is an English company formerly known as T&N plc and originally Turner & Newall Ltd. For much of the 20 th century, it was a major producer and distributor of asbestos and products containing asbestos. In particular, together with two of its subsidiaries, Gasket Holdings Inc ("Flexitallic") and Ferodo America Inc ("Ferodo"), it used to distribute products containing asbestos in the United States. As is now well known, asbestos is (at least in certain forms) a serious potential danger to the health of anyone who is exposed to it. In particular, exposure to asbestos can cause four main diseases:

i) Mesothelioma (predominantly a cancer of the lining of the lungs (pleural mesothelioma); it is always fatal and is almost exclusively caused by exposure to asbestos. It is scientifically recognized as a signature asbestos disease);

ii) Asbestos-related lung cancer (which is almost always fatal);

iii) Asbestosis (a scarring of the lungs which is not always fatal but can be a very debilitating disease, greatly affecting quality of life); and

iv) Diffuse pleural thickening (a thickening of the membrane surrounding the lungs which can restrict lung expansion leading to breathlessness).

8

Several factors can contribute to determine how asbestos exposure affects an individual, including (i) dose (how much asbestos an individual was exposed to); (ii) duration (how long an individual was exposed); (iii) size, shape, and chemical makeup of the asbestos fibres; (iv) source of the exposure; and (v) individual risk factors, such as smoking and pre-existing lung disease. In many cases, the symptoms only appear many years after the original exposure.

9

Asbestos litigation in the US began in the 1960s and thereafter exploded. According to the American Academy of Actuaries, the management of this litigation by both litigants and courts in the US became an almost insoluble problem. Many companies which had manufactured, sold or distributed asbestos were faced with a large number of claims which eventually resulted in them filing for bankruptcy. Over the last 40 years or so, various possible solutions and part-solutions have been canvassed and implemented (including the Wellington Agreement as considered, for example, in Hiscox v Outhwaite (No 3) [1991] 2 Lloyd's Rep 524); but these have generally foundered or been only partly successful for one reason or another. The result is that there remains a very large number of claimants who have allegedly suffered personal injury as a result of exposure to asbestos many years ago and whose claims have even now still not been resolved.

10

By the mid-1990s, T&N's principal business had moved away from asbestos and had focussed instead on engineering. However, it remained exposed to its legacy of asbestos related claims. The nature and basis of such claims was explained in a detailed written statement of Paul J Hanly Jr who is a qualified US attorney and partner in Hanly Conroy Bierstein Sheridan Fisher & Hayes LLP and (apart from a brief hiatus) acted as defence Counsel for T&N, Flexitallic and Ferodo from 1981 until 2001. This statement was put in evidence by the Trust. By agreement, Mr Hanly did not give oral evidence because none of the other parties wished to cross-examine him. Based on Mr Hanly's statement, the following would appear to be uncontroversial.

11

During the 20 th century, T&N ultimately became, and was for many decades, the largest vertically-integrated asbestos company in the world being involved in every aspect of asbestos, from the mining and milling of the mineral (at its mines and mills in southern Africa and Canada), through the manufacturing processes (at its factories in England, India, Africa, North America and Western Europe), to the sale, distribution and installation of its asbestos-containing products (through its sales, distribution and installation companies throughout the world). Every one of the T&N companies, both in the U.K. and abroad, manufactured products using all of the asbestos fibre types — including crocidolite (blue asbestos), amosite (brown asbestos), and chrysotile (white asbestos).

12

In the event, T&N found itself as a defendant in asbestos cases in both the US and other countries. The basic elements of the causes of action against T&N and its subsidiaries were (i) failure to warn based on strict products liability and (ii) negligence. T&N was first named as a defendant in a US asbestos personal injury case in 1977. Thereafter, it was faced with...

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