RE PAN ATLANTIC INSURANCE CO LTD
(Filed: 02/10/2003)

Chancery Division
Lloyd J
July 22, 2003

Insurance - Company Law - Insolvency - Human Rights - Provisional liquidators concluded that best exit route for creditors of insurance company was scheme of arrangement rather than compulsory winding up - Court sanctioned scheme - No infringement of European Convention on Human Rights Art 6

FACTS

A petition for the court to sanction a scheme of arrangement under s 425 Companies Act 1985 regarding an insurance company that had been in run off since 1991 and in provisional liquidation since 1996. The provisional liquidators concluded that the best exit route for the creditors of the company would be a scheme of arrangement rather than a compulsory winding up. The court made an order convening a meeting of creditors and 98 per cent in number and 99 per cent by value of the creditors voting at that meeting voted in favour of the scheme. The proposed scheme required the company to send known creditors a claim and certificate form which had to be returned within two months. The scheme officers, who would be the provisional liquidators, had an absolute discretion to allow the late submission of a form but otherwise a creditor who failed to claim by the bar date would be deemed to have waived its right to a dividend. The dividend was expected to be very modest. The scheme provided for valuation of claims and adjudication of disputed claims. The independent adjudicator's decision was to be final and binding in so far as the law allowed. Claims were to be submitted with an auditor's certificate but the scheme officers had a discretion to accept some other documentary means evidencing the amount of a claim. The company sought the court's sanction for the scheme.

ISSUE

Whether the court should sanction a scheme of arrangement of an insolvent insurance company under s 425 Companies Act 1985.

HELD

(sanctioning the scheme)

The steps necessary and required by the court order convening the meeting of creditors had been followed correctly and only one class of creditors existed. The result of the meeting was very substantially in favour of the scheme. In circumstances in which the company had not been underwriting since 1991 and had been in provisional liquidation since 1996 there was only a theoretical possibility of unknown creditors coming forward. As a matter of discretion the court would sanction the scheme as an entirely proper scheme, one of whose objectives was to ensure that the limited funds available for distribution were not wasted in further costs of litigation to establish the precise amount of creditors' claims. The imposition of a bar date only two months in the future was reasonable and appropriate in the circumstances. The fact that scheme creditors were bound by the provisions of the scheme and by the determination of the independent adjudicator did not infringe Art 6 European Convention on Human Rights. Limited access to the courts that was inherent in the scheme was not a reason for refusing to approve it. The Insurers (Reorganisation and Winding Up) Regulations 2003 would not apply to the company since the provisional liquidators were appointed before 20 April 2003 and it was extremely unlikely that their appointment would be discharged before a winding-up order was made.

Gabriel Moss, QC, (instructed by DLA) for the provisional liquidators.

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