An application was made to court for approval of an insurance business transfer scheme. A representative policyholder of the transferor raised concerns regarding the effect of the proposed transfer. Although accepting that the policyholders had no right to any particular level of excess assets, he pointed out that their first call on the excess capital (whatever that level might be) would be lost and that the transferor's policyholders would rank equally with the far more numerous existing policyholders of the transferee and so the level of assets per policyholder would be greatly reduced.
Henderson J held that the court should give its approval to the transfer. There was no principled basis for assessing what is the "right" level of excess capital for the transferor to hold. That level is liable to fluctuate and is not set at any specific amount because it exceeded the mandatory regulatory requirements. Instead, the critical question is whether the scheme poses a material risk to the solvency of the transferee and thus the security of the transferring policyholders. The independent expert (and the regulators) had found that the transferee would remain in a strong capital position, both before and after the introduction of Solvency II. The judge said he had no reason to challenge that conclusion.
Crooks v Hendricks Lovell: Assessing whether a Part 36 offer has been beaten where benefits are recoverable
Under a statutory scheme, a defendant to a personal injury claim (broadly) pays reduced damages to the claimant and then refunds "recoverable benefits" to the state ("recoverable benefits" include social security benefits paid in respect of injuries sustained in an accident at work). When making a Part 36 offer, the defendant can therefore choose whether to make the offer "without regard to any liability for recoverable amounts" or state that the offer "is intended to include any deductible amounts".
In this case, the defendant offered £18,500 "net of CRU" (ie net of recoverable benefits due to the Compensation Recovery Unit). After judgment was given (in the sum of £29,550), the recorder adjourned his consideration of costs until after the outcome of a review by the CRU of the certificate of recovery benefits which it had issued prior to judgment. After the revised certificate was issued, it was held that the claimant had failed to beat the defendant's Part 36 offer. The claimant appealed and the Court of Appeal has now held as follows:
- This had been a valid Part 36 offer. As it was intended to be made "without regard to any liability for recoverable amounts", the defendant did not have to state the amount of gross compensation which the claimant would receive.
- "Net of CRU" meant that the amount of the offer had to be compared with the judgment sum after any corresponding adjustments for recoverable benefit have been made.
- The recorder had been correct to wait until the CRU's review before deciding whether the Part 36 offer had been beaten. It is not always necessary to compare the offer with the award made on the day of judgment. Sometimes, as here, the judge cannot decide costs straight away.
- The Part 36 offer had been beaten by the claimant. When determining whether or not an offer had been beaten "one had to look at the net sum paid to the claimant, not the gross sum including monies payable to the CRU" (ie not the total amount which the defendant had to pay). Once the sum owed to the CRU had been calculated, the claimant received £22,789 as the amount that was net of recoverable benefit, and so had beaten the offer.
Accordingly, the appeal was allowed.