Thompson v Gamble; Gamble v Thompson - [2010] NSWSC 878 - NSWSC 2010 case summary — Zoe

NSWNSWSC

Thompson v Gamble; Gamble v Thompson

[2010] NSWSC 878

Supreme Court of NSW|2010-07-30|Before: Slattery J, Rules Schedule J

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Source facts

Court

Supreme Court of NSW

Decision date

2010-07-30

Before

Slattery J, Rules Schedule J

Source

Original judgment source is linked above.

Judgment (53 paragraphs)

[1]

CITATION : Thompson v Gamble; Gamble v Thompson [2010] NSWSC 878

[2]

In accordance with the orders sought in the Summons in the Estate proceedings the Court advices and directs pursuant to Trustee Act s 63 that the plaintiffs are at liberty to distribute the Estate of the Deceased, Keith Munro Gamble, without making any retention, or provision in respect of any contract of insurance, or reinsurance, underwritten by the deceased in the course of his business as an underwriting member of Lloyd's of London. 58. The orders I make by consent in the Family Provision Act proceedings in accordance with the short minutes of order are:- 1. Order that, in lieu of the provision made for the Plaintiff in Clause 3(a) of the Will of Keith Munro Gamble ("the Deceased"), the property known as Aquarius Apartment 33A, 4 Old Burleigh Road, Surfers Paradise, Queensland, be transmitted to the Plaintiff absolutely. 2. Order that, pursuant to s. 31 of the Family Provision Act 1982, the release contained in Paragraph 7 of the Deed between the Plaintiff, the Defendants and Anne Therese Church and Mary Louise Low ("the Deed") dated 17 May, 2010 be approved. 3. Order that the Defendants' costs, calculated on the indemnity basis, be paid out of the estate of the deceased. 4. Order that the Plaintiff's costs, calculated on the ordinary basis, be paid out of the estate. DECISION : 5. The Court notes, otherwise, the terms of the Deed. 6. The parties agree that: (a) The Plaintiff's Application filed in these proceedings was made within time; and (b) The Plaintiff is an eligible person; and (c) The Plaintiff has served a notice identifying all other eligible persons on the Executors at the time of serving the Summons; and (d) The Administrator has filed a copy of the Affidavit required by Supreme Court Rules Schedule J. (e) The Administrators have served notice of the Plaintiff's Claim on any person who, in the Administrators' opinion, may be an eligible person. (f) The Administrators have filed a Notice of Appearance.

[13]

c. I GIVE the rest and residue of my estate to my Wife for her own use and benefit absolutely. 4. IF my Wife does not survive me by thirty days or more I GIVE the whole of my estate to my Daughters in equal shares as tenants in common for their own use and benefit absolutely. 5. I TRANSFER and give to my Daughters equally as tenants in common all my right title and interest in any loan accounts standing to my credit in the Gamble Investment Trust the Trustee of which is Gamble NSW Pty Limited. 6. I DIRECT that if either of my Daughters dies before me or dies before attaining a vested interest under this Will and leaves children surviving her then such child or children shall on attaining the age of eighteen years take in equal shares the share (including the benefit of the loan account referred to in 5 above) which his, her of their mother would otherwise have taken under this my Will had such mother survived me and attained a vested interest." 3 The will appointed as the executors and trustees of the estate, Phillip Andy Thompson and Richard John Campbell Church who will be referred to in this judgment as the "trustees". 4 The proceedings come before the Court today in two parts. Noelene Gamble has indicated that she may make a claim under the Family Provision Act 1982 against the estate. The trustees have taken the prudent course of negotiating with her in relation to that potential claim. Rather than expend the estate's funds on legal fees contesting her claim, the trustees have reached a satisfactory agreement with her. That agreement is fully reflected in a deed of settlement and consent orders to which the parties now wish to give effect. The overall settlement gives or acknowledges the following financial events and transactions altering the provisions of the will (1) the Gold Coast apartment is devised to Noelene Gamble absolutely, (2) the closure of the principal CBA account and the distribution of its funds in approximately equal shares to Noelene Gamble and Mr Gamble's grandchildren (and some to Noelene Gamble's children) is acknowledged, (3) Noelene Gamble's residuary estate entitlements to shares in Gamble NSW Pty Limited are split to give her a monthly income of $5000 and upon her death the balance of the fund goes to Mr Gamble's daughters, and (4) Noelene Gamble retains her other entitlements to residuary estate including the contents of the additional CBA account. The deed also deals with other assets and funds of small value, which are not of significance to the present application. 5 But the deed recognises that this agreed scheme for distribution of the estate should not be given effect until Mr Gamble's contingent liabilities as a Lloyd's name both before and after 1992 are addressed. The deed contemplates the application in these proceedings for approval of the distribution of the estate despite those contingent liabilities. The deed provides for this court application and for the effects of the proposed distribution in clauses 6, 7, and 9 in the following terms: "Lloyd's liability 6.1 In respect of the contingent liability of the Testator's estate to Lloyd's, the Executors have commenced proceedings in the Court seeking orders in terms of Recital L and an order that the Plaintiff's costs of such proceedings, calculated on an indemnity basis, be paid out of the estate of the Testator. The proceedings are numbered 91421 of 2010. 6.2 The Executors agree to do all things reasonably necessary to obtain such orders. 6.3 Noelene, Anne and Louise acknowledge that, if such orders are made by the Court, they will, as beneficiaries of the estate of the Testator, become liable (but only to the extent of benefits received by them from the estate of the Testator) in respect of the contingent liability, if any, of the estate of the Testator to Lloyd's and/or its insureds. 6.4 If Noelene, Anne, Louise or the Executors become legally liable to pay or contribute to a liability of the type referred to in 6.3, then the parties acknowledge and agree that such claim or claims will be met by Noelene, Anne and Louise in the following proportions:-

[19]

9.2 In the event that the Court refuses to make orders in terms of the conditions precedent, or in the event that it becomes impracticable to fulfil such conditions precedent, the parties agree that this Deed shall be of no force or effect." 6 Recital L refers to an opinion from Senior Counsel to the effect that the trustees should seek orders from the Supreme Court to the effect that they are at liberty to distribute the estate "without making any reduction or provision in respect of any contract of insurance or reinsurance underwritten by the Testator in the course of his business as underwriting member of Lloyd's." 7 The Court is asked today to do two things. The Court is asked to approve the settlement that has been reached between the trustees and Noelene Gamble under section 31 of the Family Provision Act 1982. Also the Court is asked to authorise the distribution of the estate in accordance with the deed of settlement and amended will upon the basis that the Family Provision Act approval is granted. The Court's authorisation to the distribution is necessary in the interests of creditors, the trustees and the beneficiaries of the estate because of Mr Gamble's position as a former name at Lloyd's in 1993, 1994 and in years prior to 1992. The principal question in relation to the proposed distribution is: whether it should be made a condition of any distribution that there be a retention of monies in the hands of trustees to meet any contingent liability that the estate might have in relation to Mr Gamble's role as a Lloyd's name; or whether as a condition of distribution some security should be provided by beneficiaries to meet such contingent liability. Noelene Gamble and the trustees contend before me that the distribution should occur without either requirement. They say that the existing Equitas reinsurance arrangements for Lloyd's names such as Mr Gamble, (which have been demonstrated in evidence and which I will shortly explain) provide reasonable protection to the estate and to contingent creditors of the estate with respect to any contingent liability of the estate. They say that no special conditions are now required for the proposed distribution.

[20]

8 The hearing today is the joint hearing of two proceedings. The first matter is the Family Provision Act claim in which Noelene Kay Gamble as plaintiff, seeks relief under Family Provision Act s 7 against the trustees and for approval of the deed under Family Provision Act s 31, (proceeding No 89047 of 2010 - "the Family Provision Act proceedings"). The other matter is brought by the trustees as plaintiffs, (proceedings No 91421 of 2010 - "the estate proceedings") in which they seek the Court's advice under Trustee Act 1925, s 63 as to whether they are at liberty to distribute the estate of Mr Gamble without making any retention or security on account of the estate's contingent liabilities for Mr Gamble's role as a name at Lloyd's. I directed in the course of the hearing this morning that both these matters be heard together and that evidence in one be evidence in the other. 9 I have received evidence in the Family Provision Act proceedings from Noelene Gamble as to her means and needs and the basis upon which her Family Provision Act claim would be made out were it to be fully contested. Full information is contained in the affidavits in those proceedings as to the assets of Noelene Gamble. 10 In the estate proceedings, the trustees have given an account of the course of administration of the estate and of the relevant facts of Mr Gamble's professional life as a Lloyd's name, together with evidence of some important inquiries, (to which I will shortly come) about the current status of the syndicates in which Mr Gamble was involved before and after 1992. 11 The outcomes of these matters are interdependent. The settlement deed makes it a condition of the operation of the settlement that the Court approves the Family Provision Act release of Noelene Gamble's rights under s 31 of the Family Provision Act, and that the Court approves the distribution of monies in accordance with the agreement. There is, of course, no point in seeking the judicial advice being sought unless the Family Provision Act agreement is approved. 12 It is convenient to deal with the two matters in the following order. I will first analyse the issues relating to the distribution of the estate, in the event that the settlement is approved. Before commencing this analysis I indicate now that I will approve the settlement. The result of my analysis in the estate proceedings are that I accept the trustee's submissions that they may distribute without retention and without obtaining security from beneficiaries.

[21]

The Estate Proceedings 13 Mr Gamble was a 'name' at Lloyd's for years both before and after 1992. Names at Lloyd's are members of underwriting 'syndicates'. A Lloyd's syndicate is an annual venture of members, who agree to assume a proportion of the risks underwritten by that syndicate. The significance of the date 1992 is that in that year, an accumulating series of substantial underwriting claims relating to liability for pollution and the distribution of asbestos products led to a crisis at Lloyd's which called into question the solvency of many Lloyd's syndicates for syndicate years up to and including 1992. In 1996 the restructuring of reinsurance arrangements for syndicates up to and including 1992 substantially contained the crisis. Business at Lloyd's continued after 1992. Mr Gamble continued to participate in Lloyd's underwriting syndicates in 1993 and 1994. Post-1992 syndicates were not restructured. 14 The important fact is that Mr Gamble was involved in both sets of the syndicates, those that were restructured for years up to and including 1992, and syndicates in the two following years. The detailed restructuring arrangements that were made for years up to and including 1992 are explained below. But it is useful first to identify the applicable law. Applicable Legal Principles 15 The relevant principles relating to the liability of trustees to creditors and to beneficiaries upon the distribution of an estate have not been widely considered in recent years. Sanction can be properly given by the Court to distribution by trustees, even in cases where a provision for future creditors cannot be guaranteed to be sufficient. This has been fully explained by Lindsay J in Re York (deceased); Stone and Another v Chataway and Another (1997) 4 All ER 907, an English case which addressed the same problem that faces the Court today. Re York (deceased); Stone and Another v Chataway and Another was the first consideration after the restructuring of Lloyd's of the problem of what trustees of deceased Lloyd's names must do in distributing estates in the context of the Lloyd's restructuring. 16 After an extensive discussion of the decided cases, the generally applicable law in relation to the liability of trustees and beneficiaries upon a distribution in the face of contingent liabilities, was stated by Lindsay J in Re York (deceased); Stone and Another v Chataway and Another (1997) 4 All ER 907, at 921 as follows:

[25]

17 If a distribution is made in conformity with a judicial advice under Trustee Act s 63, it affords complete protection to the executor. If a Court order does not provide for retention of any sums, the executor does not need to look to any retention for protection. 18 The principles identified by Lindsay J in York's case were applied by Austin J in Estate L H Hall [1999] NSWSC 1297, another case dealing with the distribution of the estate of the name at Lloyd's. There his Honour explained that both the substantive law and the procedural mechanisms for granting approval for executors' distributions are analogous in Australia to those identified in York's case. Austin J referred to Re Gross (1949) SASR 55; Pinnock v Hull (1876) 2 VLR (E) 18 at 24-25; Chisholm v Gilcrest (1902) 2 SR (NSW) Eq 84; and GB Nathan & Co Pty Ltd (in liq), Re (1991) 24 NSWLR 674 at pg 677E-F. These cases are consistent with Lindsay J's reasons and conclusions. In GB Nathan & Co Pty Ltd (in liq), Re (1991) 24 NSWLR 674 at 677E-F McClelland J (as his Honour then was) said that if the Court directed an official administrator who had made full disclosure of material facts, the official administrator might act in accordance with a direction without thereby incurring personal liability to any person in whose interests the administration was being conducted, for example creditors or beneficiaries of a deceased estate. His Honour however pointed out that the protection of the official administrator acting under the direction of the Court, from personal liability would not however affect the rights of creditors and beneficiaries as between themselves: Ministry of Health v Simpson (Diplock's case) [1951] AC 251 at 268. 19 The immediate dilemma in this case is this. Because Mr Gamble was a name at Lloyd's, there is still no complete certainty, despite the special measures now taken for the restructuring of Lloyd's that an actual claim may not mature and ultimately be made against Mr Gamble's estate. The choice faced by the trustees here is similar to the stark choice faced by the executors in Re York (deceased); Stone and Another v Chataway and Another (1997) 4 All ER 907, at 915, between retaining the entire estate indefinitely which would be unfair to the beneficiaries or distributing on the basis that the creditors have no right to expect the trustees to make such an indefinite retention when the creditors have protection which has been assessed to be commercially appropriate. But for the reasons, which I will explain below, the possibility of a future claim by a Lloyd's policyholder in a relevant syndicate year against Mr Gamble's estate must be seen as extremely remote; and so remote indeed as not to prevent a distribution. 20 The present position may best be understood by briefly looking at the history of the Lloyd's restructuring and the way that it has been dealt with firstly, in the cases since, and in the most recent reconstruction of July 2009. The purpose and effect of the restructuring of Lloyd's syndicates has been to provide more protection to former Lloyd's names and their estates against the possibility of claims by policyholders during the years up to and including 1992, the subject of restructuring. 21 The position of Lloyd's names before 1992 is in most respects similar but in some respects different. The position of Lloyd's names for that period is in common, in that common measures were taken to secure all Lloyd's names against the disastrous financial circumstances of syndicates for the period up to 1992. But the position of individual Lloyd's names is also different. It is different in the sense that: each name was involved in different syndicates; and each name had the option whether or not to take up the security arrangements provided by the restructuring. 22 The liabilities of Mr Gamble's state should first be dealt with on the basis of the common Lloyd's restructuring arrangements as they affect Mr Gamble's estate. Then Mr Gamble's individual situation must be considered. That is the structure that I will pursue in this judgment. The liabilities of Mr Gamble's estate in respect of his participation in syndicates during the 1993, 1994 years, which were not the subject of any common restructuring, will also be considered. 23 As with other Australian cases about distributions from the estates of Lloyd's names (such as the decision of Austin J in Estate L H Hall [1999] NSWSC 1297) the common arrangements for the restructuring of the financial position of Lloyd's names is not the subject of direct evidence in these proceedings. But the case law is sufficient to make what has occurred since 1996 a matter of public record. 24 Stability of Lloyd's was achieved in mid 1996 when arrangements were made for Lloyd's names involved pre-1992 syndicates, which syndicates could not otherwise obtain reinsurance so as to allow the syndicates to be finalised, to be reinsured by the Equitas Group. The Equitas Group was a special purpose vehicle set up to supply this reinsurance, which could not be found elsewhere by individual syndicates. A detailed description of how that restructuring occurred and affected each Lloyd's member in a syndicate, is conveniently set out in the judgment of Lindsay J in York's case (at 911-913), which description also appears in Austin J's judgment in Hall at [9]: "As to the position of names, I have received evidence, none of which has been challenged, from Mr William David Robson, a director and the chairman of Anton Jardine Members Agency Ltd, a leading Lloyd's members' agent; he has been involved in the Lloyd's market since 1963. He is chairman of the Lloyd's Underwriting Agents' Association. He explains that each individual member of a syndicate, names such as Mr Yorke, agrees to assume a proportion of the risks underwritten by that syndicate. The liability of an individual for that agreed part is unlimited, but there is no liability upon him for the failure of any fellow member of the syndicate to bear that other's proportion. From 1927 there was a central fund, a principal function of which has been to assume responsibility for claims where the members concerned have failed to meet their liabilities. On becoming a name each individual signs a general undertaking to the effect that he and his personal representatives shall be bound by the rules of Lloyd's. Each syndicate is, in a sense, an annual venture; it exist for a year of account but syndicates are accounted for under a three-year accounting system. A syndicate's profit or loss is calculated only at the end of three years. However, at the end of any three years there are nowadays very likely still to be unsettled claims and the possibility of future ones. In order to achieve finality in respect of any accounting period of three years there is what is called 'reinsurance to close' (RITC). Members of a syndicate for a year which is to become a 'closed year' pay a premium to and assign their rights in relation to the 'closed year' to members of a syndicate for a later year who, in return, assume the liability of the members for the 'closed year' for all the known and unknown liabilities attributable to the 'closed year'. Until the year of account is closed by RITC it remains an 'open year', but once closed it is not reopened. By way of successive assignments by which syndicates for later years have year after year thus assumed responsibility for the risks of earlier years, any given syndicate which has become a reinsurer by way of RITC may find itself liable for late emerging or late-settled claims in respect of risks run many years before. In 1992, for example, there were still risks covered in respect of policies written before the 1939-45 war. The representative creditor, Mr G N Clarke, a past or present name, has the RITC for one of his years insured by a syndicate which included Mr Yorke; it is in that way in which he comes to be a possible future creditor of the estate. If there is in respect of a given year, a material degree of uncertainty about the appropriate figure to be fixed for its RITC, the syndicate's accounts will remain open; the syndicate is then in 'run-off'. The syndicate itself continues to pay claims and to debit its members until its present and future liabilities are felt to be sufficiently quantifiable to make a closure by RITC equitable as between the syndicate for the closing year and that of the year which proposes to take over the risk by becoming the reinsurer under the RITC.

[27]

A policyholder with a claim insured or reinsured at Lloyd's submits his claim to Lloyd's which then passes it on to the appropriate syndicate. The syndicate then meets it out of its reserves, including its RITC. If a syndicate has inadequate reserves to meet its claims before it is closed, then its members will be required to inject cash by way of 'calls'. If a 'call' is not met, a syndicate's managing agent may sue the member or his estate for the 'call' plus interest or the central fund I mentioned earlier may discharge the debt on the member's behalf and, where appropriate, then sue the member or estate concerned. A member ceases to be a member at his death. He does not participate in the syndicates for the year in which his death occurs. His personal representatives, however, are bound by the general undertaking which the name made upon his joining Lloyd's. The general practice in the past has been that estates protected by an EPP have distributed without making any further provision in respect of open years but in cases where the estates have not had the protection of EPPs, the executors not uncommonly, I am told, have made retentions of the whole or part of their estates against the risks of liabilities in respect of open years. In the period 1988-1992 Lloyd's suffered enormous losses. There have been years of anxiety, uncertainty, difficulty and litigation leading, in late July 1996, to the circulation of the 'settlement offer document' giving details of the 'Lloyd's reconstruction and renewal'. A reinsurance group was to be formed, Equitas into which all liabilities for 1992 and earlier years were to be reinsured. By late August 1996 the settlement offer had become unconditional and thereupon reinsurance of all Lloyd's 1992 and earlier non-life business was reinsured into Equitas for all names and the estates of deceased names, whether or not they had accepted the settlement offer.'" 25 York's Case was decided in July 1997. The Equitas Group restructuring was less than 12-months old that that time. The structure Lindsay J described in York's Case subsisted until July 2009 when the protection of former names from pre-1993 syndicate liabilities was strengthened. 26 In the late 1990s the Equitas Group structure included a holding company, Equitas Holdings Limited and two wholly owned subsidiaries, which were authorised by the Department of Trade and Industry pursuant to the Insurance Companies Act (1992) UK to carry on business as insurers. The subsidiaries were Equitas Reinsurance Limited and Equitas Limited. 27 Austin J explained in 1999 in Estate L H Hall [1999] NSWSC 1297 [10] that Equitas Reinsurance Limited reinsures, acts as a conduit for the collection of payments, and cedes its reinsurance into Equitas Limited, which is required by the regulator, to show an appropriate surplus of assets over liabilities on its balance sheet. And then a third company, Equitas Policy Holders Trustee Limited, held the rights of names under reinsurance contracts for the benefits of underlying policy holders. 28 The precise structure for that arrangement is further conveniently set out in Lindsay J's judgment in York's case (at 913):- "'The mechanics of Equitas are such that the liability of the EPPs in relation to years up to 1992 have been compulsorily reinsured into Equitas. A 'finality bill' (so-called) has been sent to names and to the personal representatives of deceased names under which, upon payment of the sums specified, the years in question attain RITC through Equitas. The DTI has accepted that reinsurance into Equitas can be treated as an RITC and that upon payment of the relevant 'finality bill' the names and the executors concerned may cease to be members of Lloyd's.

[28]

Should Equitas fail, liability would revert to the relevant names. Policyholders under the arrangements now made, are unable to look to Lloyd's as they were in the past but rather would ultimately need to go directly against the particular names. Even should Equitas fail there are remedies or palliatives which may suffice to satisfy or head off the claims of policyholders before any individual name or any estate of a name might come to be sued. First, at the request of the DTI the Equitas arrangements contain a proportionate cover plan which would enable it to pay claims at a reduced rate rather than going into insolvent liquidation. So long as a policyholder feels he has been treated fairly in relation to all other claims, his recovery of a proportion only of his debt might suffice to head him off from pursuing the matter further. Secondly, Equitas would be able to propose a scheme under s425 of the Companies Act 1985 under which a policyholder may have to be satisfied with less than a payment in full. In addition, some policyholders might have recourse to the deposits required by some regulatory authorities in other jurisdictions, which deposits might then be renewed by the then members of Lloyd's in order that Lloyd's could continue to do business in that jurisdiction, thus conferring on policyholders in such jurisdictions a possibility of recoupment out of deposits, possibly even beyond the extent of the deposit as it was at the time of failure. Beyond that there would be a strong commercial pressure upon Lloyd's, rather than to allow any Lloyd's policy to be dishonoured, for it to inject hitherto uncovenanted funds into Equitas to ensure that, even should Equitas at first have failed, its obligations would nonetheless be met. A policyholder still unsatisfied after the above measures had been exhausted and persistent in his wish to recover to the full might then embark on suits against the particular names within the particular syndicates covering his risk, a course fraught with difficulty on the part of the policyholder leading, to a persistent policyholder, to proceedings which, as against any one name, when identified, would be likely to be only for a relatively small proportion of the policyholder's overall and thus far still unsatisfied claim.'" 29 This adequately describes the Equitas Group structure and its legal effects until July 2009. With that background, Austin J in Estate L H Hall [1999] NSWSC 1297 [11] usefully set out the three factors that a Court must identify in any case where the contingent liability position of an individual name such as Mr Gamble is to be established upon an application such as the present. 30 These three factors need to be established in this case. Austin J identified the factors as: (a) that there was no syndicate in which the deceased participated which had been left outside the Equitas arrangements; (b) that the Equitas reinsurance arrangements, so far as they affected the deceased, were still in force; and (c) that the two Equitas companies which had been granted authorisation to operate as reinsurers still had the benefit of that authorisation, and there was no basis for apprehending that it would be withdrawn. I find below that these three factors are established in this case on the evidence. Austin J had also found them established in 1999 in Hall's case. Scheme Approval in July 2009 31 In July 2009 there was a strengthening of the protection against contingent liabilities for Lloyd's names participating in pre-1993 syndicates. This strengthening was achieved through the approval of a scheme of arrangement. The scheme was designed to achieve legal finality under English law for names by transferring their legal liabilities under the original policies to Equitas Insurance Ltd. The financial substratum of the scheme of arrangement was created when Equitas Limited and Equitas Holdings Limited entered into what has been described as the "NICO Retrocession Contract" with National Indemnity Company of Nebraska ("NICO") under which Equitas Limited retroceded its liabilities to NICO up to a limit of $5.7 billion over and above existing reserves. Operational functions including responsibility for the management of the run-off of claims were all delegated to Equitas Management Services Ltd, which renamed under NICO's control, has been responsible for the day-to-day conduct of the run-off since the NICO Retrocession Contract took effect on 30 March 2007. 32 The scheme of arrangement was approved in Blackburne J's judgment In the Matter of the Names of Lloyd's for the 1992 and Prior Years of Account represented by Equitas Limited [2009] EWHC 1595 (Ch). The 2009 restructuring is explained in summary form in paragraphs [9], [10] and [11] of his Honour's judgment in Equitas Limited [2009] EWHC 1595 (Ch) which are reproduced below:- "9. Economic finality for Names in respect of the pre-1993 difficulties and the litigation that it had spawned was to a large extent achieved through the NICO Retrocession Contract of 2006. However, neither the Equitas reinsurance nor the NICO retrocession arrangements resulted in legal finality for Names who remained directly liable to policyholders in respect of the 1992 and Prior Business under the original policies: Names continued to be exposed in respect of their liabilities to such policyholders in the event that EL should be unable to pay to a policyholder the entire amount of a Name's liability. The purpose of the scheme now before the court for its sanction has been to achieve legal finality under English law for Names by transferring to EIL the legal liabilities of Name under those original policies.

[30]

The scheme has the following particular features: the policies, assets and liabilities (together the Transferring Business) are transferred to EIL; the relevant rights and obligations of the Names as reinsureds under the reinsurance contracts that cover the Transferring Business transfer to EIL, with amendments to those contracts to reflect the fact that the Transferring Business is transferred from the Names to EIL; the interest of the Names as reinsureds and various outstanding obligations of the Names as reinsureds under the Equitas Reinsurance Contract are transferred to EIL (subject only to the previous assignment in favour of EPTL put in place at the time of Lloyd's R & R); the reinsurance structure relating to Lioncover is simplified but with the equivalent protection made available to transferring policyholders of PCW Names that was available to them prior to the transfer; there are similar (although, for historical reasons, not identical) provisions in the case of Centrewrite; the terms on which EPTL holds the rights of Names as reinsureds under the Equitas Resinurance Contract, assigned to it at the time of Lloyd's R & R and held for the benefit of transferring policyholders, are varied to reflect the transfer of the Transferring Business to EIL; any judicial, quasi-judicial, administrative or arbitration proceedings pending by or against EIL such that EIL is entitled to all defences, claims, counterclaims and rights of set-off hitherto available to the Names; EIL discharges on behalf of the Names (alternatively, indemnifies them against) all liabilities under the transferring policies and, to the extent that they would be recoverable by the Names under the various reinsurance contracts but for the scheme, any other liability or expense incurred in connection with the Transferring Business." 33 The important result of the 2009 scheme approved by Blackburne J was to achieve finality for all Lloyd's names, by transferring to a new subsidiary of Equitas Holdings, namely, IEL, the legal liabilities of names under those original policies. The practical effect for a name such as Mr Gamble was that the scheme removed his and his estate's liability under the original policies written in the syndicates in which he was involved for 1992 and before. This considerably reduces the risk that Lloyd's names in pre-1993 syndicates will receive claims. That reduction in risk in part depends upon the adequacy of the financial arrangements put in place under the NICO Retrocession Agreement. 34 Mr Reuben, Counsel for the trustees, has drawn my attention to a number of financial matters that concern the current reinsurance arrangements for these Lloyd's syndicates. 35 I have had the advantage of reviewing in evidence the Annual Report and Financial Statements for Equitas Holdings Limited for the years ending 31 March 2009 and 31 March 2010. Those two reports record the forward planning from about 2007, by which Equitas Holdings arranged a two-phase transaction, the first phase of which involved the purchase of very significant additional reinsurance cover of the order of $5.7 billion. The second phase involved seeking the approval of the High Court to transfer names' obligations to policyholders to Equitas Insurance Limited. The second phase was effected with the scheme approval in the judgment of Blackburne J. The second phase also involved further purchase of reinsurance cover of $1.3 billion, which, as the 2010 financial statements show, left in place net additional reinsurance cover from NICO of $6.256 billion. 36 The parts of the Equitas Holdings Limited Annual Report and Financial Statements, describing the current status of reinsurance arrangements under the NICO Retrocession Agreement, are set out below:- " Overview

[39]

The Group financial statements have been prepared under the provision of The Large and Medium-sized Companies and Group Accounts (Accounts and Reports) Regulations 2008 ("S12008/410") relating to insurance groups and in accordance with the Statement of Recommended Practice on Accounting for Insurance Business issued by the Association of British Insurers ("the ABI SORP") dated December 2005, as amended in December 2006. The accounts have been prepared in accordance with applicable accounting standards." 37 The current financial position of the Equitas Group has been substantially strengthened by the additional reinsurance cover and the financial strength of National Indemnity itself. For a claim to be made now on a former name, such as the late Mr Gamble, it would be necessary for a claim of sufficient size to be made, or for a number of claims of sufficient size to be named, for the substantial reinsurance summarised in this judgment to be found to be insufficient and for all the other protective mechanisms to prevent claims against names to fail and for the claimant to then pursue Mr Gamble's estate. 38 On the material before him, Austin J found in the Hall case, as events stood in 1999, that the prospect of such an event happening was very remote. Lindsay J persuasively explained in Re York (deceased); Stone and Another v Chataway and Another (1997) 4 All ER 907, at 913 - 914 the several legal commercial and practical reasons why a policyholder would be unlikely to pursue a Lloyd's name after the 1996 restructuring even if the reinsurance arrangements of the restructuring were to fail. In my view the prospect of such a claim is even more remote now due to three factors occurring since 1999. First, the risk of claim has become more remote simply due to the passage of time. Second, the reinsurance position has only strengthened by the purchase of additional reinsurance. Third, the July 2009 scheme of arrangement has now transferred the legal liabilities under pre-1993 policies to Equitas Insurance Limited. Mr Gamble's individual position 39 To complete the issues under consideration, it is necessary for me to briefly examine the evidence that shows that Austin J's three requirements are satisfied with respect to Mr Gamble and that the general restructuring Lloyd's applies to him. 40 The trustees wrote to Lloyd's about Mr Gamble's position in respect of 1992 and prior years of account for his underwriting business at Lloyd's. The trustees received from Lloyd's a reply that satisfied the first and second of Austin J's requirements, that (1) there was no 1992 or prior years syndicate in which Mr Gamble participated which was outside the Equitas arrangements and (2) the Equitas reinsurance arrangements, so far as they affected Mr Gamble were still at force. The letter in reply sent on behalf of Lloyd's Members Agencies Service Ltd on 5 November 2009 said:- "As you will be aware, all of the late Mr Gamble's 1992 and prior year of account underwriting business was reinsured into Equitas under Lloyd's Reconstruction and Renewal Plan. Equitas has subsequently been reinsured under a Part VII transfer which was finalised in July 2009. All syndicates on which the late Mr Gamble participated for the 19993 and 1994 years of account have now closed by reinsurance into succeeding Lloyd's syndicates.

[42]

1993 and 1994 Syndicate years 44 The Lloyd's letter of 5 November 2009 confirms that all the syndicates in which Mr Gamble participated for the 1993 and 1994 years of account have now closed by reinsurance into succeeding Lloyd's syndicates. There has been no suggestion of failure in these succeeding Lloyd's syndicates. 45 Finally, there is evidence in relation to the advertising of the trustees' intention to distribute under s 60 of the Trustee Act. The evidence is that notice of no other liabilities has been given to the trustees. They are, of course, otherwise aware of the contingent liability in relation to Mr Gamble's position as a Lloyd's name. 46 In my view, the appropriate course is to permit a distribution. I do this on the basis of my conclusion that the Equitas reinsurance arrangements effected now through the restructuring in 2009 and previously described by Lindsay J are in full force and effect with respect to Mr Gamble's estate, and they do provide reasonable protection to his estate with respect to his contingent liabilities as a name. I also note that in the deed Mr Gamble's beneficiaries have had the foresight to agree upon the proportions in which they would bear any such liability should it ever eventuate. This gives further support for the course I propose to follow. 47 There is, of course, a remote possibility that, if the overall reinsurance arrangements fail, in consequence of some as yet unrevealed catastrophe that a further claim may be made against the estate. I respectfully agree with Lindsay J's assessments in 1997, and Austin J's assessments in 1999, on the basis of the events since that time, that such a possibility is remote. It is clearly now, 10 years after Austin J's assessment in 1999, even more remote. It should not prevent the trustees from distributing the whole of the estate to the beneficiaries who are entitled to receive it. And in those circumstances, it is reasonable for the trustees to seek the protection of the advice and direction of this Court similar to that given by Lindsay and Austin JJ. I am prepared to give that advice and direction under Trustee Act s 63.

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The Family Provision Act Proceedings 48 It is necessary now to briefly consider the issues relating to the approval of the Family Provision Act release by Noelene Gamble. 49 Noelene Gamble is now 72 years of age. She lives in a home unit in Mosman, NSW, in which she is the surviving joint tenant. She lives by herself. Her health is good. She was employed as a secretary until 1960 but did not work for financial reward after that date. She was a loving spouse and companion of Mr Gamble throughout her marriage of 23 years which ended with his death during which time she contributed to his welfare. Noelene Gamble's total assets at the time of hearing were approximately $5.9 million, including $2.2 million in liquid assets. She has annual expenditure of approximately $65,000 which includes expenses of maintaining her unit in Mosman, her motor vehicle, her golf club membership and other health, clothing, food and general entertainment expenses. 50 I am satisfied on the evidence that is appropriate for provision to be made out of the estate for her. Objectively a particular concern for her is to ensure that her capital is not eroded. The arrangements that had been made between her and members of the family ensure that that will not occur. 51 The deed also provides for a release under Family Provision Act s 31 of her rights to claim against the estate. The relevant requirements of s 31 are set out below:- "31 Release of right to apply for provision (1) A reference in this section to a release by a person of the person's rights to make an application in relation to a deceased person is a reference to a release by a person of such rights, if any, as the person may have to make such an application and includes a reference to: (a) an instrument executed by the person which would be effective as a release of those rights if approved by the Court under this section, and (b) an agreement to execute such an instrument. (2) A release by a person of the person's rights to make an application in relation to a deceased person has no effect except as provided in subsection (3).

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(6) The Court may approve of a release in relation to the whole or any part of the estate or notional estate of a deceased person." 52 The Court has been assisted in this case by an affidavit explaining the steps that have been taken to satisfy the requirements of Family Provision Act s 31(5) in this case. 53 Noelene Gamble in her affidavit of 17 May 2010 says that she has taken independent advice in relation to the release from a solicitor, Mr Garry Francis Stewart Boyce, a solicitor of Hunt & Hunt, and that she has given due consideration to that advice. She says she is satisfied that the proposed release is made to her advantage financially or otherwise as a consequence of orders made in the application. I accept this evidence. 54 In my view, there can be no doubt that the orders are to her financial advantage compared with her position under the will. Her financial security is undoubtedly improved. She declares she believes it is prudent for her to make the release. I agree with that assessment. 55 Finally, she says that she regards the terms of settlement as fair and reasonable at the time of making the agreement. And with that I also agree. 56 In those circumstances, I am prepared to approve her granting a release of her rights under the Family Provision Act upon the terms and conditions set out in the deed of settlement of her rights pursuant to s 31 of the Act. Accordingly, I am prepared to make the consent orders which have been proffered to the court. Orders 57 In accordance with the orders sought in the Summons in the Estate proceedings the Court advices and directs pursuant to Trustee Act s 63 that the plaintiffs are at liberty to distribute the Estate of the Deceased, Keith Munro Gamble, without making any retention, or provision in respect of any contract of insurance, or reinsurance, underwritten by the deceased in the course of his business as an underwriting member of Lloyd's of London. 58 The orders I make by consent in the Family Provision Act proceedings in accordance with the short minutes of order are:- 1. Order that, in lieu of the provision made for the Plaintiff in Clause 3(a) of the Will of Keith Munro Gamble ("the Deceased"), the property known as Aquarius Apartment 33A, 4 Old Burleigh Road, Surfers Paradise, Queensland, be transmitted to the Plaintiff absolutely.