Vol 3 (2006) - Issue 5

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In re Cape plc and Others

The Cape scheme presented the court with a novel problem in a highly unusual setting, and the court responded in a pragmatic manner without any departure from settled principle.
The first ruling [2006] EWHC 1316, was given on 7 June 2006. It set out the general background to the scheme. Cape Plc and twenty-four subsidiaries (the scheme companies) proposed an arrangement with actual and potential claimants with asbestos-related personal injuries. One employee and one former employee were joined to the application, funded by Cape. One, Mr Hurst, already had a provisional award of damages in his favour, with the right to apply for a further award if he should develop any other disease or conditions
specified in the judgment. The other, Mr O’Brien, did not presently suffer from any asbestos-related condition, but during one period of his employment by a Cape subsidiary he had been intermittently exposed to asbestos.
As is well known, exposure to asbestos dust can cause or contribute to a range of medical conditions, some of which are very serious. These conditions can take a long time to emerge. Cape estimated that claims might continue to emerge for 40-50 years. Unsurprisingly,
there was great uncertainty as to the likely cost of future claims; actuarial reviews produced a best estimate of GBP 119.4 million in a range of GBP 70.2– GBP 240.3 million.
Although solvent, Cape acknowledged a risk that uncertainty as to future claims could not guarantee solvency for the future. That uncertainty was acting as a brake on the development of Cape’s business and Cape had already experienced some inability to fund projects at commercially acceptable rates or without the imposition of onerous terms. The availability of some insurance cover was not thought to be a sufficient solution to the problem.
These tensions led to the development of the scheme proposals, which were designed to balance the competing claims of making proper provision for the payment of asbestos related claims whilst protecting the business from those very claims and thereby putting the Cape businesses in a position to maximise their opportunities for successful development. The proposals had been the subject of a process of consultation with trade unions, victim support groups and firms of solicitors with experience of acting for asbestos-related personal injuries claimants.
On behalf of Mr O’Brien (the employee who had no symptoms of asbestos-related disease), Mark Phillips QC (instructed by Russell Jones & Walker) argued that potential future claimants should be in a separate class from those with present but unresolved claims, and that the court could not sanction a scheme which contained provisions for the subsequent amendment of important terms. On behalf of Mr Hurst, the former employee with the benefit of a (preliminary) award, Martin Pascoe QC (instructed by Thompsons) argued that by excluding or restricting the liability of the scheme companies for personal injury and death, the scheme fell foul of the Unfair Contract Terms Act 1977.