Case No: 2000/0033/A3
Neutral Citation Number: [2001] EWCA Civ 241
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MRS JUSTICE ARDEN

Royal Courts of Justice
Strand, London, WC2A 2LL

Friday 23rd February 2001

B e f o r e :

LORD JUSTICE PILL
LORD JUSTICE CHADWICK
and
MR JUSTICE WRIGHT

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	IN THE MATTER OF THE HAWK INSURANCE COMPANY LIMITED		

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040,  Fax No:  020 7831 8838
Official Shorthand Writers to the Court)
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MR GABRIEL MOSS QC and MISS FELICITY TOUBE (instructed by DLA, London for the Company)
MR PHILIP JONES amicus curiae  (instructed by the Treasury Solicitor )

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Judgment
LORD JUSTICE CHADWICK:

1.	This is an appeal from the refusal by Mrs Justice Arden, in an order made on 21 December 1999, to give the sanction of the court under section 425(2) of the Companies Act 1985 to a scheme of arrangement proposed between The Hawk Insurance Company Limited (in provisional liquidation) and its creditors. The appeal is brought with the permission of the judge.
The background facts
2.	The Hawk Insurance Company Limited (“the company”) was incorporated in 1964 under the Companies Act 1948. Its business, as its name suggests, was the writing of insurance contracts. From 1965 until the end of 1968 the company wrote motor business. That proved unprofitable; and from 1969 until 1976 other non-life business (including liability business) was written through a Lloyd’s underwriting agency. In October 1976 the company ceased to write new business or to renew existing business. But it continued to receive claims in the course of the run-off of its business. 
3.	In October 1979 the company entered into a non-marine re-insurance contract with its parent company, Al-Ahleia Insurance Co. S.A.K., under which the parent company undertook to provide re-insurance cover for the run-off of the company’s business. The amount of the re-insurance cover was increased from time to time over the period 1979 to 1993. But, in the light of the position shown in draft accounts as at 31 December 1994, the parent company decided not to increase its support further, beyond its then existing commitments. It was recognised that the company was insolvent, with gross liabilities of £7.6 million or thereabouts, and a net deficiency of some £2.7 million. 
4.	It was in those circumstances that, on 21 December 1995, the company, by its directors, presented its own petition for winding up, pursuant to section 122(1)(f) of the Insolvency Act 1986, on the grounds that it was unable to pay its debts. That petition has been adjourned pending the final determination of the petition under section 425 of the Companies Act 1985. But, in order to protect the company’s assets and to enable a full investigation of its affairs to be undertaken, provisional liquidators were appointed. The need for provisional liquidators to undertake the role which would more usually be undertaken by administrators appointed under Part II of the Insolvency Act 1986 arises because an administration order cannot be made in relation to an insurance company – see section 8(4) of the Insolvency Act 1986. 
5.	The provisional liquidators, after consultation with an informal committee of creditors, took the view that the most appropriate and beneficial method of winding-up the company’s affairs would be through a scheme of arrangement between the company and its creditors under which, subject to the court giving its sanction to the scheme, those creditors within the scheme (“scheme creditors”) would be paid a proportion of their valid claims against the company, after allowing for any applicable set-off. The relevant proportion, or percentage, would be calculated under the scheme by reference to the assets of the company available for distribution at the time. In the absence of agreement the value of the claims would be determined by a scheme adjudicator in accordance with a procedure prescribed in the scheme. 
6.	It will be necessary to examine the provisions of the scheme more closely later in this judgment. It is sufficient to note, at this point, that the scheme was approved, without dissent, at a meeting of scheme creditors held on 9 December 1999; that no creditor sought to oppose the scheme on the application for sanction under section 425(2); that the judge accepted, at the hearing in December 1999, that there were strong commercial arguments in favour of the scheme; and that, when the petition came back before her for further consideration in January 2000, the judge indicated that, subject to the question of jurisdiction (upon which she had ruled against the company in December 1999), to certain modifications in the drafting and to any change of circumstances in the meantime, she would have seen no reason to refuse the court’s sanction. 
The issue on this appeal
7.	The judge held, for the reasons which she gave in a judgment delivered on 21 December 1999, that she had no jurisdiction under section 425(2) of the Companies Act 1985 to sanction the scheme of arrangement. She took that view because she was not satisfied that the scheme creditors constituted a single class for the purposes of the statutory requirement that the scheme be approved by the requisite majority at a meeting of the creditors or class (or classes) of creditors with whom the compromise or arrangement proposed by the scheme was to be made. As she put it: 
“I appreciate that there are very strong commercial reasons for this scheme, but the question of constitution of classes does go to jurisdiction and therefore is one which the court is bound to consider even in the absence of a creditor making the point . . .”
The issue on this appeal is whether the judge was right to take the view that she did. 
8.	The point is of some general importance. The practice of using a scheme proposed by provisional liquidators and sanctioned under section 425 of the Companies Act 1985 as an effective method of winding-up an insolvent insurance company has developed over the past decade for the reasons explained in paragraph H16.04A of Totty and Moss: Insolvency. And, as the editors observe: “Recent decisions have highlighted the difficulty faced by scheme draftsmen in ensuring that the classes of creditors are correctly identified for the purpose of holding valid statutory meetings to approve the scheme.” Examples of the problems which have faced judges of the Companies Court on applications for sanction under section 425 can be found not only in the present case, but also in two recent decisions of Mr Justice Neuberger, In re Osiris Insurance Ltd [1999] 1 BCLC 182 and In re Anglo American Insurance Company Ltd  (unreported, 12 April 2000), and in the decision of Mr Justice Jonathan Parker in In re BTR plc [1999] 2 BCLC 675.
9.	As I have indicated, the petition was not opposed before the judge. There is no respondent to the appeal. But we have had the benefit of written and oral submissions from counsel instructed as amicus curiae. He did not feel able to support the reasoning of the judge. But he put forward a careful and thorough analysis of the relevant principles and, for my part, I have found his submissions of much assistance. They have led to an application by the company to adduce further evidence for the purposes of the appeal. That evidence explains (with more particularity than had appeared in the evidence before Mrs Justice Arden) the nature of the company’s business and of the claims arising from that business that fall to be dealt with under the scheme. We have thought it right to allow that evidence to be adduced. 
Section 425 of the Companies Act 1985
10.	I turn, therefore, to the provisions of section 425 of the Companies Act 1985. The section is in these terms, so far as material:
“(1)	Where any compromise or arrangement is proposed between a company and its creditors, or any class of them, . . . the court may on the application of the company or any creditor . . . , order a meeting of the creditors or class of creditors . . . (as the case may be) to be summoned in such manner as the court directs. 
(2)	If a majority in number representing three-fourths in value of the creditors or class of creditors . . . (as the case may be), present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement, if sanctioned by the court, is binding on all creditors or the class of creditors . . . (as the case may be), and also on the company . . .”
11.	There are, as I sought to point out in In re BTR plc [2000] 1 BCLC 740, at page 742, when this Court refused permission to appeal from the order made by Mr Justice Jonathan Parker, three stages in the process by which a compromise or arrangement becomes binding on the company and all its creditors (or all those creditors within the class of creditors with which the compromise or arrangement is made). First, there must be an application to the court under section 425(1) of the Act for an order that a meeting or meetings be summoned. It is at that stage that a decision needs to be taken as to whether or not to summon more than one meeting; and, if so, who should be summoned to which meeting. Second, the scheme proposals are put to the meeting or meetings held in accordance with the order that has been made; and are approved (or not) by the requisite majority in number and value of those present and voting in person or by proxy. Third, if approved at the meeting or meetings, there must be a further application to the court under section 425(2) of the Act to obtain the court’s sanction to the compromise or arrangement.
12.	It can be seen that each of those stages serves a distinct purpose. At the first stage the court directs how the meeting or meetings are to be summoned. It is concerned, at that stage, to ensure that those who are to be affected by the compromise or arrangement proposed have a proper opportunity of being present (in person or by proxy) at the meeting or meetings at which the proposals are to be considered and voted upon. The second stage ensures that the proposals are acceptable to at least a majority in number, representing three-fourths in value, of those who take the opportunity of being present (in person or by proxy) at the meeting or meetings. At the third stage the court is concerned (i) to ensure that the meeting or meetings have been summoned and held in accordance with its previous order, (ii) to ensure that the proposals have been approved by the requisite majority of those present at the meeting or meetings and (iii) to ensure that the views and interests of those who have not approved the proposals at the meeting or meetings (either because they were not present or, being present, did not vote in favour of the proposals) receive impartial consideration. As it was put in the BTR case, [2000] 1 BCLC 740, at page 747g-h:
“. . . the court is not bound by the decision of the meeting. A favourable resolution of the meeting represents a threshold which must be surmounted before the sanction of the court can be sought. But if the court is satisfied that the meeting is unrepresentative, or that those voting at the meeting have done so with a special interest to promote which differs from the interest of the ordinary independent and objective shareholder, then the vote in favour of the resolution is not to be given effect by the sanction of the court.”
The decision whether to summon more than one meeting 
13.	The decision whether to summon more than one meeting – and, if so, who should be summoned to which meeting - has to be made at the first stage. If the matter were free from authority, I would have regarded the basis upon which that decision has to be taken as self-evident. The relevant question is: between whom is the proposed compromise or arrangement to be made? There are, as it seems to me, three possible answers to that question. Which answer is correct in any particular case will depend upon the circumstances peculiar to that case. 
14.	First, there will be cases where it is plain that the compromise or arrangement proposed is between the company and all its creditors. In such a case, section 425(1) of the Companies Act 1985 provides for the court to order a single meeting of all the creditors. 
15.	Second, there will be cases where it is plain that the compromise or arrangement proposed is between the company and one distinct class of creditors; for example, unsecured trade creditors whose debts accrued before (or after) a given date.  Or it may be plain that there are two (or more) separate compromises or arrangements with two (or more) distinct classes of creditors; for example, one compromise with unsecured trade creditors whose debts accrued before a given date and a separate compromise (on different terms) with unsecured trade creditors whose debts accrued after that date. In such a case, the section provides for the court to order a meeting of each class of creditors with whom the compromise or arrangement is to be made. That is the plain meaning of the words in the section: “Where a compromise or arrangement is proposed between a company and its creditors, or any class of them, . . . , the court . . . may order a meeting of the creditors or class of members (as the case may be)”.   
16.	Cases which fall into the two categories which I have described above are likely to be recognised without difficulty.  More difficult to recognise are cases in a third category. Those are cases where what appears at first sight to be a single compromise or arrangement between the company and all its creditors (or all creditors of a particular description; say, unsecured creditors) can be seen, on a true analysis, to be two or more linked compromises or arrangements with creditors whose rights put them in several and distinct classes. The compromises or arrangements are linked in the sense that each is conditional upon the other or others taking effect. In such a case, the section provides for the court to order – and the court should be asked to order – that there be summoned separate meetings of each of the distinct classes of creditors.  
17.	If the correct decision is not made at the first stage, the court may find, at the third stage, that it is without jurisdiction. The reason is that the court’s jurisdiction under section 425(2) of the Companies Act 1985 is limited to sanctioning a compromise or arrangement between the company and its creditors or any class of creditors (as the case may be) which has been approved by the requisite majority at a meeting of the creditors or that class of creditors (as the case may be). So, if what has been put forward at the first stage as a single compromise between the company and all its members, or all of a single class of members, is seen by the court, at the third stage, to be (on a true analysis) a number of linked compromises or arrangements with creditors whose rights put them in several and distinct classes, the court will find that the condition which gives rise to its power to sanction is absent; none of the linked compromises or arrangements will have been approved by the requisite majority at a relevant meeting because there have been no meetings of the distinct classes. That is what the judge found to be the position in the present case.
18.	It might be thought that the structure of the statutory provisions required the court to consider, at the first stage when deciding whether or not order a meeting or meetings to be summoned, whether the scheme proposed was a single compromise or arrangement with all the creditors with whom it was to be made or was (on a true analysis)  two or more linked compromises or arrangements with creditors whose rights put them in several and distinct classes. That has not been the practice in the Companies Court. The practice which has been adopted (so far as I am aware) for the past 65 years or more is set out in a Practice Note issued by Mr Justice Eve which can be found at [1934] WN 142:
“In proceedings under section 153 of the Companies Act 1929 [a statutory predecessor of section 425 of the 1985 Act] for the sanction by the Court of a compromise or arrangement between a company and its creditors, or a class of them, his Lordship said that the responsibility for determining what creditors are to be summoned to any meeting, as constituting a class, is the applicant’s; and if the meetings are incorrectly convened or constituted or an objection is taken to the presence of any particular creditors as having interests competing with the others the objection must be taken on the hearing of the petition for sanction, and the applicant must take the risk of having it dismissed.”
19.	The effect of that practice, as it seems to me, is that the fact that the court has made an order under section 425(1) of the 1985 Act for a meeting or meetings to be held is not to be taken to imply that the court has addressed its mind at all to the question whether those are the meetings which the scheme proposed actually requires before sanction can be given under section 425(2) of the Act. The question whether or not those were the meetings which the scheme actually required is left to be decided at the third stage; by which time a wrong decision by the applicant at the outset will have led to a considerable waste of time and expense.
20.	It may be that that is inevitable. It may be thought impracticable to give notice to all scheme creditors of the application at the first stage; or to have a hearing, at the first stage, at which dissentient creditors might put forward their views. It is not clear to me why that should be so. But, if it is impracticable to have a hearing on notice at the first stage, then it is plain that an order made without notice, at the first stage, must be open to review, at the third stage, on the application of a dissentient who has not previously had the opportunity to be heard.  But what seems to me unacceptable – and likely to lead to justifiable dissatisfaction with what is plainly intended to be a useful and beneficial jurisdiction – is that the existing practice has led, in the present case, to the court reviewing of its own motion, at the third stage, the utility of the order which it made at the first stage. 
21.	In my view an applicant is entitled to feel aggrieved if, in the absence of opposition from any creditor, the court holds, at the third stage and on its own motion, that the order which it made at the first stage was pointless. It is, to my mind, no answer to say that that is a risk which the applicant must accept. It may be inevitable that an applicant must accept the risk that a dissentient creditor will persuade the court at the third stage that the order which it made at the first stage (without hearing that creditor) was the wrong order. But that is not to say that the applicant must be required to accept that, when exercising what is plainly a judicial discretion at the first stage, the court will not address the question whether the order which it makes serves any useful purpose; or that, if it has addressed that question at the first stage, it will change its mind, of its own motion, at the third stage. 
22.	I should make it clear that, in drawing attention to what I regard as a defect in the existing practice, I intend no criticism of the judge in the present case. I accept that she was bound to consider a point which went to her jurisdiction and which, under the existing practice, she was right to think had not been considered at any earlier stage in the proceedings. I draw attention to the position because it has led to delay and expense which could have been avoided; and because I think that the existing practice merits re-examination.

How is it to be determined whether separate class meetings are required?
23.	As I have indicated, I would have regarded it as self-evident, in the absence of authority, that the relevant question at the outset is: between whom is it proposed that a compromise or arrangement is to be made? Are the rights of those who are to be affected by the scheme proposed such that the scheme can be seen as a single arrangement; or ought the scheme to be regarded, on a true analysis, as a number of linked arrangements? The question may be easy to state; but, as the cases show, it is not always easy to answer. Nor can it be said that, hitherto, the courts have posed the question in quite those terms.
24.	The starting point, and (so far as I am aware) the only decision of this Court on the point, is Sovereign Life Assurance Company v Dodd [1892] 2 QB 537. It is, I think, necessary to have the facts of that case in mind before turning to what was said in the judgments. The issue was whether the defendant was bound by a scheme sanctioned by the court under section 2 of the Joint Stock Companies Arrangement Act 1870 (a statutory predecessor of section 425 of the Companies Act 1985). The scheme provided that policies effected with the Sovereign Life Assurance Company (which was in liquidation) should be transferred to the Sun Life Assurance Company upon terms that the policy holders should, in full satisfaction of their claims against Sovereign Life accept reduced payments from Sun Life. The scheme was to take effect on 4 August 1890; and provided both for those policy holders whose policies would (but for the winding up order) have matured between 4 August 1887 (the day before the date upon which the petition for winding up was presented) and 4 August 1890 (“matured policies”) and for those whose policies would (but for the winding up order) not have matured before 4 August 1890 (“subsisting policies”). The holders of subsisting policies were to be issued new policies by Sun Life guaranteeing “the payment on death or other time specified in the said policy” of a reduced sum. The holders of matured policies were to have the right to payment from Sun Life “within one month after proof of death and title” of the same reduced payment “as if such policy had been a subsisting policy and had matured after August 4, 1890”. There had been a single meeting of all policy holders; and no separate meetings of the holders of matured and subsisting policies. The defendant was the holder of two matured policies who had not attended the meeting.
25.	Lord Esher, Master of the Rolls, took the view that the defendant was not a person who had been summoned to any meeting of policy holders. He said this, at page 580:
“In the present case, the persons who had notice of the meeting were policy holders – that is to say, policy holders whose policies had to be dealt with. But the defendant was not a policy holder at all; his policies had been fulfilled, and he was a creditor for the amount of the policies, and could have sued the company for the amount due; he had a vested cause of action, the policy holders had none; and it is obvious that he could not consider the matter with the same mind and from the same point of view as the policy holders who were summoned to the meeting. I do not say that, when there is nothing left to be done but the payment of money, a person in the defendant’s position may not properly be said to be in the same class as others who are creditors of the society; but, at any rate, he cannot fall within the same class as those whose polices have not matured. The defendant, therefore, belongs to a different class from those persons who were summoned as policy-holders, for his policies had not to be dealt with in any way; they had already matured; he has, therefore, not been summoned to the meeting, and what was done there does not bind him.” [emphasis added]
26.	Lord Justice Bowen felt “grave doubt” whether the term “policy-holder” included those persons (in the position of the defendant) “who have been policy-holders, but whose policies have matured not by death but by the happening of the stipulated event.” But he did not think it necessary to decide that question; the answer to which had formed the basis of Lord Esher’s reasoning. He asked himself whether, on a true construction of section 2 of the Act of 1870, the deed of arrangement bound dissentient creditors. In a passage (at pages 582-583) which is often cited, he held that it did not:
"“What is the proper construction of that statute? It makes the majority of the creditors or of a class of creditors bind the minority; it exercises a most formidable compulsion upon dissentient, or would-be dissentient creditors; and it therefore requires to be construed with care, so as not to place in the hands of some of the creditors the means and opportunity of forcing dissentients to that which it is unreasonable to require them to do, or of making a mere jest of the interests of the minority. If we are to construe the section as it is suggested on behalf of the plaintiffs it ought to be construed, we should be holding that a class of policy-holders whose interests are uncertain may by a mere majority in value override the interests of those whose rights have nothing to do with futurity, and whose rights have already been ascertained. It is obvious that those two sets of interests are inconsistent, and that those whose policies are still current are deeply interested in sacrificing the interests of those whose policies have matured. They are bound by no community of interest, and their claims are not capable of being ascertained by any common system of valuation. Are we, then, justified in so construing the Act of Parliament as to include those persons in one class? The word “class” is vague, and to find out what is meant by it we must look at the scope of the section, which is a section enabling the Court to order a meeting of a class of creditors to be called. It seems plain that we must give such meaning to the term “class” as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. If that be so, in considering the deed of arrangement made with the company which took over the business of the Sovereign, we must so construe it as not to include in one class those whose policies had already ripened into debts, and those whose policies might not ripen into debts for years to come; for the position of a person like the defendant, who had an ascertained sum of 2,000l. due to him from the company was entirely different from that of those policy-holders whose future was entirely uncertain. It was, therefore, not right to summon as members of one and the same class those who had an absolute bar against any claim of the company and those who did not.” [emphasis added]
The answer, therefore, which Lord Justice Bowen may be taken to give to the question . . .  “are the rights of those who are to be affected by the scheme proposed such that the scheme can be seen as a single arrangement; or ought it to be regarded, on a true analysis, as a number of linked arrangements?” is clear enough. The scheme proposed may be regarded as a single arrangement with those creditors whom it is intended to bind if, but only if, the rights of those creditors are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. If the rights of those creditors whom the scheme is intended to bind are such as to make it impossible for them to consult together with a view to their common interest, then the scheme must be regarded as a number of linked arrangements. In the latter case it will be necessary to have a separate meeting of each class of creditors; a class being identified by the test that the rights of those creditors within it are not so dissimilar that as to make it impossible for them to consult together with a view to their common interest.
27.	Lord Justice Kay agreed with the judgments of both the other members of the court. He observed, at page 584, that his judgment depended “on the facts of the case which are very peculiar and may possibly never recur”. It is, I think, of some importance to understand why he took that view. The defendant’s policies were endowment policies: that is to say, they were policies under which the sum assured became payable on a fixed date or on death before that date. The date was 7 May 1888 – that is to say, a date after the presentation of the petition to wind up Sovereign Life (5 August 1887) but before date on which the winding up order was made (30 July 1889) and before the date on which the deed of arrangement with Sun Life was entered into (11 April 1890). The policies had been mortgaged to Sovereign Life to secure moneys lent to the defendant; and, perhaps unsurprisingly, he sought to set off the amount payable on maturity (£2000) against the moneys lent to him. In the light of Lord Hoffmann’s analysis one hundred years later, in Stein v Blake [1996] AC 243, 250H-255G, it might now seem beyond argument that, whether or not there was a contractual set-off when the policies matured in 1888, there was a mandatory set off under statute (then section 38 of the Bankruptcy Act 1883) upon the making of the winding-up order; so that the claim and cross-claim were extinguished and only the net balance was payable. Be that as it may, the action, brought by Sovereign Life through its liquidator, was to recover the moneys lent without giving credit for the amount payable under the matured policies. It was said that the effect of the deed of arrangement was to release Sovereign Life from the defendant’s claim to the policy moneys; so that he was, thereafter, no longer entitled to set off his claim to the policy moneys against the company’s claim for the moneys lent. The provision relied upon by Sovereign Life as a release was clause 11 of the deed of arrangement:
"If this agreement is sanctioned by the Court, all policy-holders of the Sovereign Company who were such on 4 August 1887, shall accept the provision hereof in full satisfaction of all claims on the Sovereign Company and the assets thereof.”
28.	After referring to that provision Lord Justice Kay said this, at page 586:
"Without deciding whether this clause is binding on any particular policy-holder, I am not satisfied that it amounts to a release of the defendant’s claims against the company; can it be contended that clause 11 operates to deprive a man of an existing right of set-off? I think not; and as the defendant had such an existing right, I do not think that this clause applies.”
That would have been sufficient to dispose of the appeal. But Lord Justice Kay went on, in the next paragraph:
“I also agree that it is exceedingly doubtful whether this deed relates at all to a policy-holder in the position of the defendant. There was never a separate meeting of the class of policy-holders to which he belonged, and he ought not to have been mixed up with those whose policies had not matured. It is not contested that his policies had matured; the sum secured by them was due, and he had a claim to set off that sum in order to liquidate the sum due from him to the company. I think, therefore, that this deed of arrangement cannot be treated as a release by him of the debt due from the company.”
29.	I have thought it right to examine the judgments in Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 at some length, not only because the decision in that appeal is the only authority binding upon this Court, but because the decision has been relied upon from time to time in later cases for the proposition that creditors whose rights have vested must, necessarily, be regarded as a different class from creditors whose rights are contingent. It has long been cited, in successive editions of Buckley on the Companies Acts, as authority for the proposition that “in the case of a life assurance company holders of matured policies are a different class from holders of current policies –see in the 13th Edition (1957) at page 407, in the 14th Edition (1981) at page 471 and in the current edition (2000) at paragraph 425.25. In my view, the Sovereign Life case is authority for neither of those propositions. On its facts the case is authority for the proposition that, in relation to the terms of the scheme in that case, a person with an existing right to set off moneys due to him under a policy which had matured against moneys owed by him to the company was not in the same class of creditors as those who had no such right. It may well be said, also, that this Court would have found, had it been necessary for it to do so, that, the terms of the scheme in that case did lead to the conclusion that those whose policies had matured constituted a different class of creditors from those whose policies had not matured; but that is because the terms of the scheme substituted for rights under policies which had matured during the life of the policy holder the rights which those policy holders would have had on death if the policies had not matured. 
30.	But it will not necessarily follow, in every case, that the treatment under the scheme of vested and contingent rights, or the rights under matured and current policies, will be so dissimilar that the holders of those rights must be regarded as persons in different classes in the context of the question “with whom is the compromise or arrangement made”.  In each case the answer to that question will depend upon analysis (i) of the rights which are to be released or varied under the scheme and (ii) of the new rights (if any) which the scheme gives, by way of compromise or arrangement, to those whose rights are to be released or varied. It is in the light of that analysis that the test formulated by Lord Justice Bowen in order to determine which creditors fall into a separate class – that is to say, that a class “must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest” – has to be applied.
31.	The test formulated by Lord Justice Bowen in Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 has been consistently adopted in later cases, both in these courts and overseas. Cases in which the test has been adopted in these courts include the three recent authorities to which I have already referred - In re Osiris Insurance Ltd [1999] 1 BCLC 182, at page 188a-b, In re BTR plc [1999] 2 BCLC 675, and In re Anglo American Insurance Company Ltd  (unreported, 12 April 2000; transcript at page 13E) – and In re Hellenic & General Trust Ltd [1976] 1 WLR 123, at page 126C.  The test has been adopted in courts in Australia: see In re Chevron (Sydney) Ltd [1963] VR 249; In re Jax Marine Pty. Ltd [1967] 1 NSWR 145 (in which Mr Justice Street, sitting in the Supreme Court of New South Wales, described it, at page 148, as “a standard test”); In re Landmark Corporation Ltd [1968] 1 NSWR 759; Nordic Bank plc v International Harvester Australia Ltd and anor [1982] 2 VR 298, at page 303; and In re Linter Textiles Corporation Ltd and others [1991] 2 VR 562, at page 565. It was applied by Mr Justice Nazareth in Hong Kong in In re Industrial Equity (Pacific) Ltd [1991] 2 HKLR 614. That it is the test to be applied in determining which creditors fall into the same class must, now, I think be regarded as settled law.
32.	Nevertheless, it is important to keep in mind that the underlying question, to which Lord Justice Bowen’s test must be directed, is that posed by the statutory language: with whom is the compromise or arrangement to be made? Or, as I have put it earlier in this judgment: “are the rights of those who are to be affected by the scheme proposed such that the scheme can be seen as a single arrangement; or ought it to be regarded, on a true analysis, as a number of linked arrangements?” If I may say so, there is much force in the observations of Mr Justice Lush, when giving the judgment of the full court in Nordic Bank plc v International Harvester Australia Ltd and anor [1982] 2 VR 298. He said this, at page 301, lines 36-46:
“The general plan of section 315 [the equivalent statutory provision in the Companies (Victoria) Code] is that when a scheme is proposed it is first put to meetings to test whether those affected by it substantially support it. If they do, it is still open to any one or more persons affected to oppose its final approval. A separated class of creditors can only be bound by the scheme if the meeting of that class approves it by the necessary majority. It is appropriate that creditors who share an interest vis-à-vis the company which places them in a position distinct from that of other creditors and so dissimilar as to make it impossible for them to consult together with a view to their common interest should be allowed to make a separate decision. To break creditors up into classes, however, will give each class an opportunity to veto the scheme, a process which undermines the basic approach of decision by a large majority, and one which should only be permitted if there are dissimilar interests related to the company and its scheme to be protected. The fact that two views may be expressed at a meeting because one group may for extraneous reasons prefer one course, while another group prefers another is not a reason for calling two separate meetings.”
33.	When applying Lord Justice Bowen’s test to the question “are the rights of those who are to be affected by the scheme proposed such that the scheme can be seen as a single arrangement; or ought it to be regarded, on a true analysis, as a number of linked arrangements?” it is necessary to ensure not only that those whose rights really are so dissimilar that they cannot consult together with a view to a common interest should be treated as parties to distinct arrangements – so that they should have their own separate meetings – but also that those whose rights are sufficiently similar to the rights of others that they can properly consult together should be required to do; lest by ordering separate meetings the court gives a veto to a minority group. The safeguard against majority oppression, as I sought to point out in the BTR case, [2000] 1 BCLC 740, at page 747g-h, is that the court is not bound by the decision of the meeting. It is important Lord Justice Bowen’s test should not be applied in such a way that it becomes an instrument of oppression by a minority. 
Were separate class meetings required in the present case?
34.	As I have indicated the answer to that question depends upon analysis (i) of the rights which are to be released or varied under the scheme and (ii) of the new rights (if any) which the scheme gives, by way of compromise or arrangement, to those whose rights are to be released or varied.
35.	So far as is now material, in the context of this appeal, the relevant provisions of the scheme may be summarised as follows. (1) The scheme is made between the company and “the scheme creditors”. For that purpose a scheme creditor is a person who is or claims to be a creditor in respect of a “debt”; but excluding any person in respect of whom the debt owed has been or will be extinguished by set-off or by the realisation of security. For practical purposes, therefore, the scheme is between the company and its unsecured creditors. (2) A “debt” is any debt or liability to which the company is subject at the “ascertainment date” (meaning 31 December 1997) or to which it becomes liable by reason of any obligation incurred before that date. For that purpose it is immaterial whether the debt or liability is certain or contingent, of an amount which is fixed or liquidated, or capable of being ascertained by fixed rules or as a matter of opinion. (3) All debts subject to the scheme are to be valued as at the ascertainment date (31 December 1997). For that purpose, scheme creditors are to submit to the joint scheme administrators a claim on or before the “final claims submission date” (meaning 91 days after the date on which the order of the court sanctioning the scheme has been delivered to the registrar of companies for registration). (4) The valuation process leads to an “agreed debt”. (5) In the case of a claim arising otherwise than under a contract of insurance or re-insurance, that is to be done by agreement between the claimant and the joint scheme administrators or (failing agreement) by the “scheme adjudicator” in accordance with the “dispute resolution procedure”. The first scheme adjudicator is named in the scheme. The dispute resolution procedure provides for the scheme adjudicator to endeavour to achieve agreement between the claimant and the joint scheme administrators, but (failing agreement) to determine disputes as expert and not as arbitrator. (6) Where the claim arises from an insurance or re-insurance contract the process is more complex. That is because claims under insurance or re-insurance contracts may fall into one of three classes: (i) “unsettled paid claims” – that is to say, losses for which the company would be liable to indemnify the claimant under an insurance or re-insurance contract, the amount of which had been paid by the claimant to its insured or re-insured on or before the ascertainment date (31 December 1997); (ii) “outstanding losses” – that is to say, losses for which the company would be liable to indemnify the claimant under a contract of insurance or re-insurance and which had been reported to the claimant by its insured or re-insured on or before the ascertainment date, but which had not been paid by the claimant to its insured or re-insured; and (iii) “IBNR” (“incurred but not reported”) – that is to say, losses for which the company would be liable to indemnify the claimant under a contract of insurance or re-insurance and which at the ascertainment date had been incurred by the claimant’s insured or re-insured, but which had not, at that date, been reported to the claimant. The valuation process provided for the joint scheme administrators to endeavour to agree with the claimant a figure for IBNR reserves; and, failing agreement, for that figure to be determined by the scheme adjudicator in accordance with the dispute resolution procedure. Further, it was provided that, in agreeing the value to be attributed to outstanding losses and IBNR, the joint scheme administrators could, in their absolute discretion, take account of the continued development of losses (and other market related matters) which emerged after the ascertainment date. Subject to that, unsettled paid claims, outstanding losses and IBNR were (failing agreement) to be determined by the scheme adjudicator under the dispute resolution procedure. It is clear that an agreed debt might well include unsettled paid claims, outstanding losses and IBNR (or claims under any two of those heads) and might also include claims which did not arise from an insurance or re-insurance contract. (7) Following the agreement or determination of the agreed debt in relation to all the claims of a claimant under the scheme, the joint scheme administrators are to determine the amount which, after set-off and the deduction of the amount of any applicable security, constitutes the “admitted claim” in respect of the relevant scheme creditor. Where the claims of a scheme creditor arise out of insurance or re-insurance contracts, the joint scheme administrators are to apportion the aggregate of the admitted claim between “admitted claim for unsettled paid claims”, “admitted claim for outstanding losses” and “admitted claim for IBNR”. (8) After paying preferential debts and scheme expenses, and after all admitted claims have been determined, the joint scheme administrators are to determine the “available distributable amount”. The available distributable amount is to be the amount which, in the opinion of the joint scheme administrators, is prudently available for distribution by way of dividend to scheme creditors in respect of admitted claims (other than preferential debts). (9) The available distributable amount is to be paid to scheme creditors by way of dividend  on the amounts of their admitted claims; but subject, in the case of admitted claims arising out of insurance and re-insurance contracts, to weighting of admitted claims in accordance with the formula set out in clause 19.3.1 of the scheme. 
36.	Clauses 19.3.1 and 19.3.2 are in these terms:
	“19.3.1		in  the   case   of   Admitted   Claims  arising  out   of 					insurance and reinsurance contracts, dividends will  be 
			calculated by reference to:
		19.3.1.1      100%  of the proportion  of a Scheme Creditor’s            				       Admitted  Claim attributable to  Unsettled Paid                				       Claims
		19.3.1.2      75%  of the  proportion of  a Scheme Creditor’s            				       Admitted  Claim   attributable  to  Outstanding                 				       Losses
		19.3.1.3      50% of the proportion  of  a Scheme  Creditor’s            				       Admitted Claim attributable to IBNR
	19.3.2             in  all   other  cases,  shall be calculated by reference  to                 			                100% of a Scheme Creditor’s Admitted Claim
	For the avoidance of doubt, weighting of Admitted Claims pursuant to                	Clause 19.3.1 is for dividend purposes only.”
1.	
1.	The rationale which underlies the weighting provisions in clause 19.3.1 is explained in the explanatory statement, required under section 426(2) of the 1985 Act, which was sent to creditors with the notice convening the meeting. Under the heading “Determination of the Available Distributable Amount” there is the following paragraph: 
" Dividends payable to Scheme Creditors whose claims arise from insurance or reinsurance contracts will be calculated by reference to 100% of the proportion of their Admitted Claim which relates to Unsettled Paid Claims, 75% of the proportion of their Admitted Claim which relates to Outstanding Losses, and 50% of their Admitted Claim which relates to IBNR. This basis recognises the fact that, in this case, where no detailed actuarial methodology has been created for calculating the value to be attributed to Outstanding Losses and IBNR, the value placed on these under the Scheme is likely to be less accurate than would be otherwise be the case. In calculating the dividend to be paid to Scheme Creditors whose claims arise from insurance and reinsurance contracts, therefore, more emphasis will be placed on the proportion of such a Scheme Creditor’s Admitted Claim which represents actual quantified losses which the Scheme Creditor has paid; slightly less emphasis will be placed on the proportion which represents losses which have been reported to the Scheme Creditor, but which have not been, and may never be paid by him; and still less emphasis will be placed on the proportion which represents the estimate of losses which have not been, and may never be, reported to the Scheme Creditor. This system also recognises the time value of money and represents a degree of discounting for future losses.”
2.	It was the dividend weighting provisions which led Mrs Justice Arden to take the view that the scheme creditors fell into different classes; and to hold that, in the absence of separate class meetings to approve the scheme, she had no jurisdiction to sanction it. At page 21, lines 17 to 23, in the transcript of her judgment, she said this: 
“. . . Counsel’s main submission on classes . . . is that the rights of the unsecured creditors are all identical; they are all unsecured creditors and therefore they can constitute a single class. In my judgment, the difficulty here is that, unlike the schemes in BTR and Osiris, creditors are to be treated differently under this scheme for distribution purposes.”
The judge then described the effect of the weighting provisions, and referred to the passage in the explanatory statement which I have set out. She continued, at page 22, lines 3 to 21:
"In my judgment, for the purposes of this scheme, the various creditors must be treated as having different rights. Those with Outstanding Losses and IBNR have, or are treated as having, no accrued debt due, and they are to be scaled down, for distribution purposes, in accordance with the proportions that I have just mentioned.
In addition, the creditors with Outstanding Losses and IBNR will have their claims assessed by a valuation process which does not necessarily accord with the valuation process which would have applied in the winding up of the company.
I take first the effect of the provisions about weighting for distribution purposes. In my judgment there are differences in the rights of the creditors in this case which are reflected in these provisions. Moreover, because of the weighting provisions, creditors have competing interests in ensuring that their claim receives as high a weighting as possible, and those of other creditors as low a weighting as possible.”

She referred to Lord Justice Bowen’s test in the Sovereign Life case and went on, at page 23, lines 14 to 26, to say this:
“Applying those words to this case, the creditors in this case cannot in my judgment be treated as a single class. As I have said, creditors who do not have Unsettled Paid Losses are in a different position. Their legal position vis-à-vis the company is different. They have or are to be treated as having no accrued claim against the company, and one of the features of the scheme which affects them, as opposed to the holders of Unsettled Paid Losses, is that they rank for distribution purposes only in respect of a proportion of their claim. For the reasons explained above, on the basis of the test of different rights set out by Bowen LJ in Sovereign Life v Dodd, they have in my judgment to be treated as separate classes.”
3.	It is, perhaps, unclear whether the judge took the view that there were two classes of creditors – that is to say, (i) non-insurance creditors and insurance creditors whose claims were in respect of unsettled paid claims and (ii) insurance creditors whose claims were not in respect of unsettled paid claims; or that there were three classes of creditors – that is to say, (i) non-insurance creditors and insurance creditors whose claims were in respect of unsettled paid claims, (ii) insurance creditors with claims in respect of outstanding losses and (iii) insurance creditors with claims in respect of IBNR losses. Her observation that “because of the weighting provisions, creditors have competing interests in ensuring that their claim receives as high a weighting as possible, and those of other creditors as low a weighting as possible” suggests that she may have favoured the latter view. It was not, of course a point which she needed to decide. It was enough, for the purposes of deciding that she had no jurisdiction to sanction the scheme, that she was satisfied that the creditors did not fall into a single class. But the point illustrates the need to analyse, first, whether the rights which are to be released or varied under the scheme are so distinct that the scheme must be treated as a compromise or arrangement with more than one class of creditor; and, second, whether the new rights which the scheme gives, by way of compromise or arrangement, to those whose rights are to be released or varied lead to that conclusion. 
4.	The judge, I think, reached the conclusion that the rights which were to be varied fell into two classes – (i) rights to an accrued debt due and (ii) rights to payment which had not accrued due – and reached the further conclusion that the new rights given under the scheme fell into (at the least) three classes -–(i) rights to a dividend on 100% of the admitted claim, (ii) rights to a dividend on 75% of the admitted claim and (iii) rights to a dividend on 50% of the admitted claim. If that were the correct analysis, then – as it seems to me – there could be no basis for holding that those whose rights were to a dividend on 100 % of the admitted claim could not consult together with those whose rights were to a dividend on a lesser percentage of the admitted claim; but that those whose rights were to a dividend on 75% of the admitted claim could consult together with those whose rights were to a dividend on 50% of the admitted claim. 
5.	In my view the judge was wrong both on her conclusion that the rights to be varied fell into two classes; and on her further conclusion that the new rights given under the scheme fell into more than one class.  
6.	It is, to my mind, essential to have regard to the fact that the scheme is proposed as an alternative to a winding-up. There is no doubt that the company is insolvent. It has presented a petition for winding up and the court has appointed provisional liquidators. The right approach in those circumstances, as it seems to me, is to consider the position on the basis that the relevant rights are those which creditors would have in a winding up. 
7.	Section 143(1) of the Insolvency Act 1986 requires the liquidator of a company which is being wound up by the court to get in and realise the assets of the company and to ensure that the assets are distributed to the company’s creditors and, if there is any surplus, to the persons entitled to it. A person claiming to be a creditor of the company and wishing to recover his debt in whole or in part must submit his claim to the liquidator – see rule 4.73 of the Insolvency Rules 1986. In that context “debt” means (i) any debt or liability to which the company is subject at the date on which it goes into liquidation and (ii) any debt or liability to which the company may become subject after that date by reason of any obligation incurred before that date – see rule 13.12(1) of the Insolvency Rules 1986. The liquidator must consider the claim and “estimate the value of any debt which, by reason of its being subject to any contingency or for any other reason, does not bear a certain value” – see rule 4.86 of the 1986 Rules. All debts can be the subject of a claim; and, if claimed, must be valued. The position is put beyond doubt by rule 13.12(3):
"For the purposes of references in any provision of the [Insolvency] Act or the Rules about winding up to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent, or whether the amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in any such provision to owing a debt are to be read accordingly.”
8.	It follows that (but for any special rules applicable to the valuation of claims under insurance policies) the rights of non-insurance creditors, insurance creditors with unsettled paid claims, insurance creditors with outstanding losses and insurance creditors with IBNR losses are the same in this respect: that in the context of a winding up of the company they will all be entitled to submit claims in the winding up and to have those claims admitted or rejected. The difference between the position of non-insurance creditors and insurance creditors with unsettled paid claims (on the one hand) and insurance creditors with outstanding losses or IBNR losses (on the other hand) is that, in the case of the latter, their claims are in respect of debts which by reason their “being subject to any contingency or for any other reason” do not bear a certain value and so must be the subject of an estimate.  But that does not lead to the conclusion that the rights of, say, non-insurance creditors and insurance creditors with IBNR losses are different. They have the same rights in a winding up. It is simply that, in order to give effect to the rights of the creditors with IBNR losses, it is necessary to estimate their value.
9.	Thus far I have made no reference to the special rules for valuation which apply to claims under insurance policies. Those rules supplement the position under the general law; they do not abrogate that position. The historical background was explained by Mr Justice Hoffmann in Transit Casualty Co and another v The Policy Holders Protection Board and others [1992] 2 Lloyd’s Rep 358, at page 359:
“Until 1870 insurance business in the U.K. was entirely unregulated and the claims of policyholders in a bankruptcy or liquidation of the insurer fell to be valued in accordance with the general law. This allowed proof in respect of all contingent debts and provided for a “just estimate” to be made of the value of such debts or claims as did not bear a certain value. The contingent debt was valued at the date of the winding up order, but subsequent events were taken into account for the purpose of retrospective adjustment of its value. These principles laid down in Victorian statutes and case law are today reflected in r.4.86 of the Insolvency Rules 1986. . . .  
Special rules for the valuation of claims under insurance policies were first introduced by the Life Assurance Companies Act, 1872, one of a short series of statutes passed in the wake of the spectacular collapse on Sept. 17, 1869 of the Albert Life Assurance Co. . . .”
After referring to the fact that the liquidation of the Albert was so complicated that after two years no end appeared to be in sight and the costs were threatening to absorb a substantial part of the remaining fund, and to the difference of view between Vice-Chancellor James and Lord Romilly, Master of the Rolls, (on the one hand) and Lord Cairns, as statutory arbitrator appointed under The Albert Life Assurance Company Arbitration Act 1971, (on the other hand)  as to the basis on which a life policy should be valued, which led to the enactment of the 1872 Act, Mr Justice Hoffmann observed:
“The relevance of this history is to show that from the very beginning of its intervention in questions of valuation Parliament has been concerned to strike a balance between precise justice to each claimant and the expense and delay which this might involve.”
That is, of course, the objective which the present scheme seeks to achieve.
10.	Rules for valuing non-life policies were introduced by the Assurance Companies Act 1909. Section 17 of that Act drew a distinction between “the value of a policy” and “the value of a liability under . . . a policy”. As Mr Justice Hoffmann pointed out in the Transit Casualty case, at page 360:
"This language is intended to distinguish between the value of the cover afforded by the unexpired part of the policy at the date of the winding up and the value of the indemnity in respect of events which had occurred before the winding up.”
In the present case we are concerned with the valuation of liabilities under policies; the policies themselves had expired long before the presentation of the winding up petition. That was the position, also, in the Transit Casualty case, at least in respect of the bulk of the scheme companies’ liabilities – see the description of the scheme in the third paragraph of the judgment, at page 358, and a passage at page 361:
"Most of the policies issued by the scheme companies have expired. They ceased writing new business on various dates between Jan 1, 1988 and Jan 1, 1989 and only about 20 policies were still current when the winding up petitions were presented. The great bulk of the companies’ liabilities are actual or contingent claims under expired policies. In the case of “occurrence” policies, they are cases in which the relevant occurrence took place during the currency of the policy but the liability, if any has not yet been ascertained. The potential claim could be at any stage from being unknown to anyone (as in the case of a workman in whom symptoms of asbestosis have not yet shown themselves) to being just short of final settlement by judgment or agreement."
11.	In the Transit Casualty case Mr Justice Hoffmann asked himself what the position would have been under the Insurance Companies Act 1958 – that is to say, before the introduction of the Insurance Companies (Winding Up) Rules 1985. He answered that question in the following passage, at pages 361 to 362:
“The first task would be to ascertain the “value of the policies”, . . . The next stage would be to value the liabilities under the policies, which means claims for indemnity rising out relevant events which occurred before the winding up, whether in respect of current or expired policies. The relevant event is that designated by the policy itself as having to occur before its expiry date: . . . The schedule [to the 1958 Act] contains no method for the valuation of these claims and they have therefore to be valued on the basis of a “just estimate” under the general law, . . .”
The position, therefore, until the introduction of the 1985 Rules was that there were no special rules for the valuation of the claims of those who claimed rights of indemnity under “occurrence” policies in respect of events which had already occurred. Their claims fell to be valued on the basis of a “just estimate”, in the same way as any other claim which had no certain value. 
12.	That has remained the position in relation to claims under “occurrence” policies where the liability has not fallen due for payment – see paragraph 2(2)(b) in schedule 1 to the 1985 Rules, and Mr Justice Hoffmann’s analysis in the Transit Casualty case, at pages 362 to 364, which I respectfully adopt. He concluded that “contingent liabilities arising out of pre-liquidation events, whether in respect of current or expired policies, fall within par. 2(b)”. That paragraph (paragraph 2(2)(b) in schedule 1 to the 1985 Rules) requires the value to be the same just estimate of value as under the general law – that is to say, as would be required under rule 4.86 of the Insolvency Rules 1986.      
13.	The further evidence adduced on appeal – and so not before Mrs Justice Arden – makes it clear (i) that company carried on “general business” (within rule 6 of, and schedule 1 to, the 1985 rules) and did not carry on “long term business”; (ii) that the claims of insurance creditors covered by the scheme are, necessarily, claims under “occurrence” or long tail policies – in that the company ceased writing business as long ago as 1976; (iii) that there are no unexpired policies; (iv) that the claims under any policy could be for all or any combination of unsettled paid claims, outstanding losses or IBNR losses (although, in fact, 26 insurance creditors have made claims only in respect of unsettled paid claims, for reasons which the evidence seeks to explain); and (v) that the majority of outstanding claims arise from industrial diseases and environmental liability.
14.	It is now clear (in so far as it was not clear when the matter was before the judge) that the provisions for weighting in relation to dividends do not reflect any difference in the rights of scheme creditors. On a true understanding of the position, those provisions reflect the need to make a just estimate of those claims – that is to say, claims in respect of outstanding losses and IBNR claims which have elements of contingency and futurity – which are not of certain amount. It would have been possible to achieve the same result by introducing the differential (or discounting) at the valuation stage; so that the value at which the debt was agreed would reflect, in the case of claims in respect of outstanding losses and IBNR losses, those elements of contingency and futurity. It would then be seen, more clearly, that the scheme provided on a crude or “rough and ready” basis – or, as its proponents would put it, on a “simplified and inexpensive” basis – for the admission of claims only after a “just estimate” had been made. 
15.	Seen in that light, it becomes clear not only that the provisions of the scheme do not reflect any difference in the rights which are to be released or varied, but also that the new rights given in place of the pre-existing  rights do not fall into distinct classes. Applying Lord Justice Bowen’s test from the Sovereign Life case, neither the rights released or varied, nor the new rights given under the scheme, are so dissimilar as to make it impossible for the persons entitled to those rights to consult together with a view to their common interest. The common interest, in the present case, is in achieving a relatively simple, inexpensive and expeditious winding up of the company’s affairs outside a formal liquidation. It is a striking feature of this case that the creditors have, in fact, found it possible to consult together with a view to that common interest: there have been no dissentient voices.
16.	For those reasons, I would allow this appeal. Although, for my part, I would have thought it more appropriate for the scheme to provide for the differential weighting of claims at the stage of valuation and admission – rather than in the course of distribution – I do not think it necessary to insist on that change. It has not been suggested that the form of the scheme makes any practical difference to the substance in this respect; and I am conscious that the jurisdiction conferred on the court is limited to sanctioning the scheme that has been approved by the creditors. The court should be cautious before rewriting a scheme to accord with its own notions of proper draftsmanship. If the change is merely cosmetic, it is unnecessary; if it is more than cosmetic, then the scheme as sanctioned is not the scheme that has been approved by the meeting of creditors.
17.	We are invited to make an order, in the terms of a draft minute, sanctioning the scheme in this Court; thereby avoiding the need for the matter to be considered further by a judge of the Companies Court. In the circumstances that Mrs Justice Arden was satisfied (but for the point on jurisdiction) that this was a scheme which she could sanction, that seems to me to be the appropriate and convenient course. I would propose that we adopt it. 

Lord Justice Pill:
18.	I am conscious of the danger present when the party or parties before the Court claim that the Court has jurisdiction to take a certain course of action and where there are obvious practical advantages in doing so. The Court may be tempted to take too relaxed a view of a possible limitation upon its jurisdiction. Arden J, as she then was, certainly did not succumb to that temptation. On the limited information available to her, Arden J concluded that, for the purposes of section 425(1) of the Companies Act 1985, the scheme creditors in this case fell into different classes. Since there had been no separate class meetings to approve the scheme, the Court had no jurisdiction to sanction it. Had Arden J been able to conclude that the Court had jurisdiction, it would have followed from her consideration of other issues that there was no obstacle to sanctioning the scheme in the Court’s discretion.
19.	The meaning of the word “class” in section 425(1) was authoritatively stated by Bowen LJ in Sovereign Life Assurance Company v Dodd [1892] 2 QB 537 at 583:
"The word ‘class’ is vague, and to find out what is meant by it we must look at the scope of the section, which is a section enabling the Court to order a meeting of a class of creditors to be called. It seems plain that we must give such meaning to the term ‘class’ as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for the to consult together with a view to their common interest."
20.	Chadwick LJ has set out the relevant provisions of the scheme in paragraphs 35 and 36 of his judgment. The discounting of admitted claims attributable to outstanding losses and, to a greater extent, claims incurred but not reported (“IBNR”) was expressed in the scheme. Whatever method is adopted, the valuation of claims attributable to IBNR is speculative. We are told that the majority of outstanding claims arise from industrial diseases and environmental liability. No new business has been written or existing business renewed since October 1976. A prediction needs to be made of possible claims, for example, based on insidious diseases the signs of which may emerge only a quarter of a century or more after that date. The difficulty is acknowledged in Clause 19.3.1 of the explanatory statement. What Arden J could not accept is that, applying Bowen LJ’s test, and given the existence of the discounting or weighting provisions, the creditors could be treated as a single class.
21.	The difficulty faced by a Court considering an application under section 425(1) has been explained by Chadwick LJ. When the decision is taken whether to order one meeting or more than one meeting it may be difficult on the evidence then available to make a decision based on the approved test. An incorrect decision at that stage may, on a subsequent application of the test, leave the Court without jurisdiction.
22.	Mr Moss QC, for the provisional liquidators, submits that there is no great difficulty in this case. The rights of creditors are not so dissimilar as to make it impossible for them to consult together with a view to their common interest and that has been demonstrated by events. A broad view should be taken of what constitutes a class of creditors.
23.	There are undoubtedly good practical reasons for taking a broad view in circumstances such as the present:
a)	The scheme involved insurance company creditors, described by Mr Moss as a sophisticated group of creditors. They are well able to assess the advantages and risks involved.
b)	Those creditors who have shown an interest in the scheme are all of the view that it is possible for them to consult together and to do so with a view to the common interest they believe they have.
c)	The difficulty of defining separate classes where different creditors may have different combinations of claims or types of claim.
d)	A broad view of what constitutes a class will enable costs to be limited, a relevant factor in a case such as the present where the sum available to creditors is limited (and there is a perceived common interest in early resolution). Mr Moss accepts that the cost factor cannot determine the jurisdiction but submits that the Court should bear it in mind when deciding to take a broad view of its jurisdiction.
e)	Having assumed jurisdiction, the Court retains a discretion whether to approve a scheme and that is a safeguard to all creditors. 
24.	This is not a case in which, in the event, there are creditors whose potential claims upon the fund are heavily weighted for example, towards IBNR and in whose interest it may be to seek a deferment of any proposed scheme. The overwhelming majority in value of creditors, Mr Moss tells the Court, have claims in all three categories spelt out in Clause 19.3.1. Mr Moss submits that the Court would have jurisdiction even if that were not the case. Mr Philip Jones, as amicus, submits that different considerations might apply if that factor had been absent. Mr Jones’ caution is in my view justified. In a case where some creditors have only unsettled paid claims and others only potential claims which are incurred but not reported, different considerations might apply, especially if the state of scientific knowledge were to be such that the IBNR claims are likely to be numerous, valuable and long deferred.
25.	I hope it is not unfair to Mr Moss to say that he did not encourage detailed analysis by the Court of the facts of the particular case, submitting as he does, virtually as a matter of principle, that the rights of the creditors are sufficiently similar to constitute them a class within the meaning of section 425(1). In my view, scrutiny of the facts is essential to the decision on jurisdiction.
26.	Having said that, I agree that given the statutory procedure, the protection given to creditors by the discretion available to the Court and the practical considerations already mentioned, a broad view should be taken of the meaning of “class” in section 425(1), as that word is defined by Bowen LJ. Moreover, upon the basis of the fuller evidence now available to this Court and the fuller analysis of the evidence as a whole which has been possible at this hearing, I agree that the Court has jurisdiction and that the appeal should be allowed.

Mr Justice Wright:
27.	I  agree with both  judgments delivered, and have nothing that I wish to add.

ORDER: Appeal allowed; order in terms of minutes filed.
(Order does not form part of approved Judgment)