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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Scottish Windows Ltd, Re [2025] EWHC 1482 (Ch) (14 May 2025)
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Cite as: [2025] EWHC 1482 (Ch)

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Neutral Citation Number: [2025] EWHC 1482 (Ch)
Cr-2024-004902

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMPANIES COURT (ChD)

14 May 2025

B e f o r e :

MR JUSTICE RICHARD SMITH
____________________

IN THE MATTER OF
SCOTTISH WIDOWS LIMITED
-and-
IN THE MATTER OF
ROTHESAY LIFE PLC
-and-
IN THE MATTER OF THE
FINANCIAL SERVICES AND MARKETS ACT 2000

____________________

Martin Moore KC (instructed by Herbert Smith Freehills LLP for Scottish Widows Limited and CMS Cameron McKenna Nabarro Olswang LLP for Rothesay Life Plc)

Hearing date: 14th May 2025

____________________

____________________

Crown Copyright ©

    Mr Justice Richard Smith:

    INTRODUCTION

  1. Today, I heard a joint application by Scottish Widows Limited (SWL) and Rothesay Life plc (Rothesay, together the Companies), made by Part 8 Claim Form dated 9 December 2024.
  2. The application seeks sanction under s.111(1) of Part VII of the Financial Services and Markets Act 2000 (Act) of an insurance business transfer scheme (Scheme).
  3. The Scheme concerns the proposed transfer of SWL's bulk purchase annuity (BPA) business to Rothesay (Transferring Business).
  4. The Transferring Business comprises 'buy-in' policies taken out by trustees of defined benefit schemes and which generate an income stream to enable those trustees to fund their obligations to pay some or all of the benefits payable to the scheme beneficiaries.
  5. In addition, it comprises individual 'buy-out' policies issued in respect of individual scheme members, with the income stream paid direct to those members, the trustees then statutorily discharged from their liabilities with respect to the benefits bought out.
  6. The Transferring Business also includes two residual risk policies and four longevity insurance arrangements, together with certain supporting assets.
  7. There will be no change to the terms and conditions of the policies under the Scheme which will continue to be administered by the same service provider following the transfer, if approved.
  8. The Scheme does not include any with-profits business, unit-linked savings products or other form of protection products.
  9. Related ancillary orders are sought under s.112 of the Act.
  10. In preparation for this hearing, I have read Mr Moore's skeleton argument, the policyholder pack sent to the SWL policyholders in accordance with the order of ICC Judge Mullen dated 16 September 2024, the report of the Independent Expert (IE) dated 9 December 2024, the supplementary IE report dated 30 April 2025, the first and second witness statements of Shingirai Nyahasha dated, respectively, 9 December 2024 and 1 May 2025, for SWL, the first and second witness statements of Graham Butcher dated, respectively, 9 December 2024, and 1 May 2025, for Rothesay, the first and second reports of the Prudential Regulation Authority (PRA) dated, respectively, 11 December and 9 May 2025, and the first and second reports of the Financial Conduct Authority (FCA) dated, respectively, 11 December 2024 and 7 May 2025.
  11. In addition, I have been referred by the Companies to certain correspondence involving a particular Rothesay policyholder, Mr Kell, who had also indicated separately to the Court that he would wish to address it at today's sanction hearing and who did so.
  12. BACKGROUND

  13. SWL formerly operated for some time as Clerical Medical but became the principal long-term business carrier within the Lloyds Banking Group in 2015. As at 30 June 2024, SWL's total in-force business comprised approximately 6.5 million policies with best estimate liabilities (BEL) of £164.8 billion. As at 31 December 2024, SWL's regulatory solvency capital requirement coverage ratio was 144%, expected to increase to 145% post-Scheme, if approved. SWL has less than 5% of BPA business market share. The BEL relative to SWL's BPA business is £5.3 billion, encompassing approximately 34,000 individual pensions.
  14. Rothesay was incorporated on 28 February 2007, having since established a significant presence in the BPA and individual annuity markets. It has grown both organically and by acquisition of portfolios of annuity business under Part VII of the Act. It is a subsidiary of Rothesay Limited, itself owned as to 50.2% by GIC Private Limited, the foreign investment arm of the Singapore Government and as to 47.6% by an entity controlled by Massachusetts Mutual Life Assurance Company, one of the largest US insurance companies. The remaining shares in Rothesay Limited are held by or for the benefit of Rothesay Group employees. As at 30 June 2024, Rothesay had some 365 scheme trustees to which Rothesay is the BPA issuer or provider, insuring nearly 605,000 individual policyholders. The BEL of Rothesay's in-force business is approximately £58 billion and, as at 31 December 2024, its solvency capital requirement coverage ratio was 264%, not expected to change after the Scheme, if approved.
  15. SWL has decided for strategic business reasons to sell the business to a suitable BPA provider, identifying Rothesay for that purpose given its size and experience in integrating books of business. On 13 March 2024, a business transfer agreement was entered into between the Companies, followed shortly thereafter by a reinsurance agreement under which Rothesay reinsured a material part of the business proposed to be transferred. The economic risk and reward of that business, therefore, transferred to Rothesay with effect from 1 January 2024. The premium for such reinsurance was principally SWL assets held in respect of the business, approximately 75% of which have already been transferred to Rothesay, with the remaining 25% or so retained by SWL, albeit in a segregated account. Those assets, consisting primarily of a portfolio of loan assets will, subject to a sub-set novated consensually, transfer pursuant to the Scheme, if sanctioned.
  16. TRANSFERRING BUSINESS

  17. Looking at the Transferring Business in a little more detail, the business proposed to be transferred comprises, as at 31 December 2024, 28 bulk purchase annuity policies issued to 21 pension scheme trustees, 6,651 individual 'buy-out' annuity policies (where SWL has issued annuities to individual scheme members), two residual risk policies insuring trustees against certain defined risks not covered by the 'buy-in' or 'buy-out' policies such as missing beneficiaries or payment errors and four longevity insurance agreements between SWL and Lloyds Banking Group Pension Trustees Limited as trustee to three Lloyds Banking Group pension schemes. Because of the circumstances in which the BPAs came to be issued, whether to professional trustees or as a result of an individual policyholder's employment, none of them was selected through the retail market.
  18. The Transferring Business also includes reinsurance agreements between SWL and third-party reinsurers.
  19. The transferring policies are governed by English law. There are a small number of individual policyholders or beneficiaries resident in the Channel Islands and the Isle of Man and the Companies have received advice that it is not necessary to promote equivalent procedures to Part VII in those jurisdictions.
  20. In terms of sanctions, SWL and the wider Lloyds Banking Group carry out screening for sanctioned policyholders or assets and none is included in the Transferring Business.
  21. FEATURES OF THE SCHEME

  22. As to the features of the Scheme, Part A and B identify the policies, assets, liabilities and business to be transferred to Rothesay. The Scheme contains provision for certain policies, assets or liabilities which cannot transfer on the proposed Effective Date, albeit the Companies do not anticipate the deployment of those provisions.
  23. Part C (clauses 3-12) deals with the transfer of the business assets and liabilities and contains provisions relating to data processing and the continuity of proceedings, references and mandates.
  24. Part D (clauses 13-19) addresses various matters, including the Effective Date, modifications, costs and governing law. The Effective Date is 00:01 hours (BST) on 11 June 2025. The Scheme contains an ability for the Companies to agree a later date and a requirement to return to Court if they decide to make the Scheme effective after 11 July 2025. They do not currently expect to make any such agreement.
  25. In terms of the Scheme arrangements on a practical level, a material part of the administration of the Transferring Business is undertaken by a company called Aptia UK Limited (Aptia). That outsourcing agreement will be transferred under the Scheme. The Companies suggest that, on this basis, there is no reason to suppose that there will be any change in service and administration levels for that part of the Transferring Business administered by Aptia. The Companies are co-operating on data transfer to enable Rothesay and Aptia to process and administer the business. The IE has confirmed in his Supplementary Report that he is content that the relevant workstream is on track. As regards the servicing of the longevity arrangements and the residual risk policies, Rothesay apparently has in-house expertise of similar arrangements such that the Companies, again, do not expect that service standards to be compromised.
  26. LEGAL PRINCIPLES

  27. Turning to the legal principles, for a relevant transfer to be capable of approval under Part VII, it must involve the transfer to another body of the whole or part of the business carried on in the UK by an authorised person who has permission to effect or carry out contracts of insurance, it must result in the business transferred being carried on from the establishment of the transferee in the UK and it must not be an excluded scheme, as defined in s.105(3) of the Act. In this case, SWL is an authorised person having permission to carry out contracts of insurance, its business is to be transferred to Rothesay, who will carry it on in the UK, and it is not an excluded scheme.
  28. S.107(2) of the Act permits the application to be made by either or both of the authorised persons concerned. In this case, it is made by both and properly to the High Court.
  29. S.108 confers on the Treasury power to impose requirements on applicants making a s.107 application for the sanction of a scheme. Regulation 3(2)(a) of the relevant Transfer Regulations requires the publication of a notice of the application in each of the London, Edinburgh and Belfast gazettes and two national UK newspapers. Regulation 3(2)(b) requires such a notice to be sent to every policyholder of the companies and Regulation 3(2)(c) requires notification of any reinsurer of the transferor whose contracts of reinsurance are to be transferred. Under regulation 3(3), each such notice must be approved by the appropriate regulator prior to publication or dispatch and contain the address from which a copy of the report and a statement setting out the terms of the scheme and containing a summary of the report may be obtained free of charge by anyone requesting them.
  30. Regulation 3(5) requires a copy of the application, the report and the statement setting out the terms of the scheme and containing a summary of the report to be given free of charge to the PRA and the FCA. Under Regulation 4(1)(b), no order can be made by the Court until a period of not less than 21 days has elapsed since the PRA and FCA have been given the requisite documents.
  31. Regulation 4(2) permits the Court to waive the requirement, amongst other things, to send notice to all policyholders of the parties "in such circumstances and subject to such conditions as the Court considers appropriate."
  32. These matters were considered in this case at the hearing before ICC Judge Mullen on 16 December last year when he gave directions for advertising and dispensed with notice to each policyholder concerned. As a result, policyholders eligible for direct notification were holders of transferring policies only, subject to certain normal exceptions. Detailed material was also available on dedicated SWL and Rothesay web pages, the latter containing a link to SWL's web page. A dedicated helpline was also established by SWL to field policyholder queries raised in response to the communications programme.
  33. In accordance with Regulations 3(5) and 4(1)(b), a copy of the application, the IE Report and the statement setting out the terms of the Scheme and summary of the IE report were each given to the PRA and FCA on 10 March 2025, more than 21 days prior to the date of this hearing. However, the PRA and FCA have been aware of the proposal to seek sanction of the Scheme for considerably longer than that.
  34. The PRA, having consulted with the FCA, approved the form of the notice and they were published between 10 and 16 January 2025.
  35. The dedicated questions handling helpline was also maintained by SWL at all times.
  36. I should add that, as disclosed by SWL, there are a very small number of 'gone-away' policyholders (with one more very recently discovered) who cannot be contacted, albeit accounting for only a very small percentage of transferring policyholders.
  37. The FCA has confirmed in its second report, that it is satisfied with the way in which the communications with policyholders have been conducted.
  38. Copies of the IE report, IE report summary and the Scheme document were made available on the websites identified in the communications from 9 January 2025, with the Supplementary IE report available on the website from 30 April 2025.
  39. As for the conditions for sanction, s.111 of the Act provides that:-
  40. "(1) This section sets out the conditions which must be satisfied before the court may make an order under this section, sanctioning an insurance business transfer scheme, …..

    (2) The court must be satisfied that-

    (a) …… the appropriate certificates have been obtained (as to which see Parts I and II of Schedule 12);
    (aa) …………………….
    (b) the transferee has the authorisation required (if any) to enable the business, or part, which is to be transferred to be carried on in the place to which it is to be transferred (or will have it before the scheme takes effect).

    (3) The court must consider that, in all the circumstances of the case, it is appropriate to sanction the scheme."

  41. The PRA has confirmed in its first report (at [10]) that Rothesay has the necessary authorisation to carry on the business transferred to it. Moreover, the PRA has annexed to its second report a certificate confirming that Rothesay will, taking the proposed transfer into account, possess the necessary solvency margin.
  42. As to discretion, the Court of Appeal recently considered the approach to applications under Part VII in Re Prudential Insurance Company Limited [2020] EWCA Civ 1626, as to which I summarise some of the principal points discussed when approaching the question of sanction:-
  43. (1) The judge should first identify the nature of the business being transferred and the underlying circumstances giving rise to the scheme ([75]);

    (2) Different considerations affect different types of business: so, for example, the Court considering the transfer of a book of annuities in payment, will be primarily concerned with the interests of the transferring policyholders whereas other types of business (such as with-profits) may engage questions of fairness between the remaining and transferring policyholders, the companies concerned and their shareholders ([76]);

    (3) The circumstances giving rise to the scheme proposed will also affect the approach of the Court, whether, for example, commercially motivated or occasioned by external events ([77)];

    (4) The discretion of the Court is unfettered and genuine and is not to be exercised by way of a rubber stamp but, additionally, the Court must take into account and give proper weight to matters that ought to be considered and ignore matters that ought not properly to be taken into account ([78]);

    (5) The London Life and AXA cases, as cited in Re Prudential, contain in many respects the factors likely to be applicable to the transfer of with-profits business but it is doubtful whether anything is to be gained by setting out and seeking to apply the factors listed in those cases to transfer schemes involving every type of insurance business ([79]);

    (6) In a case such as Re Prudential, the paramount concern of the Court was to assess whether the transfer would have any material adverse effect on the receipt by the annuitants of their annuities, and on whether the transfer may have any such effect on payments that are or may become due to other annuitants, policyholders and creditors of the transferor and transferee companies. The Court will also be concerned to assess whether there may be any material adverse effect on the service standards provided to the transferring annuitants or policyholders. Whether any other factors require consideration will depend on the circumstances ([80]);

    (7) The first duty of the Court is to carefully scrutinise the reports of the IE and the Regulators and the evidence of any person required to be heard under s.110, including those that allege that they would be adversely affected by the carrying out of the scheme. The Court must understand the opinions presented and is entitled to ask questions about them. It will do so, in particular, with a view to identifying any errors, omissions or inadequate or defective reasoning ([81]);

    (8) In the absence of such defects, the Court will always, in exercising its discretion, accord full weight to the opinions of the IE and the Regulators. That does not mean that the Court can never depart from the recommendations of the expert or the non-objections of the Regulators, but it does mean that full weight must be accorded to them, so the Court will not so depart without significant and appropriate reasons for doing so. That is particularly so in relation to the financial and actuarial assessments required as regards security of financial benefits ([82]);

    (9) This approach applies to the crucial question of whether the proposed scheme will have any material adverse effect on policyholders, employees or other stakeholders. An adverse effect will only be material to the Court's consideration if it is (a) a possibility that cannot sensibly be ignored having regard to the nature and gravity of the harm feared (b) a consequence of the scheme and (c) material in the sense that there is the prospect of real or significant, as opposed to fanciful or insignificant, risk to the position of the stakeholder concerned ([83]);

    (10) Even if the Court finds that the proposed scheme would have a material adverse effect on some group or groups of policyholders, it may still sanction the scheme in the exercise of its discretion. That might occur if the scheme is in the nature of a rescue of the business. If there are differential effects on the interests of different classes of person affected, the Court will need to consider whether the proposed scheme as a whole is fair as between those interests ([84]);

    (11) The Court should adopt the same approach to the exercise of its discretion when making the more general comparison between the positions that would exist with or without the proposed scheme in respect of (a) the security of the policyholders' benefits and (b) the standards of service and corporate governance that the policyholders can expect ([85]);

    (12) Once the Court has undertaken these evaluations, it will decide whether or not to sanction the proposed scheme if under s.111(3) it is, in all the circumstances of the case, appropriate to do so. It cannot require the applicants to vary or alter the scheme although that may sometimes be the effect of the Court expressing its concern ([86]).

  44. So, say the Companies, a material adverse effect remains the acid test for sanction. It is not necessary to show that the transfer will be beneficial to those policyholders affected although, in this case, it is said that there are benefits to policyholders from the transfer to Rothesay as a willing provider, SWL having decided that BPA is no longer part of its core business.
  45. The Court of Appeal did decide that two factors were irrelevant to the exercise of the Court's discretion, namely the availability or the possibility of non-contractual support from other companies in the transferor or transferee group and the fact that policyholders had chosen the transferor for reasons of age, venerability and reputation and had assumed that their policies would not be transferred to another provider. Such subjective factors, however much one may sympathise with them, are not to be taken into account.
  46. Finally, the Court of Appeal also underlined the importance of appreciating the dynamic and forward looking nature of insurance regulation to which UK insurers are subject.
  47. REGULATORY ENVIRONMENT

  48. As to the UK regulatory environment, the post-Brexit UK solvency regime, which will eventually become known as 'Solvency UK', is substantially the same as the Solvency II regime in force for UK insurers since January 2016.
  49. In terms of prudential capital requirements, the starting point for insurance company solvency requirements is the quantification of BEL representing the present value of future liability cash flows on a realistic basis required to pay all the sums due over policy term. To that, the risk margin is added to reflect an additional amount which would have to be paid to another insurer to take over the policies and run them off, calculated on the basis of compensation for the buyer to take on the business and its risks.
  50. Accordingly, there is a high degree of protection to policyholders in terms of the assets a firm must hold even before amounts are set aside to cover the Solvency Capital Requirements (SCR), calculated by reference to the risks that firms generally run and the firm itself is running as an amount necessary to ensure that it can withstand, to use the vernacular, a 1-in-200 year stress event on its BEL and assets over the next year and remain able to pay its liabilities.
  51. Solvency UK also requires a firm to develop its Own Risk and Solvency Assessment, a forward looking assessment of its solvency requirements set against its risk profile and risk appetite.
  52. Solvency UK also requires firms to produce and make public annually a Solvency and Financial Condition Report.
  53. A further protection is derived from a firm's capital policy, an internal discipline dictating how much capital over and above the SCR the firm chooses to hold, allowing management to take appropriate action to manage and mitigate the risks that the SCR is breached. So, the level of assets an insurer has to hold to meet policyholders' claims (above assets matching BEL) are determined by reference to the capital policy, the SCR and the risk margin.
  54. INDEPENDENT EXPERT

  55. Turning now to the role of the IE, s.109 provides that:-
  56. (1) An application under s.107 in respect of an insurance business transfer scheme must be accompanied by a report on the terms of the scheme ("a scheme report").

    (2) A scheme report may be made only by a person-

    (a) appearing to the [appropriate regulator] to have the skills necessary to enable him to make a proper report; and

    (b) nominated or approved for the purpose by the [appropriate regulator].

    (3) A scheme report must be made in a form approved by the [appropriate regulator]."

  57. The IE in this case is Mr John Hoskin, a partner of Barnett Waddingham, actuarial consultants. He is a Fellow of the Institute and Faculty of Actuaries. His appointment was approved by the PRA as was the form of his report. As to Mr Hoskin's independence, that is ensured by the provisions of the PRA's statement of policy and the PRA's involvement in the nomination process and oversight. Mr Hoskin has confirmed his understanding of his role in Sections 1 and 3 of the IE Report as well as, through his statement and recognition at Appendix B, that his duty is one which is owed to this Court. His report has been peer reviewed.
  58. Re Eagle Star Insurance Co Limited [2006] EWHC 1850 (Ch) recognised that the Court obviously retains a discretion to sanction the scheme and that the IE report does not necessarily outweigh every objection. However, the conclusions of the IE report are a crucial matter and ordinarily decisive. Re Prudential makes clear that the Court is entitled to interrogate the report for errors, obscurities or inadequate or defective reasons, but it does not substitute its own expertise for that of the IE and should not depart from it without significant and appropriate reasons for doing so.
  59. In his IE report, Mr Hoskin has analysed the effect of the Scheme on the security of the policyholders concerned. His summary conclusions at Section 2.8 state, subject to his outstanding work on the member options, now addressed in his supplementary report:-
  60. "2.8.1 I am satisfied that the implementation of the Scheme will not have a material adverse effect on

    • The security of the benefits of the policyholders of SWL and Rothesay, including the Transferring Policyholders

    • The reasonable expectations of the policyholders of SWL and Rothesay in respect of their benefit expectations, service standards, management and governance, including the Transferring Policyholders.

    2.8.2 Based on the analysis above, and in the remainder of my Report, I am satisfied that the Scheme is equitable to all classes and groups of SWL and Rothesay policyholders … [subject to the point about options to which I will return]

    2.8.3 I am satisfied that the proposed communications plan is appropriate and that the Policyholder Communication Packs that I have seen are appropriate.

    2.8.4 I have also considered the impact of the Scheme on the four third-party companies that reinsure (accept some risks on) the Transferring Policies, and have concluded that the Scheme will have no material impact on those third parties."

  61. In terms of the underlying detail, Mr Hoskin provides an overview of the regulatory environment in which the parties operate in Section 4 of his Report which, as noted, Re Prudential considered to be an important part of the assessment. In Sections 5 and 6, he sets out the background to, and financial position of, the Companies. The capital policy of SWL is discussed at Section 5.6 of the Report and that of Rothesay at Section 6.6. The Companies are assessed to be of roughly equal financial strength. In Section 7, he discusses in detail the background to the Scheme, the provisions of the business transfer agreement, the reinsurance arrangements, the provisions of the Scheme and the communications plan. In Section 8, he deals importantly with the implications for the Scheme for policyholders transferring from SWL to Rothesay. In Sections 9 and 10, he deals with the impact of the Scheme on the remaining policyholders of SWL and the existing policyholders of Rothesay. In Section 11, he deals with the impact of the Scheme on reinsurers.
  62. Mr Hoskin's Supplementary Report dated 30 April 2025 addresses developments since the completion of his main IE report and ([at 2.6]) his further work on member options. This concerns the current use by SWL and Rothesay of different assumptions such as life expectancy and interest rates, which differences may become relevant when a member exercises certain choices available to them in relation to their pension, such as transfers or deferral of retirement. Those options affect a limited number of members. The proposed mitigation of any direct detriment that might be experienced in the four years following the Effective Date of the Scheme as a result of such differences is to apply an uplift, tapering down to zero at the end of four years. Mr Hoskin has considered this closely and concludes that it is a pragmatic and reasonable solution given the unpredictability of when a relevant option might be exercised and how the relevant assumptions might change over time.
  63. He also sets out his conclusions in relation to the communications exercise as undertaken and addresses objections received by SWL ([4.3]) and the specific position with Mr Kell ([4.4]).
  64. Mr Hoskin concludes ([5.1.4]) that:-
  65. "The additional information and events, including issues raised by policyholders, have not led me to change my conclusions regarding the likely effects of the Scheme. I remain satisfied that the implementation of the Scheme will not have a material adverse effect on:

    • the security of the benefits of the policyholders of SWL and Rothesay, including the Transferring Policyholders.
    • the reasonable expectations of the policyholders of SWL and Rothesay, including the Transferring Policyholders in respect of their benefit expectations, service standards, management and governance.
    • the four reinsurers whose contracts with SWL will be transferred to Rothesay by the Scheme."

    OBJECTIONS

  66. In terms of objections to the Scheme, s.110 permits various parties to be heard on the application for Court approval to an insurance business transfer scheme. The parties entitled to be heard are the PRA and the FCA, and "any person, including an employee of the transferor concerned or of the transferee who alleges that he would be adversely affected by the carrying out of the Scheme."
  67. (a) The Regulators

  68. The Regulators, in accordance with practice, are expected to submit their reports. In addition to dealing with certain technical aspects of the jurisdiction, the reports are expected to describe the role of the Regulators in relation to Part VII transfer schemes in general and their views of the transfer from their regulatory perspectives.
  69. In their respective second reports, the PRA has stated that it is not currently aware of any issues that will cause it to object to the Scheme and the FCA that the Scheme is within the range of reasonable and fair schemes available to the transferor and transferee and, accordingly, neither objects to the Scheme.
  70. Neither the PRA nor the FCA has sought to be heard at the hearing, although I am told that there may be representatives of one or the other or both here today.
  71. (b) Policyholders

  72. The witness evidence explains that the communications programme elicited 132 responses from SWL policyholders and other interested parties, the great majority of which were general queries. There have been five objections to the Scheme from SWL policyholders, although one has subsequently been resolved to the policyholder's satisfaction, and none of them has indicated an intention to appear at the hearing or done so. As David Richards J (as he then was) noted in Royal Sun Alliance Insurance plc [2008] EWHC 3436 (Ch), that does not mean that the Court should not scrutinise the proposals fully.
  73. None of the trustees, who represent together a large share of the economic interest in the Transferring Business, has objected.
  74. Mr Hoskin has considered carefully the objections from policyholders in his Supplementary Report (at [4.3]) and the specific concerns raised by Mr Kell (at [4.4]). In addition, each of the PRA and the FCA has, in their respective second reports, addressed the objections and explained that none gives them cause to object to the Scheme. I too have considered the individual objections.
  75. Taking the SWL objections as they have been addressed in the IE report, one concerned whether the Companies are profiting from the transfer at the expense of policyholders, one concerned Rothesay's financial security compared to SWL's, one concerned a desire to cash out a policy, one concerned a suggested frequent change in pension provider, one concerned a suggested failure to mention in the transfer guide the effect of inflation on future pension payments, one concerned the possible reduction in spousal pension if there was a large age gap between the deceased policyholder and the spouse and one identified no particular reason for objection and has since been reassured by the further information provided. Although no doubt genuinely held concerns, having regard to Mr Hoskin's analysis undertaken in relation to each of them, I too am satisfied that none indicates a material adverse effect on the policyholders concerned or policyholders more generally. As such, they present no impediment to sanction.
  76. As for Rothesay policyholders, three have contacted that Company, including Mr Kell who also contacted Mr Hoskin directly. Two of those were considered by the Companies and Mr Hoskin not to be objections properly so-called rather than straightforward queries. Two SWL policyholders also contacted Rothesay and they were directed to SWL and their contact has been included in the response statistics for SWL.
  77. Mr Hoskin also explains how he has received a large volume of communications from Mr Kell since 9 January 2025, including over 150 emails; either as the main recipient or in copy. They have also had several telephone calls. Those communications covered the same issues and themes as Mr Kell has raised with Rothesay. According to Mr Hoskin, Mr Kell has stated that he does not want to be classified as an objector to the Scheme - albeit Mr Kell said differently to me today - but he has raised concerns that Mr Hoskin considered warranted his consideration, both as to Mr Kell's annuity policy and related interactions with Rothesay and as to the Part VII transfer process. Having reviewed Rothesay's response, Mr Hoskin is satisfied that it appropriately addresses the material issues raised. Mr Hoskin has also provided his own response.
  78. As explained by Mr Hoskin, Mr Kell's own policy was transferred to Rothesay from Prudential Assurance Company in late 2021 under a Part VII transfer. Since then, Mr Kell has been in dispute with Rothesay over confirmation of the terms and conditions applicable to his policy and the provision of evidence to prove the policy was actually transferred from Prudential to Rothesay. Mr Kell has also expressed dissatisfaction with the way Rothesay has interacted with him over the period. Rothesay has been unable to pay the benefit since the policy was transferred to it from Prudential because Mr Kell has not provided information to allow payments to be made.
  79. As Mr Hoskin points out, the scope of his role as IE does not extend to arbitrating such disputes but he has considered whether Mr Kell's experience provides new information that might affect his conclusions when assessing whether the Scheme will have a material adverse on service standards, management and governance for transferring policyholders compared to their current situation.
  80. According to Mr Hoskin, part of Mr Kell's dispute with Rothesay appears to stem from Prudential's administrative procedures which mean that certain documents forming part of the insurance contract were not held against individual policy records transferred to Rothesay. It is said that there are no such issues or ambiguities for transferring policyholders under the Scheme.
  81. Mr Hoskin also considers if the concerns raised by Mr Kell about his interactions with Rothesay are likely to lead to a material adverse effect on the transferring policyholders compared to their current position. Having reviewed correspondence from both Mr Kell and Rothesay, Mr Hoskin's view is that the circumstances of the particular dispute are not typical of Rothesay's interactions with its policyholders and that Rothesay has acted reasonably in respect of information provided to Mr Kell shortly after the transfer from Prudential and that many of the subsequent concerns stem from a difference of opinion as to the reasonableness of their ongoing interactions. Overall, Mr Hoskin considers that Rothesay has acted reasonably and that such a difference in opinion is unlikely to occur for transferring policyholders given the absence of issues or ambiguities in the contractual documents for the transferring policies.
  82. Some of Mr Kell's concerns relate to Rothesay's third-party administrator of his policy. That is not Aptia and Mr Hoskin therefore considers this not to be of particular relevance to the transferring policyholders whose policies will be continue to be administered by Aptia. Nor does Mr Hoskin consider Mr Kell's concerns in this regard to be significant in any event. Some concern him residing overseas, which include issues with the addressing and delivery of paper mail and initially being given inaccurate information on the payment of annuities overseas, subsequently corrected by Rothesay. Mr Hoskin has considered whether the transferring policyholders residing overseas are likely to be adversely affected by the proposed transfer generally or specifically as a result of the concerns of expressed by Mr Kell. Rothesay currently pays a material number of annuities to overseas policyholders. Having considered Rothesay's complaints data generally and specifically from Rothesay's overseas policyholders over a five period, the number of complaints on similar issues, including those made by Mr Kell, are small, suggesting that such incidents are isolated. In light of this, the concerns raised by Mr Kell do not change Mr Hoskin's opinion that the Scheme will have no adverse impact on the transferring policyholders who reside overseas.
  83. Mr Hoskin concludes that the issues raised by the policyholder do not change his opinion that the Scheme will have no material adverse effect on transferring policyholders with respect to service standards, management and governance.
  84. Mr Kell has also raised concerns that he was prevented from attending the directions hearing and has been denied information and documents in relation to the Scheme and the outcome of the directions hearing and says that the information on how he can contact the Court in advance of the sanction hearing has been withheld. As to that, Mr Hoskin says that he is satisfied that both Companies have met all legal requirements in relation to the provision of information and communication of the Scheme to affected policyholders, including Mr Kell, and that he has been given reasonable information in relation to how he can contact the Court in advance of the sanction hearing.
  85. Mr Kell also questioned Mr Hoskin's independence and requested copies of the full contractual terms as between Barnett Waddingham and the Companies. These were not provided given that disclosure of the engagement terms between Barnett Waddingham and the Companies is already included as an appendix to Mr Hoskin's first report.
  86. I also heard from Mr Kell today. As a preliminary matter, he made clear to me that he was objecting to the Scheme presently before the Court.
  87. In light of the terms of s.110(1)(b) and what was said in Tesco Personal Finance Plc [2024] EWHC 3516 (Ch) (at [21]-[25]) about the ability under that section to be heard at the sanction hearing. I sought to establish from Mr Kell whether he alleges that he would be adversely affected by the Scheme, and, if so, how. Mr Kell's response was principally directed to the conduct of Rothesay, in particular, as to how he says he has been unable to extract from them the terms and conditions of his policy contract, a problem which he says is not limited to him. If the Scheme was simply approved without qualification, nothing, he said, would change. He also highlighted the suggested changing risk profile of Rothesay since he had become a Rothesay policyholder following a transfer from Prudential, and the overstated profile of its shareholders. He also considered that these proceedings had been convened in a non-transparent fashion and made observations as to the use of the Part VII procedure far too readily and in a manner not originally intended by Parliament.
  88. Having considered Mr Kell's submissions, in which I allowed him considerable latitude in the points he put before the Court in a wide-ranging critique of Rothesay and its conduct and customer service, I declined to allow him to be heard further today even though I understand he had some further points to make if he had been permitted to do so. I came to that decision for the reasons expressed before the short adjournment. The essential point is that none of the matters he highlighted addressed the question I asked him at the outset, namely why the Scheme before me today would have an adverse effect on him. As I said earlier too, the high-water mark of his engagement with the question of the effect of the Scheme was his submission that nothing would change if it were approved without qualification. That submission confirms that the Scheme would have no adverse effect on him. It will make no difference at all. Similarly, his points about the changing risk profile of Rothesay and the identity of its shareholders have nothing to do whether I do or do not approve the Scheme today. The procedural requirements leading to this sanction hearing have also been complied with.
  89. Accordingly, as genuine as I accept Mr Kell's feelings are about the matters he has ventilated today, and as courteously and as articulately as he addressed the Court about them, I declined to hear further from him.
  90. I should also add that SWL has received correspondence from Mrs Kell in connection with the Scheme, albeit not identifying a connection with Mr Kell. Mrs Kell has not been identified as the policy of SWL or Rothesay but she has asserted that she has a "long-term interest in the conduct of business by Lloyds Banking Group and its subsidiaries", including SWL, and that her "interests are financial and ethical." She has invited SWL to consider Rothesay's customer service standards in connection with the Scheme. SWL sought to obtain further information from Mrs Kell to identify the nature of her interest in the Scheme. Mrs Kell suggested that she has an indirect interest as a shareholder of Lloyds Banking Group, although she has confirmed that she is not entered in the register of shareholders and, therefore, it is not possible to verify this. On the basis that Mrs Kell is not a policyholder of SWL or Rothesay, nor identified clear grounds for how she alleges that she is adversely affected by the Scheme, SWL categorised her correspondence as "Other".
  91. In an update to the Court dated yesterday Mr Hoskin explains that he has received an email from Mrs Kell with the title "CR-2024-004902 Objection" in which she states that she is a longstanding shareholder of Lloyds Banking Group and has personal experience of Rothesay that has adversely affected them and that she considers the shareholders of Rothesay to be "relatively small" and "potentially more risky" than those of SWL.
  92. I agree that, in the absence of clarity from Mrs Kell as to the nature of her relationship, if any, with SWL, and as to any allegation that she would be adversely affected by the Scheme, her correspondence with SWL cannot meaningfully inform what I have to decide today. Moreover, even if she were, for example, a transferring policyholder under the Scheme, as I have already noted, non-contractual support that might be available from shareholders of the transferee (or indeed not available) is not a relevant consideration. Her reference to "personal experience" is presumably that recounted in the voluminous correspondence from Mr Kell and before me at some length today but, as Mr Hoskin concluded, and I agree, that experience does not indicate that the Scheme will have any material adverse effect.
  93. CONCLUSION/ DISPOSAL

  94. Accordingly, having considered the papers lodged in support of this joint application, having read and heard the Companies' related submissions and evidence, having considered the objections raised to the Scheme, including those indicated by Mr and Mrs Kell, and having heard from Mr Kell I am satisfied that the Scheme is one which, in all the circumstances of this case, it is appropriate for the Court to sanction. In Particular:-
  95. (1) the Scheme gives effect to a reasonable commercial objective;

    (2) the IE has concluded that the Scheme will not have a material adverse effect on the policyholders concerned;

    (3) having considered the Scheme in the context of their statutory duties, the Regulators do not object to the Scheme;

    (4) the Scheme is fully explained in the documents made available to policyholders in accordance with this Court's prior order;

    (5) none of the small number of objections which have been raised is sufficient to stand in the way of Court sanction;

    (6) specifically Mr and Mrs Kell's comments do not indicate that the Scheme will have a material adverse effect; and

    (7) on the basis of the evidence, I accept the IE's conclusions that the Scheme will not have a material adverse effect.

  96. I therefore sanction the Scheme and will now consider with counsel for the Companies the appropriate ancillary orders in light of the Court's approval.

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