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| ISSN 1470-8108 | Issue 53 | Winter 2003-04 |
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Contents: 1. T&N Administrators £17,000,000 – Victims 0 1. T&N Administrators £17,000,000 – Victims 0 On October 1, 2001, a UK administration order obtained by the T&N Group froze all outstanding legal claims, including those from dying asbestos victims, against the former “asbestos giant” whilst permitting it to carry on trading as normal (see newsletter issues 45, 46, 48 & 51). Of the 4,000 or more people who have died from the asbestos cancer mesothelioma during the 28 months since then, many had valid claims against T&N. These asbestos plaintiffs have been shamefully betrayed; first by an employer which put profits before safety, then by a judicial system which allowed professional advisers to swallow £23 million ($41.65 million) of T&N’s rapidly dwindling funds. On November 27, 2003, a well-attended public demonstration was held outside the Manchester offices of the Kroll Corporate Advisory & Restructuring Group, the court-appointed Administrators for T&N; Tony Whitston, spokesperson for North-West Asbestos Victims’ Support Groups, said: “Kroll have charged £17 million in fees to date and their solicitors have charged £6 million. The charge out rate for a senior partner at Kroll is £460 per hour. The financial “killing” being made by the Administrators is reducing the resources left to pay dying victims. We think this behaviour is a classic example of corporate greed and callousness.”1 Patricia Woodruff, the widow of a former T&N employee who died of mesothelioma, echoed these sentiments: “Everyone should be paid a fair day’s pay for a fair day’s work. But what is fair about professional fees of £460 per hour which eat into the pitifully small compensation fund to be paid to widows now living in poverty.” At the demonstration, Solicitor Anthony Coombs explained that the T&N Creditors’ Committee was virtually powerless: “The Creditors’ Committee is not in a position to challenge the fees incurred in the UK and USA because the time and expense involved will be enormous, and we (the plaintiffs’ solicitors who are members of the Committee) are volunteers. The Chapter 11 bankruptcy process gives no financial incentive to those involved professionally to bring the process to a rapid end. Just the opposite. The longer the process continues, the more the lawyers, accountants and other professionals involved on both sides of the Atlantic will be paid. This money will ultimately come out of the Group’s assets. It is likely to reduce the compensation available to be distributed to asbestos victims. Unlike most forms of court process, there is in my opinion no effective watchdog to control and limit the fees incurred. We don’t know when the Bankruptcy process will end. We don’t know when any victims will begin to receive payment. I think it may be another two years before any victims are paid, which will be 4 years in all since the company went into administration.” It seems that Coomb’s disillusionment with the administrative process was shared by other members of the T&N Creditors’ Committees all of whom rebelled on November 4, 2003 by refusing to sign off on the Administrators’ current invoices. Objecting to the £460 hourly fees and apparent over-staffing, they took the only action permitted and withheld approval of the current bills. As 75% of these are automatically paid by court order, this means that 25% of the total claimed remained unpaid. Kroll, having been urged to reconsider its fee structure, replied in mid-January 2004, that the firm’s rates would not be reduced. In a last-ditch attempt to salvage some kind of working relationship, committee members put a new set of proposals to the Administrators. These included: the appointment by the Creditors’ Committees of a person or company to audit and challenge existing and future bills at a court hearing, payment by the Administrators of “reasonable fees” for the auditor, limits on the amount of money Kroll and their lawyers, Denton Wilde Sapte, can draw for fees and disbursements, a guarantee that committee members would not be made personally liable for the expense of having the accountants' and lawyers' fees assessed by the court, and an agreement that upon the resolution of the administration or by August 31, 2004, whichever comes first, the court will be asked to assess the charges made during the administration process. Rumours abound as to the status of litigation brought by the Administrators against T&N’s former Employers’ Liability insurers: the Royal Insurance Company Ltd. and the Brian Smith Syndicate at Lloyd’s of London; an appeal by these defendants of a May 2003 decision which was scheduled to be heard in November 2003 was postponed in October “at the request of the parties to allow settlement discussions to take place.” It is unknown whether these negotiations are ongoing. Speculation is that the insurers may be attempting to buy their way out of the litigation by offering a one-off payment. If so, would this money be treated as part of the parent company’s global assets or be ring-fenced for UK employees? If the former, then UK victims would remain at the end of a very long line; if the latter, then current and future UK asbestos claimants may stand some chance of obtaining a reasonable sum. Although these developments will affect the rights of UK asbestos victims, they represent only a small piece of the global jigsaw. The prospects for all T&N claims can only be accurately assessed in the context of the emergence out of Chapter 11 status of Federal-Mogul (FM), T&N’s parent company. As a member of both FM and T&N Creditors’ Committees, US lawyer Steven Kazan explains: “When FM first filed for Chapter 11 protection, there had been some optimism that this matter could be resolved within three years; this is not going to happen. We can be hopeful that matters will soon be back on track, with appropriate exit financing soon in place and a structure for going forward agreed. As someone who has represented clients with mesothelioma for 30 years, I am appalled at the delays in paying compensation incident upon this and other US bankruptcy reorganizations, and at the vast sums of money being spent on lawyers, advisors, experts and consultants while victims die and their families wait for inadequate recompense. I would like to believe that a scheme will be in place under which money will be made available to pay asbestos claims by 2005, but that could well be unduly optimistic." 2. Control of Asbestos at Work Regulations: Ready or Not? When the Control of Asbestos at Work Regulations (CAWR 2002) were laid before Parliament on October 31, 2002, three deadlines for implementation were specified: November 21, 2002 for the bulk of the regulations, May 21, 2004 for Regulation 4 and November 21, 2004 for Regulation 20 (see newsletter issue 49).2 As the heart of these hard-won Regulations is to be found in Regulation 4, the rapid approach of the May deadline is increasing the pressure on companies to adopt a precautionary approach for dealing with asbestos-containing products within UK buildings. With less than four months until D-day, feedback from asbestos surveyors, analysts, removal experts, consultants and trade unionists suggests that across the country compliance is patchy, misunderstandings are rife and ignorance of the new regulations persist despite the best efforts of the Health and Safety Executive (HSE). While awareness amongst blue chip companies appears good, it is poor in small and medium-sized enterprises. Not much seems to have changed since a spokesperson for Zurich Risk Services reported in 2002 that: “more than 75% of small businesses have no asbestos risk management plan.” A number of companies which have taken steps to comply with CAWR 2002 have done so under a misapprehension: “Many people believe that the new regulations mean you must have a survey done, but this is not the case. The new ‘duty to manage’ concept requires that asbestos is managed and that no one is exposed to asbestos unnecessarily. This often requires a survey, but not always and not in every area of the property.3 A management plan is a necessity though, and this is where some companies, even those who have had surveys done, are still failing. Our message is – get the management plan in place, then arrange the survey afterwards if there’s a need for one.”4 Confusion amongst employers and building owners over basic requirements of the new rules has been reported. Robert Blackburn, Managing Director of Redhill Analysts and Chair of Asbestos Testing and Consulting (ATaC), an industry group set up to improve standards, believes that the existence of multiple dutyholders adds to uncertainty and delays action. Regulation 4 assigns responsibility for the management of asbestos in non-domestic premises to a variety of parties including property owners, landlords, building and maintenance managers, licensees, tenants and employers: “every person who has, by virtue of a contract of tenancy, an obligation of any extent in relation to the maintenance or repair…(and) every person who has, to any extent, control of that part of those non-domestic premises or any means of access thereto or egress therefrom.” According to Solicitor Moray Thompson: “Owner-occupiers self-evidently bear full responsibility to comply. The same normally goes for tenants with full repairing and insuring leases. However, in the typical multi-let property, for example, or other situations involving internal repairing leases, the occupiers will normally be responsible for their own areas, while the landlord’s duty covers common areas of the structure and exterior but also quite possibly an overriding duty to co-ordinate everyone else’s efforts… landlords and occupiers need to work together and negotiate effectively who is responsible for what, including the cost.” Although the CAWR 2002 is not a radical departure from the regulatory regime as laid out in previous legislation (the Health and Safety at Work Act 1974, the Management of Health and Safety at Work Regulations 1999, the Control of Substances Hazardous to Health Regulations 1999, the Construction (Design and Management) Regulations 1994 and the Defective Premises Act 1972), making the effective management of asbestos a statutory priority for organizations is new; the tougher enforcement mandate given to the HSE, backed up by increasingly large penalties and the possibility of cumulative fines for breaching asbestos regulations, should induce firms to address these new challenges. Regulation 4 stipulates the requirements:
Over the last eighteen months, the demand for qualified asbestos surveyors has grown, at times outstripping the capacity of the 60 UK firms accredited to conduct asbestos surveys. Non-accredited organizations, employing unqualified or inexperienced staff, have moved in to breach the gap. “Although staff may have obtained BOHS P402 training in surveying,” Blackburn observes, “this qualification is a beginning and not an end in itself. A lead surveyor needs a minimum of two years experience before he/she can be regarded as competent.”5 In recent years, the cost of insurance for organizations which offer any type of services associated with asbestos has risen dramatically; Steve Shutler of the Midlands firm SP Shutler Associates Ltd. reports that his company’s Employers’ Liability and Professional Indemnity Insurance premiums doubled this year. To cut costs, rogue contractors neglect to obtain the necessary insurance cover; prior to employing the services of asbestos surveyors, consultants and removal contractors, clients are advised to insist on viewing evidence of current Employers’ Liability, Public Liability and Professional Indemnity Insurance policies. In the run-up to the May deadline, HSE staff have, working closely with industry partners, held asbestos awareness conferences and training sessions, issued a raft of guidance notes, advertised the new regulations in the media and made information available through the HSE website and information line. Bill McDonald, Head of HSE’s asbestos policy team, feels that “a solid start has been made but we still have some way to go.” Even though the HSE accepts that “it would be unrealistic to expect full compliance by 21 May 2004,” it is imperative that dutyholders act now to “ensure that maintenance staff are not put at risk by unknowingly working with, or around, asbestos materials.” Failure to do so earned one maintenance service company a £20,000 ($35,000) fine in December 2003 after it was prosecuted by Manchester Metropolitan District Council for exposing two workers to asbestos during the removal of a hot water cylinder in a hundred year old building. The lack of an asbestos audit meant that the workers were not warned of the presence of asbestos in the boiler insulation; after stripping the insulation, they carried the cylinder through an adjacent office thereby exposing others to the hazardous fibers. Asbestos disease levels in Scotland, amongst the highest in the UK, prompted West Dunbartonshire Council (WDC) to adopt a proactive approach to a range of asbestos problems. In April, 2001, WDC took the lead in setting up and operating the Short Life Working Group on Asbestos of the Convention of Scottish Local Authorities (COSLA). Councillor Andy White, Leader of WDC, explains: “In light of the horrors inflicted by asbestos on the Scottish population, the Council felt it was imperative to address a range of asbestos issues, one of which was the need for safe management of asbestos in buildings. As property owners, all Scottish authorities were faced with the problem of how to make their buildings safe for workers and occupants. It seemed a logical and cost-effective step to develop procedures which could be used by all.” In June, 2002, the Asbestos Working Group Report was published; in 113 pages, it covered issues such as sound asbestos management policies, asbestos emergency procedures and health and safety regulations. An analysis of feedback received from Scottish schools revealed the financial impact asbestos was having on education budgets: “The costs of removing damaged asbestos in ten schools ranged from £15,000 in the lowest example given to £3 million in the highest. Expenditure on these ten asbestos removal projects adds up to just under £8 million.” Highlighting the need for greater awareness, the Report recommended that asbestos training and guidance: “should be provided to all Local Authority staff who may be liable to come into contact with asbestos during the course of their employment. This would include Council employees who are also responsible for the day to day management of Council premises (including)… maintenance staff, apprentices and trainees… head teachers, janitors, unit managers, concierges and other appropriate Local Authority personnel.” Examples of best practice in key areas were cited such as the recommendation that local authorities verify that tendering contractors: hold appropriate licenses for the work being planned, have Employers’ Liability and Public Liability Insurance, are members of a trade association, have established procedures for vetting sub-contractors, produce details of HSE prosecutions, prohibition notices or improvement orders and demonstrate the practical skills and financial ability to meet contractual obligations. Surprise site visits to monitor on-going operations were suggested as a means of confirming health and safety performance. Local councils were advised to share information obtained on contractors with other Scottish Local Authorities. While the comprehensive effort being made by COSLA to address Scotland’s asbestos legacy is impressive, that of its Southern counterpart, the Local Government Authority (LGA), is not; a recent keyword search of the LGA website for “asbestos” came up with zero hits. This lack of interest can only worsen the poor compliance record of local authorities as reported by the Centre for Corporate Accountability (CCA) in their report Safety Lottery, published in November 2003.6 Despite the LGA’s lacklustre performance, some English and Welsh councils are acting responsibly. Mike Smith of the Derwentside District Council reports: “It has taken more than ten years but we are almost free of asbestos in public buildings… it has cost a lot of money but I believe the benefits will be felt in the coming years. All of the council’s non-domestic buildings have an asbestos survey outlining the whereabouts of all asbestos products. The report covers issues such as type of fiber, location, condition and risk rating. It is the building managers’ task to ensure that contractors are shown the report and building drawings to ascertain whether work will put people at risk.” Over the last year, Redcar and Cleveland Council, working closely with the GMB trade union, has developed a prototype asbestos management strategy for local authorities with £25,000 of partnership funding from the Department of Trade and Industry. Council Safety Manager Lena Hogg reports that asbestos registers now exist for all council buildings. Prior to the commencement of work, contractors are required to fill out “authorization to work forms” which entails inspection of the asbestos register. All managers of council buildings have received training in how to use and update asbestos registers. Eventually, a school head will be able to access, but not amend, the school asbestos register by computer; only the council surveyor will be able to make changes to the register. An asbestos training program for council maintenance staff and cleaners is ongoing; eventually all 7,000 employees of the council and its partners will receive training on council procedures for dealing with asbestos. Training is also a priority for Carmarthenshire County Council, the third largest Unitary Authority in Wales; since 1999, the Council has been carrying out: “asbestos training aimed at specific individuals/roles. Whilst initially the training was designed for and aimed at individuals who would be responsible for asbestos management others such as maintenance officers, designers, architects, works supervisors etc were also given a number of full day awareness courses. The Authority currently employs 3 fully qualified asbestos surveyors who report directly to the Asbestos Co-ordinator. Additionally an ongoing programme has been implemented to give awareness training to head teachers, premises managers and anyone with responsibility for premises… To date over 500 members of staff from a wide-ranging background have attended these courses.” With its diverse non-domestic property portfolio of schools, day centers, residential homes, libraries, leisure centers, museums, administrative buildings, depots, farms, commercial and industrial properties, the Council accepted the need for a comprehensive asbestos policy; the document Processes and Procedures for the Management of Asbestos in Carmarthenshire County Council Premises was adopted by the Council in November 2001 and can be viewed on the HSE website.7 National enforcement of the “duty to manage” will be compromised by a shortage of HSE inspectors. According to Kim Sunley of the GMB trade union, the average workplace is inspected every 10 to 15 years. In an article which appeared in the Academy Newsletter, Ms. Sunley wrote: “As trade union safety representatives…have a right to inspect most documents held by the employer in relation to health and safety, this would include any information relating to the presence of asbestos, e.g. building plans, surveyors’ reports and asbestos management plans. Come 21st May, we will be recommending that our Reps ask for a copy of the asbestos management plans and, in instances where there is no plan, take appropriate action which may include calling in the inspector.” Plans being made for a London medical conference on asbestos in May 2004 include a presentation on identifying asbestos-containing materials in hospitals and public buildings. Failure to comply with the new asbestos regulations will be discovered, if not by HSE or council inspectors, then by trade unionists or members of staff. During the current transition period, there is no doubt that unscrupulous traders will attempt to profit from the misunderstandings which persist over the new regulations. The fact that dodgy garages overcharge customers does not excuse motorists from getting their cars inspected. The good news is that information and assistance is available to ensure that dutyholders make responsible and enlightened choices. What are you waiting for? ___________
1 It has not been possible to obtain more recent data on UK expenditure but as administration and legal costs were averaging £1 million ($1.82 million) a month, the totals will have increased significantly since November 2003. ___________ Compiled by Laurie Kazan-Allen |