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|ISSN 1470-8108||Issue 58||Spring 2005|
Nothing short of a miracle will stop the administrators of the T&N Group from beginning a controlled realization of the company's assets on April 30, 2005. The threat of industrial unrest at T&N's English companies and the seemingly unbridgeable gap between the U.S. and UK positions have left little room to manoeuvre in what has become one of the world's most complicated transnational insolvency events and probably the longest ever trading (UK) administration.1 Asbestos claimants remain shut out from the feeding frenzy that has paid handsome rewards to the company's administrators, lawyers, accountants and other professional advisers. Although T&N pensioners continue to receive full pension entitlements for the time being, deferred pensioners and the current workforce agonize over what the future holds.
Towards the end of 2004, there was a flurry of activity generated by the prospects of a December 9 hearing in the U.S. Bankruptcy Court for the District of Delaware.2 In the run-up to that Court date, proposals were made by the U.S. co-proponents of the Federal-Mogul (FM) Reorganization Plan (the Plan)3 to UK administrators and independent trustees of the T&N and Champion Pension Plans. Unfortunately, a global agreement could not be reached. The UK administrators, Kroll Limited Corporate Advisory and Restructuring Group, and the independent trustees of the T&N Pension Fund, Alexander Forbes, remained convinced that the Plan was structurally unfair, treated creditors unequally, did not comply with UK insolvency law and failed to give creditors the best possible result. Rulings by High Court judges supported the right of the administrators and trustees to withhold their support for the Plan. On October 21, 2004, Mr. Justice Richards directed the administrators not to propose UK insolvency procedures to implement the U.S. Plan without a further court order and gave them permission to file their objections to the Confirmation Plan in the U.S. Bankruptcy Court. He said:
I am satisfied that the administrators and the creditors represented on this application have raised serious issues requiring consideration with respect both to the fairness and to other aspects of the proposals embodied in the Plan. I do not consider that it would be right to direct the administrators to oppose confirmation, in the sense of requiring them to do so. It is however appropriate to give them liberty to be represented in the hearings and to oppose confirmation.4
In the same vein, Mr. Justice Patten supported the independent trustees' rejection of the Plan finding that this action did not breach their fiduciary duty to T&N Pension Scheme members. Patten noted:
Anne Hearn Associates, the independent trustee of the Champion Pension Plan,7 acting on the advice of the same UK judge, voted to accept FM's offer of £11 million as part of the Plan. In light of the impasse which has been reached, T&N administrator Gary Squires is understandably pessimistic:
It's looking increasingly unlikely that the Champion scheme will receive the GBP11m the closer we get to 30 April without a wider agreement being reached This (Champion's) deal is dependent on doing deals with T&N pension scheme trustees and the UK asbestos community. The biggest sticking point is the T&N (pension) scheme because the deficit is so colossal and the plan proponents have so far been unable to agree on a settlement.
One of the major stumbling blocks is disagreement over the size of FM/T&N's asbestos-related liabilities. Estimates compiled for FM by Dr. Peterson are considered grossly inflated by UK experts. Peterson calculates that:
An analysis of Peterson's data, submitted to Mr. Justice Richards by the administrators and compiled by the EMB Consultancy LLP, assessed:
Yet another analysis of Peterson's data was commissioned by the T&N pension scheme trustees. Consulting Actuary Michael Angelina, who warned of the inherent uncertainty in any actuarial estimates of asbestos liabilities, estimated future U.S. asbestos liabilities in the range of $2.1-$5.5bn. His figure for UK claims of £216.7m is £35.3m less than Peterson's (£252m).8 Because of the dispute over the figures, an estimation hearing will be held in the U.S. in June, 2005. Even when the court rules on this issue, the matter will not be resolved as the estimates will be based on the U.S. tort system judicial process and not the more rigorous English system under which the claims would eventually be considered and adjudicated as part of a UK liquidation process. So, while a U.S. court ruling on the sum total of FM/T&N's asbestos liabilities could be helpful, it will not be determinative.
Although T&N's UK businesses have continued to trade, the ongoing uncertainty has taken its toll on the workforce and customer base. Negotiations between U.S. and UK stakeholders over the last few months have been non-productive; as a consensual solution remains elusive, the administrators have decided that, in the absence of a breakthrough, a controlled realization of the company's UK assets must commence at the end of April, 2005.9 T&N's businesses will be sold off as going concerns; the monies raised will eventually be divided amongst all creditors including the pension plans and asbestos victims.
The threat to pensions is a political hot potato especially in the pre-election period. On April 6, 2005 the Pension Protection Fund (PPF), set up to cover pension payments to workers whose companies go bust, opened for business.10 Although the fund is designed to cover schemes that collapse after April 6, T&N's pensioners might be eligible; under the PPF, a second insolvency event, such as liquidation or even a company voluntary arrangement, might enable those in the T&N schemes to qualify.11 Dick Croft, a spokesperson for Amicus, has been negotiating on behalf of T&N pensioners; he believes that the PPF:
could be the lifeboat. There are still a lot of negotiations to go through before we even get to that but at least people who are members of the pension scheme know where the bottom line is.
Theoretically, the PPF will pay 100% of pension entitlement, up to £25,000 a year, for people who have reached normal pension age with younger scheme members receiving only 90%. In reality, however, a flood of claims, such as those coming from T&N and MG Rover pension holders, could threaten the viability of the Fund. The PPF was intended to protect workers at risk from small pension fund failures and not members of schemes run by major corporations; total funding for the first two years is £450m with only £150m allocated for 2005. Actuary Danny Vassiliades says:
If the scheme starts with an enormous deficit, then you are likely to get one of two things. Either the premium companies have to pay will go up or the benefits for victims of failed schemes will be cut. There's no guarantee that members will receive the 90% entitlement. The problem we have is the fund is starting with nothing. There's no doubt that the fund will struggle if a number of schemes enter straight away.12
Tim Culverhouse, a trustee of the T&N Pension Fund, agrees:
Negotiations with the Company and the Plan Proponents continue.Should these not be successful it seems probable that there will be a second insolvency event and that will trigger a PPF assessment period.It is likely that the scheme, with no further support, will be unable to pay PPF level of benefits.
Pensions expert John Ralfe believes that once T&N's UK assets are sold, the PPF could face a bill of £225m to plug the pension hole.13
What about T&N's UK asbestos victims? Representatives of UK asbestos claimants told Mr. Justice Richards of their concern over the possibility that they might:
be required to release rights to sue UK companies in the UK courts in respect of claims governed by UK law, and will instead have their rights adjudicated in the United States by US representatives of the trustees under procedures governed by US law.
In May, 2004, a settlement was reached with the Employers' Liability insurers which covered T&N during the period 1969-1995. As of mid-April, 2005 none of the £34.74m paid by the Brian Smith Syndicate at Lloyd's of London and the Royal and Sun Alliance has found its way to injured workers or grieving relatives. According to the administrators, a scheme of arrangement to permit distribution of the settlement monies, which will require creditor and court approval, is being prepared. Neil Griffiths, a solicitor for the administrators, believes that the process is likely to take some months yet but much of the preparatory work has now been done.intention is to start paying claims very soon after court approval is obtained.
Colin Laidler, whose father's settlement with T&N was reached four days before the company went into administration, is angered and saddened at the events of the last three years:
My father had worked for 39 years at Turner & Newalls Manufacturing plant in Washington in Tyne & Wear. He was proud that he was an employee of T&N. My brother, also Ronald, co-executor of my Father's Estate, and I were 3rd generation Laidlers to be employed by T&N. My brother has pleural plaques, as does my mother, Sarah Laidler. My grandfather had asbestosis and my grandmother had cancer. I have a cousin who has been affected by exposure to asbestos. What we have in common is that we were employed by T&N T&N has slowly but surely been killing and maiming three generations of my family who had been their loyal and hard working employees.
Ronald Laidler's diagnosis of mesothelioma devastated the whole family. In May, 2001 Mr. Laidler filed a claim for damages, hoping that he could gain some financial security and stability for his wife. Even this small consolation was denied to him:
My father knew about the complexity of the legal problems that beset his case after the Administration Order was made. He died a painful and degrading death not knowing whether there would be a satisfactory outcome to it all. Now, 21 months after his death my mother, brother and I have still to see my father's dying wish fulfilled; that my mother would be financially provided for by the compensation T&N had agreed to pay for causing his untimely death
I am concerned that the Americans (proponents of the FM Plan) seem to want to push through a plan that is not only unfair, but contains no indication of how much or when compensation would be paid and may make no meaningful contribution towards the compensation for my father's death.14
By the end of 2001, 193 UK mesothelioma claims against T&N had been frozen by the administration order.
Ian McFall, a member of T&N Creditors' Committees15 and Head of National Asbestos Litigation at Thompsons Solicitors, represents the Laidler family and other T&N asbestos claimants. Commenting on the administration process, he said:
Throughout this wretched process it is undoubtedly our clients who have suffered most through illness and death from asbestos related disease caused directly by T&N. Yet despite the strength of their claims they are likely to benefit least from the outcome of the Administration. So far they have had nothing; not a penny in compensation, while obscene amounts in professional fees have been consumed on both sides of the Atlantic. How much longer must this sickening farce continue before the interests of our clients are redressed ?
A Mesothelioma Summit held at the London headquarters of the British Medical Association on March 9, 2005 attracted a capacity audience of asbestos victims, family members, trade unionists, medical personnel, journalists and public health campaigners to consider what steps can be taken to focus national attention on the needs of thousands of UK citizens who have been disadvantaged by asbestos-related illnesses. This initiative was organized by the British Lung Foundation (BLF) in collaboration with the June Hancock Mesothelioma Research Fund, the Mick Knighton Mesothelioma Research Fund and other groups and individuals active on this issue. Welcoming delegates, Dr. Mark Britton, Chairman of the BLF and a Consultant Physician with an interest in chest diseases, described the seemingly inexorable rise of mesothelioma deaths in the UK. Photographs of hazardous working conditions and a graph showing a correspondence between national asbestos consumption and the annual incidence of male mesothelioma deaths were the background to a presentation which pinpointed current geographic hotspots and at-risk occupations such as carpenters, plumbers, insulators and shipbuilders.
The next speaker, Professor Mike Richards, is commonly referred to as the Cancer Tsar. The 1999 appointment of Richards by the Department of Health as the National Cancer Director broke the UK tradition whereby only civil servants worked with ministers to develop and implement government health policy. In his presentation The Challenges of Mesothelioma, Professor Richards acknowledged that while the incidence of mesothelioma is increasing in the UK, the diagnosis, treatment and care of those with this lethal disease remain patchy. The Department of Health's new Lung Cancer Advisory Group is currently looking at ways to improve the delivery of services; it has been proposed that mesothelioma networks should be set up throughout the country headed by designated specialist clinicians to oversee treatment of mesothelioma patients in their regions.16 Richards admitted that no clinical guidelines for the treatment of mesothelioma have been issued by The National Institute for Clinical Excellence (NICE). (NICE Guideline 24: The diagnosis and treatment of lung cancer does not cover mesothelioma.17) Responding to a question about the funding of multicentric mesothelioma trials, Richards replied that the number of people on clinical (mesothelioma) trials has doubled in 3 years.
According to Prevention, Trends and Statistics, the presentation by Dr. John Osman, Head of the Health and Safety Executive's (HSE's) Epidemiology and Medical Statistics Unit, there will be 65,000 UK mesothelioma deaths between 2002 and 2050. For those already affected by this deadly disease, care and treatment services need to be vastly improved. To prevent future avoidable deaths, the HSE introduced the Control of Asbestos at Work Regulations (2002); Regulation 4, which came into force in May, 2004, 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. Making the effective management of asbestos a statutory priority for organizations signalled a new determination to manage a hazard which continues to pollute the national infrastructure.
Dame Helena Shovelton, Chief Executive of the BLF, expressed the view of many delegates that that there is a real need to push mesothelioma up the national political agenda:
The government needs to make it (mesothelioma) more of a priority, it was hardly mentioned in the 2000 Cancer Plan18 and victims are basically told there is nothing that can be done for them. This is distressing for those diagnosed with the cancer and simply is not good enough. It would not happen with any other cancer.19
To raise awareness, Shovelton said, the BLF is proposing that:
Speaking about this failed group of patients, Liz Darlison discussed the steps being taken by Mesothelioma UK to educate and communicate with a broad spectrum of stakeholders. Forums at which she has participated include those organized by lung cancer nurse specialists, researchers, asbestos victims, charities, civil servants and solicitors; a free phone help-line provides vital support to victims and their relatives as well as nursing staff.
Dr. Helen Clayson, a specialist in palliative care, described the findings of a research project comparing the experiences and treatment of 83 mesothelioma patients in Barrow-in-Furness, Leeds and Doncaster. The use of quotes from interviewees added a personal dimension to the data and findings presented:
A recurrent theme was the difficulty of accessing government benefits and obtaining compensation. Professor Anthony Newman Taylor, Chairman of the Industrial Injuries Advisory Council, a scientific advisory group to the Department for Work and Pensions (DWP), confirmed that due to the underclaiming of Industrial Injuries Disablement Benefits (IIDB) by mesothelioma victims, a comprehensive review of mesothelioma and other asbestos-related diseases had been conducted. The report which is now awaiting the Minister's attention confirmed that:
Adrian Budgen, of Irwin Mitchell Solicitors, explained some of the complexities of claiming benefits such as Industrial Injures Disablement, Constant Attendance Allowance and Exceptionally Severe Disablement and the process of obtaining civil compensation from negligent employers. Responding to a question about the high cost of treatment with Pemetrexed (Alimta), a palliative chemotherapy drug, Mr. Budgen suggested including treatment costs in mesothelioma awards.
Another recurrent theme was the lack of government funding for medical research and treatment with new drugs. Dr. Jeremy Steele said that 60% of patients experienced improvement in their symptoms after treatment with drugs such as Alimta and Cisplatin; unfortunately, six cycles of these drugs cost £10,000. According to the Greater Manchester Asbestos Victims' Support Group, Primary Care Trusts in Greater Manchester are refusing to approve the necessary expenditures:
Treatment of mesothelioma has to date cost the NHS very little; until recently patients were simply sent home to die. Now that palliative chemotherapy treatment is available it is imperative for medical and ethical reasons, and justified on grounds of cost, that it be provided NOW.
In the UK, funds for research into mesothelioma biology and treatment protocols are urgently needed.
The penultimate session of the day was a presentation by Chris Knighton, whose husband Mick died of mesothelioma in 2001. Photographs of Mick in his naval uniform showed a fit and robust man, referred to by Chris as her rock. The story of Mick's symptoms, diagnosis, medical treatment and deterioration was the most hard-hitting of the day. Chris said:
It happened so suddenly. When Mick was diagnosed he was told he had just months left and there was no treatment, no cure. He was just left.
Determined to ensure that others do not suffer as Mick did, Chris and her family set up the Mick Knighton Mesothelioma Research Fund; their original goal to raise £100,000 for research has been surpassed.
To facilitate discussion about the proposed Mesothelioma Charter, delegates were offered the opportunity to join one of five break-out groups. Opinions expressed in these sessions included:
There was consensus on the need for coordinated action and it was agreed that the Mesothelioma Charter, with some revisions, should be adopted.
During the day, an agreement was signed by Kimberley Stubbs, Co-Trustee of the June Hancock Mesothelioma Research Fund (the Fund), and Mark Britton, representing the BLF, which will permanently amalgamate the assets and fundraising activities of the Fund into those of the Charity (BLF), and enable the continuation of the Fund under the British Lung Foundation's charity number. Ms. Stubbs, June Hancock's daughter, explained the reason for the June 1, 2005 merger:
In partnership, we will become an even greater force in the fight against this terrible disease. I couldn't wish for anything more, and I know that my Mum would be pleased and proud that we have come so far. Between us, we can significantly increase the profile of mesothelioma on a nationwide level by achieving a much louder voice, sharing valuable resources, and jointly lobbying those individuals and institutions that can really influence the fight against this disease.
Since it was founded in 1997, shortly after June's death from mesothelioma, the Fund has raised £250,000; awards by the Fund have financed the National Mesothelioma Helpline and supported important research projects in Leicester, Glasgow and London including the pilot project for the MSO1 trial.
A series of asbestos events is being planned for the UK:
May 18: Mesothelioma - The Silent Epidemic, British Museum, London. Organized by: Irwin Mitchell Solicitors; contact: Guy Darlaston: email: Guy.Darlaston@IrwinMitchell.com
May 18: Asbestos Seminar. Barking, East London. Organized by: Barking and District Asbestos Victims' Support Group; contact Margaret Sharkey: email: email@example.com
May 20: Asbestos Conference, Belfast. Organized by: Justice for Asbestos Victims (Northern Ireland); contact Fiona Sterritt: email: firstname.lastname@example.org
May 23: Asbestos Seminar, University of Strathclyde, Glasgow. Contact: Arthur McIvor; email: email@example.com
May 24: Asbestos Meeting, Glasgow. Organized by: Clydebank Action on Asbestos and West Dunbartonshire Council. Contact: Tommy Gorman; email: Thomas.Gorman@west-dunbarton.gov.uk
May 26: Asbestos Seminar, Cardiff. Organized by: Asbestos Awareness Wales.
June 3: Conference - Asbestos & The Law, Liverpool. Organized by Merseyside Asbestos Victims Support Group. Contact: John Flanagan; email: firstname.lastname@example.org
1 McAllister D. Champion faces loss of £11m payout as T&N deadline looms. Pensions Week. April 4, 2005.
2 On December 6, 2004, FM announced that the December 9 hearing to confirm the Plan to exit bankruptcy court protection (Chapter 11) had been postponed.
3 In 1998, the US automotive parts manufacturer, Federal-Mogul Corporation, bought the UK-owned company: T&N Ltd. On October 1, 2001 FM/T&N filed for voluntary Chapter 11 reorganization in the U.S. and administration in the UK (see British Asbestos Newsletter, issues 45, 46, 48, 51, 53, 55 & 56).
4 Mr. Justice David Richards. Approved High Court Judgment In the Matter of T&N Limited & Others and In the matter of the Insolvency Act 1986. October 21, 2004.
5 The phrase Let it Run refers to a proposal whereby the pension fund would continue to receive contributions from the FM Group over a number of years.
7 On June 30, 2004, the Champion pension scheme had 1,156 members, a market value of £44.4m and a deficit on a buy-out basis of £41.4m. The sum of £43.9m is needed to enable the benefits payable under the scheme to be maintained.
8 Disagreement over the value of T&N's realizable assets exists amongst various stakeholders with the co-proponents of the FM Plan contending that they are worth $488m, the administrators valuing them at $1.116bn and the T&N pension trustees estimating their worth at $993m.
9 The April 30, 2005 deadline is confirmed in the Fifteenth Witness Statement of James John Gleave to the High Court. February, 2005: In order to avert the threat of industrial action, the Administrators considered it necessary to place a final deadline on the time limit for achieving a deal with the Plan Proponents. The deadline chosen was April 30, 2005. This deadline was communicated to the (T&N) employees during the presentations (made in January, 2005). The employees were told that, in the absence of any deal with the Plan Proponents by 30 April, the UK Debtors will enter into a controlled realisation process. The Plan Proponents are aware of this deadline.
10 Legislation setting up the PPF and appointing a new Pensions Regulator to oversee occupational pensions was included in the Pensions Act 2004. The PPF is funded by compulsory levies on the trustees and managers of UK pension schemes. The ability of the Pensions Regulator to force foreign parent companies to adequately support troubled UK pension schemes is not assured.
11 Complimenting the PPF, the Financial Assistance Scheme (FAS) will offer compensation for members of pensions schemes which collapsed between January 1, 1997 and April 5, 2006. The Government has committed £400m to the FAS.
12 Larke M. Fears for new pension net. April 8, 2005. http://www.thislondon.co.uk/news/business/articles/timid399483?source=
13 Mawson J. Turner & Newall to cost Protection Fund £225m. http://www.ipe.com/article_default.asp?article=18439
14 Laidler C. Witness Statement of Colin Laidler (in the matter of T&N Limited and Others and in the matter of the Insolvency Act 1986) June 7, 2004.
15 In February, 2002, Ian McFall became a member of the Creditors' Committees of Newalls Insulation Co. Ltd., J. W. Roberts Co. Ltd. and T&N Shelf Twenty-six Ltd.
16 A spokesperson for the Department of Health told the BBC: A subgroup of the lung cancer advisory group has been set up specially to look at this type of cancer. It will recommend what action should be taken to tackle this particular cancer including service organisation, treatment and awareness raising, and will be making an initial report to the wider advisory group in April. Asbestos cancer victims 'ignored'. March 9, 2005. BBC website:
19 Asbestos cancer victims 'ignored'. March 9, 2005. BBC website: http://news.bbc.co.uk/go/pr/fr/-/2/hi/health/4328845.stm
Compiled by Laurie Kazan-Allen