Restoring companies to the register: A new role for insurers?

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Restoring companies to the register: A new role for insurers?

Published 1 septiembre 2020

The recently decided case of Holmes v S & B Concrete Limited [2020] EWHC 2277 (QB) has thrown into the spotlight the issue of restoring dissolved companies to the Register for the purposes of bringing a personal injury claim.

The claimant brought a NIHL claim against one of his former employers.  The relevant time line is:

  • 1986 – 1993 Claimant employed by the Defendant
  • 19 August 1995 Defendant dissolved following a voluntary winding up
  • 30 May 2018 Claimant issues a claim for damages for NIHL against the Defendant
  • 13 August 2018 Claimant applied to restore the Defendant to the register of companies
  • 20 August 2018 Claimant served the Particulars of Claim

In the Particulars of Claim, the Claimant pleaded his date of knowledge was less than 3 years before the issue of proceedings or in the alternative that he should be granted s.33 discretion to proceed out of time.

The case was listed for a preliminary hearing on limitation at which it was found that the Claimant’s date of knowledge was mid-2007 and that it would not be equitable disapply the limitation period pursuant to s.33.  At this point the Claimant’s counsel raised a fresh argument based on the case of Financial Services Compensation Scheme Limited v Larnell (Insurances) Limited (in liquidation) [2005] EWCA Civ 1408.

The argument was that the restoration of the company had retrospective effect such that the company was deemed to have been in voluntary liquidation throughout that period and that limitation had ceased to run and therefore the general moratorium on limitation would apply. This argument was rejected by the judge at first instance.

The Claimant appealed, submitting that the Financial Services case ought not to be distinguished because his claim was for personal injury and that case was not and that the judge erred, in the light of the authorities which it was asserted supported a general proposition that limitation periods in respect of claims against a company cease to run when it goes into liquidation: the judge’s findings in respect of S.33 were not appealed

The appeal was dismissed by Mr Justice Martin Spencer who held that the interpretation that the Claimant sought to place on the Financial Services case could not have been intended by Parliament when it enacted the provisions of the Companies Act 2006 that deal with restoration.  Had that been so the limitation period would never have run and a direction that the period between the dissolution of the company and the order to restore being made would be unnecessary.

The appeal judge ruled that the trial judge had correctly distinguished the Financial Services case. In the vast majority of cases the liability of the insurance company would be well under the statutory minimum level of insurance of £2 million, the result being that the whole of the claim would be covered by the insurance and would therefore be “outside the liquidation" whereas in Financial Services the claim was not “outside the liquidation"

Acknowledging that there could be some cases in which the liability of the insurance company could be insufficient to cover the whole of the claim, the judge suggested that it could be made a condition of restoring the company to the register that any claim against it be restricted to the liability of the insurer under the insurance policy with the result that the desirable result of keeping the claim distinct from the situation in Financial Services. This would ensure that a claimant whose claim was otherwise unmeritorious because the necessary knowledge was acquired more than 3 years before the issue of proceedings and in respect of whom for the court to exercise its discretion to extend the limitation period would be inequitable would not gain an undeserved windfall.

At appeal Mr Spencer J made an observation which could prove to have a significant impact on insurers were his suggestion to be adopted stating:

It is unfortunate that, in the present case, the Defendant company was restored to the Register without notice of the application being given to the Company’s insurers who were the ultimate target for the Claimant in making his application for restoration, and that the order was made without, apparently, consideration being given to the resolution of any issue between the Claimant and the Defendant’s insurers in relation to a possible defence under the Limitation Act 1980. I would encourage the Rules Committee to give consideration to a change in the rules, requiring such notice to be given to a relevant insurer when such an application is made for restoration.

If adopted, this would give insurers in such situations the opportunity at an early stage to bring forward for determination any limitation challenge that there may be and, if successful, prevent the restoration of the company to the Register.

However, any provision which would require notification to the insurer, if it is going to be effective in the way envisaged by Spencer J, will need to have around it appropriate provisions to enable the insurer to identify and deal with any limitation issues that there may be.  This would require the prospective claimant being obliged to give full disclosure and provide both their expert and lay witness evidence without which the insurer would be unable to investigate and identify and limitation issues.  In the absence of such an open approach, the judge’s vision of a unified approach to limitation and restoration could not be achieved.

If we do see a move towards insurers being notified of applications to restore then it will be necessary for them to be alert to applications and to ensure that their legal advisers are instructed in a timely manner in order that steps can be taken to identify and limitation arguments so that they can be properly argued at the restoration hearing.

DAC Beachcroft, will be keeping track of any proposed rule changes, and we will keep you  informed as to any changes which may occur and how these may impact on the handling of disease claims.

For more information or advice, please contact one of our experts in our disease team.

Key Contacts

Thomas Jordan

Thomas Jordan

Bristol

+44 (0)117 918 2122

Will Potts

Will Potts

Leeds

+44 (0)113 251 4847

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