Redman v Zurich Insurance Plc & Anopr [2017] EWHC 1919 (QB)

In Redman v Zurich Insurance, Mrs Justice O’Farrell DBE considered the interplay between the Third Party (Rights Against Insurers) Act 1930 (“the 1930 Act”) and the Third Parties (Rights Against Insurers) Act 2010 (“the 2010 Act”) in the context of the transitional provisions to the 2010 Act.

The Judge held that there was no scope for the 2010 Act to operate retrospectively and parallel to a claim governed by the 1930 Act.  He therefore struck out the Claimant’s claim.

The decision is considered by Katie Powell of 4 New Square.

THE BACKGROUND FACTS

On 5 November 2013, Mr Redman died from lung cancer alleged to have been caused by exposure to asbestos when employed by a company known as ESJS1. ESJS1 was the subject of a voluntary winding up on 30 January 2014 and was later dissolved on 30 June 2016.

Mrs Redman, the widow and administratrix of Mr Redman, brought a claim against Zurich, the insurer of ESJS1, under the 2010 Act.  The principle advantage to her claiming under the 2010,  rather than the 1930, Act was that she could bring a claim directly against Zurich without first having to establish her claim against ESJS1 and to revive the company for that purpose.  Zurich applied to strike out or, in the alternative, for summary judgment on, the claim.

The application took the form of a “friendly action”, with Zurich agreeing to indemnify Mrs Redman as to the costs of preparing for and hearing the application.

THE ISSUES AND THEIR RESOLUTION

Issue 1: When does a person “incur liability” for the purposes of the 1910 Act?

Section 1 of the 2010 Act provides:

Rights against insurer of insolvent person etc

This section applies if –

a relevant person incurs a liability against which that person is insured under a contract of insurance, or

a person who is subject to such a liability becomes a relevant person…”

Schedule 3 to the 2010 Act provides:

Transitory, Transitional and Saving Provisions

Despite its repeal by this Act, the Third Parties (Rights against Insurers) Act 1930 continues to apply in relation to –

cases where the event referred to in subsection (1) of section 1 of that Act and the incurring of the liability referred to in that subsection both happened before commencement day;

cases where the death of the deceased person referred to in subsection (2) of that section happened before that day.

In this Schedule “commencement day” means the day on which this Act comes into force.”

The effect of these provisions is that the 1930 Act continues to apply if, before the commencement date of the 2010 Act,[1] (i) the relevant person has incurred a liability against which that person is insured under a contract, and (ii) the person subject to such a liability has become a “relevant person”.[2]

Mrs Redman initially sought to justify her claim under the 2010 Act on the basis that ESJS1 had “not incurred a liability against which that person is insured under a contract” before the 2010 Act came into force (thus taken her outside Schedule 3).  In the event, however, Counsel for Mrs Redman abandoned this stance.  Counsel’s decision was endorsed by the Judge; following Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 Q.B. 363 and Bradly v Eagle Star Insurance Co [1989] 2 W.L.R.568, a liability is incurred when the cause of action is complete and not when the claimant’s rights against the wrongdoer are crystallised.

Issue 2: Does the 2010 Act to operate retrospectively and parallel to claims governed by the 1930 Act?

Having abandoned the initial basis on which the claim was brought under 2010 Act, Counsel for the Claimant advanced the “brave submission” that the 2010 Act nevertheless applied to the claim because, on the proper interpretation of the transitional provisions, the application of the 1930 Act did not preclude the retrospective but parallel operation of the 2010 Act.

This submission was rejected resoundingly by the Judge on the basis that:

(i) it was wholly inconsistent with the wording of section 1 and Schedule 3 of the 2010 Act;

(ii) if correct, it would render the transitional provisions of the 2010 Act otiose because the 2010 regime would apply retrospectively and indiscriminately;

(iii) if Parliament had intended the 2010 Act scheme retrospectively to apply to all third party claims, a relatively straightforward drafting exercise could have achieved this;

(iv) if the two schemes operated in parallel, one would expect that there to be some merit in affording the claimant a choice between the two; however, the 2010 Act scheme was always more advantageous to a claimant than the 1930 scheme.

COMMENTARY

The case proceeded as a friendly action because of the number of claimants in a position similar position to Mrs Redman who were seeking to argue that a liability was incurred for the purposes of the 2010 Act when his rights were crystallised, rather than when the cause of action was complete.  Thus, despite the ultimate abandonment of the point at the hearing, the case serves as a useful reminder of the meaning of “incurs a liability” in the context of third party claims against insurers.

The actual ratio of the case, namely that the transitional provisions do not allow for the 2010 regime to be applied retrospectively so as to run parallel with the 1930 regime, is hardly surprising; a finding that the two regimes operated retrospectively not only would be inconsistent with the transitional provisions of the 2010 Act itself, but also would wreak havoc across a whole host of other statues with similar transitional provisions.

[1] 1 August 2016

[2] The term “relevant person” is deployed in the 2010 Act to refer to an individual or corporate body falling within any of the formal legal categorisations of insolvency listed.

 

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