Disease claims: Court of Appeal offers guidance to insurers of dissolved companies

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10 March, 2020

Kevin Cowley v LW Carlisle & Co Ltd (2020)[2020] EWCA Civ 227 CA (Civ Div) (McCombe LJ, Holroyde LJ, Peter Jackson LJ) 25/02/2020

The facts

The Claimant brought a claim for industrial deafness. He sought damages for noise induced hearing loss alleged to have been sustained in the course of his employment, by four different employers, between 1963 and 2000.

The Claimant was employed by LW Carlisle & Co Ltd ("LWC") between 1978 and 1983. LWC had since been struck off the register of companies and was dissolved. The Claimant's solicitor was aware that the LWC was a dissolved company when it issued proceedings in 2017. A letter accompanied the claim form stating that the Claimant would be seeking LWC's restoration to the register. Copies were also sent to LWC's insurer who confirmed that LWC was dissolved so proceedings could not be served on them. No steps were taken by the Claimant to restore the company.

In 2018, solicitors for LWC's insurer purported to lodge an acknowledgement of service on behalf of LWC indicating an intention to contest the jurisdiction. It also issued an application notice for an order striking out the claim against LWC as an abuse of process, or for a declaration that either the court had no jurisdiction or would not exercise its jurisdiction against LWC.

At the hearing the district judge held that the court would only allow the claim to progress against a company that existed and would only correct errors in procedure where there was imminent restoration. The Judge was concerned about the delay on the other three Defendants, the fact that this was a low value claim, that there was no evidence that progress had been made to restore the company and no explanation why this had not happened. He refused the Claimant's application for a stay.

First Instance Appeal

On appeal, the judge at first instance found that the district judge had not erred in principle in exercising his case management powers to strike out a claim on the basis that the purported defendant did not exist and no sensible, timely steps had been taken to restore it to the register. Moreover, a failed application for a declaration that the court had no jurisdiction to hear the case did not prevent the court from exercising its case management powers.

The Claimant appealed against the strike out of his claim against LWC.

The Court of Appeal

The Judge held that the district judge had been entitled to strike out the claim and 'could not be faulted' for taking this step. He was entitled to consider whether the overriding objective was properly served by the presence in the action of a non-existent company.

The appeal was therefore dismissed.

Costs

The Court of Appeal also took a robust stance on the issue of costs and noted that there was "good reason" to think that the Claimants 's solicitors should not expect the Claimant personally to bear any of the costs of any party of the proceedings (including his own costs). The Court of Appeal went on to say "those costs were occasioned essentially by the misguided commencement of proceedings by the solicitors against LWC at a time when it was known that that company had been dissolved and was not in existence and without taking prompt steps to pursue the restoration of the company to the register".

Forbes comment

The Court of Appeal offered advice at the end of its judgment to insurance companies notified of a claim against a dissolved company. Without wanting to be prescriptive, the Court of Appeal suggested that insurers should notify the claimant of the dissolution of the company and either invite or require him/her to make an application for restoration of the company to the register and to apply to the court for the main claim for a stay of the substantive proceedings in the interim.

If the claimant does not co-operate then the insurer should write to the court notifying it of the situation and asking it to consider making an order for a stay of its own motion until notified of any order for restoration.

Following such a stay, if nothing is done after a sensible time, it would then be open to the insurer to invite the court to strike out the proceedings.

For more information contact Chris Booth in our Insurance department via email or phone on 0161 918 0002. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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