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Court of Appeal issues guidance on restoring a dissolved company to the register.

The Claimant sought to pursue a noise induced hearing loss claim against a number of his former employers.

On 25 February 2020 the Court of Appeal handed down judgment in an appeal brought on behalf of a claimant by Walker Prestons for strike out of his noise-induced hearing loss claim.

The important aspect to note in relation to this matter is the court’s guidance to insurers on how to deal with a matter when their insured is dissolved.

The claimant sought to pursue a noise-induced hearing loss claim against a number of his former employers. One of those, L W Carlisle & Company Limited, was a dissolved company at the time of issue and service of proceedings, making proceedings a nullity. Purported reliance was placed on Peaktone v Jodderel [2012] EWCA Civ 1035 on the basis that actions taken when a company was dissolved can be retrospectively validated by restoration. However, it appears that rather than get on with the restoration, the claimant’s solicitors sought to oppose an application to strike out on technical procedural points as well as reliance on Peaktone.

As noted by the Court of Appeal, unlike in Peaktone, L W Carlisle & Company Limited was not restored by the time the application to strike out was heard. There was no evidence that any steps had been taken to even commence that process.

The court limited itself to considering if the orders made by the district judge and circuit judges in the County Court were valid based on the facts known to them. It dismissed the procedural challenges on the basis that they assumed valid service had taken place.

On the basis that L W Carlisle & Company Limited did not exist and there was no imminent restoration of the company (which would have validated service), the claim was struck out.

The Court of Appeal considered that the approach adopted by the district judge (and upheld at an initial appeal) fell within the ambit of the discretion allowed when making case management decisions and the appeal was therefore dismissed.

Of most interest to insurers dealing with legacy claims and businesses that are often insolvent was the guidance issued by the Court of Appeal towards the end of its judgment. It suggested a “wise” approach to be as follows:-

  1. Notify the claimant that the insured company is dissolved and invite a restoration application and a separate application to stay the main claim
  2. If the claimant does not respond, the insurer should ask the court to stay the proceedings of its own motion
  3. Once a stay has been imposed if nothing is done after a “sensible time”, a request to the court could be made to strike out the claim.

Given this judgment we may now see more applications to restore companies to the Register prior to service regardless of any agreement not to raise the point. In addition, it seems unlikely that insurers will be able to escape paying costs of restoration as related to an underlying claim, as claimant solicitors will be able to point to this judgment and Peaktone to say that it was a necessary step to pursue the claim.

There are also comments in the judgment which could be concerning in terms of conduct of litigation. A few comments are littered throughout about the potential validity of the application made on behalf of L W Carlisle & Company Limited – because of course they were dissolved, and the insurer’s authority to act for that company may have disappeared when the company was dissolved.  

No final decision was made on this aspect (the court getting around it on this occasion by referring simply to the fact that the application was before the district judge) but there is the prospect of further litigation to follow on this issue. As an immediate point, it is not entirely clear that an insurer’s request made in accordance with the Court of Appeal’s advice will be recognised as they may not have standing in the claim, they will not be a party to a claim and may not have representation on the Court record.

This case could well be seen as a high stakes game of poker, seeking to bluff the defendants into submission. It is understood from the judgment that L W Carlisle & Company were responsible for less than 20% of a claim worth in the region of, at most, £5,000. On this occasion, with apparent costs involved in pursuing the appeals upwards of £50,000, and potentially having to pay wasted costs of the appeal, the bluff has backfired this time.

For those who wish to read the concise judgment in full, it can be found here.

If the content of this update raises any issues for you, or you would like to discuss, please liaise with Peter Tyler, Associate on 0121 616 6560 or email at peter.tyler@Weightmans.com.

 

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