Rt Hon Lord Mance

2 FEBRUARY 2010

  Q111Chairman: Lord Mance, first of all, may I thank you very much for coming to this meeting of the Special Public Bill Committee on the Bill. Like Professor Merkin, who gave evidence last week, it is clear to us all that you are a great expert on this Bill. I wonder whether you might like to start by telling us something about the decision of the House of Lords in Bradley v Eagle Star and what the consequences of that decision were?

  Lord Mance: Thank you very much first for inviting me to give evidence. That was a decision of the House of Lords that in circumstances where an insurer was insuring a company that was not only insolvent but had disappeared in the sense of being struck off the register and no longer existed, there was no possibility of the third party who had a claim against the insured pursuing that claim or therefore of establishing the insured's liability, and, in those circumstances, there could be no transfer of rights under the Third Parties (Rights against Insurers) Act 1930 and it was bad luck for the third party, in that case a typical personal injuries plaintiff, if I remember, a victim of a long-term infirmity. A number of people, including myself, felt that that decision, which was reached by a majority of the House of Lords, with Lord Templeman dissenting, was most unfortunate. Subsequent research leading to an article of mine, which you have seen, indicated to me that it was also completely unnecessary and it was contrary to the original intention of the Act. Be that as it may, when the decision of the House of Lords came out, we took steps to redress it and I actually enlisted the assistance of a very well-known Lloyd's insurer, Robert Kiln, who was a great friend, sadly now dead, and he very public-spiritedly wrote to the Attorney General, who was Lord Lyell at that stage, who blessed a retrospective amendment to the Companies Act 1985. It happened that the Companies Act 1989 was going through at that stage and we inserted into that 1989 Bill an amendment which went through the Commons. It was rather more contentious in the Lords and Lord Templeman, as you saw from my note, had to speak twice in order to ensure that it went through, but it did go through and, broadly, it did not directly reverse Bradley; what it said was that companies that had been struck off the register could now be restored within a much longer period than was previously possible. I think the period for restoration had previously been as short as two years and it was now extended, if I recall, to something like 20 and as a result I think even Mrs Bradley's defendant company could be restored to the register, judgment could be obtained against it, and then of course the statutory transfer under the 1930 Act would, according to the decision in Bradley v Eagle Star itself, take effect.

  Q112  Chairman: It follows from all that you have been concerned with this subject since 1989, is that right, or possibly even before?

  Lord Mance: I think from before because we have all been conscious at the Bar of the importance of the Third Parties (Rights against Insurers) Act 1930 and of some of the difficulties.

  Q113  Chairman: For a long time you have been concerned?

  Lord Mance: Yes.

  Q114  Chairman: Then of course you gave the lecture which I think we have all read. That was in 1994, was it not?

  Lord Mance: Yes.

  Q115  Chairman: And at the end of that lecture you called for legislation, as I recall, and of course legislation is what we have now got. Could I just ask you this very general question right at the beginning: are you satisfied with the general approach adopted in the Bill as a result of the call that you made as long ago as 1994 for legislation in this field?

  Lord Mance: Yes, I am very satisfied. The most basic change of course is that it does sweep away the actual decision in Bradley v Eagle Star. It provides that it is no longer necessary first laboriously to establish the insured's liability and only then to get the benefit of the full statutory transfer. You can now proceed directly against the insurer and establish the insured's liability in that proceeding against the insurer, and you can join the insured to that proceeding if you wish. To my mind, that is a huge improvement and actually one that goes back to the original spirit of the 1930 Act, in my view.

  Q116  Chairman: I am sure we are all very grateful for that answer, particularly I think the Law Commission will have been very glad to hear that. Unless you have any better ideas, we might now look at the notes which you have provided for us and take the matters more or less one-by-one. I think you cover all the points covered earlier by Professor Merkin so, with that in mind, one could perhaps start with paragraph 2(iv) at the bottom of the first page of your notes, which is of course the question of a possible amendment under Schedule 1 paragraph 1(1)(b). This is the point which Professor Merkin dealt with in paragraph 13.4 and discussed at page 22 of the transcript.

  Lord Mance: Yes, I see the force of Professor Merkin's point. It is of course a more general point and I think that may be the problem. I note the suggestion is that one might add the words "or may be unable to satisfy a judgment against him". I think the more general point is that it would often be very nice for a claimant to be able to know what assets a potential defendant has. An insurance claim in respect of liability is of course only one asset, but there is no general right in the law at the moment to ascertain substantively or procedurally what assets a defendant has. Of course if you have a well-founded suspicion that a defendant is likely to be salting away his assets, or would be likely to do so, then there is a very well-established jurisdiction to obtain a freezing order. It may be confined to United Kingdom assets, it may be world-wide, and that is always accompanied in practice with an order for disclosure of assets, so in that way a claimant can ascertain assets where a defendant is, so to speak, suspect in his conduct, but there is no general right, where you are simply concerned that an apparently honest defendant may not have assets, to find out about how valuable his house is or whether it is in his wife's name or whether it is on mortgage and so on. In that sense, the amendment will perhaps be going further than the general law and raises a general problem that might need more general consideration. If one takes the view, as I can see could well be the case, that in many quite common instances liability insurance is a special field, and of course the Act does to a large extent take that view—and it is especially applicable in the case of compulsory liability insurance—then I can see the force of the argument for a brief addition along the lines that have been suggested.

  Chairman: Has any member of the Committee got any questions on paragraph 2(iv) of Lord Mance's paper?

  Q117  Lord Archer of Sandwell: I just wonder whether Lord Mance can tell us how serious this problem is? Is it something that occurs regularly or can it in fact be dealt with procedurally as you suggest?

  Lord Mance: I think it would be dangerous for me to try and generalise here. I think that the existence of insurance in respect of liability is often a pretty important factor when you are considering whether to commence proceedings. In some cases, as I say particularly in compulsory insurance, you are pretty confident that there will be someone behind the defendant and you often know that quite well from the nature of the solicitors who pop up answering your correspondence. Of course, what you cannot say, and what even the disclosure here might make it difficult to say is what the prospects of recovery under the insurance would be if there is a dispute between the insured and the insurer, and that can still exist even if the insurer's solicitors are acting for the insured. They may have reserved the position and there may be some lurking problem, or indeed there may be limits or something like that which are going to be unhelpful to you. However, I think in general terms the answer is that the existence of liability insurance is a pretty important factor and it would be helpful to some claimants to know whether it exists, and of course one thinks in particular of non-commercial circumstances.

  Q118  Lord Archer of Sandwell: So it is not a case where you might have a pretty shrewd guess one way or the other?

  Lord Mance: I think certainly in the case where insurance is compulsory, either by law or by professional practice, you would normally assume that insurance was in place and that is good enough.

  Q119  Chairman: Any other questions on that paragraph? Then I think you move on from that to a possible extension of 1(3)(b)(iii) which covers the question of set-off. Could you explain that?

  Lord Mance: I think that this would possibly already fall within the existing wording which covers situations where the insured has been informed by the insurer that the insurer is claiming not to be liable, but I am not confident of that. It may be that the insurer had not directly raised the point yet, and if one was seeking information from the insured then if the insurer had not raised the point the insured would not know about it, but I can see the force of clarifying 1(3)(b)(iii) by making it clear that it covers situations where the insurers or the person who is receiving the request for information knows that the insurer is claiming some set-off.