Rt Hon Lord Mance

2 FEBRUARY 2010

  Q120  Chairman: Yes, I follow. Any questions on 1(3)(b)(iii), which obviously could say more than it does but I think your suggestion is that it is adequate as it stands? Is that right?

  Lord Mance: I think certainly if the insured had been informed by the insurer that the insurer was claiming a set-off then, to that extent, the insurer was claiming not to be liable, I would have thought. One hopes it would be construed in that way.

  Q121  Chairman: We then move on to your sub-paragraph (vi), which is clause 17 and Schedule 1, paragraph 5. Is there anything that you would like to add to that, Lord Mance?

  Lord Mance: Yes, this is the anti-avoidance provisions which to some extent simply reproduce what is already in the Act but do make mild improvements, and I welcome those improvements. I think they clearly aim to offer a balance between the overriding principle that all that is transferred is the insured's actual rights against the insurer and the exigencies of insolvency which do require some slight modification of that principle, and that is achieved in clause 9(2) by enabling the third party to do things which are necessary to preserve the policy and also by providing that if an insured has completely disappeared from the scene, been dissolved, or in the case of an individual died, then conditions cease to be relevant. I think all that is to be welcomed. One could go further but it would be impinging on the position as between the insured and the insurer and would be correspondingly controversial. The basic point which is likely to give rise to problems in practice still is clause 9(4), which provides that a condition requiring the insured to provide information or assistance to the insurer does not include a condition requiring the insured to notify the insurer of the existence of a claim under the contract of insurance. However, one understands why that is there, because insurers are entitled to at least know there is a claim.

  Q122  Chairman: Any questions on sub-paragraph (vi) on page 2? Presumably any attempts to change the emphasis there would be resisted by insurers quite strongly?

  Lord Mance: That would be my guess.

  Q123  Chairman: Then could we move on to sub-paragraph (vii), the "pay first" clause and P&I clubs. What would you like to add there?

  Lord Mance: I welcome that. I think there might have been a case for going further but it probably would have been controversial, and I think the solution is pragmatic and does not appear to be controversial. I have dealt in my note with a point which Lord Hunt of Wirral mentioned and I hope that is clear enough.

  Lord Hunt of Wirral: Yes, it is.

  Chairman: Do you want to press that point?

  Lord Hunt of Wirral: No, it is very clear, thank you.

  Q124  Chairman: Any other questions on sub-paragraph (vii) P&I clubs? Then we move to perhaps more difficult areas now. First of all, would you like to add anything to paragraph (viii)?

  Lord Mance: No, I think again the provisions of clause 18 of the Bill are clearly going to give rise to some case law in the future. As to how far they go, I do not want to disqualify myself too completely from being involved in it, but, broadly, it seems to me, at the moment that Professor Merkin's comments in his supplementary notes on the points raised by Professor Briggs have force, and this provision must, as both of them point out, be read against the background of both the Brussels Regulation on civil jurisdiction and judgments, which regulates jurisdiction between different European countries, and to some extent regulates it between Europe and the rest of the world, and also against the background of English procedural rules to which they have referred. I think Civil Procedure Rule 6.33(3) is the rule. It does look as if the intention is that there should be very broad jurisdiction in the British courts, subject of course to the jurisdiction being one which is permissible under the Brussels Regulation, but the Brussels Regulation itself caters for this type of situation (direct actions against insurers and joinder of the insured to those actions) and, in those circumstances, certainly where the insurer is domiciled in a European state, and the claimant is domiciled here, the insurer can easily be sued here. Of course, in other situations one will have to find some other basis for service, but the Act itself appears to contemplate litigation in England, and in those circumstances there is provision in the rules for service, as has been pointed out, even on an Australian insurer, apparently without leave.

  Q125  Chairman: Thank you very much for that answer. There appears to be no great difficulty in relation to that?

  Lord Mance: I can see some arguments arising but I think not.

  Q126  Chairman: Coming then to the more difficult areas in your paragraph 3 on page 3, you start by considering limitation in respect of claims against the insured, is that right, in paragraph 3(i)?

  Lord Mance: Yes. This deals with clause 12 which deals with a situation of a claim against an insurer and the insurer seeking to say that the claim against the insured is time barred. Clause 12 says that that is not the case so long as the claim against the insurer is brought while there are proceedings against the insured in progress if those proceedings were themselves begun within the limitation period. Personally, I am not sure whether that would add anything to the law as it is anyway.

  Q127  Chairman: It is certainly not doing any harm?

  Lord Mance: It is certainly not doing any harm.

  Q128  Chairman: Then in (ii) you come on to limitation in a claim by an insured against insurers; is that right?

  Lord Mance: No.

  Q129  Chairman: Against the insurer.

  Lord Mance: This is limitation for a claim against the insurer by a third party where the insured's right to sue the insurer has expired.

  Q130  Chairman: Exactly.

  Lord Mance: If it has expired before anyone brings proceedings against the insurer, whether it is the third party or the insured, then of course it is too late, but if it has expired but the insured began proceedings against the insurer within the limitation period and those proceedings are still continuing, the question arises can the third parties step into those proceedings, and the answer suggested is probably yes under the rules. Perhaps it is a pity that the Act does not clarify that that is possible. Under the rules, if you have existing proceedings brought by the insurer, then, if there is a statutory transfer of the right of action to a third party, the rules should allow the third party to be substituted. The problem arises if the proceedings by the insured against the insurer are arbitration proceedings.

  Q131  Chairman: We will come to that in your (iii).

  Lord Mance: Yes, and here there has been some most unsatisfactory authority. I analysed it in my lecture. It has not been solved since. I suggested in my lecture that any Bill should address the problem and make it clear that the third party has the right to step into the insured's shoes as the claimant if the insured had already commenced an arbitration against the insurer. That is not made clear by the Bill. I think that is a pity. The courts will have to return to the issue one day. It would have been quite simple to say, and one suspects it may well reflect the general law, that if the insured is pursuing proceedings against the insurer in arbitration then if there is a statutory transfer the third party may step into the shoes of the insured and pursue the arbitration proceedings.

  Q132  Lord Hunt of Wirral: That change would have wider implications, would it not?

  Lord Mance: I think not. It would simply be a provision which applied to this particular context. It may also, as I have been suggesting, reflect the general legal position, but that would mean that it is even less harmless. If it does not reflect the general legal position then it remains simply as an exception.

  Chairman: Any other questions on (iii)? Yes, Lord Goodhart?

  Q133  Lord Goodhart: I just wanted to raise a rather broader question which is what we are looking at here is a new procedure for dealing with Law Commission bills, fast track, mainly concerned with non-controversial bills, and we are anxious, of course, not to put forward amendments unless they are unlikely to be controversial or are so important that we really might be prejudicing our position if we did not accept that amendment. Do you think this matter falls into either of those categories?

  Lord Mance: Absolutely not. I do not think any of the points which I have mentioned are what I may describe as "dealbreakers". I welcome the Act. The Act is a good piece of draft legislation, in my view. It has been, if I may say so, well redrafted and is clear and I have made these points and I do not have in mind any more than to try to be helpful in pointing out points where one might have gone further.

  Q134  Lord Sheikh: Is there anything you would suggest with regard to changing the procedures rather than making amendments to the Bill, to reinforce a point to me, and that is we are trying to get this legislation through, if we can, providing we do not have a big issue on any particular point? Is there anything you can suggest regarding amending the procedures in order to improve the points that you have made?

  Lord Mance: Do you have in mind the procedures of the House?

  Q135  Lord Sheikh: The procedures of the courts basically.

  Lord Mance: I think that the courts could address some of these points by procedural rules, possibly even the disclosure point, although that is quite a substantive point in some ways, but I think the right to step into existing proceedings is probably, as I suggest, already covered by the rules. Arbitration could not be covered by court rules of course. That is a matter for arbitrators[5] though a matter for court decision ultimately to decide whether it is possible, but, yes, there is some scope for procedural steps to be taken but not much.

  Q136Lord Sheikh: Or perhaps a proviso that perhaps we give a recommendation to the insurers, because the arbitration clause is in the policy itself really, and whether the insurer would be willing to improve on what is already in existence?

  Lord Mance: It could theoretically be dealt with by a specific provision in the arbitration clauses, yes. I doubt whether that will happen.

  Lord Sheikh: Thank you.

  Chairman: Any other questions?

  Q137  Lord Borrie: I am not absolutely clear from what Lord Mance has said to Lord Sheikh. Following Lord Goodhart's question, if I revert to paragraph 3(iii) of Lord Mance's memorandum on page four, I think Lord Mance has been saying that if an amendment to the Bill would be so simple as to make the logic on Lord Mance's point that if you step into the shoes of the insured it should not matter whether the insured is engaged in court proceedings or arbitration proceedings?

  Lord Mance: Yes.

  Q138  Lord Borrie: If Lord Mance feels that there is no ground in principle for distinction between the two for the purposes of the Bill, then if it can be done very simply, and I am no parliamentary draftsman, is Lord Mance suggesting that perhaps it should be dealt with by way of amendment?

  Lord Mance: I think my answer to that would be yes as long as it does not prejudice the passage of the Bill.

  Lord Borrie: My answer would be the same if we were in the reverse position!

  Q139  Chairman: Can we then move to the next paragraph, also dealing with arbitration, but in a slightly different context. On paragraph 4(i), is there anything you wish to add, Lord Mance?

  Lord Mance: No. This is dealing with the question: can the insured be joined in court proceedings against the insurer, notwithstanding that the third party's claim against the insured is subject to an arbitration clause? I saw the discussion on that and I think Lord Borrie suggested, and Professor Merkin accepted, probably not. I have written "maybe not" here and maybe parallel proceedings remain unavoidable in such a case. The only point I am making is that the Act is capable of giving rise to argument on that point because it just leaves it in the air.