Keoghs Insight

Author

Oliver Bingle

Restoring the Future?

Blogs11/03/2020

Cowley v LW Carlisle & Company Ltd [2020] EWCA Civ 227

The Court of Appeal has dismissed the claimant’s appeal against an order striking out his noise induced hearing loss (NIHL) claim. At the time of the strike out application the defendant was a dissolved company.

The application was made by solicitors for the defendant’s insurers on the basis the claimant had failed to restore the defendant to the companies house database before commencing proceedings.

A similar issue had previously been considered in the Court of Appeal in Joddrell v Peaktone Ltd. [2012] EWCA Civ 1035.

Peaktone

In Peaktone, the defendant company, whilst dissolved at the time of service of proceedings, had been restored when the application to strike out was made. It was held that on restoration the effect of s.1032(1) of the Companies Act 2006 was that a company is deemed to have continued in existence as if it had not been dissolved or struck from the register.

The procedural irregularity of serving on a non-existent company could be retrospectively forgiven once the steps were taken.

Cowley

At first instance District Judge Etherington distinguished the claim from Peaktone. In Cowley restoration proceedings had not even commenced on the date of strike out. DJ Etherington said:

"If you had said to me 'we issued this, we did not apply our mind. Insurers usually let this go, this one hasn’t. We’re now underway with an application to restore. We are going to need another three or four weeks’ you would have been in an entirely different position. But to sit back with loads of fatuous technical arguments that amount to nought and still have done nothing practical. In the time he did all of that nonsense, he could have restored the company to the register, and that is the problem.”

The Court of Appeal agreed and dismissed the appeal.

Jurisdictional Issues

Before the Court of Appeal it was also argued the judge had erred in striking out the claim under CPR 3.4. If the defendant’s challenge was really a jurisdictional one it should have been brought under CPR 11. As a proper challenge had not been made, it should be dismissed.

The Court of Appeal held that in order to proceed with this argument the court would have to accept that service had been properly effected on a company which did not exist. That would not have been a correct assumption.

The only issue was whether DJ Etherington had erred in striking out the claim under his case management powers. It was held he had correctly considered the impact of allowing the matter to proceed on the overriding objective and to strike out a claim against a non-existent entity.

Another issue considered was that if a company is non-existent, there are real difficulties in an insurer doing anything in a claim. Authority for an insurer to act as an agent likely expires once a company dissolves. It was questionable in Cowley whether the insurer really had authority to instruct solicitors to act. Consequently insurers could find themselves retrospectively liable for significant sums. The Court of Appeal offered the following advice:

  1. Once made aware of a claim they should invite the claimant to restore the defendant before issuing.
  2. If the claim has litigated, they should invite the claimant to apply for a stay.
  3. In the absence of cooperation from a claimant they should write to the court notifying it of the situation and ask the court to make an order for a stay of their own motion.
  4. If still nothing is done insurers should write to the court and invite a strike out.

Time for a change of strategy?

The Court of Appeal’s guidance is useful, although perhaps overly optimistic about the prospect of courts taking steps based only on a letter from a non-party. Experience shows that in the overworked and underfunded court service an application is normally necessary to make anything happen.

Perhaps what we should take from this is that it is now worthwhile forcing restoration. Many insurers currently adopt an approach of waiving the need for restoration in NIHL cases. This avoids the increased claimant’s cost that flow from restoration. However the claimant market has changed significantly over the last year or so.

Only a few claimant firms continue to issue claims in any volume and we are seeing evidence of reluctance to bankroll claims. Due to non-payment of invoices by claimants, acoustic engineers have started asking for advances and some medical experts are refusing to take instructions at all. It is rare claims are issued for more than a £5000 limit.

There must now be strategic merit in forcing restoration. The remaining players in the claimant market would have little option but to change approach. Only the strongest claims could litigate. Failure to restore can be met by applications supported by Cowley. The added benefit is procedural protection.

For more information, please contact Oliver Bingle.