Bradley v Eagle Star Insurance Company Ltd

JurisdictionUK Non-devolved
JudgeLord Keith of Kinkel,Lord Brandon of Oakbrook,Lord Templeman,Lord Oliver of Aylmerton,Lord Jauncey of Tullichettle
Judgment Date02 March 1989
Judgment citation (vLex)[1989] UKHL J0302-1
Date02 March 1989
CourtHouse of Lords
Bradley (A.P.)
(Appellant)
and
Eagle Star Insurance Company Limited
(Respondents)

[1989] UKHL J0302-1

Lord Keith of Kinkel

Lord Brandon of Oakbrook

Lord Templeman

Lord Oliver of Aylmerton

Lord Jauncey of Tullichettle

House of Lords

Lord Keith of Kinkel

My Lords,

1

I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Brandon of Oakbrook. I agree with it, and for the reasons he gives would dismiss this appeal.

Lord Brandon of Oakbrook

My Lords,

2

The appellant, Mrs. Doris Bradley, was employed by Dart Mill Ltd. in the cardroom of its cotton mill at Bolton from 1933 to 1934, 1940 to 1946 and 1953 to 1970. In August 1970 she was certified by the Pneumoconiosis Medical Panel to be suffering from byssinosis and her disability caused by it was assessed at 30 per cent. Byssinosis is a respiratory disease caused by the inhalation of cotton dust. It is the appellant's case, firstly, that in the course of her employment by Dart Mill Ltd., the conditions in which she worked necessarily involved her in the inhalation of substantial quantities of cotton dust; secondly, that the byssinosis from which she suffers was caused by such inhalation; thirdly, that the exposure to such inhalation was caused by the negligence and breach of statutory duty of Dart Mill Ltd.; and, fourthly, that Dart Mill Ltd. was, during the periods when she was employed by that company, insured in respect of liability for personal injuries to its employees by the respondents, Eagle Star Insurance Co. Ltd.

3

Dart Mill Ltd. was voluntarily wound up in 1975 and dissolved in 1976. Under section 651 of the Companies Act 1985 the company could not be restored to the register more than two years after it was dissolved. In the result the company no longer exists and is incapable by any means of being restored to existence.

4

In 1984 the appellant's solicitor decided to bring an action on her behalf against the respondents under section 1(1) of the Third Parties (Rights against Insurers) Act 1930. In order to enable him to have the necessary material on which to found the action, the appellant's solicitor required to have prior discovery of the relevant insurance policies issued by the respondents to Dart Mill Ltd. Accordingly on 26 September 1986 he applied on behalf of the appellant, under section 33(2) of the Supreme Court Act 1981 and R.S.C., Ord. 24, r. 7A, in the Oldham District Registry of the High Court, Queen's Bench Division, for an order that the respondents should disclose to the appellant the terms and particulars of all contracts of insurance issued by the respondents to Dart Mill Ltd. in respect of that company's liability to its employees for personal injuries sustained at work during the periods 1933 to 1934, 1940 to 1946 and 1953 to 1970.

5

The originating summons came first before Mr. District Registrar Burton who on 30 January 1987 ordered the respondents to make substantially the disclosure applied for on behalf of the appellant. The respondents appealed to Macpherson J. who on 9 April 1987 allowed the appeal and set aside the order of the district registrar. Macpherson J. refused the appellant leave to appeal to the Court of Appeal, but such leave was subsequently given by that court. On 25 March 1988 the Court of Appeal (Purchas, Lloyd and Staughton L.JJ.) unanimously dismissed the appeal.

6

In order to understand the basis of the substantive claim which the appellant seeks to bring against the respondents, and the grounds on which the Court of Appeal decided her application for pre-action discovery against her, it is necessary to refer to the relevant provisions of the Third Parties (Rights against Insurers) Act 1930. That Act provides:

"1(1) Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities to third parties which he may incur, then —

  • (a) in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or

  • (b) in the case of the insured being a company, in the event of a winding up order being made, or a resolution for a voluntary winding up being passed, with respect to the company, or of a receiver or manager of the company's business or undertaking being duly appointed, or of possession being taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge;

if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred.

(2) Where an order is made under section one hundred and thirty of the Bankruptcy Act 1914, for the administration of the estate of a deceased debtor according to the law of bankruptcy, then, if any debt provable in bankruptcy is owing by the deceased in respect of a liability against which he was insured under a contract of insurance as being a liability to a third party, the deceased debtor's rights against the insurer under the contract in respect of that liability shall, notwithstanding anything in the said Act, be transferred to and vest in the person to whom the debt is owing."

7

The grounds on which the Court of Appeal decided against the appellant on her application for pre-action discovery can be stated as follows. First, under section 1(1) of the Act of 1930 the appellant only had transferred to and vested in her such rights against the respondents as Dart Mill Ltd. itself would have had under the relevant contracts of insurance. Secondly, Dart Mill Ltd. would only have been entitled, under such contracts of insurance, to be indemnified by the respondents in respect of any liability incurred by it to the appellant if the existence and amount of that liability had first been established either by a judgment of a court, or by an award in an arbitration, or by an agreement between Dart Mill Ltd. and the appellant. Thirdly, the existence and amount of any liability incurred by Dart Mill Ltd. to the appellant had never been established in any of those three ways while Dart Mill Ltd. existed or was capable of being restored to existence, and there was now therefore no longer any means by which the existence and amount of any such liability could be established. Fourthly, that being so, there was not, and could not now ever be, any right of indemnity of Dart Mill Ltd. against the respondents in respect of any such liability, which could be transferred to and vested in the appellant under section 1(1) of the Act of 1930. Fifthly, that being so, the appellant's proposed action against the respondents could not succeed, and it would therefore serve no useful purpose to make the order for pre-action discovery sought by her.

8

The Court of Appeal, rightly in my view, considered themselves bound to reach the conclusion which they did by an earlier decision of that court in Post Office v. Norwich Union Fire Insurance Society Ltd. [1967] 2 Q.B. 363. It follows that this appeal requires your Lordships to consider whether that earlier case was rightly decided.

9

The facts in the Post Office case, as they appear mainly from the headnote of the report, were these. In May 1963 a company of contractors called Potters damaged a Post Office cable. The Post Office by letter claimed £839 10s.3d. for its repair. The contractors denied liability. Before any proceedings had been begun to determine liability and quantum, the contractors in June 1964 went into compulsory liquidation. The contractors were insured under a public liability policy in the usual terms, which provided that the insurers "will indemnify the insured against all sums which the insured shall become legally liable to pay … in respect of … damage to property." On 17 June 1965 the Post Office issued a writ against the contractors' insurance company claiming that under section 1 of the Act of 1930 they were entitled, once the contractors had gone into liquidation, to claim against the insurance company direct the sum of £839 10s.3d. The trial judge gave judgment for the Post Office, against which the insurers appealed to the Court of Appeal (Lord Denning M.R. and Harman and Salmon L.JJ.).

10

That court allowed the appeal and dismissed the Post Office's claim on two grounds. The first ground, which was unanimous, turned on a particular condition of the contract of insurance, to which it is not necessary to refer further. The second ground, which was relied on by Lord Denning M.R. and Salmon L.J. but not by Harman L.J., was that the contractors could not have claimed to be indemnified by the insurance company until the existence and amount of their liability to the Post Office had been properly established, and the Post Office could not be in any better position as against the insurance company in this respect than the contractors.

11

Referring to section 1(1) of the Act of 1930, Lord Denning M.R. said [1967] 2 Q.B. 363, 373-374:

"Under that section the injured person steps into the shoes of the wrongdoer. There are transferred to him the wrongdoer's 'rights against the insurers under the contract.' What are those rights? When do they arise? So far as the 'liability' of the insured is concerned, there is no doubt that his liability to the injured person arises at the time of the accident, when negligence and damage coincide. But the 'rights' of the insured person against the insurers do not arise at that time.

The policy says that 'the company will indemnify the insured against all sums which the insured shall become legally liable to pay as compensation in respect of loss of or damage to property.' It seems to me that the insured only acquires a right to sue for the money...

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