Financial Services Compensation Scheme Ltd v Larnell (Insurances) Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE STEEL |
| Judgment Date | 24 February 2005 |
| Neutral Citation | [2005] EWHC 362 (QB) |
| Docket Number | Case No. IHQ/05/0110 |
| Court | Queen's Bench Division |
| Date | 24 February 2005 |
[2005] EWHC 362 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Steel
Case No. IHQ/05/0110
IHQ/04/1048
MR ADAM TULLEY (instructed by Squire & Co) appeared on behalf of the CLAIMANT
MR PAUL STANLEY (instructed by Denton Wilde Sapte) appeared on behalf of the DEFENDANT
(Approved by the Court)
This is an application by the Defendant to strike out the Claimant's claim, on the basis that it is time-barred. Although the application is made under CPR 24, it is, as I understand it, agreed between the parties that, I should decide the issue one way or another, rather than seek to identify whether the Claimant, on this issue, has a reasonable prospect of success.
The application has proceeded on the basis that the allegations in the Particulars of Claim are true. Accordingly, the assumed facts are as follows. The claim is advanced by the ultimate assignees of six investors, whose claims against the Defendant were met, in whole or in part, by the Investors Compensation Scheme.
These investors had been advised at various times, between May of 1986 and June 1989, to transfer from occupational pension schemes to personal pension plans. This advice was negligent and as a result, the investors sustained loss, represented by the difference between the value of their present pension entitlement and the value it would have had, but for the advice. The total claim is in the region of £600,000.
The Defendant Company went into a creditors' voluntary liquidation on 3 rd May 2000.
These proceedings were initiated, or instituted on 16 th September 2004.
It is common ground that the Claimant has instituted the proceedings with a view to establishing liability, for the purposes of a claim under the Third Party Rights against Insurers Act 1930.
Prima facie, the claims are time-barred and handsomely so. First, since the losses were sustained no later than June 1989, the six year period of limitation under s.2 of the Limitation Act 1980, expired in June 1995, some nine years before the claim form was issued.
Secondly, as regards the extended limitation period under s.14(a) of the Act, as amended by the Latent Damage Act 1986, it is accepted for the purposes of this application that, the investors acquired the relevant knowledge no earlier than 9 th May 1997. Thus, the additional period of three years provided for under s.14(a) expired on 9 th May 2000, over four years before the claim form was issued.
Thirdly, as regards the fifteen year provided for by s.14(b), which runs from the date of the relevant breach, this period expired no later than June 2004, still some three months before the claim form was issued.
The Claimants contend, however, that since the resolution to wind up the Defendant Company was passed some six days before the extended period ended, a month or so before the fifteen year period expired; this had the effect of stopping time running for limitation purposes.
In summary, the argument presented on behalf of the Claimants, as I understand it, runs broadly as follows. Firstly, the moment a company enters into liquidation, its liabilities are crystallised. In effect, its various liabilities are replaced by rights for its creditors to prove in liquidation, for a share in the assets under the terms of the Insolvency Act 1986.
Secondly, accordingly, it does not matter that a limitation period applicable to a claim expires after the winding up—see in Re: General Rolling Stock [1872] LR 7 Chancery Appeals 646, re the cases of Taft Wells Limited [1992] BCLC page 11 and re Mix Hurst Limited [1994] 2 BCLC at 19.
Thirdly, concurrently, the effect of the liquidation is to transfer to the Claimants, any rights of the Defendant Company under the relevant contracts of insurance—see E. G. Freekly v. CR International Court of Appeal 11 th February 2005.
Fourthly, thereafter, liability proceedings by any Claimant will have the objective of establishing the amount of the debt provable in the liquidation, a claim which is advanced outside the terms of the insurance contract. The fact that it is hoped also to find a claim under the 1930 Act is irrelevant to the limitation provision.
The Defendants advanced their submissions under three heads. Firstly, whilst it is the case that for the purpose of proving a debt in a liquidation or bankruptcy a claim may be admitted to proof, even though it would have been time-barred at that date and, provided it was not time-barred at the date of the liquidation or the bankruptcy, this rule only applies for the purpose of the liquidation or the bankruptcy itself. It does not apply to any proceedings outside the liquidation or the bankruptcy.
Secondly, even if the Claimant's contention about the suspension of limitation periods was thought to be generally correct, it can have no application in a case where the Claimant has to rely on s.14(a). The contention that time stops running on a liquidation in circumstances where the six year time limit is already expired, is contrary to principle and unsupported by authority.
Thirdly, in any event the Claimant has delayed so long in bringing the claim that, the long-stop provisions in s.14(b) of the 1980 Act apply and as a result, the claims have not merely been barred, but have been extinguished altogether and the liquidation can make no difference.
It is convenient to start with the main focus of the dispute, namely the effect of insolvency on questions of limitation. The starting point for my purposes here is the decision of the Court of Appeal in Benzon Re: Bower v. Chetwynd [1914] Chancery 68. A bankrupt died, having exercised a general power of appointment under his father's will in the sum of some £15,000, which sum did not pass to his trustee in bankruptcy. The debts incurred by the bankrupt were prima facie, barred many years earlier. But it was contended that the effect of the bankruptcy was to...
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