Re OT Computers Ltd ; First National Tricity Finance Ltd v OT Computers Ltd ((in Administration))
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Maurice Kay,Lord Justice Jonathan Parker |
| Judgment Date | 25 May 2004 |
| Neutral Citation | [2004] EWCA Civ 653 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 May 2004 |
| Docket Number | Case No: 2003 2369 A3 |
[2004] EWCA Civ 653
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(THE VICE CHANCELLOR)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Jonathan Parker
Lord Justice Longmore and
Lord Justice Maurice Kay
Case No: 2003 2369 A3
JOHN McDONNELL Esq QC and Mrs CONSTANCE MAHONEY
(instructed by Nabarro Nathanson) for the Appellant
GABRIEL MOSS Esq QC and BARRY ISAACS Esq
(instructed by Lovells) for the Respondent
Introduction
This appeal raises two important points in relation to the Third Parties (Rights Against Insurers) Act 1930 ("the 1930 Act") pursuant to section 1 of which the rights of a person, insured against liability to third parties, to recover against his insurers is, in the event of insolvency on the part of the insured, transferred to the third party to whom the insured was liable. In order to give effect to such rights, section 2 gives third parties the right to obtain information about the insurance arrangements made by the insolvent insured.
The first question is whether the 1930 Act applies to insurance against liability generally or only to some kinds of liability and, if so, which kinds of liability. The second question is whether the third party claimant is entitled to obtain information about the insurance arrangements as soon as the insured person has become insolvent or whether he must first seek a determination of the insured's person's liability to him. Concealed in this second question is (or may be) a third question viz. at what date can it be said that there occurs the statutory transfer (provided for by section 1 of the 1930 Act) from the insured person to the third party claimant? Is it on insolvency or on ascertainment of the insured's person's liability to the third party?
The answer to all these questions is to be found in the relevant provisions of the 1930 Act which (as subsequently amended) can conveniently be set out at this stage:-
"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 or an administration 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 or of a voluntary arrangement proposed for the purposes of Part I of the Insolvency Act 1986 being approved under that Part;
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.
. . . . . . . . . . . . . . . . . . . .
(5) For the purposes of this Act, the expression "liabilities to third parties", in relation to a person insured under any contract of insurance, shall not include any liability of that person in the capacity of insurer under some other contract of insurance.
. . . . . . . . . . . . . . . . . . . .
2 . . .
(1) In the event of any person becoming bankrupt or making a composition or arrangement with his creditors, or in the event of the estate of any person falling to be administered in accordance with an order under section 421 of the Insolvency Act 1986, or in the event of a winding-up order or an administration order being made, or a resolution for a voluntary winding-up being passed, with respect to any 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 it shall be the duty of the bankrupt, debtor, personal representative of the deceased debtor or company, and, as the case may be, of the trustee in bankruptcy, trustee, liquidator, administrator, receiver, or manager, or person in possession of the property to give at the request of any person claiming that the bankrupt, debtor, deceased debtor, or company is under a liability to him such information as may reasonably be required by him for the purpose of ascertaining whether any rights have been transferred to and vested in him by this Act and for the purpose of enforcing such rights, if any, and any contract of insurance, in so far as it purports, whether directly or indirectly, to avoid the contract or to alter the rights of the parties thereunder upon the giving of any such information in the events aforesaid or otherwise to prohibit or prevent the giving thereof in the said events shall be of no effect.
(2) If the information given to any person in pursuance of subsection (1) of this section discloses reasonable ground for supposing that there have or may have been transferred to him under this Act rights against any particular insurer, that insurer shall be subject to the same duty as is imposed by the said subsection on the persons therein mentioned.
(3) The duty to give information imposed by this section shall include a duty to allow all contracts of insurance, receipts for premiums, and other relevant documents in the possession or power of the person on whom the duty is so imposed to be inspected and copies thereof to be taken."
The Facts
The dispute between the parties arises from an extended warranty scheme given by computer suppliers to their customers. A customer (who will normally be a consumer for the purposes of consumer legislation) may be content with the mixture of common law and statutory rights he has under the ordinary law but computer suppliers often offer additions to these rights for an extra price. The standard support package included a promise to repair or replace faulty parts or, indeed, faulty products if any defect appeared within one year. There was then a one year on site option by which the company promised to visit the customer and rectify any hardware problem arising within one year of purchase. An additional option was the "Premier on site option" for 3 or 5 years by which the company promised to send someone to the customer's premises to repair the computer at home or, if that was impossible, to take it away and return it when repaired. Different schemes had different features but the feature of each scheme was that it was additional to a customer's ordinary rights, which would merely entitle the customer to compensation for any breach of a contract which a customer could prove.
The suppliers of computers in the present case were a Jersey corporation OT Computers Limited ("OT Computers") and their Jersey subsidiary, Tiny Computers Ltd ("Tiny") . OT Computers supplied the computers in the name of Tiny and were thus undisclosed principals liable on the contracts. The customers, insofar as they thought about it, thought that they were dealing with Tiny; these customers were able to obtain credit facilities from a subsidiary of First National Bank Plc known as First National Tricity Finance ("FNTF") . Pursuant to section 75 of the Consumer Credit Act 1974 FNTF (as lenders of money to enable a consumer to purchase goods) were jointly and severally liable with the supplier to compensate the customer for any breach of contract on the part of the supplier. As financiers they would have a remedy against the supplier to the extent that they compensated the customer. That remedy was reinforced in this case by an express indemnity given by Tiny under the terms of an agreement between FNTF and Tiny of 28th October 1999. Tiny's obligations under that agreement were guaranteed by OT Computers.
Unfortunately OT Computers and Tiny ran into difficulties. The court in Jersey appointed administrators of OT Computers and requested the English Chancery Division to do the same. This was done on 29th January 2002 and the defendants in the present action are the administrators appointed by the court. (We are told that the company is now in creditors' voluntary liquidation.) OT Computers' business was sold the very next day but, naturally enough, the purchasers did not assume any of the liabilities under the extended warranty scheme. FNTF was left holding the extended warranty "baby" and have had themselves to make arrangements to honour OT Computers' obligations under the scheme. They have, at some considerable cost, arranged for customers' computers to be repaired or replaced pursuant to their obligations under the Consumer Credit Act and now claim to be subrogated to claims which those customers have against OT Computers for failure on the part of the company to comply with their obligations under the extended warranty contracts. The administrators have been content to accept for the purposes of FNTF's application that there will be customers who do have rights to which FNTF will be subrogated. They do not, for example, take the point that, once the customers have been indemnified by FNTF, the customers no longer have any remedy against Tiny or OT computers. But there is a dispute (which we were...
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