Financial Services Compensation Scheme Ltd v Larnell (Insurances) Ltd: CA 29 Nov 2005

The claimant investors said that their financial adviser, the defendant insolvent company, had given them negligent advice. The action was brought as a preliminary to claiming against the defendant’s insurers under the 1930 Act, in the way made necessary by the Post Office and Bradley cases. Limitation defences were deployed to strike the action out. The claimant had put in a proof of debt in the liquidation, but the liquidator had neither admitted nor rejected it.
Held: Establishment of liability by action, by arbitration or agreement between the insured and the third party, was a prerequisite to a claim, even though agreement will not always be possible, for example where the policy prohibits it.
Lloyd LJ said: ‘If proceedings are necessary, they may take one of a number of forms. The obvious instance is a claim such as the present. Because the company is in voluntary winding-up it is unnecessary to obtain consent before starting such a claim. If the winding-up were compulsory the court’s permission would be needed, and the court might regard it as more appropriate for the third party to prove for its debt. If the liquidator were to reject that proof, the third party could appeal against that rejection under rule 4.83 of the Insolvency Rules 1986. That would lead to a judicial determination which would also be sufficient establishment of the liability of the insured. Nothing turns on the particular procedure adopted. It makes no difference whether the proceedings themselves are brought within the bankruptcy or winding-up { proceedings or outside them, as is the present claim.’

Judges:

Lloyd LJ, Moore-Bick LJ

Citations:

[2004] Ch 317, [2005] EWCA Civ 1408, [2006] 1 QB 808

Links:

Bailii

Statutes:

Third Parties (Rights against Insurers) Act 1930

Jurisdiction:

England and Wales

Cited by:

CitedLaw Society of England and Wales and others v Shah and others ChD 30-Nov-2007
Solicitor firms had been made bankrupt leaving a shortfall after thefts from client accounts of over 12 million pounds. The thief had diappeared, and the other partners were now discharged form bankruptcy. The Law Society accepted that it could not . .
CitedLaroche v Spirit of Adventure (UK) Ltd CA 21-Jan-2009
Hot Air balloon was an aircraft: damages limited
The claimant was injured flying in the defendant’s hot air balloon. The defendant said that the journey was covered by the 1967 Regulations and the damages limited accordingly. The claimant appealed against a decision that the balloon was an . .
CitedLB Holdings Intermediate 2 Ltd, The Joint Administrators of v Lehman Brothers International (Europe), The Joint Administrators of and Others SC 17-May-2017
In the course of the insolvent administration of the bank, substantial additional sums were received. Parties appealed against some orders made on the application to court for directions as to what was to be done with the surplus.
Held: The . .
Lists of cited by and citing cases may be incomplete.

Limitation, Insurance, Insolvency

Updated: 04 August 2022; Ref: scu.235436