Law 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 proceed to claim against the discharged bankrupts, but now sought recovery from their insurers.
Held: The Society could proceed. ‘while the claim remains disputable, it is not established that the insured has suffered a loss. Once the claim is settled or adjudicated on, it is clear that he has suffered a loss because he has come under an indisputable obligation to pay. Although it might be said that the insured was always under an obligation to pay from the moment the cause of action arose, once the claim is agreed or adjudicated on that obligation acquires a different quality. It is only where there is an established obligation to pay that an indemnifiable loss comes into being and that the indemnity under the contract arises. ‘
The effect of bankruptcy was to remove the action against the bankrupt for the debt, not to remove the debt itself. Once admission of the debt in the bankruptcy is adequate establishment of the Law Society’s claim to give rise to indemnifiable loss and a claim under the policy, then the release of the bankrupt from the obligation to pay (or more accurately the remedy of payment) is irrelevant.
[2007] EWHC 2841 (Ch), Times 20-Dec-2007, [2007] All ER 488, [2009] Ch 223, [2008] Lloyd’s Rep IR 442, [2007] BPIR 1595, [2008] Bus LR 1742, [2008] 3 WLR 1401
Third Parties (Rights against Insurers) Act 1930, Solicitors Act 1974, Insolvency Act 1986 281(1)
England and Wales
CitedSocony Mobil Oil Co Inc and others v West of England Ship Owners Mutual Insurance Association Ltd (Padri Island) (No 2); Firma CF-Trade SA v Similar (The ‘Fant’) HL 14-Jun-1990
The House was asked as to the effect of section 1(3) of the 1930 Act on policies including ‘pay or be paid’ clauses.
Held: The central question was whether the condition of prior payment was rendered of no effect by section 1(3) of the Act of . .
CitedWest Wake Price and Co v Ching 1957
A clerk employed by a firm of accountants defrauded two of the firm’s clients of andpound;20,000 over a period of about three years.
Held: One can not ‘pay’ a cause of action.
Devlin J said: ‘I think that the primary meaning of the word . .
CitedPost Office v Norwich Union Fire Insurance Society Ltd CA 1967
A contract of insurance provided an indemnity for ‘all sums which the insured shall become legally liable to pay as compensation in respect of loss of property’. The claim was by the Post Office against a contractor, Potters, for damaging one of . .
CitedBradley v Eagle Star Insurance Co Ltd HL 1989
Mrs Bradley was employed by Dart Mill several times from 1933 and 1970 and acquired byssinosis from inhaling cotton dust. The company was wound up in 1975 and dissolved in 1976. In 1984 she applied to the court for pre-action disclosure under . .
MentionedRe Harrington Motor Co Ltd, Ex parte Chaplin 1928
A person injured in a road accident had obtained judgment for damages against the company, but had been unable to enforce the judgment before the company went into liquidation. The company’s motor insurers paid the amount of the judgment to the . .
CitedCox v Bankside Members Agency Ltd and Others QBD 27-Jan-1995
Some agents had policies against which there were likely to be various calls, either because several claims were being pursued against the same agents by different Lloyd’s Names, or because the policies were group policies covering several agents . .
CitedFinancial 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 . .
CitedFirst National Tricity Finance Ltd v OT Computers Ltd; In re OT Computers Ltd (in administration) CA 25-May-2004
The company had gone into liquidation. They had sold consumer policies as extended warranties on behalf of the claimant. The company had insured its own joint liability under the contracts, and the claimant sought information from the company’s . .
CitedHeather and Son v Webb 1876
It was said that, after the discharge of the debtor from his bankruptcy, he had uttered a fresh promise to pay the debt. The court considered the proper construction of section 49 of the 1869 Act. Earlier statutes had made express provision making . .
CitedWight, Pilling, Mackey v Eckhardt Marine GmbH PC 14-May-2003
(Cayman Islands) An international bank went into liquidation in the Cayman Islands, with liabilities in Bangladesh. A new bank was created in Bangladesh, and the applicants sought to make the new bank liable, and through them the liquidators.
CitedOsborne v Cole 1999
A person who challenges a bankrupt’s trustee’s conduct under section 303 must show that the trustee is acting ‘in bad faith or so perversely that no trustee properly advised or properly instructing himself could so have acted, alternatively if he . .
CitedShepherd v Official Receiver CA 7-Jun-2007
renewed application for permission to appeal . .
CitedSupperstone v Hurst (No 3) 2006
. .

Cited by:
CitedParker and Another v SJ Berwin and Co and Another QBD 17-Dec-2008
The claimants sought damages from their former solicitors. They set out to purchase a football club, expending substantial sums for the purpose, relying on the defendants’ promised provision of service in finding and arranging the funding. They said . .

These lists may be incomplete.
Updated: 07 March 2021; Ref: scu.261779