AN INSURER CAN CONTINUE AN APPEAL AFTER THE APPELLANT HAS BEEN DISSOLVED: JOIN ITSELF INTO THE ACTION

January 29, 2025 · by · in Appeals, Civil Procedure

The Court of Appeal decision in Birley & Anor v Heritage Independent Living Ltd [2025] EWCA Civ 44 also dealt with an interesting point of procedure. The appellant company had been dissolved shortly before the appeal was heard.  The Court of Appeal allowed the appellant’s insurers to continue the appeal, adding them to the action as a party.

“In this case there is an issue between the insurers and the claimants, i.e. the question of costs. It is clearly desirable to add the insurers as additional parties so that the court can resolve the issue in a manner binding on all relevant parties and so the order will be made as part of the final order disposing of this appeal.”

THE CASE

The appellant company brought an appeal relating to an order for costs.  However the company itself was dissolved in October 2024.  The Court of Appeal considered the issue of whether the appeal could continue.  It determined that the insurer could add itself to the action and continue the appeal on the appellant’s behalf.

THE JUDGMENT ON THIS ISSUE

    1. Before turning to the two main issues, a further point emerged a few days before the hearing of the appeal. The appellant company Heritage Independent Living Ltd had been dissolved on 19 October 2024. On the face of it one might think that the appeal could not succeed in these circumstances since there was no appellant, unless the company was restored to the register. The matter was discussed with counsel at the outset of the hearing. Since this appeal has only ever been about costs, the appellant’s insurers explained, via counsel and solicitors for the appellant, that they wished to pursue the appeal in their own interest and did not see a purpose in restoring the appellant company to the register. They submitted that s1, 2 and 6A of the Third Parties (Rights against Insurers) Act 2010 (the 2010 Act) came into play, automatically transferring and vesting the claimants with the rights which Heritage had under the insurance contract between Heritage and its insurers.

 

    1. Briefly, by s1(2), if an insured person incurs a liability against which that person is insured and that person becomes a “relevant person”, then their rights under the contract of insurance automatically transfer to and vest in the third party to whom the liability is or was incurred. One way in which a liability can be incurred is by a judgment (s1(4)(b)). By s6A, a company is a relevant person if it has been dissolved. By s2(3) the insurer may rely on any defence the relevant person could rely. The effect of these provisions is summarised in a passage in Halsbury’s Laws Vol 13 at [90] as follows:

 

“Under the Third Parties (Rights Against Insurers) Act 2010, where under any contract of insurance a person is insured against liabilities to third parties which he may incur, then, in the event of the insured becoming bankrupt or insolvent, or being a company, in the event of its winding-up, administration or dissolution, if any such liability is incurred by the insured, his rights against the insurer under the contract in respect of the liability are transferred to and vest in the third party to whom the liability was so incurred.”

    1. Therefore, the insurers submitted, Heritage, having been dissolved, is now a relevant person and the costs orders against Heritage, including those made below, are directly enforceable by the claimants against the insurers. Moreover by s2 of the 2010 Act the insurers contended any defence open to Heritage was something the insurer could rely on in its own interest. The appeal relates to a costs order made in Heritage’s favour, which depending on the outcome of the appeal, could be material to the insurer’s liability to satisfy the existing costs orders made against Heritage below.

 

    1. In effect, the insurers were seeking to maintain this appeal in their own interests. We decided that the appropriate way forward in these circumstances was for the insurers (Angel Risk Management and AXA XL Insurance Company UK Ltd) to be joined as parties to these proceedings and directed that an application notice seeking an order that they be joined under CPR r19.2(2)(b) be issued and served. We would decide the application in this judgment. In accordance with the court’s direction that was done on 21 November 2024.

 

The application of 21 November 2024

    1. Under CPR r19.2(2)(b) the court has power to order a person to be joined as a new party when there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue. The power can be exercised at any stage. The rule does not require the court to decide the issue one way or another at the stage at which the party is joined. No doubt in most cases the power will be exercised before trial but if appropriate, as here, it can be exercised on appeal.

 

  1. In this case there is an issue between the insurers and the claimants, i.e. the question of costs. It is clearly desirable to add the insurers as additional parties so that the court can resolve the issue in a manner binding on all relevant parties and so the order will be made as part of the final order disposing of this appeal. For the remainder of this judgment, I will refer to the appellant as Heritage without getting into the distinction between that dissolved company and the insurers. The heading of this judgment has been amended accordingly.
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