Ooops, I sued a dissolved defendant!

11 Oct 2012

Somewhat like the future Queen’s bikini top, applications to restore a dissolved company to the companies register are often spoken of, but rarely seen, at least so far as injury practitioners are concerned.

As I say in my training seminar on the topic, the apparent complexities of reviving a claim where the Defendant is dissolved (or is dissolved after proceedings start) take injury practitioners outside of their comfort zone.

One particular trap that has always vexed Claimant PI practitioners is the rule that a claim issued against a dissolved entity is a nullity. Moreover, where a Defendant is dissolved after proceedings have been issued (and where the Claimant’s legal team had not protected the position in the winding-up process by preventing the Defendant being dissolved until the PI claim finishes), the proceedings came to a permanent end. This was confirmed by the Court of Appeal in Re Philip Powis [1998] 1 BCLC 440. The practical effect would be that, once the Defendant company was restored to the companies register, proceedings would have to be re-issued, and Claimants invariably found that their claim had become statute-barred and at the mercy of an application under s.33 of the Limitation Act 1980. There were some skirmishes around the argument that the deeming provisions of the Companies Act 1985 cured the problem of the nullified or void proceedings, but these generally failed.

In the current economic climate and so long as the Government continues to drag its feet over implementation of the Third Parties (Rights against Insurers) Act 2010, the problems dealing with the dissolved Defendant continue to loom.

The Court of Appeal has recently considered the status of proceedings issued against a dissolved Defendant in light of the provisions of the Companies Act 2006. Following a careful trawl of authorities going back 85 years, the unanimous decision in Peaktone Ltd v Joddrell [2012] EWCA Civ 1035 was that the effect of s.1032(1) of the 2006 act is retrospectively to validate an action purportedly commenced by or against a company during the period of its dissolution. The writer is troubled that the CA appears not to have been referred to Re Powis, but he has the feeling that the CA may have given it short shrift of the kind reserved by a UK tabloid editor for an offer of long range photographs of Kate Middleton on holiday.

Claimants in a pickle can breathe a sigh of relief, for now. Insurers will be frustrated, but if the 2010 Act is implemented, the prospect of an occasional windfall success will likely be swept away. The opportunity remains to argue over the effect of the 2006 Act in cases where the Claimant allows the Defendant to be dissolved after proceedings have been issued.

As part of his expertise in EL/disease matters, Jamie Clarke has extensive experience of the companies restoration procedure. Clients may be interested in Jamie’s 60 minute training session  “Restoration to the Register: Some 'Red Flags'" – contact the Practice Management Team for more information.


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