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URL: http://www.bailii.org/scot/other/SLC/Report/2001/184(4).html
Cite as: [2001] SLC 184(4) (Report)
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PART 4
DISCLOSURE OF INFORMATION TO THE THIRD PARTY
1 Introduction
4.1 In the consultation paper we explained the way that the disclosure provisions in section 2 of the 1930 Act have been interpreted by the courts and the difficulties to which this has given rise.[1] We provisionally proposed that substantial clarifications and extensions should be made in a new disclosure regime. This aspect of our proposals received strong support from a broad spectrum of consultees, including insurers.[2]
4.2 The draft Bill provides a new, self-contained procedure by which third parties can obtain insurance information before issuing proceedings, and without having to obtain a court order.[3] These rights to information will enable the third party, before issuing proceedings, to discover if there is insurance and, if there is, the identity of the insurer. They will therefore enable him to make an informed decision on whether or not to pursue a claim.
4.3 The draft Bill also provides, in England and Wales only, a procedure by which a third party may, in narrowly defined circumstances, obtain documentation relating to the insured's liability to him.[4] The third party will be able to use this procedure, if the insured is a company which is no longer on the register of companies, and he is proceeding against the insurer without having previously established the insured's liability. The procedure will enable the third party to obtain similar documentation to that which he would be able to obtain if he restored the insured to the register of companies and obtained orders for standard disclosure under the CPR.
4.4 In this Part we briefly review the problems with the disclosure regime in the 1930 Act. We then examine other ways in which the third party may be able to obtain information. Finally, we set out our reform proposals, referring to the views of consultees on each issue.[5]
2 Problems with the disclosure regime in the 1930 Act
3 No right to disclosure until insured's liability established
4.5 The 1930 Act provides for the disclosure to the third party of 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...[6]
The courts have held that a third party has no right to the disclosure of information under the Act until he has established the liability of the insured.[7]
4.6 Consequently, the third party who has yet to establish the insured's liability must decide whether or not to litigate without the benefit of any information other than that which has been disclosed voluntarily.[8] After incurring considerable expense, he could discover that the insurer is able to defeat his claim. This feature of the regime has attracted judicial criticism.[9] It also seems to be contrary to the intention of Parliament when it enacted the 1930 Act, which appears to have been to give the third party the right to information before issuing proceedings.[10]
4 Two stage disclosure
4.7 The 1930 Act only imposes a duty to disclose on insurers if the information disclosed by the insured or the office-holder "discloses reasonable ground for supposing that there have or may have been transferred to him under this Act" rights against that insurer.[11] This results in a two stage process. Not only does this lengthen the time it takes for third parties to obtain the information they need, but a third party who fails to obtain adequate information from the insured or the office-holder never acquires a right to disclosure from the insurer.
5 No right to require a broker to disclose information
4.8 Those with an initial duty to disclose information under the 1930 Act are:
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 [any property comprised in or subject to a charge][12]
The Act does not impose a duty to disclose policy information on insurance brokers or others authorised to hold policy information, such as managers of pools set up by a number of insurers or travel agents arranging cover for holidaymakers. In many instances such people may be those best able to identify the insurer and the policy governing a particular claim.[13]
6 Unhelpful definition of the information required to be disclosed
4.9 The information and documentation which is required to be disclosed under the 1930 Act is described in general terms.[14] We referred in the consultation paper to criticisms which had been made of this vague wording.[15]
7 The position of office-holders
4.10 We referred in the consultation paper[16] to the difficulties which the disclosure provisions in the 1930 Act present for office-holders, both because of their imprecision and because of potential conflicts of duties.[17]
8 Other means by which a third party may obtain information
9 Disclosure regime in England and Wales
10 Pre-action disclosure and pre-action protocols
4.11 Under the 1930 Act the third party is unable to overcome the deficiencies in the statutory disclosure regime by obtaining disclosure orders under rules of court.[18] Notwithstanding the changes we propose to the statutory transfer of rights, in our view, before he issues proceedings, the third party will still be able to obtain little (if any) information about the insured's insurance position under the CPR. We note, in particular:
(1) Orders for pre-action disclosure will only be granted against prospective litigants.[19] They would not, for example, be available against insurance brokers.
(2) Such orders will only be granted in respect of specified documents.[20] A third party who is completely ignorant of the insured's insurance position may find it difficult to specify documents.
(3) Such orders will only be granted if early disclosure is desirable in order to dispose of the future proceedings fairly, avoid future proceedings or save costs.[21]
4.12 In certain circumstances it appears that a third party may be able to obtain some information without issuing proceedings, as a result of pre-action protocols.[22] In our view, however, this is by no means clear.[23]
11 Disclosure after proceedings have started
4.13 Once he has issued proceedings the third party will be entitled to apply[24] for a number of disclosure orders, in particular, an order for standard disclosure[25] or an order for the disclosure by a non-party of a specific document or documents.[26] In this way, the third party may be able to obtain a large amount of the information he needs.[27]
12 The recovery of evidence in Scotland
4.14 Section 1(1) of the Administration of Justice (Scotland) Act 1972 confers a power on the Court of Session and Sheriff Court to order the production and inspection of documents and other property which may be relevant in any existing or likely civil proceedings. This can therefore be used either during an action or before an action is raised. It can be used to obtain disclosure from sources that are not parties to the action. Alternatively, during the course of the action, the court can order a commission and diligence to recover documents either from parties or others.[28] These rules would allow a third party to seek disclosure from sources other than the insured or the insurer.
4.15 In other words, Scots law permits broader rights to recover information than do the CPR. However, part of the recommended statutory regime is wider still. As we are in favour of permitting wide disclosure in the context of the proposed draft Bill, we recommend that this part applies to Scotland.[29]
13 Statutes
4.17 In Scotland, section 45(1) of the Bankruptcy (Scotland) Act 1985 provides that a permanent trustee may, not less than eight weeks before the first accounting period, apply to a sheriff for an order for the public examination before the sheriff of a debtor or of a "relevant person".[30] An examinee may be required to produce for inspection any document in his custody or control relating to the debtor's assets, his dealings with them or his conduct in relation to his business or financial affairs. The examinee may also be required to deliver the document or a copy of it to the permanent trustee for further information.[31]
14 Registers of insurance information
4.18 In the case of employers' liability insurance, third parties may now take advantage of a new Code of Practice, A Code of Practice for Tracing Employers' Liability Insurance Policies, ...Department of Environment, Transport and the Regions ("DETR"), October 1999), which came into force on 1 November 1999. This is operated by the insurance industry and was developed in consultation with, and is supervised by, the DETR.[32] It requires insurers to record and divulge insurance information on request. The code is potentially extremely helpful to third parties who do not know the identity of the insurer. Such third parties will be in particular difficulties as they will not be able to extract information from the unknown insurer, nor issue proceedings under transferred rights. It remains to be seen how well the scheme works in practice. The Code will not help a third party trying to trace insurers in the context of other types of insurance.
4.19 As part of the Company Law Review, the DTI is considering whether a central register of insurers of companies should be set up, possibly to be maintained by an additional question on corporate annual returns.[33] It is also considering whether to introduce a register of charges over insurance policies. It appears that the former proposal has so far received little support but that the latter has been strongly approved by consultees.[34]
15 Consultation: the general approach
16 Broad support for a strengthened statutory disclosure regime
17 Objections to a statutory disclosure regime
4.21 The specific disclosure regime we are recommending places the third party who receives a transfer of rights under the draft Bill in a better position than the third party faced with a solvent insured. In particular, it enables him to obtain information before issuing proceedings. By contrast, a third party faced with a solvent insured would in the usual case receive nothing which was not volunteered.[35]
4.23 In our view, information about insurance cover held by an insured who has been declared insolvent, or whose circumstances have otherwise caused a transfer of rights under the draft Bill, should be treated differently from information about insurance cover held by a solvent insured. Under the draft Bill the third party is a statutory assignee of some of the insured's rights under the insurance contract. In our view it would be inappropriate to require a third party to expend time and money discovering whether the rights conferred on him are valuable or worthless. A third party using the 1930 Act is often forced to do this; in our view a new Act should not reproduce this failing.[36]
18 Duty to disclose will only arise on request
4.25 The disclosure regime in the draft Bill differs in one major respect from that which we provisionally proposed in the consultation paper. Our provisional view was that the obligation to disclose should arise on a transfer of rights, and that disclosure should be given within 14 days of the disclosing party becoming aware that a third party has a possible claim under the Act.[37] A number of consultees argued persuasively that this suggestion was flawed and the requirement was too onerous on insurers. It was maintained that it was wrong to require an insurer to investigate or react to possible claims of third parties who had yet to contact the insurer, let alone make a claim. It was also pointed out that it would be difficult or impossible to prove when awareness of a claim occurred. We agree, and the disclosure regime in the draft Bill only imposes a duty to disclose information on receipt of a request for information from the third party.
4.26 Notwithstanding the fact that the third party will be able to obtain much of the information to which the draft Bill entitles him under procedural rules after the issue of proceedings,[38] we decided that the statutory right to obtain disclosure should be conferred on third parties both before and after the issue of proceedings. The alternative would have been to have withdrawn the right on the issue of proceedings. In our view this would have resulted in a more complex and less transparent regime.
19 Disclosable information under the draft Bill specified
4.27 In the consultation paper we sought consultees' views on whether the information to which the duty of disclosure extends should be clarified by a list in the proposed new Act, and whether a catch-all provision requiring disclosure of "other relevant documents and information" should be included.[39]
20 Details of the disclosure regime
21 Specified disclosable information
4.29 In the consultation paper we set out a provisional list of what should be disclosed. Consultees made many valuable suggestions on the list and this led us to make a number of changes to it. We concluded that, under the draft Bill, the following information should be disclosable:[40]
(1) the existence of any insurance contract;
(2) the identity of the insurer;
(3) policy terms;
(4) whether the insurer has purported to repudiate the policy or deny cover;
(5) details of any proceedings between the insurer and the insured concerning what is now the third party's claim under the insurance policy;
(6) how much (if any) of the fund has been paid to other claimants; and
(7) whether the insurance proceeds are subject to a fixed charge.
4.30 We comment below on the principal issues we considered while finalising the above list.
22 Grounds for denying liability or repudiating cover
4.31 We suggested in the consultation paper that the insurer should be required to disclose any grounds on which he had already purported to repudiate the insurance policy. We recognised that there was a danger that this might cause privileged information to be passed to the third party and argued that the insurer might be given a right to apply to court for an order relieving him of this duty to disclose if the court was satisfied that the information would prejudice the insurer's case on the insured's liability to the third party.[41] A number of consultees objected to this aspect of our proposals; they thought that the insurer should only be obliged to inform the third party if he had purported to repudiate (or had successfully repudiated) cover but should not have to disclose the grounds of the repudiation. We have adopted that suggestion. We were influenced in particular by the following considerations:
(1) If the insurer does intend to deny cover or repudiate liability he is likely in any event[42] to volunteer information to the third party on how he intends to do so unless he thinks it likely that such a revelation may prejudice him later.
(2) What matters to the third party is how the insurer will defend a claim against him under the Act. What may have been said, or not said, in past correspondence with the insured could be an unreliable guide. At the time he receives a request for information under the Act, the insurer will usually not have received a claim, much less considered his response to it. Even if he has put forward grounds for repudiation, these may be altered or abandoned once the insurer comes to defend proceedings.
(3) The grounds on which the insurer actually intends to deny cover or repudiate liability will shortly be revealed to the third party in the insurer's pleaded defence.
23 Details of proceedings between insurer and insured
4.32 When he acquires rights under the draft Bill, the third party will be able to apply to be substituted for the insured in current cover proceedings between the insured and the insurer.[43] The third party will only be able to do so, however, if he knows that such proceedings are taking place. The draft Bill enables the third party to obtain sufficient details of any such proceedings to enable him to apply to be substituted into them.[44]
24 Whether insurance fund is subject to a fixed charge
4.33 It is possible that the insured may have allowed the insurance proceeds to become the subject of a fixed charge.[45] If he did so, the third party who has received a transfer of rights would find that his rights were subject to the charge. This would reduce their value, perhaps to zero. The draft Bill enables a third party to ask whether the insurance proceeds are subject to a fixed charge before deciding whether or not to issue proceedings.[46]
25 No disclosure of settlements between insured and insurer
4.34 Consultees supported our provisional view[47] that details of settlements reached before a transfer of rights should not be specifically disclosable. The effect of any settlement, insofar as it affects his rights, will be apparent to the third party from other details which are disclosable, in particular the terms of the insurance contract and the amount of the fund which has been paid out to other claimants.[48]
26 The request for information
4.35 The draft Bill imposes a duty of disclosure arising on receipt of a request for information which must be complied with within 28 days.[49] The duty will only extend to information specified in the request. The request must be in writing.[50]
27 The timing of the request for information
4.36 Consultees strongly supported our provisional proposal that the right to information should not be delayed until the liability of the insured was established.[51] This is the effect of the draft Bill.[52]
28 Persons entitled to request information
4.37 One consequence of creating a right to disclosure which arises before liability is established is that it becomes necessary to specify who is to receive that right. We have followed the approach of the test in the 1930 Act which gives rise to the insurer's duty to disclose.[53] Those entitled to issue a request for information are those who believe on reasonable grounds that they have or may have received a transfer of rights under the draft Bill.[54]
29 Persons from whom information may be requested
4.38 We asked consultees whether anyone other than the insured, the office-holder and the insurer should be subject to a duty of disclosure.[55] Consultees generally supported the idea that third parties should be able to impose a duty of disclosure on those in control of the specified information; several emphasised that intermediaries will often have the most information. We agree. Under the draft Bill, a person entitled to request information may do so from anyone he believes on reasonable grounds has that information.[56]
30 Extent of duty of person from whom information requested
4.39 Consultees supported our provisional view[57] that those providing information should disclose information which was within their knowledge or reasonably ascertainable from their records. The draft Bill gives effect to this.[58] The draft Bill also provides that if the person from whom information is requested cannot provide the information, he should inform the third party why it cannot be provided and, in certain circumstances, say who might be able to do so.[59]
31 No "continuing duty"
4.40 Although many consultees supported our provisional conclusion[60] that the duty imposed by a new Act should be a "continuing duty", others suggested that this would be too onerous and was unnecessary. We were persuaded by the latter view. We concluded that it would be unacceptable to require insurers and others to monitor indefinitely information relevant to the third party's claim. The idea that a request for information will yield a "snapshot" of information currently held (analogous to a company search) is familiar and readily understood. Third parties will be entitled to make further requests for information to ensure that it is up to date.[61] In addition, in England, once litigation is under way, the defendants to the third party's claim are likely to be subject to continuing duties of disclosure.[62] The rules on recovery of evidence in Scotland are set out in paragraph 4.14 above.
32 Duty to disclose information not documents
4.41 In the consultation paper we envisaged that the duty to disclose would extend to both information and documentation.[63] In the course of drafting Schedule 1 to the draft Bill, however, we came to the view that the duty should extend only to specified information. Our reason for this was as follows. The duty is imposed by the draft Bill in order to help the third party evaluate his newly acquired insurance rights. In the light of consultation we have decided what information he needs to do this, and have listed it in the draft Bill. The third party would be entitled to require the insurer to give him this information. There is, accordingly, no need to require the insurer also to provide any documents. The insurer may choose to comply with a request by providing a copy of a document; or he may prefer to set the information out separately.
33 Insured is company not on the register (England and Wales only[64])
4.43 One of our aims in this project has been to remove a third party's need to restore a defunct company to the register. One reason a third party using the 1930 Act may do this is so that he can establish the insured's liability. A third party proceeding under the draft Bill will not have to resurrect a company for this purpose.[65] Another reason why a third party proceeding under the 1930 Act may do this is to bring about the insolvency of the insured (if the company has been struck off the register under section 653 or 651 of CA 1985 this may not have happened). A third party proceeding under the draft Bill will no longer have to do so.[66]
4.44 If a third party takes advantage of these reforms and brings his action against the insurer alone before the liability of the insured to him is established, he may find that he receives incomplete documentation relating to the insured's liability. He will only receive a list of the documents that the insurer controls, not those which the insured (or more precisely the insured's ex-directors) possess. Therefore, he might decide to apply to restore the insured to the register in order to obtain disclosure of these extra documents.[67]
4.45 The disclosure provisions in the draft Bill at Schedule 1, paragraphs 3 and 4 are designed to remove the need for any such applications. The third party will be entitled to impose[68] the same duties of disclosure on former officers employees and office-holders of the insured as would have been imposed by the court had the insured been restored to the register and orders for standard disclosure been obtained. The third party will only be able to request such information after he has begun proceedings against the insurer.[69] The third party's rights will be the same whether he is involved in litigation or arbitration proceedings against the insurer.[70]
34 Privileged documents
4.46 Schedule 1 does not require the disclosure of documents subject to legal professional privilege.[71]
35 Sanction for non-compliance
4.47 We did not think it necessary to provide an explicit sanction for non-compliance with the disclosure provisions in the draft Bill.[72] If someone from whom information or documentation was validly requested failed to respond adequately, the third party would be able to apply for a court order to require him to do so. If there were no proceedings yet in progress this application could be by way of a fresh claim.[73] In order to clarify the position in England and Wales, however, we recommend that CPR 31 should be amended to deal specifically with the procedure under Schedule 1.[74]
36 Anti-avoidance
4.48 Section 2(1) of the 1930 Act makes void any provision in an insurance contract which purports to prohibit the giving of the prescribed information once rights have been transferred under the Act. The draft Bill contains a similar provision.[75]
Note 2 A small minority of consultees were strongly opposed to any form of disclosure regime in a new Act. We set out a summary of this view, and our reasons for disagreeing with it, at paras 4.21-4.24 below. [Back] Note 3 Schedule 1, paras 1 and 2. [Back] Note 4 Schedule 1, paras 3 and 4. [Back] Note 5 We have followed the 1930 Act (s 2) by including the disclosure regime in the draft Bill itself. However, we recognise that it may be more in keeping with modern practice, and allow more flexibility, for such detailed provisions to be put in secondary legislation. [Back] Note 7 Bradley v Eagle Star Insurance Co Ltd [1989] AC 957. See also Woolwich Building Society v Taylor [1995] 1 BCLC 132. [Back] Note 8 The insurer may disclose insurance information voluntarily at an early stage in litigation under the 1930 Act. For example, if the insurer is conducting the defence of the insured and has avoided, or intends to avoid, cover, it will be in his interests to disclose this. He will hope that the third party will see the futility of proceeding against him and will desist. To a limited extent, therefore, a third party trying to establish liability in order to pursue a claim under the 1930 Act may be able to make educated guesses on the extent of cover. There are obvious problems however with relying on voluntary disclosure and inference. [Back] Note 9 In an interlocutory decision in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd, (unreported), 26 February 1993, Phillips J considered s 2 of the 1930 Act and said “one might have expected in a situation such as this the [1930 Act] to enable a plaintiff to ascertain the extent of insurance cover before incurring costs of litigation, because the rationale of that Act is to afford to those who can establish a good claim the protection of insurance of the insolvent company against that liability.” He concluded, however, that the House of Lords’ decision in Bradley v Eagle Star Insurance Co Ltd [1989] AC 957 thwarted any such expectations. Phillips J’s final judgment in that case, reported at [1994] 31 EG 68, was appealed, on issues unconnected with the 1930 Act, to the Court of Appeal ([1995] QB 375), and thereafter to the House of Lords under the name of South Australian Asset Management Corporation v York Montague [1997] AC 191. [Back] Note 10 RA Taylor MP is reported in Hansard as saying: “I regard it as of great importance that the injured poor person should have the right to demand from the insurance company, before they resort to the expensive and uncertain processes of the law, all the relative facts disclosed to them in order to enable them to make up their minds as to whether they have a substantial claim or not” (HC) 10 April 1930, vol 237, col 2507. As Mance J has pointed out (“Insolvency at Sea” [1995] LMCLQ 34 at p 42), the record in Hansard of the Bill’s third reading might properly be cited in future litigation under s 2 on the principle in Pepper v Hart [1993] AC 593. [Back] Note 13 In the case of pool managers, insurance may have been pooled to facilitate the handling of insurance cover provided by foreign insurers: there may be particular advantages to a third party having a right to disclosure against a pool manager based in this country as well as against a foreign insurer. [Back] Note 14 In addition to the general formulation in s 2(1), set out at para 4.5 above, s 2(3) specifies: “...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...”. [Back] Note 15 Consultation paper, para 6.4. [Back] Note 16 Consultation paper, paras 6.9-6.10. [Back] Note 17 In particular, conflicts between their duty to third parties under the 1930 Act and to the insured’s other creditors under IA 1986. [Back] Note 18 See Burns v Shuttlehurst Ltd [1999] 1 WLR 1449. Burns, a paraplegic, obtained judgment against his insolvent ex-employer, Shuttlehurst Ltd, in negligence for damages to be assessed. The insurer, General Accident, claimed to have repudiated cover. Burns sought discovery of insurance details. He did so, inter alia, in an application for pre-action discovery in his proposed action against the insurer. The Court of Appeal reversed the first instance judge and refused the plaintiff his discovery order on two grounds. First, the proposed action against General Accident was for an indemnity for damages, not for personal injuries, so the court had no jurisdiction under s 33 of the Supreme Court Act 1981 to make the order (s 33 then required the action to be for death or personal injuries. It has since been amended). Second, until the damages awarded had been quantified (which, it was recognised, would be an expensive business), no right to an indemnity crystallised. Burns had therefore no right of action against General Accident, and so it could not be said that General Accident was “likely” to be a party to the proposed action as was (and is) required by rules of court. [Back] Note 19 CPR 31.16(3)(a) and (b). [Back] Note 20 CPR 31.16(4)(a). [Back] Note 21 CPR 31.16(3)(d). It is not yet clear how the courts will view this requirement. Commentators have suggested that the courts will view such orders as “exceptional” (Blackstone’s Guide to the Civil Procedure Rules (2nd ed 1999) p 226). The Court of Appeal considered the application of this rule in Bermuda International Ltd v KPMG (a Firm) The Times 14 March 2001. It declined to lay down guidelines at such an early stage in the life of the new rule, and emphasised that it was a matter for the judge’s discretion. [Back] Note 22 To date four pre-action protocols have come into force: (1) Personal injury claims; (2) Resolution of clinical disputes; (3) Defamation; (4) Construction and engineering disputes. Each contains detailed provisions setting out the information which the prospective parties to litigation should exchange; in each case this includes documents on which they propose to rely. In the case of other types of claim, para 4 of the Practice Direction states that the prospective parties should behave as if a pre-action protocol existed. [Back] Note 23 The insurer may take the view that the third party is not likely to embark on litigation. He may also consider that non-compliance with a hypothetical protocol does not amount to a breach of rules of court and he may observe that, though the court may, in its discretion, make an award of costs or interest against him, these sanctions are not punitive (see Practice Direction - Protocols, para 2.4). [Back] Note 24 No automatic duty to disclose without a court order arises under the CPR. In the past, RSC O 24 r 1 automatically required mutual discovery in most cases. [Back] Note 25 As defined by CPR 31.6. [Back] Note 26 Under CPR 31.17. [Back] Note 27 Though possibly not all that he needs. A narrower range of documents are caught by disclosure orders under the CPR than was formerly the case. Under RSC O 24 it was necessary to disclose documents “relating to any matter in question in the cause or matter” (O 24 r 3(1)). This was interpreted to include any document containing information “which may enable the party [applying for discovery] ...either to advance his own case or to damage that of his adversary, [or] if it is a document which may fairly lead him to a train of inquiry which may have either of these two consequences” (Compagnie Financiere du Pacifique v Peruvian Guano (1882) 11 QBD 55 at p 63). Under CPR 31.6, by contrast, it is necessary only to disclose documents which support or adversely affect the case of a party to the proceedings. [Back] Note 28 The rules for recovering evidence by commission and diligence or under the Administration of Justice (Scotland) Act 1972 during an action are found in Rule 28 of the Ordinary Cause Rules and Rule 35 of the Court of Session Rules. [Back] Note 29 Draft Bill, Sched 1, paras 1 and 2. (Paragraphs 3 and 4 do not extend to Scotland as existing Scots law on this point is adequate). [Back] Note 30 By virtue of s 45(1)(b), the Accountant in Bankruptcy, the commissioners or at least one quarter in value of the creditors may also request that the trustee apply to the Sheriff for a public examination. Section 45(2) provides that the Sheriff has no discretion and must grant the order. A “relevant person” is defined in the Act as the debtor’s spouse or any other person the permanent trustee believes can give such information. [Back] Note 31 Bankruptcy (Scotland) Act 1985, s 46(4). [Back] Note 32 The DETR’s involvement stems from that department’s responsibility for health and safety at work. [Back] Note 33 See: Modern Company Law for a Competitive Economy - Completing the Structure (2000) DTI, para 8.26. [Back] Note 34 See: Modern Company Law for a Competitive Economy - Registration of Company Charges (2000) DTI, para 3.38. [Back] Note 35 At no stage, even after judgment, would he be entitled to details of the insured’s insurance position. Of course, if the insured failed to satisfy the judgment then the claimant might be able to petition for bankruptcy or winding-up and, if successful, would then receive a transfer of rights under the 1930 Act. He would then be entitled to information under s 2 of the 1930 Act. [Back] Note 36 This was the view of Mance J in “Insolvency at Sea” [1995] LMCLQ 34 at p 43: “True, a plaintiff must normally take his defendant as he finds him. But the key to the 1930 Act is to recognise the fundamental difference between an insolvent defendant and other defendants. First the insolvent defendant is and is known to be unable to pay. Secondly, despite his own insolvency, his insurers can and will often make the task of establishing liability against him extremely onerous.” [Back] Note 37 Consultation paper, para 13.4. [Back] Note 38 See para 4.13 above. [Back] Note 39 Consultation paper, para 13.13. [Back] Note 40 Schedule 1, para 1(2). [Back] Note 41 Consultation paper, paras 13.9-13.10. [Back] Note 42 As he might thereby dissuade the third party from issuing proceedings against him. [Back] Note 43 See para 3.43 above. [Back] Note 44 Schedule 1, para 1(2)(iv). [Back] Note 45 In Siebe Gorman v Barclays Bank [1979] 2 Lloyd’s Rep 142, Slade J held that it was possible to create a fixed charge over prospective assets such as future book debts provided that they could be clearly ascertained. The same reasoning would apply to proceeds of an insurance policy. Although it is unlikely that such a charge would be created intentionally, it might happen accidentally. See para 7.13 below. [Back] Note 46 Schedule 1, para 1(2)(b)(vi). The third party is likely to request from the insurer most of the information to which the draft Bill entitles him. However, as we explain below (para 4.38), the draft Bill enables the third party to require information from anyone who possesses it. The insurer might well not know if the insured had subjected the insurance proceeds to a fixed charge; a third party concerned about this point would be well advised to direct a request for such information to the insured instead. [Back] Note 47 Consultation paper, para 13.14. [Back] Note 48 Nor does the draft Bill require disclosure of any settlements reached after a transfer of rights. This is because, once the transfer has occurred, the insured and insurer have no rights or obligations inter se under the insurance contract in respect of the insured’s debt to the third party, so any arrangements they arrive at will not affect the third party’s rights. [Back] Note 49 Schedule 1, para 2. We agreed with consultees who argued that the 14 days suggested in the consultation paper (para 4.25) was too short a period. [Back] Note 50 Schedule 1, para 1(1). [Back] Note 51 Consultation paper, para 13.4. [Back] Note 52 Schedule 1, para 1(1). [Back] Note 54 Schedule 1, para 1(1). The request for information must specify those grounds (para 1(5)). [Back] Note 55 Consultation paper, para 13.20. [Back] Note 56 Schedule 1, para 1(1). The request for information must specify the third party’s grounds for believing that the person from whom the information is requested has that information (para 1(5)). [Back] Note 57 Consultation paper, para 13.18. [Back] Note 58 Schedule 1, para 2(1)(a) and para 7. [Back] Note 59 Schedule 1, para 2(1)(b) and para 2(2). [Back] Note 60 Consultation paper, para 13.4. [Back] Note 61 See the Interpretation Act 1978, s 12(1). [Back] Note 62 Under CPR 31.11 duties of disclosure continue until proceedings are concluded. [Back] Note 63 See, for example, para 13.13 of the consultation paper. [Back] Note 64 The provisions of the draft Bill discussed here do not extend to Scotland, where the third party will be able to obtain sufficient documentation by way of court order. See para 4.14 above. [Back] Note 65 See Part 3 above. [Back] Note 66 See Part 3 above. [Back] Note 67 Alternatively, if involved in court proceedings, he might apply for non-party disclosure under CPR 31.17. This would probably not, however, solve the third party’s difficulty. Not only would it require an application to court, but the order he could obtain would not be as broad as an order for standard disclosure, as all documents subject to the order would have to be specified in it (CPR 31.17(4)(a)). [Back] Note 68 By issuing a request enclosing a copy of the claim form against the insurer. See Sched 1, para 3. [Back] Note 69 As the rights are intended to replicate the effect of standard disclosure. For the same reason, the duty of disclosure imposed by Sched 1 paras 3 and 4 is, like that in CPR 31.6, framed in terms of documents rather than information. One difference with the CPR rule should, however, be noted: consistent with other duties of disclosure imposed by the draft Bill, the duty is not a continuing duty. See Sched 1, para 4(3). [Back] Note 70 See paras 5.39-5.44 below on the circumstances in which the third party will be involved in arbitration proceedings. [Back] Note 71 Schedule 1, para 2(3) makes this clear in relation to a notice requesting information under para 1. In Scotland, this covers information which is subject to confidentiality as between client and professional legal adviser. So far as a notice requesting disclosure under para 3 is concerned, the duties of disclosure and the rights of inspection under para 4(1) are the same as the corresponding rights and duties under the CPR. CPR 31.19 provides that those rights and duties are defeated by a valid claim to legal professional privilege. [Back] Note 72 Where an Act creates a duty, the law will supply an appropriate remedy: see Doe d Murray v Bridges (1831) 1 B & Ad 847 at p 849; 109 ER 1001, per Lord Tenterden CJ. The closest analogy is with the Norwich Pharmacal jurisdiction (Norwich Pharmacal Co v Commissioners of Customs and Excise [1974] AC 133) under which the Court has a general jurisdiction to require the disclosure of documents or other information by a party who (albeit blamelessly) has become involved in the wrongdoing of others (see White Book 2001, Vol 1, para 31.18.3). [Back] Note 73 CPR 31.18, which makes clear that the specific rules do not limit any other powers to order disclosure. Note that CPR 31.16 applies to applications before commencement of proceedings, but only in relation to disclosure of documents and against a person who is likely to be a party to subsequent proceedings. By contrast, Schedule 1 para 2 of the draft Bill imposes obligations to supply information (not merely documents) before any proceedings are begun, on persons who arenot necessarily expected to be parties. Schedule 1 para 4, under which the duty is limited to disclosure of documents, and applies only where proceedings have been begun, seems to be adequately covered by rule 31.17. [Back] Note 74 This recommendation will be drawn to the attention of the Rules Councils in Scotland. [Back]