The judgment of the Court of Appeal in Elysa Alton v Powszechny Zakład Ubezpieczeń [2024] EWCA Civ 1435 (BAILII) serves as something of a cautionary tale and a salutary reminder to Claimant representatives to ensure that their house is in order vis-à-vis cross-border issues before issuing a claim against the insurer of a foreign-registered vehicle. It is also an example to Defendant representatives as to the approach that can (and can’t) be taken in response to a defectively-pleaded claim.
The problems with the pleadings
Ms Alton’s claim arose out a RTA between her (English-registered) vehicle and a Polish-registered lorry (insured by the Defendant, “PZU”) which occurred in England on the M20 motorway back in the heady pre-Brexit days of September 2017. Liability was conceded in pre-action correspondence; however a number of potentially fatal missteps were made in pursuing the claim including:
- Issuing against the Defendant’s UK claims handler “InterEurope” (with whom pre-action correspondence had been exchanged) rather than the relevant insurer (PZU);
- Asserting a direct right of action against the Defendant insurer via the Third Party (Rights Against Insurers) Act 2010; and
- Asserting a direct right of action against the Defendant insurer via the European Communities (Rights against Insurers) Regulations 2002.
The 2010 Act, which primarily concerns insolvency situations, is almost always a red herring in RTA cases including those involving foreign insurers. The 2002 Regulations are usually the basis for bringing a claim directly against an insurer following an RTA, but there are strict eligibility criteria, one of which is that the Defendant vehicle is “normally based” (ie, effectively, “registered”) in the United Kingdom. Although the Claimant was given permission to amend the pleadings to correct the name of the Defendant to PZU, the difficulties with the claim continued because the Claimant missed an opportunity to rectify the basis for a direct right of action against the (now correctly-named) insurer.
The strike-out application
All of this led, understandably, to a strike-out application by the Defendant and a slightly belated cross-application to amend the claim in order rectify the problems. At the hearing before the Deputy District Judge, although the Claimant’s representatives had abandoned their reliance on the 2002 Regulations and the 2010 Act, they had still not identified the precise legal basis for a direct action against PZU.
The claim was struck out. The DDJ was unsure that the Claimant could, or that she intended to, rectify the defect in the pleadings and was concerned that any amendment to the claim would fall foul of the Limitation Act 1980 if it pleaded a cause of action arising out of a different set of facts (one such “new fact” being that that Polish law provides for a direct right of action against an insurer).
The appeals (reinstating the claim)
On appeal to the Circuit Judge, the basis for a direct action against PZU was clarified as being Article 18 of Rome II combined with Article 822(4) of the Polish Civil Code (Polish law being relevant as the law of the Defendant’s insurance contract). In considering whether to set aside the order striking out the claim, HHJ Parker referred to the dictum of Tugendhat J in Park v Kim [2011] EWHC 1781 (QB) to the effect that where there is a defect in the pleadings, before striking out a claim, the Court should give the party concerned an opportunity to rectify the defect by way of amendment.
Although HHJ Parker described the Claimant’s representatives’ conduct in failing to remedy the defect in the pleadings as “deeply unimpressive”, he identified a lack of any prejudice to the Defendant insurer, whom he considered probably knew all along what the basis for direct action against them would be. The Defendant appealed to the Court of Appeal.
The judgment of Popplewell LJ (with whom Holgate LJ and Peter Jackson LJ agreed) effectively doubles down on HHJ Parker’s reasoning for overturning the strike out. The factors which were relevant to the exercise of discretion on a strike-out application of this type included:
- the principle set out by Tugendhat J in Park v Kim as indicative of the overriding objective;
- whether the defect in the pleading could (and would) be cured (ie amended so as to have a real prospect of success); and
- the balance of prejudice;
In this particular case, the prospects of success of the proposed amendment depended on, first, whether there was, or was likely to be, a direct right of action against an insurer in Polish law and, second, whether any amendment would fall foul of the Limitation Act 1980 on the basis that it relied on new facts. The Court of Appeal did not identify any real issue with either aspect. Although the relevant provision of Polish law had not been specified before the DDJ, it had already established as ‘overwhelmingly likely’ that there was such a right. Popplewell LJ’s “provisional view” was that a claim pleaded under the 2002 Regulations and a claim pleaded under Article 18 of Rome II would arise out of the same or substantially the same facts, however it was not necessary to decide that point in order to find that the DDJ had been wrong to conclude that it was unlikely that the defect in the pleadings could be rectified.
The Court of Appeal held that the balance of prejudice in this case “militated strongly in favour of dismissing the strike out application.” The Claimant would lose a claim in which liability was unlikely to be in issue and quantum was to a large extent simply “not admitted” rather than denied. By contrast, the Defendant would suffer no prejudice and would be able to raise limitation arguments, if necessary, at the hearing of the Claimant’s application to amend the pleadings.
The appeal against HHJ Parker’s decision to reinstate the claim was accordingly dismissed and the claim survived.
Concluding thoughts
It is difficult to be critical of the Defendant’s initial response to this claim which was plainly pleaded in a defective manner and which had already been amended once without any attempt to correct the pleadings so as to plead a viable cause of action against the Defendant. However, some criticism is levied by the Court of Appeal at the approach the Defendant took subsequently: “Whilst there is no general duty on one party to provide information to remedy defects in its opponent’s case, the circumstances which had arisen before the DDJ made it incumbent on PZU to make clear whether it challenged what was said in paragraph 17 of Mr Rowley’s skeleton [ie whether there was a direct right of action in Polish law or not].”
There is also clear criticism for the manner in which the claim was initially pursued by the Claimant’s representatives, but ultimately the decision of the Court of Appeal shows that the balance of prejudice is such (as is so often the case) that strike out is always going to be a last resort in disputes about defective pleadings.
Although all was well that ended well for the Claimant in this case, cross-border litigants and their representatives would be well-advised to get into the habit of double-checking the legal basis for any claim involving a foreign insurer (perhaps even “checking it twice”) before the claim is pleaded so as to avoid appearing on the Court of Appeal’s naughty list.