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Insurer’s pre-insolvency pay-out remains company asset; TP(RAI)A 2010 gap confirmed; no contractual/constructive trust or unjust enrichment (Wood v Desai [2024] EWHC 1893 (Ch))

Published on: 11 September 2024

Published by a LexisNexis Restructuring & Insolvency expert
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Wood and another v Desai and another [2024] EWHC 1893 (Ch)

What are the practical implications of this case?

From a practical standpoint, the outcome is vexing, as it uncovers a lacuna that could have been remedied almost a hundred years ago. The judgment observes that Re Harrington Motor Co Ltd, ex p Chaplin [1928] Ch 105 was viewed by the Court of Appeal as highly unsatisfactory, prompting the Third Party (Rights Against Insurers) Act 1930, which paved the way for today’s TP(RAI)A 2010. Under that statutory scheme, had the company been insolvent at the moment the pay-out was obtained, the respondents would have been within cover and able to receive the funds (assuming they proved their claim). Here, however, the matter fell between the stools: the pay-out was made before the company qualified as a relevant person for the purposes of TP(RAI)A 2010, and only afterwards did the company tip into insolvency. Some modest legislative refinement might yet be warranted to seal this loophole. That result disadvantages the respondents, arising not from fault or proof, but purely from the sequencing of events in time...

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