Title to sue

For the second time in recent months it has been necessary for a court to decide whether an arbitration commenced, by oversight, in the name of the wrong claimant – the named claimant having transferred his rights to a third party – is to be treated as valid subject to the substitution on the documents of the name of the third party. In Harper Versicherungs AG v River Thames Insurance Co Ltd [2006] EWHC 1500 (Comm) it has been confirmed that this type of error is procedural only, and does not affect the validity of the proceedings.

Harper: the facts

A reinsurance treaty was entered into in 1965. This contained an arbitration clause under which disputes were to be resolved by an arbitral tribunal, one arbitrator appointed by each party and an umpire appointed by the arbitrators themselves. The treaty had run without any difficulty for some 40 years, albeit with changes in the identities of the participating reinsurers. In 2005 the reinsurers refused to settle various long-tail asbestos claims in respect of risks declared to the treaty in the 1960s, and had insisted upon an inspection of underwriting and claims records. The underlying allegation was that risks had been ceded to the treaty which fell outside its terms. The original reinsureds, IM and LS, were managed by Resolute. Acting on behalf of the reinsureds, Resolute commenced arbitration proceedings against the reinsurers, HT and RT, both of which were in run-off under the management of Castlewood, and an arbitrator was appointed for IM and LS. Unfortunately, in April 2005, shortly before the arbitration had been commenced, and unknown to Resolute, the insurance business of IM and LS had in April 2005 been transferred to another company, OM, under a scheme sanctioned by the court under Part VII of the Financial Services and Markets Act 2000. Therefore in May 2005 Resolute authorised solicitors to commence arbitration in the names of IM and LS, which had no title to support the action.