Commercial litigators in the firm’s Dispute Resolution team were instructed by an insurer of new-build homes in respect of a substantial liability following an individual’s breach of his indemnity.
A builder company in the business of developing new-build houses and flats was contractually bound to ensure its properties complied with the insurer’s requirements for new-build homes. It failed to do so, as it later transpired the properties were defective in a number of ways, leading to damage caused by water ingress. The builder then entered liquidation. In turn, the insurer complied with its obligation to the property’s owner to remedy those defects and incurred substantial costs in the process. As the builder was in liquidation, the firm advised the insurer on recovery against the builder’s director who had provided the insurer with an indemnity should the insurer become liable for any payments, costs or losses as a result of the builder’s actions.
The insurer issued Court proceedings against the indemnifier who failed to respond to the claim. Once the insurer had obtained default judgment, the Defendant indemnifier applied to set aside that judgment, partially on grounds that he had (allegedly) filed a Defence in time. The Court ordered that the indemnifier provide a witness statement to explain why he did not respond to the claim and why he is not liable under the indemnity. The Defendant failed to do so and the insurer made a successful application for an ‘unless order’. The Court granted the unless order which set out that unless the Defendant complied with the Court’s requirement for a witness statement, the Defendant’s Defence would automatically be struck out and his application to set aside the insurer’s judgment be dismissed. The Defendant failed to comply with the Unless Order, losing his ability to defend the claim and pursue his application to set aside the judgment. At a subsequent hearing, the insurer was successfully awarded its costs of both opposing the Defendant’s application and issuing its own application for the Unless Order.
This case provides useful reminders of:
- the importance of complying with Court orders;
- the impact of unless orders under CPR 3.1 – whilst appearing draconian, they continue to be a useful tool against parties that fail to comply with orders of the Court; and
- the power of personal guarantees and indemnities – particularly with directors that are taking on the potential liabilities of companies, it is usually the case that their responsibilities continue even when the company has been dissolved and/or their directorship has ended.