Application of insurance proceeds following receivership

The claimant mortgagor fell into arrears and the mortgagee appointed a receiver. The receiver took out building insurance over the property and advised the claimant to cancel his own policy. Following a leak at the property, the receiver failed to notify a claim in time. The claimant alleged that the receiver had breached its duty to him by failing to submit a timely claim.

The Court of Appeal has now upheld the trial judge's finding that the receiver owed no duty to the claimant: "any duties owed by the Receivers in relation to the insurance claim were owed exclusively to the trustee-in-bankruptcy". A further issue was whether, had a valid insurance claim been made, the receivers would have been obliged to spend the insurance monies on making good the water damage. The position is governed by the Law of Property Act 1925, which provides that the mortgagee can, if it wants, require the receiver to use the insurance proceeds to carry out repairs. However, on the facts, the judge concluded that: "There is no evidence to show that the Bank would necessarily have directed the Receivers to expend the money on repairs as opposed to the reduction of the mortgage liabilities and subsequent events strongly suggest that the Bank would have sought to reduce its exposure. In my view, the claimant has not produced the evidence necessary to establish his case on causation".

Blake v Stewart: Adding a third party to a claim

PD19A provides that "A new defendant does not become a party to the proceedings until the amended claim form has been served on him", and the case of Kettleman v Hansel Properties [1987] is cited as authority for that. However, in this case, the judge held that a claim form need only be served if directions are given to do so. Otherwise, it was held that only the order joining the new party must be served on all parties as well as the new party. Although the court may give directions for service of a claim form (pursuant to CPR r 19.4), it is not bound to do so.