The Law Commission is due to publish its delayed Report on reform of the Third Parties (Rights Against Insurers) Act 1930 this summer, following receipt of Responses to its Consultation Paper1 published in 1998. The purpose of this article is to provide a reasoned critique of the reforms suggested in that Consultation Paper, illustrated by reforms to the common law position that have been introduced in Australia. It is contended here that the Australian reforms, at both State and Federal level, have followed a very different and preferable path to what is, it is here contended, the complicated and unsatisfactory legal position created in England by the 1930 Act. Those flaws, in the writer’s opinion, require a greater degree of reform than the restricted modifications foreshadowed in the Consultation Paper, which will not cure the major deficiencies experienced in the operation of the 1930 Act. The Federal Australian approach of creating a judgment creditor’s priority over relevant insurance monies received, has the great attraction of simplicity, and appears to work well enough. It is here argued that English law should do away with the present Act altogether, and adopt legislation in the form of that in Australia.

At common law, a third party who had secured a judgment against another who was insured against such liabilities had no remedy directly against the insurer to enforce the contractual indemnity afforded to the insured. The position was that, when an injured person got judgment against an insured wrongdoer, and the wrongdoer then went bankrupt, the injured person had no direct claim against the insurance monies. He could only prove in the bankruptcy, and the insurance monies went into the pool for the benefit of the general body of creditors.2 Even an attempt to enforce the judgment against the wrongdoer by way of garnishee proceedings against the insurance monies was held to fail.3