1 All ER (Comm) 354
Society of Lloyd’s v Jaffray and others
QUEEN’S BENCH DIVISION (COMMERCIAL COURT)
15, 22 JANUARY 1999
Practice – Stay of proceedings – Costs orders in earlier proceedings – Lloyd’s applying for summary judgment against names – Names relying on defence of fraud – Court holding that alleged fraud could not provide a defence – Lloyd’s obtaining summary judgment and costs orders – Names relying on same fraud allegations in claims for damages against Lloyd’s – Lloyd’s applying for claims to be stayed pending payment of costs in summary judgment proceedings – Whether stay should be granted.
The Society of Lloyd’s (Lloyd’s) sued a number of names for non-payment of the Equitas reinsurance premium, and applied for summary judgment. In those proceedings, the names made various allegations of fraud against Lloyd’s, contending that the alleged fraud gave them a defence to the claim. That contention was rejected by the court, and accordingly Lloyd’s was granted summary judgement and obtained various costs orders in its favour. For the purposes of the summary judgment proceedings, it had been unneccessary to determine the merits of the fraud allegations, and those same allegations formed the basis of claims and counterclaims for damages brought by the four of the names. Lloyds applied for those claims to be stayed pending the payment of the costs orders in the summary judgment proceedings. In support of its application, Lloyds relied on the settled practice of the court to grant such a stay where a party who had been unsuccessful in one action commenced further proceedings in respect of the same subject matter.
Held – Where the court stayed proceedings pending the payment of costs orders in previous proceedings, it did so in order to discourage the unnecessary duplication of proceedings directed to the determination of the same or substantially the same issues. In such cases, there had been a misuse of the court’s procedure, but this might fall short of an abuse of process or vexatiousness sufficient to justify striking out the second set of proceedings. Similarly, the circumstances might not give rise to an issue estoppel which could form the basis of a strike-out application. In the instant case, the fraud allegations could not have been determined in the summary judgment proceedings, and thus the prosecution of the claims and counterclaims did not involve any needless procedural duplication. Accordingly, the case fell outside the principle for granting a stay, and the application would be dismissed (see p 362 j to p 363 b j to p 364 a, post); Hines v Birkbeck College (No 2)  4 All ER 450, M’Cabe v Bank of Ireland (1889) 14 App Cas 413, Martin v Earl Beauchamp (1883) 25 Ch D 12, Payne, Re, Randle v Payne (1883) 23 Ch D 288, Thames Investment and Securities plc v Benjamin  3 All ER 393 and Theakston v Matthews (1998) Times, 13 April considered.
Per curiam. In most cases the policy of the courts will be to discourage needless procedural duplication, but an order for a stay of proceedings is discretionary and there may be exceptional cases in which countervailing considerations may involve a discretionary balancing exercise (see p 364 b c, post). [*355]
For stay of proceedings under inherent jurisdiction generally, see 37 Halsbury’s Laws (4th edn) para 442.
Cases referred to in judgment
Hall v Paulet (1892) 66 LT 645.
Henderson v Henderson (1843) 3 Hare 100, [1843–60] All ER Rep 378, 67 ER 313.
Hind v Whitmore (1856) 2 K&J 458, 69 ER 862.
Hines v Birkbeck College (No 2)  4 All ER 450,  Ch 33,  3 WLR 557, CA.
M’Cabe v Bank of Ireland (1889) 14 App Cas 413, HL.
Martin v Earl Beauchamp (1883) 25 Ch D 12, CA.
Morton v Palmer (1882) 9 QBD 89, DC.
Payne, Re, Randle v Payne (1883) 23 Ch D 288, CA.
Society of Lloyd’s v Fraser  CA Transcript 1611; affg  CLC 127.
Society of Lloyd’s v Leighs  CLC 1398, CA; affg  CLC 1012.
Society of Lloyd’s v Wilkinson (23 April 1997, unreported), QBD.
Thames Investment and Securities plc v Benjamin  3 All ER 393,  1 WLR 1381.
Theakston v Matthews (1998) Times, 13 April,  CA Transcript 515.
Wickham, Re, Marony v Taylor (1887) 35 Ch D 272, CA.
Cases also referred to or cited in skeleton arguments
Penny v Penny  2 All ER 329,  1 WLR 1204, CA.
Peters v Tilly (1886) 11 PD 145.
The applicant, the Society of Lloyd’s, applied to stay claims or counterclaims brought against it in consolidated proceedings by Lloyd’s names, including Sir William Otho Jaffray, until the payment of costs awarded to Lloyd’s in related summary judgment proceedings. The facts are set out in the judgment.
Anthony Grabiner QC and David Foxton (instructed by Freshfields) for Lloyd’s.
Michael Freeman of Grower Freeman & Goldberg for the defendant names.
Cur adv vult
22 January. The following judgment was delivered.
This is an application by Lloyd’s to stay proceedings variously brought by way of claim or counterclaim in a number of different actions brought by or against four members of Lloyd’s which were by my order of 30 June 1998 ordered to be tried at the same time. The reason for that order was that all such claims and counterclaims raised substantially similar issues between the names and Lloyd’s. For present purposes, it is sufficient to describe those points as allegations by each of the names that in the course of the period from about 1980 they were induced to become members of Lloyd’s and to renew their membership year by year by fraudulent misrepresentations made to them by or on behalf of Lloyd’s. They [*356] also claim as a subsidiary point that one of the consequences of those ongoing misrepresentations was that, as members, the claimants had been bound by the regime, involving Equitas as reinsurer of the names and by the duty to pay reinsurance premiums associated with the reconstruction and renewal settlement (the R&R settlement) subject to the ‘pay now sue later’ provision of the reinsurance contract (cl 5.5).
The names claimed or, as the case may be, counterclaimed damages for fraud. Those damages would in substance be quantified by reference to their overall net losses as members and the computation of the amount recoverable would clearly have to take into account amounts paid or payable by the names in respect of the Equitas reinsurance premium.
The factual basis of the application to stay these actions is as follows. Lloyd’s issued writs against names who did accept the R&R settlement offer described in Society of Lloyd’s v Leighs  CLC 1398 (affg  CLC 1012). Lloyd’s proceeded under RSC Ord 14 and recovered judgment on the basis that the three names in those test cases had no arguable defence. Amongst the issues raised by way of defence was the allegation that Lloyd’s had fraudulently induced those names to become members and to remain members. The names sought to rely on their fraud allegations as a foundation for their claim to have rescinded their membership agreements, as a set-off of damages for fraud against Lloyd’s claims and as a basis for a stay of execution of any judgment for the Equitas premium. These defences all failed for reasons to be found in the judgments given by me and the Court of Appeal. A major obstacle to the names’ defences based on fraud was cl 5.5 of the reinsurance contract which had the effect of insulating recovery of the premium from the names’ cross-claims for fraud. The hearings were conducted on the express assumption that the question whether there had been fraud by Lloyd’s and whether it had induced the names to become and remain members and thereby sustain loss was a matter which would have to be tried if it became relevant. As appears from the judgments, it would become relevant by way of defence only if the names were held be right as a matter of law on their rescission argument or on their set-off argument. If they were wrong on both issues as a matter of law and if there could be no stay of execution, the position was recognised by all parties to be that Lloyd’s would be entitled to judgment without a stay in respect of the Equitas premium, but that the names would be left to pursue their fraud claims by way of separate action or counterclaim in the actions brought by Lloyd’s.
Following the judgment in the Court of Appeal in Leighs, Lloyd’s issued a large number of Ord 14 summonses against other names who had failed to pay the Equitas premium, including Mr Fraser and Sir William Jaffray. In the Ord 14 proceedings which followed, those and other names put forward an argument that Lloyd’s could not rely on the insulation provided by cl 5.5 because its insertion into the reinsurance contract was part and parcel of a device to protect Lloyd’s from the consequences of its own fraud and was therefore a matter of bad faith. There was also an argument based on art 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 4 November 1950; TS 71 (1953); Cmd 8969). Tuckey J in Society of Lloyd’s v Fraser  CLC 127 declined to permit the names to rely on the bad faith argument on the ground that, in the context of managed litigation, it should have been raised in the Leighs case and it was an abuse of process to raise it at that later stage. He also rejected the European Convention defence. The Court of Appeal [*357] dismissed an appeal from that judgment on 31 July 1998 (see  CA Transcript 1611).
Accordingly, the position at the end of July 1998 was that there had been held to be no viable defence to Lloyd’s claims for the Equitas premium. The names’ underlying claims for fraud had been relied upon as the factual foundation for two main grounds put forward by way of defence which had failed as a matter of law, but the determination of those claims had necessarily been postponed because, as a matter of procedural management, it was unnecessary that they should be determined in the context of the Ord 14 applications. Indeed, many of the names had not pleaded a defence and counterclaim at that stage. They relied on affidavits in defence. They did, however, adopt the substance of the counterclaim pleaded on behalf of Sir William Jaffray. Thus, once the Ord 14 defences had failed and Lloyd’s was entitled to summary judgment on its claim, the position was that the counterclaims remained pending and any of the names who subsequently issued a writ confined to the substance of the fraud claim would be in precisely the same position in substance as a name left with a pending counterclaim.
Following the judgments in Leighs and Fraser orders for costs were made in Lloyd’s favour. The matter was complex because the defence to the Ord 14 proceedings both in the case of Leighs and of Fraser was supported by the names’ organisations. In particular, the Leighs defences were supported by the United Names Organisation (UNO) (representing British names) and by the American Names Association (ANA) (representing American names). UNO represented 175 names and put up about two-thirds of the defendants’ own costs, ANA represented 373 or 585 names, the precise number being at present unclear, and put up about one-third of the defendants’ own costs. The Association of Canadian Names (ACN) appeared as intervenors. On 25 October 1998 upon Lloyd’s application for orders under s 51 of the Supreme Court Act 1981 that those who supported the proceedings should, in addition to the nominal defendants, be liable for the costs, I ordered that the members of UNO and ANA at the relevant time should, in addition to the three defendants, be jointly and severally liable for Lloyd’s costs in Leighs, but that the order should not be enforced against any such member on a non-numerical rateable basis without the leave of the court. The total amount of costs payable by the defendants in Leighs apart from the amount paid by ACN in respect of the hearing of Leighs in the Court of Appeal, has been agreed in the sum of £331,772. Although, according to the affidavit evidence of Mr Michael Freeman, solicitor for the defendants, UNO is in the process of collecting rateable contributions on a numerical basis from its members, it has so far paid to Lloyd’s no more than about £35,000. The members of ANA appear not to have paid anything at all so far.
In the Fraser action Tuckey J ordered that the defendants should be jointly and severally liable for the costs of the proceedings and the Court of Appeal refused leave to appeal against that order. It ordered that the costs of any particular issue taken in the Court of Appeal should be borne on a joint and several basis by those raising that issue. There has not yet been a taxation of Lloyd’s Fraser costs. They are said substantially to exceed the Leighs costs. A figure of £1Š786m has been put forward for the first instance costs and £168,508Š28 in the Court of Appeal. No payment has been made in respect of those costs.
Finally, by way of introduction, the present proceedings, to which I refer as ‘the Jaffray action’, consist of counterclaims of some 120 names in proceedings [*358] which were part of the Fraser action and claims by writ by some 30 other names. These proceedings are, however, supported by UNO.
Lloyd’s grounds for this application
Mr Anthony Grabiner QC, on behalf of Lloyd’s, submits that, based upon a long and consistent line of authorities, there is a settled practice that where a party, who has been unsuccessful in one action and has therefore sustained an adverse costs order, commences further proceedings in respect of the same subject matter, the court will stay the second action until the costs of the first action have been paid. Where the costs have not yet been taxed the court will require payment of an appropriate sum into court as a condition of lifting the stay, as ordered in Thames Investment and Securities plc v Benjamin  3 All ER 393,  1 WLR 1381. It is submitted that this settled practice should apply in the present case because the subject matter of the counterclaim, or as the case may be, the claim, is exactly the same as the underlying fraud allegation deployed by way of defence in Leighs and Fraser, it being asserted in Leighs that fraudulent misrepresentation gave rise to a right of rescission or to a damages claim which could operate by way of a defence of equitable set-off and in Fraser that the inclusion in the Equitas reinsurance contract of cl 5.5 emanated from and was in furtherance of the same initial fraudulent misrepresentations. Since all the points based on fraud failed, and since the claims and counterclaims should be treated as separate proceedings from those in which the unsuccessful defences were raised, it should not be open to the Jaffray claimants or counterclaimants to litigate that issue of fraud until they had discharged the outstanding costs orders against them, namely that each of the Leighs and Fraser defendants and each member of UNO was jointly and severally liable for Lloyd’s costs.
In Re Payne, Randle v Payne (1883) 23 Ch D 288 a married woman, Mrs Randle, had previously brought an action by a next friend against the executors of her father for the administration of his personal estate and against her husband to enforce her equity to a settlement. An order was made that the next friend should give security for the costs of those proceedings on the grounds of his poverty, but he failed to comply with the order and the action was therefore subsequently dismissed with costs. Four months later Mrs Randle started another action by a different next friend in which substantially the same relief was claimed against the same defendants. There was an application by the defendants to stay the second action until the costs of the first action, which had then been taxed, were paid.
In reversing the decision of the Hall V-C refusing the application for a stay, Cotton LJ in the Court of Appeal said (at 289–290):
‘If an infant sues by a next friend and the suit is dismissed with costs, it would not be right to prevent him from bringing a new suit by another next friend on the ground that the costs of the former suit had not been paid. But a married woman has a power of selecting her next friend. She has to a certain extent a voice in the suit, and she is under an obligation to select a responsible person as next friend who may be answerable to the Defendant for costs if the suit should be dismissed. I see no reason why the same rule should not apply to her as to persons who sue without a next friend, namely, that if a suit is dismissed with costs the same plaintiff cannot proceed in another suit for the same objects until the costs of the first action have been [*359] paid. Undoubtedly it would have been hard upon the new next friend to order him to pay the costs of the first action personally. But that is not what is now asked for, but only that the second action may be stayed till the costs of the first have paid by somebody or other. There is no case in point except Hind v. Whitmore ((1856) 2 K&J 458), in which there is an expression of opinion by Vice-Chancellor Wood that the rule ought not to be extended to such a case as we have before us. But a married woman stands now on a different footing from that on which she stood at that time. She can sue without a next friend by leave of the Court under Order XVI, rule 8, with or without security for costs, as the Court may direct. Therefore, it cannot be said that she is prevented from suing because she cannot find a next friend. We must, therefore, lay down the rule that a married woman cannot be allowed to bring a fresh action till the costs of the former suit are paid. She must take care to select a next friend who is a responsible person. If she does not do so she will be at this disadvantage, that if she fails in her suit she cannot bring a new one until the costs in the former are paid.’
Lindley LJ concurred thus (at 291):
‘We must therefore act on principle, and the principle is that a person ought not to be harassed by vexatious litigation. There are several ways in which a married woman can bring an action. If she is a pauper, she can bring an action without a next friend; and if she is not a pauper she can have recourse to Order XVI, rule 8, and obtain leave of the Court to sue without a next friend, in which case she would generally have to give security for costs. But if she cannot sue in either of these methods, she must select a next friend who is not a pauper, but is able to be answerable for costs. If she does not do so, is it right that she should be entitled to bring another action by another next friend without paying the costs of the first action? I am disposed to say, No, and I must so decide unless there is an authority to the contrary … I am therefore of opinion that we ought to decide this case so as to protect the Defendants against vexatious litigation, and that this second action cannot go on till the costs of the first action are paid.’
It is to be observed that the court’s order staying the second proceedings until the costs of the first proceedings had been discharged was aimed at what was seen to be a procedural abuse, namely the decision to sue through a next friend who could not afford to pay the costs in a case where she could have sued without a next friend or through a next friend who could afford the costs. She had therefore been responsible for misusing the court’s procedure.
In Martin v Earl Beauchamp (1883) 25 Ch D 12 the plaintiff as legal personal representative of Elizabeth Bunch (EB), had revived a bill for an account against the representatives of the two administrators of the estate of an intestate. The claim was dismissed with costs on the grounds that the plaintiff had failed to prove that EB was next of kin of the intestate. The plaintiff subsequently obtained a grant of letters of administration with the will annexed of that part of the personal estate of the same intestate which had been left unadministered by the original administrators of that estate. The plaintiff in that capacity brought a second action against one of the representatives of the administrators for an account of that part of the estate received by that administrator. That representative had been a defendant in the first action. On appeal from an order [*360] by Pearson J that the second action should be stayed until the costs of the first action had been paid, the Court of Appeal dismissed the appeal.
Cotton LJ, with whom Lindley LJ agreed, said this (at 15):
‘The rule is established that where a plaintiff having failed in one action commences a second action for the same matter, the second action must be stayed until the costs of the first action have been paid. Here the Defendant is only one of the Defendants in the old suit, but he is sued in the same character as before. The Plaintiff in the former suit sued as personal representative of Elizabeth Bunch, he now sues as administrator de bonis non of William Jennens. But though he is not suing in the same character as that in which he formerly sued, he is suing substantially by virtue of the same alleged title. If he recovers any part of this estate from the Defendant he will recover it as a trustee for the estate of Elizabeth Bunch, and I am of opinion that he is to be treated as bringing a second suit for the same matter as the former.’
Thus, the basis of the decision was that the plaintiff in one capacity was seeking to relitigate an issue upon which he had failed in a different capacity in the first action, namely the allegation that EB was next of kin of the intestate.
The House of Lords approved and applied Martin v Earl Beauchamp in M’Cabe v Bank of Ireland (1889) 14 App Cas 413. In that case, which was an appeal from a decision of the Court of Appeal in Ireland, the plaintiff had commenced proceedings in the Exchequer Division in Ireland in his capacity as his wife’s representative to recover from the bank an amount of stock which many years previously had been settled on his wife since deceased. The claim was dismissed with costs. He then started fresh proceedings in the Chancery Division in Ireland, alleging that the first action had failed because it had been started in the wrong division. The defendant bank applied for and obtained a stay until the plaintiff had satisfied the costs order in the first action. In dismissing the appeal Lord Herschell LC observed (at 415–416):
‘Now, my Lords, I find that it was laid down in a recent case in the Court of Appeal, Martin v. Earl Beauchamp ((1883) 25 Ch D 12), that “the rule is established that where a plaintiff having failed in one action commences a second action for the same matter the second action must be stayed until the costs of the first action have been paid;” and even although the actions were not between precisely the same parties or persons suing in the same capacity, the case was held to be within the rule inasmuch as the plaintiff there was “suing substantially by virtue of the same alleged title.” It cannot be denied that in the present case the parties are the same, and that the plaintiff is “suing substantially by virtue of the same alleged title;” and therefore I think that the present case has been properly disposed of in accordance with that rule, which I apprehend is not in any respect confined to the Courts in England but applies as well to the Courts in Ireland, arising as it does out of the inherent power which resides in the Court to prevent a second suit being brought upon the same cause of action until the costs incurred in the first action have been paid. It is impossible for us to interfere with that which the Court of Appeal have done, which was entirely within their jurisdiction, and which I can see no reason to doubt has been right.’
Lord Fitzgerald said (at 416): [*361] ‘My Lords, I concur in everything which my noble and learned friend on the woolsack has stated, and I should only add, from my experience of the practice in Ireland, where I was for a long time upon the bench, that as long as I can recollect it has been part of the inherent jurisdiction, and never doubted, of every Court in Ireland to stay proceedings in an action before it, where a prior action has been brought substantially asserting the same rights against the same parties in the same or another Court, until the costs of that prior action have been paid.’
Again, therefore, the emphasis is on the second set of proceedings involving the relitigation of an issue raised in the first action. The matter having already been determined in the Exchequer Division, the subsequent proceedings in the Chancery Division involved a duplication of procedure which would be permitted only upon satisfaction of the outstanding costs order.
In Hall v Paulet (1892) 66 LT 645 the trustees of a will brought an action in trespass against one Hall who had been occupying certain property to which he claimed to be entitled as heir in law of the deceased former owner. Hall put in a defence claiming that he was rightfully in possession. He counterclaimed against the plaintiff trustees on the basis that they were wrongfully in possession. He later withdrew his defence and was ordered to pay the costs. He later brought a second action in which he claimed a declaration that he was entitled to the same estate as heir-in-law. Kekewich J made an order staying the second action until the costs order in the first action had been complied with. He stated (at 646):
‘Here the actions are intimately connected, the questions in this action are questions which would have been decided in the previous action if Hall had not withdrawn his defence.’
In much more recent times the Court of Appeal has upheld orders for a stay pending satisfaction of an order for costs against the plaintiff. In Hines v Birkbeck College (No 2)  4 All ER 450,  Ch 33, after the plaintiff’s first action for wrongful dismissal was struck out with costs, there being no jurisdiction, he commenced a new action when there had been a change in the law which had conferred jurisdiction on the courts in certain circumstances. Having referred to Martin v Earl Beauchamp and M’Cabe v Bank of Ireland, Nourse LJ quoted the judge’s reasons for having ordered a stay:
‘In the light of M’Cabe v Bank of Ireland I conclude that when a plaintiff is ordered to pay the costs of an action and then brings a second action against the same defendant concerning the same subject matter then, on application by the defendant for a stay, the stay will be ordered as of course, unless no doubt there are some wholly exceptional circumstances. I certainly see no exceptional circumstances in this case, so that it is appropriate to order stay.’ (See  4 All ER 450 at 457,  Ch 33 at 45.)
And Nourse LJ then continued:
‘Before this court the plaintiff sought to argue for a less stringent rule, for which purpose he relied mainly on Morton v Palmer (1882) 9 QBD 89 and Re Wickham, Marony v Taylor (1887) 35 Ch D 272. However, each of those cases was concerned with the question whether a stay should be granted until the payment of costs which had been ordered to be paid in the same action. I can well see that a different rule may apply where there has been no final disposal [*362] of the action. That is not a state of affairs with which we are here concerned. M’Cabe’s case is clear and binding authority for the rule to be applied where an action has been finally disposed of and the costs of it have not been paid. In my view the judge correctly extracted the principle of that decision and it cannot be said that he erred in applying it to the present case.’ (See  4 All ER 450 at 457–458,  Ch 33 at 45–46.)
It is to be observed that a distinction is drawn between the costs previously ordered to be paid in the same action and costs ordered to be paid in an earlier separate action.
In Theakston v Matthews (1998) Times, 13 April,  CA Transcript 515, the Court of Appeal reversed an order for a stay pending payment of a costs order in the same action. The larger part of the defendant’s counterclaim had been struck out with costs, but the judge had stayed further proceedings in the counterclaim until that order for costs had been satisfied. Nourse LJ, with whose judgment Mummery LJ agreed, explained the reversal of that order in these words:
‘I am of the opinion that the judge erred in principle in making an order which, at one and the same time, allowed part of the counterclaim to proceed and then stayed it until payment of costs which had only been ordered to be paid by that very same order; cf Morton v Palmer (1882) 9 QBD 89 and Re Wickham, Marony v Taylor (1887) 35 Ch D 272. The case is entirely different, for example, from the more familiar one where a plaintiff having failed in one action, commences a second action for the same matter. In such a case, the invariable practice of the court is to stay the second action until the costs of the first action have been paid; cf M’Cabe v Bank of Ireland (1889) 14 App Cas 413. However, that is a principle which cannot apply to this case.’
It is to be observed that the crucial feature which was missing in that case was the element of needless procedural duplication. There was only one set of proceedings. The continuation of the proceedings on the remainder of the counterclaim was not preceded by any needless procedural exercise which raised those same issues, as had happened in all the cases, including M’Cabe v Bank of Ireland, to which I have referred.
Mr Grabiner relied on Thames Investment and Securities plc v Benjamin  3 All ER 393,  1 WLR 1381 as authority for the proposition that where it is appropriate to order a stay of the proceedings due to failure to satisfy a costs order, but there has not yet been a taxation of, or agreement as to the amount of, those costs, an order may be made that the proceedings be stayed until an estimated amount is paid into court. I accept that analysis. It is, however, instructive to see that, when Goulding J came to identify the underlying principle, he did so in the following way:
‘… where an application has been made for particular relief and has been dismissed with costs because of some fault or lack of success on the part of the applicant, then, generally speaking, the application ought not to be allowed to apply again for identical or equivalent relief if he is guilty of failure to pay the costs of the previous application.’ (See  3 All ER 393 at 394,  1 WLR 1381 at 1383.)
The effect of these authorities can be analysed as follows. The underlying purpose of such stay orders is to reflect the fact that there has been a needless [*363] duplication of proceedings directed to the determination of the same or substantially the same issues. There has thus been a misuse of the court’s procedure. In many cases this may fall short of an abuse of process or vexatiousness, such as would justify striking out the second set of proceedings. Moreover, the circumstances may not be such as to give rise to an issue estoppel which could be the basis for an application to strike out the second set of proceedings. Nevertheless, the conceptual justification for these orders is clearly to discourage unnecessary procedural duplication. They reflect a much wider and well-established approach manifested in germaine principles, such as the nemo debit bis vexare rule, issue estoppel and Henderson v Henderson (1843) 3 Hare 100, [1843–60] All ER Rep 378.
Does the settled practice apply in this case?
The starting point has to be the very first summons for directions in relation to the Ord 14 applications by Lloyd’s which came before me in 1996. What was made clear by the defendants’ solicitor at that hearing was that the names intended to rely on a broad spectrum of defences many of which would be founded on the basis of initial and continuing fraudulent misrepresentation by Lloyd’s. It was for this reason that I ordered that the Ord 14 test cases should be heard in two stages, the first stage dealing with the non-fraud defences, the second stage dealing with the fraud-based defences, which needed to be deployed by the names only if the non-fraud defences were unarguable.
For reasons of efficient case management those Ord 14 proceedings were conducted on the basis that it was for present purposes unnecessary to investigate or determine any of the names’ allegations of fraud because Lloyd’s contended that, even on the assumption that those allegations could be proved or were arguable, summary judgment should still be given against the defendants, there being no right to rescind, and because cl 5.5 was an insuperable hurdle for the names and there was no equitable set off.
It was against that background that the Ord 14 hearings in both Leighs and Fraser took place. The issue of fraud was raised in relation to those hearings not for the purpose of being determined by the court, but simply as the factual basis, commonly assumed for the more efficient disposal of those applications. Thus, when it was determined that there was no arguable defence to Lloyd’s claims to the Equitas premium, that conclusion left entirely untouched the allegation underlying the names’ defence that there had been fraudulent misrepresentations by Lloyd’s. Those allegations, although a factual foundation for various unsuccessful defences, inasmuch as they were relied on as counterclaims or, in some cases, as fresh claims, remained to be determined as the great unresolved group of issues between the names and Lloyd’s. Indeed, Lloyd’s could not conceivably have assumed at any stage that it would have been open to the names to have those remaining issues immediately determined within the procedural framework laid down for test case management purposes.
Upon these facts the submission that the settled practice should apply and that the fraud counterclaims and claims be stayed until discharge of the costs orders in Leighs and a payment into court of an estimate of the costs as yet untaxed in Fraser is completely misconceived. The prosecution of the claims and counterclaims will involve no element of needless procedural duplication. Those fraud issues could not previously have been determined and they will fall to be determined at the earliest possible stage in these proceedings and in a number of [*364] new actions at which, consistently with the case management regime, they could have been determined. Above there have been no earlier proceedings in which those issues could have been determined. There is therefore lacking the essential ingredient for the practice of granting a stay pending satisfaction of an earlier order for costs.
For these reasons this application fails.
I would only add that had I concluded that the principle under which a stay is granted was wide enough to cover the facts in this case, I should have been unlikely to follow it unless I had taken the view that the names had proceeded in blatant and unreasonable disregard for the court’s procedures. Any order for a stay is a discretionary order. In most cases the policy of the courts will be to discourage needless procedural duplication. However, there may be exceptional cases in which countervailing considerations may involve a discretionary balancing exercise. The present case involves allegations by the names of the utmost seriousness, involving a pattern of deception by Lloyd’s directed to maximising its capacity in order to accommodate more business. These allegations are not confined to a short period of time many years ago. They allege a continuing culture of misrepresentation over many years.
These allegations are exceptionally damaging to Lloyd’s reputation and to the reputation of the London insurance market in general. Further, if they are made good at the trial, it may also be proved that this conduct has caused the names to suffer immense financial losses, so great in many cases that individuals have been driven to bankruptcy, physical illness and death as a result. In many cases the difficulties in discharging the costs orders may be shown to have been caused by the very fraud alleged. In view of these exceptional circumstances I would have given very considerable weight in any discretionary balance to the public interest in the ventilation and determination in these proceedings of the outstanding fraud issues, regardless of the failure to satisfy the prior costs orders. In the event, the result of the exercise of that discretion might well have been no different from that which I have already indicated in this judgment.
Rania Constantinides Barrister.