bates.txt


Bates and Others v. Barrow Ltd. and Others

Ansell and Others v. Same and Others 

[1995] 1 Lloyd's Rep. 680 

Queen's Bench Division (Commercial Court) 

QBD (Comm Ct)

Nov. 16, 17, 21, 22 and 23, 1994; Dec. 8, 1994; Dec. 8, 1994 

Before Mr. Justice Gatehouse 

Reinsurance - Stop-loss policies - Illegality - Insurers not authorized under 
Insurance Companies Acts to carry on insurance business in the U.K. - 
Plaintiffs claimed under policies - Insurers alleged inter alia policies 
illegal and void and therefore unenforceable - Whether policies enforceable 
by virtue of s. 132 of the Financial Services Act, 1986 - Whether loss too 
remote. 

The plaintiffs were Lloyd's Names who on various dates between 1981 and 1983 
took out stop-loss cover in respect of their 1982, 1983 and 1984 underwriting 
years of account. The placing broker was Robert Barrow Ltd., the first 
defendant. The cover was placed with Kansa General International Insurance 
Co. Ltd., the sixth defendants and the second, third, fourth and fifth 
defendants were members agents who on behalf of their respective Names 
instructed Barrow to obtain the cover and acted as intermediaries between 
Barrow and their Names.

Kansa were a Finnish reinsurance company based in Helsinki. They were not 
authorized under the Insurance Companies Acts to carry on insurance business 
in the United Kingdom.

The plaintiffs claimed under their stop-loss policies but Kansa denied 
liability pleading inter alia that the policies were illegal and void and 
therefore unenforceable under the provisions of the Insurance Companies Acts.
The plaintiffs sought to rely on s. 132 of the Financial Services Act, 1986 
which came into force on Jan. 12, 1987. By the combined effect of sub- ss. 
(1) and (6) a contract of insurance which was illegal and unenforceable by 
either party was henceforth to be enforceable against the insurer but not 
against the assured except in the limited circumstances set out in sub-s. 
(3).
On July 24, 1994 Mr. Justice Cresswell ordered the trial of the following 
preliminary issues:
1A. Whether the policies were effected in the United Kingdom within the 
meaning of the Insurance Companies Act, 1974, 1981 or 1982.
B. Whether the policies were carried out in the United Kingdom within the 
meaning of such Act.
C. Whether the policies were void for illegality and unenforceable by the 
plaintiffs or any of them against Kansa.
D. Whether notwithstanding such illegality the policies were enforceable 
against Kansa by reason of s. 132 of the Financial Services Act, 1986.
2. Whether in the event that it was found that the policies were void for 
illegality and unenforceable by the plaintiffs against Kansa, (a) the first 
defendants as the reinsurance brokers retained by the plaintiffs to procure 
the stop-loss reinsurance for the years in question were in breach of the 
duty of care owed by them to the plaintiffs.
A further order by Mr. Justice Colman added the following additional issue.
2. . .Whether (c) any loss caused by (i) the policies being void and 
unenforceable; and/or (ii) Kansa relying upon such defence was not too remote 
a consequence of any such breach of duty as may be found to exist to be 
recoverable.
Issues raised under s. 132 of the 1986 Act included inter alia (i) whether s. 
132 applied only to contracts of insurance entered into after it came into 
force or whether it had retrospective effect; and (ii) if the latter, did 
retrospectivity only extend to contracts which contravened s. 2(1) of the 
Insurance Companies Act, 1982, or also to contracts which contravened 
identical prohibitions contained in the previous Acts of 1974 and 1981. Only 
a few of the plaintiffs' stop-loss contracts were entered into after Jan. 28, 
1983 when the relevant parts of the 1982 Act came into force.
Held, by Q.B. (Com. Ct.) (GATEHOUSE, J.), that 
(1) the agreed documents demonstrated how, under Barrow's coverholder's 
agreements with Kansa, the stop-loss policies were entered into and how they 
were administered; it was clear beyond argument that the policies were 
effected in the U.K. within the meaning of the relevant Insurance Companies 
Acts and that they were carried out in the U.K. within the meaning of such 
Acts; consequently preliminary issues (A) (B) and (C) would be answered in 
the affirmative (see p. 684, cols. 1 and 2); 
(2) the use of the word 'shall' which appeared twice in sub-s. (1), once in 
sub-s. (2), twice in sub-s. (4) and twice in sub-s. (6) was simply stating 
what the various effects of contravention were to be as from the date when 
the section came into force; it was not stating by implication, and nowhere 
did the section expressly state, that these effects were to apply only to 
contravening contracts entered into after that date (see p. 684, col. 2; p. 
685, col. 1); 
(3) it could be inferred with certainty that at the time of contracting every 
insurer as well as every assured, intended to fulfil its obligations (and 
enjoy its rights) under the contract; Kansa continued to pay claims arising 
out of the 1982/1983/1984 stop-loss contracts until 1989; and to argue that 
s. 132 created a new obligation was not supported by the rationale of the 
decided cases which was founded on the concept of fairness (see p. 686, col. 
1);
-Bedford Insurance Co. Ltd. v. Instituto de Resseguros do Brasil, [1984] 1 
Lloyd's Rep. 210 and Phoenix General Insurance Co. of Greece S.A. v. Halvanon 
Insurance Co. Ltd., [1986] 2 Lloyd's Rep. 552, considered; 
(4) if s. 132 had effect only on contracts entered into after it came into 
force, Parliament (i) left wholly unremedied the great number of contracts 
which needed remedy and (ii) particularly left unprotected the many insurers 
who might be financially devastated if their reinsurers pleaded illegality 
which had not in the past been perceived and (iii) more particularly left 
potentially uninsured very many original policyholders who could not have 
known of any illegality by their own or the latter's reinsurers; if this was 
the result then Parliament had failed to grapple with the mischief exercising 
the market (see p. 686, col. 2; p. 687, col. 1); 
(5) the word 'shall' in the various sub-sections of s. 132 had no bearing on 
whether the contracts referred to were only those entered into after Jan. 12, 
1987; the legislative intention was not made clear from the section itself 
nor was it clear from the Act as a whole; the mischief sought to be remedied 
was plain and applying the section to contracts entered into before that date 
would achieve the remedy; there was no unfairness in giving the section this 
effect; at the time of the contract the insurer's interest in enforcing the 
contract was just as great as the assured's, and Kansa had accepted premiums 
and paid claims long after the Court had pronounced on illegality; s. 132 was 
retrospective (see p. 688, col. 1); 
(6) both the making of a contract and its performance by an unauthorized 
insurer in the U.K. was illegal under all three statutes; the making of the 
contract and part of the performance i.e. payment of the premium, might have 
occurred at a time when the 1974 or 1981 Act was in force and would render 
the contract illegal under the Act; but the facts founding many claims might 
not even arise until long afterwards; s. 132 entitled the plaintiffs to 
pursue their claims and question D would be answered 'Yes' (see p. 689, cols. 
1 and 2); 
(7) Barrow as brokers were under a duty to each Name to use reasonable care 
to ensure that his stop-loss policy did not infringe the Insurance Companies 
Acts; and on the facts and evidence the claim for breach of duty was made 
out; no reasonably well informed and competent broker in Barrow's position 
would have failed to realize that the scheme contravened the Act; if a Name's 
contract was unenforceable because of illegality his damage flowed directly 
from Barrow's breach of duty (see p. 698, col. 2; p. 690, cols. 1 and 2; p. 
691, col. 1); 

(8) Barrow could not have contemplated that there was a real danger that 
Kansa would plead its own breach of s. 2 of the Insurance Companies Acts 
against a policyholder; Kansa were regarded in the London market as entirely 
reputable and solid security and the loss was too remote a consequence of the 
breach to be recoverable (see p. 691, col. 2). 

The following cases were referred to in the judgment:

Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd., 
(C.A.) [1989] 2 Lloyd's Rep. 238; [1992] 1 A.C. 233;
Bedford Insurance Co. Ltd. v. Instituto de Resseguros do Brasil, [1984] 1 
Lloyd's Rep. 210; [1985] 1 Q.B. 966;
Boucraa, The (H.L.) [1994] 1 Lloyd's Rep. 251;
Cavalier Insurance Co. Ltd., Re [1989] 2 Lloyd's Rep. 430;
D.R. Insurance Co. v. Seguros America Banamex, [1993] 1 Lloyd's Rep. 120;
Ealing London Borough Council v. Race Relations Board, (H.L.) [1972] A.C. 
342;
Gladstone v. Bower, [1960] 3 All E.R. 353;
Heron II, The (H.L.) [1967] 2 Lloyd's Rep. 457; [1969] 1 A.C. 350;
Joseph v. Law Integrity Insurance Co. Ltd., [1912] 2 Ch. 581;
Parsons (Livestock) Ltd. v. Uttley Ingham & Co. Ltd., (C.A.) [1977] 2 Lloyd's 
Rep. 522; [1978] 1 Q.B. 791;
Phoenix General Insurance Co. of Greece S.A. v. Halvanon Insurance Co. Ltd., 
(C.A.) [1986] 2 Lloyd's Rep. 552; [1988] 1 Q.B. 216;
R. v. Secretary of State for Trade and Industry, [1989] 1 W.L.R. 372;
Saif Ali v. Sydney Mitchell & Co., (H.L.) [1980] A.C. 198;
Sarginson Brothers v. Keith Moulton & Co. Ltd., (1942) 73 Ll.L.Rep. 104;
Secretary of State for Social Security v. Tunnicliffe, (C.A.) [1991] 2 All 
E.R. 712;
Stewart v. Oriental Fire & Marine Insurance Co. Ltd., [1984] 2 Lloyd's Rep. 
109; [1985] 1 Q.B. 988;
Yew Bon Tew v. Kenderaan Bas Mara, (P.C.) [1983] 1 A.C. 553. 

This was an action by the plaintiff Lloyd's Names, Sir Geoffrey V. Bates and 
others and Mrs. Elizabeth Ansell and others, claiming against the sixth 
defendants, Kansa General International Insurance Co. Ltd., under the stop-
loss policies which had been placed with Kansa by the first defendant brokers 
Robert Barrow Ltd. The second defendants, R.F. Kershaw Ltd., the third 
defendants, D.M. Green & Co. (Underwriting) Ltd., and BPC Members Agency 
Ltd., the fourth defendants, Gooda & Partners Ltd., and J.H. Minet Agencies 
Ltd. and the fifth defendants, David Evers Ltd. Underwriting Agents and 
Posgate & Denby (Agencies) Ltd. were Members Agents who on behalf of their 
respective Names instructed Barrow to obtain the cover and acted as 
intermediaries between Barrow and their Names. 

Representation 

Mr. Michael Crane, Q.C. and Mr. Matthew Reeve (instructed by Messrs. Richards 
Butler) for the plaintiff Names; Mr. Dominic Kendrick and Mr. David Allen 
(instructed by Messrs. Cameron Markby Hewitt) for the first defendants, 
Robert Barrow Ltd.; Mr. David Donaldson, Q.C. and Mr. Robert Anderson 
(instructed by Messrs. Squire & Co.) for R.F. Kershaw Ltd., D.M. Green & Co. 
(Underwriting) Ltd., David Evers Ltd. Underwriting Agents and BPC Members 
Agency Ltd.; Mr. David Railton and Mr. Richard Handyside (instructed by 
Messrs. Stephenson Hanwood) for Kansa; J.H. Minet Agencies Ltd. (clients of 
Clifford Chance) and Gooda & Partners Ltd. and Posgate & Denby (Agencies) 
Ltd. were not represented.
The further facts are stated in the judgment of Mr. Justice Gatehouse.
Judgment was reserved.
Thursday Dec. 8, 1994 

JUDGMENT 

Mr. Justice GATEHOUSE:
The plaintiffs are Lloyds Names who, on various dates between 1981 and 1983, 
took out stop-loss cover in respect of their 1982, 1983 and 1984 underwriting 
years of account. The placing broker was Robert Barrow Ltd., the first 
defendant. The cover was placed with Kansa General International Insurance 
Co. Ltd., the sixth defendant. The second, third, fourth and fifth defendants 
are Members Agents who, on behalf of their respective Names, instructed 
Barrow to obtain the cover and acted as intermediaries between Barrow and 
their Names.

Kansa are a Finnish reinsurance company based in Helsinki who, at least in 
the years in question, were regarded in the London market as a substantial 
and reputable company. They met the demanding solvency requirements of the 
Finnish insurance authorities. But they were not authorized under the 
Insurance Companies Acts to carry on insurance business in the U.K.

On Nov. 10, 1983 Mr. Justice Parker gave judgment in the well known but much 
criticized case of Bedford Insurance Co. Ltd. v. Instituto de Resseguros do 
Brasil, [1984] 1 Lloyd's Rep. 210; [1985] 1 Q.B. 966 which caused widespread 
dismay in the London market. Of this, more later. In essence the Judge held 
that as Bedford, a Hong Kong company, were not authorized under the Acts to 
carry on marine insurance business in the U.K., the original contracts 
written on their behalf by London brokers were illegal and unenforceable: as 
a result Bedford were unable to recover under their reinsurance contracts 
with the defendants.

On Apr. 18, 1984, Mr. Justice Leggatt arrived at a contrary conclusion in 
Stewart v. Oriental Fire & Marine Insurance Co. Ltd., [1984] 2 Lloyd's Rep. 
109; [1985] 1 Q.B. 988. Again, in essence, the Judge held that the defendant 
reinsurers were not authorized under the (1974) Act to carry on insurance 
business in (Great Britain) but that the Act did not expressly prohibit the 
making of individual contracts; that the purpose of the Act was the 
protection of policyholders, and that public policy did not require that 
innocent policyholders should be deprived of their insurance cover where they 
were unaware that their reinsurers were carrying on unauthorized business. 
The Judge declined to follow the Bedford decision.

The relevant law was therefore uncertain, but any relief the market may have 
felt at the latter decision was dispersed when the Court of Appeal gave 
judgment in Phoenix General Insurance Co. of Greece S.A. v. Halvanon 
Insurance Co. Ltd., [1986] 2 Lloyd's Rep. 552; [1988] 1 Q.B. 216. With 
obvious reluctance at the result, the Court felt bound to uphold the Bedford 
decision and to over-rule Stewart. In giving the leading judgment Lord 
Justice Kerr referred to the - 

. . .most unfortunate state of affairs for the insurance market, as all 
Judges who have had to grapple with the problem have recognised. . . 
and he adverted also to the 'widespread consternation' in the market as a 
result of the Bedford decision, referred to by Mr. Justice Leggatt in 
Stewart. The Lord Justice then continued: 

But will this really cause consternation? The illegality in question is not a 
patent one which the Court is bound to take into account of its own volition. 
None of the Counsel before us, all experienced in the Commercial Court, had 
heard of any case where an insurer had taken this point by relying on his own 
illegality as a defence, in order to avoid payment to an insured. Undoubtedly 
it may have serious repercussions on contracts of reinsurance, and we were 
told that a number of other reinsurance cases were awaiting the outcome of 
this appeal. All that one can say in that regard is that any reputable 
reinsurers, solicitous of their good name and reputation, will no doubt 
hesitate long before relying on this defence.

As Mr. Kendrick points out, this is a somewhat curious position: the Court 
was clearly encouraging reinsurers in the strongest terms to honour their 
contracts and make payments - payments which were illegal.
The judgments were given on Oct. 9, 1986.

The Financial Services Bill was then before Parliament, and cl. 132 was 
included which, as s. 132, I shall have to consider at length hereafter. 
Broadly, its purpose was clearly intended to reverse the difficulties created 
by the Bedford and Phoenix decisions. The Bill received the Royal Assent on 
Dec. 18, 1986 and s. 132 was brought into force by Statutory Instrument on 
Jan. 12, 1987. Its effect can be briefly summarized as follows: by the 
combined effect of sub-ss. (1) and (6) a contract of insurance which, in 
accordance with the law settled in Phoenix was illegal and unenforceable by 
either party was henceforth to be enforceable against the insurer, but not 
against the assured except in the limited circumstances set out in sub-s. 
(3). Two crucial issues, fully argued before me are (i) whether s. 132 
applies only to contracts of insurance entered into after it came into force, 
as Kansa contend, or whether as Barrow contend it has retrospective effect; 
and (ii) if the latter, does retrospectivity extend only to contracts which 
contravened s. 2(1) of the Insurance Companies Act, 1982, or also to 
contracts which contravened the identical prohibitions contained in the 
previous 1974 and 1981 Acts? The practical effect of this second question is 
that only a few of the plaintiffs' stop-loss contracts were entered into 
after Jan. 28, 1983 when the relevant parts of the 1982 Act came into force.
Despite the decisions in Bedford and Phoenix, Kansa continued to pay stop- 
loss claims until some time in 1989. Thereafter they ceased doing so and 
these various combined actions were brought. The pleadings are voluminous and 
various issues arise with which I am not here concerned. It is enough to 
summarize the claims in this way:

1. The plaintiffs claim against Kansa under their stop-loss policies.

2. Kansa plead inter alia that the policies are illegal and void and 
therefore unenforceable under the provisions of the Insurance Companies Acts.

3. The plaintiffs deny this but alternatively plead in reply s. 132 of the 
Financial Services Act, 1986.

4. The plaintiffs claim against Barrow that if their policies are 
unenforceable, Barrow are liable to them in negligence for failure to effect 
valid stop-loss policies.

5. The plaintiffs also claim against their respective Members Agents, but 
this was not pursued before me.

I do not think it is necessary to go any further into the pleadings because 
on July 24, 1994 Mr. Justice Cresswell ordered the trial of preliminary 
issues in the following form: 

IT IS ORDERED THAT: - 
(1) The following question or issue be tried as a preliminary issue before 
the trial of the other issues in these actions namely: 

IT BEING AGREED THAT: - 

I. Kansa General Insurance Company Limited was at all material times a body 
incorporated in Finland and carrying on business as, inter alia, reinsurers. 
II. Robert Barrow Limited ('Robert Barrow') was at all times a Lloyd's 
insurance and reinsurance broker carrying on business from 69/70 Mark Lane, 
London. 

III. Robert Barrow was at all material times authorised by written 
Coverholder's agreements made with Kansa on 20 November 1980 and 14 August 
1981 (as amended) to bind reinsurances for Kansa's account in accordance with 
the terms and conditions therein set out and to issue certificates of 
insurance and endorsements in respect thereof. 

IV. By Article IV of the Coverholder's Agreement Robert Barrow was authorised 
to bind business to indemnify the original individual reinsured in respect of 
a net underwriting loss at Lloyd's for, inter alia, the 1982, 1983 and 1984 
years of account. 

V. On various dates between 1981 and 1983 the Names entered into policies of 
stop loss insurance ('the Policies') with Kansa in respect of the 1982, 1983 
and 1984 underwriting years of account. 

VI. It is illegal to effect or carry on insurance business in the United 
Kingdom unless and until the person effecting or carrying on such business is 
authorised to do so under the Insurance Companies Act for the time being in 
force (being the Insurance Companies Acts 1974, 1981 or 1982). 

VII. Stop loss insurance is and was at the material time 'insurance business' 
within the definition of that term in the said Insurance Companies Acts. 

VIII. At no material time was Kansa and/or Robert Barrow authorised to effect 
or carry out any class of insurance business in Great Britain or the United 
Kingdom pursuant to the provisions of the Insurance Companies Act 1974, 1981 
or 1982, or any of them. 

(A) WHETHER the Policies were effected in the United Kingdom, within the 
meaning of the requisite Insurance Companies Act. 

(B) WHETHER the Policies were carried out in the United Kingdom within the 
meaning of such Act. 

(C) WHETHER the Policies are void for illegality, and unenforceable by the 
Plaintiffs (or any of them) against Kansa. 

(D) WHETHER, notwithstanding such illegality, the Policies are enforceable 
against Kansa by virtue of the provisions of Section 132 of the Financial 
Services Act 1986. 

(2) In addition to the matters set out in Paragraph (1) above, the following 
questions or issues be referred to the Judge who is to try the preliminary 
issue so that he may decide whether such additional issues should be 
determined at the same time or immediately after the preliminary issue, 
namely: 

WHETHER in the event that it is found that the Policies are void for 
illegality and unenforceable by the Plaintiffs (or any of them) against Kansa 
General International Insurance Company Limited: 

(a) the First Defendants, as the reinsurance brokers retained by or on behalf 
of the Plaintiffs in connection with the procurement of stop loss reinsurance 
for the years of account in question, were thereby in breach of the duty of 
care owed by them as such to the Plaintiffs; 

(b) the Second to Fifth Defendants, as Lloyd's underwriting agents appointed 
by the Plaintiffs as their Members' Agents for the years of account in 
question, were thereby in breach of the duty of care owed by them as such to 
the Plaintiffs. 

(3) In addition to the issues set out in Paragraphs (1) and (2) above, the 
Judge may (on the application of any party or of his own motion) try such 
other issues as appear to him to be convenient to be so tried at that stage 
(provided that the same are issues upon which factual and expert evidence has 
been exchanged in accordance with the following directions). 

(4) Kansa General International Insurance Company Limited be Plaintiff in the 
preliminary issue.

The Judge then gave directions for the trial of these preliminary issues. As 
mentioned above, par. 2(b) no longer arises as a preliminary issue. But 
following a further order of Mr. Justice Colman and by agreement between the 
parties the following additional issue was added to par. 2 above: - 

Whether (c) any loss caused by: (i) the policies being void and 
unenforceable; and/or (ii) Kansa relying upon such a defence was not too 
remote a consequence of any such breach of duty as may be found to exist to 
be recoverable.

I can deal with questions (A) (B) and (C) very shortly because the answers 
are plain from the agreed documents put before me. They demonstrate how, 
under Barrow's coverholder's agreements with Kansa, the stop-loss insurances 
were entered into and how they were administered. No oral evidence was called 
to explain the documents further or to suggest that the effecting and 
carrying out of the contracts was other than as therein disclosed. Mr. 
Railton for Kansa put before the Court very full written opening submissions 
based upon the documents, for which I am grateful because they obviate the 
need for me to rehearse the facts and arguments in this judgment. I agree 
with him that it is clear beyond argument that the policies were effected in 
the U.K. within the meaning of the requisite [sic, relevant?] Insurance 
Companies Acts; that it is equally clear that they were carried out in the 
U.K. within the meaning of such Acts and consequently the answers to 
questions (A) and (B) are 'Yes'. As to the consequences, although the 
judgments of the Court of Appeal in Phoenix were obiter, they are of course 
in the highest degree persuasive and have been followed in other first 
instance decisions, and I was not asked to examine the problem afresh and 
reach my own conclusions. It follows that, subject to the problems arising 
under (D), question (C) must therefore also be answered 'Yes'. 

Question (D): s. 132 

The only reported decision on the section is D.R. Insurance Co. v. Seguros 
America Banamex, [1993] 1 Lloyd's Rep. 120, a judgment of Mr. Adrian 
Hamilton, Q.C. sitting as a Deputy High Court Judge. He had to consider 
somewhat similar preliminary issues as (A) and (B) in the present case and 
came to the same conclusions, following Phoenix and the decision to the like 
effect by Mr. Justice Knox in Re Cavalier Insurance Co. Ltd., [1989] 2 
Lloyd's Rep. 430.

Mr. Hamilton then went on to consider s. 132. He referred first to the long- 
established presumption against giving retrospective effect to statutes which 
altered substantive rights. Even without that presumption, he construed the 
section as prospective only, relying principally on the word 'shall' in sub-
s. (6) and, to a lesser extent, on the phrase in sub-s. (1) '. . .a contract. 
. . which is entered into. . .'. Mr. Railton for Kansa and Mr. Donaldson, 
Q.C., for the Members Agents contended that Mr. Hamilton's decision on this 
point was right and that I should follow it.

The presumption has now to be reassessed in the light of the decision of the 
House of Lords in The Boucraa, [1994] 1 Lloyd's Rep. 251, but I propose to 
consider first the words of the section. Unless I am driven by them to the 
same conclusion as Mr. Hamilton, I have no doubt that I should attribute to 
the legislature an intention of retrospectivity, for reasons hereafter given.

I do not find the words of the section persuasive and I feel compelled, 
though with natural diffidence, to disagree with Mr. Hamilton's conclusion on 
construction. In my judgment the use of the word 'shall', which appears twice 
in sub-s. (1), once in sub-s. (2), twice in sub-s. (4) and twice in sub-s. 
(6), is simply stating what the various effects of contravention are to be as 
from the date when the section comes into force. It is not stating by 
implication - and of course nowhere does the section expressly state - that 
these effects are to apply only to contravening contracts entered into after 
that date.The matter can be tested in this way: even if the legislature had 
made it clear that retrospectivity was intended, e.g., by providing in sub-s. 
(1): - 

Subject to sub-section (3) below, a contract of insurance . . . whether 
entered into before or after this section comes into force by a person in the 
course of . . .etc. 

the word 'shall' would still have been necessary in exactly the same places 
as it now features. In my view, the word 'shall' is directed at, and is a 
necessary introduction to the description of, the legal consequences which 
are henceforth to follow: it gives no indication as to which contracts, 
whether entered into before or after the Act, it applies to. Of course, the 
section can only operate from the time it comes into force but the word 
'shall' is the natural way, certainly the shortest and probably the best way 
of introducing the changes in the law.

Mr. Donaldson and Mr. Railton relied on s. 5 of the Act in support of their 
arguments. Section 5, in Part II of the Act is very similar to s. 132 and it 
applies to certain agreements entered into in contravention of s. 3 
('investment business'). Section 5(7) read with Part II of Schedule I, which 
lists the 'activities constituting investment business' defines the 
agreements concerned and, by par. 10 of Part I of that Schedule investment 
business includes long-term insurance contracts. The argument is that 
investment business was a new concept introduced by the Financial Services 
Act (see R v. Secretary of State for Trade and Industry, [1989] 1 W.L.R. 372) 
and therefore s. 5 read with Schedule 1 and ss. 130 and 131 had only 
prospective effect: therefore, the similar provisions of s. 132 should be 
read likewise. I do not accept this. Insurance contracts are separated in the 
Act into two classes, those which constitute investment business (s. 3) and 
are unenforceable if contravening that section, and those to which s. 132 
applies, which expressly excludes the former. The argument is a non sequitur: 
the fact that the framework of s. 5 has, to a considerable extent, been 
adopted in s. 132 does not lead to the result contended for.

Another argument against retrospectivity was based on the reference in s. 132 
to contravention only of s. 2 of the 1982 Act but I will consider this when 
dealing with the question of which contracts s. 132 affects, assuming it does 
have retrospective effect.

Although, as I have held, the wording of s. 132 - and in particular the use 
of the word 'shall' - does not limit its applicability only to contracts 
entered into after Jan. 12, 1987, there is, I think, some indication of 
retrospectivity in sub-ss. (3) and (4). It is clear from sub-s. (1) and the 
first part of sub-s. (6) that the Bedford/Phoenix principle was substantially 
reversed. Prior to the section coming into force, an insurance contract which 
contravened s. 2 of the 1982 Act was illegal and unenforceable by both the 
insurer and the assured. Under the section, such a contract became 
enforceable against the insurer but remained unenforceable against the 
assured except to the limited extent provided for in sub-s. (3). This would 
require the Court to be satisfied, under (a) that the contravening insurer 
'reasonably believed' that his entering into the contract 'did not constitute 
a contravention . . .' and, under (b) that it is just and equitable for the 
money 'paid . . . under it [typically, premium] to be retained'. This is 
providing for an exercise of the Court's discretion by reference to past 
events. Similar considerations apply under sub-s. (4) to an assured who 
elects not to perform a contract unenforceable against him, or who recovers 
[premium] paid by him, in which case he has to repay, typically, claims which 
have been paid by the insurer.

The rights and obligations of the assured are governed by reference to past 
events. See also the assured's right of recovery under sub-s. (1).

It may be that the issue of proceedings by either party under these sub- 
sections immediately after Jan. 12, 1987 would have been impermissible in the 
case of infringing contracts entered into before that date, but that would 
seem to be a somewhat artificial result: the more natural interpretation, as 
it appears to me, is to apply the provisions to previous contracts. This is 
particularly so because it would be very difficult, though I accept not 
impossible, for an insurer to satisfy the requirements of sub-s. (3) in the 
case of a policy entered into after Jan. 12, 1987. The pitfalls would have 
been well known for over three years and an insurer who was still infringing 
s. 2 would have only himself to blame.

I turn now to the presumption against retrospectivity of a statute which 
affects substantive rights, a topic dealt with in very many reported 
decisions and discussed in the leading text books such as Maxwell, Craies and 
Bennion. The principle is expressed in these words in Yew Bon Tew v. 
Kenderaan Bas Mara, [1983] 1 A.C. 553 at p. 558F: 
Apart from the provisions of the interpretation statutes, there is at common 
law a prima facie rule of construction that a statute should not be 
interpreted retrospectively so as to impair an existing right or obligation 
unless that result is unavoidable on the language used. A statute is 
retrospective if it takes away or impairs a vested right acquired under 
existing laws, or creates a new obligation, or imposes a new duty, or 
attaches a new disability, in regard to events already past.

For present purposes, the emphasis is on the impairment of a 'vested right 
acquired under existing laws', or the creation of 'a new obligation. . .in 
regard to events already past'. It was not suggested that Kansa had acquired 
any vested rights which would be impaired. Both Mr. Donaldson and Mr. Railton 
concentrated on what they maintained was a new obligation, in other words the 
imposition by s. 132 of a legal obligation where none had existed before, 
because the Bedford/Phoenix judgments meant that every infringing contract 
was void ab initio. This seems to me to give a curious meaning to the word 
'obligation' as used in the restatement of the general principle and not one 
which can have been intended in previous authorities. Prior to the Bedford 
decision, the evidence is clear that no-one in the insurance market thought 
that a contract would be unenforceable merely because the insurer was not 
authorized under s. 2(1) of the 1982 Act, or the identical provisions of s. 
2(1) of the 1981 Act, or the virtually identical provisions of s. 2(1) of the 
1974 Act.

It can be inferred with certainty that at the time of contracting, every 
insurer as well as every assured intended to fulfil its obligations (and 
enjoy its rights) under the contract. Even by the time of the hearing of the 
Phoenix appeals in July, 1986, no insurer had apparently taken the point, 
relying on his own illegality, although some reinsurance cases were by then 
said to be awaiting the outcome. In the present case, Kansa continued to pay 
claims arising out of the 1982/3/4 stop-loss contracts until 1989. The 
reasons why they then ceased doing so are not in evidence and are immaterial. 
The fact is that Kansa originally assumed the obligations and continued to 
honour them long after Bedford/Phoenix held that they were not legally 
obliged to do so. To argue that s. 132 created a new obligation is, in my 
view, not supported by the rationale of the decided cases which, as the House 
of Lords decision in The Boucraa sup., makes clear is founded on the concept 
of fairness. I see nothing unfair in restoring the parties in 1987 to the 
contractual position they had both assumed and long acted upon. No authority 
was cited which prohibited retrospectivity because of an 'obligation' of this 
kind.

When Parliament's intention is not made clear from the words of the statute, 
I have always understood that it is of cardinal importance to ascertain the 
mischief which the legislature must have intended to remedy and the 
reasonableness of the consequences of interpreting the statute in a 
particular way. In Ealing London Borough Council v. Race Relations Board, 
[1972] A.C. 342 at pp. 360-361, Lord Simon referred to the usual legislative 
history of a statute: stretching back from Parliamentary proceedings by 
successive drafts of a bill, heads of instruction to the draftsmen, 
departmental papers and minutes of executive committees. Even if I were 
permitted to turn to Hansard, there is apparently no record of any debate in 
either House on the subject of s. 132. I am left without any information as 
to its legislative history. But the mischief of the common law at which it 
was aimed is clear enough. One only has to refer to the judgment of Mr. 
Justice Leggatt in Stewart at p. 111, col. 2; pp. 997-998, and that of Lord 
Justice Kerr in Phoenix at p. 571, col. 2 to p. 572, col. 1; pp. 275H to 
276F. To the dismay of the insurance market, a vast number of contracts 
entered into prior to the Bedford decision in the belief on all sides - 
assureds, brokers, insurers and reinsurers - that they were fully 
enforceable, were suddenly held to be void ab initio and unenforceable. One 
does not need the evidence of market experts such as Mr. Kiln in the Stewart 
case to realize the potential chaos that could have followed. The insurance 
market, both Lloyd's and U.K. companies, depends to a very large extent on 
reinsurance of their primary risks. If reinsurers were to start refusing 
claims, either relying on their own lack of authorization or, as in Bedford, 
on their assured's contravention of the Act the result would be progressively 
catastrophic and the policyholders would be left without remedy by reason of 
a statute whose primary purpose was their protection. Apart from the failure 
of original insurers if their reinsurers reneged, the chain reaction would 
extend to deprive original assureds of protection; and they would be entirely 
innocent because they could not know of the illegality involved. The Names in 
the present case are obvious examples. It took a little time before 
reinsurers began to rely on their own, or their assureds' illegality, but the 
trend was beginning when Phoenix was argued in the Court of Appeal. So the 
mischief that needed correction by Parliament was plain.

Neither Mr. Railton nor Mr. Donaldson addressed this point, although they 
relied on another, hypothetical, kind of mischief in arguing against 
retrospectivity, to which I will return.

If Parliament was intending to reverse the Bedford/Phoenix decisions which is 
clear, and intending to remedy the mischief which followed, it seems to me 
remarkable if s. 132 was nevertheless intended to have effect only upon 
contracts entered into after Jan. 12, 1987. This would leave wholly 
unaffected the vast number of earlier contracts which were in jeopardy, while 
only 'biting' on what by comparison must be a very small number of post-
January, 1987 infringing contracts. The Bedford decision caused widespread 
consternation in the market and it is not in dispute that the startling and 
unwelcome news spread rapidly. It is a fair inference that thereafter, 
brokers and primary insurers must have taken urgent steps to safeguard new 
policies from infringing s. 2, either by placing reinsurance with authorized 
reinsurers, or at least by so arranging matters that contracts were unlikely 
to be held by the Courts to have been effected or carried out in 
contravention of the Acts. Legitimate alternatives were probably still 
available: Barrow had been using authorized stop-loss reinsurers before 
switching to Kansa, presumably because of better premium rates.

Not only are there likely to have been fewer reinsurance contracts once the 
Bedford and, a fortiori, the Phoenix decisions became known: one might 
reasonably argue that those foolish enough, or careless enough, to continue 
the old practices did not deserve the assistance of Parliament under the 
remedial section.

In summary, therefore, if s. 132 had effect only upon contracts entered into 
after it came into force, Parliament (i) left wholly unremedied the great 
number of contracts which needed remedy, and (ii) particularly left 
unprotected the many insurers who might be financially devastated if their 
reinsurers pleaded illegality which had not in the past been perceived 
(whether or not it ought to have been) and (iii) more particularly, left 
potentially uninsured very many original policyholders who could not possibly 
have known of any illegality by their own insurers or the latter's 
reinsurers.On the other hand, the only effect of s. 132 so construed would be 
to afford a remedy to probably a small number of cases, and most of those not 
deserving of rescue. If this is the result, then as Mr. Kendrick put it, 
Parliament has singularly failed to grapple with the mischief exercising the 
market.

I need to consider the presumption against retrospectivity in the light of 
The Boucraa. Like every decision on this topic the case was concerned with 
the effect of the general presumption on a particular statute - in that case, 
the question whether an arbitrator, in exercising the newly granted statutory 
power to dismiss a claim for want of prosecution, was entitled to take 
account of inordinate and inexcusable delay occurring before the statute came 
into effect. But Lord Mustill's speech, with which all their Lordships 
agreed, examined the presumption generally and held that its basis is no more 
than simple fairness. This would depend in any particular case on the inter-
action of several factors, but the single question of fairness had been 
addressed by Lord Justice Staughton in Secretary of State for Social Security 
v. Tunnicliffe, [1991] 2 All E.R. 712 at p. 724 in a passage which the House 
approved as follows: 

In my judgment the true principle is that Parliament is presumed not to have 
intended to alter the law applicable to past events and transactions in a 
manner which is unfair to those concerned in them, unless a contrary 
intention appears. 

I emphasize the words ' . . . unfair to those concerned in them . . . ' 
because of Mr. Donaldson's reliance on a number of hypothetical situations, 
some of which in my view are irrelevant to this test. Based on these 
situations, Mr. Donaldson argued that retrospectivity could stir up a 
hornets' nest, and that Parliament may well have seen so many problems that, 
as he put it, 'it is more than conceivable that Parliament thought that they 
could only address future problems' i.e., those arising under contracts 
entered into after the section came into force. Taking some of his examples, 
it is irrelevant, as I see it, to consider supposed 'unfairness' which can 
apply not just to the parties but to settlements already concluded; or past 
suits for negligence which may have been compromised; or a possible blight on 
foreign insurers which could put up rates and therefore reduce the capacity 
of the London market. But in any case, as I have mentioned before, there is 
simply no evidence at all - let alone admissible evidence - to show that 
Parliament took account of any such matters.

Lord Mustill referred at p. 259 to a passage in the judgment of Lord Denman, 
C.J. in one of the Poor Law cases, and said 

. . . the passage quoted is germane, because it reveals an assumption that a 
person newly qualified for relief may have that relief assessed in terms of 
events occurring before the relief became available. 
There was nothing unfair in that; nor was it unfair in the case before the 
House to apply the same principle. I see no unfairness in affording an 
assured relief under s. 132 in respect of an infringing contract entered into 
before the section came into force.

Kansa, supported by the Names' agents, concentrated their argument on the 
imposition of a new obligation: they expressly disavowed reliance on the 
impairment of any 'right' (perhaps taking note of Lord Templeman's remarks in 
The Boucraa). But in effect, this is really what the argument amounts to. As 
from January, 1987 Kansa lost the 'right' to assert their own criminality as 
a defence to future claims.

Leaving general considerations aside, the present case is concerned only with 
the enforcement of claims after January, 1987. The question arises whether s. 
132 gives a remedy (i) only to contracts made and claims arising after that 
date, or (ii) to claims arising after that date from contracts entered into 
previously, or (iii) to claims arising as well as contracts made before that 
date. Mr. Kendrick succeeds if the correct answer is (ii). This would seem to 
follow from the passage in Lord Mustill's speech in the Boucraa quoted above.
In summary, I am satisfied as to the following matters: 

(1.) The word 'shall', as used in the various sub-sections of s. 132 has no 
bearing on the question whether the contracts referred to are only those 
entered into after Jan. 12, 1987. The legislative intention is not made clear 
from the section itself, although I think there is at least some indication 
of retrospectivity, nor is it clear from the Act as a whole; (2.) the 
mischief sought to be remedied was plain; (3.) applying the section to 
contracts entered into before that date would achieve the remedy: limiting it 
to subsequent contracts would not; (4.) there is no unfairness in giving the 
section this effect. It restores the protection of the assured which was the 
purpose of the Acts; it restores the original mutual intention that the 
assured would be entitled to recover under his policy, and it gives at least 
a limited right of enforcement to the insurer. At the time of contracting, 
the insurer's interest in enforcing the contract was just as great as the 
assured's: his business depends on the receipt of net premiums which, 
overall, he judges will exceed the totality of valid claims and expenses; 
(5.) although the above considerations are of general application, to which 
particular facts are irrelevant, it is at least of interest that Kansa 
accepted premiums and paid claims long after the Courts had pronounced on 
illegality.

I am therefore of opinion that s. 132 is retrospective in the sense 
discussed.

That leads to question of the extent of retrospectivity. Mr. Railton and Mr. 
Donaldson point to the words of s. 132 which expressly refer only to 
contravention of s. 2 of the Insurance Companies Act, 1982: the section does 
not refer to a contravention of the identical s. 2 in the 1981 Act or to the 
virtually identical s. 2 in the 1974 Act. Unless one can read the words used 
as embracing contravention of earlier Acts, the extraordinary result would 
follow that the remedy would apply only to contracts rendered unlawful by the 
1982 Act regime which began on Jan. 28, 1983. All Counsel agreed that it 
would be nonsensical to attribute to Parliament an intention to limit 
retrospectivity in this arbitrary fashion, and this was relied upon as 
showing that no retrospective intention could therefore be inferred.
I do not accept the latter argument: the reasons which I have attempted to 
set out in favour of retrospectivity are too compelling. But the wording 
undoubtedly presents a problem of construction. Counsel contending for the 
narrow construction relied upon the provisions of ss. 16 and 17 of the 
Interpretation Act, 1978. Section 16(1) provides: 

. . . where an Act repeals an enactment, the repeal does not, unless the 
contrary intention appears . . . (b) affect the previous operation of the 
enactment repealed . . . 

To take an example, it was argued that a contravention of s. 2(1) of the 1974 
Act remained a contravention of that Act even though the Act was repealed by 
Schedule 6 of the 1982 Act. Therefore it was not a contravention of s. 2(1) 
of the 1982 Act, and the consequential illegality arose under the former, not 
the latter.

Section 17(2)(a) of the Interpretation Act provides: 

(2) . Where an Act repeals and re-enacts, with or without modification, a 
previous enactment then, unless the contrary intention appears - (a) any 
reference in any other enactment to the enactment so repealed shall be 
construed as a reference to the provision re-enacted . . .

As Counsel pointed out this does not work in reverse, so as to make a 
reference - in this case, in s. 132 - to the re-enacted provision include a 
reference to the provision repealed.

The 1982 Act was an Act to consolidate the Insurance Companies Acts, 1974 and 
1981. Section 2(1) of the 1974 Act contained the prohibition against 
unauthorized insurers carrying on insurance business in Great Britain and s. 
11 provided for penalties. Schedule 5 to the 1981 Act repealed, inter alia, 
ss. 1 and 11 of the 1974 Act, but re-enacted them in ss. 2(1) and 14. In 
turn, the consolidating Act of 1982 repealed these sections but re-enacted 
them in identical terms in ss. 2(1) and 14.

Thus the legislative history of s. 2 does appear to support the argument that 
only contracts entered into during the 1982 Act regime are to be the subject 
of the remedies contained in s. 132. Mr. Kendrick's answer was that the 
draftsman was using shorthand and must be taken to have intended to include 
infringing contracts under the previous Acts when referring to the equivalent 
section in the consolidating Act. I do not think this is a sufficient answer. 
It is a well-known canon of construction that, where the words of the statute 
are clear, it is for the legislature not for the Courts to supply words in 
order to remedy an omission, even if it is evidently unintentional. See, 
e.g., Halsbury's Laws, vol. 44 pars. 857, 862 and 864, and the many 
authorities cited. A powerful example is Gladstone v. Bower, [1960] 3 All 
E.R. 353 at p. 358. See also par. 867: the onus upon those who assert that 
words are used loosely or inexactly is a heavy one. Furthermore, the 
draftsman must be taken to have been well aware of the provisions of the 
Interpretation Act. Apart from this presumption there is an express 
disapplication of s. 17(2)(a) in par. 17 of the Schedule 4 to the 1982 Act 
(applying to Northern Ireland), and it seems to me that par. 22 of that 
Schedule in substance repeats the general effect of s. 17(2)(a).

But I think there is a permissible solution to this problem that does not 
offend against these canons of construction but still avoids attributing an 
irrational intention to Parliament. In Phoenix, at p. 571, col. 1; p. 274 the 
Court of Appeal expressly approved the passage in Mr. Justice Parker's 
judgment in Bedford at pp. 214-215, pp. 981-982 - 

The express prohibition is upon the carrying on of insurance business of a 
relevant class but, as I have already mentioned, the definition in the case 
of each class begins, 'The effecting and carrying out of contracts of 
insurance'. What therefore is prohibited is the carrying on of the business 
of effecting and performing contracts of insurance of various descriptions in 
the absence of authorization. It is thus both the contracts themselves and 
the performance of them at which the statute is directed. Thus both the 
making of a contract and its performance by an unauthorized insurer in the 
U.K. is illegal under all three statutes. 'Performance' must include 
everything done under the contract - payment of premium, making claims, the 
investigation, assessment, adjustment and particularly the payment of those 
claims. The making of the contract and part of the performance, i.e., payment 
of premium, may have occurred at a time when the 1974 or 1981 Act was in 
force and would render the contract illegal under that Act. But the facts 
founding many claims may not even arise until long afterwards, e.g., when, as 
in the present case,the Revenue accepts the assessment of the Name's losses. 
When the Name then makes a claim he is seeking illegal performance of the 
contract and is doing so at a time when the 1982 Act regime is in force. That 
is 'a contravention of Section 2 of the said Act of 1982' in the words of s. 
132(6), and is a wider concept than merely 'entering into' a prohibited 
contract, and wider still than entering into a contract in contravention of 
s. 2 of the 1982 Act.

A defect which, it seems to me, does arise because of the wording of sub-s. 
(1) is that (a) the assured is only entitled to recover his premium and 
interest under an infringing contract entered into under the 1982 Act regime, 
and similarly (b) the discretionary remedy available to the insurer under 
sub- s. (3) is limited to enforcement, etc., of such a contract. Contracts 
entered into in contravention of the earlier Acts are not provided for. But 
in view of the passage of time this may be insignificant in practical terms, 
and it is not relevant here.

In my judgment, s. 132 entitles the plaintiffs to pursue their claims, and I 
answer Question(D): 'Yes'.
The remaining preliminary issues do not arise if I have correctly answered 
Question (D). But in case that answer is wrong, it was obviously sensible to 
decide the issue as to the allegation that Barrow were negligent and/or in 
breach of contractual duty to the plaintiffs in placing unenforceable stop-
loss policies, and the further issue of the remoteness of any consequential 
damage.

On this second stage, I heard evidence from two distinguished and experienced 
insurance brokers; Mr. Vermont for the Names, who had had long experience 
with the Sedgwick Collins group, latterly being the deputy chairman of the 
main reinsurance broking company; and Mr. Harris on behalf of Barrow. He had 
also had long experience of insurance and reinsurance; for some years he had 
acted also as an underwriter, and for 24 years he was the consultant editor 
of the periodical 'Re-insurance'.

On this part of the case, although not admitted in evidence for the first 
stage, there were also put before me the Kiln Report which had been agreed 
expert evidence before Mr. Justice Leggatt in Stewart, and a number of other 
articles written successively in the aftermath of each of the Bedford, 
Stewart and Phoenix decisions.

Barrow, as brokers, were under a duty to each Name to use reasonable care to 
ensure that his stop-loss policy did not infringe the Insurance Companies 
Acts. Barrow themselves either knew, or ought to have known, because they 
themselves were operating the scheme, that there was infringement at least in 
the way the contracts were effected. No steps were taken to arrange for the 
underwriting to be done by Kansa. The rating of each Name's premium was done 
by Barrow, an offer was then made by Barrow and accepted by the Name, 
following which a cover note was issued together with a premium debit note by 
Barrow, before any acceptance or formal confirmation was issued from 
Helsinki. No attempt was made even to give the appearance of the underwriting 
being carried out in Helsinki. 

In pars. 2 to 5 of his supplementary statement Mr. Vermont describes the 
essential operation of the scheme, and in par. 6 he said - 

I cannot believe that, in 1981 to 1982, a reputable broker who appreciated 
that this scheme would involve a risk of contravening the Insurance Companies 
Acts would have exposed Names to the risk of being party to an illegal 
contract on the assumption that the only consequence of contravention would 
be a fine for the insurer. I repeat the view expressed in my previous report 
that a reputable broker would not have placed business pursuant to a scheme 
which he believed might involve a risk of illegally contravening the 
Insurance Companies Acts. Mr. Harris agreed with this, subject only to 
preferring 'feared' or 'considered' instead of 'appreciated' in the first 
line. Thus a reputable broker in Barrow's position would not have been 
entitled to assume that the only risk of contravention would have been a fine 
for the insurer. This is of importance because of the suggestion on behalf of 
Barrow, undoubtedly supported by the post-Bedford articles referred to above, 
that there was a general assumption in the market before Mr. Justice Parker's 
decision that this would be the only effect.

But it seems doubtful, on the evidence, whether there was any such general 
positive assumption: it seems more likely that the majority of brokers simply 
did not sufficiently consider the consequences of illegality. As Mr. Harris 
said in the course of cross-examination: 

There was no coherent view in the market. Prior to the Bedford decision, no-
one had a clue as to what the consequences might be, and would have had to 
seek legal opinion. 

Mr. Harris was here conceding, quite rightly, that even if there had been a 
consensus in the market, the consequences of illegality can only be a 
question for lawyers: no-one would be entitled to rely on a consensus of lay 
opinion. This had to follow from his statement (par. 6.5 of his report) that 
'the effects of illegality is a technical legal question'. There was no 
difference of opinion on this between the experts.

Mr. Crane, Q.C. referred me to the decision of Mr. Justice Hallett in 
Sarginson Brothers v. Keith Moulton & Co. Ltd., (1942) 73 Ll.L.Rep. 104 where 
insurance brokers were held liable for giving an incorrect opinion on a 
question of law without consulting lawyers, and thus without taking the steps 
which a reasonably prudent person would clearly have deemed necessary before 
the answer could be given with reasonable safety. Had Barrow done this, the 
argument goes, any competent solicitor or Counsel would have turned to the 
1981 edition of MacGillivray as the leading text book and found in the 
chapter on Illegality, par. 424 which reads: 

Failure on the part of the insurers to manage their business according to the 
statutory regulations imposed upon insurance companies may lead to policies 
issued by them being rendered unenforceable due to the illegal nature of 
their business. Thus if a company carries on business without the 
authorization required by the Insurance Companies Act 1974, all policies 
issued by it during the continuation of such default are illegal and void, 
because the purpose of the statute is to prohibit such a company from doing 
business at all. 

Although the legal adviser would probably consider that the Courts would 
strive to avoid the result which deprived the innocent policyholder of the 
protection of the Acts, he would be bound to warn that a Name was at least at 
some risk. A reputable broker would not, therefore, commit a Name to this 
scheme. Obviously Barrow cannot be in a better position because they failed 
to take legal advice.

Of course, I have to bear in mind the well-known statement as to the standard 
of care required of a professional man which appears in Lord Diplock's speech 
in Saif Ali v. Sydney Mitchell & Co., [1980] A.C. 198 at pp. 218D and 220D - 

No matter what pr