1 W.L.R. 446
HOUSE OF LORDS
ASHMORE AND OTHERS, RESPONDENTS
CORPORATION OF LLOYDS, APPELLANT
DATES: 1992 Feb. 26, 27; April 1
JUDGES: Lord Keith of Kinkel, Lord Roskill, Lord Bridge of Harwich, Lord Templeman and Lord Goff of Chieveley
SOLICITORS: Solicitors Department, Lloyds; Michael Freeman & Co.
COUNSEL: Peregrine Simon Q.C., Paul Walker and Matthew Reeve for Lloyds.
Michael Lyndon-Stanford Q.C., Paul Griffin and Nicholas Peacock for the plaintiffs.
1 April. Lord Keith of Kinkel. My Lords, I have had the advantage of considering in draft the speeches to be delivered by my noble and learned friends, Lord Templeman and Lord Roskill. I agree with them and for the reasons they give would allow this appeal.
Lord Roskill. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Templeman. I agree with it and would allow this appeal for the reasons he gives. I [*448] add some observations of my own only to reinforce what my noble and learned friend says in the concluding passages of that speech. The writ in this case was issued nearly five years ago in the Commercial Court. When nearly a century ago what was then called the Commercial List was introduced into the Queens Bench Division of the High Court its purpose was to facilitate the speedy trial of commercial disputes in the simplest manner. Pleadings were to be called points of claim and points of defence, the purpose of the nomenclature being to ensure the brevity of the pleadings so that nothing but the most relevant facts relied upon by each side were included. To this end it was, and I believe still is, the practice of judges in charge of cases in the Commercial Court to ensure that the issues to be decided should readily emerge from those brief pleadings or if they did not, to ensure that the necessary steps were taken, whether by amendment or even in some cases by striking out, to define those issues properly. Further if from those pleadings it were possible to identify one or more issues a decision on which would either finally determine the dispute or at least substantially reduce the length of any further trial, it is right that the judge, of course after recognising, as did Gatehouse J., the possible hazards of trying preliminary issues, should order such issues to be tried first. A trial judge who has had control of the proceedings in its interlocutory stages is in a far better position to deal with these matters than any appellate court can be. That is especially true in the present case where Gatehouse J. had not only listened to part of a lengthy opening speech but also to almost as lengthy argument whether the already amended points of claim should be re-amended.
My Lords, as my noble and learned friend has said, the basic issue in this case emerges early in the re-amended points of claim in paragraph 15 and in the immediately following paragraphs. As regards the paragraphs between 23 and 85 it is far from easy to ascertain precisely what further issues they are intended to raise and counsel for the plaintiffs under some pressure from your Lordships had some difficulty in formulating what, if any, additional duties on the part of Lloyds those paragraphs were intended to aver. One ground seemingly relied upon by the Court of Appeal for disturbing the order of Gatehouse J. was that the proposed preliminary points did not embrace the issues raised by those later paragraphs. My Lords, the answer given by my noble and learned friend to that submission, which is substantially that given by the judge in his judgment, is in my view completely convincing and I need not repeat it.
The Court of Appeal appear to have taken the view that the plaintiffs were entitled of right to have their case tried to conclusion in such manner as they thought fit and if necessary after all the evidence on both sides had been adduced. With great respect, like my noble and learned friend, I emphatically disagree. In the Commercial Court and indeed in any trial court it is the trial judge who has control of the proceedings. It is part of his duty to identify the crucial issues and to see they are tried as expeditiously and as inexpensively as possible. It is the duty of the advisers of the parties to assist the trial judge in carrying out his duty. Litigants are not entitled to the uncontrolled use of a trial judges time. Other litigants await their turn. Litigants are only entitled to so much of the trial judges time as is necessary for the proper determination of the relevant issues. That was what Gatehouse J., [*449] in my view entirely correctly, sought to achieve by the order which he made, an order which as all your Lordships agree should be restored.
Lord Bridge of Harwich. My Lords, I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Templeman and Lord Roskill. I agree with them and for the reasons they give would allow the appeal.
Lord Templeman. My Lords, the defendant Lloyds is a society of individual underwriters incorporated by statute and authorised by its constitution to exercise supervisory, regulatory and disciplinary powers over its members. The plaintiffs are names, underwriting members of Lloyds organised in syndicates. The relationship between Lloyds and a member is governed by the constitution of Lloyds, by documents presented by Lloyds to an applicant for membership and by written agreements between Lloyds and each name. The name is personally liable to the limit of his fortune for all underwriting effected in his name and undertakes with Lloyds that his premium income will not exceed in any calendar year a sum specified in the undertaking. If a name pursues his underwriting business as a member of a syndicate, the business must be carried on by a managing agent approved by Lloyds and the name must not interfere. The relationship between a name and a managing agent is governed by a written agreement between them.
The plaintiffs became names at various times between 20 January 1971 and 30 December 1981. Each of the plaintiffs, with others, became a member of one or more syndicates managed by Oakeley Vaughan (Underwriting) Ltd. (O.V.U.). The plaintiffs claim damages from Lloyds for losses on insurance contracts entered into by O.V.U. as managing agent in 1980, 1981, 1982 and 1983.
The plaintiffs issued their writ on 28 August 1987 and served points of claim on 26 November 1987. The pleadings were complete and trial was fixed for 8 October 1990. In August 1990, the plaintiffs obtained leave to make extensive amendments to the points of claim. The trial began before Gatehouse J. on 22 April 1991. There were more than 60 binders of documents and the trial was not resumed until 29 April in order that the judge might read some of the documents. The plaintiffs counsel then continued his opening and had reached day seven in his opening when he made an application to make further substantial amendments to the points of claim. This application was resisted by Lloyds and took five days to argue. The judge allowed the amendments though he said he was reluctant to allow these substantial re-amendments at so late a stage, with the inevitable consequence of another adjournment. The next day Lloyds submitted that since substantial further amendments had been allowed and the trial consequently interrupted and prolonged, preliminary points of law should be ordered to decide whether in law Lloyds owed to each plaintiff any and if so which of the duties alleged in the points of claim and to decide the extent and application of the immunity from suit conferred on Lloyds by section 14 of the Lloyds Act 1982. The application for preliminary points of law to be argued was contested by the plaintiffs but on 17 June 1991 the judge made the order. The hearing could not, however, continue because the plaintiffs appealed and on 20 September 1991 the Court of Appeal (Nourse, Ralph Gibson and Woolf L.JJ.) set aside the order of Gatehouse J. for the [*450] determination of preliminary points of law. In the course of his judgment Ralph Gibson L.J., with whom the other Lords Justices agreed, said:
I think it not improbable that the order made by Gatehouse J., if allowed to stand, would produce decisions of law which would fairly resolve the effective issues of law between the plaintiffs and Lloyds, one way or the other; and I have much sympathy with his general view of these proceedings, that, in the events which happened, it would probably be in the interests of both sides if the main issues of law could be properly resolved without the added expense of a full trial of liability on all the evidence.
Nevertheless, Ralph Gibson L.J. decided that the order made by Gatehouse J. could not stand. He commented that:
The parties will, of course, remain free to reach such agreement as they can for the trial of issues and to invite the judge to take such course as he thinks right in the light of that agreement.
This hint fell on stony ground; the parties failed to agree on the issues, and Lloyds present appeal asks for the order of Gatehouse J. to be restored.
It will be necessary for the judge eventually to decide whether Lloyds owe any duty in law to each of the plaintiffs. It seems sensible that this decision should be made at the outset of the trial. If the decision is in favour of the plaintiffs, the judge, having defined the relevant duty may logically proceed to hear evidence in order to decide whether Lloyds acted in breach of duty and the consequences of any breach. If Lloyds owed no duty to each plaintiff then the action will be at an end without further delay, expense or harassment of witnesses.
Gatehouse J. observed that paragraphs 1 to 22 of the plaintiffs re-amended points of claim set out the primary facts relied upon as giving rise to the duties said to be owed by Lloyds to each of the plaintiffs and that the only facts relevant to the preliminary issues of law were contained in a few documents or in the allegations of primary fact.
By paragraph 15 of the re-amended points of claim, the plaintiffs assert that Lloyds owed to each plaintiff: (a) a duty imposed by statute, pursuant to its constitution, to perform duties thereafter set forth in paragraph 16, 16A, 17, 18 and 19; (b) a duty of care imposed by common law so to exercise its powers under its constitution that the interests of the plaintiffs, as members of Lloyds would be adequately protected. (c) A duty imposed by an implied term of the membership agreement made with each of the plaintiffs or, in the alternative, of the general contractual relationship between Lloyds and each of the plaintiffs, that Lloyds would perform the specific duties set forth in paragraphs 16, 16A, 17, 18 and 19.
Any duty owed by Lloyds must have been imposed by statute, by common law in tort, or by contract. Paragraph 15 asserts all three possible origins of the duty and seeks to introduce some other vague origins. Paragraph 15(b) appears to be a particular duty which is not contained in paragraphs 16, 16A, 17, 18 and 19 but is a duty to take care to protect the interests of each plaintiff, remarkable for its vagueness and novelty.
Paragraphs 16 to 19 ascribe to Lloyds various duties in the widest terms but these can I think be distilled and in any event mainly consist [*451] of two important duties said to be owed by Lloyds to each plaintiff. First, there is said to be a duty on Lloyds to take reasonable care to ensure that a managing agent obeys the rules of good underwriting and does not commit a breach of his contractual obligations to the name. Secondly, it is said that there is a duty on Lloyds to inform a name of any serious breach of the duties owed by the managing agent to the name whenever Lloyds discovers the breach, or with reasonable diligence could have discovered the breach.
The order made by Gatehouse J. on 18 June 1991 was as follows:
1. That the following questions or issues be tried as preliminary issues in this action namely: (a) Duty of care. (i) Whether, on the basis of the primary facts alleged in paragraphs 1 to 22 of the re-amended points of claim (i.e. excluding paragraphs 15, 16, 16A (except for particulars (1), (2) and (3)), 17 to 19 inclusive and 20(b)), answer 8 and the schedule to the further and better particulars of the points of claim served on 13 January 1989 and paragraph 3 of and schedule 1 to the amended points of defence and counterclaim, the defendant owed to the plaintiffs any, and if so which, of the duties alleged in paragraphs 15, 16, 16A, 17, 18 and/or 19 of that pleading and, if so, then (ii) whether the position would be different (and, if so, how) if the allegation in paragraph 20(b) of that pleading that the plaintiffs . . . did rely upon Lloyds to exercise appropriate and satisfactory supervision of the market so as adequately to safeguard and protect their interests were proved at trial. (b) Immunity. If Lloyds did owe a duty of care then is it immune from suit in respect thereof by virtue of section 14 of the Lloyds Act 1982 and, if so, from what date?
All the primary facts specified in paragraph 1(a)(i) of the order are admitted by Lloyds. The reliance mentioned in paragraph 1(a)(ii) is not admitted by Lloyds; hence the difference between the two questions (a)(i) and (a)(ii). It is agreed that the issue of immunity is suitable for decision by preliminary issue.
Before Gatehouse J. decided to order preliminary issues of law he considered the dangers involved in that course and the guidance of this House in Tilling v. Whiteman  A.C. 1. In my opinion, when a judge alive to the possible consequences, decides that a particular course should be followed in the conduct of the trial in the interests of justice, his decision should be respected by the parties and upheld by an appellate court unless there are very good grounds for thinking that the judge was plainly wrong.
Many objections to the making of an order for preliminary issues were advanced by the plaintiffs before the trial judge and before the Court of Appeal. In the event, there remain two arguments and even those arguments were not pressed by counsel in the light of questions asked by all your Lordships. The first argument was that the points of law ordered by Gatehouse J. did not cover the plaintiffs case that there was a duty in tort.
If Lloyds owe a duty by statute or contract, then the preliminary issue will be decided in favour of the plaintiffs. But if no duty was imposed by statute or contract it does not appear to me that a duty could have arisen in tort. If statute or the contract between Lloyds and a name do not impose an obligation on Lloyds to convey information to a name concerning his managing agent, an obligation to convey [*452] information could not arise just because and whenever information was obtained by Lloyds. Then it was said that if no duty in tort existed when a name became a member of Lloyds, such a duty arose in the present case in a later stage towards each of the plaintiffs who were names on 6 March 1981. This alleged duty was never clearly pleaded, but arose, so it was now said, when a member of the committee of Lloyds suggested amendments to and approved a letter which was sent out by O.V.U. to its names and dated 6 March 1981. The letter commented on a Lloyds press release and two financial press reports of an investigation by Lloyds into certain aspects of the conduct by O.V.U. of underwriting business. It is said that Lloyds in September 1981 discovered facts from which Lloyds should have realised that the letter ought to be corrected in certain respects. But Lloyds never assumed responsibility for the letter and the plaintiffs receiving a letter from O.V.U. had no right to rely on Lloyds for the accuracy of its contents. Ralph Gibson L.J. thought that these considerations might turn out to be a conclusive answer to the plaintiffs case based upon late duty in tort but declined to decide the point upon the material which is before the court on this appeal. For my part I fail to see how the letter could have created a duty in tort owed by Lloyds to each of the plaintiffs if no such duty existed beforehand.
The second objection to the points of law ordered by the judge was that they could not be decided in advance of oral evidence concerning certain admissions alleged to have been made by Lloyds. The plaintiffs have culled from records of meetings, some public and some private, remarks which Gatehouse J. dismissed as informal comments made by members of the committee of Lloyds. Mr. Lyndon-Stanford, on behalf of the plaintiffs, submitted that subject to cross-examination of the committee members concerned in order to determine what each had said and what each had meant, these admissions were evidence upon which he could rely to prove the existence of an implied term in the contract between Lloyds and each plaintiff. It would indeed be strange if a term were implied in a contract of 1971 or a duty in tort arose in 1971 or later because an underwriting member of the committee of Lloyds made an informal comment in 1981 about the duties of Lloyds. Again the admissions were not clearly pleaded for present purposes but Ralph Gibson L.J. in upholding a submission by Mr. Lyndon-Stanford said that:
The evidence of informal comments, as the judge called them, to the effect that Lloyds owed a duty of care to names, was contained in the agreed documents and the judge would, in my view, have been required to consider the evidence, such as it was, and the plaintiffs submissions upon it.
My Lords, the relationship between Lloyds and a name crystallised when the name became a member of Lloyds. That relationship is the same for all names and does not differ from one name to another name according to their different dates of membership. The relationship is not altered by the conduct of Lloyds in exercising or failing to exercise the powers and discretions conferred on Lloyds. The task of the court in deciding whether the statute has imposed a duty on Lloyds towards each member or whether in the contract between Lloyds and a member there are implied terms which impose a duty on Lloyds, cannot be affected by subsequent remarks of a committee member. I have no [*453] doubt that a committee member accepts a moral duty towards the public and a professional duty towards all the members of Lloyds; but it is for the court to decide whether Lloyds owe a duty in law to each of its members and the observations of committee members are neither relevant nor admissible to decide whether a duty in law exists.
Between paragraphs 23 and 81 of the points of claim the plaintiffs detail, not consistently in chronological order, facts, evidence, comments and submission. Further events appear in paragraphs 82A and 84. Apart from allegations that O.V.U. exceeded premium limits, the allegations against O.V.U. are confused and difficult to follow. The evidence consists mainly of partial extracts from reports and enquiries made by Lloyds. It is the rule that evidence as such should not be pleaded. Paragraph 82 pleads that by late September 1981 Lloyds was or ought to have been well aware by reason of the foregoing, inter alia, that O.V.U. were thoroughly unfit to act as managing agents. Paragraph 83 alleges that Lloyds, at no material time, took any or any adequate steps to inform the plaintiffs of the facts known to them as pleaded . . . Paragraph 85 alleges that the facts and matters referred to above were such as required Lloyds to act so as to protect the plaintiffs whether by (a) suspending O.V.U. . . . (c) informing the plaintiffs directly or indirectly of the facts and matters known to Lloyds or by other specified means. Paragraph 86 pleads that Lloyds in breach of duty or negligently, inter alia, wrongfully permitted O.V.U. to continue underwriting and failed to inform the plaintiffs of the facts. Paragraph 87 alleges that if Lloyds had properly discharged its duties to the plaintiffs they would each have ceased underwriting at some date or dates unspecified. It is clear from the pleadings that it is not said that Lloyds came under a duty to suspend O.V.U. until late September 1981. It is not clear from the pleadings whether or when a duty of Lloyds arose and was broken to give information to each of the plaintiffs prior to late September 1981. But by paragraph 88 the loss and damages claim to have been suffered by the plaintiffs include losses on all contracts underwritten in excess of premium income limits in 1980, 1981, 1982 and 1983.
The points of defence deny that Lloyds owed any duty to each of the plaintiffs other than a duty to act in good faith in the exercise of the powers and discretions vested in Lloyds. The points of defence also challenge the accuracy and completeness of the events narrated in the points of claim.
The parties and particularly their legal advisers in any litigation are under a duty to co-operate with the court by chronological, brief and consistent pleadings which define the issues and leave the judge to draw his own conclusions about the merits when he hears the case. It is the duty of counsel to assist the judge by simplification and concentration and not to advance a multitude of ingenious arguments in the hope that out of 10 bad points the judge will be capable of fashioning a winner. In nearly all cases the correct procedure works perfectly well. But there has been a tendency in some cases for legal advisers, pressed by their clients, to make every point conceivable and inconceivable without judgment or discrimination. In Banque Keyser Ullmann S.A. v. Skandia (U.K.) Insurance Co. Ltd.  2 A.C. 249, 280, I warned against proceedings in which all or some of the litigants indulge in over-elaboration causing difficulties to judges at all levels in the achievement of a just result. I also said that the appellate court should be reluctant [*454] to entertain complaints about a judge who controls the conduct of proceedings and limits the time and scope of evidence and argument. So too, where a judge, for reasons which are not plainly wrong makes an interlocutory decision or makes a decision in the course of a trial the decision should be respected by the parties and if not respected should be upheld by an appellate court unless the judge was plainly wrong. The Court of Appeal in the instant case did not comment upon and apparently therefore found nothing remarkable in the points of claim or the length of the plaintiffs opening or in the prospect of protracted oral evidence and interminable submissions based on that oral evidence. The judge thought he would be assisted by an early deliberation of issues of law, whatever the result of that consideration. He deserved support. In his judgment in the Court of Appeal Ralph Gibson L.J. recorded that the plaintiffs had resisted the application to Gatehouse J. by Lloyds for a determination of preliminary issues on many grounds in addition to the two specific grounds of objection to which I have referred. Mr. Lyndon-Stanford repeated the arguments in the Court of Appeal and, as Ralph Gibson L.J. remarked:
He claimed in particular that it was wrong thus to take the conduct of the proceedings out of the hands of the plaintiffs and thereby to disappoint the plaintiffs in their legitimate expectation that the trial would proceed to a conclusion upon the evidence to be adduced.
Ralph Gibson L.J. thought that there was considerable force in those submissions. My Lords, I disagree; the control of the proceedings rests with the judge and not with the plaintiffs. An expectation that the trial would proceed to a conclusion upon the evidence to be adduced is not a legitimate expectation. The only legitimate expectation of any plaintiff is to receive justice. Justice can only be achieved by assisting the judge and accepting his rulings. I have read and agree with the observations of my noble and learned friend, Lord Roskill.
I would allow the appeal, restore the order of Gatehouse J. and order the plaintiffs to pay the costs of Lloyds in this House and in the Court of Appeal.
Lord Goff of Chieveley. My Lords, I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Templeman and Lord Roskill. I agree with them and for the reasons they give would allow the appeal.
Appeal allowed with costs.