Society of Lloyds v Noel
COURT OF APPEAL (CIVIL DIVISION)
 EWCA Civ 937
HEARING-DATES: 20 JUNE 2002
20 JUNE 2002
Practice Summary judgment Action for recovery of debt or damages Action by Lloyds against former name for Equitas premium Defendant not signing 1986 general agreement Judge finding defendant liable for premium irrespective of general agreement Whether judge in error Lloyds Act 1982
The Applicant appeared in person; R Jacobs for the Respondent
PANEL: WALLER, ROBERT WALKER LJJ
JUDGMENTBY-1: WALLER LJ
WALLER LJ:  On 27 March 2002 Andrew Smith J gave summary judgment against Mrs Noel in favour of the Society of Lloyds for the premium alleged to be payable to Equitas. Mrs Noel seeks permission to appeal that judgment to the Court of Appeal.
 Andrew Smith J correctly identified in his judgment the test for granting summary judgment. He said it was for Lloyds to persuade him that Mrs Noel had no reasonable prospect of successfully defending their claim. To obtain permission to appeal to the Court of Appeal Mrs Noel must persuade us that there is a reasonable prospect of persuading the Court of Appeal that Andrew Smith J should not have granted judgment, ie that he should not have concluded that there was no defence to the claim.
 The background to the claim, put shortly, is that Mrs Noel joined Lloyds in 1978, her first underwriting year being 1979. Her last underwriting year was 1986. Mrs Noel, like many others, was on Syndicates that suffered enormous losses arising, in the main, out of the taking on of past liabilities. The accounting procedures at Lloyds was a 3-year accounting procedure. At the end of the third year a year would be closed into next year under what was called, and is called, the reinsurance to close. In that way Syndicates took on the liabilities of past years. It was only by virtue of the reinsurance to close that Names could be released from liabilities. It is in that context that in Mrs Noels case her years for 1985 and 1986 were not closed and they remained open until 1996.
 In order to deal with the problem that many years were left open in 1996 by virtue of these enormous losses and liabilities, Lloyds produced a scheme which resulted in the formation of Equitas as a company to take on the reinsurance of those open years. The intention was to produce a reinsurance to close with Equitas acting as the reinsurer. They used their powers under bye-laws passed pursuant to the 1982 Lloyds Act, s 6.
 Various bye-laws had previously been passed. For example, in 1983 the Substitute Agents Bye-law was passed which empowered the Council to appoint a substitute agent and give directions to such agent. In 1995 they passed the Reconstruction and Renewal Bye-law, which contained powers for Lloyds to give such directions as may appear to the Council to be desirable or expedient for giving effect to the Equitas scheme. Pursuant to the powers granted by that bye-law, a resolution and direction was given on 3 September 1996 which revoked the authority of existing underwriting agents in respect of underwriting years 1982 and prior, and directed a substitute agent, AUA9, to enter into the Equitas reinsurance contract. AUA9 entered into a reinsurance contract for Mrs Noel with Equitas. It is the premium due to Equitas under that arrangement for which Lloyds sue.
 It is important to emphasise that if Lloyds were right in their case, which simply relies on s 6, the bye-laws and the resolution and direction, then Mrs Noel, in addition, became liable under clause 5.5 (the pay now sue later clause), a clause which has been considered by the courts many times. Under that clause, Mrs Noel would be liable for the premium. If she had a counterclaim (ie a claim for fraud), she would have to bring that claim in separate proceedings. So far as Andrew Smith J was concerned, and as far as this court is concerned at this stage, the question whether she had a claim for fraud is not actually in issue. Fraud claims were independently tried in an action called the Jaffray action. It seems that Mrs Noel did not join that action, so, for my part, I recognise she may have difficulty in bringing any claim for fraud having chosen not to join that action. But, if Lloyds are right in the case they make, that issue does not and would not arise on appeal.
 When Lloyds initially sued Mrs Noel for this premium, they did not simply rely on the Lloyds Act, the bye-law and the resolution and direction. They relied on her signing a general undertaking to be bound by the Lloyds Act, in particular the Lloyds Act 1982. Lloyds allege that she had signed an undertaking in 1978 when, as Evans LJ put it, the Lloyds Act was barely a twinkle in Lloyds eye. Many other Names, in addition to the undertakings they signed pre the 1982 Lloyds Act, signed further undertakings in 1986 after that Act came into force. But Mrs Noel did not do so and that is accepted by Lloyds. If she had signed that 1986 undertaking, she would have been in the position of many other Names who have attempted to defend claims brought by Lloyds for the premiums.
 The various defences raised by other Names have been dealt with by a series of cases, some of which have come to the Court of Appeal, including The Society of Lloyds v Leighs  CLC 759, and The Society of Lloyds v Fraser (unreported, transcript 31 July 1998). The defences that have been dealt with in those cases were allegations that the R & R scheme was ultra vires for numerous reasons, including allegations that it was conceived in bad faith. Attempts were made to raise the defence of set-off alleging fraudulent misrepresentation, which raises the clause 5.5 point to which I have alluded. Allegations were made that the figures had not been calculated correctly. All defences raised by Names who signed the 1986 undertaking have been dealt with and failed. Summary judgments were given against Names for the amount of the premium.
 Cresswell J originally thought that Mrs Noel was in no different position from all those Names who had signed undertakings post the 1982 Lloyds Act. But she had not signed any undertaking post that Act. When she attempted to appeal that judgment to the Court of Appeal, she was granted permission to appeal by Evans LJ and Turner J. Her appeal came on before Simon Brown and Brooke LJJ and my Lord, Lord Justice Robert Walker. They allowed her appeal, pointing out this was a unique point so far as she was concerned.
 On that occasion an attempt was made by Lloyds through Mr Jacobs, who appeared for Lloyds in the Court of Appeal on that occasion, to suggest that since the point that is now taken by Lloyds was a good point, then the appeal should be dismissed. But, in fairness to Mrs Noel, the court said that the matter must be re-pleaded by Lloyds and looked at by the Commercial Court. It was in that context that Brooke LJ suggested that he could not tell whether there may not be some further evidence Mrs Noel might want to put in once the case had been further pleaded. The court strongly warned Mrs Noel that Lloyds would be likely to amend their pleading to allege that, whether or not Mrs Noel had signed an undertaking, she was simply bound by virtue of the fact that the 1982 Act was an Act of Parliament, a bye-law had been passed which related to her and a direction pursuant to that bye-law had appointed an agent who had the power to sign the undertaking on her behalf.
 The matter went back to the Commercial Court. Lloyds did amend their pleading, initially with the consent of Mrs Noel. The matter then came on before Andrew Smith J to consider the matter afresh. At the hearing Mrs Noel attempted to withdraw her consent to the amendment. She alleged that the original pleading was a dishonest attempt to mislead the court. Andrew Smith J held that that was not so. The original statement in the pleading was a standard pleading used by Lloyds in relation to Names and the pleader had simply not appreciated the unique position in which Mrs Noel found herself. Andrew Smith J ruled that the amendment would stand. He was clearly right in not setting aside the amendment. I do not understand Mrs Noel to be attempting to challenge that ruling.
 The judge then had to consider the point that Lloyds wanted to take. He ruled that the Lloyds Act 1982 took effect as a statute and that its efficacy was not dependent on any consent from Mrs Noel. Thus, he ruled that Mrs Noel was liable on the straightforward basis that bye-laws had been passed under powers conferred by statute, and the resolution and direction appointing an agent to make the Equitas contract on Mrs Noels behalf was made pursuant to the bye-law.
 The point made in the judgment is that undertakings were only obtained from Names in 1986 and the Lloyds Act came into force on 1 January 1983 so, any other finding would have left a lacuna; a period in which the Names at Lloyds would not have been bound by bye-laws passed after the Lloyds Act or by resolutions made pursuant to those bye-laws. The effect of that finding by Andrew Smith J was that he ruled that Mrs Noel was in no different position from other Names. It followed that Mrs Noel could not raise any defence which had been disposed of by the previous cases before the Court of Appeal, including the case of set-off (the defence of fraud to which I have referred).
 The judge then went on to consider three points which Mr Jacobs suggested might conceivably not have been considered in the other cases. First, he dealt with the point that the allegation that the bye-law was unconscionable. Mrs Noel suggested that it had been passed to defeat actions being brought by Names against managing agents and members agents. The judge pointed out that no settlement with agents, managing agents or members agents was actually imposed on the Names, but he ruled in any event that the bye-law itself would only be unconscionable if the whole scheme was unconscionable. In the light of the Court of Appeal authorities it was not open to him to find that the scheme was unconscionable.
 The judge then, secondly, ruled on a point on irrationality. In the light of the previous Court of Appeal authorities, he found, rightly, that it was not open to him to find that there was any irrationality in the bye-law.
 The third point the judge dealt with was unique to Mrs Noel. She alleges that even the verification form that she gave to Lloyds prior to the 1982 Act, was forged. Her signature was a forgery and this is the matter about which, not surprisingly, she feels very strongly. She has spent a deal of time and effort raising this point.
 The difficulty for her, as Andrew Smith J pointed out, is that once it has been ruled that any undertaking given to Lloyds is irrelevant, and in particular any undertaking given prior to the Lloyds Act 1982 is irrelevant, it does not matter what the position is in relation to that original verification form. The simple way in which Lloyds put their case is, and there is no issue on this, that Mrs Noel was a member of the Syndicates underwriting for the period which I have outlined (1979 to 1986), the Lloyds Act applied to her, the bye-laws applied to her and the resolution applied to her. Thus, any point on the original verification form not relevant to the case.
 Mrs Noels main point is that in every other case Lloyds have relied on an undertaking and not simply the Lloyds Act, the bye-law and the resolution. She points to authority after authority showing that that is the way Lloyds approached the liability of other Names. She asks, and one understands why she asks, "Why in my case should it be different? I did not sign a form of undertaking, why is it that Lloyds should not have to rely on an undertaking?" It is right that that question should be asked. The previous Court of Appeal, when allowing her appeal on the last occasion, thought it was right that that question should be asked and should be asked and carefully considered. Andrew Smith J clearly considered it with care.
 Having considered it with care myself (and I understand my Lord to agree), the plain fact is that those undertakings were "belt and braces". The position is quite clear. The Lloyds Act is a statute, the bye-laws are passed pursuant to the statutory power, the resolutions and directions were given to pursuant to the effective bye-law. They clearly covered someone in the position of Mrs Noel who was on Syndicates at Lloyds during the period 1979 to 1986. Thus, although it is right that Lloyds relied on undertakings in other cases, it transpires that there was actually no necessity to do so. There was a straightforward claim on the above basis. In my view, Andrew Smith J was plainly right on the view he took and he was plainly right on the other points.
 It probably does nobody any good to express sympathy, but Mrs Noel and others who are present in this court should know full well that it is not because the court does not have sympathy with the appalling losses that Names suffered. At the end of the day, this court has to look at the position in law. The position in law, as I see it, is absolutely clear. It follows that to give Mrs Noel permission to appeal and allow her a further day in court in which Lloyds would be represented, would be doing her no service whatever. She would simply be liable for the costs that would be incurred and it would therefore do her no favours at all. There being no reasonable prospects of success on this appeal, her application for permission must be refused.
JUDGMENTBY-2: ROBERT WALKER LJ
ROBERT WALKER LJ:  I agree.
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