Society of Lloyd’s v Laws and others

[2003] EWHC 873 (Comm); [2003] All ER (D) 349 (Apr)

DATES: 17 April 2003

HEADNOTE: The applications before the court concerned litigation between the Society of Lloyd’s and some of its former “Names”. The Names were underwriting members of Lloyd’s who subscribed to policies of insurance through membership of one or more syndicates. Those party to the action had incurred substantial losses from having joined Lloyd’s at a time when a great many syndicates were subject to asbestos-related claims which had been persistently underestimated. They issued proceedings seeking, inter alia, damages for fraudulent misrepresentations allegedly made by Lloyd’s in brochures and other publications issued by them which, it was said, had induced the Names to become members of Lloyd’s and to enter into agreements with members agents and managing agents. In a judgment to consider the “threshold issue” of those fraudulent misrepresentations, the court ruled ([2000] All ER (D) 1674) that the brochures did not contain the alleged representations, and even if they had, the other ingredients of the tort had not been made out, in particular fraud. The Names appeal was dismissed (see [2002] All ER (D) 399 (Jul)); however, the court ruled that the brochures had contained untrue representations that there was in existence a rigorous system of auditing which involved the making of a reasonable estimate of outstanding liabilities, including unknown and unnoted losses, and a representation that Lloyd’s believed that to be the case. Those representations were untrue. The appeal was dismissed on the ground that the Names had failed to prove other elements of the tort of deceit. The order of the Court of Appeal allowed the Names to make a further application for permission to amend to the Commercial Court. The instant hearing was concerned with such applications. The draft pleadings before the court included pleadings following the holdings of the Court of Appeal regarding the false representations in the brochures, which contended that those representations constituted breaches of a duty of care, negligent misrepresentation and statutory misrepresentation under the Misrepresentation Act 1967. It was further pleaded that s 14(3) of the Lloyd’s Act 1982 was ineffective to exempt Lloyd’s from liability for those misrepresentations because of the Names’ right to a fair trial under art 6(1) of the European Convention on Human Rights. A number of Names also made further allegations including breach of duty and bad faith in failing to disclose the inadequacy of the audit system, both before and after the representations made in the brochures; misrepresentations regarding underwriting accounts, annual accounts, conduct of Lloyd’s and regulation of the market; and breach of duty regarding auditing. Litigants in person put forward other allegations as well. Lloyd’s contended: (i) that the claims were irretrievably time barred whatever section of the Limitation Act 1980 was relied on; and (ii) that authorities had established that no duties were owed to Names in relation to any claim for misrepresentation or negligence, and moreover it had a complete immunity under s 14(3) of the 1982 Act. Section 14(3) provided that subject to other parts of s 14, Lloyd’s “shall not be liable for damages whether for negligence or other tort, breach of duty or otherwise, in respect of any exercise of or omission to exercise any power, duty or function conferred or imposed by Lloyd’s Acts 1871 to 1982 …”

The court ruled:

(1) The Names had no realistic prospect of success on their Convention arguments and the 1998 Act could not be used to construe the 1982 Act with retrospective effect; art 6 of the Convention was not engaged, and there was no possible construction consistent with the 1998 Act which would avail the Names if the 1998 Act was to be applied and art 6 was engaged (see [170], [205]).

(2) On the facts of the case, the only claims which had any realistic prospect of success and for which permission could be given were those brought by Names who had previously notified the court of a claim for negligent misrepresentation made in the brochure which was made to them after November 1981 and was relied on by them in concluding arrangements with Lloyd’s and underwriting arrangements with agents prior to July 1982 when the 1982 Act came into force. If those Names who had pursued such claims did not have the requisite knowledge under s 14A of the 1980 Act more than three years prior to the issue of the writ or claim form in their respective actions, they might be able to pursue those claims further, provided always that their claim was not barred by s 14(B) of the 1980 Act. There appeared to be a limited number of Names who fell into that category. Should such pleas be properly particularised the court would grant permission to amend (see [216], [217]).

COUNSEL: Charles Aldous QC, David Anderson QC, David Foxton and Maya Lester (instructed by Freshfields Bruckhaus Deringer) for the claimant.; Bernard Weatherill QC (instructed by More Fisher Brown) and Gordon Nardell (instructed by Grower Freeman) for the defendant and the UNO Names.

Other names appeared in person.