Stockwell and others v Society of Lloyd’s

Public office – Abuse of – Misfeasance by a public officer – Ingredients of tort – Public officer – Whether Lloyd’s of London public officer

[2007] EWCA Civ 930, (Transcript: Wordwave International Ltd (A Merrill Communications Company))

Buxton, Moore?Bick, Smith LJJ

DATE: 27 JULY 2007

COUNSEL: P Jenkins for the UNO names
K Adams for Mrs Heather Mary Adams
SM Butler appeared in person
D Foxton QC for the Society of Lloyd’s
Grower Freeman; Freshfields Bruckhaus Deringer



[1] This appeal from a decision of Andrew Smith J and an application within that appeal can only be understood against the background of the litigation about the affairs of and connected with the Society of Lloyd’s that has occupied the courts for many years. The history was summarised in paras 13 – 32 of the judgment under appeal. The parties indicated that they did not disagree with that summary, although one of the litigants in person made some forensic comments on those passages of the judgment. In those circumstances, I can confidently save time and unnecessary repetition by appending those paragraphs to this judgment.

[2] The effect of the process there described was that the Threshold Fraud Point (TFP) was a preliminary issue, though a preliminary issue of central importance. It was important because, on the cases as then pleaded, it was capable of concluding the claims brought by the Names against Lloyd’s. The Names who were party to the TFP issue, and who are bound by the decision of this court upon it, included a substantial number of those who are Appellants in the appeals before us.


[3] The proceedings before this court were originally concerned, and concerned only, with an appeal from various rulings of Andrew Smith J, [2005] EWHC 850. The first and most substantial group of applications are the Henderson applications, made in the case of Lloyd’s v Jaffray already described, in which a group of Defendants in that action, conveniently identified in these proceedings as the UNO Names, seek to introduce an amended defence and counterclaim in order to allege against Lloyd’s Misfeasance in Public Office. The other matters of appeal are described in paras 3 and 4 of the judgment of Andrew Smith J.

[4] In addition, however, and since the judgment of Andrew Smith J, an application has been made by the UNO Names under CPR 52.11(2)(b) that the court should admit further evidence in support of the UNO Names’ appeals. The only sensible way of dealing with that application is for us first to consider the issues in the appeals without reference to that further evidence. That will enable it to be decided, first, what parts of the appeals are viable as a matter of law; and then whether, in the state of the appeals as they stood before Andrew Smith J, the Names could establish any of the facts that they needed in order to succeed under those legal rules. Only when that is done will it be possible to identify whether any part of the new evidence is relevant to, and makes any substantial difference to, the case as it stood before Andrew Smith J. That enquiry will be important in any event, but particularly in the context of the formidable problems that the Names face in seeking to introduce this evidence at this very late stage of the process.


[5] The issues before this court can be most conveniently demonstrated by an account of the findings made by Andrew Smith J.

The Henderson Applications.

[6] Andrew Smith J rejected the Henderson applications on four grounds:

• (i) Lloyd’s was not, as a matter of public law, a public officer in the sense required by the tort of Misfeasance in Public Office, and accordingly was not in any event susceptible to liability for that tort.

• (ii) Even if Lloyd’s came in principle within the tort of Misfeasance in Public Office, the UNO Names were precluded by the decision of the Court of Appeal on the TFP from asserting the bad faith on the part of Lloyd’s which is an essential element in the tort.

• (iii) If the UNO Names sort to rely on factual matters other than those addressed in the Threshold Fraud Point proceedings, the proposed amendment would fall foul of CPR 17.4(2), which forbids amendments after the end of a relevant limitation period (as is conceded to be the case with the proposed amendments) unless the new claim arises out of the same or substantially the same facts as the claim already standing in the proceedings.

• (iv) The proposed amendments were an abuse of process (a) because of the diffuse nature of the pleading; and (b), as the judge thought more importantly, because the issue of Misfeasance in Public Office was only raised years after the commencement of the proceedings and turns on facts which on any view are closely related to those on which the TFP point was based. Not only had there been ample opportunity to take the point, if it was seen as a good one, but also opportunities to take the point had been expressly declined by counsel, including leading counsel, instructed on behalf of the Names.

[7] It will be appreciated that, in order to succeed in this appeal, the UNO Names have to dislodge both of findings (i) and (iv); and to show that the judge was wrong in thinking that finding (iii) necessarily precluded success in respect of finding (ii); and to show that the judge was wrong about at least one or other of findings (ii) and (iii).

The Stockwell Applications.

[8] These applications turned on the ability of the Applicants to plead Misfeasance in Public Office. The judge, at his para 88, dismissed them for the same reasons as he refused to permit the UNO Names to amend to plead Misfeasance in Public Office. As Lloyd’s pointed out to us, that was definitively the end of those applications. The original defences pleaded by these Applicants had made no allegations at all of fraud or deceit; so, without question, an attempt now to rely on Misfeasance in Public Office would involve the introduction of new matter, and thus a demonstration that the claims did not arise out of the same or substantially the same facts as a claim already standing in the proceedings.

The Lowe Applications.

[9] The judge’ general finding that Lloyd’s are not susceptible in any event to the tort of Misfeasance in Public Office in itself caused these applications to fail. He also found against the Applicants on at least two other elements in their case.

[10] First, these Applicants advanced a particular argument with regard to bad faith which, it is accepted, is an essential element in the tort of Misfeasance in Public Office. This argument was explained by Andrew Smith J in his para 108:

“The fundamental reasoning of the draft pleading appears to be that because Lloyd’s failed to appreciate that it was exercising public law powers, therefore it necessarily acted outside the proper constraints which control the lawful exercise of such powers; and because it did not ask itself whether its powers were public law powers, Lloyd’s was ‘recklessly indifferent’ as to whether it was acting within such proper constraints. No other allegation of bad faith, or the necessary mental element of the tort of Misfeasance in public office, is pleaded with proper particularity and the proposed amendment depends on this reasoning.”

[11] The judge explained in his paras 109 to 111 why, as a matter of fact, that complaint could not be sustained. As will be explained below, there is a further reason why, as a matter of legal analysis, the complaint is ill?founded.

[12] Second, the judge found that, as a matter of causation, the damage alleged by these Applicants did not follow from anything done or omitted by Lloyd’s. His reasoning is summarised in para 112 of the judgment below.

[13] It will be appreciated that the Lowe Applicants have to dislodge all of the judge’ reasons for finding against them before they can succeed in this court.

The Forensic History.

[14] Andrew Smith J refused permission to appeal against his decision, but that permission was granted by a somewhat differently composed constitution of this court on 14 February 2006. That permission had to extend to all of the matters of which the Appellants complain because, for the reasons indicated above, the Appellants have to succeed on every issue that was before Andrew Smith J in order to dislodge his decision. It was only on 25 October 2006, months after permission to appeal had been granted, and only three working days before these appeals were due to be heard, that the application was made to introduce further evidence into the appeal. The appeals were listed before, again, a somewhat differently composed constitution of this court for three days, commencing on 31 October 2006. At the sitting of the court on that day we were informed that the ENO Appellants were in difficulties because, early on that same morning, they had parted company with counsel who had appeared before Andrew Smith J, settled the grounds of appeal and skeleton argument, and advised them up to and including the previous day. With very considerable hesitation, we agreed that the proceedings should be adjourned, to enable the ENO Appellants to make other arrangements. The appeals and the application were relisted for 25 July 2007, the first available date. It may perhaps be noted that Lloyd’s issued its claims against the Appellants in 1996, and it is regrettable that those claims remain unresolved 11 years later.

[15] In the hope of introducing some order into the proceedings, in particular in respect of the application to adduce further evidence, the court ordered that the pleadings must be amended to indicate clearly what the Names now contended; the particular parts of the new evidence relied on, and for what purpose; and how that evidence affected the case as originally pleaded. That further explanation of the case was provided by Mr Jenkins, who had taken over the case, together with a substantial skeleton argument. As part of that explanation, Mr Jenkins produced a further defence and counterclaim, completely different in form from that which had been before Andrew Smith J. That was intended for illustrative purposes only, to show how the fresh evidence illuminated the case that the Appellants wished to put. I will refer to this defence as Pleading II.

[16] It may also be recorded that, concurrently with these appeals, the Appellants also brought proceedings under the jurisprudence of Taylor v Lawrence, seeking to use the material contained in their new evidence to re?open the decision of this court in Lloyd’s v Jaffray. Those applications were rejected by this court in a judgment with neutral citation number [2007] EWCA Civ 586, delivered on 6 June 2007. That will have some relevance at a later stage of this judgment.

[17] Investigation of this history has revealed a major difficulty for the Appellants at the very threshold of the appeal. The application before Andrew Smith J was and is in the original Jaffray action in which the TFP rulings had been made by Cresswell J and considered by this court. The application was to amend the pleadings as they had been before Cresswell J. The proposed amended pleading, served on 9 February 2005, extended to 210 pages and 409 paragraphs. I refer to this document as Pleading I. The judge said of it, in para 81 of his judgment:

“Both the draft pleading originally put forward and the recent draft in respect of which the application is now pursued are long, unstructured and in places confused and repetitious. What are acknowledged to be ‘extraneous and peripheral matters’ dominate the drafts. Perhaps most importantly, it is difficult, and sometimes impossible, to discern with any proper certainty the basis for allegations of bad faith. Particularly bearing in mind that Lloyd’s has already defeated allegations of bad faith made by Names against the Corporation and many individuals in it, it is entitled to have new allegations of this kind made much more clearly and specifically than they are in these drafts.”

[18] For that reason, and quite apart from the objections of law that he found, the judge refused permission to amend as a matter of discretion. However, before us Mr Jenkins said that he still sought to stand on Pleading I, and it was for that document, and not for Pleading II, that he sought permission.

[19] It seems to me that unless the Appellants can dislodge the judge’ objections to Pleading I in terms of form they are bound to fail in any event; and they are unlikely to achieve that end, and indeed did not try to do so, in a matter that is essentially one for the trial judge’ if not discretion then at least judgment. I have, however, concluded that, in the way in which the case has developed, it would be too austere a course to dismiss the appeals on that ground alone. Mr Jenkins was permitted by us to develop all of his points, and permitted to illustrate them from Pleading II, which, although damagingly lacking in particularity, is a much more manageable document than Pleading I. If, after that demonstration, I had concluded that the ground had been laid for an acceptable amendment to the proceedings, I would have been prepared to consider (and no doubt in the face of understandable objections by Lloyd’s) a yet further redrafting to put the case in acceptable form. However, as will be explained below, that possibility does not arise because I have not reached the conclusion that any version of the proposed amendment is open to the Appellants.



[20] It will be apparent from the account already given that central to all the appeals is the question of whether Lloyd’s is a “public officer”, and thus in principle a proper Defendant in the tort of Misfeasance in Public Office. It was accepted on behalf of the Appellants that the underlying factual basis of the issue of whether Lloyds is a public officer is uncontentious, and so we are as well placed to decide that issue as would be a judge at trial. If the Appellants fail on that issue, they fail entirely. To show the context in which the issue arises, it will be convenient to start, as Andrew Smith J started, by reminding ourselves of the elements of the tort, as now definitively set out by the House of Lords in Three Rivers District Council v The Bank of England (number 3) [2003] 2 AC 1, [2000] 3 All ER 1, [2000] 2 WLR 1220.

The Nature Of The Tort.

[21] Before Andrew Smith J, counsel then appearing for the Names relied on the insight of Hale LJ (as she then was) in her seminal judgment in Ammoo?Gottfried v Legal Aid Board (unreported, 1 December 2000), that the tort is directed at:

“The exercise of power by public official, not for the purpose for which it was given, but for some ulterior or impermissible purpose, knowing or being reckless as to whether it would damage the Plaintiff.”

[22] Andrew Smith J then went on to summarise, in terms that were not challenged before us, the more detailed elements that were set out within that statement in Three Rivers. I can conveniently repeat paras 10 and 11 of his judgment:

“In the Three Rivers DC case, Lord Steyn (loc cit at page 191B et seq) identified the following six ‘ingredients’ or ‘requirements’ of the tort:

(i) the Defendant is a public officer.

(ii) power as a public officer is exercised either by the Defendant himself or by someone for whom he is vicariously liable.

(iii) either (i) the Defendant, or officer for whom the Defendant is vicariously liable, acts out of targeted malice, in the sense of a specific intention to injure a person or persons, or (ii) the ‘public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the Plaintiff’ (loc cit at page 191E/F). The latter alternative (which is an ingredient of what I shall call the ‘second’ form of the tort) involves bad faith in as much as the public officer does not ‘have an honest belief that his act is lawful’ (per Lord Steyn at page 191F) and it suffices if ‘the public officer acted with a state of mind of reckless indifference to the illegality of his act’ (at page 193C/D) and about the consequences of his act (at page 196B/C).

(iv) the Claimant has a sufficient interest to have legal standing to sue.

(v) there is damage caused by the wrongful act.

(vi) that damage is not too remote to be recoverable.

I emphasise the third ingredient, the intentional or subjectively reckless nature of the tort. I have cited from Lord Steyn’ speech. Similarly, Lord Hutton (at page 227F) said that ‘dishonesty is a necessary ingredient of the tort, and it is clear from the authorities that in this context that dishonesty means acting in bad faith’. Lord Millett said (at page 235B/C) that the tort is an ‘intentional’ tort that ‘cannot be committed negligently or inadvertently’, and that ‘the core concept is abuse of power. This in turn involves other concepts, such as dishonesty, bad faith, and improper purpose. These expressions were often used interchangeably; in some contexts one will be more appropriate, in other contexts another. They are all subjective states of mind.’ He went on to emphasise that excessive power is not the same as abuse of power and that ‘even a deliberate excess of power is not necessarily an abuse of power’.”

[23] Those formulations do not discuss how a “public officer” is defined, and general authority on that point is not easy to find. That may well because, as I suggest later in this judgment, the answer in almost every case is obvious. However, Lloyds was able to point us to two relevant observation within the speeches in Three Rivers. At p 190H, Lord Steyn said that “the rationale of the tort is that in a legal system based on the rule of law executive or administrative power may only be exercised for the public good”, and Lord Hobhouse, at p 229A, that the tort concerned “the acts of those vested with governmental authority and the exercise of executive powers”. The Appellants were not able to show us anything that pointed away from this analysis, essentially in terms of those who exercise governmental power.

[24] The requirement that the subject of Misfeasance in Public Office should be a governmental body springs from the very nature of the tort. As Hale LJ pointed out in the passage cited above, the nature of the wrong is that a public official, who is given powers for public, governmental purposes, misuses them for a different purpose, conscious that in so doing he may injure the Claimant. Or, as the Manitoba Court of Appeal said when discussing this tort in Dershmann v Manitoba Vegetable Producers Marketing Board [1976] 69 DLR (3rd) 114 at p 123:

“Public bodies must not use their powers for purposes incompatible with the purposes envisaged by the statutes under which they derive such powers.”

[25] None of this guidance makes sense save in relation to bodies that have been given governmental powers, that is, the power to interfere with the way in which other citizens wish to conduct their affairs. That cannot possibly be said of a commercial operation like Lloyd’s, concerned with the internal commercial interests of its own members. To make that latter point good, it is necessary to look more closely at the nature and structure of the Lloyd’s Insurance Market, in the context of arguments advanced by the Appellants in an attempt to demonstrate that the nature of Lloyd’s allegedly regulatory operations indicates that Lloyd’s is indeed a public body.

The Relevant Characteristics Of Lloyd’s.

[26] The Appellants’ argument rested strongly on the contention that the powers enjoyed by the Council of Lloyds in relation to the affairs of its members, and the special position that Lloyd’s holds under the Insurance Companies Act, indicate that Lloyd’s is a regulator of at least the part of the insurance market occupied by Lloyd’s underwriting, and thus performs public functions such as to serve as at least a strong indicator that it is a public body in the sense relevant to Misfeasance in Public Office. That argument had several facets, and was not advanced in a wholly coherent fashion; a difficulty that will be mirrored in the description of and comment upon it that follows.

[27] First, it has to remembered that “Lloyd’s” is not an insurer at all. It is the Names who are the insurers. Second, therefore, if each such insurer were regulated in the same manner as a large insurance company, the public regulator would be faced with having, for instance, to satisfy himself of the solvency of huge numbers of separate insurers. That is why the detailed structure provided for Regulation of Insurance Companies in Pt II of the Insurance Companies Act 1974 does not apply to Lloyd’s underwriters. In its place, s 73 provides that an approved auditor will provide a certificate of solvency to the Committee of Lloyds and to the Secretary of State; and that each underwriter has to provide to the Committee information required for the statement of business that the Committee has to provide to the Secretary of State under s 74. The same provisions are repeated in ss 83 and 84 of the (consolidating) Insurance Companies Act 1982.

[28] Various conclusions follow from these arrangements. First, Mr Jenkins was minded to argue that before the creation of the Financial Services Authority (FSA) in 2000 there was no external regulation at all of the Lloyd’s market. That was plainly wrong. The provisions referred to above show that the market were responsible to and regulated by the Secretary of State, by a different and less onerous mechanism, but in principle just the same as were other insurers. The difference centres on the aggregate reporting of solvency, and some special rules, for instance about transfer of business, that reflect the fact that in some respects the Lloyd’s insurance market can be considered to be a single economic unit. It was thus in this context that Leggatt LJ said in R (Briggs) v Lloyd’s of London [1993] 1 Lloyd’s Rep 176 at p 185, [1993] COD 66 (a judicial review case, but illuminating for its general observations):

“Lloyd’s is not a public body which regulates the insurance market. As counsel remarked, the Department of Trade and Industry does that. Lloyd’s operates within one section of the market. Its powers are derived from a private act which does not extend to any persons in the insurance market other than those who wish to operate in the section of the market governed by Lloyd’s and who, in order to do so, have to commit themselves by entering into the uniform contract prescribed by Lloyd’s. In our judgment, neither the evidence nor the submissions in this case suggest that there is such a public law element about the relationship between Lloyds and the Names as places it within the public domain and so renders it susceptible to judicial review.”

[29] Second, it was argued that the provisions of s 6 of the Lloyd’s Act 1982, relating to the powers of the Council and of the Committee, showed some sort of public control by Lloyd’s, in particular in saying that:

“The Council shall have the management and superintendence of the affairs of the Society and the power to regulate and direct the business of insurance at Lloyd’s.”

[30] But the section goes on to say that in so doing the Council is exercising the powers of the Society: that is, that this is a convenient method of exercising powers of self?regulation. Self?regulation (which I did not understand to be questioned as the nature of Lloyd’s regulatory operations) is the very antithesis of regulation by a public authority.

[31] Third, it was suggested that the statutory immunity from suit of members of the Lloyd’s community, save in the case of bad faith (the provision which is the source of all the complaints in these present proceedings), is characteristic of a regulator, just as immunities are given in similar terms to the FSA and its staff by para 19 of Sch 1 to the Financial Services and Markets Act 2000. But the latter and similar immunities are conferred in respect of all of the activities of the regulator. The Lloyd’s statutory immunity is conferred only in relation to Lloyd’s dealings with its own members. It has no immunity with regard to suits by members of the public, in particular policyholders, as might be expected if in truth Lloyds or the Council was a public regulator.

[32] None of this derogates from the fact that there is a public interest in the Lloyd’s insurance market being properly regulated. But that interest does not make Lloyd’s the regulator, and much less does it make Lloyd’s a public body.

[33] I can sum up this point by saying that, in my respectful view, the position of Lloyd’s in the context of claims that it is a public body was accurately stated by this court in R (West) v Lloyd’s of London [2004] EWCA Civ 506, [2004] 2 All ER (Comm) 1, [2004] 3 All ER 251. At para 7 of the judgment, Brooke LJ said that Lloyd’s had long been subject to external regulation, instancing the 1982 Act, and then pointed out that since 2000 a more extensive regime had been provided by the FSA. The events with which we are concerned took place before 2000, but as Mr Foxton QC commented the status of Lloyd’s as a public body could not have altered just because of a change in the intensity of the arrangements for external regulation.

[34] Then, at paras 38 and 39 of the report, Brooke LJ dealt with the allegedly “public” nature of Lloyd’s:

“The objectives of Lloyd’s are wholly commercial. The nature of Lloyd’s is not governmental, even in the broad sense of that expression . . . . It is the FSA which performs governmental functions in these matters, not Lloyd’s. The fact that Lloyd’s regulates its members’ activities in the way it does as a result, in part, of its desire to avoid a more intrusive governmental regulatory regime cannot possibly convert it into a body exercising public functions itself within the meaning of the Strasbourg case law.”

Or, I would respectfully add, at all.

[35] It is in my view impossible for the Appellants to get round these observations which, with deference, have the additional merit of stating no more than the reality of the obvious. The structure and operations of Lloyd’s, and the management of the affairs of Lloyd’s, is an exercise in commerce, not an exercise in government, however that latter expression is understood. When the Appellants decided to become insurers in the Lloyds market, I imagine that the last thing that they thought was that either the people with whom they were dealing or the organisation of which they were all a part were some sort of governmental or executive authority, on a par with the Bank of England or Swansea City Council. That does not of course mean that the Names were not owed some obligations, not merely moral but also legal. But those obligation were not those of a public officer, such as to found a claim for Misfeasance in Public Office.

[36] Two further aspects of the argument must be briefly mentioned.

Judicial Review.

[37] Various attempts have been made to bring judicial review proceedings against Lloyd’s by members of the Society. All of them have failed on jurisdictional grounds, Lloyd’s being held not to be a public body for judicial review purposes. Lloyd’s naturally relied strongly on this stream of authority. I would, however, hesitate to assume that this authority can be read directly across into our present enquiry, and the judge did not so hold. Apart from anything else, Misfeasance in Public Office is a tort in private law, where the nature of the Defendant is an element in the definition of liability; whereas in judicial review the nature of the Defendant is an element in the jurisdiction of the public law court.

[38] However, that said, in the course of considering these judicial review applications the courts have made observations about the nature of Lloyd’s, its operations and responsibility, that throw directly relevant light upon whether Lloyd’s can truly be said to exercise public or governmental responsibilities. I have already cited from Briggs and from West. The persuasive relevance of those observations to our enquiry is not reduced by their having been made in judicial review cases.

Acts Of Public Authorities Under S 6(3)(B) Of The Human Rights Act.

[39] I mention this possible source of illumination of the concept of public office in the tort of Misfeasance in Public Office only to dismiss it. Section 6(3)(b) says that in s 6 “‘Public authority’ includes any person certain of whose functions are functions of a public nature.”

[40] Section 6 serves the instrumental purpose of introducing into the protection afforded to Convention rights by English domestic law the full range of recourse that the subject might enjoy against the national government if impleaded before the European Court of Human Rights. That is an entirely different exercise from the creation of liability by the imposition of private law tortious obligations. And that Lloyd’s is not a public authority under s 6 was, as we have seen, expressly confirmed by this court in West.

[41] For those reasons, it manifestly does not follow, as the Appellants argued at one point, that because a public authority under s 6 can include a body some, only, of whose functions are of a public nature, therefore it does not affect the status of Lloyd’s as a public officer that some of its functions are on no view public. Section 6 is irrelevant to the issue before us because, by contrast to the enquiry that is required by s 6, whether a body is a public officer under the tort of Misfeasance in Public Office turns on what that body is, and not on what it happens for the moment to be doing. As Lord Steyn put it at p 191B of the report in Three Rivers, it is the office in a relatively wide sense on which everything depends. He approved an observation of Slade LJ in Jones v Swansea City Council [1989] 3 All ER 162, [1990] 1 WLR 54 at p 71. “It is not the juridical nature of the relevant power but the nature of the Council’ office which is the important consideration.”

Conclusion As To Misfeasance In Public Office.

[42] The claim that Lloyds is a public officer for the purpose of this tort fails, as it failed before Andrew Smith J. That is the end of these appeals, but in deference to the elaborate argument that we have received on the other issues, and the importance of those matters not only to the Appellants but also to Lloyd’s, I go on to consider, albeit obiter, the other points argued before Andrew Smith J and ourselves.



[43] The statement of the elements of the tort correctly drawn by the judge from Three Rivers and repeated above emphasises that the public officer must act dishonestly or in bad faith in relation to the legality of his actions. That immediately presents a serious problem for the Appellants, because in the TFP proceedings this court found that, in making the representations there complained of, Lloyd’s had not acted dishonestly. That difficulty was sought to be avoided by an argument foreshadowed in the Lowe applications before the judge, and taken up before us as the central part of the Appellants’ case.

[44] It will be recalled that Lord Steyn said at p 193C of his speech in Three Rivers that the requirements of the tort were satisfied if the public officer acted with reckless indifference to the illegality of his act. In para 108, as set out above, Andrew Smith J described how the Lowe Applicants claimed that Lloyd’s had been recklessly indifferent as to whether it was acting within its (allegedly public law) powers because it had given no thought as to whether its powers were indeed public powers. The judge explained why that was not a sufficient state of mind to meet the requirements of the tort. Nothing daunted, before us the Henderson Appellants took up that theme. In particular, it was said in para 28(b) of the skeleton before this court:

“The CA in Jaffray decided that (a) the representations were false but (b) Lloyd’s failed to realise this when it was responsible for ensuring an adequate system was in place to protect members and policyholders. It is contended that Lloyd’s failure in this regard, that’s, its failure to maintain a working accounting and auditing system, if correctly characterised as recklessly indifferent, is sufficient to make out bad faith.”

[45] That appears to be a submission that the conclusion in Jaffray that Lloyd’s did not know that its representations as to the accounting system were false is irrelevant in establishing bad faith for the purposes of Misfeasance in Public Office, because the culpable nature of Lloyd’s lack of knowledge shows reckless indifference. In oral argument Mr Jenkins went even further, saying that Lloyd’s honest state of mind in making the representations, as found in Jaffray, was in fact symptomatic of Lloyd’s reckless disregard of its obligations to maintain proper working systems: because a person who had properly performed his obligation to regulate the market could not honestly made the representations found by the Court of Appeal to have been made by Lloyd’s.

[46] These submissions are fatally flawed because they plainly misstate the findings in Three Rivers on which they rely. The whole thrust of that case was that knowledge of, or subjective recklessness as to, the lawfulness of the public officer’ acts and the consequences of them is necessary to establish the tort. That is clear from the whole of the exposition in Three Rivers, and very precisely from Lord Steyn’ discussion of the meaning of “recklessness” in this context at pp 192G?193C of his speech. Lloyd’s could only have been recklessly indifferent in that sense to its failure to maintain working accounting and auditing systems if it knew or suspected that the systems were defective. But if it knew or suspected that, it must have acted dishonestly in making the representations about the systems that were in issue in the TFP trial. As this court said, at para 481 of its judgment in the TFP issue:

“The Names have failed to show to the necessary high standard that those at the centre of Lloyd’s did not believe throughout either that there was in place a rigorous system of auditing which involved the making of a reasonable estimate of outstanding liabilities, including unknown and un-noted losses, or that they at any stage knew or were reckless as to whether the representations in the brochures were untrue.”
[47] That the case is now put on reckless indifference, as that concept is understood by the Appellants, rather than on the subjective recklessness that is an essential element of Misfeasance in Public Office, is further very clearly demonstrated by para 141 of Pleading II, headed “Lloyds reckless indifference”. That paragraph also dealt with Lloyd’s (objective) failure to appreciate what, for the reasons already stated, is not the case, that it has the status of a public officer for the purposes of Misfeasance in Public Office. However, para 141 also set out the proposed case on Lloyd’s state of mind in relation to the accounting systems:

“Lloyd’s failed to ensure that it had in place rigorous systems of accounting and auditing in circumstances where the importance of such systems was known to be crucial and where grave reservations about their proper functioning were being expressed. That Lloyd’s failed to realise this, for example by testing the accuracy of the systems, is a further instance of its gross failure in this regard and its willingness to turn a blind eye to systematic defects affecting the solvency of members and the LIM (London Insurance Market) as a whole. Further, not only did Lloyd’s fail to realise it was unable properly to certify as to the solvency of the LIM, but it represented otherwise to existing and prospective Names.”
[48] That formulation, resting as it does on failure by Lloyd’s to realise what it should have realised, speaks entirely the language of objective, not of subjective, fault. The only possible departure from that position is the reference to the turning of a blind eye. But that formulation, quite apart from being far too loosely expressed to found an allegation of fraud, only indicates subjective fault if the person with the blind eye knows what he would see were he to look: which the rest of the pleading assumes Lloyd’s did not know.

[49] In this analysis I leave aside the further difficulty that if a case on subjectively reckless failure to act were to be made good, it would have to be demonstrated who took the decisions not to act, and with what knowledge. Nothing in those terms has been demonstrated, or sought to be demonstrated, even with the assistance of the proposed fresh evidence. That is no doubt why the case falls back on objective recklessness, which could be demonstrated by inference: but such demonstration is not enough for the tort of Misfeasances in Public Office.

[50] The Henderson Applicants therefore necessarily fail on this point. There is a second way in which deceit is alleged, that applies only in the case of the Lowe Applicants. They complain of a failure by Lloyd’s to protect them from losses incurred in relation to the underwriting years in 1993 and 1994. Those losses were caused by what was known as the LMX spiral: put shortly, involving the transfer of loss?making business to reinsurers. In Sphere Drake Insurance v Euro International [2003] EWHC 1636 (Comm), [2003] Lloyd’s Rep IR 525, Thomas J found that a different spiral, the PA spiral, had been created deliberately by underwriters in order fraudulently to transfer loss?making business. The Lowe Applicants’ case was based on a claim that the LMX spiral was the same or similar to the PA spiral, and that Lloyd’s was responsible for failure to prevent the loss by regulation in the former case as, it was alleged, it had failed in the latter case.

[51] Andrew Smith J went into this case in considerable detail in paras 97?112 of his judgment, and demonstrated a very large number of objections to it. Nothing said to us suggested that he was wrong, but since the case fails in any event on the Misfeasance in Public Office point it would be an undue use of resources to examine that matter further.


[52] This issue arises in the Henderson and Stockwell applications, but not in the Lowe application. The requirement that the Appellants have to satisfy is that in CPR 17.4(2):

“The new claim arises out of the same facts or substantially the same facts as the claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.”

[53] Before us, it was argued that a new claim sufficiently “arises out of” the same facts as an existing claim if there is a sufficient nexus between the old and the new claim, in the sense that some or a substantial part of the facts relied on to promote the new claim were relied on to promote the old claim. That takes far too broad an approach to the rule, which it effectively rewrites. The new claim does not arise out of the facts on which the old claim was based if, in order to prove it, new facts have to be added. That is why this court has said that the basic test is whether the plea introduces new facts: Goode v Martin [2001] EWCA Civ 1899, [2002] 1 All ER 620, [2002] 1 WLR 1828 at para 42.

[54] The additional possibility that the new facts are substantially the same as those already relied on is limited to:

“. . . something going no further than minor differences likely to be the subject of enquiry but not involving any major investigation and/or differences merely collateral to the main substance of the new claim, proof of which would not necessarily be essential to its success: P&O Nedlloyd BV v Arab Metals Co [2005] 1 WLR 3733 at paragraph 43, per Colman J.”

[55] Mr Jenkins said that the approach that he urged was justified by the application of art 6 of the European Convention of Human Rights, to which reference has been made in Goode v Martin. But that jurisprudence was relied on in that case only to avoid what on any view was an extremely pedantic interpretation of the wording of the rule. If it had been intended to recognise a licence to rewrite the rule, the court in Goode v Martin would not have expressed itself in the limited terms set out above.

[56] The judge in his para 53 set out, from Pleading I, a formidable list of new lines of enquiry, over and above those standing in the pleadings before Cresswell J, that were part of the MPO claim. Before us, no sensible attempt was made to dislodge that objection, the case rather being put on the approach to the basic requirements of the rule already described. More generally, the allegation of Misfeasance in Public Office necessarily relies on detailed factual material about events at Lloyd’s that was not in issue in relation to the claim in deceit. I quite accept that Cresswell J’s judgment sets out a good deal of background material about Lloyd’s, but, first, those were not facts “in respect of which” (in the terms of CPR 17.4(2)) the deceit remedy was claimed; and, second, and in any event, the facts required for the way in which the Misfeasance in Public Office claim was put go well beyond those deployed by Cresswell J.

[57] As the judge said in para 64 of his judgment:

“A claim for Misfeasance in Public Office would raise another issue about the state of mind of those at Lloyd’s. It is a requirement of the tort that the public officer acts in the knowledge that his act will probably injure the Claimant or persons in the class of the Claimant and this is not an element of the tort of deceit.”

[58] I should also add this. Mr Jenkins properly drew our attention to the judgment in Laws v Lloyd’s [2003] EWCA Civ 1887, where in commenting on comparison between the old and the new claims required by CPR 17.4 under the rubric of “substantially the same facts” this court said, at its para 52:

“The balancing exercise was very much a matter for the judge and, in our view, this court should not interfere with his conclusion unless he erred in principle or was plainly wrong. We should not simply substitute our view for his, even if we would have reached a different conclusion if sitting at first instance.”

[59] The Appellants’ argument did ask us to come to a different conclusion from that of Andrew Smith J. Far from holding that he erred in principle or was plainly wrong, I would hold that he was plainly right: but in any event this court cannot interfere.

[60] The Henderson and Stockwell applications therefore fail for the additional and further reason that the claim for Misfeasance in Public Office is barred on grounds of limitation.

[61] We should also note that the limitation problem impacts on the issue of bad faith, already discussed. For the Appellants to establish subjective reckless indifference on the part of Lloyds, it is inescapable that they would have to adduce and rely on a very wide range of facts and allegations that went far beyond the matters relied on for the allegation of bad faith that failed in the TFP proceedings. Andrew Smith J forcefully explained, in his para 79, the dilemma in which that places the Appellants. Either the allegations of bad faith in relation to the tort of Misfeasance in Public Office are based on the same acts as those relied on for the original deceit claim, in which case there is an un-appealable finding of this court that those acts were not done dishonestly; or the allegations are different from those made in support of the deceit claim, in which case the pleading falls foul of CPR 17.4(2). I see no answer to that objection.


[62] I have alluded above to the first ground on which the judge rejected the application to amend as a matter of discretion.

[63] As to his second conclusion under this head, I have no doubt that, quite apart from any of the matters so far set out in this judgment, the attempt to introduce Misfeasance in Public Office into the case at this stage is an abuse of process. In para 14 of his judgment Andrew Smith J explained how as early as 1997 leading counsel for the Names (including all of the UNO Appellants) indicated that the pleading of Misfeasance in Public Office was under consideration. That step was not taken, even when, as Andrew Smith J explained in his paras 18 and 19, it was made clear that the structure of the enormously expensive TFP proceedings had been set up in order to deal at one time with all of the allegations of fraud sought to be brought against Lloyd’s. It is a plain abuse to come back to court now, after having gone unsuccessfully through the whole of the TFP trial and appeal, with a new claim that it was decided ten years ago not to plead.

[64] That a conscious decision was taken not to plead Misfeasance in Public Office is not just a matter of inference. When explaining that the Misfeasance in Public Office claim satisfies the requirements of CPR 17.4(2), because it addresses the same facts as the deceit claim, para 25(a) of the Appellants’ skeleton before this court says:

“The claim for fraudulent misrepresentation was simply the specific vehicle chosen at the time (principally for case management purposes) to make Lloyd’s account for one aspect of its mismanagement and failure to regulate the LIM.”
Having made that choice, the Appellants cannot go back on it ten years later.

[65] On the case as presented to Andrew Smith J, the Appellants fail on all issues. I now consider whether that conclusion should be disturbed in the light of the fresh evidence sought to be adduced under CPR 52.11(2) and the jurisprudence of Ladd v Marshall.


The Evidence.

[66] The application is to adduce new evidence from eleven witnesses: Messrs Attwood; Hay-Davison; Davidge; Jackman; Jervis; Kingsley; Mason; Merrett; Sinclair; Smallbone and Sturge. To that is added various exhibits, principally a very large number of documents produced by Mr Merrett. It was agreed before us that the application had broadly to meet the criteria originally laid down in Ladd v Marshall [1954] 3 All ER 745, [1954] 1 WLR 1489. I deal with those requirements in turn.

Could The Evidence Have Been Obtained With Reasonable Diligence Before The Hearing Below?

[67] For this, the Appellants rely on a statement of their solicitor, Mr Freeman, made on 25 October 2006. That statement was quite inadequate to meet the requirements of the rule. It mainly concentrated on the delays between the completion of the statements and their filing in court, rather than on why the evidence had not been obtained for the hearing before Andrew Smith J or, for that matter, for the trial before Cresswell J. There are significant difficulties about all of the evidence in that latter respect, none of which are satisfactorily explained and some of which are inexplicable. I deal with the witnesses in turn.

[68] Messrs Kingsley, Smallbone and Sturge all gave evidence in the trial before Cresswell J. They were therefore also available to give the evidence that they now want to give, if anyone advising the Appellants had thought before now that such evidence was relevant. Mr Hay-Davison produced a long statement that was put before Andrew Smith J. Either the evidence that he now wants to give was contained in that statement, in which case it is not new evidence; or it was omitted from that statement. I deal below with the attempt to explain that omission.

[69] Messrs Attwood, Jackman, Jervis and Mason offer evidence of an expert or quasi?expert nature. All of them, except for Mr Jervis, gave evidence on behalf of these Claimants or some of them either in Henderson v Merrett [1997] LRLR 265 or in Poole v HM Treasury [2006] EWHC 2731 (Comm), [2007] 1 All ER (Comm) 255, [2007] 1 Lloyd’s Rep IR 114. Quite apart from there being no suggestion that these four witnesses have expertise that no other expert could offer, there is no suggestion at all that they were not individually known of by the Claimants.

[70] Messrs Davidge and Sinclair were prominent members of the Lloyds Council, whose existence and ability, if there was such, to support the Appellants’ case must have been know to the Appellants’ advisers for many years.

[71] The explanation for these delays that was given before us was as follows. The trial before Cresswell J was understood to be limited to misrepresentation without accounting for long?term asbestos liability. However, the Court of Appeal when giving judgment found a wider representation, as summarised in its para 587(i):

“There was a representation in the 1981 brochure that there was in place a rigorous system of auditing which involved the making of a reasonable estimate of outstanding liabilities including unknown and unnoted losses.”

[72] Mr Hay-Davison, who was the catalyst for the recruitment of the other witnesses, had believed that he had nothing to contribute to the TFP trial, because he was not expert in asbestos insurance. Once it was appreciated that the representation found was not limited to accounting for asbestos losses, he and others appreciated for the first time that they could give evidence showing that representation to have been false.

[73] This explanation of the delay is hopeless. To start with, as the pleadings that we were shown demonstrated the case before Cresswell J was in terms of the failures of the accounting system generally. That failure in relation to asbestos was merely seen by the Claimants as the most graphic illustration of what was wrong. So the premise on which the argument is based is unsound. But there are two other, and conclusive, reasons why this evidence cannot be adduced.

[74] First, the reason given in oral argument why Mr Hay-Davison, and thus the others, did not come forward timeously is quite different from the reason given in the application. In para 4 of his statement, Mr Freeman says:

“As [Mr Hay-Davison] explains in his statement, he had expressly declined to be a witness or to provide Names with any assistance in the Jaffray proceedings, at the instigation of Lloyd’s solicitors, Freshfields. He was led to believe that he did not have relevant knowledge. It was only many years later in the context of the MPO application the Names made at the High Court in Henderson, subsequent to the Court of Appeal decision in 2002, that Mr Hay-Davison felt he had material evidence, based on his regulatory experience, that should be used to assist the court.”
[75] Accordingly, it was not the alleged change in the nature of the representation that caused Mr Hay-Davison to think that he had relevant evidence. Rather, once Misfeasance in Public Office had been pleaded, he thought that his regulatory experience would assist in what was now a case about a regulator. That experience was available to the Claimants years earlier, had it been thought by them to be relevant to the case until they sought to introduce Misfeasance in Public Office into it.

[76] Second, as Moore?Bick LJ pointed out in the course of argument, even if it were true that the decision of the Court of Appeal changed everything, that decision was made in 2002. The new evidence could have been assembled then, well before the hearing before Andrew Smith J, and not held back until the end of 2006. There was no answer to that objection.

[77] Finally, on this part of the case, a further requirement is that the evidence, once obtained, should be put before the court promptly. The statements sought to be adduced were signed on various dates between September 2005 and May 2006, but as we have seen were not filed until three days before the hearing in October 2006. No explanation was given for that delay.

[78] Mr Merrett falls into a different category. Mr Freeman describes how he came across Mr Merrett in July 2006 and subsequently learned that he would be willing to assist the Claimants in this appeal. The reason why it had never occurred to anyone to approach Mr Merrett earlier was because (Mr Freeman, para 10) Mr Merrett was very much part of the “Lloyd’s establishment”. But a much more real reason is that Mr Merrett is one of the 33 members of the Lloyd’s establishment against whom allegations of fraud were made in the present proceedings, allegations that are indeed repeated in para 211 of Pleading I. That obviously presents the Appellants with a significant difficulty in seeking nonetheless to adduce evidence from Mr Merrett. However, it is not necessary to explore that point further, because there are other reasons, applying to Mr Merrett as to the other proposed witnesses, why the Ladd v Marshall requirements are not met.

Would The Evidence Have An Important Effect On The Result Of The Case?

[79] First, does any of the evidence improve the Appellants’ position on the central issue of whether Lloyd’s is a public officer? The answer to that is a plain negative. The only respect in which the evidence touches upon that question is a statement by Mr Hay-Davison that, when working at Lloyd’s as the representative of the Governor of the Bank of England, he saw his role as one of performing a public office. Two comments must be made. First, what Mr Hay-Davison’ status was or was seen by him as being has nothing, or at least very little, to do with what Lloyd’s status was. Indeed, the fact that Mr Hay-Davison was inserted by the governer would seem to indicate that if anyone was publicly responsible for Lloyd’s it was not Lloyd’s itself. Secondly, and most importantly, if Mr Hay-Davison is seeking by his reference to “public office” to give evidence about the legal meaning of that term, that is simply inadmissible evidence on a matter of law.

[80] Secondly, the form of the rest of the evidence is unsatisfactory in that it largely does not relate to the witnesses’ own experience, but makes comments and draws inferences from events or materials produced by others. A lot of it is therefore quasi?expert evidence, for which no permission has been given, nor is likely to be given. Even in regard to Mr Merrett, counsel in the Taylor v Lawrence application, faced with the inadmissibility of much of Mr Merrett’ statement, was reduced to saying that he also should be looked on as if he were an expert. That criticism does not apply to the documents sought to be relied on, but those, and such of the affidavit material as might be admissible on ordinary principles, present a further difficulty for the Appellants.

[81] Third, then, the subject matter of the evidence presents the Appellants with an impossible dilemma. There is no doubt that a prime motive behind the adduction of the evidence was to undermine the findings of Cresswell J and of this court in the deceit claim. Mr Freeman said as much in para 23 of his statement:

“The evidence would appear to me to be reasonably credible, backed by documentation, and had it been adduced at the trial in my view would have had a significant effect on the court’ approach to the other evidence and its ultimate conclusions on the ‘knowledge’ issue in particular.”

[82] But this court cannot now revisit those ultimate conclusions. That could only be done if the decision of this court were re?opened under the jurisprudence of Taylor v Lawrence. And it was that very exercise that was unsuccessfully attempted, relying on the same evidence as is before us in this application, in the proceedings mentioned above. However, on the other side of that coin, to the extent that the evidence is admissible and addresses matters different from those before Cresswell J, it merely reinforces the objection that the claim is new, and out of time.

Conclusion As To The Application To Adduce Fresh Evidence.

[83] I have gone through the requirements for the adduction of fresh evidence in some detail in order to demonstrate that even if there were no other objection to it the present application comes nowhere near to meeting those requirements. But, in addition, this application is plainly abusive, and seriously so. It is intolerable that at this late stage of proceedings that have been on foot for some eleven years a huge amount of material that does not improve the case at all should be imposed on the court and on the opposite party.

[84] The application to adduce fresh evidence is dismissed.


I agree.


I also agree.

Application dismissed.