Hallam-Eames and Others v Merrett Syndicates Limited and Others

Queen's Bench Division

(Transcript:Beverley Nunnery & Co)

HEARING-DATES: 14 October 1994

14 October 1994

B Doctor for the Plaintiffs; J Rowland for the Managing Agents Defendants; R Toulson QC and C Edelman for the Members' Agents Defendants; C Clarke QC and M Howard for the Auditors Ernst and Whinney

PANEL: Gatehouse J


GATEHOUSE J: These actions involving the Merrett Defendants concern actions brought by Names at Lloyd's who participated in Marine Syndicate 418 and its incidental non-marine Syndicate 417 on the 1985 year of account which remains open. There are, essentially, three groups of actions in the litigation. They may be summarised as follows:

(a) Those Names who were members of Syndicates 418/417 for the 1985 year of account but who had first joined the Syndicate in the 1983 year of account or some earlier year. These plaintiffs claim essentially in respect of two broad areas of alleged negligence:

(i) The writing of a number of "run-off" contracts by Syndicates 418/417 in the period 1978 to 1983; and

(ii) The effecting of the reinsurance to close of the 1979 to 1984 underwriting years of account inclusive.

There are a number of writs issued by these Names, the first in time was a writ issued on 27th January 1993, the first named plaintiff being Mr Alder. However, this group of actions is known as the "Hallam-Eames" action (or the "Early Joiners" action).

(b) Those Names who first joined the Syndicates for the 1984 underwriting year of account. Their claim is essentially based on the alleged negligent closure of the 1983 year of account into the 1984 year of account and subsequently the 1984 year of account into the 1985 year of account. There are again several writs involved in these actions, the writs being issued in the Spring of 1992. The first named plaintiff in these actions was Mr Henderson and the actions are known collectively as the "Henderson" action.

(c) Those Names who first joined the Syndicate for the 1985 year of account and whose complaint concerns the alleged negligent closure of the 1984 year of account into the 1985 year of account. The writs in these actions were issued in the Spring of 1993 with the first named plaintiff being Elise Hughes. These are known collectively as the "Hughes" action.

The present applications are concerned only with the Hallam-Eames action.

The Hallam-Eames Names claim in both contract and in tort against the managing agent and active underwriter of the Syndicates (the Merrett defendants), against their Members' Agents (where different) and against the Syndicate auditors (Ernst & Whinney).

Prior to 1st January 1986 Merrett Syndicates Ltd acted as both a managing and Members' Agent at Lloyd's. On 1st January 1986 Merrett Underwriting Agencies Management Ltd assumed the management of the Syndicates, and Merrett Syndicates Ltd became purely a Members' Agent. Names who participated on Syndicates 418/417 prior to 1st January 1986 who appointed Merrett Syndicates Ltd as both their Members' and managing agent were "direct" Names and advance their claims against Merrett Syndicates Ltd in both contract and in tort. Names who participated in the Syndicates through a different Members' Agent were "indirect" Names and advance their case against Merrett Syndicates Ltd (as a managing agent) and Merrett Underwriting Agencies Management in tort. All Names advance a claim in tort against Mr Merrett personally (as the active underwriter) but not in contract.

All three groups of actions are due for trial (on issues other than quantum) in March 1995. The present estimate for that hearing is 20 Commercial Court weeks.

One of the central issues in the Hallam-Eames action is the question of limitation of action. All the defendants in the Hallam-Eames action have pleaded limitation defences to all the claims made by those Names. No such limitation defences arise in either the Henderson or Hughes actions. (Note: there are small numbers of Names in the Hallam-Eames action who appear to have joined the Syndicates for the first time in either 1984 or 1985. As against those who joined in 1985 there is no limitation defence available. Those Names in fact have no cause of action against the defendants for any other claim than the closure of the 1984 year of account, and there is no limitation plea raised in respect of that claim. It is assumed that these Names were intended to be in the Hughes action.)

The Hallam-Eames Names in turn rely on section 14A of the Limitation Act 1980 (Latent Damage) and section 32(1)(b) of the same Act (deliberate concealment) to overcome the limitation defences.

All the defendants now seek to have determined by way of O 14A or by way of a preliminary issue pursuant to O 33, r 3 the question of whether or not the limitation period provided for by section 14A of the Limitation Act had also expired at the date when the first of the Hallam-Eames writs was issued (27th January 1993) and whether, in consequence, the claims advanced by the Hallam-Eames Names are statute-barred pursuant to section 14(3) of the Limitation Act 1980 on the basis that those Names had received (either actually or by their Members' Agent having received) certain documents from the defendants (primarily the relevant underwriting accounts for the Syndicates and some limited correspondence).

The Names' case in respect of the run-off contracts and the RITCs is set out at paras 8, 9 and 10 of their amended points of claim. So far as the run-off contracts are concerned, the Names complain about the writing of 11 policies from 1978 to 1983 (the last of these contracts was written in December 1982 but not signed through LPSO until January 1983). So far as the closure of years is concerned, each of the reinsurances to close from the 1979 year of account through to the 1984 year of account is criticised. The 1979 year of account was closed by way of the RITC in or about May 1982. The last year to be closed, the 1984 year of account, was closed by way of the RITC into the 1985 year of account in or about May 1987.

The Merrett defendants' plea of limitation in respect of these causes of action is to be found at para 55 of its points of defence. The plea of limitation extends to all of the run-off contracts, the last of which was written on 29th December 1982. The six year primary limitation period expired in respect of the last contract on 29th December 1988. The plea of limitation in respect of the RITCs encompasses each of the RITCs from 1979 year of account to 1983 year of account. The RITC of the 1983 year of account into the 1984 year of account was effected no later than 2nd June 1986, the primary six year period ending on or before 2nd June 1992. One further reinsurance to close was effected, the 1984 year of account being closed into the 1985 year of account in or about May 1987, and the limitation period in respect of that closure had not elapsed prior to the issue of the Hallam-Eames writs. However, save for those Names who first joined the Syndicate in 1985 (referred to above) the Hallam-Eames action concerns those who joined the Syndicate for some earlier year of account. The RITC of the 1984 year of account into the 1985 year of account caused no loss or damage to these early joiners save insofar as they increased their percentage share of the allocated capacity of the Syndicates for the 1985 year of account. To date no Name has alleged any such increased share. Accordingly, the last effective reinsurance to close which could have caused any loss to these Names is the reinsurance to close the 1983 year of account into the 1984 year of account which was effected on or before 2nd June 1986.

Similar pleas of limitation are to be found in the Members' Agents points of defence at para 12 and the Ernst & Whinney points of defence at para 83.

Save for those Names who first participated in the Syndicates for the 1985 year of account, all the Hallam-Eames Names are prima facie statute-barred from pursuing their claims.

The Names rely, in particular, upon an extension to the primary limitation period either pursuant to section 14A of the Limitation Act or pursuant to section 32(1)(b) of the Limitation Act. The Names' case is set forth in their points of reply at para 5 (latent damage) and 7 (concealed fraud) of their points of reply.

The plaintiffs object to the summonses both on the merits and because they say the matters are not suitable for decision at this stage either under O 14A or O 33(3) of the Rules of the Supreme Court. They say the questions of limitation should be decided only at trial and in the light of all the evidence then given. I do not agree with this procedural objection for reasons which I will develop later and meanwhile I turn to the substance of the matter.

There are certain central points which are not, I think, in issue:

1. Where a defendant pleads the statute, the onus lies upon the plaintiff in the first place to plead, presumably in his reply, and prove the necessary facts which show that his action is not time-barred. See London Congregational Union v Harris & Harris [1988] 1 All ER 15 280 EG 1342.

2. The causes of action arose or accrued at the time when each of the run-off contracts and RITCs were respectively entered into. See Iron Trades Mutual Insurance Co Ltd v Buckenham [1990] 1 All ER 808, and Islander Trucking Ltd v Hogg Robinson and Gardner Mountain (Marine) Ltd in the same reports at p 826. It was at that moment that each of the Names became exposed to the risks which have since materialised and continued to materialise. This is the result of the underwriting agent entering into the contracts which it is alleged should never have been entered into. See also Moore v Ferrier [1988] 1 All ER 400, [1988] 1 WLR 267.

It is true that in the separate points of reply to each of the points of defence of the underwriting agents, the Members' Agents and the auditors, a formal denial is pleaded that the causes of action did so arise. But no alternative is put forward, nor was any suggested by Mr Doctor for the plaintiffs in the course of his very full argument. There seems to be no logical alternative and the date of contracting is in line with the decisions referred to above.

Furthermore, it is worth noting that in Sheldon v RHM Outhwaite Underwriting Agencies Ltd (to which I refer subsequently) a case involving similar facts, it seems to have been accepted by the parties and by Saville J that the causes of action arose on the writing of the run-off contracts. See, for example, the report in [1994] 4 All ER 481, [1994] 1 WLR 754 at pp 755E and G of the latter report, where the learned judge said:

"[The] central allegation is that the managers of those syndicates failed properly to perform their responsibilities in regard to the writing and reinsuring of a number of 'run-off' contracts in 1981 and 1982."

Then later, at letter G:

"The submission made by the defendants is that section 32 of the Act only applies to a deliberate concealment that occurs at the time when the claimant's cause of action arises and not to any later concealment. In the present case it is common ground that some at least of the plaintiffs' pleaded rights of action arose before the end of 1982, whereas the facts and matters alleged by the plaintiffs to amount to deliberate concealment all occurred after the beginning of 1984."

Of course this is not an authority because the point was common ground but if any date later than the making of the contract was arguable, it is at least surprising that the experienced counsel concerned did not so contend, for it would presumably have been crucial to their whole argument on section 32. The learned judge accepted this common ground, so did the Court of Appeal. See later.

It follows that the primary limitation period of 6 years has long since expired in respect of all the run-off contracts and all the RITCs except the last one, the closure of the 1984 year of account into the 1985 year. So far as the causes of action are founded on contract, all these claims are statute-barred; there is no provision for extension of the primary period. All claims founded on tort will similarly be barred, apart from the closure of 1984 into 1985, unless the Names can bring themselves within the requirements of section 14A of the 1980 Act, the three year period introduced by the Latent Damage Act 1986 or section 32(1)(b) of the 1980 Act, the subsection providing for the postponement of the limitation period in the case of deliberate concealment.

The arguments before me were directed almost entirely to section 14A but I need to refer to section 32(1)(b) in order to dispose of it. By their reply the Names plead deliberate concealment but the allegations are all of facts occurring long after the impugned causes of action had accrued. When Sheldon v Outhwaite [1994] 4 All ER 481, [1994] 1 WLR 754 went to the Court of Appeal, it was held, reversing the judge below, that where the concealment complained of occurred after the cause of action arose, section 32(1)(b) has no application. The decision was on 30th June 1994 and is, I think, so far unreported but a transcript is included in the defendants' authorities bundle. There was a short dissenting judgment from Staughton LJ. I am told that leave has been given for a further appeal but no one seems to know of its progress. In any case, I think I have to apply the law as it now stands, which means that section 32 is of no assistance to the plaintiffs.

Section 14A. There is no direct authority on the central issue of what is the "starting date" referred to in subsection (4)(b) and subsection (5), which in turn refers to "the knowledge required for bringing an action for damages in respect of the relevant damage". This is defined in subsection (6).

But in all material respects the new section 14A mirrors the provisions of sections 11 and 14 which apply to personal injury actions. The Court of Appeal has recently had to consider these two sections in Dobbie v Medway Health Authority [1994] 4 All ER 450, [1994] 1 WLR 1234. In my view, their reasoning must apply to section 14A in the present case. The judgments in Dobbie make it plain that the date on which the three year extended limitation period began to run against the plaintiff was the date on which she first had knowledge (1) of the personal injury on which the claim was founded, in that case the surgical removal of the plaintiff's breast, and (2) that the injury was "significant" within the definition in section 14(2) which was obvious in that case, and (3) that the injury was wholly or partly attributable, that is to say capable of being attributed to the act or omission which is alleged to constitute negligence.

Two further facts set out in section 14(1) paras (c) and (d) had to be known to the plaintiff but these were not in issue. Knowledge that any acts or omissions did or did not as a matter of law involve negligence is irrelevant.

The ratio of that decision is plain from all three judgments and in particular that of the Master of the Rolls at pp 1240 and 1243 of the latter report, and that of Lord Justice Steyn at pp 1246-7 of the latter report. At p 1240 of the latter report the Master of the Rolls said:

"The effect of sections 11(4)(b) and 14(1)(a) is to postpone the running of time until the claimant has knowledge of the personal injury on which he seeks to found his claim. That is 'the injury in question'. The word 'knowledge' should be given its natural meaning (Davis v Ministry of Defence . . .

"The test is not in my judgment hard to apply. It involves ascertaining the personal injury on which the claim is founded and asking when the claimant knew of it."

He deals with examples in the case of personal injury.

"Time does not begin to run against a claimant until he knows that the personal injury on which he founds his claim is significant within the definition in section 14(2). That gives rise to no issue in this appeal."

At letter G, the Master of the Rolls continues:

"Time starts to run against the claimant when he knows that the personal injury on which he founds his claim is capable of being attributed to something done or not done by the defendant whom he wishes to sue. This condition is not satisfied where a man knows that he has a disabling cough or shortness of breath but does not know that his injured condition has anything to do with his working conditions. It is satisfied when he knows that his injured condition is capable of being attributed to his working conditions, even though he has no inkling that his employer may have been at fault."

At p 1243 of the latter report, the Master of the Rolls set out the findings of the trial judge which included these words:

"In my judgment, she had broad knowledge of sufficient facts to describe compendiously that her breast had been unnecessarily removed, that something had gone wrong and that this was due to the defendants' negligence and further (or in the alternative) that it had been removed without her consent. Even though she might not have had the knowledge to enable her counsel to draft a fully and comprehensively particularised statement of claim, in my view, she had knowledge of the nature referred to in section 14(1)(b) sufficient to set time running against her both in negligence and trespass . . ."

The Master of the Rolls comments:

"The judge's reasoning is in my view open to criticism in two respects:

"(1) He was wrong to refer to the breast being 'unnecessarily' removed, to something going wrong, and to the health authority's negligence. These matters were on a correct construction of section 14 irrelevant."

The second point does not arise or is not material to this present case. At letter D, the Master of the Rolls continued:

"But I am in complete agreement with the judge's conclusion. The personal injury on which the plaintiff seeks to found her claim is the removal of her breast and the psychological and physical harm which followed. She knew of this injury within hours, days or months of the operation and she at all times reasonably considered it to be significant. She knew from the beginning that this personal injury was capable of being attributed to, or more bluntly was the clear and direct result of an act or omission of the health authority. What she did not appreciate until later was that the health authority's act or omission was (arguably) negligent or blameworthy. But her want of that knowledge did not stop time beginning to run."

At p 1246 of the latter report, Lord Justice Steyn said he agreed with everything that the Master of the Rolls and £eldam LJ had said and he added only this:

"In the writ, which was issued on May 5, 1989, [the plaintiff] claimed damages against the health authority on the basis of the removal of her left breast on April 27, 1973. Her cause of action accrued on the very day of the operation. Subject to [the plaintiff's] date of knowledge as defined in the Limitation Act 1980, her claim became statute-barred three years later.

"That brings me straightaway to section 14(1) of the Limitation Act. That provision defines 'the date of knowledge'. It is the date on which the injured person first had knowledge of four 'facts'. The provision is in conjunctive terms: it requires knowledge of all four facts. On the other hand, it is also exhaustive: no knowledge of any further facts is required. The four facts identified in section 1 are mirrored by the 'facts' referred to in section 14(3) which deals with constructive knowledge. In this case it is unnecessary to consider section 14(3) further.

"The first fact mentioned in section 14(1) is that the injury in question was 'significant' in the sense given to that word in section 14(2). The injury in question must mean in this case the removal of [the plaintiff's] left breast. It was undoubtedly a significant injury. The fact was known to [the plaintiff] in April 1973. The second indispensable fact under section 14(1) is defined as follows:

'(b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty.' (My emphasis)

"Again, the application of these words cause no difficulty in this case. Attributability does not mean legal responsibility. It can only refer to causation. It is alleged in the action that the surgeon was negligent in removing [the plaintiff's] breast. She knew in April 1973 that her injury (the removal of her breast) was caused by the act of the surgeon, or in the words of the statute was attributable to him. She therefore had the necessary knowledge of fact (b) at the end of April 1973. Facts (c) and (d) involve knowledge of the identity of the defendant. It is conceded that [the plaintiff] had knowledge of the identity of the defendant (the health authority) by the end of April 1973. Applying the plain meaning of the words of section 14(1) to straightforward and indisputable facts, the consequence seems to follow that the claim became statute-barred at the end of April 1976."

The learned Lord Justice then went on to deal with a number of arguments seeking to avoid that consequence and dismissed them.

Mr Doctor, emphasising the parallel words of section 14A(8)(a), that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence, drew some comfort from the judgment of Beldam LJ at p 1245G where the learned Lord Justice said:

"In the present case I agree with the Master of the Rolls that the injury in respect of which the plaintiff claims damages is the loss of her left breast and the severe psychological symptoms which followed."

Then he adds:

"The act or omission of the defendant on which she relies is the act of the surgeon in removing the breast and the omission to carry out a test before doing so which would have indicated that the removal of her breast was unnecessary."

Mr Doctor argued that this imported the need to know the facts on which the allegation of negligence was subsequently founded even though it did not have to be shown that the plaintiff appreciated that those facts could be categorised as negligent or as affording evidence of negligence. But although the learned Lord Justice used the word "unnecessary" I do not think that assists Mr Doctor. Lord Justice Beldam agreed with the Master of the Rolls who had expressly criticised the trial judge's use of the word in that case.

The reference to section 14(1)(b) and the identical words in section 14A(8)(a) to the act or omission which is alleged to constitute negligence does not import any qualitative ingredient. It refers only to causation, as Lord Justice Steyn pointed out.

There is no inconsistency between Dobbie [1994] 4 All ER 450, [1994] 1 WLR 1234 and the previous decision of the Court of Appeal on section 14 in Broadley v Guy Chapman & Co [1993] 4 Med LR 328. See per Balcombe LJ at p 332, ("qualitative knowledge is irrelevant"); per Leggatt LJ at p 333:

"In my judgment the only function of the words 'which are alleged to constitute negligence' is to point to the relevant act or omission to which the injury was attributable."

Per Hoffmann LJ at p 333:

"This case is concerned with identification of the act which caused the injury . . ."

and p 334:

". . . it seems to me clear that the essence of Mrs Broadley's complaint is that her nerve was damaged in the course of the operation."

Turning now to the identical provisions of section 14A, the starting date for the extended period of limitation is:

". . . the earliest date on which the plaintiff . . . first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action."

By subsection (6) that knowledge means knowledge both (a) of the material facts about the damage in respect of which damages are claimed, and (b) of the other facts relevant to the current action mentioned in subsection (8) below. By subsection (7) the material facts about the damage are:

". . . such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment."

In other words, subsection (6)(a) and subsection (7) equate with section 14(1)(a) and (2). The other facts mentioned in subsection (8) are equivalent to those in section 14(1)(b), and (d). As in section 14(1), so section 14A(9) excludes knowledge of negligence. Finally, section 14(3) relating to constructive knowledge is mirrored in section 14A(10). I see no reason why the principles laid down in Dobbie as regards section 14 should not apply mutatis mutandis to the present case involving section 14A.

The plaintiffs have to show that they first had knowledge of significant damage as defined in subsection (7) capable of being attributed to the defendants within the three year period ending on 27th January 1993. As in Dobbie [1994] 4 All ER 450, [1994] 1 WLR 1234 no issue arises on identity of the defendants. The starting date of the period is 27th January 1990.

I turn to the run-off contracts. Over four years before that date a letter was sent out by the underwriting agents over Mr Stephen Merrett's signature, dated 18th April 1985, which I regard as very significant. It referred to the 1982 underwriting account and reported heavy losses for Syndicates 418/417 arising out of the run-off contracts entered into during 1978, 1981 and 1982. The anticipated loss for a Name with a £50,000 share was between £15,000 and £20,000. The letter also contained a number of other statements reflecting adversely on the underwriting of those contracts and anticipating very heavy future losses. The last paragraph started: "I know the contents of this letter will be of great concern to you".

In view of my interpretation of the "knowledge" requirements of section 14A, I do not need to refer specifically to the other dismal facts so reported because it seems to me clear that any Name who received this letter must have known or been taken to have constructive knowledge that the acts in respect of which the present claim based on the run-off contracts is now brought, had resulted in significant loss attributable to the underwriting defendants. Mr Doctor contends that the losses thus reported would not necessarily be regarded as significant because evidence may show that (1) some Names would have been shielded from them by reserves or stop loss insurance and (2) what is substantial to one Name is small change to another. He also contended that evidence would be receivable from the individual Names on other matters, and I will return to this issue later but I comment now that I do not accept either (1) or (2) above. That a Name might be shielded merely means that his net result will be better than if he had had no reserves or stop loss insurance. The loss remains a loss.

Secondly, in my view, it is not open to a Name to assert that he would not have troubled to sue. The test in section 14A(7) is objective. Would a reasonable person who had suffered such damage consider it sufficiently serious to justify suing a solvent defendant who offered no defence? On the reported losses as a proportion of share in the syndicate, this is clearly satisfied. I conclude therefore that every Name who received this letter had the requisite knowledge for the purposes of section 14A before the relevant starting date.

The defendants' summonses are directed to those plaintiffs who received the letter and the underwriting agents and, the auditors add, or whose Members' Agents received it. The Names argue that summonses in this form are unsuitable for an application under O 14A or O 33, r 3 because the result must depend upon evidence of receipt which is not admitted so the question cannot be finally determined at this stage. This, in my judgment, is only a theoretical objection. The letter was sent personally to all direct Names and distributed to the respective Members' Agents in the case of indirect Names. There can be no dispute that direct Names received the letter. The evidence available at present strongly indicates that indirect Names were sent copies of the letter or a personal letter from their agent containing the same essential information. This is no more than one would expect from a Members' Agent to whom alone the Name must look for all important information and advice concerning his underwriting affairs. It was the plain duty of all Members' Agents to pass on at least the substance of this serious and most unwelcome news and I have little doubt that all did so. The evidence is principally contained in Ms Savile-Tucker's first affidavit and exhibits.

Whether or not this is correct, it was contended by counsel for Merrett and the auditors that notice to the Members' Agent is deemed to be notice to his Names on the well known principle referred to in Bowstead on Agency Article 102, paras 1 and/or 2. Mr Doctor contended that this principle had no application because, as I understood his argument, the managing agent as a subagent of the Name is also in the position of the Names' agent, which would give rise to the absurdity that a tort committed by the subagent would be deemed to be known to the Name at the moment it was committed. This may be one of the reasons for the dichotomy referred to in the comment on Article 102 at p 413 of the 15th edition, but that matter was not further investigated.

Mr Toulson QC, on behalf of the Members' Agents defendants, also distanced himself (in this matter only) from the arguments of Mr Rowland for Merrett and Mr Clarke QC, for the auditors, on the basis that the history of section 14A(10) showed that Article 102 does not apply. He referred in particular to the Law Reform Committee's 20th report, paras 41, 49, 59, 60, 68 and 69. I prefer the contrary arguments. There is room for the application of the principle because section 14A(10) is not exclusive and it is difficult, if not impossible, to conceive of a relationship which more clearly calls for the presumption than that of an indirect Name and his Members' Agent. The facts fall squarely within para 2 of Article 102. As far as I know, there is no means of direct communication between the underwriter and an indirect Name, and in practice it never happens. Information relevant to the Names' underwriting affairs is always channelled through the Members' Agent whose duty it is to pass it on to his principal.

There is this further matter to note. In his third affidavit on behalf of the Names, Mr Edwards deposed in para 10:

"While it is correct that the documentation does reveal that run-off policies had been written, and, obviously, that each year up to 1984 had been closed into the next year, and that losses have been suffered . . ."

In para 28 Mr Edwards asserts that:

"Some of the Names would never have read the documentation sent to them over the years, some only read it cursorily. Many of them are not commercially minded and are unbusinesslike which is not surprising given . . . the whole basis for the Lloyd's system . . ."

If this is intended to foreshadow the calling of individual plaintiffs to give evidence of what each did or understood etc, as I think it is (see Mr Doctor's skeleton argument) such evidence would, in my view, be irrelevant. The defendants could not and do not rely upon the actual knowledge of every plaintiff but on constructive knowledge under section 14A(10)(a) and/or (b). Each again imports an objective test arising from "observable" or "ascertainable" facts. But the point is that although Mr Edwards refers to what, as he says, individual Names would or would not have done or understood, nowhere is it suggested that the documents were not received in any individual case.

I am satisfied that all the Names who received the letter had at least constructive knowledge before the starting date, that significant losses had arisen on the run-off contracts of which they complain in the action, and that the losses were attributable to the acts of the managing agents who entered into them. I am also satisfied that the indirect Names whose Members' Agents received the letter are in the same position.

In addition to this crucial letter the defendants other than the auditors (who of course are not concerned with the run-off contracts) rely upon the receipt by the Names of the underwriting accounts as of 31st December 1984, 1985, 1986, 1987 and 1988. Each of these accounts was sent out in May or June of the following year so even the latest would have been received by Names no later than June 1989 before the starting date of 27th January 1990. Each of those accounts, both in the figures shown in the accounts themselves and in the managing agents/underwriters' report, disclose the losses being sustained on the run-off contracts, the position deteriorating year by year as the pollution and asbestosis claims increased and Syndicate 417's reserves and reinsurance were increasingly shown to be more and more inadequate. I do not propose to recite all the references but a particularly significant one appears in the 1987 managing agents' report sent out in June 1988 which revealed accumulated losses of $109 million.

In the case of the annual accounts and reports it is even clearer that each plaintiff received these whether or not he troubled to look at them or could understand them. There is a Lloyd's bye-law which requires that they be sent out annually to each Name and this is reflected and reinforced by the specific term of each Name's agreement with his agent, that the accounts shall be sent to him as soon as practicable after the end of each calendar year. Furthermore, the points of claim allege that the plaintiffs, without exception, were misled by the underwriting accounts for, inter alia, 1987 and 1988.

I am therefore satisfied that, applying the reasoning of the Court of Appeal in Dobbie's case [1994] 4 All ER 450, [1994] 1 WLR 1234 to the virtually identical provisions of section 14A of the Act, each plaintiff who received these documents first had the required knowledge before the three year period ending with issue of the first writ in the Hallam-Eames action. All claims based on the run-off contracts are statute-barred. I decide para 1 of the Members' Agents summons and para 1, subparas (1) and (2), without the need to consider subpara (3) of the Merrett summons, in favour of the defendants.

I turn to the RITCs. The plaintiffs' allegations under these policies are that Mr Merrett and the managing agents were negligent in deciding to close the 1979 to 1984 years of account into each succeeding year and in effecting the RITCs and/or fixing the premium; that the Members' Agents are vicariously liable for the torts of the underwriters and that the auditors were negligent in approving and/or facilitating the closures. Each of the defendants pleads limitation in respect of all years except the last. This was closed in May 1987 and the primary limitation period had not expired by January 1993. But the earlier closures were all effected more than six years previously.

The points of reply rely upon section 14A and, as against the underwriters and Members' Agents but not the auditors, on section 32(1) of the Act. I have already observed that the latter is irrelevant in the present state of the law. Mr Clarke adopted the arguments of both Mr Toulson and Mr Rowland as to the starting date under section 14A, but takes the preliminary point on the pleadings which he says is a pure question of law unarguably suitable for determination on this summons. He says that the replies founded upon section 14A have missed the target. If, as he contends and I have decided, the starting date is the first date on which the plaintiffs had knowledge of significant loss resulting from the contracts complained of and attributable to the defendants, it was necessary for the plaintiffs in reply to plead that they were ignorant of those facts until after 27th January 1990. They have not done so. Their reply, para 4, refers only to the dates in 1991 and 1992 when they acquired knowledge of various facts alleged to have constituted negligence which is irrelevant.

The misconception is echoed in the plaintiffs' skeleton argument, paras 7(7) and (10) which set out "the essence of the plaintiffs' case in connection with the run-off policies and the RITCs". The facts there summarised as arguably establishing negligence are not the facts relevant to the limitation issues with which I am concerned. I think this is a point of substance. Normally the court will allow a defective pleading to be amended with no more than possible costs consequences. But I do not see how it is possible for the plaintiffs to amend their reply in order to plead and therefore undertake to prove ignorance of the relevant matters until after 27th January 1990 in order to bring themselves within the protection of section 14A. The documents relied upon by the defendants make it plain that RITCs were entered into in respect of the 1979, 1980, 1981, 1982 and 1983 years of account; that they have been audited by Ernst & Whinney; that liabilities had been incurred in respect of each RITC which substantially exceeded the premium charged. The losses thus disclosed included the losses on the run-off contracts in each year that the latter were written. The documents which reveal these facts are essentially the underwriting accounts as at 31st December 1981, 1982 and 1983, the letter of 18th April 1985 and the underwriting accounts as of 31st December 1984, which would have been received in May or June 1985, and the subsequent accounts for the years ending 1985, 1986, 1987 and 1988. These accounts show for every year that the premium paid by the syndicate in order to close a particular year of account exceeded, usually by a very substantial margin running into millions of pounds, the amount received by the syndicate from the previous year's closure. Thus the losses on each of the RITCs in question were explicit and very substantial. Any Name who himself received, or in the case of an indirect Name whose Members' Agent received, these documents had constructive notice of the material facts earlier than the starting date and any claim in respect of the RITC for any relevant year of account is statute-barred.

I have decided these questions on the summonses as originally issued which rely upon order 14A. It is unnecessary, in my view, to consider the amendments made in order to invoke O 33, r 3. Order 14A enables the court to determine any question of law or construction of any document. This precludes the determination of issues involving disputed questions of fact which in appropriate cases can be heard as preliminary issues under O 33, r 3. Mr Doctor contends that there are disputed issues of fact. I do not agree. The matters on which he says evidence is necessary are, according to him, whether documents were received by individual plaintiffs, whether they were read or understood and whether the losses disclosed were significant within section 14A(2). I have held that these are not relevant facts for the purpose of s 14A. I recognise that evidence under section 14 relating to, for example, the significance of personal injury may be necessary and was admitted in Nash v Eli Lilly [1992] 2 Med LR 353, but different considerations clearly apply in personal injury cases.

Apart from this, there are grave problems of permitting individual Names to give evidence of their individual states of mind in a case such as the present where one comprehensive points of claim has been delivered on behalf of all plaintiffs asserting no individual variations and has been fully pleaded to in the points of defence, which in turn have resulted in replies which are general and not tailored to individual differences. I am satisfied that it is appropriate to decide these two questions on the summonses as framed. Very substantial advantages result from the exclusion of questions of negligence in the writing of all the run-off contracts and all RITCs, except the last, from which no further damage apparently flows. Mr Doctor says that these limitation issues should be left for determination at trial. Whether at the beginning or the end of trial would be a matter for the trial judge but presumably it would be after all the evidence has been heard, as Mr Doctor himself contends. If the issues were resolved in the way that I have held, that would mean that the great bulk of the evidence and argument, if not all of it, would have been unnecessary. It seems to me obvious that if the issue can be disposed of at this stage, that is an infinitely preferable course. Similarly, if tried before the substantive issues but decided in favour of the defendants, very substantial costs of preparing for a full trial would be wasted. There are other important advantages referred to in the auditors' skeleton argument. I do not accept the plaintiffs' contention that evidence of alleged negligence in connection with the statute-barred contracts will in any case need to be heard at trial.

Judgment accordingly

Fisher Brown; Reynolds Porter Chamberlain; Oswald Hickson Collier; McKenna & Co