Society of Lloyd's v Noel




[2002] EWHC (Comm), (Transcript: Smith Bernal)




27 MARCH 2002




Practice - Summary judgment - Action for recovery of debt or damages - Action by Lloyd's against former name for Equitas premium - Defendant not signing 1986 general agreement - Whether defendant liable for premium irrespective of general agreement - Lloyd's Act 1982



R Jacobs QC for the Claimants; S Noel appeared in person







ANDREW SMITH J: [1] The Society of Lloyd's is suing Mrs Sally Rosemary Noel for 13, 047 and interest. Lloyd's applies for Summary Judgment upon the claim. In broad terms the nature of the claim is that money is due in respect of the insurance premium paid for re-insurance provided by Equitas.


[2] In order to succeed upon the application, Lloyd's must persuade me that Mrs Noel has no real prospect of successfully defending the claim. Mr Jacobs QC has represented Lloyd's upon this application. Mrs Noel has represented herself. There is also before me an application brought by Mrs Noel relating, in particular, to Lloyd's pleading. And in order to explain this I must first set out something in the history of this litigation.


[3] Lloyd's issued these proceedings against Mrs Noel on 10 October 1996. The claim was then put on the basis that having been a member of Lloyd's since 1978 or 1979, Mrs Noel signed an undertaking whereby she agreed to be bound by the provisions of the Lloyds Acts 1871-1982.


[4] Eventually, Lloyd's applied for Summary Judgment and that application was heard by Cresswell J on 10 May 1999. Mrs Noel raised a number of defences to the claim but Cresswell J gave Summary Judgment upon it. In his Judgment he said this:


"The Defendant was elected as an underwriting Member of Lloyd's with effect from the 1st January 1979. She signed an undertaking with Lloyd's in which she expressly agreed that she would be bound by the provisions of the Lloyd's Act 1871-1982, such bylaws as were made or were to be made thereunder, and any direction given or provision or requirement made by the Council or on its behalf."


[5] Later in his Judgment he said,


"Having carefully considered the materials placed by Mrs Noel before the Court, it seems to me, that in effect, Mrs Noel is seeking to raise the same arguments as were raised before the Court of Appeal, and rejected in two decisions."


[6] The Judge was referring to the decisions in Lloyd's v Leighs and others, in which the Court of Appeal upheld two decisions of Coleman J. And in Lloyd's v Fraser and others, in which the Court of Appeal upheld the decision of Tuckey J. Cresswell J then analysed those decisions and reached the conclusion:


"In the light of the two decisions in the Court of Appeal to which I have referred there can be no defence to the sums claimed. I emphasise it again, for the benefit of Mrs Noel, that the essential question upon the Summary Judgment procedure is whether the Court considers those a triable issue.


If a particular argument is already covered by an adverse decision of the Court of Appeal, that decision is binding upon this Court; and it is conclusive for all purposes, not merely for the parties who were before the Court on that occasion. That is the position in relation to this application."


[7] Accordingly, as I have said, he allowed the application the Summary Judgment. Mrs Noel was given permission by the Court of Appeal to appeal against that decision, and her appeal was heard by Simon Brown LJ, Brooke LJ and Robert Walker LJ on 30 March 2001. It was successful because the factual basis of the pleaded claim was wrong. Mrs Noel had not signed an undertaking that she agreed to be bound by the provisions of the Lloyd's Act 1982. She signed no such undertaking after 1979, when Lloyd's Act 1982 was not enacted or even contemplated.


[8] In his Judgment, Robert Walker LJ, who gave the first Judgment in the Court of Appeal, said this:


"Mrs Noel's case, on the points previously dealt with by this Court and by Mr Justice Cresswell in his Judgment, appears to me to be hopeless (although I did not hear full argument on that part of the case, and I do not express a final view).


But the Judge did not, as Mr Jacobs has very fairly and candidly accepted, deal with the single point which is special to Mrs Noel's case. The only authority on that single point, so far as I can see, was not Court of Appeal authority. As I have mentioned, neither Judgment of this Court seems to touch on the point. So far as it can be called authority at all, there is only a short passage, apparently directed to an issue of proper law, at the end of the Judgment of Mr Justice Tuckey, in Daly.


I note, also that in the original declaratory Order, Mr Justice Coleman had carefully referred to Membership, 'at the relevant time or in the relevant context'; so as to leave that point open without further investigation decision as to what the relevant time or the relevant context might be.


If Mrs Noel was to have Summary Judgment given against her in a matter on which she has the strongest possible feelings, she was entitled to know why her defence was being rejected. On what Lord Justice Evans called the 'contractual ground', (but only as I have said, on that single ground) she was not given any adequate explanation of why she was debarred from defending the claim.


In this Court, Mr Jacobs, who did not appear below, has sought to make good that deficiency, relying on a Respondent's notice. Mr Jacobs has argued that the point on which Mrs Noel's relies is one of form and not of substance. He has candidly conceded that the plea in the second sentence of paragraph three of the points of claim was quite wrong; but it was, he said, in any event, unnecessary. He says that the pleading would still stand up if the whole of that sentence were deleted. His case at its simplest and starkest, is that Mrs Noel cannot opt out of an Act of Parliament.


Mr Jacobs has concentrated on that single, simple and stark point and has not developed other points, including the difference, if any, between the meanings of the expressions 'for the time being' and 'from time to time', which were raised in Mr Smith's skeleton argument. Mr Jacobs did, however, also rely - at least in passing - on another point made in the skeleton argument, that Mrs Noel carried on underwriting for some years after the 1982 Act came in force. That is so, and it may give rise to all sorts of arguments, based on Mrs Noel's state of knowledge and what is to be inferred from her conduct. However, those matters were not part of the case pleaded against her, nor were they the subject of any affidavit evidence in support of the application for Summary Judgment.


Mrs Noel's should, I think, be in no doubt as to the strength of the potential claim against her if there was a further application - which under the new Civil Rules Procedures would be an application under part 24 - for Summary Judgment against her. But any such application would be made on a different basis from the case which was made against her on the first application. Mr Jacobs, in brief and realistic submissions, has submitted that to require a new application to be made to the Commercial Court would be a waste of time and resources, and that this Court should, itself, resolve the matter. To do so, he said, would be in accordance with the Case Management Ethos of the new Civil Procedure Rules."


Having considered that argument, Robert Walker LJ continues:


"For my part, I do not think it would be right for this Court to say on the materials now before us that it is so clear that Mrs Noel has no possible defence to an alternative way of putting the case against her; that she should be simply debarred from defending. If My Lords agree that this appeal should be allowed, Mrs Noel ought to consider very carefully, and ought to take advice as to whether she should now find some consensual means of disposing of Lloyd's claim at a time when she may be able to do so at a far lower price (in terms of legal costs) than may at one time have seemed likely. However, that must be a matter for her."


[9] He, therefore, concluded that he would allow the appeal. The reasons of the other Judges in the Court of Appeal were similar to those of Robert Walker LJ. I think I need mention only this: Firstly, Brooke LJ said,


"It seems to me in those circumstances, that elementary principles of fairness now require that this matter should be reopened before a Judge of the Commercial Court and that we should not deal with it in this Court in the way suggested by Mr Jacobs. For all I know, Mrs Noel may wish to put further evidence in response to the case which Lloyd's now wish to make against her."


[10] I refer to this paragraph because Mrs Noel's has indeed put before me documents which were not before Cresswell J, including a document headed 'Affidavit', which documents I have read and considered.


[11] Secondly, in the course of his Judgment, Simon Brown said this:


"Although, therefore, we are allowing the appeal, to enable Lloyd's true case to be put formally on a proper basis, for my part I do so without any real expectation that Mrs Noel will be able to defeat it. I cannot sufficiently emphasise to her, therefore, how important it is that she should now take this last opportunity to reconsider her position, hopefully with the benefit of legal advice."


[12] After that decision of the Court of Appeal, Lloyd's went about amending their pleading and sought Mrs Noel's consent to an amendment. They were seeking to plead their claim on the basis that, notwithstanding Mrs Noel had not signed a relevant undertaking, she is liable because of the provisions of the Lloyd's Act 1982, and Lloyd's bylaws made under that Act.


[13] At the heart of the proposed new pleading was this paragraph:


[14] "As a Member of Lloyd's, the Defendant," - that is to say Mrs Noel -


"was bound by all bylaws affecting Members of Lloyd's and made by the Council of Lloyd's, pursuant to its powers under the Lloyd's Act 1982 and all actions lawfully taken pursuant to such bylaws. Lloyd's contends that she was so bound, irrespective of whether or not she signed the 1986 form of General Undertaking which contained an express agreement to be bound by, amongst other things, the Lloyd's Acts 1871-1982."


[15] Correspondence passed between Lloyd's and Mrs Noel about the proposed amendment. And on the 26 July 2001 Mrs Noel wrote to Lloyd's as follows:


"I am reluctantly agreeing to your proposed amendments, because you lead me to believe that the Courts are likely to grant Lloyd's permission to amend, and meanwhile, you say, I will incur 2,008 in costs. I believe that point 3 of your points of claim was not a mistake, but a deliberate attempt to deceive the Court and get a Judgement against me under false pretences. Just another bit of legal chicanery I have discovered."


[16] Mr Moore-Bick J, on 26 July 2001 gave permission, by consent, for Lloyd's to amend the points of claim. Having done so, on 18 September 2001 Lloyd's issued a second application for Summary Judgment. On 16 October 2001 Mrs Noel issued an application seeking, amongst other things, to withdraw her consent to Lloyd's being permitted to amend their pleading. In the same application, and also an application made on 22 November 2001, Mrs Noel applied for various Orders relating to disclosure and other matters. For the most part, those applications were decided by Mr Justice Moore-Bick on 7 December 2001.


[17] However, I must consider paragraphs one and two of the first application made by Mrs Noel which read as follows:


"I, Sally Noel, litigant in person, make an application to withdraw my consent to Lloyd's amending their pleadings re action 1996, folio 2039. Point 3 of Lloyd's Points of Claim was intended to deceive the Court, which it did in the Court of first instance, in order to pervert the course the justice, and what, in point of fact, conspiracy to defraud. An Order to overrule Lloyds application for Summary Judgment in view of the permission granted by Simon Brown, Brooke and Robert Walker, to rely on further evidence not pleaded in Leighs, Fraser and Jaffrey cases."


[18] With regard to the application to withdraw consent to the amendment, I make no Order. I have no doubt that Lloyd's would have been given permission for the amendment whether or not Mrs Noel consented to it. I need add only two points: Firstly, there is not strictly an application before me to set aside the Order of Mr Justice Moore-Bick, but I do not refuse Mrs Noel's application on this technical point. I do so on the basis that, if there had been an application to set aside the Order, I would have refused it. The Court of Appeal clearly contemplated that Lloyd's might amend their claim in this way. Secondly, I understand the reference made by Mrs Noel to point three of Lloyd's points of claim to be a reference for the claim based upon an undertaking given by her. I reject the assertion that that claim was put forward to pervert justice, or as part of a conspiracy to deceive. No evidence put before me supports that assertion.


[19] The second paragraph of Mrs Noel's first application stands or falls with Lloyd's application for Summary Judgment. It is that which I now turn.


[20] The position in which Mrs Noel finds herself was described by Robert Walker LJ thus:


"Mr Jacobs QC accepts that Mrs Noel ceased to be an underwriting Member [of Lloyd's] and that if 1985 and 1986 had not proved to be 'open years', she would, in due course, have ceased to be any sort of Member of Lloyd's by 1989. But 1985 and 1986 were very bad years for the syndicate of which Mrs Noel was a Member. It is not entirely clear to me whether someone in her position would naturally have been referred to after 1989 as simply a name or as a non-underwriting Member, with or without some further explanation of her particular circumstances. However, plainly she did not and could not choose simply to walk away from obligations in respect of past open years, and I do not understand that to be her case."


[21] More generally the background to this litigation is sufficiently described by Mr Jacobs in his skeleton argument, in two paragraphs which read as follows:


"The liability of Lloyd's names for the Equitas premium arose as a result of a series of bylaws and decisions taken by the Council of Lloyd's in 1996 in order to solve the serious problems faced by the Lloyd's market at that time. Many Lloyd's names were trapped on 'open years' ie underwriting years of account which syndicates were unable to close by the normal method of closure into a subsequent year of account. There was widespread litigation by Names against Agents and Auditors as a result of very serious losses incurring by the market in particular in the late 1980's and early 1990's."


[22] The solution to the problem, commonly referred to as 'reconstruction and renewal' or 'R and R' was the creation of Equitas. Equitas had agreed to re-insure and run-off the liabilities of all 1992 and prior years of account of all the syndicates in the market. A re-insurance and run-off contract was concluded and all Lloyd's names who had underwritten for the 1992 and prior years were made party to this contract. It was essential to the Scheme that all Names should re-insure their liabilities into Equitas. In order to achieve this end Lloyd's utilised the extensive bylaw making powers which were conferred by the Lloyd's Act 1982. Section six of that Act gave the Council power to:


"make such bylaws as from time to time seem requisite or expedient for the proper and better execution of Lloyd's Acts 1871-1982 and for the furtherance of the objects of the Society, including such bylaws as it thinks fit for any or all of the purposes specified in Schedule 2 to this Act."


[23] Schedule two contained a lengthy list of purposes for which bylaws could be made.


[24] Lloyd's argument that Mrs Noel is liable for premium paid to Equitas is not complex. It is that she became a party to a contract with Equitas as a result of the bylaws passed under the 1982 Act. I have already referred to Section six of that Act. A bylaw was passed in 1983, the Substitute Agents Bylaw, which empowered the Council of Lloyd's to point a substitute Agent for "any underwriting Member of the Society" and give directions to such Agent. In 1995 a further bylaw, to which I will refer as "the amendment bylaw", amended the bylaw of 1983 by providing "for the avoidance of doubt", that the powers vested in the Council of Lloyd's under the 1983 bylaw,


"to appoint a substitute Agent or to issue directions, should apply in relation to an underwriting Member, or a former underwriting Member, notwithstanding that he may at the time of the appointment or direction, or subsequently, have ceased to be a Member by reason of resignation, death or otherwise".


It is unnecessary for me to consider whether that amendment was necessary or whether such power was, in any event, conferred by the bylaw of 1983.


[25] A further bylaw as passed in 1995, the Reconstruction and Renewal Bylaw. That contained powers to give "such directions as may appear to the Council to be desirable or expedient" for giving effect to the Equitas Scheme. A resolution and direction of 3 September 1996 revoked the authority of existing underwriting Agents in respect of underwriting years 1992 and earlier, and directed a substitute Agent to enter into the Equitas re-insurance contract. That substitute Agent was a company known as AUA9 which was indirectly owned and controlled by Lloyd's. Accordingly, Lloyd's appointed AUA9 to enter into the Equitas re-insurance contract on behalf of all the names and to pay the premium on their behalf.


[26] I shall not expand upon this brief explanation of how the Equitas premium came to be paid by Equitas, and payable by Lloyd's Members, because the position has been fully explained by Coleman J in Lloyd's v Leighs and others, and I would merely be repeating what he has said. It follows, however, that the position of Mrs Noel is no different from names (or former names, if that terminology be preferred) who signed an undertaking referring to the 1982 Act. The Lloyd's Act 1982 takes effect as a statute, and its efficacy is not dependant upon consent. That is my decision upon the question which led to the Court of Appeal setting aside the Order of Cresswell J.


[27] Mrs Noel, however, has raised other items before me, as she had earlier done before Cresswell J. Cresswell J considered most of them and concluded that they had been considered and rejected in the case of Lloyd's v Leighs or Lloyd's v Fraser. He explained why he came to this conclusion. On those matters which were raised before Cresswell J, I come to the same conclusion as he did; and my reasons are similar to his. I see no point in my repeating those reasons, or seeking to rephrase his Judgment in respect of those arguments. However, there were three points which it seems to me were, or might, not have been considered by Cresswell J and to which I must refer.


[28] The first of these was drawn to my attention by Mr Jacobs. It is Mrs Noel's argument that the amendment bylaw is "unconscionable". What Mrs Noel says about this, is as follows:


"A) it was intended for point a person to act as Agent or sub-Agent where such Member has no underwriting Agent. B) The appointments were not in the interest of such Member, it was in the interest of the Council of Lloyd's to end a successful litigation against our Agents and to keep concealed the Ground Conspiracy to defraud the names since 1978. C) It was not pleaded in Leighs and Fraser. Had it been, the Court, I allege, would have ruled the bylaw and Lloyd's exercise of power invalid and ultra vires."


[29] It is indeed the case that the point was not specifically pleaded in either Lloyd's v Leighs or Lloyd's v Fraser. However, the argument that the amendment bylaw was designed to end the litigation against Managing and/or Members' Agents, which was being pursued by Names Groups around that time, cannot, in my Judgment, be sustained. The bylaw and the 'R and R' arrangements of which it was part, did not impose any settlement or cessation of the litigation against Agents upon names. Individual names were free to settle with Agents or not to do so as they chose. The amendment bylaw was an integral part of the 'R and R' Scheme. Whether it was unconscionable or not depends upon whether the Scheme, as a whole, was unconscionable. The Court of Appeal has held that a primary object - if not the primary object - of 'R and R', and in particular the Equitas Scheme, was to save Lloyd's for the benefit of its Members. In these circumstances it is not open to me to hold that an individual component of the Scheme, the amendment bylaw, was unconscionable, invalid or ultra vires.


[30] The second point which calls for a specific mention is that Mrs Noel's submits that the appointment of AUA9 "was in itself invalid for irrationality". This calls for mention because this argument was not, it seems to me, advanced in Lloyds v Leighs. I refer to the Judgment of Coleman J where he says,


"It is not suggested that the appointment of AUA9 was, in itself, invalid through irrationality."


[31] However, Mrs Noel has not put forward any material which leads me to believe that it is remotely arguable that the appointment of AUA9 was irrational, given that for reasons that I have explained, I am bound to accept that the 'R and R' Scheme itself was proper.


[32] The third point arises in relation to the signing of the verification form and a question as to whether that was signed by Mrs Noel on 5 October 1978. Mrs Noel wishes to argue that her signature on that form is a forgery. This was a matter to which Mr Justice Moore-Bick made reference in his Judgment of 7 December 2001. The short point is that this form is not relied upon by Lloyd's in any way in support of its claim in these proceedings, or in its application for Summary Judgment. This litigation is not concerned with whether Mrs Noel might have a claim against Lloyd's or others on the basis of fraud or improper conduct. In Lloyd's v Fraser the Court considered the effect and efficacy of cl 5.5 of the contract with Equitas, the so-called "Pay now, sue later" Clause. Even if Mrs Noel does have such a claim - and it is not for me to express even the most provisional view about that - it would not provide a defence to the claim by Lloyd's in this action.


[33] I, therefore, conclude that these points, and the other points which were raised by Mrs Noel both before Cresswell J and me, do not raise issues which, in light of the decisions of the Court of Appeal in the two cases to which Cresswell J referred, provide a defence that stands any real prospect of success.


[34] I, therefore, conclude that the amendment of the pleading having been made, and the basis for the decision of the Court of Appeal in Mrs Noel's favour having been removed, Lloyd's is entitled to Summary Judgment on their claim.


[35] I add only this: Mrs Noel asked that I Order that there be a full and independent enquiry into what she describes as 'Lloyd's fraud' and that all future litigations should be suspended pending the outcome of such an enquiry. I have - for better or worse - no power to Order such an enquiry, or to Order a suspension of litigation generally. In so far as Mrs Noel is requesting that these proceedings be stayed unless and until an enquiry of this kind is held, I must decline to do so. To make such an Order would undermine the efficacy of cl 5.5 to which I have referred.



Judgment accordingly.