SIR RICHARD BODY (SUING ON HIS OWN BEHALF & ON BEHALF OF ALL OTHER MEMBERS OF THE ROSE THOMSON YOUNG SYNDICATE 255 NAMES ACTION GROUP) v SOCIETY OF LLOYD'S (1999)

QBD Commercial Court (Timothy Walker J) 6/3/98

INSURANCE - GUARANTEE AND INDEMNITY - COMMERCIAL - PROPERTY - CIVIL PROCEDURE - CONTRACT - FINANCIAL

LLOYD'S NAMES : SETTLEMENT FUND : OFFER OF SETTLEMENT : CONSTRUCTION OF DOCUMENT : APPLICATION TO STRIKE OUT : COSTS : EXPENSES REFUNDS : MAXIMUM AMOUNT : DEDUCTIONS : GROSS CLAIMS : PAYMENT

On a true construction of the whole settlement document, Lloyd's were entitled to deduct a sum previously paid in respect of expenses out of a settlement fund, from the maximum amount they were required to pay for expenses.

Application by the plaintiffs ('the Names') under RSC O.14A to determine a question of law, namely whether on a true construction of a settlement agreement, the sum of £75 million referred to in an agreement between the parties fell to be reduced by the amount of costs, totalling £13.4 million, recovered by certain litigants and action groups. In a counter application, the defendants applied to strike out the single above point in the Points of Claim. The point was one of pure construction of the settlement offer Document put forward by the defendants (Lloyd's) to the Names. The document included at Appendix 1 the "Settlement Agreement" and at Appendix 3, a document headed "Allocation of the Settlement Fund". The settlement offer included an offer of a maximum of £75 million in respect of properly incurred expenses of action groups and litigating names. It was provided that should the amount not be enough to meet the claims (as indeed it was not), the amounts to be paid to parties would be scaled down accordingly. The Names complained that in so doing Lloyd's had only paid out some £62 million; £13.4 less than they should have. This was because the settlement fund included a sum of £340 million paid out by underwriters and frozen pending various actions in solicitors' accounts. When the settlement offer was made, £13.4 million had already been paid to another action group in respect of expenses. The plaintiffs contended that Lloyd's were not entitled to take account of the "leak" from the fund.

HELD: (1) The agreement by Lloyd's to pay was fund-orientated and not cash-orientated. The essence of the obligation was to pay out of the identified fund. From reading the settlement offer document as a whole, what was being offered was a maximum of £75 million out of the fund. The fund was clearly identified, and part of this was the sum paid out by underwriters. It did not affect the principle that £13.4 million had already been paid out in respect of expenses. (2) Although the other action groups who had received the expenses had to give credit for what they had received, the question was whether the £75 million cap was applied to net claims, as the Names argued, or to gross claims, with the deduction of the sums already recovered being made at the payment stage as opposed to the claim stage. It was clear from the wording that the latter approach (ie Lloyd's case) was the correct one. (3) The sum of £75 million therefore did fall to be reduced by the amount of costs already recovered. Accordingly the answer to the question was in the affirmative and the proceedings were struck out.

Question answered in the affirmative. Counter application allowed.

Mr N Underhill QC and Mr R Handyside instructed by Charles Russell for the plaintiffs. Mr A Grabiner QC and Mr D Foxton instructed by Freshfields for the defendants.

LTL 22/7/99 (Unreported elsewhere)

Judgment Official

Document No. AC8001121