SOCIETY OF LLOYD'S v (1) TIMOTHY JOHN BURNINGHAM (2) MRS SCHERZADE KHAN (3) ANTHONY WILLIAM GOODA (1998)

QBD Commercial Court (Tuckey J) 4/3/98

INSURANCE

LLOYD'S NAMES : UNDUE INFLUENCE : SUMMARY JUDGMENT : DETRIMENT

Constructive notice would only arise where a transaction was not on its' face beneficial to a wife and where there was substantial risk that the transaction was procured by undue influence. Transactions were not to a wife's detriment if they enabled her to underwrite insurance and indeed to gain a financial benefit.

Lloyd's of London applied for summary judgment in respect of underwriting losses suffered by one Mrs Khan, who was introduced to Lloyd's by her husband. She was 21 years old and he was in his 50's and had had substantial commercial experience. He filled out the forms for her and told her where to sign. He attended all the relevant meetings with her. She received no advice on joining Lloyd's other than from her husband and no-one suggested she should seek such advice. Her husband provided a bank guarantee which represented her stakemoney but later replaced it with a guarantee secured over Mrs Khan's jewellery. In practice he kept the proceeds from any profitable underwriting. Mrs Khan defended on the basis that she had entered under the undue influence of her husband, and sought an adjournment to seek funds for representation.

HELD: (1) To show presumed undue influence arising from a special relationship (in this case that of husband and wife) the wife had to show not only that she was influenced by her husband but that it was to her manifest disadvantage (ie one which is so improvident that it cannot be explained by the normal motives by which men and women act). (2) It also had to be shown that Lloyd's had actual or constructive notice of the fact of undue influence. Constructive notice would arise where the transaction was not on its' face beneficial to the wife and where there was substantial risk that a transaction of this kind would be procured by undue influence. These transactions were not obviously, from an objective standpoint, to Mrs Khan's detriment as they enabled her to underwrite insurance and indeed to gain a financial benefit. (3) The remedy for undue influence was recission. Recission would not be allowed where the parties could not be restored to their original positions. Third parties' insurance had been underwritten on the basis of Names's contracts. The ability to write insurance legally was personal and not returnable as it would not only affect Lloyd's, other Names but the insured third parties. Recission was unavailable as a remedy to Lloyd's Names.

Application for an adjournment to seek funds for representation refused. Application for summary judgment granted.

Mr D Foxton instructed by Dibb Lupton Alsop for the plaintiff. Mr J Brettler instructed by Clifford Harris & Co for Mr Gooda. Mark Watson-Gandy instructed by Tennakoons for Mrs Khan.

LTL 26/3/98 (Unreported elsewhere)

Judgment Official

Document No. AC8000698