Ackman and Others v Policyholders Protection Board and Royal Insurance (UK) Ltd and Others ; Scher and Others v Policyholders Protection Board and Royal Insurance (UK) Ltd and Others ; Ackman and Others v Policyholders Protection Board and Others ; Scher and Others v Policyholders Protection Board and Others (Conjoined Appeals)
| Jurisdiction | England & Wales |
| Judge | Lord Templeman,Lord Griffiths,Lord Ackner,Lord Goff of Chieveley,Lord Mustill |
| Judgment Date | 10 February 1994 |
| Judgment citation (vLex) | [1993] UKHL J0715-1 |
| Date | 10 February 1994 |
| Court | House of Lords |
[1993] UKHL J0715-1
House of Lords
Lord Templeman
Lord Griffiths
Lord Ackner
Lord Goff of Chieveley
Lord Mustill
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley. For the reasons given by him. I too would dismiss this appeal.
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley. For the reasons given by him. I too would dismiss this appeal.
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley. For the reasons he gives I too would dismiss this appeal.
My Lords,
These appeals are concerned with insurance, and in particular with the circumstances in which a body called the Policyholders Protection Board ("the Board") is responsible for assisting or protecting policyholders. The Board was established pursuant to the Policyholders Protection Act 1975 ("the 1975 Act"). It will be necessary in due course to set out the most relevant provisions of the 1975 Act. and to analyse certain of them in some detail. At this stage it is enough to state that. under the Act. the functions of the Board are to take certain measures for the purpose of indemnifying or otherwise assisting or protecting policyholders and others who have been or may be prejudiced in consequence of the inability of insurance companies carrying on business in the United Kingdom to meet their liabilities (see the preamble and section 1 (2)(a) of the 1975 Act). To meet its liabilities under the Act, the Board has power to raise a levy on authorised insurance companies carrying on business in the United Kingdom (see sections l(2)(b) and 21).
The actions which are the subject of the present appeals were brought by two groups of assureds who are seeking to establish the liability of the Board to indemnify them following the insolvency of certain insurance companies, viz. Kingscroft Insurance Co. Ltd., El Paso Insurance Co. Ltd., Lime Street Insurance Co. Ltd. and Mutual Reinsurance Co. Ltd. These insurance companies have been collectively referred to as the KELM companies. The two groups of assureds have been referred to respectively on the appeals as the Ackman appellants and the Scher appellants. The Ackman appellants are (1) the individual partners, the professional corporation ("PC") partners and the shareholders in the PC partners in Fried Frank, a partnership of lawyers with offices in the United States and in London: and (2) the partners in Clarkson Gordon, a partnership of accountants practising in Canada. The Scher appellants are all physicians with private practices in New York. The defendants to the action were the Board itself, and two representative insurance companies � the Royal Insurance (UK) Ltd. ("the Royal") and New Hampshire Insurance Co. Ltd. ("New Hampshire") � representative of all insurers upon whom the Board may impose or seek to impose a levy under the 1975 Act.
Both groups of appellants were insured against professional liabilities under policies subscribed in several proportions by (among others) the KELM companies. Following the insolvency of the KELM companies, the appellants sought declarations as to the liability of the Board to indemnify them in respect of claims made against them in the United States and in Canada. However both Webster J. at first instance, and the Court of Appeal, declined to make any declarations as to the right of the appellants to be so indemnified, but instead made declarations as to the meaning and effect of certain provisions of the 1975 Act. I must confess to feeling some unhappiness at this method of proceeding, preferring as I do to consider matters of this kind in the context of the relevant provisions of the applicable contracts, together with the specific facts upon which the relevant claims are alleged to arise. However, the courts below having proceeded as they have done, there appears to be no practical alternative to your Lordships' House proceeding in the same manner in respect of those issues which fall to be decided by this House.
Of the issues which were the subject of consideration by the courts below, not all have been pursued before your Lordships' House. Moreover, of those which were the subject of argument before the Appellate Committee, one, which arose on the Royal's appeal, is of particular importance, both because it affects all claims against the Board (including, of course, those of the Ackman appellants and the Scher appellants), and because, so your Lordships were informed, its financial implications are very great. That issue arises under section 4(2) of the 1975 Act. Sections 3 and 4 are concerned with the general scope of the Board's functions under the Act. From these sections it appears that the Board's functions are exercisable only where the insurance companies in question are authorised insurance companies as defined in section 3(2), in respect of a policy of insurance which is a United Kingdom policy as defined in section 4(2). The issue is concerned with the meaning of the definition of United Kingdom policy in section 4(2). The argument on this issue advanced by the Royal before the Appellate Committee was supported by New Hampshire in the courts below. The argument was broadly accepted by Webster J. at first instance, but was rejected by the Court of Appeal.
The remaining issues arose on the appeals of the Ackman appellants and the Scher appellants. Not only are these issues narrower in their effect: but, as they came under close scrutiny by the Appellate Committee following the close of argument, considerable anxiety came to be felt that some of these remaining issues, though the subject of abstract declarations in the courts below, might be of no practical relevance in the context of the present litigation. In these circumstances I understand that all your Lordships have reached the conclusion (with which I agree) that further enquiries should be made of the parties directed to the question of the relevance of the remaining issues; but that in the meantime, having regard to the great importance and obvious relevance of the first issue, the members of the Appellate Committee should now make their report to the House on that issue alone, so that a decision can be made upon it at this stage rather than await the results of enquiries made of the parties regarding the remainder.
I accordingly now proceed to address the first issue which, as I have said, is concerned with the definition of the expression 'United Kingdom policy' in section 4(2) of the 1975 Act. This issue, like the other issues in this case, has to be placed in its statutory context. The immediate statutory context is to be found in the relevant provisions of the 1975 Act. These provisions cannot however be considered in isolation. There is a long history of statutory regulation of insurance in this country, stretching back to the middle of the nineteenth century, and culminating in the Insurance Companies Act 1974 ("the 1974 Act"), a consolidating Act which was in force at the time when the 1975 Act was enacted, and now the 1982 Act, a later consolidating Act which replaced the 1974 Act. In the 1975 Act as enacted, there were certain specific references to provisions of the 1974 Act � notably, in the present context, for the meaning of the expression "authorised insurance company" in section 3(2) of the 1975 Act, and for the expression "policyholder" used elsewhere in the same Act. After the 1982 Act was enacted, these references were replaced (though without altering their effect) by the appropriate provisions of the 1982 Act. It is an important function of the 1982 Act, as it was of the 1974 Act which it replaced, to restrict the carrying on of insurance business in the United Kingdom, subject to certain specific exceptions, to bodies authorised by the Secretary of State to carry on any one or more of certain classes of insurance business. (In the 1974 Act, the restriction related to the carrying on of insurance business in Great Britain). Furthermore, it is provided that any person who carries on business in contravention of these provisions will be guilty of an offence. Another important function of the legislation is to make provision for the regulation of insurance companies in a number of respects, designed ultimately for the protection of policyholders. These provisions relate, in particular, to the accounts and statements of insurance companies; to assets and liabilities attributable to long term business: and to financial resources, notably a requirement that each insurance company shall maintain a margin of solvency. Powers of intervention are conferred on the Secretary of State for the protection of policyholders. Provision is also made for the transfer of long term business, with the sanction of the court, and of general business, with the approval of the Secretary of State: and for winding up. It was against the background of this regulatory legislation, as then embodied in the 1974 Act, that the 1975 Act was enacted, drawing in certain specific respects upon provisions of the 1974 Act. Reference will have to be made as necessary to this earlier legislation, when considering the specific issues which...
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