Deeny v Gooda Walker Ltd (No 2) [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Phillips J |
| Judgment Date | 06 April 1995 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 April 1995 |
Queen's Bench Division (Commercial Court)
Phillips J.
Andrew Smith QC and David Lord (instructed by Wilde Sapte) for the plaintiffs.
Bernard Eder QC and Simon Bryan (instructed by Elborne Mitchell) for the defendants.
The following cases were referred to in the judgment:
Brown v KMR Services Ltd (formerly HG Poland (Agencies) Ltd) [1994] CLG 492.
Hawkins v New Mendip Engineering LtdWLR [1966] 1 WLR 341.
Mulholland v MitchellELR [1971] A.C 666.
Murphy v Stone Wallwork (Charlton) LtdUNK [1969] 2 All ER 949.
Parry v CleaverELR [1970] AC 1.
Society of Lloyd's v Clementson [1995] CLC 117.
Sword-Daniels v Pitel & Ors [1994] CLC 492.
Trans Trust SPRL v Danubian Trading Co LtdELR [1952] 2 QB 297.
Damages — Assessment of damages for losses suffered by Lloyd's names as result of negligent underwriting — Whether proceedings ought to be stayed — Proper approach to damages — Whether appropriate to award damages in respect of past claims and reserve future claims-Rules of the Supreme Court, O. 33.
This was an application to stay proceedings, in which judgment had been given for the plaintiff Lloyd's names in respect of losses suffered as a result of incompetent underwriting, pending the determination of Society of Lloyd's v Clementson 1992 Folio No. 1820. The main issues were whether or not it was appropriate to proceed with the assessment of damages, and if so, the proper approach to damages.
On 4 October 1994 Phillips J gave judgment ([1994] CLC 1224) for the plaintiff Lloyd's names in the present action, holding that the names were entitled to. recover damages for losses sustained as a result of breach of duty against the managing agents of their syndicates and their members' agents. They could recover for losses flowing from incompetence in the writing of excess of loss business. The award of damages was to place them in the same position as if the underwriting carried on on their behalf by each syndicate had been competently performed. The defendant underwriters applied for a stay of proceedings, inter alia, pending the determination inSociety of Lloyd's v ClementsonOf the issue of illegality of claims by Lloyd's for reimbursement from names of sums paid out of the central fund. No such issue was raised in the present proceedings, in which Clementson and other names who had had liabilities discharged by payments out of the central fund asserted that they were liable to reimburse the central fund in respect of such payments.
Held, awarding damages accordingly:
1. Since the issue of illegality was not raised in the present proceedings, and even if Clementson's defence in separate proceedings were eventually to succeed it was unlikely to do so on a basis that would require the Commercial Court to refuse to grant the present plaintiffs any further relief, it was not appropriate to grant a stay of proceedings.
2. If Lloyd's were to make payments out of the central fund in discharge of the plaintiff names' liability on the false premise that the plaintiffs would be bound to reimburse Lloyd's, the defendants would remain liable to the plaintiffs in damages. It followed that the plaintiffs' liability to Lloyd's in respect of payments from the central fund was not a precondition for their recovery in damages from the defendants.
3. If the plaintiffs recovered damages in respect of liabilities discharged by Lloyd's in an action where they asserted that they were liable to indemnify Lloyd's, as in the present case, it was probable that Lloyd's could claim reimbursement under principles of agency and restitution without the need to rely on the Lloyd's arrangements.
4. Since the plaintiffs raised no issue of illegality in the present action, the defendants had no answer to the plaintiffs' contention that they were obliged to reimburse the central fund under para. 10 of the central fund byelaw. The Court of Appeal ruling in Clementson [1995] CLC 117) that there was an arguable defence was no bar to the plaintiffs establishing in this action, where that defence was not asserted, that there was a liability to reimburse the payments made from the central fund. It followed that the payments made out of the central fund did not reduce the losses in respect of which the plaintiffs were entitled to claim damages.
5. The court had power under RSC, O. 33 to make an award of damages in relation to part of a claim while deferring for adjudication another part. There was accordingly jurisdiction to make an award in respect of claims that had been paid while reserving for future determination that part of the plaintiffs' claim relating to anticipated claims.
6. The exceptional course of deferring the assessment of damages relating to anticipated claims was justified by the nature of the loss, which was uncertain, the difficulties of assessing the loss, which could not be predicted with reasonable confidence and the consequences of once and for all assessment of damages. In all the circumstances, including the desirability of a uniform approach to the Lloyd's cases, it was appropriate to award damages for underwriting losses when they were sustained and not in anticipation of them. (Brown v KMR Services Ltd (formerly HG Poland (Agencies) Ltd)andSword-Daniels v Pitel & Ors[1994] CLC 492followed.)
Phillips J:
This judgment deals with a number of issues of principle that fall to be resolved in relation to the assessment of damages.
Mr Eder submitted that, having particular regard to comments recently made by Saville LJ when this and other Lloyd's proceedings came before the Court of Appeal, it is not appropriate to embark on the assessment of damages at this stage. Saville LJ said:
“I think the only policy, as I recall it, when I set up the management system was that the point generally about first past the post was indeed adumbrated; I in fact raised it and I think I did point out to everybody that there was at least a possibility that victory first time round did not necessarily mean victory in total, that there would very likely indeed be a second round of litigation in which the question as to who scooped the pool (as we called it) or pools would arise and I simply gave that warning. If my memory is correct, in order not to pre-empt that question the orders and directions I gave, now nearly two years ago, were all orders or directions for the hearing of trials which would not end on my directions in final money judgments.”
These comments do not give, and clearly were not intended to give, any guidance as to what course should be followed by judges who are now faced with the implications of competing claims to limited E & O recoveries. When dealing with an application for interim payment in this action and faced with a similar argument advanced by Mr Eder, I ruled that it was not appropriate to be influenced by the effect that making or refusing the order sought would have on claims to E & O funds. I remain of that view and accordingly, subject to the next point raised by Mr Eder, I propose to proceed with the assessment of damages in this action.
Mr Eder submits that I should not proceed to assess damages in this case until judgment has been given in the Society of Lloyd's v Clementson1992 Folio No. 1820 (see [1995] CLC 117). In that action Lloyd's seek to recover from Mr Clementson moneys paid out of the central fund pursuant to para. 7(a) of the central fund byelaw in order to make good defaults by Mr Clementson in meeting his obligations to policyholders under contracts of insurance written on his behalf. Mr Clementson is a plaintiff in this action. The damages he claims in this action include liabilities to policyholders which have been discharged by part of the payments from the central fund which Lloyd's are seeking to recover from Mr Clementson. In this action it is...
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Deeny v Gooda Walker Ltd (No. 2)
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