Hallam-Eames v Merrett Syndicates Ltd [QBD (Comm)]

JurisdictionEngland & Wales
JudgeGatehouse J.
Judgment Date14 October 1994
CourtQueen's Bench Division (Commercial Court)
Date14 October 1994

Queen's Bench Division (Commercial Court)

Gatehouse J.

Hallam-Eames & Ors
and
Merrett Syndicates Ltd & Ors

Brian Doctor (instructed by More Fisher Brown) for the plaintiff names.

John Rowland (instructed by Reynolds Porter Chamberlain) for the defendant managing agents.

Roger Toulson QC and Colin Edelman (instructed by Oswald Hickson Collier) for the defendant members' agents.

Christopher Clarke QC and M Howard (instructed by McKenna & Co) for the defendant auditors.

The following cases were referred to in the judgment:

Broadley v Guy Clapham & Co [1993] 4 Med LR 328.

Dobbie v Medway Health AuthorityWLR [1994] 1 WLR 1234.

Iron Trade Mutual Insurance Co Ltd & Ors v J K Buckenham LtdUNK [1990] 1 All ER 808.

Islander Trucking Ltd (in liq) v Hogg Robinson & Gardner Mountain (Marine) Ltd & OrsUNK [1990] 1 All ER 826.

London Congregational Union Inc v Harriss & Harriss (a firm)UNK [1988] 1 All ER 15.

Moore (D W) & Co Ltd & Ors v Ferrier & OrsWLR [1988] 1 WLR 267.

Nash & Ors v Eli Lilly & Co & Ors [1992] 3 Med LR 353; [1993] 4 All ER 383 (CA).

Sheldon & Ors v RHM Outhwaite (Underwriting Agencies) Ltd & OrsWLR [1994] 1 WLR 754; [1994] CLC 703 (CA).

Limitation of action — Lloyd's names suing managing agents, members' agents and syndicate auditors in respect of run-off contracts and reinsurance to close — Limitation defence — Reliance on deliberate concealment of facts — Date requisite knowledge acquired to bring action for damages — Limitation Act 1980, s. 14 A, 32(1) (b) (as amended) — Rules of the Supreme Court, O.14A, O. 33, r. 3.

These were applications by the defendants under RSC, O. 14A and O. 33, r. 3 to determine whether actions were statute-barred.

The actions were brought in contract and tort by Lloyd's names who were members of syndicates 418/417 on the 1985 year of account which remained open. The defendants were the managing agents, members” agents and the auditors of the Merrett syndicates. The actions concerned the writing of run-off contracts from 1978 to 1983, and the effecting of reinsurance to close (“RITCs”) of the 1979 to 1984 underwriting years of account. The first writ was issued on 27 January 1993. The defendants claimed that the actions brought by plaintiffs who had joined the syndicates in question before 1985 were statute-barred under s. 14(3) of the Limitation Act 1980, relying on information sent directly or indirectly to the plaintiffs concerning heavy losses and anticipated future heavy losses between 1984 and 1988. The plaintiffs relied on an extension by three years of the primary limitation period under s. 14A of the 1980 Act, as amended, on the basis of latent damage or the postponement of the limitation period unders. 32(1)(b) in the case of deliberate concealment.

Held, granting the defendants' applications and dismissing the actions of the plaintiffs who had joined the syndicates before 1985:

1. The causes of action accrued at the time when each of the run-off contracts and RITCs were entered into. It followed that the primary limitation period of six years had long since expired in respect of each of the run-off contracts and RITCs except the closure of the 1984 year of account into the 1985 year. There being no provision for an extension of the primary period in contract, all the causes of action founded on contract were statute-barred.

2. Section 32(1)(b) of the 1980 Act did not operate to prevent time running where the defendant deliberately concealed facts after the plaintiffs cause of action had arisen. The concealment of which the plaintiffs complained occurred after their cause of action arose. Accordingly the plaintiffs could not rely on s. 32(1)(b) of the 1980 Act to overcome the statutory time bar. (Sheldon & Ors v RHM Outhwaite (Underwriting Agencies) Ltd & Ors[1994] CLC 703applied.)

3. The “starting date” for the extended period of limitation in s. 14A of the 1980 Act was the date that the plaintiff had knowledge that the damage suffered was significant and capable of being attributed to the act or omission of the defendant which was alleged to constitute negligence. (Dobbie v Medway Health AuthorityWLR[1994] 1 WLR 1234followed.)

4. The test of whether the plaintiffs had constructive knowledge under s. 14A(10) was objective. It was sufficient for the defendants to show that they had provided relevant information to the plaintiffs, who were not entitled to rely on subjective evidence as to the state of mind of individual plaintiffs.

5. Between 1984 and 1988 the plaintiffs received information either directly or via members' agents concerning heavy losses arising out of the relevant run-off contracts. That constituted constructive knowledge within s. 14A(10)(a)that the acts in respect of which the claims based on the run-off contracts were brought had resulted in significant loss attributable to the underwriting defendants. The plaintiffs had therefore failed to show that they first had knowledge of significant damage within s. 14A(7) capable of being attributed to the defendants within the three-year period ending on 27 January 1990. Their claims in tort were accordingly statute-barred.

6. Similarly the plaintiffs' receipt of the underwriting accounts in respect of RITCs as at 31 December 1981 to 1988 showing very substantial losses constituted constructive knowledge of the material facts earlier than the starting date of 27 January 1990. Any claim in tort in respect of the RITC for any of the relevant years of account was statute-barred.

7. Since the criteria in s. 14A were objective, the preliminary issues raised involved pure questions of law. No disputed issues of fact concerning individual plaintiffs were relevant. Accordingly the applications were appropriate for decision as preliminary issues under RSC, O.14A without recourse to the determination of disputed issues of fact under O.33, r. 3.

JUDGMENT

Gatehouse J: These actions involving the Merrett defendants concern actions brought by names at Lloyd's who participated in marine syndicate 418 and its incidental non-marine syndicate 417 on the 1985 year of account which remains open. There are, essentially, three groups of actions in the litigation. They may be summarised as follows:

  1. (1) Those names who were members of syndicates 418/417 for the 1985 year of account but who had first joined the syndicate in the 1983 year of account or some earlier year. These plaintiffs claim essentially in respect of two broad areas of alleged negligence:

    1. (a) the writing of a number of “run-off” contracts by syndicates 418/417 in the period 1978-1983; and

    2. (b) the effecting of the reinsurance to close of the 1979-1984 underwriting years of account inclusive.

    There are a number of writs issued by these names, the first in time was a writ issued on 27 January 1993, the first named plaintiff being Mr Alder. However, this group of actions is known as the “Hallam-Eames” action (or the “early joiners” action).

  2. (2) Those names who first joined the syndicates for the 1984 underwriting year of account. Their claim is essentially based on the alleged negligent closure of the 1983 year of account into the 1984 year of account and subsequently the 1984 year of account into the 1985 year of account. There are again several writs involved in these actions, the writs being issued in the spring of 1992. The first named plaintiff in these actions was Mr Henderson and the actions are known collectively as the “Henderson” action.

  3. (3) Those names who first joined the syndicate for the 1985 year of account and whose complaint concerns the alleged negligent closure of the 1984 year of account into the 1985 year of account. The writs in these actions were issued in the spring of 1993 with the first named plaintiff being Elise Hughes. These are known collectively as the “Hughes” action.

The present applications are concerned only with the Hallam-Eames action.

The Hallam-Eames names claim in both contract and in tort against the managing agent and active underwriter of the syndicates (the Merrett defendants), against their members' agents (where different) and against the syndicate auditors, Ernst & Whinney.

Prior to 1 January 1986, Merrett Syndicates Ltd acted as both a managing and members” agent at Lloyd's. On 1 January 1986 Merrett Underwriting Agencies Management Ltd assumed the management of the syndicates, and Merrett Syndicates Ltd became purely a members” agent. Names who participated in syndicates 418/417 prior to 1 January 1986 who appointed Merrett Syndicates Ltd as both their members” and managing agent were “direct” names and advance their claims against Merrett Syndicates Ltd in both contract and in tort. Names who participated in the syndicates through a different members” agent were “indirect” names and advance their case against Merrett Syndicates Ltd (as a managing agent) and Merrett Underwriting Agencies Management in tort. All names advance a claim in tort against Mr Merrett personally (as the active underwriter) but not in contract.

All three groups of actions are due for trial (on issues other than quantum) in March 1995. The present estimate for that hearing is 20 Commercial Court weeks.

One of the central issues in the Hallam-Eames action is the question of limitation of action. All the defendants in the Hallam-Eames action have pleaded limitation defences to all the claims made by those names. No such limitation defences arise in either the Henderson or Hughes actions. (Note: there are small numbers of names in the Hallam-Eames action who appear to have joined the syndicates for the first time in either 1984 or 1985. As against those who joined in 1985 there is no limitation defence available. Those names in fact have no cause of action against the defendants for any other claim than the closure of the 1984 year of account, and there is no limitation plea raised in respect of that claim. It is assumed that these names were intended to be in the Hughes action.)

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1 cases
  • Hallam-Eames and Others v Merrett and Others
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 16 June 1995
    ...s. 14A, 32(1)(b)(as amended) Rules of the Supreme Court, O. 14A, O. 33, r. 3. This was an appeal against a decision of Gatehouse J ([1994] CLC 1291) on applications under RSC, O. 14A and O. 33, r. 3 that certain claims in tort by the defendants were The actions were brought by Lloyd's names......

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