Poole v HM Treasury

Friday, 18th February 2005

Approved Ruling

The claimants, who I am told number 1,097, allege in the claim as currently pleaded that they were Names at Lloyd's at various times during the period 1980 to 1996. They claim in respect of losses incurred by reason of their membership of Lloyd's. In the claim as currently pleaded, those losses relate to liabilities inherited through successive reinsurances to close whereby syndicates in which they participated reinsured liabilities arising from prior underwriting years of account. The losses claimed are confined to losses arising out of the 1992 and earlier years of account—see paragraph 2.4 of the Amended Particulars of Claim and Grower Freeman's letter of 18th March 2004.

By a proposed Re-Amendment of the Particulars of Claim, about 130 to 140 of the claimants, I am told, seek in addition to claim losses flowing from "the PA Spiral", in which syndicates 103 and 718 participated in the 1993 and 1993 and 1994 years of account respectively. This ruling relates to the application to amend in relation to the PA Spiral.

The claimants' claim as currently pleaded is, in summary, as follows: (1) the United Kingdom was required to implement Directive 73/239/EEC on the co-ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance ("the Insurance Directive") in relation to Lloyd's; (2) the United Kingdom failed properly to do so; (3) the United Kingdom's breaches of the Insurance Directive were sufficiently serious to give rise to Francovich liability on the part of the United Kingdom to persons whom the Directive was intended to protect and who suffered losses as a result of its breaches; (4) the claimants are such persons and the United Kingdom's breaches caused the losses in that but for those breaches they would not have joined Lloyd's when they did and/or would not have underwritten at the levels at which they did and/or would have left Lloyd's earlier than they did.

The responsibility for the obligations imposed on the United Kingdom by the Insurance Directive lay with the Secretary of State for Trade and Industry during the period when the breaches of the Directive alleged by the claimants first occurred. Those responsibilities and any relevant liabilities were transferred to the defendant with effect from 5th January 1998. The Secretary of State was originally a defendant to the claim, but was removed by order made at the first Case Management Conference on 31st March 2004. The original claim form, in what the claimants now regard as an indicative statement, valued the claimants' claims at a sum in excess of £1 billion.

The defendant's case, in summary, is that (1) the Insurance Directive does not entail the grant of rights to the claimants in relation to the subject matter of this claim which involves losses incurred not as a result of any impairment of the claimants' freedom of establishment within the EU, nor any default in Lloyd's insurers' obligations to policyholders, but rather the unprofitability in particular years of account of reinsurance business underwritten by them as participants in the Lloyd's market; (2) no breach of the Insurance Directive occurred, since the obligations it imposed on the United Kingdom were properly discharged; (3) any breach of the Directive was not sufficiently "manifest and grave" as to ground state liability in this case; (4) there is no direct causal link between the alleged breaches of the Directive and the damage alleged to have been sustained by the claimants; (5) the alleged losses have to date been insufficiently particularised; (6) the claimants' claims are time-barred.

The defendant resists the proposed additions to the scope of the claim ("the Spiral claim amendments").

As to the procedural history, the claim form was originally issued on 2nd September 2002 identifying the then claimants in a schedule. A series of amended claim forms were issued, each containing changes to the schedule to accommodate changes in the body of claimants.

The claimants instructed solicitors to go on the record and to prepare Particulars of Claim. The Particulars of Claim, along with an amended claim form, were served on 23rd December 2002. A Defence was served, followed by a Reply, as well as two Part 18 requests by the defendant.

Pursuant to orders made at the first Case Management Conference on 31st March last year, (i) the Secretary of State was removed as a defendant; (ii) provision was made for the position of certain claimants who had served notices of discontinuance, in some cases (the claimants say) on the basis of inaccurate information received from third parties; (iii) consequential and other minor amendments were made to the claim form, Particulars of Claim, Defence and Reply; (iv) two issues, grant of rights and limitation, were isolated for determination at a first trial. The order of 31.3.04, paragraph 7(1) and (2), defined those issues (subject to any order further refining the issues. (The first trial is listed to begin in May 2005, with four reading days and eight hearing days, the latter being Tuesday, 10th to Monday, 23rd May) (v) provision was made for preparation of a Statement of Facts.

A Group Litigation Order was made, subject to the consent of the Lord Chief Justice, on 31st March 2004. Consent was given on 5th April 2004. The Group Litigation Order provided by paragraph 1:

"This order applies to claims in respect of the following common or related issues of fact or law ('GLO issues')—

Whether the United Kingdom (including any department or part of its government) is liable to the claimants or to any additional potential claimants for losses suffered by them as present or former underwriting members or Names of Lloyd's alleged to have been caused by the failure of the United Kingdom to comply with applicable provisions of European Community law or (so far as material) domestic English law relating to insurance undertakings."

Paragraph 7 provided that the Commercial Court will be the Court which will manage the claims on the group register, and any future claims to which the order applies are to be issued in the Commercial Court and entered in the register.

Paragraph 9 provided:

"Further individuals who on or before 30 June 2004 (later changed to 30 July 2004) issued claims to which this order applies shall be entered in the group register and joined as claimants under the terms of this order. Further individuals who issued claims to which this order applies after that date shall, unless the Commercial Court otherwise orders, be precluded from joining the Lloyd's Names UK Government Group Litigation. Any individual who joins the group litigation by virtue of such an order will be deemed to have become party to the proceedings on the date of entry on the group register and will be bound by the court's determination of such, if any, issues as may have been determined as of that date."

Paragraph 10 provided:

"Claimants falling within paragraph 9 of this order, or prospective claimants, may inspect copies of the pleadings in the claim in the title of this order at the Offices of Grower Freeman or at the Commercial Court registry. They may adopt the Particulars of Claim and any other Statement of Case served in the claim in the title to this order (the Poole claim); and, if they do so, shall serve Statements of Case which shall (a) state which paragraphs or provisions of the Particulars of Claim or other Statement of Case served in the Poole claim they adopt and (b) otherwise be limited to allegations other than those made in the Poole claim."

The claimant's submissions.

Mr Richard Plender, Queen's Counsel for the claimants, submitted as follows.

The proposed re-amendments do not plead a new claim. They particularise the loss which, as previously pleaded, the "claimants have suffered as a result of the defendant's breaches".

In the context of an action based on the rule recognised in Francovich, a failure to implement a Directive gives rise in principle to a continuing breach of statutory duty.Paragraphs 22A to 22I of the proposed amendment describe features of the reinsurance and Spiral business and plead that among those to suffer loss were Names on syndicates 103 (in respect of the 1993 year of account) and 718 (in respect of years of account 1993 and 1994).

Paragraph 104A pleads that if the defendant had fulfilled certain specified obligations under the Insurance Directive, "the PA Spiral losses on syndicates 103 and 718, as described in the judgment of this court in Sphere Drake, would not have occurred".

An amendment which gives factual details of a cause or causes of action already pleaded does not constitute a new claim. Alternatively, the addition of further losses or heads of losses arising from the same factual situation does not create a new cause of action.

This is not a case where a party seeks to add a new cause of action or to redefine his claim so as to advance a different cause of action. The claim began as a Francovi...