Society of Lloyd's v Laws and Others
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr. Justice Cooke,Mr justice Cooke,The Honourable Mr Justice Cooke,Mr Justice Cooke |
| Judgment Date | 28 January 2004 |
| Neutral Citation | [2004] EWHC 71 (Comm),[2003] EWHC 873 (Comm),[2004] EWHC 130 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 1996/2032 |
| Date | 28 January 2004 |
[2003] EWHC 873 (Comm)
IN THE HIGH COURT OF JUSTICE COMMERCIAL COURT
QUEENS BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Cooke.
Case No: 1996/2032
Mr. Charles Aldous QC, Mr. David Anderson QC, Mr. David Foxton and Miss Maya Lester (instructed by Freshfields Bruckhaus Deringer) for the Claimant.
Mr. Bernard Weatherill QC (instructed by More Fisher Brown) and Mr. Gordon Nardell instructed by Grower Freeman) for the Defendant and the UNO Names.
Mrs Mackenzie Smith, Mrs Reisz, Mr Burns, Mr Butler and Mr Wilson (for himself and his wife), Mrs Ann Strong and Mr Doll-Steinberg for Mrs Doll-Steinberg in person
Hearing dates: 26 th &: 27 th March 2003, 31 st March – 7 th April 2003
and 10 th– 14 th April 2003
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Index
Introduction: History of the proceedings and identification of the parties to the application for permission to amend (paragraphs 1–27)
The test for allowing amendment of pleadings (paragraphs 28–34)
Claims in respect of Lloyd's duty to the Names to disclose information, advise and regulate the Lloyd's market (paragraphs 35–37)
Claims in respect of fraudulent Misrepresentations other than those advanced and determined by Cresswell J and the Court of Appeal (paragraphs 38–40)
Are the Names' claims for Statutory or Negligent Misrepresentation time barred?
When did the cause of action arise? (paragraphs 41–51)
The relevant Limitation Period (paragraphs 52–53)
Section 32 of the Limitation Act (the 1980 Act) (paragraphs 54–61)
The effect of CPR17.4 and s 35 of the 1980 Act on applications to amend pleadings after the time bar has elapsed. (paragraph 62)
Misrepresentations made prior to 5. 1.1983 (paragraphs 63–67)
Misrepresentations made after 5. 1.1983 (paragraphs 68–81)
Section 14A and B of the 1980 Act. Are the claims time barred even if section 35(5) of the 1980 Act and CPR 17.4 apply (paragraphs 82–84)
1. Section 14B of the 1980 Act (paragraphs 85–88)
2. Section 14A of the 1980Act (paragraphs 85–94)
2.1. The nature of the knowledge required (paragraphs 95–109)
2.2. The knowledge of the Names. (paragraphs 110–129)
The Lloyd's Act 1982 (the 1982 Act) (paragraphs 130–197)
When did section 14(3) of the 1982 Act come into force? (paragraphs 130–132)
The Impact of the Human Rights Act (the HRA) on section 14(3) of the 1982 Act.
1. The 1982 Act's effect prior to the HRA (paragraphs 133–141)
2. The retrospectivity argument (paragraphs 142–158)
3. Is Article 6 of the Convention engaged? (paragraphs 159–170)
4. Is a compatible construction of section 14(3) with the HRA possible?(paragraphs 171–179)
5. Was the publication of brochures by Lloyd's part of its regulatory function? (paragraphs 180–197)
Other Interpretations (paragraphs 198–206)
Miscellaneous Points (paragraph 207)
Discretion and Prejudice (paragraphs 208–215)
Conclusions (216–218)
Mr justice CookeIntroduction.
On 3rd November 2000 Cresswell J gave judgment on the "Threshold Fraud Point", as it was known, in a number of actions. In actions commenced by Lloyd's against various Names who had refused to accept the R & R settlement offer of July 1996, claims were brought in respect of premium for reinsurance of their liabilities to Equitas and counterclaims were raised by those Names. In other actions, Names had themselves brought claims, the common thread between the Names' claims and counterclaims being allegations of fraudulent misrepresentation made by Lloyd's in brochures and other publications issued by them which, it was said, induced the Names to become members of Lloyd's and to enter into agreements with Members Agents and Managing Agents. For a comprehensive account of the background, and the extensive history which lies behind the "Threshold fraud" trial, reference should be made to the terms of the lengthy judgment of Cresswell J and the appendices to it. The Names appealed against the decision of the learned Judge and that appeal was rejected on 26th July 2002 in another lengthy judgment delivered by Waller LJ on behalf of the Court of Appeal. Once again, reference should be made to that judgment for the background to the appeal.
By an Order dated 30th June 1998, Colman J had ordered that four specific actions should be tried together and the Threshold Fraud point determined, following exchanges of pleadings and evidence in accordance with the directions he made. There was a requirement to identify the different categories of claim advanced by different Names by reference to the Threshold Fraud Point which was, at that stage, defined as:
"the issue whether Lloyd's made misrepresentations which it knew to be untrue and/or as to which it was reckless whether they were true or false and whether such misrepresentations were communicated to the Names and if so when".
Of those Names so identified, who had not at that stage served a claim or counterclaim alleging fraud against Lloyd's, one claimant from each category was to serve a pleading incorporating such part of the Points of Defence and Counterclaim already served on behalf of Sir William Jaffray as he might be advised and setting out any particular matters relating to the Threshold Fraud Point which applied to their claim. By a letter of 16 th September 1998 Schedules were served by solicitors acting for the UNO Names setting out the categories of claim and those Names who were pursuing them. Only one category, Category 1, related to misrepresentations in the Brochure for Applicants for Underwriting Membership for the year of joining. As it turned out, the categories overlapped in the content of their cases (the other 20 categories related to the Global Report and Accounts produced by Lloyd's in relation to closed years of account between 1977 and 1995) so that it became unnecessary to draft a multiplicity of pleadings and that of Sir William Jaffray which pleaded reliance on the Brochure became the key pleading.
By a further Order dated 1st July 1999, the allegations of fraud to be tried on the 11th January 2000 were further refined, being confined to the period 1978 to 1988 and by reference to the alleged fraud of 33 named persons at Lloyd's. In addition to the matters previously referred to, the issue of reliance by 3 sample Names was also to be determined. It was specifically provided that the Names would not seek to investigate at trial the position of any particular Lloyd's syndicate or seek to show that any such syndicate wrongly closed any years of account: nor would any allegations of fraud be made against panel auditors: nor would the Names seek to investigate at trial the manner in which any particular firm of auditors conducted the audit of any Lloyd's syndicate for any particular syndicate year of account. Moreover the only allegation to be made as to the withholding of material information from underwriters or auditors by Lloyd's was that Lloyd's had failed to distribute the Murray Lawrence letter of 18th March 1982 to the Members Agents, an issue which was ultimately determined against the Names by Cresswell J at the Threshold Fraud Trial.
On 1st November 1999, Cresswell J made a further order for directions. In this order, as in others, additional Names were identified as counterclaiming Names and in each case, where the Name had no existing proceedings, a date was specified as the deemed date of commencement for Limitation Act 1980 purposes. He ordered that any Names who wished to advance allegations of fraudulent inducement to become or remain an Underwriting member of Lloyd's by reason of Lloyd's failure to disclose the nature and extent of the market's liability for asbestos related claims had to provide written notice by a specified date, failing which they would thereafter be precluded from advancing such allegations without the permission of the Court. As a result of this order (as appears from the statement sent on the Court's instructions to Names who were in dispute with Lloyd's) the Court hoped to ensure that all fraud arguments would be enshrined in the Threshold Fraud Trial and would be determined once and for all, between Lloyd's and all non-accepting Names, however such fraud claims were framed, whether by reference to misrepresentation or non-disclosure of information.
As finally reformulated in the Re-Re-Amended Points of Defence and Counterclaim of Sir William Jaffray, the fraud alleged against Lloyd's was contained in a series of representations made in the Lloyd's Brochure and by reference to the Aggregate Results/Global Reports and Accounts which Lloyd's issued annually and upon which the Name relied in deciding to join or remain in Lloyd's and in deciding on premium limits and the continuation of underwriting. The details of these alleged representations are set out in the judgment of Cresswell J and the judgment of the Court of Appeal. It was alleged that the representations were false because Lloyd's knew, at the time of making such representations that the minimum audit reserves were manifestly inadequate in the light of its knowledge of the Lloyd's market's exposure to asbestos related liabilities, as set out in paragraph 34 of the Re-Re-Amended Points of Defence and Counterclaim. As part of the plea of falsity, in paragraph 34.2, it was alleged that Lloyd's failed to make proper and full disclosure of material information relating to the exposure of the Lloyd's market to potentially huge and escalating asbestos related claims and that, moreover,...
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