Society of Lloyd's v Levy
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morison |
| Judgment Date | 30 July 2004 |
| Neutral Citation | [2004] EWHC 1860 (Comm) |
| Date | 30 July 2004 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 1997F761/778 |
[2004] EWHC 1860 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Morison
Case No: 1997F761/778
2000/58/59
Mr D Foxton (instructed by Lloyd's) for the Claimant
Prof. M Watson-Gandy (instructed by James Barnett) for the Defendants
Hearing dates: 26–27 July 2004
Approved Judgment
Mr Justice Morison:
There are two cases in which applications are being heard together. They arise out of the Lloyd's of London affair. Both sets of Defendants, Dr and Mrs Levy and Mr & Mrs Johnson live outside the jurisdiction. In each case Lloyd's say that they owe the Society monies in respect of renewal premiums, the rights to claim which were assigned to the Society by Equitas Reinsurance Limited by way of security. The amounts involved are reasonably substantial; £300,000 odd, plus interest, in relation to Dr and Mrs Levy; over £1/2 million in relation to Mr and Mrs Johnson, plus interest. This matter was set down for a two day hearing by Cooke J on 5 August 2003.
There are, in essence, four applications before me:
(1) An application by Lloyd's, the Claimants, for summary judgment on their claims and in respect of a counterclaim brought by the Johnsons;
(2) Three applications brought by the Defendants:
(1) permission to amend to tidy up the existing pleading to remove points which cease to be arguable in the light of the decisions of this court and the Court of Appeal and to "plead or more fully explain the defendants' case … on the remaining issues [which] the defendants rely on" namely:
(a) the registration point, namely that the security on which the Claimants' debt claim is based is unregistered;
(b) in the Levys' case, that Lloyd's are unable to prove the cause of action for unpaid premium was assigned to them "given that no stamp duty has been paid";
(c) The European Directive point
(d) In the case of the Johnsons, to raise a question on quantum
(2) An application for specific disclosure and Inspection;
(3) An application that the court should refer this case to the ECJ under Article 234 because there has been an infringement of The Insurance Companies Act 1982 and EC Directive 73/239.
The background to the Lloyd's litigation in general is too well known to require extensive recital. In brief, Lloyd's implemented a Reconstruction and Renewal Plan in 1996 which involved the compulsory reinsurance of all Names for the 1992 underwriting year and prior year's underwriting liabilities by Equitas Reinsurance Limited in return for a premium payable by each name. By clause 13 of the Completion Agreement, dated 3 September 1996, the debt owed by the Defendants to Equitas was assigned to Lloyd's. Notice of the assignment was formally given to the Defendants by pro forma letter dated 24 February 1997. On 3 September 1996 the Reinsurance and Run-Off Contract was entered into between Equitas and the Names. Pursuant to clause 5.1(b) of the Reinsurance Contract, the Names, including the Defendants became liable for the premium which was payable to Equitas on 4 September 1996, although interest did not accrue until 30 September 1996. At the same time Names were offered a settlement under the terms of a Settlement Agreement. Accepting Names became obliged to pay on 30 September 1996, and interest accrued as from that date.
The validity and effectiveness of the Reconstruction and Renewal Plan and its related contracts has been the source of much litigation. The background to the present litigation is conveniently set out in Mr Foxton's skeleton argument and I incorporate it, with a few minor changes, as it is accurate.
The Background
The Levys
The writs against Dr and Mrs Levy claiming payment of outstanding Equitas premiums were issued on 24 March 1997. Service was acknowledged on 20 May 1997 by Grower Freeman. On 16 January 1997, Epstein Grower wrote to Lloyd's solicitors, identifying the Levys amongst the list of Names for whom they acted. The Levys were also among the "funders" of the Leighs litigation who were made liable for the costs of that litigation pursuant to the order of Colman J dated 26 October 1998. Summary judgement on the claim against the Levys was not initially pursued because they filed for bankruptcy in the US on 9 February 1998 in the Northern District of California. It would potentially have been a contempt of court to proceed with court proceedings here whilst the bankruptcy was pending. In fact, the Levys' application for bankruptcy was dismissed.
Dr and Mrs Levy also participated in the Jaffray action. Again, they were, initially, represented by Grower Freeman, until More Fisher Brown became the solicitors on the record. The Levys were joined to this action as at 5 January 2000 pursuant to paragraph 1 and Schedule 3 of the Order of Cresswell J dated 14 January and stamped on 21 January 2000. Although the writ against the Levys had been served by this time, they were listed in the case as "original claimants" rather than "counterclaimants" (perhaps as a result of an oversight). The Levys participated in the Jaffray proceedings throughout.
In the run-up to the trial of that action, at the Court's request, Lloyd's voluntarily undertook not to pursue proceedings against Names who were parties to the Jaffray action. This stay was voluntarily continued to the final disposition of the appeal against Mr. Justice Cresswell's judgment. The Court of Appeal handed down judgment on 26 July 2002, and Lloyd's voluntary stay came to an end at the hearing refusing permission to appeal to the House of Lords on 28 October 2002.
At this point, the Levys:
(1) made an application for permission to amend their claim in the Jaffray action (made on their behalf by MFB) to plead a claim in negligent misrepresentation in reliance on the Human Rights Act 1998. This application was made on 25 October 2002, and became known as the Laws application;
(2) served Defences and Part 20 Claims in their Equitas Premium proceedings (served by Grower Freeman) relying by way of counterclaim on the proposed claim of negligent misrepresentation for which permission was being sought in the Jaffray claim: the Defences and Part 20 Claims were served on 14 November 2002.
In these circumstances, it was eventually agreed that the applications for summary judgment which Lloyd's had issued against the Levys should be heard after the application for permission to amend had been heard and determined in the Laws application ( L2/28/8). The Levys, again represented by MFB, were parties to the Laws litigation. Their applications for permission to amend were refused by Cooke J in his judgment of 17 April 2003 ( Society of Lloyd's v. Laws and others [2003] EWHC 873 (Comm)), and their applications for permission to appeal were refused by the Court of Appeal by judgment dated 19 December 2003 ( Laws and others v. Society of Lloyd's [2003] EWCA 1887).
After Cooke J. had refused the application for permission to amend in Laws, the Levys instructed a new solicitor, Mr. Barnett. On 28 November 2003, he provided Lloyd's with a new draft Amended Points of Defence and Counterclaim (to which Lloyd's did not consent) which sought to attack the vires or validity of the steps by which the Levys had become parties to the Equitas Contract, and which challenged the entitlement of Lloyd's to rely on the assignment of the Equitas Premium debt by Equitas to Lloyd's, the Stamp Act point. In addition, various challenges were made to the quantum of Lloyd's claim. This draft has been superseded by a further draft provided to Lloyd's on 8 June 2004 which forms the basis of the application for permission to amend.
The Johnsons
The Johnsons were not served with Equitas Premium writs until 18 January 2000. They were "conditional acceptors" and issues had to be resolved as to their status ( J1/30). They participated in the Jaffray action as original claimants, by virtue of their inclusion in a schedule served by their then solicitors, Grower Freeman, on 26 June 1998 ( J1/7–9). Thereafter they have participated in the Jaffray and Laws cases, represented by MFB.
The Johnsons served Defences and Counterclaims on 25 February 2000. These raised allegations of deceit and alleged that "Lloyd's have failed to comply with the European Insurance Regulations and audit obligations". These Defences were amended in May 2000 to replace the allegation against Lloyd's with an allegation against the British Government that it failed properly to apply the provisions of European Directive 73/239 and to raise an issue as to the debt credits. By application notice dated 14 July 2004, the Johnsons (who are now instructing Mr. Barnett) seek permission to re-amend the Defence and Counterclaim to raise similar arguments raised by the Levys, and in addition an argument based on an alleged breach by Lloyd's of Directive 73/239.
The parties' submissions
Professor Watson-Gandy has represented the Defendants' case with ability and good sense. He explained that the latest versions of the draft pleadings endeavour to cut out from them those points which have become unarguable in the light of the Court's many previous decisions. The points which are left for consideration are those identified for convenience as The European Directive point; the stamp duty point; the registration point and, in the case of the Johnsons, the quantum point.
I have put the European Directive point at the top of the list because it is the point upon which most...
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