Society Of Lloyd's v Fraser & Ors

Order 14 is a summary judgment procedure, not a summary trial. Judgment may be entered where no triable defence exists, including where an earlier legal decision has already resolved the proposed defence.

A no-set-off clause may be enforced despite allegations of fraud or regulatory breach where it preserves a separate remedy and forms part of a legitimate restructuring scheme. Foreign securities legislation does not ordinarily defeat an English-law contract made and performed in England. EEC insurance directives cannot be applied retrospectively or used to neutralise the clause where an effective remedy remains. A conclusive-evidence clause requires a clear manifest error, not a general audit of the underlying figures.

The Society of Lloyd's claimed reinsurance premiums from non-accepting Names under the 1996 reinsurance and run-off contract. The Commercial Court had made earlier Order 14A determinations and had rejected fraud-based defences. Tuckey J subsequently rejected a proposed bad-faith defence as an abuse of process, rejected a Canadian securities-law defence, decided quantum issues and directed that Order 14 judgments be entered. Colman J made a corresponding order in the case of Mr Thomas-Everard.

The Names sought leave to appeal. The principal issues were whether the bad-faith argument could be raised, whether Canadian securities legislation or EEC insurance directives supplied a defence, and whether the Society's calculation of the premiums disclosed triable quantum issues.

1. Disposition. Hobhouse LJ delivered the judgment of the court, and all applications for leave to appeal were refused. The proposed appeals could not affect the Order 14 judgments because the proposed defences were not arguable.
2. Order 14. Order 14 is not a summary trial. The court determines whether there is an issue requiring trial or another reason for trial. It may decide legal questions already determined under Order 14A or in earlier binding proceedings, but it must not determine disputed facts. A previous decision states the law generally, not merely between the original parties. The position may differ where fresh evidence or materially different facts are shown. The principles in Ashmore v British Coal [1990] 2 QB 338 and House of Spring Garden v Waite [1991] 1 QB supported that approach.
3. Bad faith and abuse of process. The bad-faith argument repeated the earlier fraud allegations, supplied no evidential basis for fraud in 1996 and could not distinguish the earlier decisions. Clause 5.5 was a standard and legitimate no-set-off provision, necessary to protect the prompt operation of the Lloyd's market and not to protect the alleged wrongdoer. Authorities including Arbuthnott v Fagan [1996] LRLR 135 and Marchant v Higgins [1996] 2 Lloyd's 31 supported that conclusion. Parties within marshalled litigation must ordinarily abide by test-case outcomes, although the court indicated that a person merely notified of proceedings might not be privy to them. The bad-faith argument nevertheless failed on its merits.
4. Foreign and EEC law. The contracts were governed by English law, made in England and required performance in England. The exceptions in Ralli Bros v Co Nav Sota y Aznar [1920] 2 KB 287, Foster v Driscoll [1929] 1 KB 520 and Regazzoni v Sethia [1958] AC 301 did not apply. The regulatory and non-universal character of the Ontario securities legislation did not engage the public-policy or comity exception discussed in Re: Missouri Steamship 42 Ch D 321 and Vita Food v Unus Shipping [1939] AC 277. The Third Non-Life Insurance Directive was not retrospective, and clause 5.5 preserved a separate remedy for any EEC-law claim.
5. Quantum. Personal expenses formed part of the outstanding liabilities covered by the reinsurance contract. Non-accepting Names had no right to require allocation of CLSF or PSL credits against the premium; the contractual allocation provisions operated as stated. Clause 5.10 made the Society's calculations conclusive absent manifest error. A Name had to identify and demonstrate a clear error, and no general inspection or audit was available. The costs orders were within the judge's discretion.

1. Court of Appeal (Civil Division) — Heard the inter partes applications for leave to appeal against the Order 14 judgments and refused all applications.
2. Court of Appeal (Civil Division) — On 31 July 1997, dismissed related appeals from Colman J's earlier Order 14A and fraud-related determinations.
3. Commercial Court — Colman J made earlier legal determinations and later entered judgment against Mr Thomas-Everard. Tuckey J rejected the bad-faith argument on 3 December 1997, rejected the Canadian securities-law defence in January 1998, decided the quantum issues and directed entry of the Order 14 judgments. Leave to appeal was refused below.