Laws & Ors v The Society of Lloyd's

The Court of Appeal refused to allow the broad attempt by a number of Names to amend pleadings after the Jaffray litigation so as to assert claims in negligent misrepresentation or statutory misrepresentation where those claims would be defeated by the immunity conferred by section 14(3) of the Lloyd’s Act 1982. The court held that the Human Rights Act 1998 could not be used under section 3 to read down section 14 so as to produce retrospective effect or to deprive Lloyd’s of the substantive immunity it enjoyed from July 1982; Article 6 ECHR was not engaged in a way that required a different construction.

On limitation, the court accepted the judge’s analysis that (i) the Lloyd’s Act came into force on 23 July 1982; (ii) section 14B of the Limitation Act 1980 imposes a 15-year longstop for actions in negligence; and (iii) section 14A of the 1980 Act applies to causes of action which are true actions in negligence but does not apply to statutory misrepresentation claims under section 2 of the Misrepresentation Act 1967.

The court also upheld the judge’s exercise under section 35(5) Limitation Act 1980 that newly pleaded negligent-misrepresentation causes of action did not in general arise out of the same or substantially the same facts as the previously pleaded fraud claims; only a limited group of pre-July-1982 Names who could show reliance within the 15-year window and lack of knowledge under section 14A might be permitted to amend.

Background and procedure. This appeal arises out of the long-running Lloyd’s litigation. After the Commercial Court threshold fraud proceedings (Cresswell J) and the subsequent Court of Appeal decision on representations contained in Lloyd’s brochures, a group of Names sought permission to amend pleadings to allege negligent misrepresentation and/or statutory misrepresentation (Misrepresentation Act 1967 s.2). Lloyd’s resisted on the basis of (a) section 14(3) of the Lloyd’s Act 1982 which, in their submission, immunised the Society from damages except for bad faith, and (b) limitation defences under the Limitation Act 1980 (notably ss.2, 14A, 14B, 32 and the section 35(5) gateway for new causes of action arising out of the same or substantially the same facts).

Relief sought and issues. The Names sought permission to amend pleadings so as to pursue non-fraud misrepresentation claims. The principal issues framed by the court were:

• whether the Human Rights Act 1998 (and in particular section 3) could be invoked to read down section 14(3) of the Lloyd’s Act so as to permit such causes of action, or alternatively whether section 4 HRA required a declaration of incompatibility,
• whether Article 6 ECHR was engaged so as to require a different construction,
• the proper date on which the Lloyd’s Act 1982 took effect,
• whether proposed new causes of action for negligent misrepresentation or statutory misrepresentation fell within the limitation gateways of the Limitation Act 1980 (sections 14A, 14B, 32 and the section 35(5) rules), and
• ancillary case management and fairness points about adding claims or parties and the effect of prior schedules served in 1998.

Court’s reasoning on the Human Rights point. The court applied and relied upon the House of Lords authority in Wilson v First County Trust (No 2) and the reasoning in Matthews v Ministry of Defence and related authorities. It emphasised the presumption against retrospectivity and the distinction between substantive rights and purely procedural bars. The court concluded that section 14(3) of the Lloyd’s Act confers a substantive immunity and that section 3 HRA could not be used to read down that substantive immunity so as to alter accrued rights or expectations arising before the HRA came into force. Article 6 was not engaged in a way that required overruling the statutory immunity.

Limitation and causation issues. The court held (a) the Lloyd’s Act came into force on the day of Royal Assent, 23 July 1982; (b) section 14B of the Limitation Act 1980 provides a 15-year longstop applicable to actions in negligence and therefore representations relied upon more than 15 years before the relevant commencement of proceedings are time-barred; (c) section 14A extends limitation in certain negligence cases by reference to knowledge but is confined to true actions in negligence and does not apply to statutory misrepresentation claims under section 2(1) of the Misrepresentation Act 1967 because those claims do not require the claimant to plead an act or omission ‘‘which is alleged to constitute negligence’’; and (d) section 32 concealment was not made out on the facts.

Section 35(5) analysis. The court endorsed the judge’s approach that the appropriate comparison for the section 35(5) test is between the facts in issue for the prior pleaded cause (fraud) and the new cause (negligent misrepresentation). The court agreed that, conceptually and in practice, fraud and negligence usually raise different factual inquiries (state of mind of individuals versus what steps should have been taken) and that the proposed negligent-misrepresentation claims (especially for post-Lloyd’s Act joiners) did not arise out of the same or substantially the same facts as the earlier fraud claims.

Practical result. Appeals by post-Lloyd’s Act Names were dismissed. A limited group of pre-July-1982 Names identified by the judge remain able to apply further, subject to particularisation and proof on knowledge under s.14A and subject to the 15-year longstop of s.14B. Other procedural and estoppel arguments and complaints about fairness of the hearing were rejected.

Appeal dismissed. The Court of Appeal upheld the judge’s central rulings: (i) section 3 of the Human Rights Act 1998 could not be used to reinterpret section 14(3) of the Lloyd’s Act 1982 so as to displace the substantive immunity that existed from 23 July 1982; (ii) Article 6 ECHR is not engaged so as to require a different construction of section 14(3); (iii) the Lloyd’s Act came into force on 23 July 1982; (iv) section 14A Limitation Act 1980 applies to real negligence claims but not to statutory misrepresentation under the Misrepresentation Act 1967 s.2; (v) section 14B imposes a 15-year longstop; and (vi) the proposed negligent-misrepresentation causes of action did not generally arise out of the same or substantially the same facts as the previously pleaded fraud claims, so permission to amend was refused except as to a limited category of pre-1982 Names falling within the judge’s identified window and subject to proof of the knowledge threshold and particularisation.

Appeal from a decision of Cooke J sitting in the Commercial Court (Queen’s Bench Division) concerning permission to amend pleadings after the threshold fraud proceedings and the Court of Appeal decision on representations in the Jaffray litigation. The Court of Appeal heard submissions and delivered this judgment dismissing the appeals on the main issues raised (HRA construction, Article 6 engagement, limitation and section 35(5) gateway).