Society of Lloyd's v Laws & Ors

Permission to amend a pleading should be granted where the proposed claim has a real prospect of success, arises from the same or substantially the same facts as an existing claim, and any prejudice can be managed consistently with the overriding objective.

Claims for negligent or statutory misrepresentation accrued when the claimant suffered measurable detriment by entering membership, agency or underwriting arrangements, rather than when later underwriting losses or calls occurred. Section 14(3) of the Lloyd’s Act 1982 gave Lloyd’s immunity from damages claims falling within its terms from Royal Assent. The Human Rights Act 1998 could not retrospectively alter that position or create liability for earlier events. Only narrowly defined pre-23 July 1982 claims could potentially proceed.

The Names sought permission to re-amend defences and counterclaims after the dismissal of fraud claims arising from alleged representations in Lloyd’s brochures and global accounts. The Court of Appeal had found that the brochures represented that Lloyd’s operated a rigorous audit system producing reasonable estimates of outstanding liabilities, but had rejected the allegation that Lloyd’s knew the representations were false.

The proposed amendments advanced negligent and statutory misrepresentation, failures to disclose information, advise or regulate the market, and arguments based on limitation and the Human Rights Act 1998. The central questions were whether the claims were time barred, whether they arose from the same facts as the earlier claims, and whether section 14(3) of the Lloyd’s Act 1982 prevented them.

1. Amendment test. Under CPR 17.3 and 17.4, an amendment introducing a new claim after expiry of the limitation period may be allowed only where the new claim arises from the same or substantially the same facts as an existing claim. The proposed claim must have a real, rather than fanciful, prospect of success. The court must also consider the overriding objective and prejudice.
2. Duty claims. Lloyd’s owed no contractual, statutory or common-law duty to Names to exercise reasonable skill and care, act in good faith, provide information or regulate the market. In the absence of a duty, allegations of bad faith could not establish breach.
3. Accrual and limitation. Damage occurred when a Name entered or renewed membership and underwriting arrangements, assumed contingent liabilities, charged assets and incurred fees. The cause of action therefore did not await the writing of particular risks, reinsurance to close, a call or the ultimate underwriting loss. Section 32 of the Limitation Act 1980 did not postpone time because there was no evidence of deliberate concealment of a material fact. Section 14B imposed a fifteen-year long-stop. Section 14A applied to negligence, but not statutory misrepresentation. The Names’ knowledge of the representation, its falsity, reliance and damage was sufficient to engage section 14A; their individual actual or constructive knowledge remained arguable on the evidence.
4. Relation back. A pre-5 January 1983 negligent misrepresentation claim in the form already notified and based on the reformulated brochure representation could arise from substantially the same facts as the earlier claim and could potentially relate back under section 35(5) of the Limitation Act 1980 and CPR 17.4. Post-5 January 1983 negligent misrepresentation claims required materially different factual and expert investigations from the earlier fraud claims and could not relate back.
5. Lloyd’s immunity and Convention arguments. Section 14(3) of the Lloyd’s Act 1982 was clear and applied from 23 July 1982. It covered negligent, statutory and other damages claims concerning Lloyd’s statutory powers, duties and functions, including publication of brochures as part of regulating admission and the market. The Human Rights Act 1998 could not retrospectively change accrued rights or impose liability where none previously existed. Article 6 was not engaged because section 14(3) defined the substantive scope of the right of action. No compatible interpretation could be achieved by dividing Lloyd’s functions into regulatory and commercial functions or by reading down the word “any”.
6. Outcome. Permission was refused for the claims barred by limitation, section 14(3), or the absence of duty. In principle, permission could be given, subject to particularisation and further directions, to qualifying Names who had previously notified a negligent misrepresentation claim, relied on a representation made after 11 October 1981 and before 5 January 1983, and suffered damage before 23 July 1982, provided section 14B did not apply.

The judgment records that Cresswell J dismissed the fraud claims and refused permission to amend. The Court of Appeal rejected the Names’ appeal on 26 July 2002, finding the brochure representation false but not fraudulently made, and left open a further application to amend in the Commercial Court. The present court determined that further application.