Society of Lloyd's v Laws & Ors

Permission to amend should be granted where the proposed case has a realistic prospect of success, is properly arguable, or there is another compelling reason for a trial. The court should avoid conducting a mini-trial, but must assess the evidence available at the application stage.

For Lloyd’s Names, loss and the cause of action arose when the Name became legally committed to Lloyd’s or to an underwriting agent. For continuing Names, this was ordinarily when the syndicate list was agreed and signed. For new Names, election to membership was necessary before underwriting arrangements could bind them.

Under a 15-year limitation bar, the claimant bears the burden of showing that the claim is in time.

The Society of Lloyd’s sought to resist applications by Names to amend their defences and counterclaims to plead negligent misstatement and related claims. The applications followed earlier rulings on limitation, causation and the scope of permissible amendments.

The Names relied on alleged representations in Lloyd’s brochures concerning its auditing and accounting systems. They sought to show that representations were made, relied upon and followed by legally binding underwriting arrangements within the relevant limitation window, before the Lloyd’s Act conferred immunity.

The central issues were whether each Name had a realistic prospect of establishing reliance, sufficient knowledge for the purposes of section 14A of the Limitation Act 1980, and a binding commitment to underwrite within the relevant period.

1. Outcome. Permission to amend was granted to Messrs Allard, Garrow, Hardman, Ranald, Remillard, Wilkinson and Woyka. It was refused for all other Names.
2. The governing test was whether the proposed case had a real prospect of success, was properly arguable, or raised another compelling reason for a trial. The court was not to conduct a mini-trial without discovery and oral evidence. However, the court had to decide the applications on the evidence then available, taking account of the possibility of further evidence.
3. The relevant event for loss and accrual of the cause of action was the Name’s legal commitment to Lloyd’s or to an underwriting agent. A decision to join or continue underwriting was only a precursor to that commitment. Under the pre-1987 agency arrangements, the Name contracted with the members’ agent, which could delegate underwriting functions. The signed syndicate list ordinarily evidenced the binding commitment.
4. For a new Name, election to membership was a necessary formality before underwriting arrangements could become binding. Arrangements made before election were conditional upon membership. A person could not lawfully be bound to underwrite at Lloyd’s without being a member.
5. Questions of reliance and knowledge ordinarily involved factual issues suitable for trial where a prima facie case had been raised. The court would reject such a case at the amendment stage only in a clear case, broadly comparable to an application for summary judgment.
6. Once a limitation defence was raised, the burden of proving that the claim was in time fell on the claimant. This applied to the 15-year long-stop in section 14B of the Limitation Act 1980 as well as to the ordinary six-year period.
7. Loss attributable to a representation and a commitment to underwrite for a particular year had to be calculated by reference to that year’s underwriting. Profits and losses across all syndicates for that year had to be taken into account. Losses on later, differently constituted syndicates were not attributable to the earlier year merely because of reinsurance to close.
8. In the overtopping issue, Mrs Bowman had made an overall profit on her 1982 underwriting and therefore had no claim. Mr Drysdale’s figures required further explanation, but his permission to amend had already been refused on other grounds. Dr Woyka obtained permission to amend, although his claim did not equal or exceed the statutory demand on the calculations advanced.

• Court of Appeal: In December 2003, the Court of Appeal heard appeals from the earlier April and May 2003 decisions, together with the appeal in Society of Lloyd’s v Bowman. The appeals were dismissed on the matters heard.
• High Court (Commercial Court): The present court proceeded with the restored applications to amend and granted permission to seven Names, refusing it for the remainder.