Goshawk Dedicated Ltd & Ors v Tyser & Co Ltd & Anor

A Lloyd’s broker is not generally bound by an implied contract or market custom to provide an underwriter with placing or claims documents formerly shown to it, particularly where disclosure may prejudice the broker’s client. A customary obligation must be certain, notorious and reasonable; habitual practice is insufficient.

Under a terms of business agreement, an access-to-records clause is qualified by the broker’s paramount duty to place the client’s interests first. Genuine and rational grounds for believing that disclosure would prejudice the client may therefore prevent access. A broker handling premiums in the non-marine market does not thereby become the underwriter’s accounting agent or assume a general duty to produce all premium records.

The claimant Lloyd’s syndicates sought inspection and copying of placing documents, claims documents and premium-accounting documents held by the defendant Lloyd’s brokers. Some documents had previously been shown or made available to the syndicates or their coverholder, while others had not.

For business written before the parties’ terms of business agreement, the syndicates relied on an implied contract and a binding Lloyd’s custom. For later business, they relied on clause 8.1 of the agreement. They also argued that the brokers were accounting parties in relation to premiums. The court had to determine the governing principles before deciding, if necessary, which individual documents had to be produced.

1. Placing and claims documents before the TOBA. No implied contract arose merely because an underwriter returned documents to a broker, or because the broker might later be expected to retrieve information. The insurance contracts remained workable without such an obligation, and the parties would not naturally be taken to have contracted on the asserted basis. The suggested equitable ownership, trust or fiduciary relationship was also rejected. Sail v Farex [1995] LRLR 116 supported treating inspection rights as a matter for commercial negotiation.
2. A Lloyd’s custom had not been established. A custom must be sufficiently certain, notorious and reasonable. Evidence that brokers often acted in a particular way showed, at most, habitual practice. The conflicting regulatory codes, draft TOBA materials and expert evidence were inconsistent with a settled customary obligation. Any custom requiring disclosure contrary to the client’s instructions or interests would in any event be unreasonable and unenforceable.
3. Placing and claims documents after the TOBA. Clause 2.2 could qualify clause 8.1.2 and could prevail where access would be inconsistent with the broker’s duty to place the client’s interests before all other considerations. That duty extended beyond obeying instructions and required the broker to form a genuine view of the client’s interests. Genuine, non-spurious and non-irrational grounds for apprehending prejudice could justify refusing disclosure, including where the client was uncontactable or unresponsive.
4. Premium accounting documents. In non-marine insurance, the fact that the assured supplied premium information through the broker, and that the broker collected or processed payments in practice, did not create an implied contract making the broker liable for premiums or the underwriter’s agent for collection. The marine authorities did not establish that position for this business. Clause 3 of the TOBA also made clear that it did not appoint the brokers as the managing agent’s agents.
5. Clause 8.1.1 was not confined to documents crossing the line between broker and syndicate. It covered documents in the broker’s possession which were pertinent to the insurance business and recorded accounting information relating to receipt or payment of premiums. The court provisionally indicated that specified premium-flow documents and relevant bank-statement entries could fall within the clause, but left the precise documents for later determination.
6. The application of clause 2.2 to premium records required assessment of the particular documents and any genuine grounds advanced by the brokers. No final determination was made on that detailed issue, and the form of order was left for discussion.