Stockwell & Ors v Society of Lloyd's

The tort of misfeasance in public office applies only to a public officer vested with governmental or executive authority. Commercial self-regulation, even within a market affected by the public interest and subject to a special statutory regime, does not make the regulating organisation a public officer.

The tort requires dishonesty or subjective recklessness concerning both the unlawfulness of the act and its probable consequences. A failure to appreciate facts which ought to have been appreciated establishes only objective fault and is insufficient. A new claim introduced after expiry of the limitation period must arise from the same or substantially the same facts; substantial new factual enquiries cannot satisfy that requirement.

Members of the Society of Lloyd's sought permission to amend their defences and counterclaims in long-running proceedings by alleging misfeasance in public office. Andrew Smith J refused the applications in [2005] EWHC 850. He held, among other things, that Lloyd's was not a public officer, that the proposed claims were barred by limitation and that the amendments were an abuse of process.

Some appellants also sought to introduce extensive fresh evidence under rule 52.11(2) of the Civil Procedure Rules 1998. The central issue was whether Lloyd's, in exercising powers over its members and the Lloyd's insurance market, was a public officer capable of committing the tort of misfeasance in public office.

1. The appeals and the application to adduce fresh evidence were dismissed. Lloyd's was not a public officer for the purposes of the tort of misfeasance in public office. The tort concerns the misuse of governmental or executive authority conferred for public purposes. Lloyd's conducted a commercial market and exercised powers of self-regulation over those choosing to participate in it. Its statutory position, the public interest in effective insurance regulation and its limited statutory immunity did not convert it into a governmental body: per Buxton LJ, with whom Smith and Moore-Bick LJJ agreed.

2. The statutory arrangements under the Insurance Companies Act 1974, the Insurance Companies Act 1982 and the Lloyd's Act 1982 showed that Lloyd's operated under external public regulation. Its internal regulation remained an exercise of the Society's own commercial powers. Judicial-review authorities concerning Lloyd's were not directly determinative of liability in private law, but their analysis of its nature and functions was persuasively relevant.

3. The concept of a public authority in section 6 of the Human Rights Act 1998 served a different purpose and did not define a public officer for this tort. Status under the tort turns on the nature of the office, rather than the juridical character of a particular power or the function being performed at a particular moment.

4. Obiter, the tort required knowledge or subjective recklessness concerning the unlawfulness and probable injurious consequences of the act. Allegations that Lloyd's failed to discover defects which it ought to have discovered amounted only to objective fault. They were also inconsistent with the earlier determination that Lloyd's had not acted dishonestly.

5. Also obiter, the proposed misfeasance claims did not arise from the same or substantially the same facts as the existing deceit claims for rule 17.4(2) of the Civil Procedure Rules 1998. They required substantial new enquiries into state of mind and probable injury. Introducing a claim which counsel had consciously declined to plead before the lengthy preliminary fraud proceedings was also an abuse of process.

6. The proposed evidence failed the requirements governing fresh evidence. Much of it could have been obtained earlier with reasonable diligence, was presented after unexplained delay, was inadmissible or quasi-expert in character, and could not materially improve the appellants' case. To the extent that it attacked the concluded deceit findings, those findings could not be revisited in this appeal; to the extent that it concerned different matters, it reinforced the limitation objection.

1. Court of Appeal (Civil Division): In [2007] EWCA Civ 930, the court unanimously dismissed the appeals and the application to adduce fresh evidence.
2. High Court, Commercial Court: Andrew Smith J, in [2005] EWHC 850, refused the applications to amend the defences and counterclaims to allege misfeasance in public office. He also refused permission to appeal.