Stockwell & Ors v Society of Lloyd's

The Court of Appeal dismissed the attempts by various groups of "Names" to amend their pleadings to allege the tort of Misfeasance in Public Office against the Society of Lloyd's. Central to the decision was the legal requirement, derived from Three Rivers District Council v The Bank of England (number 3) [2003] 2 AC 1, that the tort is committed by a "public officer" acting intentionally or with subjective recklessness as to the illegality of his act. The court held that Lloyd's is a commercial, self-regulatory body and not a public officer for the purposes of the tort, so the proposed pleading failed at the threshold.

In addition, the judge below was upheld on subsidiary grounds: (a) the pleaded allegations of bad faith were inconsistent with this court's earlier findings in the Threshold Fraud Point (TFP) proceedings; (b) the proposed amendments would introduce new facts and so fell foul of CPR 17.4(2) and limitation; and (c) permitting the amendments at this late stage would be an abuse of process. An application to admit extensive fresh evidence under CPR 52.11(2)(b) and Ladd v Marshall principles was also refused as neither timely nor capable of altering the result.

Background and parties

The appeals arise from long-running litigation between groups of Lloyd's "Names" (appellants) and the Society of Lloyd's (respondent). The proceedings include the Threshold Fraud Point (TFP) preliminary issue and subsequent rulings by Cresswell J and this court on aspects of alleged bad faith and misrepresentation. The present appeals challenge Andrew Smith J's refusal to permit amendments to plead Misfeasance in Public Office and seek to adduce new evidence.

Nature of the applications

• The principal relief sought was permission to amend defences and counterclaims to plead Misfeasance in Public Office against Lloyd's (the Henderson, Stockwell and Lowe applications).
• Ancillary relief included admission of further evidence under CPR 52.11(2)(b) and reliance on Ladd v Marshall criteria, and a contemporaneous attempt to re-open this court's prior decision under Taylor v Lawrence jurisprudence.

Issues before the court

• Whether Lloyd's is a "public officer" for the purposes of the tort of Misfeasance in Public Office as formulated in Three Rivers;
• Whether the proposed amendments were barred by CPR 17.4(2) as introducing new facts and hence by limitation;
• Whether the proposed allegations of bad faith satisfied the subjective mental element required for the tort;
• Whether amendment at this stage would be an abuse of process; and
• Whether the proposed fresh evidence met the Ladd v Marshall criteria and would materially affect the appeals.

Court's reasoning and disposition

The court began by restating the elements of Misfeasance in Public Office as set out in Three Rivers, emphasising the necessity of a public officer and a subjective state of mind (targeted malice or knowledge/subjective recklessness as to illegality). It analysed the nature and statutory framework of Lloyd's (including the Lloyd's Acts and the Insurance Companies Acts) and concluded that Lloyd's is a commercial, self-regulatory institution concerned with the interests of its members and not a body exercising governmental authority. Accordingly Lloyd's is not, in principle, a proper defendant in the tort.

Even if that threshold were met, the court held that the appellants could not escape the bar presented by this court's earlier findings in the TFP proceedings that Lloyd's had not acted dishonestly. Attempts to convert objective failings in systems into the subjective state required by the tort were rejected as inadequate. CPR 17.4(2) was applied strictly: the proposed amendments would introduce significant new facts requiring major investigation and thus did not "arise out of the same or substantially the same facts". The judge's finding that amendment would also be an abuse of process because of the long delay and the appellants' prior tactical decisions was endorsed. Finally, the application to adduce fresh evidence failed the Ladd v Marshall tests as not obtained with reasonable diligence, not likely to change the result, and abusive in timing.

Appeal dismissed. The Court of Appeal held that Lloyd's is not a "public officer" for the tort of Misfeasance in Public Office and therefore the proposed amendments could not succeed; alternatively, the amendments were barred by prior findings on dishonesty, by CPR 17.4(2)/limitation, and by abuse of process. The application to admit fresh evidence under CPR 52.11(2)(b) and Ladd v Marshall was refused for lack of diligence, lack of material effect and because it was abusive in the circumstances.

Appeal from the High Court, Queen's Bench Division, Commercial Court (Andrew Smith J) whose rulings refusing permission to amend were reported at [2005] EWHC 850 (as cited in the judgment). Permission to appeal was granted by the Court of Appeal on 14 February 2006. The appellants also sought to re-open earlier Court of Appeal decisions under Taylor v Lawrence; that application was rejected by this court in [2007] EWCA Civ 586. The current judgment is [2007] EWCA Civ 930.