Harris & Ors v The Society of Lloyd's

Claims may be struck out as an abuse of process where the court, having structured earlier litigation to determine all claims of a particular type, is asked to entertain a later claim based on the same cause of action and documents. In deceit, the representation must be clearly identified and must be a false representation of fact. The claimant must prove dishonest knowledge or recklessness, intention that the statement be relied on, and actual reliance. A distinction between the practical and legal effects of reinsurance to close does not establish actionable deceit where the documents accurately describe the practical position and there is no evidence of dishonesty. Limitation runs from when the claimant could with reasonable diligence have discovered the facts constituting the cause of action.

Forty-nine Lloyd’s names and Mrs Adams brought claims against the Society of Lloyd’s concerning representations allegedly made when they joined or renewed their membership. They contended that brochures and verification forms represented that reinsurance to close transferred all outstanding liabilities from the original names and thereby operated as a novation.

The claims followed extensive earlier Lloyd’s litigation, including proceedings in which the claimants had participated and in which the nature of reinsurance to close had been examined. Lloyd’s applied to strike out the claims under CPR 3.4(2) and alternatively sought summary judgment under CPR 24.2. The central issues were abuse of process, the arguability of deceit and fiduciary-duty claims, and limitation.

1. Representation and disclosure. The court refused the application for further disclosure. The documents sought were irrelevant or unnecessary, the application was substantially delayed, and privilege in the opinion relied on had already been lost through deployment by the claimants. No collateral waiver arose.
2. Statutory novation. Reinsurance to close was a form of reinsurance and did not itself constitute a novation. The statutory transfer provisions in Insurance Companies Act 1982, sections 49 to 52, did not apply because the conditions in section 85(2) were not satisfied. The statutory-novation argument was also unavailable to Mrs Adams because it was not pleaded.
3. Abuse of process. Applying the broad, merits-based approach in Johnson v Gore-Wood [2002] 1 AC 1, the claims were unquestionably abusive. The claimants had participated in earlier proceedings designed to determine fraud allegations against Lloyd’s. The alleged misrepresentations were contained in documents central to those proceedings, and the later claims sought to undermine the orderly and final determination of the earlier litigation.
4. Deceit. The pleaded first three representations were capable of identification, but they accurately described the practical effect of reinsurance to close and were not false. Any implied representation that reinsurance to close created a legal novation was doubtful, was not properly a representation of fact, and was unsupported by evidence that Lloyd’s held or intended that view. There was no realistic prospect of proving dishonesty, conscious knowledge of falsity, or reliance. The claim therefore failed the requirements summarised in The Kriti Palm [2007] 1 All ER (Comm) 667.
5. Limitation and fiduciary duty. The causes of action arose no later than the relevant underwriting period and were time-barred under section 2 of the Limitation Act 1980. Section 32 did not postpone limitation because the relevant facts were reasonably discoverable from the documents and authorities available during the 1990s. Any claim for non-dishonest breach of fiduciary duty was additionally barred by section 14 of the Lloyd’s Act 1982, absent bad faith.

The claims were struck out in their entirety.