Practice and Procedure


PUBLISHED December 19, 2003

Lloyd's names were refused permission to amend their pleadings to allege negligent misrepresentation or misrepresentation contrary to s.2 Misrepresentation Act 1967 because the claims of any name commencing underwriting after July 1982 when the Lloyd's Act 1982 came into force would be defeated by s.14(3) of the 1982 Act and were thus doomed to failure.Appeal by Lloyd's names from the judgment of Cooke J refusing permission to amend. Certain Lloyd's names who did not accept the Lloyd's settlement offer under Lloyd's reconstruction and renewal plan and were sued by Lloyd's for the Equitas reinsurance premium counterclaimed against Lloyd's for damages. The Court of Appeal in Society of Lloyd's v Jaffray LTL 26/7/2002 held that Lloyd's had made certain representations to names in brochures issued annually but that Lloyd's had not done so fraudulently. Following that decision the names applied to amend their pleadings to allege negligent misrepresentation by Lloyd's. When the proceedings were commenced it was thought that s.14 Lloyd's Act 1982 exempted Lloyd's from liability for any claim except a fraud claim. Cooke J refused the application for permission to amend holding that the coming into force of the Human Rights Act 1998 did not affect the interpretation of s.14 so as to permit a claim in damages for negligent misrepresentation to succeed. He held that, in relation to names who previously alleged only fraud, the proposed amendment to plead negligent misrepresentation did not arise out of the same or substantially the same facts as the fraud claim and was accordingly statute-barred, but that names who had previously pleaded negligent misrepresentations in brochures prior to the coming into force of the 1982 Act in July 1982 were pleading causes of action arising out of the same or substantially the same facts within s.35(5) Limitation Act 1980. However by virtue of s.14B of the 1980 Act no name could rely on a representation occurring more than 15 years before the commencement of proceedings in 1996. Therefore there was a potential window for certain names who commenced underwriting before the coming into force of the 1982 Act to show that they relied on a representation in a brochure after October 1981 and before July 1982. Those names should only be allowed to amend their pleadings if they could show that they did not have the requisite knowledge under s.14A of the 1980 Act more than three years prior to the commencement of the proceedings. The names appealed.HELD: (1) When the Human Rights Act came into force Lloyd's had no liability in damages under s.14(3) Lloyd's Act 1982 other than where bad faith could be established. That was the position when the litigation in which the names were involved commenced. Applying Wilson v First County Trust Ltd (No.2) (2003) UKHL 40 it was unarguable that s.3 of the 1998 Act could be used to place a different interpretation on s.14(3) of the 1982 Act in litigation which commenced before the 1998 Act came into force. Section 14 was plainly not a mere procedural bar. It conferred a substantive immunity. Article 6 European Convention on Human Rights was not engaged (Wilson (supra) and Matthews v Ministry of Defence (2003) UKHL 4 (supra) applied). The names' case on the Human Rights Act was unarguable. Lloyd's was exempt from liability in damages in respect of causes of action arising after the Lloyd's Act came into force unless bad faith was proved. (2) The judge was right to hold that the Lloyd's Act came into force in July 1982 when it received the Royal Assent. (3) The judge was right, applying Paragon Finance plc v DB Thakerar & Co (1999) 1 All ER 400, to make a comparison between what was involved in the fraud claim and the new cause of action based on alleged negligence and to hold that the two claims raised different issues. The judge was right to hold that although there were many underlying facts common to both, the facts involved in the new cause of action, which focused on what those at Lloyd's should have done rather than what they knew, were not substantially the same as those which were in issue in the fraud trial, which was all about whether particular individuals knew that the alleged misrepresentations were untrue. Therefore the fraud claim did not arise out of the same or substantially the same facts within s.35(5) and the claims of post-Lloyd's Act names were statute-barred. (4) A claim under s.2 Misrepresentation Act 1967 would arise out of substantially the same facts as a claim for damages for fraudulent misrepresentation but such a claim was not an "action for damages for negligence" within s.14A of the 1980 Act so that names could not rely on s.14A to extend the six year period for tort actions in s.2 of the 1980 Act. (5) Twelve names who had not originally made brochure claims, because they all joined Lloyd's before 1977 and a deliberate decision was made not to include a brochure claim in such cases, should not be permitted to amend to include such a claim which did not arise out of the same or substantially the same facts as were already in issue in their cases. (6) Permission to appeal was refused to raise a case alleging bad faith and/or to rely on concealment under s.32 of the 1980 Act.Appeal dismissed.

[2003] EWCA Civ 1887