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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Stockwell & Ors v Society of Lloyd's [2007] EWCA Civ 930 (27 July 2007) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2007/930.html Cite as: [2008] 1 WLR 2255, [2008] WLR 2255, [2007] EWCA Civ 930 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(ANDREW SMITH J.)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE MOORE-BICK
and
LADY JUSTICE SMITH
____________________
STOCKWELL & ORS | APPELLANT | |
AND | ||
SOCIETY OF LLOYD'S | RESPONDENT |
____________________
A Merrill Communications Company
190 Fleet Street, London, EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
____________________
Crown Copyright ©
Friday, 27th July 2007
(2.00 pm)
LORD JUSTICE BUXTON:
Background: the Lloyd's litigation.
The proceedings before this court.
The issues in the appeals.
The Henderson applications.
(i) Lloyd's was not, as a matter of public law, a public officer in the sense required by the tort of Misfeasance in Public Office, and accordingly was not in any event susceptible to liability for that tort.
(ii) Even if Lloyd's came in principle within the tort of Misfeasance in Public Office, the UNO Names were precluded by the decision of the Court of Appeal on the TFP from asserting the bad faith on the part of Lloyd's which is an essential element in the tort.
(iii) If the UNO Names sort to rely on factual matters other than those addressed in the Threshold Fraud Point proceedings, the proposed amendment would fall foul of CPR 17.4(2), which forbids amendments after the end of a relevant limitation period (as is conceded to be the case with the proposed amendments) unless the new claim arises out of the same or substantially the same facts as the claim already standing in the proceedings.
(iv) The proposed amendments were an abuse of process (a) because of the diffuse nature of the pleading; and (b), as the judge thought more importantly, because the issue of Misfeasance in Public Office was only raised years after the commencement of the proceedings and turns on facts which on any view are closely related to those on which the TFP point was based. Not only had there been ample opportunity to take the point, if it was seen as a good one, but also opportunities to take the point had been expressly declined by counsel, including leading counsel, instructed on behalf of the Names.
The Stockwell applications.
The Lowe applications.
"The fundamental reasoning of the draft pleading appears to be that because Lloyd's failed to appreciate that it was exercising public law powers, therefore it necessarily acted outside the proper constraints which control the lawful exercise of such powers; and because it did not ask itself whether its powers were public law powers, Lloyd's was 'recklessly indifferent' as to whether it was acting within such proper constraints. No other allegation of bad faith, or the necessary mental element of the tort of Misfeasance in public office, is pleaded with proper particularity and the proposed amendment depends on this reasoning."
The forensic history.
"Both the draft pleading originally put forward and the recent draft in respect of which the application is now pursued are long, unstructured and in places confused and repetitious. What are acknowledged to be 'extraneous and peripheral matters' dominate the drafts. Perhaps most importantly, it is difficult, and sometimes impossible, to discern with any proper certainty the basis for allegations of bad faith. Particularly bearing in mind that Lloyd's has already defeated allegations of bad faith made by Names against the Corporation and many individuals in it, it is entitled to have new allegations of this kind made much more clearly and specifically than they are in these drafts."
Lloyd's and Misfeasance in Public Office.
Introduction.
The nature of the tort.
"The exercise of power by public official, not for the purpose for which it was given, but for some ulterior or impermissible purpose, knowing or being reckless as to whether it would damage the plaintiff."
"In the Three Rivers DC case, Lord Steyn (loc cit at page 191B et seq) identified the following six 'ingredients' or 'requirements' of the tort.
"(i) the defendant is a public officer.
"(ii) power as a public officer is exercised either by the defendant himself or by someone for whom he is vicariously liable.
"(iii) either (i) the defendant, or officer for whom the defendant is vicariously liable, acts out of targeted malice, in the sense of a specific intention to injure a person or persons, or (ii) the 'public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the plaintiff' (loc cit at page 191E/F). The latter alternative (which is an ingredient of what I shall call the 'second' form of the tort) involves bad faith in as much as the public officer does not 'have an honest belief that his act is lawful' (per Lord Steyn at page 191F) and it suffices if 'the public officer acted with a state of mind of reckless indifference to the illegality of his act' (at page 193C/D) and about the consequences of his act (at page 196B/C).
"(iv) the claimant has a sufficient interest to have legal standing to sue.
"(v) there is damage caused by the wrongful act.
"(vi) that damage is not too remote to be recoverable.
"I emphasise the third ingredient, the intentional or subjectively reckless nature of the tort. I have cited from Lord Steyn's speech. Similarly, Lord Hutton (at page 227F) said that 'dishonesty is a necessary ingredient of the tort, and it is clear from the authorities that in this context that dishonesty means acting in bad faith'. Lord Millett said (at page 235B/C) that the tort is an 'intentional' tort that 'cannot be committed negligently or inadvertently', and that 'the core concept is abuse of power. This in turn involves other concepts, such as dishonesty, bad faith, and improper purpose. These expressions were often used interchangeably; in some contexts one will be more appropriate, in other contexts another. They are all subjective states of mind.' He went on to emphasise that excessive power is not the same as abuse of power and that 'even a deliberate excess of power is not necessarily an abuse of power'."
"Public bodies must not use their powers for purposes incompatible with the purposes envisaged by the statutes under which they derive such powers."
The relevant characteristics of Lloyd's.
"Lloyd's is not a public body which regulates the insurance market. As counsel remarked, the Department of Trade and Industry does that. Lloyd's operates within one section of the market. Its powers are derived from a private act which does not extend to any persons in the insurance market other than those who wish to operate in the section of the market governed by Lloyd's and who, in order to do so, have to commit themselves by entering into the uniform contract prescribed by Lloyd's. In our judgment, neither the evidence nor the submissions in this case suggest that there is such a public law element about the relationship between Lloyds and the Names as places it within the public domain and so renders it susceptible to judicial review."
"The Council shall have the management and superintendence of the affairs of the Society and the power to regulate and direct the business of insurance at Lloyd's."
"The objectives of Lloyd's are wholly commercial. The nature of Lloyd's is not governmental, even in the broad sense of that expression ... It is the FSA which performs governmental functions in these matters, not Lloyd's. The fact that Lloyd's regulates its members' activities in the way it does as a result, in part, of its desire to avoid a more intrusive governmental regulatory regime cannot possibly convert it into a body exercising public functions itself within the meaning of the Strasbourg case law."
Or, I would respectfully add, at all.
Judicial review.
Acts of public authorities under section 6(3)(b) of the Human Rights Act.
"'Public authority' includes any person certain of whose functions are functions of a public nature."
"It is not the juridical nature of the relevant power but the nature of the Council's office which is the important consideration."
Conclusion as to Misfeasance in Public Office.
Dishonesty and bad faith.
Introduction.
"The CA in Jaffray decided that (a) the representations were false but (b) Lloyd's failed to realise this when it was responsible for ensuring an adequate system was in place to protect members and policyholders. It is contended that Lloyd's failure in this regard, that's, its failure to maintain a working accounting and auditing system, if correctly characterised as recklessly indifferent, is sufficient to make out bad faith."
"The Names have failed to show to the necessary high standard that those at the centre of Lloyd's did not believe throughout either that there was in place a rigorous system of auditing which involved the making of a reasonable estimate of outstanding liabilities, including unknown and unnoted losses, or that they at any stage knew or were reckless as to whether the representations in the brochures were untrue."
"Lloyd's failed to ensure that it had in place rigorous systems of accounting and auditing in circumstances where the importance of such systems was known to be crucial and where grave reservations about their proper functioning were being expressed. That Lloyd's failed to realise this, for example by testing the accuracy of the systems, is a further instance of its gross failure in this regard and its willingness to turn a blind eye to systematic defects affecting the solvency of members and the LIM (London Insurance Market) as a whole. Further, not only did Lloyd's fail to realise it was unable properly to certify as to the solvency of the LIM, but it represented otherwise to existing and prospective Names."
Limitation.
"The new claim arises out of the same facts or substantially the same facts as the claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."
"...something going no further than minor differences likely to be the subject of enquiry but not involving any major investigation and/or differences merely collateral to the main substance of the new claim, proof of which would not necessarily be essential to its success: P&O Nedlloyd BV v Arab Metals Company [2005] 1 WLR 3733 at paragraph 43, per Mr Justice Colman."
"A claim for Misfeasance in Public Office would raise another issue about the state of mind of those at Lloyd's. It is a requirement of the tort that the public officer acts in the knowledge that his act will probably injure the claimant or persons in the class of the claimant and this is not an element of the tort of deceit."
"The balancing exercise was very much a matter for the judge and, in our view, this court should not interfere with his conclusion unless he erred in principle or was plainly wrong. We should not simply substitute our view for his, even if we would have reached a different conclusion if sitting at first instance."
Abuse of process.
"The claim for fraudulent misrepresentation was simply the specific vehicle chosen at the time (principally for case management purposes) to make Lloyd's account for one aspect of its mismanagement and failure to regulate the LIM."
Having made that choice, the appellants cannot go back on it ten years later.
The application to adduce fresh evidence.
The evidence.
Could the evidence have been obtained with reasonable diligence before the hearing below?
"There was a representation in the 1981 brochure that there was in place a rigorous system of auditing which involved the making of a reasonable estimate of outstanding liabilities including unknown and unnoted losses."
"As [Mr Hay-Davison] explains in his statement, he had expressly declined to be a witness or to provide Names with any assistance in the Jaffray proceedings, at the instigation of Lloyd's solicitors, Freshfields. He was led to believe that he did not have relevant knowledge. It was only many years later in the context of the MPO application the Names made at the High Court in Henderson, subsequent to the Court of Appeal decision in 2002, that Mr Hay-Davison felt he had material evidence, based on his regulatory experience, that should be used to assist the court."
Would the evidence have an important effect on the result of the case?
"The evidence would appear to me to be reasonably credible, backed by documentation, and had it been adduced at the trial in my view would have had a significant effect on the court's approach to the other evidence and its ultimate conclusions on the 'knowledge' issue in particular."
Conclusion as to the application to adduce fresh evidence.
LADY JUSTICE SMITH: I agree.
LORD JUSTICE MOORE-BICK: I also agree.
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