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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Right Honourable Francis Nigel Baron Napier & Ettrick & Anor v RF Kershaw Ltd & Ors [1996] EWCA Civ 796 (24th October, 1996)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1996/796.html
Cite as: [1996] CLC 1875, [1996] EWCA Civ 796, [1997] LRLR 1

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IN THE MATTER of the applicable Lloyd's Premiums Trust Deeds of in the Outhwaite proceedings made with their respective Members' Agents, and with the Society incorporated by Lloyd's Act 1871 by the Name of Lloyd's RIGHT HONOURABLE FRANCI [1996] EWCA Civ 796 (24th October, 1996)

IN THE SUPREME COURT OF JUDICATURE FC3 96/5877/B
COURT OF APPEAL (CIVIL DIVISION) CHANF 96/0725/B
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
(Mr. Justice Saville) and
CHANCERY DIVISION (The Vice-Chancellor)

Royal Courts of Justice
Strand, London WC2

Thursday, 24th October 1996


B e f o r e :

LORD JUSTICE NOURSE
LORD JUSTICE HOBHOUSE
LORD JUSTICE PILL

---------------



IN THE MATTER of the applicable Lloyd's Premiums Trust Deeds of Plaintiffs in the Outhwaite proceedings made with their respective Members' Agents, and with the Society incorporated by Lloyd's Act 1871 by the Name of Lloyd's

(1) THE RIGHT HONOURABLE FRANCIS NIGEL
BARON NAPIER AND ETTRICK
(2) RICHARDS BUTLER (a firm) Plaintiffs

-v-

(1) R.F. KERSHAW LIMITED
(2) THE SOCIETY INCORPORATED BY LLOYD'S ACT
1871 BY THE NAME OF LLOYD'S
(3) SIMON GILLILAN WEBER-BROWN
(4) BRUCE CAMERON DOUGLAS-HAMILTON
(5) CHARLES HUNTER sued on his own behalf
and as representative of all Members of
Syndicate 134 at Lloyd's
(6) COLIN MACKINNON sued on his own behalf
and as representative of all Members of
Syndicate 184 at Lloyd's
(7) WILLIAM DEEM sued on his own behalf and
as representative of all Members of
Syndicate 994 at Lloyd's
(8) MICHAEL SEABY sued on his own behalf and
as representative of all Members of
Syndicate 162 at Lloyd's
(9) MARK SWINBANK sued on his own behalf and
as representative of all Members of
Syndicate 683 at Lloyd's
(10) JEREMY GUY NELSON sued on his own behalf
and as representative of all Members of
SYNDICATE 416 at Lloyd's

(11) RON CLEVERLEY sued on his own behalf and
as representative of all Members of
Syndicate 843 at Lloyd's
(12) DAVID MCELLHINEY sued on his own behalf
and as representative of all Members of
Syndicate 235 at Lloyd's
(13) DAVID HOLMAN sued on his own behalf and
as representative of all Members of
Syndicate 551 at Lloyd's
(14) DEREK WALKER sued on his own behalf and
as representative of all Members of
Syndicate 387 at Lloyd's
Defendants
-----------------


- and -


IN THE MATTER of all existing Lloyd's Premiums Trust Deeds made by individual members of Lloyd's before 3rd March 1995 in respect of post-1986 or pre-1987 underwriting years of account

THE SOCIETY OF LLOYD'S Plaintiff

-v-

(1) DAVID LAURENCE WOODARD
(2) ANTHONY FREDERICK JOHN WILSON Defendants

---------------



Handed Down Judgment prepared by
Smith Bernal Reporting Limited
180 Fleet Street London EC4A 2HD
Tel: 0171 831 3183 Fax: 0171 831 8838
(Official Shorthand Writers to the Court)

----------------


MR. J. SHER QC , MR. J. CHILD and MISS J. WICKS (instructed by Messrs. Simmons & Simmons, London EC2) appeared on behalf of the Appellant The Society of Lloyd's.
MR. N. WARREN QC and MR. P. NEWMAN ( Miss E. Campbell 24.10.96) (instructed by Messrs. Richards Butler, London EC3) appeared on behalf of the First Defendant Mr. Woodard.
MR. R. SLOWE (instructed by Messrs. Richards Butler, London EC3) appeared on behalf of the Second Defendant Mr. Wilson.

---------------


J U D G M E N T
(As Approved by the Court)
Crown Copyright

Thursday, 24th October 1996


LORD JUSTICE NOURSE:
Introduction
The main question on these appeals is whether the pre-1995 form of premiums trust deed ("PTD") which every Name at Lloyd's must enter into pursuant to section 83(2) of the Insurance Companies Act 1982 embraces, in addition to premiums and other receipts of his underwriting business, sums recovered in litigation against his agents for negligent underwriting. On 14th May 1992, in Napier v. Kershaw , Mr Justice Saville decided that question in favour of the members of the Outhwaite 1982 Names' Association and answered it in the negative. On 16th May 1996 a like answer was given by the Vice-Chancellor in Lloyd's v. Woodard . Lloyd's says that the question ought to be answered in the affirmative.

The circumstances in which this and related questions have arisen are fully explained in the judgment to be delivered by Lord Justice Hobhouse, whose account I gratefully adopt. Some further explanation of the circumstances in which the appeal in Napier v. Kershaw has come to be brought so late is necessary. Immediately after Mr Justice Saville had given his decision, Lloyd's decided not to appeal and made an announcement to that effect. In an affidavit sworn on 19th April 1996 Mr David Rowland, the present chairman, has said that at that time Lloyd's was seeking to avoid further confrontation with the Names and that the decision not to appeal was made at a time when the magnitude of the problems which had come to confront it by 1996 were simply not appreciated. The failure by so many Names to meet their liabilities had thrown a totally unexpected burden on the central fund, which by 1996 was threatening Lloyd's future solvency. That was not the situation in 1992 and Mr Rowland was very confident that, if it had been, Lloyd's would have appealed at that time. He added that in the intervening four years Lloyd's had concentrated its efforts and a substantial part of its resources, not on confrontation with the Names, but in finding a solution to the market's problems, it being fundamental to any such solution that it would bring an end to the litigation brought by Names against their underwriting agents. This had culminated in the plan, embarked on in early 1995, for reconstructing and renewing Lloyd's (R & R). The implementation of the R & R proposals was well advanced by April 1996 and it was hoped, as indeed has been the case, that it would be completed by the end of August. Mr Rowland went on to explain how the destination of the Names' litigation recoveries had become critical to the completion of R & R and that it was desired to raise the question not only in Lloyd's v. Woodard but in Napier v. Kershaw as well.

Accordingly, on 19th April 1996, Lloyd's applied to this court for an extension of time for appealing against Mr Justice Saville's order. The application was listed for hearing before us on 24th July, with the appeal to follow if an extension was granted, together with the appeal in Lloyd's v. Woodard . Lloyd's' particular concern in seeking a reversal of Mr Justice Saville's decision was to ensure that the Names affected by his order did not have the benefit of any issue estoppel (it was not accepted that they could have) which would allow them to claim preferential treatment over other Names affected by a successful appeal in Lloyd's v. Woodard . It was accepted from the outset that an extension could only be granted on terms that Lloyd's did not seek to disturb the destination of the £116m received by the members of the Outhwaite 1982 Names' Association in settlement of the Outhwaite action. It was agreed that Mr Woodard should be allowed to intervene in the appeal in Napier v. Kershaw. There being, with those terms, no opposition from any of the interested parties and the court being of the opinion that an extension ought to be granted, on 26th July we made an order accordingly and proceeded with the hearing of the appeal.

The argument on both appeals was completed on 29th July. On 31st July, for reasons to be given later, we allowed the appeal in Napier v. Kershaw , stated that we would make a declaration in an appropriate form and deferred consideration of all consequential matters until after our reasons had been given, no order to be drawn up in the meantime. We made no decision in Lloyd's v. Woodard at that stage and said that we would take time to consider our judgments in that case. We emphasised, however, that our decision in Napier v. Kershaw would necessarily apply to all litigation recoveries of the same nature as those covered by the declaration to be made in that case.

We now give our reasons for allowing the appeal in Napier v. Kershaw and our judgments in Lloyd's v. Woodard . The convenient course is to deal first with the question of litigation recoveries in respect of negligent underwriting (which necessarily includes reckless underwriting), they being the most common form of recovery and that being the only question which arises in Napier v. Kershaw .

Litigation recoveries - negligent underwriting
The form of PTD to be considered in Napier v. R.F. Kershaw Ltd. is the pre-1987 form as amended, whereas in Lloyd's v. Woodard it is the post-1986 form. In all material respects the two forms are the same. As the hearing proceeded, the argument became exclusively directed towards the yellow printed draft headed "PTD G 91 Deed for General Business".

Before turning to the PTD, I desire to say this. The argument has throughout proceeded, correctly, on the footing that its relevant provisions must be construed in "the contextual scene" as it was called by Sir Thomas Bingham MR in delivering the judgment of this court in Society of Lloyd's v. Morris [1993] 2 Re LR 217. The material aspects of that scene are set out in the judgment of the Vice-Chancellor in Lloyd's v. Woodard , who quoted in full the material section of the judgment in Lloyd's v. Morris , at pp.218-219, and added four more pertinent points which had been made to him by counsel. Important though the contextual scene may be, however, the process of construction must start with the words of the relevant provisions themselves. As will appear, they are ordinary words in the English language, whose effect in relation to the main question is, to my mind, plain. I cannot help thinking that a tendency in these and some other recent cases to abstain from a close consideration of the words to be construed has made their decision appear to be more difficult than it is.

The parties to the PTD are the Name, his members' agent and Lloyd's. There are four recitals of which the first three state:

"(A) The Name is an Underwriting Member of Lloyd's and proposes to underwrite insurances that are not long term business ... through the agency of or under arrangements made by or through the Members' Agent and accordingly may do so as a member of syndicates upon which the Name may be placed by the Members' Agent or through arrangements made by the Members' Agent with other agents.
(B) Under Section 83 of the Insurance Companies Act 1982 every Member is required to carry to a trust fund in accordance with the provisions of a trust deed approved by the Secretary of State all premiums received by him or on his behalf in respect of any insurance business ......
(C) The form of this Deed has been approved by the Secretary of State for the purposes aforesaid in respect of insurance business other than long term business."
In the testatum the deed is expressed to be made "for the .. purposes aforesaid and in compliance with the statutory requirement aforesaid."
Clause 1(a) of the PTD contains many definitions of expressions used in the deed, including:
"Managing An Underwriting Agent at Lloyds
Agent appointed in exercise of any authority given by the Name to the Members' Agent (or appointed by any means derived from any authority so given) to act as agent or sub-agent of the Name for the purpose of conducting all or any part of the Underwriting and including any successors so acting of the Underwriting Agent so appointed.

The Under- The underwriting business (whether writing current or past or future) of the Name at Lloyds carried on through the agency of the Members' Agent or under arrangements made by or through the Members' Agent but excluding any long term business of the Name."
From these definitions it is clear that the expression "the Underwriting" includes underwriting business carried on both through the agency of the members' agent and through managing agents appointed by him.

So far as material, clause 2 of the PTD provides:

"(a) Subject as hereinafter provided the Trust Fund shall consist of:
(i) all premiums and other moneys whatsoever .... now belonging or payable or hereafter at any time belonging or becoming payable to the Name in connection with the Underwriting ..."
So far as material, clause 3 provides that the trust fund and the income thereof shall be held:

"(a) In trust for the payment or discharge as provided in Clause 7(a) hereof:
(i) of any losses claims returns of premiums reinsurance premiums and other outgoings now payable or at any time hereafter to become payable in connection with the Underwriting (hereinafter collectively referred to as 'Underwriting payments') and
(ii) of any expenses whatsoever from time to time incurred in connection with or arising out of the Underwriting (references to such expenses including throughout this Deed any annual fee commission other remuneration and reimbursement of outlays payable by the Name to any of the Names' Agents or to any other person in connection with the conduct or winding-up of the Underwriting and including also any fiscal liabilities incurred in or by reason of the Underwriting or in respect of the Trust Fund or its income) ...
(b) Subject to the trust hereinbefore declared in trust for the Name absolutely."
Clause 7(a) provides for the manner and order in which the underwriting payments and other expenses and outgoings shall be discharged out of the trust fund.

The question is whether litigation recoveries in respect of negligent underwriting fall within clause 2(a)(i). In order to answer that question, it is helpful to set out the material words of that provision, with the incorporation of the material parts of the definition of "the Underwriting":

"All premiums and other moneys whatsoever ... hereafter ... becoming payable to the Name in connection with the underwriting business ... of the Name at Lloyd's carried on through the agency of the Members' Agent or under arrangements made by or through the Members' Agent ...".

Broadly stated, the effect of clauses 2 and 3 of the PTD is that if the amount of the trust fund under clause 2(a) exceeds the amount of the outgoings under clause 3(a), the balance accrues to the Name under clause 2(b). The size of the balance depends in large part on the performance of the Name's managing agents. If they act competently, it is likely, to take an obvious example, that premium income will exceed claims and that the balance will increase; if negligently, that it will decrease or fall into debit. In the latter event, the Name is prima facie entitled to damages in an amount which will place him in the same position as if his managing agents had acted competently. In other words, if so to have acted would have produced the Name an increased balance or a reduced debit, he is entitled to a sum of money which will restore him to that position.

How does that sum stand in relation to clause 2(a)(i)? That provision is expressed to apply to premiums and all other moneys becoming payable to the Name "in connection with" his underwriting business. A premium is a receipt of the business. So too are recoveries in respect of reinsurance, salvage and the like. It is obvious that receipts of the business are sums payable to the Name in connection with it. But is that as far the provision is intended to go? I do not think that it is. It would have been so simple for it to apply to all premiums and other "receipts of the Underwriting", an expression which, incidentally, appears in clauses 7(d) and (e) and 13. In a deed drawn with such evident care and skill clause 2(a)(i) must be intended to have some wider application.

As I have said, a litigation recovery in respect of negligent underwriting is a sum paid to the Name in order to restore him to the position he would have been in if his managing agents had acted competently. In the obvious example stated it is a sum which replaces the lost excess of premiums over claims; likewise with an omission to reinsure or to make recoveries in respect of reinsurance or salvage, where it is the lost reinsurance or salvage moneys which are replaced. There seems to be no a priori reason for treating the replacement differently from that which it replaces. More pertinently in regard to the words themselves, the loss is in each case a loss to the business. Had it not been for the loss, the sum would not have been paid or, if you prefer, its payment was caused by or resulted from the loss. Thus there is a causal link or nexus between the business and the payment. It is not just a case where the payment "has something to do with" the business or the like. It is one where there is a real and substantial connection between the two.

For these reasons, I am of a clear opinion that litigation recoveries in respect of negligent underwriting fall within clause 2(a)(i) of the PTD. Moreover, I am satisfied that we are not constrained by authority to hold the contrary. I had, to this end, embarked on an exposition of my own when I had the advantage of reading in draft the judgment to be delivered by Lord Justice Hobhouse. Since I am in complete agreement with the views he has expressed under the heading "The previous decisions", there is little I need add.

Neither in Lloyd's v. Morris (supra) nor in Deeny v. Gooda Walker Ltd. (No.2) [1996] 1 WLR 426 was it necessary to consider the application of clause 2(a)(i) to litigation recoveries in respect of negligent underwriting. I agree with Lord Justice Hobhouse that Lloyd's v. Morris does not decide that such recoveries do not come within that provision and, further, that, when carefully considered, the judgment of this court supports the opposite conclusion, especially at p.222:

"Properly construed it seems to us that the words 'in connection with the Underwriting' import the idea that the underwriting business must be the source of the funds".
So of course does Lord Hoffmann's speech in Deeny v. Gooda Walker , the particular value of which lies in the following passage at p.432F-G:

"If a trader employs someone to perform services for the purposes of his trade, money which he realises from the performance of those services is a receipt of the trade. If the employee in breach of his legal duty fails to perform the services, or performs them badly, so that the trader realises less money than he would have done if they had been performed properly, he will be liable in damages and the damages will be a receipt of the trade. In each case the receipt arises out of the trade."
The question there was whether the damages were a taxable receipt of the Name's underwriting business. To say that the damages are a receipt which "arises out of the trade" is in substance little different from saying that they are payable in connection with it.

Other litigation recoveries
That disposes of litigation recoveries in respect of negligent underwriting and nothing more need be said about Napier v. Kershaw . Lloyd's v. Woodard , however, is also concerned with other categories of recovery, including those against members' agents in respect of omissions to effect or advise in regard to stop loss insurance or negligence in the selection of syndicates on which Names were placed. It would appear that the decision in Lloyd's v. Morris has practically concluded the question of recoveries in the latter two categories in favour of the Names. As at present advised, I would so hold. However, these and other categories were not fully explored in argument. If, after consideration of our judgments, a decision is still needed and agreement cannot be reached, further argument will be necessary.

Clause 22 of the PTD
On 2nd March 1995, after the plan for R & R had been embarked upon, the Council of Lloyd's resolved to make amendments to the PTD in order to catch all litigation recoveries of whatsoever nature achieved by Names, to the extent that they had unpaid cash calls or debts to the central fund in respect of the post-1986 years of account. The essence of the amendments was the introduction into clause 2 of a new subclause (d), whose effect was to make all litigation recoveries a component of the trust fund. The amendments are complicated, but since their effect is agreed to be plain they need not be set out. The question is whether a power to make the amendments was conferred on the Council by the PTD.

The amendments were purportedly made in exercise of the power reserved by clause 22 which, so far as material, provides:

"... the Council may from time to time revoke and determine the trusts hereby constituted or (subject always to the prior approval of the Secretary of State) vary or amend all or any of them or any of the provisions hereof in such manner as the Council think fit."
In his judgment in Lloyd's v. Woodard the Vice-Chancellor held that the prime commercial purpose of the PTD was to ensure that the receipts of the Names' underwriting business were under the control of his members' and managing agents and were available to meet the losses and expenses of the business. In deciding that the new clause 2(d) was invalid, he said:

"It was not, in my judgment, consistent with that purpose that the clause 22 power should have been used to bring litigation recoveries within the Trust Fund in order to provide additional security for the Names' existing indebtedness to Lloyds."

I respectfully agree with the Vice-Chancellor's decision on this point. But because his view of clause 22 was influenced by his narrower view of clause 2(a)(i) my reasoning is somewhat different.

Clause 22 contains two distinct powers: first, a power to revoke and determine the trusts of the PTD (in which event the trust fund would result to the Name); second, a power (subject to the prior approval of the Secretary of State) to vary or amend all or any of the trusts or provisions of the PTD in such manner as the Council think fit. Our direct concern is only with the second power, on whose unrestricted terms it is accepted by Mr Sher QC, for Lloyd's, that some restriction must be put. It is the extent of the restriction which is in dispute. Mr Sher has submitted that there was no restriction against the introduction of the new clause 2(d).

We were referred to numerous authorities on powers of this kind, amongst which the decision of the House of Lords in Hole v. Garnsey [1930] AC 472 was treated as the leading case. There Lord Tomlin, at p.500, stated the principle of construction in terms which have not, I think, been bettered:

"In construing such a power as this, it must, I think, be confined to such amendments as can reasonably be considered to have been within the contemplation of the parties when the contract was made, having regard to the nature and circumstances of the contract. I do not base this conclusion upon any narrow construction of the word 'amend' in Rule 64, but upon a broad general principle applicable to all such powers."

Although the authorities show that the application of this principle is often difficult, there is another to which we can turn for assistance in this case. The instrument to be construed being a deed, any doubt as to the meaning or effect of its operative part may be resolved by resort to its recitals. Here recital (B) refers to the requirement under section 83 of the Insurance Companies Act 1982 which, by subsection (2), provides:

"Every underwriter shall, in accordance with the provisions of a trust deed approved by the Secretary of State, carry to a trust fund all premiums received by him or on his behalf in respect of any insurance business."
Recital (C) states that the form of the PTD has been approved by the Secretary of State for those purposes in respect of insurance business other than long term business. The deed is expressed to be made in pursuance of those purposes and in compliance with the statutory requirement.

Thus the primary purpose of the PTD is to comply with section 83(2). That provision is in terms confined to premiums. The PTD would not, however, perform the function expected of it if the trust fund did not include all the receipts of the underwriting business. So a formula has been adopted in clause 2(a)(i) which includes those receipts and, as we have held, goes rather further. What is now said by Lloyd's is that the Council may, by amendment, extend the ambit of the trust fund even further still, by including litigation recoveries which do not become payable to the Name in connection with his underwriting business, in other words to assets which are personal to him.

In my judgment such an amendment cannot reasonably be considered to have been within the contemplation of the parties when the PTD was entered into. Its primary purpose having been to comply with section 83(2), it cannot have been intended to be capable of embracing assets personal to the Name, even those which may be said to "have something to do with" his underwriting business or the like. It was not intended, even to that limited extent, to be a means of attaching his personal assets as a fund for meeting the losses and outgoings of the business. Section 83(2) contains no requirement, express or implied, that personal assets should be carried to the trust fund. I would hold that the amendments were invalid.

Conclusion
The appeal in Napier v. Kershaw having already been allowed, we will deal with the form of the declaration and all other consequential matters in that case after judgment has been given in Lloyd's v. Woodard . The appeal in Lloyd's v. Woodard will be allowed in regard to litigation recoveries in respect of negligent underwriting and, by a majority, dismissed in regard to the amendments to the PTD. The further fate of that appeal, together with all consequential matters in that case, will be discussed after judgment.
LORD JUSTICE HOBHOUSE:
These appeals involve two points arising under the Lloyds Premiums Trust Deed. This deed has been revised from time to time. The first point arises upon clause 2(a)(i) providing for the constitution of the trust fund. The relevant wording is the same form in all the material documents and the point concerned is one of construction. The second point arises under clause 22, which itself has likewise remained unchanged. Clause 22 gives the Council of Lloyds a power to vary or amend the provisions of the deed. The second question concerns whether the Council had the power to make changes to the trust deed which extended the scope of the funds to which it applies.
The first point arises in a narrower and wider form. In its narrower form, it concerns recoveries made in respect of negligent or reckless underwriting and was the subject of the judgment of Saville J in the Napier v Kershaw case. In the Woodard case it arises in both its narrower and broader forms and was the subject of the judgment of the Vice Chancellor. Both the Vice Chancellor and Saville J decided the point of construction in favour of the Names. The second point only arises in the Woodard case and was decided in favour of the Names by the Vice Chancellor. Both points are relatively short points but are not without difficulty and have given rise to some difference of judicial opinion. A short explanation of the background to the Lloyds Premium Trusts Deed is necessary.

Introduction:
The character of insurance business is that it involves insurers receiving premiums in consideration of their undertaking to pay contingent future losses. It is fundamental to the transaction that the insurer will, at the time his liability to indemnify arises, have the resources to pay to the insured the losses which have occurred. It is therefore accepted as part of the regulation of the insurance industry that those engaging in it and undertaking to insure others shall meet various requirements designed to ensure so far as is possible that the insurer can and will meet his contractual obligations when they arise. In English law the relevant statutory provisions are to be found in the Insurance Companies Act 1982 and in particular Part IV of that Act which makes specific provision for Lloyds Underwriters. Section 83(2) requires every Lloyds Underwriter, in accordance with a trust deed approved by the Secretary of State, to carry to a trust fund all premiums received by him or on his behalf in respect of any insurance business. It is pursuant to this provision that the trust deed is required to be approved by the Secretary of State. Nothing however turns upon s.83 since the points raised in the present appeals do not relate to premiums but to other recoveries or receipts of the Names.
The activities of the insurance market at Lloyds in the City of London are carried on by various professional agents acting on behalf of or for the individual Names. Each Name is individually responsible for the insurance contracts made on his behalf. The Names are organised into syndicates through which the business is written but every policy issued is in truth a bundle of individual contracts made on behalf of individual Names. A Name is only responsible for his own liabilities: he is under no responsibility in respect of the liabilities of the other members of the syndicate.
At the material times a Name's contact with the market would be through the intermediary of a professional agency called the Member's Agents. Through the Member's Agents, professional sub-agents are engaged to conduct the actual underwriting business of the Name, including making and performing insurance contracts. The sub-agents are called the Managing Agents. The Managing Agents may be associated with or owned by the Member's Agents or may be independent. It is the Managing Agents that run the syndicates. Both the Member's Agents and the Managing Agents owe duties to the Name in relation to the proper conduct of the business. ( Henderson v Merrett [1995] 2 AC 145)
The conduct of the business of an insurer, or underwriter, involves, besides the making of insurance contracts, the collection of premiums and the payment of claims, such matters as the investigation of claims, the giving of guarantees, the exercising of rights of subrogation, the effecting of reinsurance, the ceding of risks, and the employment of brokers and other professional agents in any of these connections. The conduct of the underwriting business involves professional skill and judgment and if such skill and judgment is not exercised or if any of the individuals concerned are dishonest, losses will be suffered which prima facie will give the Name a right to recover from the person responsible. Such matters arise at the syndicate level and will primarily concern the relevant Managing Agent.
But the Name will also require the expert advice and assistance of the Member's Agent independently of the Managing Agent. Thus, for example, a Name needs to be advised by the Member's Agent what syndicates to join and how to split his overall premium limit between those various syndicates. This implicitly includes advice upon which Managing Agents to employ. The Member's Agent also has to advise the individual Name whether he should have Stop Loss cover and, if so instructed, employ a broker as necessary to place such cover for the Name. Stop Loss cover is a form of reinsurance which will normally cover the overall result of all the Name's underwriting in a given year and indemnify him in respect of a tranche of losses in excess of a certain limit.
Thus a distinction can be recognised between those activities which concern a Name as a member of a syndicate actually conducting insurance business and the activities of the Member's Agent in advising the Name and looking after his interests as an individual.
It is to be observed that obligations to account do not provide any distinction between one type of activity and another. The various Managing Agents who may have the power to act on behalf of a Name have an obligation to account just as does the Member's Agent. Nor does the capacity to engage in litigation or make recoveries through litigation provide any distinction. The exercise of rights of subrogation, may involve litigation as do, on occasions, the enforcement of contracts of reinsurance. Similarly the employment of brokers or other professional agents may involve the failure of such persons to perform their duties properly and therefore lead to a need to effect recoveries from them by litigation. The accounts prepared for a Name will have to cover both the costs of and the recoveries resulting from such litigation or claims when they arise. Similarly litigation may have to be defended. The standard form of agency agreement scheduled to the Lloyds Byelaws gives the agent wide powers to conduct or take part in litigation on behalf of the Name.
The organisation of the Lloyds market inevitably involves complex accounting procedures and mechanisms for the receipt and payment of sums of money. Part of the purpose of the trust deed is to provide, or assist to provide, a structure within which these sums may be received and disbursed. This is done by making provision for the constitution of a trust fund into which sums are to be paid (clause 2) and providing how the monies standing to the credit of the fund should be applied (clause 3) and for the Member's and Managing Agents to have authority to make payments out of the fund (clause 7). These provisions are an important part of the working of the market since they provide a mechanism for the marshalling of the monies to which the Name is entitled and for their application to the liabilities and expenses of the Name. Thus they fulfil both the general requirement of providing an assurance that the liabilities of the Name will be met and provide a mechanism for doing so.
The trust deed does not stand alone. The Lloyds Byelaws require Names to provide other forms of security as well and give the Council of Lloyds additional powers. Part of the need for the structure to which I have referred and its supervision and control by the Council of Lloyds is that the market is ultimately responsible for the liabilities of Names and therefore it is essential that no name should default and that every name should, if necessary, be compelled to meet his obligations under the contracts which he has authorised.
However, since the mid 1980s the history of Lloyds has not been a happy one. Prior to 1980 the profitability and lack of regulation of the market had led to practices by many of the professionals involved which did not have regard to their duties to their principals. In the 1980s the market ran into difficulties. There was a lack of capacity which lead to the imprudent involvement of Names new to the market. Business which had previously been profitable became unprofitable and questionable short-term and other devices were adopted in an attempt to preserve that profitability or at the least postpone the disclosure of its passing. As have been held in a succession of cases in the Commercial Court and, on occasions, appellate courts, some of the professionals involved were seriously at fault and failed to perform their duties to the Names. Findings of liability of the professionals to groups of Names have been made and very substantial sums have been held to be recoverable by the Names from those professionals.
The litigation which resulted has come to be called 'the Lloyds Litigation'. In a statement by the Commercial Judge, Cresswell J, dated 29th September 1994, the Judge summarised the categories of claim which were being made as follows -
"(a) LMX cases
(b) Long-tail cases
(i) run-off contract cases
(ii) reinsurance to close cases
(c) Personal Stop Loss cases
(d) Portfolio selection cases
(e) Central fund litigation
(f) Other cases."
Categories (a) and (b) come under the heading negligent underwriting since they involve faults by those actually conducting the underwriting business of the relevant syndicate as employees of the relevant Managing Agent. (c) and (d) relate to matters which are the concern of the Member's Agent and not the Managing Agents; they involve the individual relationship between the Member's Agent and the relevant Name. We are not concerned with the remaining categories. (The statement of Cresswell J includes a concise but rather fuller explanation of the subject matter of the various categories which can be referred to if necessary.) The Napier v Kershaw appeal concerns the category (a) and (b) type of recovery. The Woodard case concerns both categories (a) and (b) and categories (c) and (d) and does so both as a question of the construction of clause 2(a)(i) and of the scope of clause 22.
The problems in the market over the last ten years and the very serious losses suffered by most Names have created a crisis for the market in which questions have been raised of its ability to meet its liabilities and the Council of Lloyds have had to take strong measures to avoid default. It is in this context that the present disputes have arisen. The Council is seeking to insist that the sums recovered by Names from the negligent professionals (or their insurers) shall be paid into the Names' trust funds so as to facilitate the discharge of those Names' underwriting liabilities. The Council argues that under the deed in either its unamended or amended form the Name is under an obligation to pay all such recoveries into the trust fund. The Names argue that they are under no obligation to do so and are entitled to have any such recoveries paid to them personally to deal with as they may think fit without regard to the discharge of their liabilities to those they have insured under the contracts which have been made on their behalf at Lloyds.

Clause (a)(i):
This clause reads:
"Subject as hereinafter provided the trust fund shall consist of -
(i) all premiums and other monies whatsoever .... now belonging or payable or hereafter at any time belonging or becoming payable to the Name in connection with the Underwriting ..."
The parties to the deed are the Name, his Member's Agent and the Society of Lloyds. The recitals include the fact that the Name is proposing to underwrite insurances "through the agency of or under arrangements made by or through the Members' Agent and accordingly may do so as a member of syndicates upon which the Name may be placed by the Members' Agent or through arrangements made by the Members' Agent with other agents". The recitals also state that the Name has executed the deed "in consideration of the Members' Agent procuring or ensuring that a similar deed is or has been executed by each of the other members of the syndicates upon which the Name is placed ....". The deed is in terms executory in the sense that it applies to what is to happen in the future. It is not simply an existing declaration of trust. Its essence is that a Name undertakes to pay the defined categories of monies into the trust fund when (at dates in the future) he receives them and provides for his various agents at Lloyds to make payments into and out of the fund on his behalf. The question both in relation to clause 2 and in relation to the amendments purportedly made under clause 22 is the extent of the Name's executory obligation to pay sums into the trust fund.
The deed contains numerous definitions. A definition which is central to the present case is that of "the Underwriting" which reads
"The underwriting business (whether current or past or future) of the Name at Lloyds carried on through the agency of the Members' Agent or under arrangements made by or through the Members' Agent but excluding any long term business of the Name".
There is also a definition of "Managing Agent" as
"an Underwriting Agent at Lloyds appointed in exercise of any authority given by the Name to the Members' Agent .... for the purpose of conducting all or any part of the Underwriting ....."
Thus, it is clear that the words "the Underwriting" refer to the business conducted through the Managing Agent. Are the Name's recoveries monies which have become payable to the Name "in connection with the Underwriting"?

The Previous Decisions :
Between the time that Saville J delivered his judgment in the Napier case on 14 May 1992 and the Vice Chancellor delivered his judgment in the Woodard case on 16 May of this year there have been two decisions of appellate courts of direct relevance with the point with which we are concerned. They are Lloyds v Morris [1993] 2 ReLR 217 and Deeny v Gooda Walker [1996] 1 WLR 426.
The subject matter of the judgment of Saville J was the recoveries which certain Names had made as a result of the favourable settlement of the claims which they had made arising out of the way in which the Outhwaite syndicates had been run. It is accepted that the causes of action in respect of which these recoveries were made were breaches of contractual or common law duty in the conduct of underwriting for the syndicates. The point under clause 2(a)(i) was obviously considered to be a short point suitable for determination by the Commercial Judge: the judgment of Saville J was correspondingly short. Although it was adverse to the view taken by the Council, they welcomed his decision. They publicly stated that they were "glad that this matter has finally been clarified by the judgment of Mr Justice Saville".
In view of the brevity of the judgment it is difficult to be wholly confident of the reason which was decisive with Saville J. He refers to the definition of "the Underwriting" and continues:
"The money in question is clearly not a receipt of the underwriting business, for the business is one of underwriting at Lloyds and not one of compensating Names for mistakes allegedly made by their agents in conducting the Names' business of underwriting at Lloyds."
"What to my mind the money has to do with is not the Names' business of underwriting at all, but the rights and obligations existing between the Name and his Members' and Managing Agents: and those rights and obligations are not part of Names business of underwriting at Lloyds either, but part of the internal arrangements made between these parties as a means of enabling the Names' business of underwriting at Lloyds to be conducted. That business is business with third parties and not business between the Name and his agents. In my judgment, the money is payable in connection with the latter and not the former business within the meaning of the deeds." (p.4 of the transcript)
Saville J appears to be contrasting the actual making of underwriting contracts with paying compensation for mistakes made in so doing: it would seem that his view was that only payments made under underwriting contracts were to be brought into account. He also seems to have adopted a distinction between the relationship between the Name and those he was insuring on the one hand and the Name and those he was employing to make such contracts on his behalf. Thus the business of the Managing Agents is a distinct business from the business of accepting risks proposed by those who wish to be insured. Saville J does not seem to have drawn any distinction between the Name's respective relationships with the Member's Agent and the Managing Agent nor does he ascribe any importance to the difference in their functions.
The case of Morris also concerned the construction of clause 2(a)(i) of the trust deed. The question was whether payments to a Name under his personal Stop Loss policies fell within that clause and had to be paid into the trust fund. Tuckey J and the Court of Appeal held that they did not. Tuckey J said:
"Looking to the statutory and contractual background to the deed it is clear that its primary purpose is to provide a fund for the payment of policy holders and to this end the premium which a Name receives from his underwriting, which he can only do as a member of syndicate, becomes subject to the trust. I think that the words "other monies whatsoever payable in connection with the underwriting" are directed to other receipts of this underwriting such as reinsurance recoveries, salvage and the like. In other words they refer to all monies received by or on behalf of a Name as an underwriter on a syndicate. PSL recoveries do not fall into this category. Such recoveries are not receipts of the Name's underwriting business but the product of a personal voluntary arrangement which the Name has affected in order to soften the blow in the event that his underwriting business goes badly. I think this case is a fortiori Napier v Kershaw where the damages at least represented the proceeds of the underwriting business which but for the negligence, the Name would have received or been credited with."
Pace the Court of Appeal at 221, I do not read Tuckey J as adopting the same reasoning as Saville J. Tuckey J is drawing the distinction between things that relate to the conduct of the underwriting by the syndicate and personal arrangements independently made by the individual Name for Stop Loss reinsurance through the Member's Agent.
The judgment of the Court of Appeal was delivered by Sir Thomas Bingham MR. The ratio decidendi of the Court of Appeal would appear to be the same as that of Tuckey J:
"In contradistinction, the taking out of a personal Stop Loss policy by a Name is not syndicate business." (p.222)
"Properly construed it seems to us that the words "in connection with the underwriting" import the idea that the underwriting business must be the source of the funds. And plainly the underwriting business was not the source of the Stop Loss recovery." (ib)
Referring to the reasoning of Saville J, which they said they accepted, they appear to have considered that he based himself upon "the distinction between business transacted at syndicate level and at a personal level".
Deeny was concerned with the tax treatment of damages recoverable for negligent underwriting, specifically negligent participation in the LMX spiral. The question of the tax treatment of the damages in the hands of the Names was relevant to their assessment: if the damages would not be subject to tax, the damages should be assessed by reference only to the net loss of the Names. The Commercial Court held that the damages were subject to tax and that decision was upheld in the Court of Appeal and the House of Lords. Saville LJ was a member of the Court of Appeal and dissented reaching a contrary conclusion. The judgments in the Napier and Morris cases were considered, counsel for the defendants having argued that they were conclusive in his favour. The leading speech in the House of Lords was delivered by Lord Hoffmann with whom the other members of the House agreed. At p.435 having discussed Napier and Morris he concluded:
"I therefore think that the Morris case was rightly decided on its own facts but that it does not justify the application of the reasoning in the Napier case outside the facts of the latter case."
Considering the meaning of the words "underwriting business" which are used both in the trust deed and in s.184 of the Finance Act 1993, Hoffmann J said that the question was simply whether the damages were a receipt of that business. He continued:
"My Lords, if it were not for the dissenting judgment of Saville LJ, I would have thought that the question admitted of only one answer. If a trader sells goods, the price of what he sells is a receipt of his trade. If the buyer has to be sued for the price, the money recovered is a receipt of the trade and the irrecoverable costs are an expense. If the buyer does not accept the goods and the trader recovers damages for non-acceptance (being the difference between the price and the value of the goods left on his hands), the damages are a receipt of the trade. What is true of goods is also true of services. If a trader employs someone to perform services for the purposes of his trade, the money which he realises from the performance of those services is a receipt of the trade. If the employee in breach of his legal duty fails to perform the services, or performs them badly, so that the trader realises less money than he would have done if they had been performed properly, he will be liable in damages and the damages will be a receipt of the trade. In each case the receipt arises out of the trade." (p.432)
Lord Hoffmann expressly rejected the argument that the employment of an agent to conduct the business of the principal on his behalf was not part of that business. (p.433) At p.434, he similarly rejected any general distinction between two categories of business such as that apparently referred to in the passage I have already quoted from the judgment of Saville J. In Green v Gliksten [1928] 1 KB 475, [1929] AC 381, the argument that insuring one's stock was a different business from trading by buying and selling stock was rejected. Having made these observations, Lord Hoffmann expressly declined to decide whether Saville J's decision on the construction of the trust deed was correct. (p.435)
Turning to the case of Morris, Lord Hoffmann stressed that the Stop Loss insurance was personal to the individual Name. Its subject matter was the results of the Name's underwriting business and therefore could not logically be treated as part of that business.
"It is a payment under a contract independent of the business which depends for its calculation upon the prior computation of all the receipts and expenses of the business. To treat the Stop Loss recovery as a receipt of the business would therefore involve a circularity." (p.435)
He contrasted R v BC Fir and Cedar Co [1932] AC 441 where, as in the Gliksten case, taking out fire insurance was a part of the business. At p.436 Lord Hoffmann expressly confirmed that:
"I consider that the agency agreement with the Members' Agent is a contract made in the course of the Name's underwriting business at Lloyds."
In my judgment the House of Lords in Deeny, whilst expressly approving the decision in Morris, did not approve (or disapprove) the decision of Saville J in Napier. They disapproved his reasoning as an adequate statement of the business relationships involved and, by implication, any approval of that reasoning by the Court of Appeal in Morris. In my judgment, as clearly was the view of Lord Hoffmann, the language and decision of Saville J in Napier cannot be supported unless some special justification for it can be found in the language of the trust deed itself.
Finally, in this sequence, comes the judgment of the Vice Chancellor in the Woodard case. He considered that the ratio decidendi of Saville J was -
"The money in question is clearly not a receipt of the underwriting business for the business is one of underwriting at Lloyds and not one of compensating Names for mistakes".
This is the "two businesses" concept. He considered that the Court of Appeal in Morris had expressly accepted and adopted the same reasoning and it was part of the ratio decidendi of Morris by which he was bound.
For reasons which will be apparent from what I have already said I do not consider that this is correct. The reasoning of the Court of Appeal was different from that of Saville J. Their reasoning supported the conclusion in the case which they had before them but did not support the conclusion of Saville J in the Napier case. The Morris case, which is binding upon us as it was upon the Vice Chancellor for what it decides, does not decide that recoveries in respect of negligent underwriting by employees of the Managing Agents do not come within clause 2(a)(i). Indeed, in my judgment, the judgment of the Court of Appeal supports the opposite conclusion. Further, in my judgment, the Vice Chancellor's reading of the Court of Appeal judgment cannot stand with the speech of Lord Hoffmann in Deeny, nor can his adoption of the "two businesses" approach.
The Vice Chancellor went on to express his personal agreement with Saville J. He considered that the clause must be confined to "underwriting receipts" and that litigation recoveries were not underwriting receipts. He declined to give any further effect to the words "in connection with". Here again I must express my disagreement with the Vice Chancellor. He accepts reasoning of Saville J which is unsound and inconsistent with what was said by Lord Hoffmann. He specifically gives the clause an interpretation which disregards the wide effect of the expressions used in it and the definitions which refer to the business conducted by the Managing Agents.

The Napier Appeal :
As explained by Nourse LJ we have extended the time of Lord Napier (i.e. the Council of Lloyds) to appeal from the judgment of Saville J. The parties had agreed terms upon which it was acceptable that time should be extended. In view of this and the fact that Lord Hoffmann had raised doubt about the judgment of Saville J and the fact that the same point was one of those raised in the Woodard case, it was appropriate that the Napier case also be before this Court. At the conclusion of the argument last term we announced that we allowed the appeal in the Napier case and would give our reasons later. We also emphasised that our decision in the Napier case would necessarily apply to all litigation recoveries of the same nature as those covered by the declaration to be made in that case.
I consider that neither the reasoning nor the judgment of Saville J can stand. The wording of the trust deed does not support his conclusion: indeed, in my judgment, it is inconsistent with it. As Tuckey J pointed out in the Morris case, the language of clause 2(a)(i) is expressed broadly - "and other monies whatsoever" - "in connection with the Underwriting". This language is the opposite of restrictive language. The Underwriting specifically includes the business of underwriting through the agency of the Managing Agent. There is no justification in my judgment for breaking down the subject matter of this reference and excluding the conduct of the agency by the Managing Agents. All these things are happening at (in the words of the Court of Appeal in Morris) the level of the syndicate. If syndicate money is misapplied or embezzled by an employee of the Managing Agent, the Managing Agent remains responsible to account to the Names for that money. If some broker fails to carry out properly instructions to effect reinsurance on behalf of the syndicate and therefore compensation is payable by that broker, such recovery forms part of the income of the syndicate. Suppose, instead, that an employee of the Managing Agent forgets or omits to give the broker the requisite instructions, compensation for such default likewise is or should be part of the income of the syndicate for which the Managing Agent accounts to the Names. As previously pointed out, litigation recoveries properly form part of the income of the syndicate just as much as other receipts. Receipts of litigation to reinstate what should have been the proper financial result of the Name's participation in the syndicate, are receipts in connection with the business of the Name conducted through that syndicate. It may follow that the costs incurred by the Name in relation to any such litigation are to be regarded as expenses of that business payable out of the trust fund under clause 3. But this provides no argument against my conclusion: costs of litigation, properly incurred in connection with the Name's underwriting business, are expenses of that business.
In my judgment there is no basis for distinguishing between sums which become payable to Names in respect of defaults arising out of the conduct of the underwriting business and any other receipts. They are all "in connection with the Underwriting". In my judgment the judgment of Saville J discloses no sustainable reason for arriving at a different conclusion and the judgment of the Court of Appeal in Morris, correctly understood, shows that damages recovered in respect of negligent underwriting by employees of Managing Agents come within the scope of clause 2(a)(i).

The Wider Point under clause 2(a)(i) :
This point has not been defined with sufficient clarity to enable more than a limited answer to be given. But it can be considered in relation to damages recovered by Names from Member's Agents in respect of their breach of duty to advise or carry out instructions concerning personal Stop Loss reinsurance and syndicate selection. I consider that for such recoveries the decision of this Court is concluded by that of the Court of Appeal in Morris. The Court of Appeal expressly held that payments under Stop Loss policies did not come within clause 2(a)(i). Their decision was approved by the House of Lords in Deeny. If the correct construction of clause 2(a)(i) is that recoveries from stop loss reinsurers are not monies "payable to the Name in connection with the Underwriting", it must follow in my judgment that monies payable to the Name by the Member's Agent as damages for failure to effect such reinsurance, or advise that it should be effected, also come into the same category. I see no basis in the wording of the deed for making any such distinction. The reasoning of the Court of Appeal is equally applicable to both situations.
As regards syndicate selection, there is a possible distinction to be made but in my judgment it would not be consistent with the reasoning and decision of the Court of Appeal in Morris. It is something personal as between the Name and the Member's Agent and relates to a decision to be made by the Name before agreeing to be the member of any given syndicate in any given year. The membership of a syndicate is an annual contract that has to be made afresh each year. Any question about what syndicates to join is in every sense antecedent to the participation of the Name in that syndicate in the relevant year. It can therefore be properly said that questions relating to the selection of syndicates is wholly distinct from and does not form part of the business of underwriting through that syndicate. I therefore consider that this question is also concluded by the decision of the Court of Appeal.
Insofar as Lloyds on their appeal in the Woodard case ask for a declaration which goes beyond recoveries in respect of negligent or reckless underwriting, I would, on this part of the case, dismiss their appeal.

Clause 22 :
This clause provides that:
".... The Council may from time to time revoke and determine the trusts hereby constituted or (subject always to the prior approval of the Secretary of State) vary or amend or any of the provisions hereof in such manner as the Council think fit ...."
Purportedly pursuant to this power, the Council have directed the variation of the trust deeds so as (among other things) to extend the obligation of Names to pay sums into the trust fund. The various amendments to the deed are of some length and extreme complexity. It is not necessary to set them out. For the purposes of the appeal in the Woodard case it is only necessary to say that their effect, if valid, is that an obligation is imposed upon the Names to pay into the trust fund not only the proceeds of any recovery in respect of negligent underwriting (for which we have held that no amendment was necessary) but also proceeds of any recoveries in respect of the failure by Member's Agents to advise upon or take out Stop Loss reinsurance or properly to advise upon syndicate selection. The amendments are expressed in terms which have regard to the complexities of the litigation in which the Names are or have been involved and specifically protect the position of Names insofar as they are not in default of their liabilities. These qualifications to which the Vice Chancellor apparently attached some significance do not in my judgment affect the question of principle. They are clearly included to protect the position of names as far as possible and not to cause any unnecessary retention of funds.
It was common ground between the parties both here and in the court below that a power such as that conferred by clause 22, although unqualified in its terms, "can be exercised only for the purpose for which it is conferred and not for any extraneous or ulterior purpose". (See Re Courage Groups Pension Schemes [1987] 1 WLR 495, per Millett J at 505.) The issue was what exercise of the power was consistent with the purpose of the trust deed. It was not in dispute that the Council had acted bona fide and that their reason for so doing was the crisis with which Lloyds was faced, the need to ensure that Names' liabilities to those they had insured were met, and the unprecedented situation of Names on a large scale having to sue Member's and Managing Agents to recoup the losses which the Names had suffered as a result of having through their agency incurred those liabilities. It was a critical situation which had not been foreseen and specifically provided for and which called for action by the Council of Lloyds.
It was drawn to our attention that the Council could apparently have achieved similar results by exercising various powers under the Byelaws rather than by seeking to exercise their powers under clause 22 of the trust deed. The Vice Chancellor apparently considered that this was an argument in favour of giving a narrower construction to clause 22. Insofar as it is relevant, it does not, in my judgment, support such a view. The Byelaws demonstrate, if it needs demonstration, that it is the duty and function of the Council to organise and regulate the market and the paramount need for Names to meet their obligations. Clause 22 represents one of the powers which the Council has. The deed, as are the forms of agreement between Names and Member's and Managing Agents, is prescribed by the Lloyds Byelaws and regulations. The structure of the market and the role of the Council in it all point to taking a broad view of the purpose of clause 22 and its role in facilitating a situation in which Names will discharge their liabilities to those they have undertaken to insure.
The Vice Chancellor's approach to clause 22 was coloured by the restricted view that he had taken of clause 2. He said:
"The prime commercial purpose of each Premiums Trust Deed was to ensure that the business receipts of the syndicate underwriting business that the managing Agent was conducting, e.g. the premiums received from policy holders, the proceeds of syndicate reinsurance policies, the proceeds of salvage claims or other subrogation claims resulting from payments to policy holders, were under the control of the Name's Members' Agent and Managing Agent and were available to meet the losses and expenses of the Name's underwriting business ..... But all of the assets falling automatically within the trust fund were assets generated from time to time in the conduct of the underwriting business. The amendments, however, purported to add a specific existing asset, limited to the amount of Name's existing, current Lloyds indebtedness, to the trust fund. These amendments would, if valid, enable and cause the Trust Deed to serve an additional and different purpose to that which I have identified as its prime commercial purpose. The additional purpose would be that of enabling Lloyds to obtain, without the consent of the Name and unilaterally, security for an existing indebtedness over the assets belonging to the Name and specified in the amendment." (p.25)
"It was not, in my judgment, consistent with that purpose that the clause 22 power should have been used to bring litigation recoveries within the trust fund in order to provide additional security for the Name's existing indebtedness to Lloyds." (p.28)
In the course of his reasoning the Vice Chancellor contrasts the effect of the amendments with certain of the existing contractual obligations -
"Each Name has, by joining Lloyds and executing a Premiums Trust Deed, accepted that he is not entitled to any part of the receipts of the underwriting business conducted for him by his Managing Agent, save such part as may, after due provision for losses and expenses, be released to him under the provisions of the Trust Deed. He has accepted a contractual obligation, inter alia, to top up his trust fund when requested to do so. He has accepted a contractual obligation to reimburse payments made by Lloyds out of its central fund in discharging his underwriting liabilities. He has accepted the contractual obligation to provide Lloyds with such additional security for his underwriting obligations as Lloyds may from time to time acquire. What he has not done, expressly at least, is to grant Lloyds the power to take unilaterally such security over such assets of his as Lloyds may select. Yet that is the power Lloyds claims via the use of its amending power under clause 22." (p.27)
Certain comments must be made upon this passage. There is in my judgment no inconsistency between the relevant amendments and these contractual provisions. The substance of the situation is that the relevant Names have undischarged liabilities which, within the scope of the contractual scheme, they should discharge or at the very least fund. The amendments relate to the mechanism within the market whereby these obligations of the Names are enabled to be performed. The amendments do not have the effect of requiring sums to be retained which do not have a direct connection with the Name's participation in the Lloyds insurance market. The relevant sums are sums which arise from his employment of his Member's Agent, his Stop Loss reinsurances and his choice of syndicates. Each of these differ only from the definition "the Underwriting" in that they are not confined to the consequences of his membership of a single syndicate but cover the financial consequences of the his underwriting as a whole during the relevant year. The sums recovered represent indemnification for the lost profits (or receipts) of his involvement in the market.
It is true that they look at his involvement at the level of his relationship with his Member's agent not at the syndicate level. But this does not involve a difference which justifies the conclusion of the Vice Chancellor. The Stop Loss recovery is just another form of reinsurance recovery to indemnify the Name against the liabilities he has incurred in the market: the damages payable for negligently advising a Name to join a syndicate are likewise simply an indemnification against the liabilities incurred as a result of the insurance contracts entered into by the relevant Managing Agent of that syndicate on behalf of the Name. To put such recoveries into a category of extraneous "personal" assets irrelevant to the Name's participation in the market discloses a misunderstanding of the organisation of the market in which the Names participated. Whilst the approach of Saville J and, following him, of the Vice Chancellor would exclude all such indemnities from the scope of the trust deed, once this is seen to be mistaken even on the proper understanding of clause 2(a)(i) itself, it is clear also that such arguments provide no basis for invalidating the amendments which the Council has made under clause 22. They are not capriciously selected or outside the matters with which the Council of Lloyds and the trust deed are properly concerned. The amendments facilitate, through an application of sums received from other participants in the market arising out of his activities as a Name, the performance by the Name of his undoubted obligations to those he has insured. Far from supporting the conclusion of the Vice Chancellor, the contractual provisions to which he refers similarly confirm that the exercise by the Council of its perceived powers under clause 22 was in accordance with the general purpose of the trust deed and the scheme of which it formed part.
The argument of Mr Warren QC on behalf of Mr Woodard was based upon three primary submissions. First, he submitted that the wording of clause 22 was not wide enough to permit the Council to change the constitution of the trust fund. Secondly, he submitted that any such alterations of the constituents of the trust fund would be contrary to or exceed the purposes of the deed. Thirdly, he submitted that having regard to the fact that the causes of action of the Names against the parties liable accrued prior to the date of the amendments, the amendments were seeking to have a retrospective effect and clause 22 should not be construed so as to permit retrospective amendments.
A fundamental objection to the argument of Mr Warren must be stated at the outset. The effect of clause 2 is in the relevant respects to create an executory obligation. The deed is not simply a declaration of trust. It creates contractual obligations to pay sums of money into the trust fund and it authorises the Name's agents to perform these obligations. This is not a case where there was an initial specific trust fund and the Council is by amendment seeking to alter that fund. This trust deed is a much more complex document performing a much more extensive function as I have already indicated. In my judgment the primary submission of Mr Warren fails to have regard to the nature of the document of which clause 22 forms part and the broader function of the deed. Similarly the third submission is in my judgment mistaken. The fact that the causes of action may have come into existence at an earlier date cannot in principal preclude the Council from stipulating that recoveries in respect of those causes of action should be paid into the trust fund. It is an executory obligation which comes into existence when the recoveries are made. The amendment is not in the proper sense of the word retrospective. It may affect vested rights but that is, as the authorities show, well within the scope of clauses such as this. The amendments which the Council has made are amendments to the provisions of the deed. The relevant submission of Mr Warren is his second submission: that the amendments exceed the purpose of the clause - that clause 22 permits amendments but not to clause 2 or the definition of "the Underwriting", a submission not supported by the wording of clause 22 itself.
Clauses such as clause 22 giving a unilateral power to vary or amend the provisions of a document have come before the courts usually in the context of the byelaws, articles, or rules of some society or scheme. We were referred to a number of authorities. I will refer to certain of these, in date order, since they demonstrate that such clauses have been held to permit radical variations which significantly affect the rights of other parties and the general purpose of such clauses as being to enable appropriate provision to be made for extreme situations which had not been anticipated by those originally responsible for drafting their document. Their purpose is not confined to dealing only with mundane or routine matters.
In Strohmenger v Borough of Finsbury Building Society [1897] 2 Ch 469 (CA),the rules of the Society were amended to deal with the situation which had resulted from a loss of about £30,000 owing, among other things, to the defalcations of some of its officers. Lindley LJ said (at pp 477-8):
"The money had gone. How was the loss to be dealt with? Members considered the matter and came to the conclusion that the most expedient way of dealing with the case and the fairest for everybody was to reduce the shares. There is nothing dishonest about that - No cheating of creditors. There was a loss that had to be shared by the shareholders, and that was the method they adopted."
The Court of Appeal upheld an alteration to the rules which reduced the contractual rights of the shareholders against the Society. The members of the Society had been exercising a power given by an Act of 1874 to rescind or alter the rules of the Society. Chitty LJ said, at p.480:
"Now, in the 18th section there is no limit in terms placed on the alterations. .... But it is obvious that under the 18th section a rule cannot be made which changes the nature of the constitution of the Society, and the power of making and altering rules must be confined to the internal rights of the members of the Society. Of course the power of altering the rules will not allow the Society to say, "We will not pay our outside creditors and we will reduce our debts by one half or one third" or anything of that sort. There are obvious limits, which I do not attempt to define to the powers of making and altering rules which will have to be considered as the cases arise; but in the present case what the Court has to do with is a rule which in my opinion has been made fairly and equitably."
In Owens v The Queen [1900] 2 QB Ireland 513, a pension fund for teachers had been set up under an Act of 1879. The rights of the teachers were defined in rules scheduled to the Act and section 11 gave the Lord Lieutenant the power to revoke vary and add to the rules. In 1885 he exercised that power to introduce new rules reducing the amount of the teachers' contributions but ten years later it was discovered that the calculations which had been used contained errors and the fund was insufficient to pay the pensions provided for. In 1897 he made new rules increasing the teachers' contributions. The validity of these new rules was challenged. They were upheld notwithstanding that they imposed additional liabilities upon teachers who had taken up employment on the faith of the previous rules. Sir P. O'Brien LCJ said, at p.519:
"It is quite plain that the necessity for the new rules sprang from the impossibility of making the pension fund applicable to all claimants for whose benefit it was established, namely not alone for teachers existing at the time of the passing of the Pensions Act, but for future teachers. .... It is not denied that the pension fund contemplated by the Act of Parliament was for the benefit of all teachers - present and future.
Bearing all these matters in mind it is only reasonable to suppose that the system contemplated by the legislature should be sufficiently elastic and malleable so as not only to provide for future contingencies, but to rectify what was defective and mistaken in the past. In the present case it would, I think be an obvious mistake to make that which was intended for all available only for some. The system which would most adequately secure the rights of all that were intended to come under it should be, as I said, an elastic and malleable one which would not only provide for the present situation, but which could modify it."
In Allan v Gold Reefs [1900] 1 Ch 656 a company had altered its articles so as to give itself a lien on paid up shares in respect of the failure of the shareholder to pay calls on other shares which had not been fully paid up. The effect of the amendment was to alter the contractual rights of the shareholder. The amendment to the articles was held to have been within the power of the company under s.50 of the Companies Act 1862. Lord Lindley MR said at p.671:
"The power thus conferred on companies to alter the regulations contained in their articles is limited only by the provisions contained in the statute and the conditions contained in the company's memorandum of association. Wide, however, as the language of s.50 is, the power conferred by it must, like all other powers, be exercised subject to those general principles of law and equity which are applicable to all powers conferred on majorities and enabling them to bind minorities. It must be exercised, not only in the manner required by law, but also bona fide for the benefit of the company as a whole, and it must not be exceeded. These conditions are always implied and are seldom if ever expressed but if they are complied with I can see no ground for judicially putting any other restrictions on the power conferred by the section and those contained in it. .... Speaking therefore generally and without reference to any particular case, the section clearly authorises a limited company, formed with articles which confer no lien on fully paid up shares, and which allow them to be transferred without any fetter, to alter those articles by special resolution, and to impose a lien and restrictions on the registry of transfers of those shares by members indebted to the company.
But then comes the question whether this can be done so as to impose a lien or restriction in respect of a debt contracted before and existing at the time when the articles are altered. Again speaking generally, I am of opinion that the articles can be so altered and that, if they are altered bona fide for the benefit of the company, they will be valid and binding as altered on the existing holders of paid up shares whether such holders are indebted or not indebted to the company when the alteration is made."
See also per Romer LJ at p.678. (He adds the comment "certainly a shareholder could not say as against the company that he was entitled to special rights because he did not pay his debts".)
In Hole v Garnsey [1930] AC 472, the relevant society, called the Wilts and Somerset Farmers Ltd, was registered under the Industrial and Providence Societies Act 1893. It had become insolvent and gone into liquidation. Before doing so it had passed a resolution requiring members to subscribe for additional shares. Dissentient members challenged the power of the company to impose such an obligation upon them. They said the amendments offended the basic principal of limited liability. The House of Lords held that the amendments were invalid. Lord Atkin, at p.496, emphasised the significance of the amendments:
"If such amendments are indeed enforceable to the full extent, the present case shows the far reaching consequences. So far as I can see it would be within the power of an optimistic majority to continue indefinitely to trade at a loss. Each time the society approaches insolvency it need only write down its shares to a nominal sum and by amending the rules impose obligation on all the members to make further contributions of share capital. As long as the obligation did not exceed £200 per member, this process in theory could continue without limit."
Making the same point, Lord Tomlin said, at p.501 :
"If the scheme embodied in these amendments for extracting money from the members is legitimate, the potential liability of each member in a Society registered under the Act of 1893 is without limit and has no relation to what was within his contemplation at the moment of joining the Society. It is said that the Society is free to reduce its capital and to increase its capital and that this is what it has done. It has in fact done much more. It has discriminated between members and has laid on members an obligation to hold more shares. It has no special statutory authority to do this. It can only do it if the power to amend the rules justifies it as a matter of contract.
In my opinion the power does not justify it. I do not think that it is within the contemplation of the parties to a bargain of this kind that they should be made liable for a compulsory levy or expenditure over and above the contributions payable or to become payable under the original terms. On the contrary I think the basis of such a bargain is that the extent of the members' liability is limited by the original terms and that it cannot be enlarged by any amendment of the rules."
Lord Tomlin expressed the principle saying -
"In construing such a power as this, it must, I think, be confined to such amendments as can reasonably be considered to have been within the contemplation of the parties when the contract was made, having regard to the nature and circumstances of the contract." (p.500)
Similarly, Lord Atkin said:
"If a man enters into association with others for a business venture he commits himself to be bound by the decision of the majority of his associates on matters within the contemplated scope of the venture. But outside that scope he remains dominus, and cannot be bound against his will." (p.493)
"Full effect is given to the rule by limiting its operation as against dissients to matters which are within the scope of the administration of the venture as originally framed." (p.496)
Although there are marked differences between the problem addressed in Hole v Garnsey and the present case, the Respondents seek to apply these statements to the present case, as did the Vice Chancellor.
We were also referred to certain Australian decisions which are of interest. In Gra-ham v Perpetual Trustee [1989] 1 WAR 65, the English authorities were considered. Following a collapse of the stock market the trustees of a unit trust had varied the rights of redemption so as to substitute a current realisation value rather than the value of the holdings seven days prior to the request to redeem. The problem which had faced the trustees was obvious and the amendment was upheld even though it affected the accrued rights of unit holders who were seeking to exercise their right to redeem at the higher values. In Kearns v Hill [1990] 21 NSWLR 107, the power of variation in a trust instrument inter vivos was construed without imposing a restriction. An exercise of the power so as to add beneficiaries to the trust was upheld.
These authorities confirm that the purpose for which the power has been granted must be observed. But, provided that it is, the power can be exercised so as to alter the rights, including the vested rights, of the relevant parties. In Hole v Garnsey the amendment was considered not only to lead to absurd and fundamentally unacceptable conclusions but also to be at variance with the essential nature of the transaction and the relationship between the parties. By contrast, in Allan v Gold Reefs the taking of a right of lien was not inconsistent with the structure of the relationship between the parties and the amendment furthered that purpose rather than derogated from it. In my judgment, the Council acted within the scope of the decided cases. The amendments do not lead to unacceptable conclusions; they do not conflict with the essential nature of the transaction or the relationship between the relevant parties. The amendments are designed to further the fundamental purpose of the deed to assure and assist the discharge of the Names' liabilities to those they have undertaken to insure.
In the present case the purpose of the trust deed is to impose obligations upon the Name and provide mechanisms for the purpose of facilitating the conduct of the Name's activities at Lloyds including the discharge of his obligations within the market. In the exceptional situation which had arisen and the exceptional way in which the Names were having to enforce and obtain from their agents the financial consequences to which they were entitled arising out of their becoming Names and participating in the market, it is both consistent and proper that the Council of Lloyds should have sought to amend clause 2 of the deed so as to bring the relevant litigation receipts within its scope and require the Name to pay such sums into the trust fund insofar as it is necessary to do so to enable his liabilities to be paid out of that fund. The situation which has arisen is exceptional. But the contemplation of the deed and the relationship between the parties to it is that the fund will be provided with sums of money which are sufficient to enable the Names' liabilities to be met by payments out of that fund, using the mechanisms provided for in the deed.
In my judgment, in the relevant respect, the amendments were within the scope of clause 22 and the challenge to their validity which succeeded before the Vice Chancellor should in my judgment fail.
LORD JUSTICE PILL:
Clause 2(a)(i)
I agree with Nourse LJ and Hobhouse LJ on the question of litigation recoveries in respect of negligent underwriting and there is nothing I wish to add. The argument concentrated on that point and not upon a comprehensive definition of the activities which can be said to be "in connection with the underwriting". I would wish to reserve my position on what Hobhouse LJ has described as the "wider point" under the Clause.
Clause 22
On becoming a member of Lloyd's, a name agrees to execute a "Lloyd's Premium Trust Deed" which is expressed on its face to be a "deed for general business" and is made between the name, the member's agent and Lloyd's.
The recitals to the deed set out the factual background, Recital (A) providing that "the name is an underwriting member of Lloyd's and proposes to underwrite insurances ... through the agency of or under arrangements made by or through the members' agent and accordingly may do so as a member of syndicates upon which the name may be placed by the members' agent or through arrangements made by the members' agent with other agents." Recital (B) refers to section 83 of the Insurance Companies Act 1982 and notes that "every member is required to carry to a trust fund in accordance with the provisions of a trust deed approved by the Secretary of State all premiums received by him or on his behalf in respect of any insurance business ... ". Recital (C) notes that the form of the deed has been approved by the Secretary of State "for the purposes aforesaid in respect of insurance business ... ". Recital (D) states that "the name has accordingly agreed with Lloyd's and with the members agent to execute this deed". The consideration is then set out.
Following the recitals, it is provided that "this deed made in pursuance of the said agreement and for the consideration and purposes aforesaid and in compliance with the statutory requirement aforesaid witnesseth and it is hereby agreed and declared by and between the parties hereto as follows". The Court has already considered the effect of Clause 2(a)(i) which is concerned with what the trust fund "shall consist of". The Court has concluded that litigation recoveries obtained by the member consequent upon negligent underwriting form a part of the trust fund. Following the decision to the contrary at first instance, Lloyd's have sought to amend Clause 2 of the trust deed so as to include within the trust fund litigation recoveries broadly defined. Mr Sher QC refers to the amendments as simple in concept though complex in wording.
The power to amend is defined in Clause 22 of the deed. It provides that " ... the Council [of Lloyd's] may from time to time revoke and determine the trusts hereby constituted or [subject always to the approval of the Secretary of State] vary or amend all or any of them or any of the provisions hereof in such manner as the Council think fit ... ".
In support of his submission that the power is wide enough to permit the amendments, Mr Sher relies upon the broad wording of the clause, and the words "may amend any provisions" of the deed. He accepts that, in the words of Millett J in Re Courage Group's Pension Scheme [1987] 1 WLR 495 at 505, "a power can be exercised only for the purpose for which it is conferred, and not for any extraneous or ulterior purpose. The rule-amending power is given for the purpose of promoting the purposes of the scheme, not altering them". Mr Sher submits that the purpose of the deed is to promote and regulate business at Lloyd's in the interest of policy holders and names and to ensure that there is never a default. Provided that the asset within the amendment is, as counsel put it at different times, "generated by the name's membership of Lloyd's" or is "an asset arising out of such membership" or "an asset within the scope of Lloyd's activities", the Council of Lloyd's have power to amend Clause 2 so as to include the asset within the trust fund. Given Lloyd's duty to protect policy holders and to consider the interests of names and of the market as a whole, it is appropriate that the Council should have a broad power to amend the trust deed, subject to the approval of the Secretary of State. Mr Sher also relies upon the context in which the deed is to be construed. Given the presence of the sweeping powers in the Member's Agent's Agreement to call for new money to fund the trust and the powers of the Council under paragraph 3 of the membership byelaws to impose requirements upon members, it would be absurd to limit the powers of the Council to amend the trust deed. The ever- changing nature of the underlying commercial business makes it essential that there should be an easy way to change the provisions of the deed so as to keep it up to date. Because of the member's unlimited liability, the provisions will not capture assets beyond those required to meet his already outstanding liabilities at Lloyd's in respect of which he is in default. The member will not be deprived of the additional assets brought within the trust by reason of the amendments; they will merely act as security for existing indebtedness.
Mr Sher submits that the Vice-Chancellor has erred in confusing the purpose of the trust deed with the means of achieving that purpose. At page 26A the Vice-Chancellor stated:-
"These amendments would, if valid, enable and cause the trustee to serve an additional and different purpose to that which I have identified as its prime commercial purpose. The additional purpose would be that of enabling Lloyd's to obtain, without the consent of the name and unilaterally, security for an existing indebtedness over the assets belonging to the name and specified in the amendment."
That approach, submits Mr Sher, begs the question as to what is the purpose of the trust deed.
The Vice-Chancellor has however plainly stated his view upon the "prime commercial purpose" of the trust deed. It is "to ensure that the business receipts of the syndicate underwriting business that the management agent was conducting ... were under the control of the name's member's agent and managing agent and were available to meet the losses and expenses of the name's underwriting business. ... All of the assets falling automatically within the trust fund were assets generated from time to time in the conduct of the underwriting business." [Page 25 of judgment]. The Vice-Chancellor added at page 27 that the use made by Lloyd's of Clause 22 was "a use of the power that goes beyond the purpose for which the power was created".
Mr Sher accepts that, notwithstanding the generality of the wording of Clause 22, there are limits to the power of the Council to amend the deed. It could not be amended to include within the trust fund the member's valuable cuff-links or vintage car.
Counsel have referred the Court to authorities upon the construction of documents conferring a power to amend while accepting that no case is precisely in point. They concern situations different from the present one. However, I have found helpful in the present context statements in Hole v Garnsey [1930] AC 472 while accepting that the facts in that case concerning an industrial and provident society were very different from those in the present case. Lord Atkin stated, at p 493:-
"If a man enters into association with others for a business venture he commits himself to be bound by the decision of the majority of his associates on matters within the contemplated scope of the venture. But outside that scope he remains dominus, and cannot be bound against his will."
Rule 64 of the Society's Rules in that case provided that "the rules may be amended by resolution of a three-fourths majority at a special general meeting".
Lord Atkin considered the facts and stated, at p 495:
"These matters, generally speaking, I regard as fundamental. And unless there is reasonably clear indication in contractual terms, or statutory provisions that the individual member is to be bound in these respects against his will, his right to remain unaffected will continue. ... The only relevant question in this case appears to me to be whether r 64 giving the power to a three-fourths majority at a special general meeting to amend the rules confers a power to amend those rules in respect of the fundamentals above mentioned so as to bind a dissenting member. I think that the consent of a member to such a rule as r 64 is not an assent to have the purposes of the society or the amount of his share subscription altered against his will. ... It will, I think, be found that the fundamental matters I have referred to are carefully guarded by interposing the consent of the Court or otherwise."
At p 500 Lord Tomlin stated:
"In construing such a power as this, it must, I think, be confined to such amendments as can reasonably be considered to have been within the contemplation of the parties when the contract was made, having regard to the nature and circumstances of the contract. I do not base this conclusion upon any narrow construction of the word "amend" in Rule 64, but upon a broad general principle applicable to all such powers."
The trust deed is expressed to be made for the purposes contained in its recitals which are plainly relevant to its construction. Recital B states a purpose; to meet the requirement under section 83 of the Insurance Companies Act 1982 to "carry to a trust fund all premiums received by him (the underwriter) or on his behalf in respect of any insurance business." While the deed goes beyond the section 83 requirement by the inclusion of the expression "other monies whatsoever" after "all premiums" in Clause 2(a)(i), the monies concerned are anchored in the clause to those payable "in connection with the underwriting". In that context, I find it difficult to conclude that the purpose of the trust can be extended to include assets which are "not part of the underwriting business". Yet that is what the amendment seeks to achieve.
The amended Clause 2(d)(i) provides that "The specified litigation recoveries in question shall then become comprised in and shall constitute assets of the trust fund". By the amendments, specified litigation recoveries include the name's direct litigation recoveries and these are defined, insofar as is material, as "all relevant points of action of any and every relevant cause of action". A relevant cause of action includes any cause of action or other claim of the name:
"(i) in respect of the rights and obligations at any time existing between the name and any such person or persons which although not part of the name's underwriting business at Lloyd's are or were part of the internal arrangements between those parties as a means of enabling the name's underwriting business at Lloyd's or some part of it to be conducted." (My emphasis)
The inclusion of rights and obligations "not part of the name's underwriting business at Lloyd's" is of course consistent with Mr Sher's submission that the constitution of the fund can be amended to include "assets within the scope of Lloyd's activities" or one of the other expressions used by him but is not in my judgment consistent with the purpose of the trust.
I consider the purpose of the deed to be to constitute a trust fund from the receipts of the name's underwriting business at Lloyd's. The Court has taken a broader view of what constitutes that business than did the Vice-Chancellor but, subject to that, I respectfully agree with his view of the purpose of the deed. It is a specific purpose and the Council's power under Clause 22 to "amend any of the provisions" of the deed does not extend to include within the trust fund assets other than those generated by the name's underwriting business. "Underwriting" in Clause 2 is defined in Clause 1 as "The underwriting business (whether present, past or future) of the name at Lloyd's carried on through the agency of the member's agent or under arrangements made by or through the member's agent". It is that business which gives rise to the deed and the trust fund contemplated by the deed was not intended to attract assets acquired outside that business. When the name and Lloyd's entered into the deed, the contemplated scope of the venture was the underwriting business. When agreeing that the Council of Lloyd's should have a power to amend the provisions of the deed I do not think the parties contemplated that the power would include a power to amend the constitution of the trust fund so as to bring within it assets generated outside that business as the amended Clause 2 purports to do. The existence in the scheme as a whole of the other contractual obligations mentioned by the Vice-Chancellor and Hobhouse LJ does not in my view have the effect of broadening the purpose of this particular trust.
It is common ground that the parties to the deed in 1986 did not contemplate litigation recoveries. However, I base my conclusion not upon the absence of contemplation of particular events but on the basis that, in the context, it was not within the contemplation of the parties that assets not part of the name's underwriting business at Lloyd's could be included in the fund. The trust deed is only one of the several documents governing relations between the parties. The liability of a name is unlimited. There are other means by which the assets of a member may be obtained for the benefit of policy holders at Lloyd's. However those considerations do not appear to me to provide justification for construing the power to amend a trust deed made for a specific purpose any more widely than, in agreement with the Vice-Chancellor, I have indicated.


Order: appeal in Napier v. Kershaw having been allowed on 31st July 1996, appeal in Lloyd's v. Woodard allowed in regard to litigation recoveries in respect of negligent underwriting and, by a majority, dismissed in regard to the amendments to the premiums trust deed. All consequential matters in both cases to be decided at a later date and no orders to be drawn up in the meantime.


© 1996 Crown Copyright


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