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URL: http://www.bailii.org/ew/cases/EWHC/Comm/1999/285.html
Cite as: [1999] Lloyd's Rep IR 571, [1999] CLC 997, [1999] EWHC 285 (Comm), [1999] Lloyd's Rep PN 571, [1999] 1 All ER (Comm) 750

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    Case No: 1995 Folio No. 1636

    IN THE HIGH COURT OF JUSTICE

    QUEEN’S BENCH DIVISION

    COMMERCIAL COURT

    Royal Courts of Justice

    Strand, London, WC2A 2LL

    Date: 30th March 1999

    B e f o r e :
    THE HON MR JUSTICE LANGLEY

      COMPANHIA DE SEGUROS IMPERIO
    (a body corporate)
    Plaintiff
      - v -  
      HEATH (REBX) LIMITED
    (formerly C.E. Heath & Co. (North America) Limited) & Ors
    Defendants

    - - - - - - - - - - - - - - - - - - - - -
    Mr J. Flaux QC and Mr A. Fenton ...instructed by Messrs Barlow Lyde and Gilbert for the Plaintiff)
    Mr P. Gross QC and Mr P. Edey ...instructed by Messrs Freshfields for the Defendants)
    JUDGMENT
    With reference to R.S.C. Order 68 Rule 1 and the Practice direction of the Master of The Rolls
    dated 9th July 1990 ([1990] 1 W.L.R. 1126)
    I certify that the attached text records my judgment and direct that no further note or transcript need be made

    The Hon. Mr Justice Langley

    COPIES OF THIS JUDGMENT ARE AVAILABLE IN WORD 6 for WINDOWS 3.1 ON PROVISION OF A CLEAN DISC. APPLY TO THE CLERK TO THE HONOURABLE MR JUSTICE LANGLEY Telephone 0171-936-6395

    INDEX
    Page
    INTRODUCTION 1 - 4
    THE LIMITATION ISSUE 4 - 5
    THE INDEMNITY ISSUE 5
    THE FACTS BEFORE SEPTEMBER 12, 1989 5 -21
    THE FACTS AFTER SEPTEMBER 12, 1989 21-31
    THE POINTS OF CLAIM 31-40
    THE LIMITATION ACT 1980 41-43
    THE ACT AND THE CAUSES OF ACTION ALLEGED 44
    ACCRUAL OF THE CAUSES OF ACTION IN TORT 44-47
    FIDUCIARY DUTY AND LIMITATION 47-63
    SECTION 32 64-67
    THE INDEMNITY ISSUE 67-70
    CONCLUSIONS 70
    APPENDIX : LIST OF ISSUES AND ANSWERS

    Mr Justice Langley:

    INTRODUCTION
    The Plaintiff Company, ("Imperio"), which was incorporated in Portugal, at all material times carried on the business of insurance and reinsurance. The Defendant Companies (to which I shall refer both individually and collectively as "Heaths") at all material times carried on business as insurance brokers.
    By a generally indorsed Writ of Summons issued on September 12, 1995 Imperio made the following claims for damages against Heaths:
    (1) Damages for breach of four written binding authority agreements made on various dates between May 1977 and April 1979 the breaches alleged being
    (i) "the operation" of the binding authorities;
    (ii) the failure to act with all reasonable skill and care in their operation;
    (iii) the failure to act as authorised or instructed in connection with their operation;
    (iv) the failure to protect Imperio's interests or to act in what Heaths honestly believed to be the best interests of Imperio in relation to the operation of the binding authorities.
    (v) the failure to provide information relating to the authorities; and
    (vi) "the arranging of reinsurance" for Imperio in respect of the risks written under the authorities.
    (2) Damages for negligence and/or breaches of duty or duties "including but not limited to fiduciary duty or duties" in connection with the binding authorities, the breaches alleged being in exactly the same terms as the alleged breaches of contract.
    (3) damages for negligent misstatement and/or negligent misrepresentation and/or collateral warranty, relying in each case on statements made in various documents dated between 1976 and 1979 about the binding authorities and their operation.
    Thus the claims made by Imperio relate to the operation by Heaths of various binding authorities entered into in the years 1977 to 1979. Imperio was one of a number of approximately 40 companies forming a Pool for each of which Heaths held underwriting authority and on behalf of which Heaths accepted the reinsurance of various long-term US casualty risks. Heaths also acted as brokers on behalf of cedants to broke business to the Pool.
    During the years 1976-1979 over 1000 policies were issued in the name of the Pool. Imperio agreed to take a line of between 4% and 5% on any one risk. But Article 15 of the first of the four binding authorities agreed by Imperio provided that:
    FRONTING AGREEMENT
    It is understood and agreed that in the event of any Company/ies hereto being unable to appear on any document issued by [Heaths] or being precluded therefrom for any reason whatsoever, the remaining Companies hereto agree to assume their increased proportion of liability hereunder subject to [Heaths] arranging 100% reinsurance of such increased liability with those Companies who are not appearing on the document.
    On 117 separate risks Imperio was used by Heaths to front for the rest of the members of the Pool (with the exception of one member, which would not agree to front or be fronted) and the fronted line was generally 96.7% of the risk. Imperio was only paid premium on its net line of 4% to 5% and was reinsured by the other members of the Pool. In 53 of the 117 cases Imperio was sent a policy for signature showing the fronted line and/or a cover note recording the reinsurance by the other Pool members of the fronted line.
    It is the use of Imperio as a front which lies at the heart of the dispute, albeit it is far from being the only complaint which Imperio makes.
    Heaths pleaded that Imperio's claims were statute-barred. The date (the cut-off date) six years prior to the issue of the Writ is September 12, 1989. Heaths applied for the trial of preliminary issues intended to resolve the limitation issue. By an Order dated 20 May 1998 Rix J ordered that the limitation issue should be tried as a preliminary issue on the basis of certain assumptions. Further :
    (1) Heaths have applied for Imperio's claim to be dismissed for want of prosecution and / or under R.S.C. Order 19 rule 1;
    (2) Imperio seeks and Heaths opposes leave to amend the Points of Claim to claim an indemnity against Heaths for the liabilities or consequences arising from Imperio fronting in the 53 cases where it was expressly requested to do so. (The Indemnity Issue); and
    (3) Heaths apply to strike out as an abuse of process a further writ issued by Imperio on 28 May 1998 claiming the same relief as the original Writ.
    In the course of the hearing before me it has been agreed that the Limitation Issue and the Indemnity Issue should be addressed first and the questions of dismissal for want of prosecution and striking out left for future consideration should that be necessary in the light of my judgment on those issues.
    THE LIMITATION ISSUE
    The Order made by Rix J requires that this issue be addressed on the assumptions that:
    (1) All the facts and matters pleaded by Imperio in the Points of Claim are true and correct; and
    (2) Heaths deliberately concealed the facts relevant to Imperio's claim within the meaning of section 32(1)(b) and/or section 32(2) of the Limitation Act 1980.
    As the hearing has progressed the two major questions which have emerged have been whether or not any limitation period applies at all to the claim made by Imperio on the basis of breach of fiduciary duty (questions of acquiescence or laches were expressly excluded from the scope of the preliminary issues ordered by Rix J) and whether the facts assumed to have been concealed by Heaths were or could with reasonable diligence have been discovered by Imperio outside the limitation period within the meaning of section 32 of the 1980 Act. The parties have also helpfully agreed a list of Issues which I have annexed as an Appendix to this judgment.
    THE INDEMNITY ISSUE
    Heaths contend that the proposed amendment is unsustainable as a matter of law and/or time barred and leave to make it should be refused for those reasons and as a matter of discretion .
    THE FACTS BEFORE SEPTEMBER 12, 1989
    Because of the issue of Imperio's knowledge under Section 32 of the 1980 Act, I must set out the facts in some detail.
    On 24 September 1976, under the title "North American Binding Authority", Heaths wrote to Imperio and to certain of our regular first class companies to offer a share of our business by means of the enclosed Binding Authority. The letter (the September 1976 letter) referred to the binding powers being exercised by certain of Heaths directors (Messrs Burton, Marshall and Hutton). By a telex sent on 21 December 1976 by Archie Begg of Heaths (the December 1976 Begg telex), Mr Begg sought Imperio's agreement to the inclusion of Article 15 in the proposed Binding Authority by stating that it was sought In order to facilitate a smooth operation of the Authority and is an internal arrangement and will not affect accounting in any way whatsoever.
    On 11 May 1977 Mr Begg sent a further telex (the May 1977 Begg telex) to Imperio about the Binding Authority stating :
    In endeavour to obtain larger spread of business to this facility we have been fortunate in obtaining the agreement of Bellefonte (US Licensed company) to act as fronting company for the companies subscribing to [the] facility. The telex continued to state that this would have the advantage of producing tax savings but would require an increased overrider to be paid to Bellefonte which certainly will not be detrimental to you.
    The first Binding Authority, and the only one to contain Article 15, was signed on behalf of Imperio on 27 May 1977. It was known as the "A2 Facility". Article 3 provided that it was incumbent on Heaths before accepting any risk that the original London placing slip should have been subscribed by "a recognised London market leader". Article 4 set out by reference to Schedules the Underwriting Limit under the Authority. A Schedule also set out the names and lines taken by the other Pool members.
    On 53 of the 117 occasions when Imperio acted as a front Heaths wrote to Imperio about the particular risk enclosing a policy document which they asked Imperio to sign and return. The typical letter would continue by a statement in the terms (or to the effect) that :
    This risk is written under the A2 Facility with us and represents your own line plus other lines written by other Companies subscribing to this facility ...for whom, in this instance, you are fronting under the fronting arrangements for this facility. Also as you can see we enclose a Reinsurance Cover Note in respect of the fronted Companies.
    The premium for your line is paid to you on bordereau in accordance with A2 facility arrangement.
    The enclosed policy document would show the sum insured by Imperio to be 96% (or thereabouts) of 100% of the risk written and the Reinsurance Cover Note would show reinsurance of Imperio by all the other pool members (save the one to which I have referred) of 92% (or thereabouts) of 100% of the risk, the difference between 96% and 92% representing the 4% (or thereabouts) net line which Imperio had agreed to write. The accounting would be carried out as if there was no fronting, that is Imperio would be sent accounts showing premium and claims in respect of a 4% line only. No other or further payment was made to Imperio for undertaking the risk of fronting.
    It is these letters on which Imperio relies for the claim to an Indemnity which it seeks leave to make by amendment (The Indemnity Issue). The proposed claim is therefore limited to the 53 occasions of fronting where such letters were sent.
    In September 1979 Bellefonte gave Heaths notice to cancel their participation in the facilities with effect on 31 December 1979 referring to the fact that the parties had been unable to agree the terms of an indemnity in favour of Bellefonte and thus the facilities had "been operating on a day-to-day basis with no written contract." Imperio also cancelled the authorities with effect on 31 December 1979.
    On the evidence, by 1 April 1983 the period of cover of all of the 117 risks fronted by Imperio had terminated albeit, of course, the exposure to claims remained.
    On 13 September 1984 Heaths wrote to Imperio in respect of one of the risks Imperio had fronted ( a fire loss where the ultimate assured was the Port Authority of New York, the reinsured being Pine Top Insurance Company). The letter stated that Heaths were unable to collect from one of the Pool companies, shortly described as "RASA", for which Imperio had fronted and by which it was reinsured and we must advise that Pine Top are looking to your company for reimbursement. The letter continued by stating that since this is the first time this situation has arisen we are drawing the matter to your attention and would appreciate confirmation that we may debit your account in accordance with our normal accounting procedure. The sum involved for RASA's line was US $6288.75.
    Imperio's response was to seek an explanation as to how they could be liable for more than the net line and to complain about the delay in advising them about the claim.
    Heaths replied on 19 November. The letter referred to Article 15 as the basis of Heaths entitlement and Imperio's obligation to front the risk adding :
    We do not know now the reasons why the remainder of the security was unacceptable to the Pine Top Insurance Company, but the fact remains that a cover note was issued to them .. showing only two companies as security, these being yourselves and W....
    Since the W... already appeared for their scheduled line of 3.226% your company assumed the whole of the "fronting" for the rest of the companies on the schedule. You were automatically reinsured by these companies as agreed by the terms of the binding authorities.
    On 7 December 1984 Heaths notified Imperio of another loss in respect of a cover on which Imperio had fronted. The ultimate assured was the Sisters of St. Mary Hospital. Heaths telex referred to a Court Award of US $5.6 m which had to be paid by 15 December and as we cannot possibly collect the reinsurance in the time available sought payment of the proportion of the claim fronted by Imperio ($502,500) prior to 15 December.
    Imperio's response was to seek full information about the matter. That led to a meeting in Lisbon on 18 January 1985 attended by Messrs Hopson (who gave evidence) and Gerken on behalf of Heaths and Messrs Martens Pereira and Oliveira (who gave evidence) on behalf of Imperio. Mr Hopson's role was to chase up sums due to Heaths on the general account, which is not in issue in these proceedings. Mr Gerken was there to seek to persuade Imperio to meet the Sisters of St Mary claim. From the notes of the meeting and as Mr Oliveira accepted in evidence it is clear that Imperio were told the company had further exposures to the Sisters of Mary risk on other lines fronted by Bellefonte and on an open market line. Imperio made clear that the company would not pay more than these exposures and its net line on the cover fronted by it for the Pool. As Mr Oliveira put it in his witness statement, neither he nor Mr Martens Pereira would commit Imperio where there were doubts about Imperio's liability, and as he agreed in cross-examination Imperio came away from the meeting without being satisfied that Heaths had provided a good reason for using Imperio to front.
    At this time the documents show that it was also becoming apparent (both to Heaths and Imperio ) that other Pool members, in addition to RASA, were unable to meet the claims upon them as members of the Pool. Heaths were also funding some of the claims.
    A further meeting was held in Lisbon on 26 February 1986. Mr Hopson and Mr Bridger attended for Heaths. Mr Oliveira and Mr Santos (whose evidence was given by a statement under the Civil Evidence Act 1995) attended for Imperio. Mr Santos had succeeded Lopez Mr Pereira as head of Imperio's Reinsurance Department. An internal memorandum written by Mr Hopson records that Imperio expressed concern about:
    (1) Their numerous involvements on the same risk.
    (2) Why we have never before requested settlement of their gross line (not true);
    (3) Why we had not kept them fully informed regarding the non- paying reinsurers so that they would have had the opportunity to pursue settlement direct.
    It was at this meeting that Mr Hopson said that when asked how often Imperio had been used as a front and why Imperio had been used rather than any other Pool member he recalled Mr Bridger saying words to the effect that Imperio had themselves asked to be used as a front to enhance their international profile. When cross-examined by Mr Flaux about this (which is not recorded or referred to in any document) Mr Hopson said he was certain that Mr Bridger had made this comment. He readily agreed that he did not know at the time, or indeed when he gave his evidence, whether or not what Mr Bridger said was true. Mr Oliveira said in his witness statement that he was sure Mr Bridger had not made this comment at the meeting. In cross-examination Mr Oliveira accepted it was possible that he had forgotten what Mr Bridger had said but was emphatic that if he had said it, it was completely unsatisfactory as an explanation.
    This apparent conflict of evidence seems to me to be of no significance. If Mr Bridger did make the statement Mr Hopson recalls it would not accord with Article 15, would (as Mr Hopson agreed) be belied by the terms of the December 1976 Begg telex, and, I accept, would have been seen as completely unsatisfactory by Imperio. If he did not, then there was no other explanation offered. Indeed Mr Hopson said the only explanation he heard from anyone at Heaths for the use of Imperio to front was the one given by Mr Bridger at this meeting.
    Following the meeting Imperio telexed stating the Company would only pay net lines. That drew a sharp riposte from Mr Bridger on 7 March referring to a sum of about US $300,000 outstanding on the Sisters of St. Mary claim and to a further amount of $207,000 said to be the amount Heaths had been unable to recover in respect of other claims on risks fronted by Imperio and which Heaths had in fact paid to reassureds.
    At some date between March and early July 1986 and then unknown to Heaths Imperio sought advice on the position from Clyde & Co. Mr Mackie was the partner concerned at Clyde & Co. Mr Oliveira said that advice was sought because Imperio remained unsatisfied with Heaths' demands for payment of fronted accounts without giving any justification or explanation for them. Mr Mackie agreed that Imperio and so Clyde & Co were particularly concerned with Imperio's liability to pay original assureds or reassureds, and unless Heaths were in breach of duty to Imperio there would be no question of Imperio not being bound to pay and so the question of Heaths' duty to Imperio was at the heart of the inquiry Clyde & Co were instructed to make.
    A further meeting in Lisbon was held on 2 July 1986 again with Messrs Hopson and Bridger attending for Heaths and Messrs Santos and Oliveira for Imperio. The meeting was not very fruitful because Imperio was awaiting advice from Clyde & Co. Mr Hopson's note of the meeting does, however, record that:
    Imperio are not happy with our interpretation of the fronting clause in the Binding Authority Agreement and
    Imperio queried the intention of a telex dated 21.12.76 from Archie Begg ....
    A telex from Mr Bridger to Imperio sent on 10 July 1986 also refers to Imperio being unhappy with Heaths interpretation of the fronting clause, stated Heaths were happy to discuss it, but stressed that Imperio did not, in Heaths opinion as brokers, have any defence to a claim by Pine Top in respect of the Sisters of St. Mary Hospital loss.
    On 17 September 1986 Imperio telexed Heaths :
    In view of the problems that are arising on these binding authorities, we have decided to appoint Clyde & Co ... to represent our interests. They will be contacting you to arrange meeting and review of the documents, etc. In due course they will report back to us. Please give them every assistance.
    Privilege was not waived in respect of advice given by Clyde & Co to Imperio. But Mr Mackie, and his then assistant on the matter, Mrs Reece Thomas both gave evidence. It is also agreed that whatever was or became known to Clyde & Co is also to be treated as known to Imperio itself. Mr Mackie and Mrs Reece Thomas met Mr Norton of Heaths on 3 October 1986. Mr Norton was the head of the General Accounting Services Section of Heaths. Following the meeting Clyde & Co wrote (as agreed) to seek information, including a copy of Heaths fronting agreement with Bellefonte; a list of any other company that subscribes to the North American Binding Authorities that were used as front companies, with an indication as to how many policies were actually fronted by them; and documents showing the participation in any policies led by the recognised London leaders. The telex also stated that in due course we will need to arrange a suitable date to compare our files of policies fronted by Imperio with your own documents so that we can have copies of the ones which we are presently missing, which total approximately 30/35.
    The notes of the meeting itself prepared by Mr Mackie include notes that:
    There was a discussion about the other reinsurers on the binder and Norton conceded that many of them are difficult payers and indeed some are dead ducks.
    [Imperio's] understanding is that there were 100 risks which they front but they have received documents for only 67 or 68 of those risks.
    [Mr Mackie] asked how many other companies had agreed to front. Norton said that some other companies had been used on odd occasions.
    There was a further meeting on 17 November 1986 between Messrs Norton, Leigh and Hopson of Heaths and Mrs Reece Thomas.
    Mr Hopson made a note of the meeting. The purpose was to go through the points in Clyde & Co's telex. Mrs Reece Thomas was told that there was no written agreement between Heaths and Bellefonte. She asked about the arrangements as regards overriding commission payable to Bellefonte, and was told that at this late stage it was not possible to be certain of the arrangements. She was told Heaths could not be categoric regarding the number of situations fronted by other facility members but Heaths were in a position to prove that two other members were used as fronts. Mrs Reece Thomas was told that she would need to specify particular risks for Heaths to check who the London market lead was, and that the previously advised figure of approximately 100 Imperio fronting situations was very much a best estimate, and was in no way to be taken as a meaningful figure.
    Clyde & Co's immediate response to the meeting was to send a telex on 18 November 1986 expressing the view that it was almost incredible that there was no written agreement with Bellefonte and disappointment at Heaths inability to deal with the number and nature of the risks for which London Market Leaders were used. The telex also listed the 68 risks upon which Imperio knows it was used as a front.
    Early in January 1987 Mr Norton spoke to Mr Mackie on the telephone. His note of their conversation records that Mr Mackie was quite categoric in maintaining that Imperio will not pay monies due from defaulting reinsurers as they do not recognise that they are liable. As Mr Mackie readily accepted in cross-examination Imperio could only not be liable if Heaths were in breach of duty in the use of Imperio as a front.
    On 19 January 1987 Mr Mackie wrote formally to Mr Norton. The letter raised again the lack of documentation about the Bellefonte fronting arrangements and sought information about the amounts deducted as commission/ overrider; again sought information about how many policies were fronted by other Pool members (only two relevant cover notes had been provided by Heaths); and repeated the request for information about policies led by recognised London leaders and for details of the further 32 or so fronted risks than the 68 Imperio had identified.
    The next event of any significance was a further meeting in Lisbon on 28 May 1987 between Mr Hopson and Mr Oliveira.
    Mr Hopson's note of the meeting records that he handed Mr Oliveira a list of all eighty-five identified fronting situations. Subsequently (22 June) a further fronted risk was identified and notified to Imperio.
    Heaths instructed Freshfields. On 30 June 1987 Freshfields replied to Clyde & Co's letter of 19 January. The reply made the following points:
    (1) Bellefonte was of no relevance to the fronting issues and Imperio had agreed to an overrider being paid to them as reflected in the May 1977 Begg telex.
    (2) on the question whether Article 15 of the Binding Authority was operated properly we would argue as follows:
    the terms of the Binding authority allowed the Coverholder (Heaths ) to use any member of the pool to front for all or any other companies in the pool subject to arranging 100% reinsurance with the pool. Imperio were aware that on many occasions they were being used as a front for all but one of the other members of the pool because they received notification of the reinsurance which had been arranged with the pool as required .... we would argue that if Imperio thought that the fronting agreement was being operated improperly they should have raised the matter with (Heaths) when the reinsurance cover notes were issued and it is too late for them to do so now.
    There was no suggestion that any of the other pool members had either been unable to appear on or been precluded from appearing on any of the risks fronted by Imperio as stated in Article 15.
    (3) It appeared that two other pool members had been used to front for the pool.
    (4) The line of the recognised London market leader would not necessarily appear on the same slip as the line of Imperio.
    (5) Imperio's list of fronted risks was inaccurate. It included only 51 risks which were fronted by Imperio and in addition to those 51 our clients have identified a further 35 Imperio fronting situations, which were described by risk number and assured.
    Clyde & Co replied to this letter on 7 December 1987. This letter included the following:
    (1) Fronting. Reference was made to the December 1976 Begg telex which led to the inclusion of Article 15 in the binding authority; it was said that Imperio only agreed to the inclusion of Article 15 on the basis of the representations contained in the telex; and added that to seek, at this very late stage, to impose upon Imperio an extent and scope of liability well beyond the arrangement agreed to in December 1976 is, in our opinion, not only without merit, but also tantamount to being an admission that (Heaths) are in substantial breach of the various duties owed by an underwriting agent to its principal, including that of acting at all times in good faith. (My emphasis).
    (2) Imperio had paid the net lines on the Sisters of St Mary risk, regarded themselves as having no further responsibility for the claim and all further sums were a matter between Heaths and the other pool members.
    (3) Bellefonte . The May 1977 Begg telex was quoted in full (Heaths could not find a copy of it ) and it was said that if there was no contractual documentation and, as Heaths had said, Bellefonte was simply approached on a case by case basis, then it seems to us that this is another instance of [Heaths] being in serious breach of the various duties they owed to their principals.
    Mr Mackie, in his witness statement, said that the point he was making in his reference to a breach of the obligation of good faith was that if Heaths were now saying that Imperio was liable as a front for the rest of the Pool then it was tantamount to an admission that by sending the December 1976 Begg telex referring to Article 15 as an internal arrrangement Heaths had been in breach of duty. He also said that this "observation" had nothing to do with whether there had been a breach of or in relation to Article 15.
    I did not find this an easy distinction when I first read it. Mr Flaux in his opening submissions emphasised its importance without removing my concerns. The underlying if not the expressed basis for the allegation had to be that Article 15 was not consistent with what Heaths were now claiming and had said in the December 1976 Begg telex. In the event, any supposed distinction ceased to be significant because Mr Mackie in cross-examination readily agreed that he would not have made the allegation lightly and in re-examination that in making it he was addressing the question of the operation by Heaths of Article 15 as part of what he was alleging.
    Freshfields' response on 4 February 1988 whilst rejecting the points made, put forward nothing further of substance. As Mr Mackie agreed, the demarcation lines on the issues raised were now clearly drawn.
    Clyde & Co (Mrs Reece Thomas) also inspected, in April 1988, some of the documents held by Heaths, including a number of slips. There is no dispute that the documents revealed a number of risks on which there was no evidence of a recognised London market lead. Moreover Clyde & Co were only given access to selected documents (slips and claims files) and not to the underwriting files on the basis, as Heaths contended, that those files were Heaths own documents. Clyde & Co objected and said so in a letter dated 22 April 1988. The letter said they needed to be satisfied about the exercise of underwriting authority by (Heaths) on behalf of our clients in relation to the various risks. In a subsequent telephone conversation Mrs Reece Thomas informed Freshfields that what Clyde & Co was interested in was how the underwriting decision to use Imperio on several lines at once was taken in respect of those risks where that had occurred. The same point was made in a letter from Mr Mackie to Freshfields dated 10 June 1988. Mr Mackie agreed that the exposure to several lines on the same risk was apparent from the slips which Clyde & Co had inspected. This letter produced a response from Freshfields dated 26 July 1988 which also advanced no new points.
    Apart from the provision of quarterly accounts by Heaths, nothing further of significance occurred until 2 February 1989 when Heaths wrote to Imperio to point out that they had not yet received a report from Imperio following the investigation by Clyde & Co. The only documented consequence was that Imperio refused to pay, save for the net lines, and Heaths did not pursue the matter further. Thereafter, as Mr Oliveira put it, the matter went into abeyance and the cut-off date, September 12, 1989 passed at a time of virtual silence between the parties, which continued until 1994.
    THE FACTS AFTER SEPTEMBER 12, 1989
    On 30 March 1994 Barlow Lyde & Gilbert (BLG) (Imperio's present solicitors) wrote to Heaths saying they were now instructed by Imperio in place of Clyde & Co in connection with various issues arising out of the placement and operation by you of the binding authorities.
    The immediate cause of the matter being resurrected was a claim for some US $450m put forward by the Santa Fe Railway Company in a Texas court against a number of insurers including Imperio. A settlement of the claim had been negotiated in a sum of only some US $13.5m of which Imperio was being asked to pay some US $48,500 as the whole pool line fronted by Imperio on two contracts. BLG wrote that they had advised Imperio to pay the sum in order to secure the settlement and entirely without prejudice to Imperio 's entitlement to take issue with you (and obtain appropriate redress) about the placement and operation of the binding authorities.
    In writing this letter BLG were not in possession of any further or other information than had been available to Imperio and Clyde & Co before September 12, 1989.
    Freshfields' substantive reply to this letter was dated 3 June 1994. The letter made the point (again) that Imperio was aware that it was being used as a front on many occasions pursuant to the terms of the binding authorities ... since it received notification of the reinsurance which had been arranged with the pool as required by the binding authority. The reinsurance cover notes clearly showed that Imperio was fronting for the rest of the pool. However, Imperio did not, at the time when those covernotes were issued, ever raise any argument that the fronting agreement under the terms of the binding authority was in its view being operated in any way improperly by (Heaths).
    I would characterise this as an estoppel-type argument.
    There followed, so far as Heaths and Freshfields were concerned, a further year's silence. BLG wrote next to Freshfields on June 1, 1995. They said Imperio's rights remained fully reserved pending their continuation of the task of conducting an examination of papers previously made available by your clients, as well as those which have more recently been supplied. The letter referred expressly to Article 15 and (correctly) continued:
    As far as either we or our clients are able to tell, your clients have at no time offered any evidence or explanation of why none of the other 35 or more Pool members was in these cases able to appear on the contract documentation issued, as our clients have been entitled to assume was the case, still less why it was necessary for Imperio to be singly called upon to front for the whole of the Pool ....
    The letter referred (again correctly) to "the handful of slips" BLG had seen (which were the same as those seen by Clyde & Co ) as demonstrating that other Pool companies were in fact acceptable as security to cedants (because they took a direct facultative line) in cases where Imperio had nonetheless been used as a front.
    The letter also referred to a further claim ("North River") against Imperio as the fronting company of the Pool and sought both an explanation and evidence of the circumstances in which North River required Imperio singly to front the facility line. Proceedings were, in the event, issued against Imperio in respect of the North River claim in June 1996 in New York.
    It is this letter which Mr Flaux characterised as and Mr Hardy ( a partner in BLG) deposed to be the first occasion on which the direct question had been formally asked or asked in writing of Heaths how they could justify the use of Imperio as a front under Article 15. As a matter of words, that is correct. As a matter of substance it is wrong. The starting point for Clyde & Co (and indeed Imperio itself) must have been Article 15 and the December 1976 Begg telex which sought Imperio's agreement to it. That was the context of Clyde & Co's letters and Heaths' and Freshfields' replies to them. It was the context of the estoppel-type argument. In any event even if it was not, plainly it should reasonably have been so. BLG's questions were obvious, Clyde & Co in effect asked the same questions. There had never been answers to them.
    Freshfields substantive response was dated August 10, 1995. They enclosed a "risk register" which showed that other companies were used to front from time to time, but otherwise repeated the estoppel-type argument. Only 2 other companies were shown to have been used to front of which only 1 had been used as such to any substantial extent. The risk register also showed that in addition to the risks referred to in Freshfields letter of 30 June 1987 there were 29 other risks fronted by Imperio, making the total of 117.
    The writ was issued on September 12, 1995. Mr Hardy described it as a protective Writ so that delay in obtaining documentation would not further prejudice Imperio's rights. The claims made in the Writ have been set out in the Introduction to this judgment.
    On 11 December 1995 Writs were also issued seeking inspection of documents held by Heaths. These Writs were served on 21 December. The Writ in the main action was served on 11 January 1996. Thereafter various of Heaths documents were inspected by a Mr Slattery on behalf of Imperio.
    In the course of the contested application for the trial of preliminary issues, and as evidence on the want of prosecution issue, Mr Hardy deposed that in the North River proceedings in New York (in which Imperio unsuccessfully sought to join Heaths as third parties) in June 1997 Letters Rogatory were issued by the New York court which sought the examination of witnesses in relation to the basis on which Imperio had been used to front risks. The witnesses included Messrs Burton and Bridger who had been involved for Heaths in the operation of the binding authorities. Mr Hardy deposed that the issue of the Letters of Request provided BLG with a basis on which to contact these witnesses and he was then able to speak to Mr Burton and to arrange for someone to speak to Mr Bridger both of whom were willing to co-operate with BLG.
    The information Mr Hardy deposes was obtained from talking to Mr Burton and Mr Bridger lay at the foundation of Mr Flaux's submissions that Imperio had only come to discover facts relevant to the company's causes of action which had been concealed from it by Heaths after the cut-off point.
    Mr Burton was at the time responsible at Heaths for writing some of the risks on which Imperio was fronted. Mr Hardy deposed that Mr Burton told him at the end of July 1997 that he would be approached by Heaths employees acting as brokers to accept lines on behalf of the Pool but he was unfamiliar with the fronting arrangements and not involved in the commitment of any member to front for the remainder. That would have been done by the "back room" boys. Mr Burton also said that he felt sure it would have been very rare that any objection would have been raised by a cedant to pool companies.
    Mr Hardy, in paragraph 87 of his Affidavit, said of this information (and Mr Bridger told BLG much the same) :
    For the first time in the whole history of this matter information had thus been given as to how the facility was actually operated; and on the basis of this it appeared that there was a clear breach of the fronting provision, because the evidence of Mr Burton ... suggested that there was no basis on which to single out Imperio. It also suggested for the first time the real possibility that the operation of the facility had been dishonest - i.e. that the absence of a justifiable reason at the time the underwriting decision was made must have been known to whoever else improperly caused Imperio to be used as a front.
    I find this passage in Mr Hardy's Affidavit artificial and unrealistic. Long before BLG were instructed both Imperio and Clyde & Co had been asking Heaths to explain and justify the use of Imperio as a front. No explanation consistent with the terms of Article 15 had ever been offered, and certainly no basis on which to single out Imperio had ever been suggested, either by Heaths or Freshfields. Whether the decision to use and choice of Imperio as a front was made by an underwriter or by a back room boy seems to me to be of no significance. Anyone at Heaths responsible for the decision should have been aware of the terms of Article 15. In other words, if the conclusions Mr Hardy drew in this paragraph of his Affidavit are correct they were conclusions which at the least could and should have been drawn before BLG were ever instructed. I would add that if there had been an explanation for the use of Imperio as a front then, as Mr Mackie agreed, it should have been very easy to give it, whoever had been responsible for it. Yet when Heaths and Freshfields were asked for an explanation, as Mr Mackie also agreed, "answer came there none". It must also be remembered that before any of this information was imparted to BLG they had caused a Writ to be issued which had expressly alleged that Heaths were in breach of contract, negligent and in breach of fiduciary duty by failing to act in what Heaths honestly believed to be the best interests of Imperio in relation to the operation of the binding authorities.
    Mr Oliveira said that whilst Imperio believed before the cut-off date that it was possible that Heaths were in "breach of obligation" in relation to using Imperio as a front, Imperio did not know how the binding authority had been operated and "did not believe that there had been fraud or dishonesty by Heath." Asked by Mr Flaux whether he knew at the time of the investigations by Clyde & Co that Heaths had known when they used Imperio as a front that they were not entitled under Article 15 to do so, Mr Mackie said he had not. Asked if he suspected it he said:
    I think at this stage we simply didn't know. We had a lot of information in terms of slips but no one was telling us and explaining the actual operations of the slips and how it was done.
    I have no reason to doubt this evidence. What is, however, apparent and was recognised by Mr Oliveira in cross-examination, is that the facts and inferences from them on which the allegation of dishonesty rests were known and capable of being drawn prior to the cut-off date. For example in relation to the use of Imperio to front Mr Oliveira accepted that Imperio had never had a satisfactory answer and knew there was no good reason for it albeit he said that "it was through BLG that it became more and more evident". He also accepted that so far as he was aware nothing had changed as regards Imperio's knowledge between 1988 and September 1995 when the Writ was issued containing the allegations it did. The essence of Mr Oliveira's answers came when Mr Gross had taken him through the matters relied upon in support of the allegations in Paragraph 20 of the Points of Claim that Heaths made a fraudulent misrepresentation to induce Imperio to sign the policy which committed it to fronting.
    Mr Gross asked:
    Is there any fact relied upon in Paragraph 20 that you would like to tell his Lordship you did not know before the end of 1988?
    Mr Oliveira's answer was:
    I didn't know that I should consider it a fraudulent situation.
    Mr Mackie's evidence was to the same effect. He agreed that the use of Imperio to front was never explained to us adequately if at all ; that in 1988 it was true to say that Heaths had never been able to provide any reason to justify the use of Imperio to front; and that Clyde & Co knew from the slips they had inspected that there was no reason why other Pool companies could not have written the fronted business as there were instances where Imperio was used to front but other Pool companies had taken facultative lines.
    In paragraph 163 of his Affidavit, Mr Hardy also deposed that "much material information" in addition to the information from the underwriters, was provided by Heaths and obtained by BLG within the period of six years preceding the issue of the Writ.
    The first matter was the provision of the risk register revealing another 29 situations in which Imperio had been used as a front. However, I again do not think there is any real significance to be attached to this. The previous exchanges about the numbers of risks fronted establish that neither Imperio nor Heaths found it easy to identify all of them; reference was at one time made to an approximate figure of 100; it was never said that all of them had been identified, and neither the nature nor substance of Imperio's complaint is affected by whether it was used as a front on 88 or 117 risks. Although in a narrow sense Mr Flaux may be right in his submission that a separate cause of action arose on each occasion Imperio was used as a front, that does not in my judgment address the question which arises under Section 32 of the 1980 Act if in fact Imperio is aware that the company has been used as a front on a substantial number of occasions, aware there may be others, and in a position to know that a claim can be made for however many occasions there may transpire to have been, at least in circumstances where the picture which finally emerges is not different in scale to that which is or ought to have been understood.
    The second matter to which Mr Hardy referred was information derived from the inspection of Mr Slattery. In the event that played very little part in the hearing and has not been urged by Mr Flaux. It really amounted to little more than further information about Bellefonte, accumulations, lack of London market leaders, and the like which was not qualitatively different from what was already available. The third matter was the "persistent refusal to explain why Imperio had been used to front in the face of formal and repeated requests to do so." I have considered that above. It is not sensible or logical to consider it as a separate matter from the information obtained from the underwriters. The "refusal" was persistent after BLG were instructed; it was also persistent before they were instructed.
    THE POINTS OF CLAIM
    The Points of Claim were served on 26 November 1997. Again, I need to set out the material allegations and the matters relied upon in support of them in some detail as they are relevant to the questions which arise under Section 32 of the Act and to the nature of the claims made for breach of fiduciary duty.
    The Points of Claim plead the Binding Authority agreements, and in paragraph 9 that Heaths were:
    by virtue in particular of the said agreements, in a fiduciary relationship with Imperio and in consequence was under, inter alia, duties
    (I) to treat Imperio equally with the other parties to the ... agreements; and/or
    (ii) to treat Imperio fairly in relation to other principals for whom it was acting; and/or
    (iii) to act in what it honestly believed to be the best interests of Imperio.
    Paragraph 10 pleads implied terms that Heaths would act with all reasonable skill and care in and about the performance of its duties under the agreements and paragraph 11 pleads that the like duty was owed in tort.
    Paragraph 12 pleads the cause of action for breach of contract and in particular breach of Article 15. The particulars of the breaches alleged are that:
    (i) Heaths caused Imperio alone out of the pool members to front 117 of the 468 risks written under the first agreement.
    (ii) in none of the 117 instances were the other pool members unable to appear on the documentation or otherwise precluded from doing so (the words of Article 15).
    (iii) a fronting company was used in 204 out of the 468 risks of which Imperio was used in approximately 60% of cases.
    In summary, the pleaded breaches of contract amount to a breach of Article 15, based on the fact that the degree to which Imperio had been used as a sole front in effect showed that Article 15 could not have been operated in accordance with its terms. I would comment that this allegation would have had no less force if the figure of 117 had been 88 or the percentage of 60 had been some other substantial figure.
    Paragraph 13 of the Points of Claim pleads "breach of fiduciary duty" by Heaths in failing to treat Imperio equally with the other parties to the first agreement. The particulars of breach :
    (i) repeat the particulars given under Paragraph 12; and
    (ii) allege that by virtue of being the fronting company Imperio was "exposed or potentially exposed" to a much greater liability than its net line and was obtaining no compensation for taking on such exposure or potential exposure.
    I would comment that the greater exposure is, or at the very least should be, obvious to any insurer or legal adviser and really adds nothing of substance to the particulars in paragraph 12. The fact that it is undertaken "without compensation" demonstrates no more than that the business of insurance is the undertaking of risk for reward (premium) and that the amount and assessment of the premium depends on the degree of exposure to risk. Just as Bellefonte was paid an overrider for fronting, so too might Imperio have been. For reasons which will emerge in my consideration of the law, and without expressing any view on the correctness of the concession, Mr Flaux in effect conceded in the course of his submission that there was no cause of action known to law for a breach of fiduciary duty which was other than an "intentional" breach, and thus the claim in Paragraph 13 in contrast to Paragraph 14 was in any event unsustainable.
    Paragraph 14 (described by Mr Flaux as Imperio's main claim in the action) alleges that in breach of fiduciary duty, Heaths failed to act in what it honestly believed were the best interests of Imperio. This was the allegation made in the Writ in support of the causes of action in contract, tort and breach of fiduciary duty.
    The particulars relied upon in support of this allegation are:
    (i) The same particulars as relied upon in support of Paragraphs 12 and 13.
    (ii) the averment that Heaths knew or must be taken to have known that Article 15 ... did not apply to allow it to use, cause, require or request Imperio to front or purportedly to front as they did in relation to the 117 risks.
    The "facts and matters" relied upon in support of the allegation of knowledge being:
    (a) Heaths failure to provide any reason to justify the use of Imperio and Imperio alone as a front;
    (b) The "fact" that there was no reason why the other pool members were unable to appear or precluded from appearing on the risks.
    (c) That in a number of instances where Imperio was used to front other pool members took facultative lines on the same risk (showing they were in fact acceptable security to the cedant); and
    (d) "no reasonable or honest person could consider that Article 15 applied in such circumstances".
    I would comment that (a) was true in 1988, as Mr Mackie acknowledged in evidence; (b) and (c) were also known by that time and were apparent from the slips which Clyde & Co saw; and (d) is no more than a conclusion from what precedes it. I would add that despite the extra words the substance of what is alleged is in my judgment no different from what is alleged in Paragraph 12 itself. If the allegation in (d) was justified, it would equally have been justified by the matters alleged in that Paragraph.
    (iii) that Heaths knew that the fronting exposed Imperio to a greater liability than its net line, because that was "obvious" from the fact of fronting, the business included long-tail business, Heaths had made no adequate enquiries as to whether the other pool members were good quality security and some of them were not adequate or acceptable security.
    I would comment that these matters were equally known or capable of being inferred by Imperio and Clyde & Co prior to September 12, 1989. Nor do they add substantively to the allegation that a fronting company takes on a greater exposure; they relate to the extent of the loss to which that exposure may give rise.
    (iv) that Heaths knew that Imperio was obtaining no compensation for such exposure.
    By definition, so did Imperio and Clyde & Co
    Paragraph 15 pleads the case in negligence as regards fronting. The allegation made was that Heaths ought to have known that Article 15 could not apply in the circumstances. The facts and matters relied upon were those alleged in Paragraphs 12, 13 and 14.
    Paragraph 16 pleads loss and damage. For the purposes of this judgment it is only necessary to record that in addition to reference to those fronted losses where other pool members had not paid, loss and damage was pleaded by reference to Imperio's exposure by reason of fronting to a greater liability or potential liability than the net liability under the proportion they subscribed.
    In addition to these claims the Points of Claim advance a number of other causes of action.
    Paragraphs 17 to 22 plead a case of fraudulent or negligent misrepresentation inducing Imperio to sign policies in the 53 cases in which Heaths sent Imperio a policy showing the fronted line. The damage claimed is the same as claimed in paragraph 16. The representation relied upon is the statement in the typical letter sent in those cases in which a policy document was sent for signature by Imperio to the effect that the request to sign the policy was made in accordance with the provisions of Article 15. The plea that the representation is fraudulent was based on the same allegations as made in Paragraph 14.
    Paragraph 24 advances a discrete claim that in one instance Heaths used Imperio to front a risk written under one of the binding authorities which contained no fronting agreement such as Article 15 at all. The cover in question had a period from 1 January 1979 to 1 January 1981.
    Paragraph 26 advances a discrete claim for negligent misrepresentation made by the December 1976 Begg telex that Article 15 was "an internal arrangement".
    Paragraph 32 advances a discrete claim for negligent misrepresentation made by the September 1976 letter, the misrepresentation alleged being that at least some of the other Pool members were not "first class companies".
    Paragraph 39 advances a discrete claim for negligent misrepresentation made by the May 1977 Begg telex on the basis that the telex represented that the introduction of Bellefonte would benefit the Pool members whereas the effect of the increased overrider payable to Bellefonte more than outweighed any tax advantage.
    Paragraph 46 advances a discrete claim that Heaths were in breach of fiduciary duty to treat Imperio fairly as regards Bellefonte for whom they were also acting. The same facts are relied upon as for the claim in Paragraph 39. The same claim is also advanced in contract (paragraph 47) and tort (Paragraph 48) again on the same alleged facts.
    Paragraph 50 advances a claim for breach of the terms of the Binding Authority Agreements that the original placing slip would be subscribed by a London Market leader . A schedule sets out those risks so far identified as not complying with this term. Again the same claim is also advanced in tort.
    Paragraph 56 advances a claim for breach of the Binding Authority Agreements by committing Imperio to risks in excess of the agreed underwriting limits. The basis of this allegation is that some of the policies written exposed the Pool and Imperio to an unlimited liability in respect of the potential exposure to costs. Again the same claim is also advanced in tort.
    Paragraph 59 advances a claim for breach of contract and/or negligence in respect of the use of Imperio to subscribe to the same risk under more than one of the binding authority agreements and where Imperio had a faculltative line ("the accumulations claim") and to subscribe to "poor quality business".
    On 3 April 1998 Heaths served Points of Defence relating only to limitation. For the purposes of this judgment the material pleas are:
    (1) That insofar as Imperio's claim is founded in contract or tort it was barred before September 12, 1989 by reason of Sections 5 and 2 respectively of the Limitation Act 1980.
    (2) That insofar as Imperio's claim is properly founded on an equitable cause of action (in particular, breach of fiduciary duty) which accrued at any time before the cut-off date it is time-barred:
    (i) by analogy with the position in respect of any cause of action in tort or contract which is founded upon the same facts on the basis that equity follows the law ....
    The Defence also pleaded the dates on which it was alleged the various causes of action arose
    The Points of Reply pleaded section 32 of the 1980 Act. The Points of Rejoinder pleaded that Imperio or Clyde & Co discovered or could with reasonable diligence have discovered for the purposes of Section 32 before the cut-off date "the deliberate concealment" of some or all of the facts relevant to its right of action.
    Finally, I should record the proposed amendment to the Points of Claim (dated 27, October 1998) to raise the Indemnity Issue in new paragraphs 23A-C. The plea reads:
    ...by reason of and upon Imperio's compliance, by signing or agreeing to sign policies, with [Heaths] requirements or requests to sign policies ... implied contracts of indemnity came into existence between [Heaths] and Imperio.
    The contract in each case was to the effect that [Heaths] would indemnify Imperio against liabilities, alternatively consequences arising from signing or agreeing to sign the policy in question.
    In the premises, Imperio is entitled to be and claims to be indemnified in the amount of any and all liabilities, alternatively, consequences to which it has and does become subject pursuant to the signing or agreeing to sign of any and all such policies.
    Heaths (by Freshfields) sought further particulars of the proposed amendment in a letter dated November 11, 1998. They sought the basis on which the alleged implied contracts of indemnity was said to arise and whether Imperio relied upon any facts and matters beyond those already pleaded. BLG's answers were given by letter dated November 24. It was said that Imperio did not rely on an implication of law but upon the general principle referred to by Mustill LJ in the Nogar Marin [1998] 1 LL Rep 412 in paragraph 1 at the top of column 1 of page 417 of the Report and also say that the implication arises by obvious inference and/or from business efficacy. The second request was answered by stating that Imperio did not rely upon any facts beyond those already pleaded.
    THE LIMITATION ACT 1980

    The material provisions of the 1980 Act read as follows:

    2 Time limit for actions founded on tort

    An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.

    5 Time limit for actions founded on simple contract

    An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

    21 Time limit for actions in respect of trust property

    (1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action-

    (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or .

    (b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.

    (2) ....
    (3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued.

    For the purposes of this subsection, the right of action shall not be treated as having accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession.
    (4) ....

    23 Time limit in respect of actions for an account

    An action for an account shall not be brought after the expiration of any time limit under this Act which is applicable to the claim which is the basis of the duty to account.

    32 Postponement of limitation period in case of fraud, concealment or mistake

    (1) Subject to subsection (3) below, where in the case of any action for which a period of limitation is prescribed by this Act, either-
    (a) the action is based upon the fraud of the defendant , or
    (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or
    (c) the action is for relief from the consequences of a mistake ;

    the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

    References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.

    36. Equitable jurisdiction and remedies

    (1) The following time limits under this Act, that is to say--
    (a) the time limit under section 2 for actions founded on tort;

    (b) the time limit under section 5 for actions founded on simple contract ;
    (c) ....
    shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any such time limit may be applied by the court by analogy in like manner as the corresponding time limit under any enactment repealed by the Limitation Act 1939 was applied before Ist July 1940.

    (2) Nothing in this Act shall affect any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise.
    THE ACT AND THE CAUSES OF ACTION ALLEGED
    Apart from the claim in Paragraph 14 of the Points of Claim for damages for breach of fiduciary duty, to which Mr Flaux submits the Act has no application, all the other causes of action pleaded by Imperio are claims founded either on tort or contract and so subject to a limitation period of six years from the accrual of the cause of action under either Section 2 or Section 5.
    There is no dispute that the cause of action in contract is statute-barred subject to the application of Section 32. That is because the breach of contract occurred when Heaths caused Imperio to front a given risk and that must in every case have occurred by April 1983 by when all the risks had terminated.
    There are issues as to when the causes of action founded on tort accrued and as to the application of the Act "by analogy" to the claim for breach of fiduciary duty under Section 36(1) of the Act. The application of Section 32 to these causes of action is also in issue, save that it is not disputed that if the Act does apply by analogy to the claim for breach of fiduciary duty the analogy extends also to Section 32.
    ACCRUAL OF THE CAUSES OF ACTION IN TORT
    It is of course trite law that a cause of action in negligence does not accrue until damage has been suffered. It is also trite law that damage may be suffered without the loser being aware of it. Examples are to be found in the cases of Bell v Peter Browne [1990] 2 QB 495 ( solicitor transferring house to wife without protecting the husband's share in the proceeds should it be sold) and Forster v Outred [1982] 1 WLR 86 (plaintiff client suffers damage by solicitor's negligence by executing a mortgage deed over her property which subjected her to a liability which might mature into a financial loss). In each case damage was held to have been suffered at the time the transfer and mortgage respectively were executed, albeit the sale by the wife and liability under the mortgage occurred only much later.
    The questions whether and when damage is suffered are questions of fact: D. W. Moore v Ferrier [1988] 1 WLR 267 and Nykredit v Edward Erdman (No 2) [1997] 1 WLR 1627. But the receipt of something less valuable or the transfer of something of value without an agreed protection is itself damage. There must be actual damage within the measure of damage applicable to the wrong in question for the cause of action to accrue but an increase in a plaintiff's obligations plainly may constitute such actual damage. Nor is it relevant that the damage may later become more serious or capable of more precise quantification.
    I have already recorded that the claims in respect of fronting are alleged in Paragraph 16 of the Points of Claim to have caused loss to Imperio by exposing the company to a greater liability or potential liability than the net liability subscribed and for which the premium was calculated and paid. In the course of the hearing Mr Flaux was not inclined to dispute that such exposure for no compensation was damage and thus that the cause of action in tort accrued, as the cause of action in contract, when Imperio was committed by Heaths to front. In this, in my judgment, Mr Flaux was plainly right. Insurance is the business of undertaking risk for reward. An insurer who is committed to a greater risk than agreed for no reward has thereby suffered a real loss. In this case that is all the more real as Imperio also alleges that some of the other members of the Pool were not acceptable security to reinsure Imperio. It follows that the claims in Paragraphs 15, 17 to 22 and 24 of the Points of Claim also accrued when Imperio was committed by Heaths to front.
    Mr Flaux did not, however, accept that the same principle applied to all of the various other causes of action pleaded in Paragraphs 26 to 59 of the Points of Claim. In my judgment, however, it does and with the same result. The claims in paragraphs 26 and 32 are themselves aspects of the claims for fronting. The claims in respect of Bellefonte gave rise to a loss on each occasion an overrider was payable to Bellefonte which exceeded any tax credit. Again that must have occurred by April 1, 1983. The claim that there was no London market leader must, if it is valid, relate to a matter which affects the nature of the risk and so consideration of the appropriate premium to charge for undertaking it. Exceeding underwriting limits, the accumulations claim and writing poor quality business, all fall within the same category.
    It follows that I see no difference in this case in the application of Section 2 of the Act from the application of Section 5. If the claims are not to be statute-barred it must be because of the operation of Section 32 and not because the causes of action pleaded did not accrue to Imperio until after the cut-off date.
    FIDUCIARY DUTY AND LIMITATION
    As I have said, Mr Flaux submits that limitation periods and the 1980 Act have no application to the claim for breach of fiduciary duty pleaded in Paragraph 14 of the Points of Claim, and that is the result not of principle so much as legal history. Mr Gross submits that this court should apply the six year limit applicable to causes of action in contract and tort "by analogy in like manner" as the corresponding limits were applied before 1st July 1940 under Section 36(1) of the Act. He submits that there is a consistent theme to be discovered from the authorities starting with Hovenden v Lord Annesley (1806) 2 Sch. & Lef. 607 and ending with Paragon Finance v D.B. Thakerar & Co [1999] 1 All ER 400 that where a claim for a breach of fiduciary duty was or is made in circumstances which did and do not involve conduct by a fiduciary who has validly received or held property for the person to whom he owes the duty then equity would apply the statutes of limitation by analogy to the claim, and if the claim involved fraud, the limitation period would be applied by analogy from the time when the fraud was or should reasonably have been discovered.
    At the forefront of Mr Gross' submissions was the decision of the House of Lords in Knox v Gye (1872) LR 5 HL 656, a decision which he submitted established that the courts would have applied the six year period by analogy in a case such as the present. I think the headnote of the report accurately summarises the decision:
    Where there is a remedy at law, and a correspondent remedy in Equity, supplementing that of the Common Law, and the legal remedy is subject by statute to a limit in point of time, a Court of Equity in affording the correspondent remedy will act by analogy to the statute, and impose on the remedy it affords the same limit as to time.
    Where, therefore, in the enforcement of a legal right, the Court of Common Law would, under the provisions of the Statute of Limitations, refuse the enforcement after the lapse of six years from the accruing of the right of action, a Court of Equity will, where its powers to grant relief is asked for under similar circumstances adopt the principle of the statute, and decline to grant such relief.
    This derives from the speech of Lord Westbury at pages 674-5 of the report:
    For where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitations a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation. This is the meaning of the common phrase, that a Court of Equity acts by analogy to the Statute of Limitations, the meaning being, that where the suit in Equity corresponds with an action at law which is included in the words of the statute, a Court of Equity adopts the enactment of the statute as its own rule of proceedure. But if any proceedings in Equity be included within the words of the statute, there a Court of Equity, like a Court of Law, acts in obedience to the statute.
    On the face of it I think Knox v Gye fully justifies Mr Gross in making the submission he does. Even in the case of concealed fraud, where equity would not bar relief, it did not do so only for so long as the party defrauded remains in ignorance without any fault of his own: Bulli Coal Mining Company v Osborne [1899] AC 351 per Lord James at page 362. That principle is of course now to be found in Section 32 of the 1980 Act. But in origin it derived from the application by equity of the Statute of Limitation by analogy on the basis that the statutory time limit ran from the time when the fraud was first known to the plaintiff : The Metropolitan Bank v Heiron (1880) 5 Ex. D 319 at pages 323-4 per James LJ and pages 324-5 per Brett LJ. Heiron, indeed, is a case where equity applied the statute by analogy to a claim for dishonest breach of fiduciary duty.
    At the forefront of Mr Flaux's submissions that the Limitation Acts would not have been applied by analogy to a claim for breach of fiduciary duty such as that pleaded in paragraph 14 of the Points of Claim by a court before 1st July 1940 was the speech of Viscount Haldane in Nocton v Lord Ashburton [1914] AC 932.
    Lord Ashburton made two claims against his former solicitor. The first related to advice which led to him borrowing sums and then advancing the substantial part of them on a mortgage of property. That advance was made in 1904 and so more than six years before the Writ was issued. Moreover Lord Ashburton had been expressly warned by Mr Nocton's partners of the risks involved in making the advance in terms which it was held revealed the true facts on which he later relied for this claim or at least sufficiently put him on enquiry about them.
    The second claim was in respect of advice given in December 1905 which led to Lord Ashburton agreeing to the release of the most if not the only valuable part of the property the subject of the mortgage. The effect of the release was that Mr Nocton himself obtained a first charge over that part of the property. Both the advice and the release were given and made within six years of the issue of the Writ. The statement of claim alleged that this advice was not given in good faith but in Mr Nocton's own interest. Neville J found that fraud was not proved and dismissed the claim. The Court of Appeal reversed the finding of fact and granted relief on the basis of fraud. The House of Lords held that the Court of Appeal was not justified in reversing the finding but, to quote the headnote:
    the plaintiff was not precluded by the form of his pleadings from claiming relief on the footing of breach of duty arising from fiduciary relationship and that he was entitled to relief on that footing.
    It follows from the summary that I have given that there was no limitation issue before the House of Lords as such. The first claim was barred whether it was approached by analogy to or direct application of the Limitation Acts or by way of acquiescence or laches. The second claim, on the other hand, could not be barred on any basis.
    The passage in Viscount Haldane's speech on which Mr Flaux principally relies begins at page 956. At page 952 Viscount Haldane drew a distinction between cases involving "actual fraud" in which the jurisdiction of the courts of common law and chancery was concurrent and the exclusive jurisdiction of the court of chancery in cases where a man would be prevented from acting against the dictates of conscience of which common instances ... are cases arising out of breach of duty by persons standing in a fiduciary relation ....
    Then at page 956 he said:
    When, as in the case before us, a solicitor has had financial transactions with his client, and has handled his money to the extent of using it to pay off a mortgage made to himself, or of getting the client to release from his mortgage a property over which the solicitor by such release has obtained further security for a mortgage of his own, a Court of Equity has always assumed jurisdiction to scrutinise his action. It did not matter that the client would have had a remedy in damages for breach of contract. Courts of Equity had jurisdiction to direct accounts to be taken, and in proper cases to order the solicitor to replace property improperly acquired from the client, or to make compensation if he had lost it by acting in breach of a duty which arose out of his confidential relationship to the man who had trusted him. This jurisdiction, which really belonged to the exclusive jurisdiction of the Court of Chancery, had for the client the additional advantage that, as illustrated by the judgment of Lord Hatherley L.C. in Burdick v Garrick (1870) L.R. 5 Ch. 233, the Statute of Limitations would not apply when the person in a confidential relationship had got the property into his hands (my emphasis)
    At page 958 Viscount Haldane said:
    My Lords, the conclusion at which I have arrived is that this action ought properly to have been treated as one in which the plaintiff had made out a claim for compensation either for loss arising from misrepresentation made in breach of fiduciary duty or for breach of contract to exercise due care and skill. The main head of claim, that relating to the mortgage of 1904, is barred in equity by the acquiescence of the plaintiff, and at law by the Statute of Limitations.
    The second head of claim ... is not so barred. I am of the opinion that Lord Ashburton was entitled to succeed on this second claim.
    I find this a very flimsy basis for the proposition Mr Flaux seeks to derive from it. Limitation was not in issue. There is no reference to the application of the Statute by analogy and no reason why that should have been considered or addressed. Knox v Gye and authorities on the application of the statute of limitation by analogy were not cited. On the reasoning of the Court of Appeal acquiescence was not relevant because the claim was seen as a common law claim (see Lord Dunedin at page 960 who states that the first claim was barred by the expiry of the six years prescribed by the Statute of Limitations from the communication made by Mr Nocton's partners). Whilst the distinction between the concurrent and exclusive jurisdictions of the Court of Chancery is referred to, the reference to the non application of the Statute of Limitation in the passage I have emphasised specifically refers to circumstances in which the fiduciary has got the property into his hands. That is consistent with both earlier(such as Hovenden v Lord Annesley at 633-4 and Burdick v Garrick itself) and later authority and in principle is a distinction much more readily understood and justifiable than one between exclusive and concurrent jurisdictions (if, indeed, the two are different). The non-application of absolute statutory limitation periods to circumstances in which a person under an existing fiduciary duty receives and holds property of the person to whom he owes that duty but then deals with it in breach of duty is readily understandable. It is not his property. It is, however, very much less understandable in circumstances in which a claim for breach of fiduciary duty is no more than the mirror image of the claim for damages for breach of contract or negligence and involves no property rights at all.
    Mr Flaux also, and understandably, relied upon the first instance decisions of Laddie J in Nelson v Rye [1996] 1 WLR 1378 and Ebsworth J in Kershaw v Whelan (No 2) Unreported, 23rd January 1997. I shall consider the latter decision first.
    The reasoning of the decision of is to be found at pages 19-20 of the transcript. The claim was by a client against his former solicitor for breach of contract, negligence and breach of fiduciary duty. Mr Davidson QC, for the Defendant, was submitting the claim was time-barred; Mr Leeming QC, for the plaintiff, that short of laches or acquiescence it was not.
    The issue for me is whether the Limitation Acts apply to an action for breach [of fiduciary duty] whether directly or by analogy. Mr Davidson accepts that the 1980 Act is not of direct application ....
    Mr Davidson's carefully developed argument founded on Knox v Gye and Bulli Coal Mining Company v Patrick Hill Osborne [1899] AC 351 amongst other cases, may be summarised by saying that you look to the limitation period in law and you cannot do better in equity. The principle is, as the court said in Bulli :
    "The foundation of the claim must be the same wherever the injured party may seek redress. At law he sues for damages in an action for trespass. If he comes to a court of equity, still it is in respect of the trespass that he claims compensation. There being, therefore, a concurrent jurisdiction at law and in equity in respect of the very same wrong and the very same cause of action, the statute is as binding in equity as it is in law ..."
    Mr Leeming submits, as did counsel in Nelson v Rye , that there is no such limitation period, whether directly or by analogy. His argument is that there is no basis upon which equity will act by analogy because the ingredients of the tortious claim and that of the equitable claim are different. There is no doubt that the factual material relied on in the pleaded case is the same both as to the relationship and the conduct. There is clear authority for the proposition that no limitation period is applicable to cases of breach of fiduciary duty simpliciter. For the reasons given by Laddie J, I do not consider that is altered by the joinder in a single statement of claim of both common law and equitable actions. On this issue I think Mr Leeming is right. Although the claims in contract and tort cannot survive the statutory limitation bar, for reasons given that is not fatal to the claim for breach of fiduciary duty. I am driven to that conclusion from the judgment of Lord James in Bulli at page 363:
    "Now it has always been a principle of equity that no length of time is a bar to relief in the case of fraud in the absence of laches on the part of the person defrauded. There is therefore no room for the application of the statute in the case of concealed fraud, so long as the party defrauded remains in ignorance without any fault of his own."
    There can be no doubt that the issue which arises in this court is the same as that addressed in this passage. I regret, however, that I am unable to follow the reasoning which led Ebsworth J to the conclusion she expressed. The passage in the speech of Lord James in Bulli is entirely consistent with the application of the statute of limitation by analogy once the concealed fraud has been discovered. In other words, it is consistent with the provisions of section 32 of the 1980 Act as now enacted and the decision in The Metropolitan Bank v Heiron.
    That brings me to Paragon Finance v D.B. Thakerar & Co. The defendant solicitors acted for both the plaintiff mortgage lenders and the borrowers in relation to the purchase and mortgage of a number of flats. The defendants were aware that the borrowers were buying the properties as sub buyers at prices significantly higher than their vendor was paying to buy them from the original vendor. The defendants told the plaintiffs there were no matters they needed to bring to their attention. None of the borrowers made any payments under the mortgages and the security proved to be of substantially less value than the sums advanced by the plaintiffs partly due to the collapse of the residential property market. The plaintiffs brought claims for breach of contract, negligence and breach of fiduciary duty within six years of the last transaction. The damages recoverable on those claims would, in law, be reduced to reflect the fact that part of the loss was caused by market movements. In an attempt to recover the entire loss, but after the expiry of six years from the last transaction, the plaintiffs sought to amend their claim in order to allege fraud, conspiracy to defraud, fraudulent breach of trust and intentional breach of fiduciary duty.
    The Court of Appeal refused leave to amend under R.S.C. Order 20 rule 5(2)(5) on the grounds that the proposed pleading introduced new causes of action and allegations of fraud and dishonesty did not involve substantially the same facts as a claim based on negligence.
    The first judgment in the Court of Appeal (with which the other members of the court agreed) was delivered by Millett LJ (as he then was). As I think it is this judgment (on which both Mr Gross and Mr Flaux rely) which provides the answer to this issue, I shall seek to summarise what I think are the material parts of it and their application to this case.
    (1) Millett LJ (at page 406) referred to the proposed new plea of "intentional breach of fiduciary duty". He pointed out that the existing plea of breach of fiduciary duty did not involve any conscious impropriety and disclosed no cause of action for the reasons given in Bristol and West Building Society v Mothew [1996] 4 All ER 698. It was for this reason that Mr Flaux conceded that Paragraph 13 of the Points of Claim was not sustainable regardless of limitation considerations.
    (2) At page 407, Millett LJ said:
    Among the new causes of action which the plaintiffs seek leave to introduce are (i) fraudulent breach of trust, and (ii) intentional breach of fiduciary duty. They submit that no period of limitation applies to either cause of action. I shall deal with the two claims separately. Before doing so, however, I should express my opinion that the solution to the problem lies in the fact that the new claims are based on the same factual allegations as the common law claims for fraud and conspiracy to defraud. The equitable jurisdiction which the plaintiffs invoke is thus the concurrent jurisdiction. The new claims are not different causes of action (which is historically a common law concept) but merely the equitable counterparts of the claims at common law.
    The same, as it seems to me, applies to the claims made in Paragraphs 14 and 17 to 22 of the Points of Claim in this case, although Mr Flaux submits otherwise.
    (3) The proposed claim for fraudulent breach of trust was considered at page 408. Millett LJ noted that before 1890, when the Trustee Act 1888 came into operation, a claim against an express trustee was never barred by lapse of time because the possession of an express trustee is never in virtue of any right of his own but is taken from the first for and on behalf of the beneficiaries. The same rule was also applied to other fiduciaries who abused the trust and confidence reposed in them to obtain their principal's property for themselves. In his following analysis, Millett LJ contrasted such trustees and constructive trustees with the use of the latter expression to cover cases where the trust obligation arises as a direct consequence of the unlawful transaction impeached by the plaintiff where the defendant is not in fact a trustee at all, even though he may be liable to account as if he were. The contrast is between two cases: (1) the valid receipt of property as a trustee but then acting in breach of the trust and (2) liability for implication in fraud which if it results in the receipt of trust property at all is receipt adverse to the plaintiff. It is true that in a number of passages the judgment emphasises the timing of the creation of the trust and the first case is characterised by creation antecedent to breach and the second by the "trust" arising at the same time as the breach. Mr Flaux submitted that indeed was the crucial distinction Millett LJ was drawing and thus as Heaths were in the position of brokers and so fiduciaries before any breach occurred so, he submitted, they fell within the first category. That is not, in my judgment, what Millett LJ was saying. The contrast is between the receipt of property as a true trustee/fiduciary and obtaining property by fraud. Timing may usually provide the answer to which of the two it is but it does not provide the principle which underlies the distinction.
    (4) The importance of this distinction in the present context and in the context of Paragon lies in the application of the statutes of limitation. Millett LJ said at page 409:
    Before 1890 constructive trusts of the first kind were treated in the same way as express trusts and were often confusingly described as such; claims against the trustee were not barred by the passage of time. Constructive trusts of the second kind however were treated differently. They were not in reality trusts at all, but merely a remedial mechanism by which equity gave relief for fraud. The Court of Chancery, which applied the statutes of limitation by analogy, was not misled by its own terminology; it gave effect to the reality of the situation by applying the statute to the fraud which gave rise to the defendant's liability .... while the first kind of constructive trust was a creature of equity's exclusive jurisdiction the second arose in the exercise of its concurrent jurisdiction. That was why the statute was applied by analogy.
    Thus the test of a "true" trust to which no limitation period would apply was the receipt of property under a valid trust. That is not and could not be Imperio's case. I would add that as trusts in the true sense are now (and have since 1890 been) subject to the statutory limitation regime to be found in Section 21 it would have been a surprising conclusion that "trusts" in the other sense were not subject to any statutory regime. There is no reason of principle or policy why that should be the case; indeed the reverse is the case. The same must apply to claims against fiduciaries, as the next passages make clear.
    (5) Millett LJ addressed the proposed claim for intentional breach of fiduciary duty between pages 414 and 416. He said:
    It is clear from the authorities already cited that the Court of Chancery drew the same distinction between those whose fiduciary obligations preceded the acts complained of and those whose liability in equity was occasioned by the acts of which complaint was made ....On the plaintiffs' case the defendants did not take advantage of their fiduciary relationship to misappropriate moneys entrusted to them; the borrowers obtained the money by fraud and procured it to be channelled to them through the defendants' client account. It would be absurd if the borrowers were deprived of the protection of the Limitation Act, 1890 because of the route by which the money reached them; and equally absurd if they were entitled to it and the defendants were not. The defendants fiduciary relationship only came into being in the course of the fraud and was incidental to the means by which the fraud was perpetrated. The plaintiffs' case cannot sensibly be described as based on breach of fiduciary duty. Their case is that they were swindled.
    After considering the decision of Laddie J in Nelson v Rye [1996] 1 WLR 1378 and stating that it was wrongly decided Millett LJ continued:
    The law on this subject has been settled for more than a hundred years. An action for an account brought by a principal against his agent is barred by the statutes of limitation unless the agent is more than a mere agent but is a trustee of the money which he received .... Where the agent's liability to account was contractual equity acted in obedience to the statute ....Where, as in Knox v Gye , there was no contractual relationship between the parties, so that the liability was exclusively equitable, the court acted by analogy with the statute . Its power to do so is implicitly preserved by s. 36 of the 1980 Act ....
    Accordingly the defendant's liability to account for more than six years before the issue of the writ in Nelson v Rye depended on whether he was, not merely a fiduciary (for every agent owes fiduciary duties to his principal) but a trustee, that is to say, on whether he owed fiduciary duties in relation to the money.
    That last emphasis was contained in Millett LJ's judgment. The other emphases are mine intended to demonstrate that the material distinction is not one of exclusive or concurrent jurisdiction or when the trust or duty arose, but whether property of the plaintiff is held by the trustee or fiduciary under a valid trust or existing duty or not.
    In view of the criticism made of it in Paragon I do not think it necessary to make more than a passing reference to the decision of Laddie J in Nelson v Rye. It is true, as Mr Flaux submits, that had Millett LJ intended to say that all actions for breach of fiduciary duty were subject to the statutes of limitation either "by obedience" or analogy it would have been easy for him to do so and unnecessary to embark upon the analysis of the two types of claim which could be so expressed. That, however, is in my judgment, of no importance in this case because Imperio's claim is of the type to which the statutes would be applied by analogy for the reasons given by Millett LJ. Laddie J did not consider the question of application by analogy or Section 36 of the 1980 Act. Whether or not it is the law that claims for breach of fiduciary duty of the "true" type are wholly outside the scope of the statute may be for decision in another case.
    I note, however, that Laddie J, at page 1390, considered that it was a fallacy to treat breach of trust and breach of fiduciary duty as different causes of action where each was available, in particular because if they were it would be possible to side-step Section 21(3) of the 1980 Act by claiming as a breach of fiduciary duty what was also or in reality a breach of trust. I would only comment that this would have the satisfying consequence that the present statutory limitation regime would have no, or at least one less, gap in it and as a modern application of Section 21 by analogy it has great force. It also serves to demonstrate the anomaly that would exist if claims against the fiduciary who was a true trustee were subject to Section 21 but claims against a fiduciary who was not were subject to no statutory limitation period at all.
    Although it was not cited in Paragon, I also do not think the decision in Kershaw v Whelan can stand with the reasoning of Millett LJ.
    After the hearing was concluded and I had reserved my judgment, Mr Flaux very properly drew to my and Mr Gross' attention the decision of Mr Jules Sher QC (sitting as a deputy judge of the High Court, Chancery Division) in Coulthard v Disco Club Mix Limited and supplied a transcript of the judgment which was handed down on 1st March, 1999. By agreement both parties have made written submissions to me about the decision. One of the many issues before the deputy judge was the application of the Limitation Act to claims for breach of fiduciary duty (see page 34 et seq of the Transcript). The respective submissions of the parties appear to have followed much the same lines as those made to me. At page 40, the deputy judge summarised the authorities (including Knox v Gye) cited to him in two propositions:
    First, where the Court of Equity was simply exercising a concurrent jurisdiction giving the same relief as was available in a court of law the statute of limitation would be applied. But, secondly, even if the relief afforded by the Court of Equity was wider than that available at law the Court of Equity would apply the statute by analogy where there was 'correspondence' between the remedies available at law or in equity."
    The judge concluded (at page 41) that there was no distinction in point of limitation between an action for damages for fraud at common law and its counterpart in equity based on the same facts. I agree. Indeed the reasoning and conclusions in this judgment is generally the same as and consistent with my own and I gratefully adopt it. Mr Flaux submits that the decision is "either distinguishable or wrong." In my judgment it is neither. The material claims in this case as that for breach of contract and negligence and deceit are founded on the same allegations as the claims for breach of fiduciary duty and involve no claims in respect of trust property or property held in a fiduciary capacity. It is true Nocton v Lord Ashburton was not cited to the judge. For the reasons I have sought to express I do not think it would have made any difference if it had been.
    In my judgment, Mr Gross is right in his submissions. To use his colourful phrase, the claims pleaded by Imperio for breach of fiduciary duty are in reality claims for breach of contract or tort with an added epithet. The remedy sought in each case is damages. In each case if Heaths had complied with Article 15 the claim would not have been sustainable. Equity would not prior to 1st July 1940 have been "misled by its own terminology", but would have applied a six year limitation period by analogy from discovery or imputed discovery of the facts alleged to constitute fraud or intention. That conclusion also accords with commonsense and policy: see per Lord Nicholls in Nykredit at page 1633.
    SECTION 32
    In the course of the parties' submissions there emerged a very large measure of agreement on the correct approach the court should follow to section 32 (1) of the Act. In my judgment, reflecting that agreement:
    (1) The "fraud" in sub-section (1)(a) which prevents time running until it is discovered or could with reasonable diligence have been discovered is "the fraud alleged" which means the facts which are necessarily relied upon to justify the allegation of fraud in fact made as distinct from the label of fraud which is attached to or inferred from those facts. In this case the "fact" which underlies Imperio's case of fraud is that Heaths had failed to provide any justification for using Imperio to front (see the discussion of the Points of Claim, Paragraph 14). The allegation made includes an allegation that no reasonable or honest person could have considered that Article 15 did apply. But that is an inference or conclusion which, if it is properly drawn from the facts alleged in the Points of Claim, could properly have been drawn before the cut-off date by which time Heaths had already plainly failed to provide a justification.
    (2) Although Mr Flaux submitted that the fact that Heaths (at no time) and Clyde & Co and Imperio at no time prior to the cut-off date had admitted or thought that Heaths had acted dishonestly was compelling evidence that the court should not conclude that Imperio had or could have reasonably have discovered as much, I do not think that submission is consistent with this approach. It concentrates on whether the label of fraud was identified, not whether facts were known to which the label could be attached. As Mr Flaux also candidly acknowledged, the label only became relevant after the cut-off date.
    (3) A similar approach applies to Section 32(1)(b). A "fact relevant to the Plaintiff's right of action" does not encompass every fact which may be evidentially material to proving the claim or improving the prospects of doing so but only those facts sufficient to constitute or complete the particular cause of action. Again, the acid test at least cannot be wider than those facts which were relied upon to support the pleas made in the Points of Claim. If those facts were or could reasonably have been discovered by Imperio before the cut-off date that must be conclusive that Imperio cannot defeat the time-bar by reliance on Section 32.
    As I have already indicated in stating the facts and commenting on the Points of Claim, I have no hesitation in concluding that Imperio and Clyde & Co were in fact aware before the cut-off date of all the facts sufficient to make all the claims made in the Points of Claim or which are alleged to have been concealed by Heaths. At the very least Imperio could with reasonable diligence have discovered them and if it was justifiable to make the claims made in the Points of Claim it would equally have been reasonable and justifiable to make them in 1988.
    In summary:
    (1) The essential failure, which lies at the root of all the claims, of Heaths to justify the use of Imperio to front was known and apparent before the cut-off date.
    (2) The limited use of other pool companies to front, the fact that some of them had taken facultative lines on risks fronted by Imperio, and the fact that some of the other pool members were not adequate security, were all known before the cut-off date.
    (3) These facts, and the wording of Article 15 itself, are the whole basis of the allegations of fraud and breach of fiduciary duty as regards fronting.
    (4) The use of Bellefonte to front, the payment of an overrider for doing so, the probable lack of London market leader on some risks, and accumulations were all known before the cut-off date.
    (5) The fact that Clyde & Co could allege a want of good faith in the letter dated December 7, 1987 and the writ could be expressed in the terms it was (without any further material information coming to Imperio after the cut-off date and before the Writ was issued) also demonstrate that Imperio was in fact in a position to make the claims it now makes before the cut-off date. Indeed, whilst for the reasons I have sought to express it is the facts not the labels which matter, the reality is that even the label had been substantially attached to the facts before the cut-off date and again after it but on the basis only of what was known before it.
    THE INDEMNITY ISSUE
    In the Nogar Marin Charterers presented bills of lading to ship's agents who were authorised by the master to issue them. The agents signed the bills on behalf of the owners. The bills stated that the cargo was shipped in apparent good order and condition. Cargo interests claimed against the owners on the basis that the cargo was damaged before shipment and the claim was settled on payment of substantial sums by the owners who claimed over against the charterers in an arbitration. The owners contended that there was an implied right of indemnity against liability under bills of lading signed at the request of the charterers if the owners would not have been liable under the terms of the charterparty itself for the damage.
    The arbitrators found that the owners' claim failed because the master was negligent in failing to record the damage to the cargo so as to ensure that the ship's agents did not issue clean bills of lading. An appeal by the owners failed both at first instance and in the Court of Appeal. The relevant part of the headnote reads:
    The implication of an obligation to indemnify was not automatic; it depended on the facts of the individual case and on the terms of the underlying contractual relationship; it was well known in the shipping trade that a master need not sign a clean bill just because one was tendered; it was the master's task to verify the condition of the goods before he signed and to then sign it with whatever appropriate qualification he thought fit ...
    This does not appear to provide much, if any, support for the indemnity for which Imperio contends. The relationship with Heaths was governed by the terms of the Binding Authorities. If Heaths acted in breach of Article 15 they would be liable in damages. If they were also liable to indemnify Imperio for the whole fronted liability not only would that make them in effect insurers of Imperio but it would place them in the position where there would at the least be difficulties in relation to recovery from other pool members as reinsurers of Imperio (not Heaths ). In the business of insurance, claims made by and against insurers and in the alternative their agents are commonplace. The relationships are well known and in this case the Binding Authorities provide sufficient basis for any claim without the complications of seeking to imply indemnities for which there is no warrant in authority or, in my judgment, principle. Indeed Mr Flaux recognises this to the extent that he submits that the indemnity arises only in those 53 cases in which Imperio was specifically requested to front by what I have called the typical letter. In many ways that is an odd distinction to make as in those cases Imperio was in a position to question the use of the company to front, but as a matter of principle I can see no reason why an indemnity should be implied in the one circumstance but not the other.
    In the course of his judgment ( which was the judgment of the Court), Mustill LJ said at page 416 in relation to the authorities relating to the claim for an indemnity that they fell into two groups:
    First, there are the authorities which concern the right of indemnity arising from an act done by one person at the request of another. These extend back [to 1839] .... and culminated in Stanley Yeung Kai Yeung v Hong Kong and Shanghai Banking Corporation [1981] AC 787, which contains in the opinion of the Board a statement of the law which is the starting point for any discussion of the current law on the topic. We take the law to be as follows:
    1. The general principle is that -
    ... when an act is done by one person at the request of another which act is not manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to the rights of a third party, the person doing it is entitled to an indemnity from him who requested that it should be done.
    2. This is, however, a general principle not a conclusion of law which is always to be drawn .... whether there is an obligation to indemnify must greatly depend on the circumstances of each individual case ....
    3. A special situation exists where the person receiving the request or demand has a duty to act upon it....
    "The reported cases in the second group are concerned with indemnities and other rights arising from carriage under bills of lading ...."
    It is not suggested that the circumstances of this case placed Imperio under a duty to comply with Heaths' request to sign the policy as a front nor was Imperio's compliance with the "request" injurious to any third party but only to Imperio itself. Thus, in my judgment, the proposed claim cannot fall within the first group of authorities identified by Mustill LJ. Indeed Mr Flaux conceded this in argument despite the terms of BLG's letter dated November 24, 1998. Equally I can see no basis or justification for the application of cases concerning bills of lading to the present circumstances. There is no reason why cases concerning a quite distinct context, which as Mustill LJ's judgment makes clear are themselves not without difficulty but turn on the particular circumstances in issue, should apply to the present situation which is subject to well-developed principles which have not to date included any indemnity of the sort for which Imperio contend. The implication of an indemnity is in any event unnecessary because the Binding Authority provided in Article 15 for the situation, and if it were to apply when Heaths were not in breach of that Article it would be inconsistent with the contract the parties made. In my judgment therefore the proposed claim for an indemnity is unsustainable both in law and in the circumstances of this case. For that reason leave should not be given to advance it by way of amendment and I do not think it necessary to consider the question whether even if the claim were sustainable it also could be met with a plea of statute-bar.
    CONCLUSIONS
    It follows that in my judgment all the claims which Imperio seeks to make were statute-barred at the date the Writ was issued, and leave to amend to advance the Indemnity claim must be refused. The answers to the questions raised by the List of Issues are to be found in the Appendix to this judgment.

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

    APPENDIX

    LIST OF ISSUES AND ANSWERS

    1. THE LIMITATION ISSUE

    The burden of proof

    Q. (1) Who bears the burden of proof in relation to the Limitation Issue?

    A. Imperio (Conceded by Imperio )

    Limitation for contractual causes of action

    Q. (2) On what date did the event constituting the alleged breach of contract take place?

    A. Prior to the cut-off date (Conceded by Imperio )

    Limitation for tortious causes of action

    Q. (3) Do tortious causes of action accrue when the Plaintiff first suffers loss and damage?

    A. Yes.(Conceded by Imperio )

    Q. (4) If so, on the assumption that the allegations in the Points of Claim are true, what is the event which, as a matter of law, constitutes the Plaintiff's first suffering loss and damage:

    (i) each occasion that the Defendants caused, used, required or requested the Plaintiff to act as a front[1]?

    (ii) when the Plaintiff pays out on a fronted risk in an amount greater than their net liability[2]?

    A. (I) not (ii)

    Q. (5) If the answer to (4) is (i), when as a matter of fact did such take place?

    A. Prior to the cut-off date.

    Q. (6) If the answer to (4) is (ii), and it emerges hereafter[3] that the Plaintiff had not at the date of the writ herein alternatively even now suffered loss and damage, should the writ (or any part thereof) be struck out on grounds of prematurity?

    A. Does not arise.

    Limitation for breaches of fiduciary duty

    Q. (7) Do the time limits set down in the Limitation Act 1980 ("the Act") for contractual or tortious causes of action (or for breaches of trust) apply directly or by analogy to causes of action involving a breach of fiduciary duty?

    A. Yes, by analogy (though not for breaches of trust)

    Q. (8) If so, does section 32 (or sections 21(1)) of the Act also apply?

    A. Yes (Conceded by Heaths)

    Section 32

    On the assumption that there was a deliberate concealment of the facts relevant to the Plaintiff's right of action:

    Q. (9) What is "a fact relevant to the Plaintiff's cause of action" ?

    A. A fact which is necessary or sufficient to constitute or complete the cause of action alleged.

    Q. (10) Which of the facts in the Writ and/or in the Points of Claim are relevant facts?

    A. As (9) but it is not right to characterise the allegation of fraud as distinct from the facts on which it is based as a "fact".

    Q. (11) Would discovery of the relevant facts by Clyde & Co. (acting as the Plaintiff's solicitors) be sufficient to start time running?

    A. Yes (Conceded by Imperio )

    Q. (12) When were the relevant facts discovered (or ought they reasonably have been discovered) by the Plaintiff or (subject to (3) above) Clyde & Co.?

    A. All relevant facts were or ought reasonably to have been discovered by Imperio or Clyde & Co prior to the cut-off date.

    Conclusion on Limitation

    Q. (13) Which, if any, of the Plaintiff's causes of action are time barred?

    A. All of them.

    2. PLAINTIFF'S APPLICATION TO AMEND THE POINTS OF CLAIM

    Assuming the Plaintiff's claims for an indemnity arises out of the same or substantially the same facts as already pleaded:

    Q. (1) Is the proposed cause of action sustainable as a matter of law?

    A. No

    Q. (2) If it is sustainable as a matter of law, would it have been time barred at the date of the writ?

    (i) when does a cause of action based on a contract of indemnity accrue?

    (ii) when did it accrue?

    A. Do not arise.

    Q. (3) If it was not time barred at the date of the writ, should the Court, in the exercise of its discretion, grant leave to allow the addition of a new cause of action?

    A. Does not arise.


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