B e f o r e :
LORD JUSTICE WALLER
LORD JUSTICE CHADWICK
and
LORD JUSTICE CLARKE
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Between:
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LAWS & ORS
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Appellants
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- and -
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THE SOCIETY OF LLOYD'S
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Respondent
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(Transcript of the Handed Down Judgment of
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Bernard Weatherill QC, Gordon Nardell (instructed by More Fisher Brown and Grower Freeman) for the Appellants (UNO Names only)
Charles Aldous QC, David Anderson QC, DavId Foxton (instructed by Freshfields Bruckhaus Deringer solicitors) for the Respondent
Bernard Weatherill QC, Gordon Nardell (instructed by More Fisher Brown and Grower Greeman solicitors) for the Appellants (UNO Names only)
Charles Aldous QC, David Anderson QC, David Foxton (instructed by Freshfields Bruckhaus Deringer solicitors) for the Respondent
Mr S M Butler, Mrs C J Mackenzie Smith, Mr Doll-Steinberg for Mrs Doll-Steinberg, Mrs A G Strong, Mrs E A Reisz and Mr Wilson (for himself and his wife) in person
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HTML VERSION OF JUDGMENT
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Lord Justice Waller:
Introduction
- This is a further chapter in the Lloyd's Litigation. Certain Names who did not accept R&R have been pursued by Lloyd's for the Equitas premium, and have responded with claims against Lloyd's. In a judgment in the Commercial Court in Jaffray v The Society of Lloyd's Cresswell J spelt out the full background. By that judgment he held that Lloyd's made no representations to the Names, and in addition held that even if they had, the representations were not fraudulent. This court on appeal held that Lloyd's had made representations in brochures issued annually but confirmed that Lloyd's had not been fraudulent. Following that decision the Names, relying on the representations held by this court to have been made, applied to amend their pleadings to allege negligent misrepresentation or misrepresentation contrary to section 2 of the Misrepresentation Act 1967 ("the 1967 Act"). That application, as it was always recognised it would, faced resistance from Lloyd's, both by reference to section 14(3) of the Lloyd's Act 1982 ("the Lloyd's Act") in relation to Names who commenced their underwriting after the coming into force of the Lloyd's Act, and in relation to all Names by reference to the Limitation Act 1980 ("the 1980 Act").
- As at October 1996 (the date of commencement of the Jaffray proceedings) the Names, following decisions in other cases, had accepted that section 14 of the Lloyd's Act would defeat any claims other than a claim in fraud. We append a copy of that section to this judgment. Putting it shortly for the moment, two key issues arose. (1) Could post Lloyd's Act Names rely on the coming into force of the Human Rights Act 1998 ("the HRA") and section 3 of that Act, in order to place a construction on section 14 of the Lloyd's Act which would allow for a claim in damages for negligent misrepresentation or misrepresentation under the 1967 Act? (2) Was there any way in which the Names could overcome the limitation defences that would be raised by Lloyd's?
- Cooke J heard the applications to amend over 11 days. He held that section 3 of the HRA could not be relied on so as to provide a basis for arguing that a different construction should be placed on section 14 of the Lloyd's Act. He held that the date of the coming into force of the Lloyd's Act was July 1982 (not January 1983 as alleged by the Names). He held therefore that claims both in negligence and under the 1967 Act of any name commencing underwriting after July 1982 would be defeated under section 14 of the Lloyd's Act and were thus doomed to failure. He held in any event that, in relation to Names who had not previously alleged any negligent misrepresentation but only fraud after the Lloyd's Act came into force, the proposed amendment did not arise out of the same or substantially the same facts.
- The judge said that Names who (as in the Sir William Jaffray pleading) had previously pleaded negligent misrepresentations in brochures prior to the coming into the force of the Lloyd's Act, and who were now seeking to amend to allege representations in the form found by the Court of Appeal, were pleading causes of action arising out of the same facts or substantially the same facts within the meaning of section 35(5) of the 1980 Act. He found however that on any view by virtue of section 14B of the 1980 Act there was a longstop of 15 years and thus no name could rely on a representation occurring more than 15 years before the commencement of proceedings to which they attributed damage. He held therefore that there was a potential window for certain Names who could demonstrate that they relied on a representation in a brochure within 15 years prior to the commencement of the relevant proceedings (October 1981 in relation to the proceedings against Sir William Jaffray and others sued at the same time as Sir William Jaffray, and a little later for all others) and commenced underwriting before July 1982.
- He held that in any event these Names should only be allowed to amend their pleadings if they could demonstrate that they did not have the requisite knowledge under section 14A of the 1980 Act more than three years prior to the commencement of the relevant proceedings. He required further particularisation. There is to be a further adjudication by Cooke J in January 2004 on the question of knowledge and on the question as to which Names who commenced underwriting prior to July 1982 could arguably come within the window.
- The overall effect of his decision was that some 36 Names who had commenced their underwriting at Lloyd's before July 1982 would have the opportunity of establishing that they fell within a window commencing 15 years prior to the commencement of the relevant proceedings (i.e. 11th October 1981 for those sued at the same time as Sir William Jaffray, and later for all others), and July 1982, (the date of the coming into force of section 14 of the Lloyd's Act).
- The Names applied for permission to appeal the decision of Cooke J. Waller LJ ordered that the matter be adjourned for an oral hearing with appeal to follow if permission were granted. This court heard argument over a period of seven days. It announced its decision on the Human Rights issue, and the date of the Lloyd's Act issue at the conclusion of the oral arguments and prior to the commencement of the Bankruptcy Appeal.
- This is the judgment of the court, to which all have contributed, giving reasons for the decisions already announced and dealing with the other issues which were argued.
Principles to be applied in relation to the granting of permission to appeal
- Permission to appeal may be granted on one of two grounds: either on the basis that there is a reasonable prospect of success (the arguability basis) or on the basis that there is some other compelling reason why permission should be granted (the other compelling basis). As already indicated we heard argument over some seven days. Three of those days involved arguments on the Human Rights issue. As we indicated when we announced our decision on that aspect, although we formed the view that it was not in fact arguable that the HRA could have the effect contended for by the Names, we felt it right to recognise that full argument had been allowed by granting permission to appeal on the otherwise compelling basis. The HRA point is key. It is furthermore a point where testing arguability needed fuller argument and longer consideration than what we might call the norm. It was a point on which we heard argument on both sides. Having regard to the unique nature of this litigation, we formed the view that it was right to grant permission to appeal on the other compelling reason basis and to treat the hearing as the appeal. There are other points where it is right to recognise their arguability, and permission to appeal will be given on that basis. There are yet other points (on which we did not need to trouble those acting for Lloyd's) on which we shall refuse permission to appeal.
Principles on leave to amend
- There was ultimately little dispute as to the principles. Peter Gibson LJ said this in Cobbold v London Borough of Greenwich August 9th 1999 CA:
"The overriding objective is that the court should deal with cases justly. That includes so far as practicable ensuring that each case is dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon, provided that any prejudice to the other party or parties caused by the amendment can be compensated for in costs and the public interest in the efficient administration of justice is not significantly harmed."
- The correct approach is accepted to be the same as that which a court would have to an application for a summary judgment. The test is whether the case which the Names seek to put forward has a reasonable prospect of succeeding or whether there is some other compelling reason why there should be a trial. On a summary application it is not right to conduct a mini-trial. It is important to recognise that the more complex the case the less likely it will be that the case can be disposed of summarily: Lord Hope in Three Rivers DC v Bank of England [2001] UKHL 16, [2001] 2All ER 513 paragraph 95. There is a distinction between those cases where there are issues of fact, those cases where the facts should be found before the law should be decided and those cases where as a matter of law the case is simply bound to fail. It is further legitimate to take into account the history of the litigation, the complexity of the litigation, and the time and costs which might be saved if a point of law were decided one way or the other. There are risks which must be borne in mind of the short cut turning out ultimately to be the longest route. But this application must be placed in the context of the Lloyd's litigation as a whole. It follows many court battles and in particular the massive threshold fraud trial identified as the point to be tried at least in major part on the basis that other claims in negligence following the coming into force of the Lloyd's Act could not succeed. If the amendments were allowed, a further substantial trial would result, covering in large measure the same period but with a different focus. The court is entitled to be astute as to whether the amendments have any real prospect of success and spend some little time doing so.
The context in more detail
- We append to this judgment the Introduction to the judgment of Cooke J.
Human Rights Act 1998
- This point was dealt with by Cooke J after he had dealt with the limitation issues. It was dealt with first in argument before us and is an aspect on which we have already ruled. It is convenient to deal with our reasons at this stage.
- The following chronology is important. By the end of 1996, there were some Names who had not accepted R & R and who were determined to fight. In October 1996 Lloyd's commenced proceedings against Sir William Jaffray and others claiming the Equitas premium. Other proceedings were commenced against other Names in January 1997, and certain proceedings were commenced by Names against Lloyd's e.g. Clyne, Aldrich and others. The counterclaim pleaded by Sir William Jaffray, who had commenced underwriting in 1982 prior to the coming into force of the Lloyd's Act, pleaded fraudulent misrepresentations for the whole period of his underwriting, and made an alternative plea of negligent misrepresentation for the period prior to the coming into force of the Lloyd's Act (paragraph 108). Lloyd's say that this pattern was in essence adopted by all those Names who ultimately became parties to the "threshold fraud trial" and who commenced underwriting before the Lloyd's Act came into force. There is an issue whether it was adopted by all, for example in relation to Mrs Mackenzie Smith, Mr Thomas-Everard and others whom Lloyd's allege never made a claim based on a representation in a brochure; but for present purposes we will include them all. Those Names who had commenced underwriting after the coming into force of the Lloyd's Act did not plead any negligent misrepresentation. They simply pleaded fraud. This was in recognition of the decisions of the Commercial Court and this court which by this time had confirmed that section 14(3) of the Lloyd's Act provided Lloyd's with immunity from damages save where they were shown to be acting in bad faith. See for example, the judgment of the Court of Appeal in Society of Lloyds v Leighs (1997) CLC 1398 at 1407-8 which said:
"Under s.14 of the Lloyd's Act 1982, the society is (with irrelevant exceptions) immune from liability at the suit of Names unless the act or omission complained of was done in bad faith. To our minds, given the all-embracing language used in the clause and the fact that (to all intents and purposes) the only claims of any relevance against the society by Names that could fall outside the statutory immunity would be claims of acting in bad faith
.."
- Through 1998 and 1999, Colman J and Cresswell J identified and refined the threshold fraud point. Counsel for the represented Names before Cresswell J on 1st July 1999 said this:
"My Lord, if we lose on the threshold fraud trial that will be, I would imagine, the effective end of the proceedings. I go along with my learned friend in saying that of course there is the theoretical possibility of the case in negligence being pursued, but wholly different considerations would apply
It may well be that, as I suppose all sides hope, that the disposal of this threshold trial fraud case will conclude the proceedings one way or the other."
- The threshold fraud trial was then heard between January 2000 and July 2000.
- On 2nd October 2000 the HRA came into force.
- In November 2000, Cresswell J delivered his judgment. Shortly before the delivering of that judgment, the Names who were parties to the threshold fraud trial intimated a desire to amend their pleading to allege for the first time negligent misrepresentations post the coming into force of the Lloyd's Act, it being asserted that this was a claim that they would be entitled to make following the coming into force of the HRA. There is no dispute that if that application to amend had been made during 1998 or 1999 it would have been refused on the basis that it was doomed to failure by virtue of section 14(3) of the Lloyd's Act. As appears from Cooke J's judgment, the application made after the coming into force of the HRA was ultimately withdrawn following the finding by Cresswell J that there was no representation as alleged by the Names, but it is right to test the HRA argument by reference to a point in time immediately after the coming into force of the HRA.
- What Mr Nardell has argued in simple terms is this. The time for testing whether section 14(3) of the Lloyd's Act operates as a bar to a claim for damages is at the trial of the action or, possibly he could argue, at the time when the court was considering whether to grant leave to amend. If that is right, then no retrospectivity is involved. The court is simply applying the section at the correct moment in time. He then argues that section 14(3), if construed as it has been heretofore, is a procedural bar to a claimant obtaining damages, and that if a court enforced that procedural bar it would be denying a claimant access to the court for the determination of his civil rights. That he submits, would infringe Article 6 of the European Convention on Human Rights ("the Convention"). He submits therefore that the court should endeavour to read section 14(3) in a Convention compliant way, and that if it could not the court would be bound to declare section 14(3) incompatible under section 4 of the Act.
- This argument is reminiscent of the approach of the Court of Appeal as summarised at paragraph 156 of Lord Scott of Foscote's speech in Wilson v First County Trust Limited (No 2) [2003] UKHL 40, [2003] 3 WLR 568, which the House of Lords unanimously rejected. We will return to that summary below, but since this authority as it seems to us, disposes of Mr Nardell's arguments on the Human Rights aspect and indeed is really the only authority which needs extensive citation we will start with an explanation of what that case was about.
- Wilson was concerned with section 127(3) of the Consumer Credit Act 1974 which provides:
"The court shall not make an enforcement order under section 65(1) if section 61(1)(a) (signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1) itself containing all the prescribed terms of their agreement) was signed by the debtor or hirer (whether or not in the prescribed manner)."
- The chronology with which the House of Lords was concerned was as follows. Mrs Wilson signed an agreement in January 1999 pawning her car in return for a loan of ฃ5,000. The agreement was a regulated agreement for the purposes of section 8 of the Consumer Credit Act. A regulated agreement is not properly executed unless the document contains all the prescribed terms: section 61(1)(a). When Mrs Wilson failed to repay the loan, and the pawnbroker threatened to sell the car, Mrs Wilson commenced proceedings in the Kingston-upon-Thames County Court claiming that not all the terms had been contained in the agreement which she had signed and that the agreement was therefore unenforceable by virtue of section 127(3). On 24th September 1999, Judge Hull QC held that the agreement did contain all the terms and that it was enforceable. [He reopened the agreement as an extortionate bargain but that is irrelevant for our purposes]. Mrs Wilson appealed to the Court of Appeal, and the appeal was heard in November 2000 i.e. just after the HRA came into force in October 2000. The Court of Appeal found that the agreement did not contain all the required terms but thought it was arguable that applying section 127(3) as they were bound to do, with the effect that Mrs Wilson both kept her car and did not need to repay the loan, was an infringement of the pawnbroker's right to a fair trial guaranteed by Article 6(1) and the right to protection of property guaranteed by Article 1 of the First Protocol to the Convention.
- The Court of Appeal accordingly adjourned the appeal for the Secretary of State for Trade and Industry to be represented. After the adjourned hearing, by a judgment dated 2nd May 2001 [2001] EWCA Civ 633, [2002] QB 74, the Court of Appeal made a declaration of incompatibility under section 4 of the HRA. The Secretary of State appealed to the House of Lords. The House of Lords unanimously allowed the appeal. They did so on two grounds material to our consideration of Mr Nardell's arguments. First on retrospectivity, they held that it was not open to the court to make a declaration under section 4 unless the court had first construed the legislation under section 3(1) that to construe section 127(3) by use of section 3, in a way favourable to the pawnbroker would deprive Mrs Wilson retrospectively of the protection she acquired when entering into the agreement in 1999; and that section 3 should not be construed so as to alter existing rights and obligations provided by section 127(3). Second on whether section 127(3) engaged Article 6 at all, they said that Article 6 did not create substantive rights, but only guaranteed procedural rights to have a claim in respect of an existing civil right adjudicated by an independent tribunal; that section 127(3) restricted the substantive rights of the creditor by rendering a regulated agreement unenforceable unless the document contained certain prescribed terms; but that it did not bar access to the court to determine whether or not the agreement was in fact enforceable; and that section 127(3) was not incompatible with Article 6.
- Lord Scott in the section of his speech dealing with retrospectivity described the process of reasoning of the Court of Appeal in this way at paragraph 156:
"Section 6(1) of the Act says that "It is unlawful for a public authority to act in a way which is incompatible with a Convention right". And sub-section (3) says that a "public authority" includes "a court or tribunal". It is plain that section 6 is looking to the future. It is not purporting to make unlawful a pre 2 October 2000 act of a public authority. It was section 6(1) on which the Court of Appeal relied in the present case. The reasoning proceeded like this
i) the Court of Appeal is a public authority (see sub-section (3));
ii) it is unlawful for a public authority, and therefore for the Court of Appeal, to act in a way incompatible with a Convention right;
iii) if the relevant provisions of the 1974 Act are incompatible with a Convention right it is therefore unlawful for the Court of Appeal to give effect to them;
iv) the Court of Appeal is bound, by section 3, to try to read down the relevant provisions of the 1974 Act so as to render them compatible with the Convention; and
v) if that reading down is not possible, the Court of Appeal may make a declaration of incompatibility (see section 4).
This reasoning does not confront the issue of retrospectivity. It avoids it by concluding that if the trial, or, as in the present case, the appeal, takes place after 2 October 2000, the court is bound by section 6(1) to apply the 1998 Act without regard to whether the transactions or events in question predate or postdate the coming into force of the Act."
- He then said at paragraph 157:
"My Lords, in my opinion, this conclusion cannot be accepted. The function of the court in civil litigation between private citizens is to adjudicate on their rights and obligations in issue in the case and to grant the relief, if any, requisite to reflect those rights and obligations. If the rights and obligations of the parties require a particular result to be reached, whether by dismissal of the action, an award of damages, the making of a declaration, the grant of an injunction, or otherwise, it is the duty of the court to deal with the case accordingly. For the court to do so cannot be an unlawful act under section 6(1)."
- We start with this citation simply because it puts in clear terms how, even where (as in Wilson) the court was dealing with a section which by its terms was concerned with "enforcement" by the court, an argument similar to that of Mr Nardell which had been accepted by the Court of Appeal was rejected by the House of Lords.
- In relation to retrospectivity, since the views of other members of the House could be said to differ in their reasoning it is right to set out certain of the reasoning in extenso:
Lord Nicholls of Birkenhead:
"20. Applying this approach to the Human Rights Act, I agree with Mummery LJ in Wainwright v Home Office [2001] EWCA Civ 2081, [2002] QB 1334, 1352, para 61, that in general the principle of interpretation set out in section 3(1) does not apply to causes of action accruing before the section came into force. The principle does not apply because to apply it in such cases, and thereby change the interpretation and effect of existing legislation, might well produce an unfair result for one party or the other. The Human Rights Act was not intended to have this effect.
21. I emphasise that this conclusion does not mean that section 3 never applies to pre-Act events. Whether section 3 applies to pre-Act events depends upon the application of the principle identified by Staughton LJ in the context of the particular issue before the court. To give one important instance: different considerations apply to post-Act criminal trials in respect of pre-Act happenings. The prosecution does not have an accrued or vested right in any relevant sense.
22. In the present case Parliament cannot have intended that application of section 3(1) should have the effect of altering parties' existing rights and obligations under the Consumer Credit Act. For the purpose of identifying the rights of Mrs Wilson and First County Trust under their January 1999 agreement the Consumer Credit Act is to be interpreted without reference to section 3(1)."
Lord Hope of Craighead:
"96. In my opinion the issue about retrospectivity in this case resolves itself into a question as to whether section 3(1) permits the court, when it is determining after 2 October 2000 whether section 127(3) of the 1974 Act is compatible with FCT's Convention rights, to hold that the rights and obligations of parties to the agreement are, as a result of the coming into force of the relevant provisions of the 1998 Act on that date, different now from what they were at the time when the agreement was entered into in January 1999.
98. Then there is the general presumption that legislation is not intended to operate retrospectively. That presumption is based on concepts of fairness and legal certainty. These concepts require that accrued rights and the legal effect of past acts should not be altered by subsequent legislation. But the mere fact that a statute depends for its application in the future on events that have happened in the past does not offend against the presumption. For a recent example of this point reference may be made to R v Field [2002] EWCA Crim 2913; [2003] 1 WLR 882 (CA). In that case it was held that the making of a disqualification order under section 28 of the Criminal Justice and Court Services Act 2000 against a defendant from working with children in the future did not offend against the presumption where the offending behaviour had occurred before that Act came into force. It illustrates the point that there is an important distinction to be made between legislation which affects transactions that have created rights and obligations which the parties seek to enforce against each other and legislation which affects transactions that have resulted in the bringing of proceedings in the public interest by a public authority. The concepts of fairness and legal certainty carry much greater weight when it is being suggested that rights or obligations which were acquired or entered into before 2 October 2000 should be altered retrospectively.
99. Account may also be taken of the purpose of the 1998 Act. Its long title states that it was intended to give further effect to rights and freedoms guaranteed under the European Convention on Human Rights. The rights to which the Act gives effect are rights guaranteed by the Convention which the United Kingdom has already signed and ratified. In R v Field [2003] 1 WLR 882, 896E-F, para 61 the Court of Appeal accepted a submission by the Secretary of State for the Home Department that the court should take a more relaxed approach to a potentially retroactive element in legislation where its intended purpose was, as it clearly was in the case of section 28 of the Criminal Justice and Court Services Act 2000, to protect children. I would apply the same reasoning to section 3 of the 1998 Act. Its purpose is to ensure that legislation is read and given effect in a way that is compatible with Convention rights, so far as it is possible to do so, whenever the legislation was enacted. To restrict the application of the interpretative obligation, without exception, to "events" that happened or "transactions" entered into on or after 2 October 2000 would be to introduce a restriction which is not stated expressly anywhere in the 1998 Act. A restriction in such absolute and all-embracing terms would seem to be contrary to the intention of the legislation and incapable of being read into it by necessary implication.
101. Let it be assumed, then, that the effect of section 127(3) is to engage FCT's Convention rights and that it is possible to read and give effect to the subsection in a way that is compatible with them. This will, inevitably, have the consequence of removing from Mrs Wilson the protection which sections 61(1)(a), 65(1) and 127(3) were designed to give her when the agreement was entered into. It seems to me that the presumption against the retrospective effect of legislation ought to be given its full weight in these circumstances. The case may be regarded as a typical example of the situation where legislation in question affects transactions that have created rights and obligations which the parties to it seek to enforce against each other. I recognise that there may be cases (and I have referred to R v Field [2003] 1 WLR 882 as an example) where a more relaxed approach will be appropriate. There is an obvious attraction in a solution to the application of the presumption to the obligation in section 3(1) which depends on clear, bright line rules which do not admit of any exceptions. But rules of that kind would be bound to lead to unfairness in some cases or to have consequences that could not have been intended for other reasons. So I would prefer to base my decision in this case on the particular facts and circumstances. I would hold that the presumption would be violated in this case if section 127(3) were to be construed in FCT's favour in a way that deprived Mrs Wilson of the protection which it was designed to give her when she entered into the agreement on 22 January 1999."
Lord Hobhouse of Woodborough:
"130. The Executive, sections 6 and 7: Subject to certain qualifications, s.6(1) makes it unlawful for the Executive to act in a way that is incompatible with a 'Convention right' and s.7(1) empowers any victim of such unlawful conduct (or the threat of it) to take civil proceedings against the relevant authority or rely upon the 'Convention right' in legal proceedings. This, as regards the emanations of the Executive, i.e. public authorities, creates legal liabilities and, for the citizen, legal rights. These provisions therefore do raise a potential question of retrospectivity. S.22(4) makes express provision answering this question: as regards the victim defending himself against the authority in proceedings brought by the authority, the victim can rely upon his 'Convention rights' whenever the act in question took place, but otherwise s.7(1) only applies to acts occurring after s.7 came into force. Two consequences flow from this express provision. First it expressly provides a limited retrospective effect to part of s.7(1). Secondly, it carries with it the clear implication that the Act in general does not have retrospective effect. Thus, far from permitting a view that the Act should in general be construed so as to have a retrospective effect, the conclusion is confirmed that the Act should not (save for the limited exception in s.22(4)) be construed so as to have any retrospective effect.
132. The Judiciary, Article 6: Most of the other Articles are substantive and, in so far as they affect remedies or procedures, are dependent upon the engagement of the substantive provision. But Article 6 comes into a different category: it provides a right to a fair trial. This is a freestanding right and applies directly to the legal process and therefore (inter alia) directly to the conduct of the Judiciary. But the Article is drafted so as expressly to require that the proceedings be conducted in accordance with the law, that is to say the municipal law, in force at the relevant time - "an independent and impartial tribunal established by law" - "innocent until proved guilty according to law". These phrases correspond to those used in other Articles - "prescribed by law" - "in accordance with the law". Thus, once the Human Rights Act had been brought into effect, the litigant could call upon the tribunal before whom he is appearing to grant him the rights stated in Article 6. But it does not follow from this that he can claim a right under the Act in respect of earlier events or conduct or hearings. It is a question of the construction of the Act and whether it is to be given a retrospective effect. It certainly does not follow that merely because he is before a court on a later occasion, he can claim Article 6 rights in respect of some earlier hearing which took place before the Act came into force or require that the court apply s.3 of the Act in relation to something which occurred before it came into effect. In any event, in the present case there has been no denial to either party of their 'Convention rights' under Article 6."
- Lord Rodger of Earlsferry points out the different ways in which the word retrospective can be used, and distinguishes between retroactive provisions which alter the existing rights of those whom they affect, and the provisions which are not retroactive but alter the existing rights only prospectively (see paragraph 188). The presumption against retroactivity does not apply to the latter (paragraph 192), but a sudden change to existing rights may be so unfair that it is to be presumed that Parliament did not intend the new legislation to affect them in that respect which he describes as the presumption against interference with "vested rights" (paragraph 193). That presumption is weaker than the presumption as to no retroactivity (paragraph 195). He refers to the presumption that legislation will not affect pending proceedings, and to the fact that "this narrower presumption will be that much harder to displace". He stressed that the above deals with "substantive law" - changes in matters of "pure procedure" have been treated differently (paragraph 199). He then said:
"Although, at a general level, the distinction between matters of substance and matters of pure procedure is readily understandable , in practice it has not always proved easy to apply, especially in relation to legislation on limitation or prescription. For that reason, in Yew Bon Tew v Kenderaan Bas Mara[1983] 1 AC 553, 558H-559A Lord Brightman cautioned against potential dangers lurking in the description of a measure as "procedural"."
- Yew Bon Tew was a case concerned with whether an entitlement to plead a statute of limitation was an "accrued" right. The Privy Council held that it was and that the Malaysian Interpretation Act, section 30, which provided that the repeal of a written law shall not "affect any right ... accrued" applied to an Act which changed the limitation period from 1 year to three, so that a claimant who had issued his proceedings between three years and one year after the accident could not succeed.
- Lord Rodger then said at paragraphs 209 and 210:
"209. The operative provisions of the 1998 Act must all apply in the same way when used to give effect to the same Convention right. But they may apply differently when used to give effect to different Convention rights. Article 6 embodies rights in relation to matters of procedure. When the 1998 Act is used to give effect to those article 6 rights in our domestic law, it provides remedies for defects in procedure. There is no presumption against purely procedural statutory provisions applying generally on commencement since no-one has a vested right to any particular form of procedure. It follows that, given its unqualified language, the 1998 Act applies generally from the date of commencement in so far as it gives effect to article 6 rights. That is only what one would expect. Suppose, for instance, that during the hearing of the appeal in this case the Court of Appeal had done something - such as refusing to listen to submissions on behalf of First County - which was incompatible with their rights under article 6(1). There can be no doubt that section 6(1) would have applied and that the Court of Appeal would have acted unlawfully in terms of it. Similarly, section 7(1)(b) would have applied and under it First County could have relied on their article 6(1) rights. Sections 3 to 5 would also have applied to the appeal for this purpose. So, if the alleged infringement of First County's article 6(1) rights had arisen out of a statutory provision regulating the procedure in the appeal, section 3 would have bound the Court of Appeal. Depending on how the statutory provision could be read under section 3, the Court of Appeal could also have used the mechanism in sections 4 and 5 to make a declaration of the incompatibility of the provision with article 6(1) rights.
210. In so far as articles of the Convention contain substantive rather than procedural rights, the presumption would be that Parliament did not intend that, when used to give effect to them, the operative provisions should interfere with vested rights or pending actions. It is, however, unnecessary, and would be unwise, to go through the various articles with a view to identifying those Convention rights in respect of which Parliament would or would not have intended the 1998 Act to apply generally on commencement. For example, I reserve my opinion on whether, because of the overwhelming importance and the absolute nature of articles 2, 3 and 4, Parliament would have intended that on commencement the Act would apply generally for the purpose of giving effect to them."
- To summarise, Lord Nicholls was of the view that section 3(1) of the HRA did not apply to "causes of action accruing before the section came into force", but he emphasised that that did not mean that "section 3 never applies to pre-Act events". He instanced post-Act criminal trials relating to pre-Act events stressing the prosecution not having "an accrued or vested right in any relevant sense". Lord Hope was of the view that the section of the Consumer Credit Act was "a typical example where the legislation in question affects transactions that have created rights and obligations which the parties to it seek to enforce against each other"; he distinguished that from legislation which affects transactions that have resulted in the bringing of proceedings in the public interest by a public authority (such as in R v Field). He was clear that the presumption would be violated in the case of section 127(3). Lord Hobhouse was clear that there should be no retrospectivity and Lord Scott was also clear that there was nothing in the HRA to rebut the presumption against the HRA operating retrospectively "so as to alter accrued rights" [para 162], and was of the view that his reasons were substantially those of Lords Nicholls, Hope and Rodger [para 163].
- It seems to us that so far as civil cases are concerned there was unanimity that the HRA was not to be construed as affecting "accrued rights". It may well be possible that true Article 6 rights could in any event never affect "accrued rights", being simply concerned with procedural matters as will appear when we come to deal with the engagement of Article 6. But parties may have gained an accrued right by the application of what on one view might seem a procedural measure.
- The important point is that if one posed the question in this case - had Lloyds an accrued right or immunity by virtue of the application of section 14(3) prior to the coming into force of the HRA it seems to us there is only one answer. As at that date they had no liability in damages other than where bad faith could be established. That was the position from July 1982 and the position by reference to which they were entitled to conduct their affairs, and by reference to which many others also conducted their affairs. It was the position when the litigation in which these Names are involved commenced. If the presumption against retrospectivity is to be applied so that section 3 of the HRA, has no application to a section such as section 127(3) of the Consumer Credit Act which is directed at what the court shall not do in certain circumstances, it is unarguable that section 3 of the HRA could be used to place a different construction on section 14(3) of the Lloyd's Act especially in litigation between the parties which commenced before the HRA came into force.
Is Article 6 engaged?
- In Wilson the House of Lords dealt independently with whether section 127(3) engaged Article 6 at all.
- In most cases consideration of the engagement of Article 6 and the question of retrospectivity will be somewhat interlinked. We say that because if a provision is purely procedural, it is likely that its application to the rights of the parties will be postponed until the moment in time during the trial process that it has to be applied. But if it defines the substantive rights of the parties, it will be applicable as at the time when their rights crystallise. But as we have already said there can be provisions which appear procedural, where their application has vested rights in a party. Furthermore in Matthews v The Ministry of Defence [2003] UKHL 4, [2003] 1 AC 1163 - a recent decision of the House of Lords as to the application of Article 6 on which great reliance was placed by those deciding Wilson - it was pointed out by Lord Hoffmann how the drafting of legislation may appear to deal with substantive rights, but still fall foul of the mischief at which Article 6 is aimed: see paragraph 29.
- In Matthews the court was concerned with section 10(1) of the Crown Proceedings Act 1947 which provided as follows:
"10.(1)Nothing done or omitted to be done by a member of the armed forces of the Crown while on duty as such shall subject either him or the Crown to liability in tort for causing the death of another person, or for causing personal injury to another person, in so far as the death or personal injury is due to anything suffered by that other person while he is a member of the armed forces of the Crown if--
(a) at the time when that thing is suffered by that other person, he is either on duty as a member of the armed forces of the Crown or is, though not on duty as such, on any land, premises, ship, aircraft or vehicle for the time being used for the purposes of the armed forces of the Crown; and
(b) the Minister of Pensions certifies that his suffering that thing has been or will be treated as attributable to service for the purposes of entitlement to an award under the Royal Warrant, Order in Council or Order of His Majesty relating to the disablement or death of members of the force of which he is a member:
Provided that this subsection shall not exempt a member of the said forces from liability in tort in any case in which the court is satisfied that the act or omission was not connected with the execution of his duties as a member of those forces."
- Matthews was a claimant who had served in the Royal Navy between 1955 and 1968. In 1999 he was diagnosed as suffering from asbestos related injuries. He commenced proceedings on 22nd March 2001. By its defence the Ministry of Defence contended there were no reasonable grounds for bringing the claim and referred to its intention to apply for a certificate under section 10. It was not until 11th March 2002 that the Parliamentary Under Secretary of State at the Ministry of Defence signed a certificate as contemplated by section 10(1). Before Keith J there was an issue on retrospectivity. In the Court of Appeal that point was conceded by the Ministry because the challenge was to the issue of the Certificate, and it was that which was said to infringe Matthews' Article 6 rights.
- Mr Gordon QC for Matthews conceded that if the legislation had "preserved the common law prohibition of claims in tort against the Crown", Matthews would have had no "civil right" the determination of which Article 6 could operate to protect: Lord Bingham, paragraph 13. It can be seen from the analysis of the Strasbourg case law in the opinion of Lord Walker of Gestingthorpe, that at one time that court was of the view that a substantive right under domestic law might fall foul of Article 6: see paragraph 129 with its reference to Osman v United Kingdom (1998) 29 EHRR 245 and to the court significantly withdrawing from that in Z v United Kingdom (2001) 34 EHRR 97, and paragraph 132 with its reference to the opinion of the Commission in Ashingdane v United Kingdom (1983) 6 EHRR 69. Lord Walker having traced the authorities through to Fogarty v United Kingdom (2001) 34 EHRR 302, referred to the "uncertain shadow of Osman still lying over this area of the law". But he was clear that Mr Gordon was correct to concede that to succeed in the House of Lords "he had to satisfy your lordships that section 10 of the 1947 Act constituted a procedural bar." At paragraphs 142- 143 Lord Walker said this:
"142. In my view Mr Gordon's concession was rightly made. Although there are difficulties in defining the borderline between substance and procedure, the general nature of the distinction is clear in principle, and it is also clear that article 6 is in principle concerned with the procedural fairness and integrity of a state's judicial system, not with the substantive content of its national law. The notion that a state should decide to substitute a no-fault system of compensation for some injuries which might otherwise lead to claims in tort is not inimical to article 6(1), as the Commission said in Dyer 39 DR 246 (in a report, specifically dealing with section 10 of the 1947 Act, which has been referred to with approval by the court in several later cases).
143. In the circumstances the appellant's argument clings ever more closely to the bare fact that Mr Matthews had a cause of action when he issued his claim form, and that his claim could not be struck out as hopeless unless and until the Secretary of State issued a certificate under section 10. But European human rights law is concerned, not with superficial appearances or verbal formulae, but with the realities of the situation: Van Droogenbroeck v Belgium (1982) 4 EHRR 443, 456, para 38; see also R (Anderson) v Secretary of State for the Home Department [2002] 3 WLR 1800, 1807, para 13. The appellant's argument does, with respect, ignore the realities of the situation. It is common ground that the Secretary of State does in practice issue a certificate whenever it is (in legal and practical terms) appropriate to do so. He does not have a wide discretion comparable to that of a foreign government in deciding whether or not to waive state immunity (which may be by no means a foregone conclusion, especially in politically sensitive employment cases). The decision whether or not to waive immunity in Fogarty really was a decision about a procedural bar, but I am quite unpersuaded that it provides a parallel with this case. The fact is that section 10 of the 1947 Act did in very many cases before 1987, and still does in cases of latent injury sustained before 1987, substitute a no-fault system of compensation for a claim for damages. This was and is a matter of substantive law and the provision for an official certificate (in order to avoid or at least minimise the risk of inconsistent decisions on causation) does not alter that. Section 10(1)(b), taken on its own, is a provision for the protection of persons with claims against the Ministry. I respectfully agree with Lord Bingham's analysis of the legislative history of the 1947 Act and with the conclusions which he draws from it."
- Lords Bingham, Hoffmann, and Hope agreed with the speech of Lord Walker. They added observations of their own, but the essence of all their opinions was that Article 6 was concerned with procedural bars preventing claimants enforcing their civil rights, and that section 10 created a substantive limitation on the right to sue the Crown and the condition about the Secretary of State's certificate formed part of the substantive law. Lord Millett was of the same view but in addition he was unconvinced by the reasoning in Fogarty and thought that the better course would have been to hold that the claiming of state immunity (the subject matter of Fogarty)fell outside Article 6 altogether: see paragraph 103.
- In Wilson, with the assistance of the reasoning in Matthews, Lord Nicholls at paragraphs 34 to 36 said this:
"34. The basic principle underlying article 6(1) is that "civil claims must be capable of being submitted to a judge for adjudication": see Fayed v United Kingdom (1994) 18 EHRR 393, 429, para 65. Thus a typical case within article 6(1) is where a person enjoys under national law what is arguably a civil right but the only forum for deciding a dispute over the existence or enforcement of the right is a tribunal which is not independent and impartial. So procedural bars on bringing claims to court may fall within article 6(1). So also may procedural bars having the effect of preventing claims being decided on their merits. Tinnelly & Sons Ltd v United Kingdom (1998) 27 EHRR 249, 288-292, paras 72 to 79, is an example of the latter. The issue of a "national security" certificate had the effect of preventing complaints of religious discrimination being considered on their merits by a Fair Employment Tribunal. That was a violation of article 6(1).
35. The distinction between the substantive content of a right and an unacceptable procedural bar to its enforcement by a court can give rise to difficulty in distinguishing the one from the other in a particular case. As a matter of drafting, a restriction on the scope of a right may be framed in several different ways. But the drafting technique chosen by the draftsman cannot be determinative of this issue. Human Rights conventions are concerned with substance, not form, with practicalities and realities, not linguistic niceties. The crucial question in the present context is whether, as a matter of substance, the relevant provision of national law has the effect of preventing an issue which ought to be decided by a court from being so decided. The touchstone in this regard is the proper role of courts in a democratic society. A right of access to a court is one of the checks on the danger of arbitrary power. In Matthews v Ministry of Defence [2003] 2 WLR 435, 477, para 142, Lord Walker of Gestingthorpe noted that article 6 is in principle concerned with the procedural fairness and integrity of a state's judicial system. Lord Hoffmann observed, at p 447, para 29, that it should not matter how the law is framed, provided one holds onto the underlying principle, which is to maintain the rule of law and the separation of powers.
36. In the present case the essence of the complaint is that section 127(3) of the Consumer Credit Act has the effect that a regulated agreement is not enforceable unless a document containing all the prescribed terms is signed by the debtor. In my view, thus framed, the complaint does not bring article 6(1) into play. In terms of labels, that is a restriction on the scope of the rights a creditor acquires under a regulated agreement. It does not bar access to court to decide whether the case is caught by the restriction. It does bar a court from exercising any discretion over whether to make an enforcement order. But in taking that power away from a court the legislature was not encroaching on territory which ought properly to be the province of the courts in a democratic society."
- Lord Hope at paragraphs 105 and 108 said this:
"105. As the European Court said in Powell v United Kingdom (Application No 45305/99) (unreported) 4 May 2000:
'For the court, it still remains the case that an applicant must be able to demonstrate an arguable claim under domestic law that there has been a breach of a civil right actionable in law. It is still impermissible for the court to arrogate to itself the task of creating in favour of an individual a substantive right where none is recognised under domestic law.'
What article 6(1) seeks to do, then, is to protect the individual against anything which restricts or impairs his access to the courts for the determination of a civil right whose existence is at least arguable. But the precise scope and content of the individual's civil rights is a matter for each state party to determine: see also Matthews v Ministry of Defence [2003] 2 WLR 435, 452-453, paras 49-53.
108. The Court of Appeal said that the effect of sections 65(1) and 127(3) was to deprive the pawnbroker of its ability to enjoy benefit from the contractual rights arising from the agreement or from the rights arising from the delivery of the pawn: paragraph 32. But the fact is that FCT never had an absolute and unqualified right to enforce this agreement or to enforce the rights arising from the delivery of the motor car. Article 6(1) of the Convention and article 1 of the First Protocol cannot be used to confer absolute and unqualified rights on FCT which, having regard to the terms of the statute by which agreements of this kind are regulated, it never had at any time under the improperly executed agreement which it entered into."
- Lord Hobhouse substantially agreed with Lords Nicholls and Hope: paragraph 145. Lord Rodger agreed with Lord Nicholls on this aspect: paragraph 215. Lord Scott thought that the contention that section 127(3) of the Consumer Credit Act infringed Article 6 of the Convention was "an impossible contention": paragraph 165.
- Mr Nardell in a forceful and sustained argument sought to persuade us that section 14 of the Lloyd's Act when properly understood recognised causes of action as existing but then imposed a procedural bar against a claim in damages succeeding. This argument was supported by certain of the litigants in person including Mrs Strong, Mrs Makenzie Smith, and Ms Reisz and those for whom the latter two spoke. We mean no discourtesy if we do not repeat the submissions made to us because at the end of the day they came to the one point that section 14 of the Lloyd's Act provided a procedural bar and was not substantive in its nature.
- Our view was and is that section 14 of the Lloyds Act is a clear example of a section which to use the words of Lord Nicholls, restricts the scope of rights. It may be said that the position under section 14 of the Lloyd's Act is clearer even than that under either section 127(3) of the Consumer Credit Act or section 10 of the Crown Proceedings Act 1947. Section 14 is plainly not a mere procedural bar. It confers a substantive immunity. Article 6 of the Convention is not engaged. The position would be the same if the HRA had been in force when the Lloyd's Act was enacted, or before these proceedings were commenced. On a true analysis, as we have made clear, the question whether Article 6 of the Convention is engaged is quite independent of any question of retrospectivity.
- It was for these reasons that we ruled that the Names case on the Human Rights issue is unarguable. It is further for these reasons that we dismissed the appeal of those Names who commenced underwriting after July 1982 ("the post-Lloyd's Act Names").
- Cooke J held that, even if the HRA had the effect that Lloyd's could not now rely upon section 14 of the Lloyd's Act by way of defence to claims of the post-Lloyd's Act Names, permission to amend should nevertheless be refused because the court had no jurisdiction to grant it under the provisions of section 35(5)(a) of the 1980 Act. It was and remains common ground that the Names would have to succeed on this point as well as on the human rights issue if permission to amend was to be granted. It follows that, in the light of our decision that, for the reasons explained above, the appeals of the post-Lloyd's Act Names must fail, this point may be seen as irrelevant.
- However, since the point was argued in some detail and we were asked to express a view upon it, we will do so shortly, although our view is not necessary to our decision. We have also reached the conclusion that we should give permission to appeal on this point because it involved considerable debate, not only with regard to the difference between fraudulent and non-fraudulent misrepresentation, but also with regard to the relevance or otherwise under section 35(5) of the factual questions which would or might arise in deciding whether section 14(3) of the Lloyd's Act was proportionate if Article 6 was engaged. In this unusual case we give permission for the same reason as we did in connection with the human rights issue.
- CPR rule 17.4(2) and section 35(4) and (5) of the 1980 Act provide as follows:
CPR 17.4(2)
"The Court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."
Section 35(4)
"Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose."
Section 35(5)
"The conditions referred to in subsection (4) above are the following
a) In the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and
b) In the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action."
Although we quoted CPR rule 17.4(2), all the argument was directed to section 35(5) because it is that section which essentially confers jurisdiction on the court in this class of case. We shall therefore focus on section 35(5) of the 1980 Act and not on the rule.
- It is common ground that the claims of the post-Lloyd's Act Names are unarguably time barred unless they fall within section 35(5)(a) of the 1980 Act: see section 35(1)(b) and (3) of the Act. It is not in dispute that the claims which the Names wish to advance are new claims which involve a new cause or causes of action within the meaning of section 35(5)(a). That is because none of them made claims in the Jaffray pleading (or any other pleading) based upon non-fraudulent misrepresentations after 5th January 1983, which was the date on which the Names contended that the Lloyd's Act came into force. Neither a claim for damages for negligent misstatement or misrepresentation nor a claim for statutory misrepresentation under section 2(1) of the 1967 Act, which are themselves different causes of action, is the same cause of action as a claim for damages for fraudulent misrepresentation.
- It follows from the words of section 35(5)(a) that the question is whether the new cause or causes of action arises or arise out of the same or substantially the same facts as are already in issue on any claim made in the original action. The judge considered that question by reference to the Names' proposed claims for damages for negligent misstatement, which it has been convenient to call negligent misrepresentation. He first held that the fact that the issue of fraud has been resolved is irrelevant because the words "in issue" in the section do not mean "in dispute" but "material to". No-one suggested that that was wrong.
- The question was simply whether the action for negligent misrepresentation arises out of substantially the same facts as those in issue in the action for damages for fraudulent misrepresentation. The judge in our view correctly directed himself by reference to the following statement as to the policy of the section made by Hobhouse LJ in Lloyd's Bank plc v Rogers [1996] 3 EGLR 83 at page 86:
"The policy of the section is that, if factual issues are in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arises from those facts."
- It is common ground that there is no authority on what is meant by "substantially the same facts". That is no doubt because the words are tolerably clear and the question in each case is a factual one, depending upon the circumstances of the particular case. For example, it seems to us that the answer in a simple case involving one or two defendants may be very different from the answer in a complex case of this kind. These considerations are important because the exercise upon which the judge was engaged involved weighing up the allegations being made and proposed and forming a view whether on balance it could fairly be said that the action for negligent misrepresentation arose out of substantially the same facts as those in issue in the action for fraudulent misrepresentation. That balancing exercise was very much a matter for the judge and, in our view, this court should not interfere with his conclusion unless he erred in principle or was plainly wrong. We should not simply substitute our view for his, even if we would have reached a different conclusion if sitting at first instance.
- It was and is common ground that some of the facts relevant to the two claims are the same or substantially the same, notably the nature of the representations and whether or not they were true. However the judge based his decision on the differences between the matters in issue in the threshold fraud claim and the matters involved in the new claim. He stressed that in the former case the court was concerned with the state of mind of named individuals, in particular as to whether they knew that the representations were false or were reckless as to whether they were true or false. He then considered what was involved in the new cause of action, based as it is upon alleged negligence.
- In our view, the judge was right to make a comparison between the two and he was also right to hold that the two claims raise different issues. He did so by reference to a statement by Millett LJ (with whom the other members of the court agreed) in Paragon Finance Plc v DB Thakerar & Co [1999] 1 All ER 400:
"Whether one cause of action arises out of the same or substantially the same facts as another was held by this Court in Welsh Development Agency v Redpath Dorman Long Limited [1994] 1 WLR 1409 to be essentially a matter of impression. In borderline cases this may be so. In others it must be a question of analysis. In the Thakerar case Chadwick J observed that it would be contrary to common sense to hold that a claim based on allegations of negligence and incompetence on the part of a solicitor involves substantially the same facts as the claim based on allegations of fraud and dishonesty. I respectfully agree. In all our jurisprudence there is no sharper dividing line than that which separates cases of fraud and dishonesty from cases of negligence and incompetence."
- It is fair to say, as the judge pointed out, that that was a case in which the claimant wanted to plead fraud in a case in which only negligence had been pleaded to date. However, the judge added that it was plain, not only from that decision, but also from any sensible analysis that an entirely different element is involved when amending to plead negligence, as opposed to fraud, as the Names' draft pleading showed.
- We agree that there are conceptual differences between fraud and negligence and that they do not involve alleging the same facts and in many cases will not involve alleging substantially the same facts. However, whether they arise out of substantially the same facts will depend upon the facts of the particular case.
- The judge was right to focus on the particular circumstances of this case. Thus he set out paragraph 106J of the Names' proposed pleading:
"Lloyd's was negligent in that it failed to exercise reasonable skill and care to ascertain prior to making the representation whether there was in fact a rigorous system of auditing in place which involved the making of a reasonable estimate of outstanding liabilities including unknown and un-noted losses".
- The essential reasons for his conclusions can be seen from paragraphs 76, 79 and 80 of his judgment, which were in these terms:
"76. The facts relied on as indicating negligence or lack of reasonable grounds for belief require an investigation of what Lloyd's should and should not have done to investigate whether or not a rigorous auditing system was in place and whether that system "involved" the making of a reasonable estimate of outstanding liabilities. Despite abjuring any reference to any individual syndicates and their annual RITCs and despite the absence of any particulars as to what it was that Lloyd's should or should not have done, it is hard to see how the process of ascertainment of the operation of the system could involve anything other than exploration of the operation of the system in practice. The reference to the Business Plan and to the AU38 and AU38 (A) forms once again reveals that an investigation would be required into what Lloyd's should have understood about underwriting standards, about management information, about reserving standards and about the need for new regulatory principles in relation to accounting and auditing. It is clear that new and distinct issues arise which will not merely involve a re-run of the evidence heard at the Threshold Fraud Trial.
79. It is clear that different factual evidence and different expert evidence would be required to establish Lloyd's failure to meet the objective standards which the Names allege Lloyd's should have met. Whilst much of the background was explored in the Threshold Fraud Trial and the Judgment of Cresswell J explored in detail the systems which operated at Lloyd's, the focus there was upon the representations made, as originally pleaded by the Names, the accuracy of those representations and the state of mind of the 33 named individuals at Lloyd's who were alleged to be responsible for those representations. The fundamental basis of the allegations for negligent misrepresentation is entirely different from that for fraud, requiring an exploration of matters which did not arise in the Threshold Fraud Trial. In practice, an investigation would be required of the way in which Lloyd's regulated the market in order to ascertain whether or not it should have known of the deficient manner in which the audit system was working, both for the purpose of determining indemnity for the statutory claim and the common law claim.
80. This point is seen even more clearly when regard is had to the LMG Names form of pleading at paragraph 106 AA. In that paragraph, the LMG Names allege that there was a duty to ensure that an appropriate audit was taken and to determine the necessary reserves to be created on the syndicate accounts or to inform the Names of the inadequacy of those matters or the impossibility of them. The allegation is made that, in breach of statutory and common law duties, Lloyd's failed to take the necessary steps whilst making the representations complained of. Reliance on the Cromer Report finding and the Fisher Report, the inadequacy of monitoring premium income limits as a means of assessing risk, the absence of obligation to maintain up-to-date records of aggregate exposures on a gross and net basis or of calculations of probable maximum loss, all show the wide ambit of enquiry that would be necessitated if a plea of negligent misrepresentation were to proceed."
- The judge concluded that in the light of those circumstances it could not properly be said that the new claims for negligent misrepresentation arise out of substantially the same facts as the prior pleaded claims for fraudulent misrepresentation in the later years. The judge also referred to the issues which potentially arose under the HRA. However, as we read his judgment, the essential reason why he reached the decision he did was by a comparison between the facts in issue in the fraud claim and the new cause of action alleging negligence.
- Although the similarities between the underlying facts were stressed in argument on behalf of the Names and we recognise that there were many underlying facts common to the two cases, we have reached the clear conclusion that the judge was right to hold that the facts involved in the new cause of action, which focus on what those at Lloyd's should have done rather than what they knew, were not substantially the same as those which were in issue in the fraud trial, which was all about whether particular individuals knew that the alleged misrepresentations were untrue. Moreover that is so even if the Names' cases were limited in some way suggested by Ms Reisz. In any event we can see no basis upon which this court could say that in reaching that conclusion the judge erred in principle or was plainly wrong.
- For these reasons we would dismiss the appeal on this ground were it necessary to do so. We would only add this. The exercise involved under section 35(5) is to decide first what facts were already in issue in the claim already made, here fraud, and then to decide whether the new cause of action arises out of the same or substantially the same facts. That involves focusing at the second stage, not upon every issue that might arise if the amendment were allowed, but upon the cause of action alleged. It is for that reason that on the facts here it was right to compare the issues in the fraud trial with the allegations of negligence. Although this is not a final view, we are far from convinced that it would be appropriate to put all the facts relevant to proportionality, if it had arisen, into the equation for the purposes of the exercise under section 35(5).
- Finally, we should note that different considerations might well have arisen under section 35(5) if the new cause of action under consideration was based on section 2(1) of the 1967 Act. As further explained below in the context of our discussion of section 14A of the 1980 Act, the cause of action for damages for statutory misrepresentation does not involve making an allegation of negligence because the onus of showing reasonable grounds for believing that a misrepresentation is true is on the defendant. Thus, in the case of a new claim based on such a misrepresentation, it seems to us likely that (depending no doubt upon the facts of a particular case), where the representation was the same, a new claim for damages for a misrepresentation of the kind described in section 2(1) of the 1967 Act would be held to arise out of substantially the same facts as a claim for damages for fraudulent misrepresentation. However, so far as we are aware, such a conclusion would not assist the Names because of our conclusion that such a representation is not an action for damages for negligence within section 14A of the 1980 Act.
Limitation of action
Introduction
- At its outset the appeal raised a number of discrete questions relevant to proposed limitation defences raised by Lloyd's under the 1980 Act. As indicated above, we heard argument first on the question whether the effect of the coming into force of the HRA was to affect the rights and immunities conferred on Lloyd's by section 14 of the Lloyd's Act. We decided that it did not, so that Lloyd's is exempt from liability in respect of all causes of action which accrued after the Lloyd's Act came into force unless the act or omission complained of was done or omitted to be done in bad faith.
- We announced that decision before hearing argument on the limitation issues. The effect of it was that some of those issues became irrelevant and we did not hear argument upon them. They were, or included, the date upon which the Names' causes of action accrued and an alternative argument advanced by the Names to the effect that there were some causes of action which were not prima facie statute barred. We therefore say nothing about those issues but will consider the issues which remained live under a number of specific headings. However, before doing so, we should briefly indicate their relevance in the context of the decisions made by the judge.
- In paragraph 216 of his judgment the judge concisely summarised the following conclusions as being beyond serious argument:
"i) No claim by a Name for fraudulent or dishonest misrepresentation or fraudulent or dishonest non disclosure in relation to asbestos related losses is now maintainable following the decision of Cresswell J and the Court of Appeal, since the Orders of the Court required all such matters to be advanced and determined in the Threshold Fraud trial.
ii) Bad faith misrepresentations and bad faith non disclosure relating to asbestos related losses are the same as dishonest misrepresentations and dishonest non disclosure and are therefore also covered by the decisions of Cresswell J and the Court of Appeal and such claims cannot be maintained by any Name.
iii) Lloyd's owed no duty of care or statutory duty to advise the Names, to provide information nor to regulate the market and cannot therefore be liable for any failures to do so, whether committed in bad faith or not. This covers all the remaining claims advanced by any of the Names for which permission to amend is sought, other than negligent or statutory misrepresentation.
iv) All the claims made by the Names would be time barred if new proceedings were brought at today's date or at the date of the application for permission to amend, if the primary periods of limitation provided by section 2 of the 1980 Act are applied.
v) There has been no deliberate concealment by Lloyd's of any fact material to the Names' right of action in negligent or statutory misrepresentation within the meaning of section 32 of the 1980 Act and the running of the limitation period is not postponed for any Name under that section.
vi) Any claim by a Name based on a negligent or statutory misrepresentation made over 15 years before the issue of the writ or claim form against or by that Name is time barred under section 14B of the 1980 Act. In practice this means that all representations made prior to 11.10.1981 are caught by the provision together with some later representations, depending on the exact date of the operative representation in the Brochure to the particular Name and the date of the writ or claim form.
vii) Any Name who:
a) pursuant to the orders of Colman J of 30.6.98 and Cresswell J of 1.11.1999 notified a claim for an operative negligent misrepresentation made to him in a brochure after 10.10.1981 and before 5.1.1983 in the form set out in the Jaffray pleading and
b) can properly plead reliance on such a misrepresentation in concluding arrangements with Lloyd's and with Agents before 23.7.82. (so that his cause of action predates the operation of the 1982 Act) and
c) now advances such a claim for negligent or statutory misrepresentation in the terms of the misrepresentation found by the Court of Appeal in Jaffray
is now making a claim which arises out of substantially the same facts as the prior claim for negligent misrepresentation contained in paragraph 108 of the Jaffray pleading, and falls within section 35(5) of the 1980 Act and CPR 17.4., so that, for limitation purposes, the claim "relates back" to the date of the issue of the writ or claim form in that Name's action (the earliest such date being 10.10.1996) and may be able to pursue that claim, depending on subparagraph vi) and the operation of section 14 of the 1980 Act.
viii) Any claim by a Name for a negligent or statutory misrepresentation made after 5.1.1983 does not arise out of substantially the same facts or substantially the same facts as the prior claims for fraudulent misrepresentation in paragraph 29 of the Jaffray pleading so that the new claim cannot "relate back" to the issue of the writ or claim form. Such a Name cannot therefore rely upon section 35(5) of the 1980 Act or CPR 17.4 to make the new claim effective for Limitation Act purposes from the date of issue of the writ or claim form in the relevant action.
ix) It is accepted by the UNO Names, and it is clear, that all Names had the requisite knowledge, within the meaning of section 14 (A) (5)-(8) of the 1980 Act, to bring proceedings in respect of the misrepresentations now pleaded in draft by, at the latest, the date when they should have perused the Lloyd's Settlement Offer sent out to all Names with the Chairman's letter of 30.7.96. 2 months represents a generous period for such perusal.
a) Section 14A is therefore of no assistance to Names making new claims which cannot relate back to the date of a writ or claim form issued before 30.9.1999, (being 3 years from 30.9.1996-the date by when the Offer should have been studied). The claims which cannot "relate back" are those claims for misrepresentations made after 5.1.1983, referred to in sub paragraph viii) above. Those claims are irretrievably time barred now and cannot be saved by section 14A or any other section.
b) Section 14A may however assist those Names whose claims do relate back to the date of a writ or claim form, namely those claims for misrepresentations made between 11.10.1981 and 5.1.1983. (see paragraph vii) above) if they did not have the requisite knowledge before a date 3 years prior to the issue of the relevant writ or claim form.
x) Whilst in my judgment it is likely that all Names had the knowledge required to bring proceedings within s 14A (5)-(10) of the 1980 Act by October or December 1993, it cannot be said that the Names' position is not properly arguable at the stage of seeking permission to amend. Each Name's state of knowledge or constructive knowledge under section 14A(10) of the 1980 Act would have to be explored in evidence to ascertain what that Name knew or is to be treated as knowing.
xi) Section 14A of the 1980 Act has no application to claims for statutory misrepresentation.
xii) Any claim made by a Name for damages based on a negligent or statutory misrepresentation, upon which that Name relied in concluding underwriting arrangements first causing that Name damage after 23.7.1982 (the date when the 1982 Act came into force) is barred by section 14(3) of that Act, which gives Lloyd's immunity from suit for claims for damages.
xiii) In consequence of the above the only claims which have any realistic prospects of success and for which permission could be given are those brought by Names who have previously notified the Court of a claim for negligent misrepresentation made in the Brochure which was made to them after 11.10.1981 and was relied on by them in concluding arrangements with Lloyd's and underwriting arrangements with Agents prior to 23.7.1982 when the 1982 Act came into force. If those Names who have pursued such claims did not have the requisite knowledge under section 14A of the 1980 Act more than 3 years prior to the issue of the writ or claim form in their respective actions, they may be able to pursue those claims further, provided always that their claim is not barred by section 14(B) of the 1980 Act.
xiv) There appear to be a limited number of Names who fall into this category. There are further Names who notified claims for misrepresentation in the Global Accounts but not in the Brochures for the period mentioned in sub paragraph xiii) above. I gave leave to those Names to make further submissions on this point within 28 days, because they were taken by surprise when this point was taken in oral argument by Lloyd's, without any prior intimation.
xv) Proper particularisation of the date of the operative representation, the date of reliance in concluding arrangements with Lloyd's and with Agents is essential, as is a properly particularised case on knowledge for the purposes of section 14A of the 1980 Act before permission to amend can be given for any Name within sub paragraph (xiv)."
- The effect of our decision is that, absent bad faith, the Names can only rely upon causes of action which accrued before the Lloyd's Act came into force, which the judge held was on the date it received the Royal Assent, which was 23rd July 1982. The Names say that he should have held that that it came into force on 5th January 1983, which was the day of the first meeting of the Council of Lloyd's, which came into existence pursuant to the Lloyd's Act. The effect of our decision (in agreement with the judge) is that no cause of action which accrued after the relevant date can succeed in the absence of bad faith.
- Lloyd's submitted to the judge that all causes of action which accrued before either of those dates were time barred, principally by section 2 of the 1980 Act, which provides that 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. The Names sought to avoid the effect of that section in a number of ways, principally by relying upon section 14A of the 1980 Act, which provides in essence that in an action for negligence the limitation period may be three years from the date when knowledge of certain types is first acquired. The judge expressed doubt as to whether any of the Names fell within that category on the facts, but permitted certain Names to proceed further as set out in paragraph 216 xiii) to xv) of his judgment quoted above.
- It seems to us to be convenient to consider the points raised in this part of the appeal by reference to the judge's conclusions as identified in paragraph 216. Many of those conclusions are no longer in dispute. Thus, for example, the conclusions in subparagraphs i) to iii) are no longer in dispute, subject to one point on bad faith. We shall consider the points made by the Names under the following headings, which broadly follow the order of the judge's summary:
i) Bad faith.
ii) Section 32 of the 1980 Act concealment.
iii) Section 14A statutory misrepresentation.
iv) Section 14B the 15 year longstop.
v) Date the Lloyd's Act 1982 came into force.
vi) Names without brochure claims.
vii) Fairness of the proceedings.
viii) Other points.
i) Bad faith
- In the light of the conclusions of this court in the Jaffray appeal, the UNO Names do not seek to argue any case based upon alleged bad faith. They were, in our opinion right not to do so. Some Names, led by Mrs Mackenzie Smith, initially applied for permission to rely upon bad faith and, although she did at one stage abandon such reliance, she later sought to resurrect the point. However, we have reached the clear conclusion that the judge was right to hold that any such reliance was bound to fail for the reasons he gave in his judgment and summarised in subparagraphs i) to iii) of paragraph 216. In short, this court had already rejected any asbestos related claim for misrepresentation or misstatement in bad faith and, in so far as it might be alleged that Lloyd's were guilty of bad faith in being in breach of a duty to advise Names, such an allegation could not succeed because of the decisions of the courts that no such duty exists: see paragraphs 35 to 37 of the judgment, where the judge referred to Price v Society of Lloyd's [2002] LIRLR 453, per Colman J at pages 459 460, referring to Society of Lloyd's v Clementson [1995] CLC 117 and to Ashmore v Corporation of Lloyd's (No 2) [1999] 2 LRR 620.
- An appeal on this ground would have no prospect of success and there is no other compelling reason to give permission to appeal on the basis of it. We accordingly refuse permission to appeal on this ground.
ii) Section 32 of the 1980 Act concealment
- Here again, the UNO Names do not take the point but others do. Section 32(1) and (2) provide, so far as relevant:
"(1) Subject to subsections (3) and (4A) 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 on 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.
(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty."
- Section 32(1)(a) no longer has any application because the action based on fraud failed both before Cresswell J and in this court. In our view, notwithstanding Mrs Mackenzie Smith's valiant attempts to argue the contrary, section 32(1)(c) has no possible application because this action is not for relief from the consequences of a mistake. It is an action by the Names for damages for negligent misrepresentation (in the sense of negligent misstatement) or for statutory misrepresentation. The Names do not seek relief from the consequences of a mistake within the meaning of section 32(1)(c) and nor do Lloyd's.
- Mrs Mackenzie Smith, however, submits that Lloyd's deliberately concealed two documents, the Cromer Report and the Neville Russell letter, both of which are referred to in some detail in the judgment in the Jaffray appeal. The question is whether it is arguable that the facts stated in that report or letter were facts "relevant to the [Names'] right of action" which were "deliberately concealed from the Names" by Lloyd's.
- A decision was made to send the Cromer Report to agents and not to Names as long ago as 1969 or 1970, which was of course well before even the events to which this action relates. We cannot see that any court could hold that the facts contained in it related to the Names' right of action. It is significant in this regard to observe that the later Fisher Report, which reviewed the issues of reserves and accounting, came into existence in 1980 and was sent to Names.
- The Neville Russell letter was dated 24 February 1982. It is referred to in some detail in the judgment of this court in the Jaffray appeal. It was written by Neville Russell and addressed to Mr Randall as manager of Lloyd's audit department. It was part of the background to the Murray Lawrence letter, which was also considered in detail during the Jaffray appeal. In the light of the conclusions reached by this court in the Jaffray appeal we can see no basis upon which it could fairly be held that Lloyd's deliberately concealed it or the facts within it from the Names. The letter itself was not the kind of letter (addressed as it was) that one would expect to be disclosed to the Names. It may be that it can be said that Lloyd's, or those for whose acts or omissions it is vicariously liable, should have disclosed the concerns in the letter to Names and others in the market but we agree with the judge that it is inherent in the decision in the Jaffray appeal that Lloyd's did not know that it had committed any wrongdoing at any time between 1978 and 1988 and that in reality there is no evidence to support a case of deliberate concealment of a fact relevant to the Names' cause of action : see paragraph 60 of his judgment.
- It follows that the judge's conclusion summarised at subparagraph v) of paragraph 216 is correct. Moreover, an appeal would have no real prospect of success on this ground and the UNO Names were in our view entirely sensible not to take the point.
- In all the circumstances, we can see no other compelling reason why we should grant permission to appeal on this ground. We therefore decline to do so.
iii) Section 14A of the 1980 Act statutory misrepresentation
- As can be seen from the judge's summary, the claims which he has permitted to proceed to the next stage are limited to claims for what he called negligent misrepresentation. As we understand it, that is shorthand for claims in tort for breach of a duty of care in making a negligent misstatement of the kind identified in Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465. It is common ground that those claims are brought in actions "for damages for negligence" within the meaning of section 14A(1) of the 1980 Act. It follows that the state of knowledge of the claimant name is or was potentially relevant to the question whether the particular claim is time barred.
- The Names also claim damages for what was called in argument statutory misrepresentation, that is a misrepresentation of the kind identified in section 2(1) of the 1967 Act. The judge held that an action alleging a misrepresentation of that kind was not an "action for damages for negligence" within the meaning of section 14A of the 1980 Act, so that the Names could not rely upon that section to extend the six year period for actions for tort in section 2. The Names argue that the judge was wrong so to hold.
- We say at once that we give permission to appeal on this point, since it cannot fairly be said that the appeal had no real prospect of success. Actions for damages for statutory misrepresentations have been called actions for negligence, no doubt because it is fair to say that it is likely in many such cases that an important issue between the parties is likely to be whether the defendant had reasonable grounds for his belief that the alleged representation was true. Thus, for example, in Gran Gelato Ltd v Richcliff Ltd [1992] Ch 560 Sir Donald Nicholls V-C held that the defence of contributory negligence applied to concurrent claims for damages for the breach of a duty of care and for statutory misrepresentation under section 2(1) of the 1967 Act. He did so on the basis, as he put it at page 573D, that liability under section 2(1) "is essentially founded on negligence, in the sense that the defendant, the representor, did not have reasonable grounds to believe that the facts represented were true". See also at page 574A. See also HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6, [2003] 1 All ER (Comm) 349, where in a different context Lord Bingham (at paragraph 5) described the right to damages given by section 2(1) of the 1967 Act as a right given to "the victim of a negligent misrepresentation".
- Those dicta are plainly of importance, but the question for decision depends upon the true construction of section 14A, which provides, so far as relevant, as follows:
"(1) This section applies to any action for damages for negligence, other than one to which section 11 of this Act applies, where the starting date for reckoning the period of limitation under subsection (4)(b) below falls after the date on which the cause of action accrued.
(2) Section 2 of this Act shall not apply to an action to which this section applies.
(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below.
(5) For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.
(6) In subsection (5) above "the knowledge required for bringing an action for damages in respect of the relevant damage" means knowledge both -
(a) of the material facts about the damage in respect of which damages are claimed: and
(b) of the other facts relevant to the current action mentioned in subsection (8) below.
(7) For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.
(8) The other facts referred to in subsection (6)(b) above are-
(a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and
(b) the identity of the defendant; and
(c) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.
(9) Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above.
(10) For the purposes of this section a person's knowledge includes knowledge which he might reasonably have been expected to acquire-
(a) from facts observable or ascertainable by him: or
(b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek:
but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice."
- The section works in this way. By subsection (1), it applies only to "actions for negligence" and, by subsection (2), it disapplies section 2, which (as stated above) provides for a six year limitation period for actions in tort. By the combined effects of subsections (3) and (4), it provides for a six year period or three years from a defined staring point, provided that the expiry of the three year period is later than the expiry of the primary six year period. By subsection (5), the starting date is specified as the date on which the claimant first had relevant knowledge. By subsection (6), that knowledge must include "the other facts mentioned in subsection (8)". By subsection (8)(a), one of the necessary facts is knowledge that "the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence".
- Like any section of a statute, section 14A must be construed in its context in the Act as a whole. It is therefore appropriate to have regard to other relevant sections of the 1980 Act. Section 14B seems to us to be of assistance in this regard. We set it out in full below but it can be seen that it too applies only to "an action for damages for negligence" and, by section 14B(1)(a), the last of the relevant dates for the purpose of the 15 year long stop in the section is the last date on which there occurred any act or omission "which is alleged to constitute negligence".
- It seems to us to be clear from sections 14A and 14B that they both expressly contemplate that an action for damages for negligence will involve the claimant relying upon an "act or omission which is alleged to constitute negligence": see sections 14A(8)(a) and 14B(1)(a). If there were no such acts or omission neither section could apply. In these circumstances, we do not see how an action for damages for the kind of misrepresentation identified in section 2(1) of the Misrepresentation Act 1967 could fairly be described as an action for damages for negligence within the meaning of either section 14A or 14B.
- Section 2(1) of the Misrepresentation Act 1967 provides:
"2(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the representation would be liable to damages in respect therefore had the misrepresentation been made fraudulently, then that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true."
- It is plain from the express terms of the section that, in order to allege a statutory misrepresentation of this type, the claimant need only allege that the representation was made, that it was intended to be relied upon, that it was in fact relied upon, that it was untrue, that he entered into the contract in reliance upon the representation and that he suffered loss as a result.
- The key point for present purposes is that it is not necessary for the claimant to allege that the representation was made negligently. It is for the defendant to prove, in order to avoid liability, that he had a reasonable ground for believing that it was true and did believe that it was true. It follows, as we see it, that there is no "act or omission which is alleged to constitute negligence" as contemplated by sections 14A and 14B of the 1980 Act because it is not for the claimant to make any such allegation.
- That conclusion seems to us to be consistent with other provisions of the 1980 Act. Sections 11 and 14 were the forerunners of sections 14A and 14B, which were inserted by section 1 of the Latent Damage Act 1986. Section 11 provides for an extension of the usual limitation period for personal injuries unless the claimant has knowledge of certain facts. For present purposes, it is only necessary to note that section 11 is in wider terms than sections 14A and 14B because it is not limited to actions for damages for negligence. It applies to personal injury actions "for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision)". Section 11 thus extends to an action for breach of contract or breach of duty.
- We were referred to three cases which considered the application of section 14A to actions for breach of contract. The most recent was Michael Martin v Britannia Life Ltd [2000] Lloyd's Rep PN 412, but it is of little assistance because it was decided on its facts. The others were the decision of Mr Kenneth Rokison QC in Iron Trades Mutual Insurance Co Ltd v JK Buckenham Ltd [1990] 1 All ER 808 and the decision of this court in Soci้t้ Commerciale de R้assurance v Eras International Ltd [1992] 1 Lloyd's Rep 570, both of which held that section 14A did not apply to an action framed in contract.
- It is only necessary to refer to the decision in the latter case, in which the judgment of the court, comprising Mustill, Nourse and Nicholls LJJ, was given by Mustill LJ. At page 602 the court identified the question as whether section 14A extends to actions in contract or whether it is limited to cases where the duty of care, the breach of which constitutes the negligence relied upon, arises solely in tort. The court reached its conclusion without enthusiasm but also without doubt. Its reasoning can be seen from the following passage on page 602:
"Nevertheless, we find it impossible to resist the conclusion, in company with Mr Kenneth Rokison QC
in Iron Trade Mutual
, that as a matter of language s 14A cannot be applied to actions in contract. Even when the section is read in isolation, the words "any action for damages in (sic) negligence" denote in our minds an action asserting that the defendant has committed the tort of negligence, and are not wide enough to comprise what is often (albeit inaccurately) called "contractual negligence". This reading is reinforced by the express overriding of the ordinary provision for tort claims in s 2, coupled with the absence of any overriding of the provision for contractual claims in s 5."
The court added that the position was even clearer when reference was made to section 11, which it set out as we have done.
- That conclusion is consistent with the view we expressed above. We agree that the words "any action for damages for negligence" (not "in negligence" as included in the above quote) denote that the defendant has committed the tort of negligence. Moreover, assuming that a claim for damages based upon a statutory misrepresentation is a claim in tort, as it may well be, for the reasons we have given we do not think that it can fairly be regarded for present purposes as an "action for damages for negligence" because it is not necessary to aver any negligent act or omission and because section 14A(8)(a) cannot work since there will be no "act or omission which is alleged to constitute negligence".
- Finally in this regard, we should perhaps note in passing that the above conclusion makes it unnecessary to express a view on the question whether an action for damages of this kind is an action founded on a tort within section 2 of the 1980 Act or an action to recover a sum recoverable under an enactment within section 9 or even an action on a specialty within section 8. We would only say that it does not seem to us to be an action on a specialty. It does not perhaps matter whether it is an action within section 2 or 9 but our present view is that it is an action founded on a tort, albeit a statutory tort, and thus within section 2.
- For the reasons given above, we have reached the conclusion that the judge was correct to hold in paragraph 216 (xi) that section 14A does not apply to a claim for damages for statutory misrepresentation. Nor does section 14B. The judge was also correct to hold that the sections both apply to what have been called negligent misrepresentations: see his conclusion at paragraph 216 (vi).
iv) Section 14B the 15 year longstop.
- Section 14B provides as follows:
"(1) An action for damages for negligence, other that one to which section 11 of this Act applies, shall not be brought after the expiration of fifteen years from the date (or, if more than one, from the last of the dates) on which there occurred any act or omission-
(a) which is alleged to constitute negligence; and
(b) to which the damage in respect of which damages are claimed is alleged to be attributable (in whole or in part).
(2) This section bars the right of action in a case to which subsection (1) above applies notwithstanding that-
(a) the cause of action has not yet accrued; or
(b) where section 14A of this Act applies to the action, the date of which is for the purposes of that section the starting date for reckoning the period mentioned in subsection (4)(b) of that section has not yet occurred; before the end of the period of limitation, prescribed by this section."
- It is common ground that, where a claim is made by counterclaim, the relevant action is brought for limitation purposes when the claim form (or in this case the writ) is issued. It is thus also common ground that, for the purposes of section 14B, in a claim brought by counterclaim, the claimant must be able to point to a negligent act or omission 15 years or less before the date on which Lloyd's issued its writ. Since counterclaims were made in actions commenced by Lloyd's on different dates, and indeed some Names commenced their own actions, it follows that different longstop dates may apply to different claims.
- In subparagraph (vi) the judge identified the latest date upon which a name must be able to point to a negligent act or omission as 11th October 1981. As we understand it, he took that date because the earliest date on which a relevant action was brought by Lloyd's was 10th October 1996, when Lloyd's commenced its action against Sir William Jaffray. As just stated, there are other relevant dates in the cases of other Names because there are cases in which Lloyd's brought proceedings against Names later and there are cases in which Names brought original actions against Lloyd's. However, no such date is earlier than 10th October 1996.
- We read section 14B in this way, which we think is accepted by both Lloyd's and the UNO Names. A name must be able to identify a negligent act or omission on or after 11th October 1981 and before the date on which the Lloyd's Act came into force. If he or she can do so, he or she can in principle recover any loss flowing from the particular act or omission complained of, provided that the relevant cause of action accrued before the Lloyd's Act came into force, which (as the judge found and as appears below) was 23rd July 1982. There are various possible such acts or omissions on the facts depending upon the facts of the particular name's case. They may include a misrepresentation made for the first time on or after 11th October 1981 or a continuing misrepresentation which continued into that period or, if there was a duty to correct a misrepresentation which continued into that period, an omission to correct it within the period.
- However, as we see it, only losses flowing from such a negligent act or omission within the period can be recoverable, assuming them otherwise to be recoverable. Contrary to a submission advanced by Mrs Mackenzie Smith, we cannot see how a name could recover losses sustained before the beginning of the 15 year period by relying on an act or omission after it began. We can see no possible use of section 14B, or indeed any other principle of law, which could entitle a name to recover historical loss of that kind incurred before the act or omission complained of.
- We detect no difference between our views and those of the judge in this regard and we can see no sensible basis upon which we could properly give permission to appeal on this point.
v) Date the Lloyd's Act came into force
- As stated in paragraph 216 xii), the judge held that the Lloyd's Act came into force on 23rd July 1982. The question is whether he was right so to hold or whether the Act came into force on 5th January 1983. This point is or may be important to a limited number of Names, possibly including Ms Reisz who (among others) addressed us on the point. We indicated in our decision in the course of the argument that this point was arguable and gave permission to appeal in this regard. We formed the view that this is a pure point of law which could be decided finally at this stage. We also announced our decision that the Act came into force, as the judge held, on 23rd July 1982. We now give our reasons for that conclusion.
- In reaching his decision, the judge followed the decision of Gatehouse J in Ashmore v Corporation of Lloyd's [1992] 2 Lloyd's Rep 620. In paragraph 131 of his judgment he drew attention to some of Gatehouse J's reasoning and said that he had reached his decision for the reasons given by Gatehouse J. The question is therefore whether that reasoning is correct.
- Lloyd's case depends upon section 4 of the Interpretation Act 1978, which provides:
"An Act or a provision of an Act comes into force
(a) where provision is made for it to come into force on a particular day, at the beginning of that day;
(b) where no provision is made for its coming into force, at the beginning of the day on which the Act receives the Royal Assent."
- By section 21, an Act includes a private Act, which of course includes the Lloyd's Act. It is common ground that the Lloyd's Act received the Royal Assent on 23rd July 1982. Lloyd's say that there is no provision in the Act which makes provision for section 14 to come into force on a particular day and that it follows from section 4 of the Interpretation Act that it came into force on that day.
- The Names say on the other hand that, by virtue of paragraph 9 of Schedule 4 to the Lloyd's Act, section 14(3) did not take effect until the first meeting of the new Council on 5th January 1983. Section 17 provides that "the transitional provisions contained in Schedule 4 to this Act shall have effect". Schedule 4 is divided into two Parts. Part I makes detailed provisions for the first members of the Council. Part II provides, so far as relevant:
"9. Until the first meeting of the Council, Lloyd's Acts 1871 to 1951 shall, subject to the provisions of this Schedule continue to have effect as though the Act had not been passed.
11. Section 20 (Exclusion from membership for violation of fundamental rules, &c.) of the Act 1871 (including the Schedule to that Act setting out the fundamental rules of the Society), section 12 (Power of Committee to temporarily suspend Members) of the Act of 1911 and byelaw 87 (vi) of the byelaws made pursuant to Lloyd's Acts 1871 to 1951 shall continue to have effect until a Disciplinary Committee shall be established by byelaws made under this Act, and where proceedings have been commenced against any person under either of such sections or under such byelaw, they may be continued in all respects until concluded as if the section of byelaw under which the proceedings had been commenced continued in full force and effect."
- The opening words of section 14(3) of the Lloyd's Act provide:
"Subject to subsections (1), (4) and (5) of this section, the Society shall not be liable for any damages, whether for negligence or other tort, breach of duty or otherwise, in respect of any exercise of or failure to exercise any power, duty or function conferred or imposed by Lloyd's Acts 1871 to 1982 or any byelaw or regulation made thereunder - "
The short point taken by the Names, as Mr Weatherill QC put it in argument, is that, since neither the Committee of Lloyd's nor Lloyd's itself had immunity before the Act, there is no reason why the Act should be construed as conferring such immunity until the Council was set up and met and began exercising its regulatory functions under the Act. Why, he asked rhetorically, should the Committee or Lloyd's be immune from liability in damages for the misrepresentations in the 1982 brochure when it was not immune with respect to the 1981 brochure and the Council of Lloyd's had not yet been formed. There is undoubted force in these submissions.
- The question is when section 14 came into force. It is common ground that the transitional provisions in Schedule 4 came into force on 23rd July 1982, which is plainly correct because otherwise there would be no need for transitional provisions. In Ashmore Gatehouse J set out (at page 635) the history of Lloyd's and the Lloyd's Acts and correctly identified the principal purposes of the 1982 Act as follows:
"(i) the establishment of a Council of Lloyd's consisting of working members, external members and nominated members, to take over from the former Committee the management and regulation of the affairs of the Society; (ii) the transfer to the Council of the Society's former power to make byelaws, subject to certain safeguards; (iii) the setting-up by the Council of a Disciplinary Committee and Appeal Tribunal, coupled with the repeal of the particular processes of expulsion and suspension provided for in the earlier Acts; (iv) the separation of the activities of managing agents and brokers (ss 10, 11 and 12); (v) the granting of immunity by s 14."
- Gatehouse J then referred to sections 10(3) and 11(4), which provided for restrictions affecting Lloyd's brokers and managing agents respectively. Section 10(1) provided that the Council should not permit a person to act as a Lloyd's broker if he was or was associated with a managing agent and section 11(1) provided the converse. Section 10(3) provided:
"If at the date of commencement of this Act a person who is a Lloyd's broker is associated with a managing agent subsection (1) above shall not apply by reason of such association to that Lloyd's broker for five years from that date."
Section 11(4) made similar provision, as it were, the other way round.
- In that regard Gatehouse J said at page 635:
"Although not relied on in argument, it seems to me that this is a significant pointer to the date when the provisions of the Act itself came into force. Unless there was one specific date expressed, ie the date of the Royal assent, it would be difficult for the Council, as well as for the agents and brokers to know where they stood under the basic prohibitions in ss 10(1) and 11(1). And the need for that divorce, as well as the five year period, are wholly independent of the coming into operation of the new Council on some future and uncertain date."
- There seems to us to be considerable force in that view. We at one time thought that sections 10(4) and 11(5) might militate against it because they provided that if, at any time after the date of the commencement of the Act, a Lloyd's broker became associated with a managing agent or vice versa, the Council should have power to permit the person concerned to continue to act as a broker or an agent as the case might be for a temporary period of no more than six months. On one view that might seem to suggest that the Act could not commence before the Council was formed, but on reflection it seems to us that those provisions merely made it clear that they were only to apply to cases in which the relevant association began at any time after the commencement of the Act, and there is no reason why that should not have been the date of Royal Assent and before the first meeting of the Council.
- The essence of Gatehouse J's reasoning can be seen in this passage at the end of his judgment:
"In my judgment, the correct approach to timing is this. Obviously, Schedule 4 came into force on the passing of the Act and provided the procedure and timetable for electing the new Council. By implication from par. 2 of Schedule 4, Sc