Laws & Ors v The Society of Lloyd's

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.

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.

There was ultimately little dispute as to the principles. Peter Gibson LJ said this in Cobbold v London Borough of Greenwich August 9^th 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.

We append to this judgment the Introduction to the judgment of Cooke J.

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 1^st 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 £5,000. 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 24^th 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 2^nd 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.

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 22^nd 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 11^th 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 5^th 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.

On 3^rd November 2000 Cresswell J gave judgment on the “Threshold Fraud Point”, as it was known, in a number of actions. In actions commenced by Lloyd’s against various Names who had refused to accept the R & R settlement offer of July 1996, claims were brought in respect of premium for reinsurance of their liabilities to Equitas and counterclaims were raised by those Names. In other actions, Names had themselves brought claims, the common thread between the Names’ claims and counterclaims being allegations of fraudulent misrepresentation made by Lloyd’s in brochures and other publications issued by them which, it was said, induced the Names to become members of Lloyd’s and to enter into agreements with Members Agents and Managing Agents. For a comprehensive account of the background, and the extensive history which lies behind the “Threshold fraud” trial, reference should be made to the terms of the lengthy judgment of Cresswell J and the appendices to it. The Names appealed against the decision of the learned Judge and that appeal was rejected on 26^th July 2002 in another lengthy judgment delivered by Waller LJ on behalf of the Court of Appeal. Once again, reference should be made to that judgment for the background to the appeal.

By an Order dated 30^th June 1998, Colman J had ordered that four specific actions should be tried together and the Threshold Fraud point determined, following exchanges of pleadings and evidence in accordance with the directions he made. There was a requirement to identify the different categories of claim advanced by different Names by reference to the Threshold Fraud Point which was, at that stage, defined as:

“the issue whether Lloyd’s made misrepresentations which it knew to be untrue and/or as to which it was reckless whether they were true or false and whether such misrepresentations were communicated to the Names and if so when”.

Of those Names so identified, who had not at that stage served a claim or counterclaim alleging fraud against Lloyd’s, one claimant from each category was to serve a pleading incorporating such part of the Points of Defence and Counterclaim already served on behalf of Sir William Jaffray as he might be advised and setting out any particular matters relating to the Threshold Fraud Point which applied to their claim. By a letter of 16^th September 1998 Schedules were served by solicitors acting for the UNO Names setting out the categories of claim and those Names who were pursuing them. Only one category, Category 1, related to misrepresentations in the Brochure for Applicants for Underwriting Membership for the year of joining. As it turned out, the categories overlapped in the content of their cases (the other 20 categories related to the Global Report and Accounts produced by Lloyd’s in relation to closed years of account between 1977 and 1995) so that it became unnecessary to draft a multiplicity of pleadings and that of Sir William Jaffray which pleaded reliance on the Brochure became the key pleading.

By a further Order dated ₁st July 1999, the allegations of fraud to be tried on the 11^th January 2000 were further refined, being confined to the period 1978 to 1988 and by reference to the alleged fraud of 33 named persons at Lloyd’s. In addition to the matters previously referred to, the issue of reliance by 3 sample Names was also to be determined. It was specifically provided that the Names would not seek to investigate at trial the position of any particular Lloyd’s syndicate or seek to show that any such syndicate wrongly closed any years of account: nor would any allegations of fraud be made against panel auditors: nor would the Names seek to investigate at trial the manner in which any particular firm of auditors conducted the audit of any Lloyd’s syndicate for any particular syndicate year of account. Moreover the only allegation to be made as to the withholding of material information from underwriters or auditors by Lloyd’s was that Lloyd’s had failed to distribute the Murray Lawrence letter of 18^th March 1982 to the Members Agents, an issue which was ultimately determined against the Names by Cresswell J at the Threshold Fraud Trial.

On 1^st November 1999, Cresswell J made a further order for directions. In this order, as in others, additional Names were identified as counterclaiming Names and in each case, where the Name had no existing proceedings, a date was specified as the deemed date of commencement for Limitation Act 1980 purposes. He ordered that any Names who wished to advance allegations of fraudulent inducement to become or remain an Underwriting member of Lloyd’s by reason of Lloyd s failure to disclose the nature and extent of the market’s liability for asbestos related claims had to provide written notice by a specified date, failing which they would thereafter be precluded from advancing such allegations without the permission of the Court. As a result of this order (as appears from the statement sent on the Court’s instructions to Names who were in dispute with Lloyd s) the Court hoped to ensure that all fraud arguments would be enshrined in the Threshold Fraud Trial and would be determined once and for all between Lloyd’s and all non-accepting Names however such fraud claims were framed whether by reference to misrepresentation or non-disclosure of information

As finally reformulated in the Re-Re-Amended Points of Defence and Counterclaim of Sir William Jaffray, the fraud alleged against Lloyd’s was contained in a series of representations made in the Lloyd’s Brochure and by reference to the Aggregate Results/Global Reports and Accounts which Lloyd’s issued annually and upon which the Name relied in deciding to join or remain in Lloyd’s and in deciding on premium limits and the continuation of underwriting. The details of these alleged representations are set out in the judgment of Cresswell J and the judgment of the Court of Appeal. It was alleged that the representations were false because Lloyd’s knew, at the time of making such representations that the minimum audit reserves were manifestly inadequate in the light of its knowledge of the Lloyd’s market’s exposure to asbestos related liabilities, as set out in paragraph 34 of the Re-Re-Amended Points of Defence and Counterclaim. As part of the plea of falsity, in paragraph 34.2, it was alleged that Lloyd’s failed to make proper and full disclosure of material information relating to the exposure of the Lloyd’s market to potentially huge and escalating asbestos related claims and that, moreover, Lloyd’s failed properly to regulate the manner in which syndicates or their auditors reserved for and accounted for such potential liabilities.

In addition to these pleas there was an additional plea in paragraph 108 which read as follows:-

“Alternatively, if it be held that the representations made as set out in paragraph 29 hereof were not made fraudulently by Lloyd’s, Lloyd’s was nevertheless under a continuing duty to its Names, including the defendant, to take the steps set out in paragraph 91 hereof. In breach of duty, negligently and/or in circumstances to which section 2(1) and/or 2(2) of the Misrepresentation Act 1967 applied, Lloyd’s failed to take those steps or any of them. Insofar as the Defendant’s claim arises alternatively in tort, the Defendant contends that the loss and damage which he sustained arises from tortious conduct by Lloyd’s and its officers prior to ₅th January 1983, the date upon which Lloyd’s Act 1982, and in particular section 14 thereof, came into effect and that his damage, all as set out above is recoverable from Lloyd’s accordingly.

Particulars of Negjjgence.

1.

If and insofar as the Defendant may fail to establish that the facts appertaining to asbestos-related liability as hereinbefore pleaded were known to Lloyd’s or that Lloyd’s closed its eyes thereto, those facts were at all material times known to Lloyd’s and to each of its Committee and/or Council members;

2.

The representations made in paragraph 29 could not have been made by Lloyd’s or any officer or Council or Committee member if any care had been taken to ascertain the facts before authorising communication in the forms pleaded to the Defendant and other external Names;

3.

If the regulation of the market by Lloyd’s had been carried out with any proper or reasonable care, Lloyd’s would not have failed to take the steps set out in paragraph 91;

4.

In the premises, Lloyd’s had no reasonable grounds at any material time for believing that the facts represented were true.”

Whilst framed obscurely, this plea was primarily a plea of negligent failure to take the steps set out in paragraph 91 of the pleading which can be summarised as follows:-

In addition to this primary allegation in paragraph 108 it can be seen that there was a reference to those failures taking place in a context to which the Misrepresentation Act 1967 applied and in the particulars of negligence (subparagraphs 2 and 4) it was alleged that the representations pleaded in paragraph 29 could not have been made by Lloyd’s if any care had been taken to ascertain the facts before authorising communication in the form in which it took place. Moreover, Lloyd’s had no reasonable grounds at any material time for believing that the facts represented were true.

It is therefore the position, and it is accepted by Lloyd’s, that there were, on the face of the pleading, allegations of negligent misrepresentation and statutory misrepresentation made before the 5^th January 1983 which, the Names alleged, was the date upon which the Lloyd’s Act 1982 came into force. That date is the subject of dispute between the parties.

Following the Threshold Fraud Trial and shortly before judgment was given by

When the matter came before the Court of Appeal, as appears from the terms of the Court of Appeal judgment, the Court reformulated the alleged representations made to the Names at paragraphs 309 to 322 and, having done so, then found at paragraphs 374 to 376 that those representations were false. The Court then went on to hold that it had not been shown that Lloyd’s had knowledge of the falsity of such representations with the result that the Names’ claim failed on appeal, just as it had at first instance. (The Court of Appeal also rejected the Names application for permission to appeal on the basis that they had not received a fair trial).

The Court of Appeal found that the brochures contained “a representation that there was in place a rigorous system of auditing which involved the making of a reasonable estimate of outstanding liabilities including unknown and un-noted losses.” They found furthermore that those at the centre of Lloyd’s must have intended the representation to be understood in that way and that it was material, in the sense that it was intended to be relied on. Despite the fact that the point had never been pleaded in this way before, the Court of Appeal found that an ordinary person applying to become a Name would reasonably conclude that the brochure did contain such a representation.

It is important to note that the Court of Appeal, at paragraphs 375 and 376, found that the representation was false simply on the basis that, when R&R was carried out in 1996, so many syndicates were shown to be massively under reserved, that this demonstrated that the system had not been producing reasonable estimates of outstanding liabilities over the years. With the benefit of hindsight, the Court commented that it was clear that the un-noted losses (IBNR) were grossly underestimated throughout the relevant period. The Court made it plain that this was not an indictment of particular underwriters or auditors and that they had not explored the way in which such estimates were made by individual syndicates or individual auditors. There was therefore no question of any finding of negligence or unreasonableness on the part of those making the estimates or audits at the time those estimates were made. There was no finding that the estimates were unreasonable in the light of the facts and circumstances known at the time the representations were made. The simple fact was that “as it turned out most syndicates were under reserved”.

As a consequence, the Court of Appeal found that throughout the relevant period the system did not involve the making of a reasonable estimate of outstanding liabilities including unknown and un-noted losses. It is important in this context to emphasise that the words used by the Court of Appeal, namely “the system simply had not been producing reasonable estimates of outstanding liabilities over the years” have to be understood as meaning that the system had not been producing sufficiently accurate estimates of outstanding liabilities to be relied on as opposed to estimates which were unreasonable at the time they were made. The basis of the Court of Appeal’s decision as to falsity therefore did not depend upon anything more than the fact that, when seen at the time of R&R, the reserves made and RITC premium charged were grossly insufficient in respect of the liabilities incurred for prior years. Such a finding could only be put upon this basis since, in accordance with the earlier orders made by the Commercial Court, there had been no investigation into the individual assessment of any particular RITC premium by a syndicate or its audit for any of the years in question.

By an order dated 28^th October 2002, the Court of Appeal spelt out the consequences of its decision. It refused applications for a stay of execution, of enforcement of judgments obtained against any Name for that person’s Equitas premium, of any costs orders made in specified Lloyd’s litigation or of any writ or claim forms issued or to be issued in respect of Central Fund debt. By paragraph 8(2) the Court refused the application of the Names to discharge the order made by Cresswell 27^th April 2001, in which he dismissed the Names’ claims and refused permission to amend but, in a passage in parenthesis, the Court stated that “for the avoidance of doubt nothing [in that order] shall prevent the Names or any of them making a further application for permission to amend to the Commercial Court.

It is in these circumstances that the current applications for permission to amend arise and, it is agreed, are to be treated as such, notwithstanding the absence of any current pleading to amend, following Cresswell J’s order striking out and dismissing the claims/counterclaims. The applications are of a somewhat confused nature because of the changes in representation of a number of Names and the appearance of some as litigants in person, making representations either orally or in writing. In essence however, the UNO Names represented by More Fisher Brown and Grower Freeman have produced 3 forms of draft pleading for 3 sample Names who represent pre 1982 joiners of Lloyd’s, 1982 joiners and post 1982 joiners.

A Re-Re-Re-Amended Points of Defence and Counter-claim has been produced in the name of Mr. Laws (the sample 1982 joiner) which deletes large tracts of the prior form of pleading of Sir William Jaffray but maintains that Lloyd’s owed a duty of care and a statutory duty under the Lloyd’s Acts to manage and superintend the affairs of the Society lawfully and to advance and protect the interests of Names. At paragraph 29 the draft pleading alleges that the Annual Brochure contained representations to the effect that “Lloyd~ had put in place within the Lloyd’s market a rigorous system of auditing which involved the making of a reasonable estimate of outstanding liabilities including unknown and un-noted losses.” In paragraph 30 it is alleged that the representations were knowingly made by Lloyd’s and intended to be understood by the Names in the manner pleaded and in paragraph 31 that Lloyd’s knew and intended that prospective Names would read and rely upon the brochure and the statements and representations contained in it for the purposes of considering whether or not to become a Name. Paragraphs 32 and 33 then plead inducement whilst paragraph 34 sets out the falsity of the representation on the basis of the judgment of the Court of Appeal to which I have already referred. The particulars of falsity read as follows

“As evidence of falsity of the pleaded representation the Defendant will rely on the fact that when Reconstruction and Renewal (R&R) was carried out, syndicates at Lloyd’s were massively under reserved. The Defendant will contend that such under reserving demonstrates that the audit system put in place by Lloyd’s for the Lloyd’s market had not and was not capable of producing reasonable estimates about outstanding liabilities during the period 1982 to 1989”.

The draft pleading therefore tracks the Court of Appeal’s holdings in essence, save for making the additional point that the under-reserving revealed at R&R demonstrated that the audit system “was not capable of producing reasonable estimates of outstanding liabilities” during the relevant period and pleading a duty of care, negligent misrepresentation and statutory misrepresentation.

At paragraphs lO6A —106E the plea is made of Lloyd’s liability under the Misrepresentation Act 1967, with reliance upon admissions made by Lloyd’s in its Business Plan dated April 1993 and to a number of AU38 and AU38 (A) forms for 1986, 1987 and 1988, together with those for the Merrett syndicates at 31^st December 1981 and 31^st December 1982. At paragraphs 106A-lO6K, the plea is made of negligent misrepresentation by Lloyd’s in circumstances where it is alleged that Lloyd’s owed a duty of care in making representations. Paragraph 112 then maintains that section 14(3) of the Lloyd’s Act 1982 (“the 1982 Act”), is ineffective to exempt Lloyd’s from liability for these misrepresentations because of the terms of the Human Rights Act 1998 (“the HRA”), whilst putting Lloyd’s to proof that the misrepresentations were made in respect of a power, duty or function conferred or imposed by the Lloyd’s Acts or any bye law or regulation made thereunder relating to the admission or non-admission to or continuance of membership of Lloyd’s. In the alternative, it is contended that if section 14(3) is effective to exclude a remedy in damages, it is not effective to preclude the granting by the Court of other relief, including a stay in relation to any judgment given against the Name in Lloyd’s favour. Because Mr Laws’ draft pleading was one of the lead pleadings this action is entitled with his name, whilst previously entitled by reference to Sir William Jaffray who is no longer a party to this action.

In addition to the draft pleading in the name of Mr. Laws, there was a draft pleading in the sample name of a pre 1982 Joiner, Mr Thomas-Everard, in virtually identical form and a further draft Re-Re-Re Amended Points of Defence and Counterclaim in the name of Mr. Harris, a post 1982 joiner. Both the Laws and Thomas-Everard pleadings incorporated the larger section of the Harris pleading setting out the case that Lloyd’s is liable for any misrepresentation notwithstanding the immunity apparently provided by section 14(3) of the 1982 Act.

The essential point raised is that the 1982 Act must now be read and construed by the court by reference to the HRA. It is pleaded that, prior to 2^nd October 2000 (the date when the HRA came into force), the only claims which could be maintained against Lloyd’s were for fraudulent misrepresentation and that the contrary was not properly arguable, by reason of s 14(3) of the 1982 Act. Since the coming into force of the HRA however, it is maintained that any such construction would be incompatible with Convention rights, namely the Names’ right of access to the courts to have the merits of their non fraud claims against Lloyd’s determined and their right to a fair trial under Article 6(l) of the Convention scheduled to the HRA. Section 14 of the 1982 Act, it is alleged, interferes with such rights and engages Article 6 of the Convention so that it can only be enforced to the extent that it is a necessary interference with those rights and a proportionate means of pursuing a legitimate aim which justifies such interference. These issues are, it is said, pre-eminently a matter for determination on evidence at trial.

At one stage. a number of Names (“the LMG Names”) were represented by Memery Crystal who issued an application to amend on their behalf on 17^th February 2003. Memery Crystal ceased to act for these Names shortly before the hearing of the current application. Some of the Names for whom they acted, then reverted to representation by More Fisher Brown or Grower Freeman, whilst others represented themselves. Re-Re-Re-Amended Points of Defence and Counterclaim for five sample Names (Messrs. Hulse, Wilson and Starkey, Mrs Mackenzie Smith and Mrs Doll-Steinberg) had been drafted by Memery Crystal at a time when they were represented by them. The allegations contained in those draft pleadings were similar to but not identical to those in the draft pleadings to which I have already referred. Equally they were similar to, but not identical with, one another. Put shortly, the additional or different allegations to those of negligent misrepresentation as alleged by the UNO sample Names included:-

The Litigants in person all adopted the arguments put forward on behalf of the UNO Names in relation to the HRA. In addition, apart from Mr Butler, each adopted (at least as an alternative) the LMG Names’ Skeleton argument which had been provided to the Court before Memery Crystal came off the record. Each Litigant in person also provided points of his/her own and adopted all the arguments put forward by other Names whether represented or not as alternative arguments to their own. To the extent that any different case or argument was pursued, this is set out in this Judgment.

The Individual Litigants in Person:-

All the draft pleadings and cases put forward asserted that the representation alleged were continuing, (in the sense of not being withdrawn) as well as being repeated in later Brochures, and were false both at the time when the Name in question joined Lloyd’s and concluded agreements with his or her Agents and throughout the time each continued to underwrite. The representation continued to be relied on at the point of potential resignation or change of underwriting arrangements for the following year. The falsity was that set out by the Court of Appeal, namely that “throughout the relevant period there was not in place a rigorous system of outstanding liabilities including unknown and un-noted losses”. Moreover each Name relied, as particulars of falsity, on the fact that, when R&R was carried out, syndicates at Lloyd’s were found to be massively under-reserved. The Names’ draft pleadings contend that such under-reserving demonstrates that the audit system put in place by Lloyd’s for the Lloyd’s market had not and was not capable of producing reasonable estimates of outstanding liabilities during the relevant period.

On analysis therefore all the claims of negligent misrepresentation except for those of LMG set out in paragraph 22(ii) (b)—(d) of this Judgment are identical or similar to those advanced in the UNO Names’ draft pleadings. There are allegations of bad faith or fraud in failure to disclose the inadequacy of the audit system between 1978 and 1988, failure to disclose other matters and failure to inform or advise as well as failure to regulate the market. The remaining allegations are equivalent allegations of negligence in failing to regulate the market or of failure to disclose, inform or advise whether of matters affecting the audit system or otherwise, together with an allegation of deliberate concealment which relates to the issue of limitation, but for which no particulars are provided, save by Mrs Mackenzie Smith.

lt should also be noted that some of the UNO Names and some of the litigants in person expressed no desire to pursue a claim against Lloyd’s for damages. All they

For the purposes of this section a member of the Lloyd’s community shall be—

Subject to subsections (1), (4) and (5) of this section, the Society shall not be liable for damages whether for negligence or other tort, breach of duty or otherwise, in respect of any exercise of or omission to exercise any power, duty or function conferred or imposed by Lloyd’s Acts 1871 to 1982 or any byelaw or regulation made thereunder—

Nothing in this section shall affect any liability of the Society in respect of the death of or personal injury to any person, and for the purposes of this section the expression “personal injury” means bodily injury, any disease and any impairment of a person’s physical or mental condition.

Nothing in this section shall exempt the Society from liability for libel or slander.

For the purposes of this section “the Society” means the Society itself and also any of its officers and employees and any person or persons in or to whom (whether individually or collectively) any powers or functions are vested or delegated by or pursuant to Lloyd’s Acts 1871 to 1982.