WILLIAM HALLAM-EAMES V MERRETT SYNDICATES AND OTHERS [2001] LLOYD’S REP PN 178
FACTS:-
This case concerned certain claims in tort brought by Lloyd’s Names arising out of their losses as members of Syndicates 418/417. The Syndicate had written business in the United States, but the claims of these Claimants concerned two groups of contracts of reinsurance. The first set of claims related to 11 run off policies written in the period 1978 to 1983 and was brought against the underwriter, Mr Merrett, their Managing Agents and Members Agents on the grounds that the writing of these policies was negligent.
The second group of contracts was the “reinsurance to close” “RITC” contracts by which the accounts for the years 1979 to 1984 were closed by the outstanding liabilities being reinsured by the members of the syndicate for the succeeding year.
Again the Lloyd’s Names made out the same complaint, but brought their claim not only against the Managing and Members’ Agents but also against the syndicate auditors.
The Claimants alleged that the underwriters did not have the material on which to make any rational assessment of the potential liabilities of the year being closed, and therefore they should not have set a premium. This is what actually happened in 1985 – the year was left open.
Proceedings were first issued in January 1993, and therefore all the claims except the RITC, by which 1984 was closed into 1985 (which took place in May 1987) were prima facie statute barred by the Limitation Act 1980.
However the Claimants relied upon Section 32 (deliberate concealment) and Section 14A (special time limit for negligence actions where the facts relevant to the cause of action were not known at date of accrual).
The trial judge, Gatehouse J decided that the claims were statute barred. The Claimants appealed to the Court of Appeal.
JUDGMENT:-
Lord Justice Hoffman considered Section 14A, which was the only relevant section for the purposes of this appeal. This provided a three year limitation period from the “date of knowledge” and mirrored Section 14(1)(b) whch applied to personal injury actions. The Defendants had contended that all the Claimants could reasonably have been expected to acquire the knowledge required for bringing an action for damages from documents sent to the Names more than three years before the issue of the first set of proceedings.
Hoffman LJ considered the cases of Broadley v Guy Clapham & Co. [1993] 4 Med LR 328 and Dobbie v Medway Health Authority [1994] 1 WLR 1234.
The trial judge had decided that the reports, account and letters which the Names had received informed them that they had suffered substantial losses in consequence of the run-off contracts entered into by the managing agents. Therefore they had knowledge for the purposes of section 14A. Hoffman LJ said that the trial judge had over simplified the reasoning in these two cases. The act or omission of which the Claimant had to have knowledge had to be that which was causally relevant for the purposes of an allegation of negligence. In Nash v Eli Lilly & Co. [1993] 1 WLR 782 the court said that the Claimant must know the essence of the act or omission to which the injury was attributable.
In Dobbie, the Claimant had knowledge that a surgeon had removed a healthy breast, which was supposed to be cancerous. It was not simply the removal of her breast that gave her knowledge
Hoffman LJ then asked what were the facts which constituted the negligence of which the Lloyd’s Names complained? It would be incomplete to say that it was the writing off of the run off reinsurance policies or the RITC’s or the certification of the syndicate accounts. It was necessary to add the allegation that the run off policies and RITC’s exposed the Names to potentially huge liabilities and that the certified accounts attributed values to “Incurred but not reported” “INBR’s” none of which were in fact capable of reasonable quantification.
However quantification was a matter of judgement. In order to succeed the Lloyd’s Names would have to show, with the aid of expert evidence, that no reasonable underwriter would have regarded the risks as sufficiently quantifiable to enable a fair premium to be fixed. If that was the case, then under Subsection 10 of Section 14A, the Names would be deemed to have had the necessary knowledge, if it would have been reasonable for them to instruct an expert who could have discovered the circumstances in which the run off policies and RITC’s were concluded and the syndicate accounts certified.
The document alone (which were all that could be considered at this stage) would not enable a court to make such a finding now. The accounts showed that over successive years, the RITC premium was substantially increased. However this did not necessarily mean that a Lloyd’s Name should have inferred that the estimate in the previous year was wrong. Hoffman LJ commented that the letter of the 18th April 1985 which referred to “poor underwriting judgment” in relation to the run off policies put the Defendants on stronger ground. However the Court of Appeal would not hold that this alone amounted to constructive knowledge that the risks reinsured were not reasonably quantifiable.
Therefore the Claimants’ appeal would be allowed.
FACTS:-
This case concerned certain claims in tort brought by Lloyd’s Names arising out of their losses as members of Syndicates 418/417. The Syndicate had written business in the United States, but the claims of these Claimants concerned two groups of contracts of reinsurance. The first set of claims related to 11 run off policies written in the period 1978 to 1983 and was brought against the underwriter, Mr Merrett, their Managing Agents and Members Agents on the grounds that the writing of these policies was negligent.
The second group of contracts was the “reinsurance to close” “RITC” contracts by which the accounts for the years 1979 to 1984 were closed by the outstanding liabilities being reinsured by the members of the syndicate for the succeeding year.
Again the Lloyd’s Names made out the same complaint, but brought their claim not only against the Managing and Members’ Agents but also against the syndicate auditors.
The Claimants alleged that the underwriters did not have the material on which to make any rational assessment of the potential liabilities of the year being closed, and therefore they should not have set a premium. This is what actually happened in 1985 – the year was left open.
Proceedings were first issued in January 1993, and therefore all the claims except the RITC, by which 1984 was closed into 1985 (which took place in May 1987) were prima facie statute barred by the Limitation Act 1980.
However the Claimants relied upon Section 32 (deliberate concealment) and Section 14A (special time limit for negligence actions where the facts relevant to the cause of action were not known at date of accrual).
The trial judge, Gatehouse J decided that the claims were statute barred. The Claimants appealed to the Court of Appeal.
JUDGMENT:-
Lord Justice Hoffman considered Section 14A, which was the only relevant section for the purposes of this appeal. This provided a three year limitation period from the “date of knowledge” and mirrored Section 14(1)(b) whch applied to personal injury actions. The Defendants had contended that all the Claimants could reasonably have been expected to acquire the knowledge required for bringing an action for damages from documents sent to the Names more than three years before the issue of the first set of proceedings.
Hoffman LJ considered the cases of Broadley v Guy Clapham & Co. [1993] 4 Med LR 328 and Dobbie v Medway Health Authority [1994] 1 WLR 1234.
The trial judge had decided that the reports, account and letters which the Names had received informed them that they had suffered substantial losses in consequence of the run-off contracts entered into by the managing agents. Therefore they had knowledge for the purposes of section 14A. Hoffman LJ said that the trial judge had over simplified the reasoning in these two cases. The act or omission of which the Claimant had to have knowledge had to be that which was causally relevant for the purposes of an allegation of negligence. In Nash v Eli Lilly & Co. [1993] 1 WLR 782 the court said that the Claimant must know the essence of the act or omission to which the injury was attributable.
In Dobbie, the Claimant had knowledge that a surgeon had removed a healthy breast, which was supposed to be cancerous. It was not simply the removal of her breast that gave her knowledge
Hoffman LJ then asked what were the facts which constituted the negligence of which the Lloyd’s Names complained? It would be incomplete to say that it was the writing off of the run off reinsurance policies or the RITC’s or the certification of the syndicate accounts. It was necessary to add the allegation that the run off policies and RITC’s exposed the Names to potentially huge liabilities and that the certified accounts attributed values to “Incurred but not reported” “INBR’s” none of which were in fact capable of reasonable quantification.
However quantification was a matter of judgement. In order to succeed the Lloyd’s Names would have to show, with the aid of expert evidence, that no reasonable underwriter would have regarded the risks as sufficiently quantifiable to enable a fair premium to be fixed. If that was the case, then under Subsection 10 of Section 14A, the Names would be deemed to have had the necessary knowledge, if it would have been reasonable for them to instruct an expert who could have discovered the circumstances in which the run off policies and RITC’s were concluded and the syndicate accounts certified.
The document alone (which were all that could be considered at this stage) would not enable a court to make such a finding now. The accounts showed that over successive years, the RITC premium was substantially increased. However this did not necessarily mean that a Lloyd’s Name should have inferred that the estimate in the previous year was wrong. Hoffman LJ commented that the letter of the 18th April 1985 which referred to “poor underwriting judgment” in relation to the run off policies put the Defendants on stronger ground. However the Court of Appeal would not hold that this alone amounted to constructive knowledge that the risks reinsured were not reasonably quantifiable.
Therefore the Claimants’ appeal would be allowed.