Court rejects Oakeley case

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THE HIGH Court yesterday comprehensively rejected the case brought against Lloyd's by members of the failed 1981/82 Oakeley Vaughan syndicate.

Mr Justice Gatehouse ruled that Lloyd's did not have a duty to alert the members about information that reflected badly on their underwriting agency.

Nor did Lloyd's have a duty to establish a premium income monitoring system to prevent an underwriter accepting an excessive level of risk on their behalf, he said.

Michael Freeman, the solicitor acting for the Oakeley Vaughan members, said his clients intended to appeal against the decision.

Mr Justice Gatehouse said the formulation of the duty which the members had argued they were implicitly owed under their agreement with Lloyd's had become too complicated to pass the necessary legal test that it should be precise and obvious.

He said he 'was not intending to be flippant' when he had said that a reasonable person's answer to the proposition argued by the members 'was likely to be not 'Oh, of course' but 'Would you mind putting that in writing because I have not followed it'.'

For an unstated duty to be part of a contract, the duty had to be a necessity for the contract to work, not just a reasonable term, or one that was assumed by one of the parties.

Neither of the terms argued by the members came 'within measurable distance of passing' the test, he said. Pointing to the many thousands of people who had been members of Lloyd's, the judge said: 'It's impossible to say without these implied terms the contract will not work.'

He said the more the members' advisers had refined their proposition, 'the more divorced from reality the question became'.

Michael Lyndon-Stanford QC, counsel for the members, asked the judge to require Lloyd's to bear part of the 'very substantial' costs of the case. He argued the case could have been settled much sooner if Lloyd's had sought a judgment on the 'preliminary issues' at an earlier stage.

The judge adjourned to consider his decision on costs, saying it was the first time he could recall doing so.