Law Report: No implied duty in names' contracts with Lloyd's: Ashmore and others v Corporation of Lloyd's - Queen's Bench Division (Commercial Court) (Mr Justice Gatehouse), 2 July 1992

Lloyd's owes no duty to its underwriting members or 'names' either by contract or statute to alert them about matters of which Lloyd's becomes aware which might seriously affect their underwriting interests or to impose a premium monitoring system.

Mr Justice Gatehouse dismissed an action against Lloyd's brought by the plaintiffs, who were underwriting names and members of Lloyd's organised in syndicates managed by Oakeley Vaughan (Underwriting) Ltd, agents approved by Lloyd's.

Each plaintiff claimed damages from Lloyd's for losses on insurance contracts entered into by OVU between 1980 and 1983. Preliminary points arose: (1) Whether Lloyd's owed a duty to each plaintiff imposed as implied terms of the membership agreement or of the general contractual relationship between Lloyd's and each plaintiff or as a statutory duty arising out the Lloyd's Act 1871, as amended; (2) if Lloyd's did owe a duty of care then was it immune from suit by virtue of section 14 of the Lloyd's Act 1982?

The implied terms alleged were, in effect: (1) A duty to alert, generally and in specific circumstances, the plaintiff names about matters which merited investigation by the plaintiffs for protection of their underwriting interests; and (2) a duty to impose a premium monitoring system.

Michael Lyndon-Stanford QC and Paul Griffin (Michael Freeman & Co) for the plaintiffs; Peregrine Simon QC, Paul Walker and Matthew Reeve (Solicitors' Department, Lloyd's) for Lloyds.

MR JUSTICE GATEHOUSE said that every aspiring name was made unequivocally aware of certain matters from the moment he or she first read the brochure containing a description of Lloyd's, from the application form for underwriting membership and from the confirmation document signed by each applicant.

Those basic matters were: (1) underwriting was a high risk business which could bring losses instead of profits; (2) every name had unlimited liability with respect to his share of all policies he underwrote and would be assessed to the entire amount of his personal fortune to pay any valid claims against him; and (3) every name was required to appoint an underwriting agent to whom there must be a complete delegation of underwriting business. Those were factors which made Lloyd's a unique institution.

Implication of contractual terms was a matter of necessity and the necessity test was a stringent one.

Neither of the implied terms came within reasonable distance of passing the 'business efficacy' test.

Very many thousands of people over the years had been or were now names of Lloyd's under the same contractual arrangements and it was obviously impossible to say that without those implied terms the contract would not work.

Turning to the 'officious bystander' test, with regard to the alleged 'duty to alert', the complexity of its formulation was such that it was impossible to contemplate an officious bystander being capable of thinking up so complex a term.

The other implied term relating to premium income monitoring was surrounded by imprecision. It was to the agent that the name must look for compensation where losses were suffered by reason of the agent's failure to carry out his duties to his principal. It seemed a novel conception that where one principal (the name) undertook contractual obligations to another principal (Lloyd's) and agreed that his obligations should be discharged through an agent, the other principal was under a duty to supervise the agent and/or to inform his opposite number if he learnt that the agent was failing in his duties.

The third basis for implying a term, implication in law, was explained in Lister v Romford Ice and Cold Storage Co Ltd (1957) AC 555. The principle that certain terms would be implied in contracts of a certain type applied to certain broad categories of relationships where the individual contracts within the category would vary infinitely in their terms.

The contract between Lloyd's and each name was unique in the sense that there was no category into which it could be placed. Everyone of the contracts was in identical terms apart from the contracting party's name and individual premium income limit. It was not part of a genus: it was sui generis.

There was no authority to suggest that the principle had any application to such a case. There must first be established a genus, however various the individual contracts within it might be, before the principle could be founded upon.

Turning to the plaintiff's contention based on statutory duty, the statute did not impose any express duty upon Lloyd's.

Lloyd's was authorised by its constitution to exercise supervisory, regulatory and disciplinary powers over its members. It was a most important function of the corporation to regulate the Lloyd's insurance market, primarily for the protection of the policy holders.

It would greatly inhibit the proper discharge of those powers if those who exercised them had constantly to be looking over their shoulders because of a supposed duty to safeguard the interests of one section of the market.

If the contract between a name and Lloyd's did not impose any implied obligations of the kind contended for, the statutory framework could not do so.

Lloyd's did not owe to the plaintiffs either of the duties alleged.

Finally, section 14 extended Lloyd's immunity from a claim for damages to contractual causes of action. Section 14 came into force on the date when the Act received the Royal Assent, 23 July 1982.

Suggested Topics
News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
News
newsRyan Crighton goes in search of the capo dei capi
Extras
indybest

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Actors front row from left, Jared Leto, Jennifer Lawrence, Meryl Streep, Ellen DeGeneres, Bradley Cooper, Peter Nyongío Jr., and, second row, from left, Channing Tatum, Julia Roberts, Kevin Spacey, Brad Pitt, Lupita Nyongío and Angelina Jolie as they pose for a
film
Sport
sport
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Life and Style
news

As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”

Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Network Engineer - CCNP, Hedge Fund, London

£50000 - £60000 per annum: Harrington Starr: Network Engineer - CCNP, Hedge Fu...

Senior Network Engineer-CCIE, Multicast, Low Latency

£60000 - £70000 per annum: Harrington Starr: Senior Network Engineer-CCIE, Mul...

Network Infrastructure Engineer

£30000 - £50000 per annum: Harrington Starr: Network Infrastructure Engineer (...

Network Engineer (CCNP, BGP, Multicast)

£35000 - £45000 per annum: Harrington Starr: Network Engineer (CCNP, BGP, Mult...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition