[2002] EWCA Civ 65Case No Case No: A3/2001/0619Venue Royal Courts of Justice, Strand,, London, WC2A 2LL
Between
P & B (RUN-OFF) LTDRespondentWOOLLEYAppellant
Before
Lord Phillips MrLord Justice WallerLord Justice BuxtonGuy Newey, QC and Catherine Mackenzie Smith (instructed by Hamish M McMillan for the Appellant)George Leggatt, QC (instructed by Cameron McKenna for the Respondent)Date 7 February 2002
Lord Phillips MR :
[1]This is the judgment of the Court. Introduction In 1985 the appellant, Mrs Woolley, became a Name at Lloyds. The issue that arises on this appeal is whether she was a member of Syndicate 103 for the 1993 year of account. The results of that syndicate for that year have proved disastrous. It has not been reinsured to close, but placed into run-off. Two calls have been made on Mrs Woolley, for a total of £15,000. She has refused to pay them, contending that she was not a member of the syndicate. P&B (Run-Off) Ltd, the run-off managers, brought an action in the Commercial Court to recover them. In a judgment delivered on 27 th February 2001 Andrew Smith J. rejected her defence and gave judgment for the claimants. She appeals against this judgment with the permission of Clarke L.J.[2]Up until late 1998 all concerned, including Mrs Woolley, believed that she was a member of Syndicate 103. It was then discovered that two of the documents which should, according to the requirements of a Lloyds Bye-law, have been executed in order to make her a member of Syndicate 103, were missing. It is Mrs Woolleys contention that these documents were never executed, with the effect that she could not in law, and did not, become a member of Syndicate 103. It is P&Bs contention that the documents were executed and that, even if they were not, Mrs Woolley nonetheless became a member of Syndicate 103. The Judge held that both these contentions were correct. The first conclusion resolved what were purely issues of fact; the second resolved what was purely an issue of law. To succeed on this appeal Mrs Woolley must show that the Judge was wrong on both fact and law. The background facts and the Bye-law[3]The background facts and the relevant provisions of the Bye-law are set out by the Judge in an introduction to his judgment which spans eight pages. Seven of these are devoted to the provisions of the Bye-law, which is an indication of their complexity. I do not propose to duplicate the exercise so adequately performed by the Judge, for this part of his findings is not challenged. I shall simply make a short summary of the position and annexe his judgment to my own.[4]The relevant Bye-law, which was made on 7 December 1988 pursuant to Lloyds Act 1982, prescribes the terms, and in some instances the form, of the agreements creating and governing the relationships between Names at Lloyds, their Members agents and their Managing agents. In 1992 Mrs Woolley entered into an agreement in writing, which accorded with the requirements of the Bye-law, (a Schedule 1 agreement) under which she appointed Knightstone Underwriting Limited (KUL) as her Members agent.[5]KUL agreed with Mrs Woolley that they would take the action necessary to make her a member of, among others, Syndicate 103, of which the managing agents were Knightstone Syndicate Management Limited (KSM), a company in the same group as KUL. The Bye-law prescribes the manner in which this was to be achieved. In accordance with its provisions KUL and KSM had first to have concluded a standard agents agreement in writing in the form set out in Schedule 2 (a Schedule 2 agreement). A Schedule 2 agreement includes provisions as to the manner in which the members agent can agree, on behalf of the Name, to the conclusion of a contract between the managing agent and the Name under which the Name will be placed on a particular syndicate or syndicates managed by the managing agent. This is achieved by the members agent and the managing agent signing an Agents Syndicate List containing the Names who are to join the syndicate, together with details of the extent of participation of each Name, whereupon an agreement in the form set out in Schedule 3 to the Bye-law (a Schedule 3 agreement) is deemed to have been concluded between each Name and the managing agent.[6]It is common ground that KUL and KSM acted on the common assumption that a Schedule 2 agreement had been concluded between them. It has, however, proved impossible to find a copy of this agreement or any document referring to it. It is P&Bs case that such an agreement was concluded in writing, but has been lost. It is Mrs Woolleys case that no such agreement was ever concluded.[7]Two Agents Syndicate Lists prepared by KUL have been preserved which list the Names that were to be placed on Syndicate 103, the first dated 11 February 1993 and the second, a revised list, dated 10 May 1993. The first list is 59 pages and the second 60 pages long. Each page of each list has been signed by a representative of KUL. No page of either list has been signed on behalf of KSM, although each has a space for such signature. It is P&Bs case that each list is one of a pair presented to KSM and that the second list in each pair was signed by KSM, but has been lost. It is Mrs Woolleys case that KSM did not sign any Agents Syndicate List for Syndicate 103. It is, however, common ground that KUL, KSM and Mrs Woolley proceeded, up until 1998, on the assumption that KUL had concluded with KSM a Schedule 3 agreement on behalf of Mrs Woolley, constituting her a member of Syndicate 103.[8]Andrew Smith J. held that a Schedule 2 agreement was signed by KUL and KSM, which has been lost, and that KSM countersigned duplicate copies of each Agents Syndicate List, which have also been lost. We turn to consider Mrs Woolleys challenge to these findings.[9]So far as evidence was concerned the Judge had the evidence of Mr Thompson, and Mr Casement as live witnesses. Mr Thompson had been employed in the Lloyds market since 1976. From 1990 he was the Administration Director of Spratt & White until in October 1992 they were purchased by KUL. He then became their Administration Director leaving KUL in October 1993. He was accordingly with KUL at the time the Syndicate Lists should have been signed. The agents agreement should have been in place prior to his arrival, and it was part of his responsibility to see that documents were in place. He could not say that he actually remembered seeing the particular documents, but he could give evidence of his practice as Administration Director, and explain why he thought the documents must have existed. Mr Casement, a solicitor, simply gave evidence of the efforts made to locate the documents.[10]The Judge also had a statement of Mr Moore. He was the agency manager of KSM following the take-over of the John Poland Group by the Knightstone Group. His statement had been taken by P&B and supported the case at that time being made by P&B that a series of novation agreements had been made the effect of which was to place KUL as members agent under a contract with KSM as managing agent. On the basis that there were the relevant novation agreements his statement said: Thus there is no Agents Agreement existing between KUL and KSM because we relied on the existing Agents Agreement dated 7 th and 8 th September 1989 by the previously named Poland managing and members agencies.[11]He relied then on novations of those agreements one of which was said to have been novated to KSM. P&B abandoned this case shortly before the trial. There simply was not a novation and on Mr Thompsons understanding of the position that was not surprising because (as he explained in evidence page 17) it was the Poland Syndicates who were not going to carry on business, which were dealt with by novation, whereas for ongoing syndicates new agreements were set-up by Knightstone on their formation or the commencement of their underwriting on 1 st January 1992. Mr Moore also suggested that the Syndicate List had not been signed by KSM because Names were changing their mind about participation (see paragraph 14).[12]The statement of Mr Moore was put in evidence on behalf of Mrs Woolley as she was entitled to do, and Mr Moore was not called and was thus not cross-examined.[13]The Agents Syndicate List was a key document. It was from that document that KSM could be sure that they had underwriting authority and from which KUL could be sure that they had given underwriting authority to KSM.[14]Two copies of the Agents Syndicate List were found in the files of P&B who took over from KSM, one signed for KUL by Mr Thompson himself, and the other for KUL by Mr Gillespie. There was a place on both for the signature of KSM but on the copies no signature on behalf of KSM appears.[15]It was Mr Thompsons evidence that it was the practice to send two copies to KSM, one to be countersigned and returned, and the other to be retained by KSM for its files. There is support for that being the practice from the following. Mr Thompson specifically remembered delivering a list to Mr Moore of KSM in which an error was noticed and he remembered taking the list back to be re-signed, and then redelivered. On P&Bs file was found a letter dated 14 May 1993 from KUL to KSM which states that it attached a further set of 1993 Syndicate Lists for signature.[16]Furthermore Mr Thompson said that it was the practice on receipt of the list countersigned by KSM, and only then that the information on the list was sent to MUS for the stamp to be drawn up. A stamp for Syndicate 103 was drawn up in February and again in May.[17]The Judge was impressed by Mr Thompson. He not only thought him a plainly honest witness, but was impressed by his professional expertise as an administrator which, as he put it, would have ensured that the job was completed thoroughly, that being particularly likely in the context of a concern which Mr Thompson said he had, to have things in order, because as part of Lloyds regulatory review, one of the standard pieces of information they would have asked to look at would have been copies of the agency agreements and syndicate lists.[18]The Judge also had evidence that many of the Knightstone Group documents had been lost, and indeed that was not disputed. It was put to Mr Thompson that some Syndicate Lists that were found did contain both signatures, and Mr Thompson could not offer an explanation for that, but he reiterated his reason as to why the Syndicate Lists, properly signed, must have existed in the following terms I would have had to produce the documents . to the general review department, and they would have picked up if there had been a gap I would not also have been able to file my return with Lloyds by the due date confirming that I had received all syndicate lists . (page 14 lines 1-9) The Judge took account of the point that some Syndicate Lists had been found with both signatures on, but on Mr Thompsons evidence he accepted that there must have been an Agents Syndicate List signed by KSM returned to KUL which would have been used for the purpose of getting the stamp drawn and that that list was one of the documents lost.[19]So far as the Agency Agreement was concerned the Judge accepted that the position was much less clear. Indeed if one reads Mr Thompsons original statement it comes to little more than an assertion that there should be such an agreement (paragraph 16). But when cross-examined his evidence became stronger. He was asked about his involvement in the preparation of an agents agreement, and he said that it was his job to make sure that an agreement was in place for each syndicate and managing agency the members agency supported. (page 8 line 31) He gave a reason why he thought there would be a new agreement and not a novation as already set out above (page 17 lines 21-29). His evidence relating to the Agents Syndicate Lists furthermore covered the Agents Agreement as well. He said that as part of the Lloyds Regulatory Review one of the standard pieces of information they would have asked to look at would have been copies of the agency agreement and Syndicate Lists as far as I recall we were never taken to task I would not have allowed a fundamental error like that to happen, nor indeed would the Lloyds regulatory department, when they came in to review the agency documentation. (page 9 lines 41-57). He furthermore said that there was a particular place where KUL filed Syndicate Lists, - they were kept in a filing cabinet with the copy of the agreement, the agreement being identified as the agreement between the members agent and the managing agent. By inference he was saying that the agents agreement was also kept in the particular place.[20]The only basis for contending that no such documents existed was their absence and the statement of Mr Moore. But it was plain that many documents had gone missing including Agents Agreements, and if the documents were kept in the same place and together, if one was missing it is likely that the other would be missing too. Mr Moore also could not be right in this sense. There simply was no relevant novation agreement. If the administration was efficient that would have had to have been noticed. Mr Thompsons evidence was that when he joined KUL the administrative efficiency was not good, but when put to him that there were still administrative problems in the year he was there, his answer was Absolutely not (see page 5 line 15).[21]That evidence was clearly accepted by the Judge. As we have emphasised the Judge was very impressed by Mr Thompson and impressed by his reliability as an administrator. He had the advantage of assessing Mr Thompson in the witness box which this Court simply has not had. In reliance on that evidence he was satisfied on the balance of probabilities that both the Syndicate List signed by both KUL and KSM, and the Agents Agreement did exist and had been lost. Those were findings that the Judge was clearly entitled to reach, and the appeal on the facts is dismissed.[22]Having reached the conclusion that there is no basis upon which the facts found by the Judge can be upset, for this reason alone the appeal must fail. We shall, however, deal with the other findings made by the Judge, for they cover an issue of general importance. Agency[23]For Mrs Woolley, Mr Newey, QC, contended that if no Schedule 2 agreement had been concluded, or Agents Syndicate List countersigned by KSM, Mrs Woolley was placed on Syndicate 103 without her authority. There were two reasons for this. The first was that the authority that she gave was subject to the implied limitation that KUL should do nothing that breached the Lloyds Bye-laws. It is not clear from the judgment that this is precisely how the argument was advanced below. In any event we can deal with the point shortly by stating that we can see no basis for this implied limitation.[24]The second reason for denying authority was a little convoluted. It was as follows. Mrs Woolley conferred express authority on KUL by her Schedule 1 agreement. That authority was to conclude an agreement on the terms of a Schedule 3 agreement. Clause 11.1 of the standard form of the Schedule 3 agreement provides that it shall take effect on the signing of the Agents Syndicate List under clause 2 of the Agents Agreement. If an agreement was concluded on the terms of the Schedule 3 agreement, it never took effect as no Agents Syndicate List was signed by KSM. On analysis this is not a contention that the Schedule 3 agreement was concluded without authority but a contention that the Schedule 3 agreement that was concluded never took effect.[25]Neither the pleadings nor the grounds of appeal advance this particular reason for contending that Mrs Woolley never became a member of Syndicate 103 and we suspect that it may have been the product of the ingenuity of Mr Newey, who did not appear below. While the argument is ingenious, we do not believe that it is sound. Assume that Mrs Woolley and KUL agreed that she would become a member of Syndicate 103 when KUL and KSM signed an Agents Syndicate List and assume that KSM failed to sign the list. KSM, KUL and Mrs Woolley thereafter proceeded as if the list had been signed. KUL informed MUS of the Names on the list, so that the stamp was drawn up, KSM proceeded to write business for the Names on the stamp and Mrs Woolley was content that they should do so. Principles of ratification, estoppel or agreement by conduct would preclude both KSM and Mrs Woolley from contending that the failure on the part of KSM to sign the Agents Syndicate List meant that the Schedule 3 agreement never took effect. Illegality[26]For the purpose of this argument it is necessary to assume that, but for the requirements of the Bye-law, the conduct of the parties would have resulted in Mrs Woolley concluding a contract with KSM on the terms of Schedule 3. The issue is whether the fact that the requirements of the Bye-law were not complied with has the result that the contract was illegal and void. That is the position for which Mr Newey contends.[27]The Bye-law expressly prohibits a Name from authorising a managing agent to write business on that Names behalf and a managing agent from writing such business otherwise than in accordance with the procedures laid down in the Bye-law. These procedures involve both the conclusion of a Schedule 2 agreement in writing and the signing and countersigning of an Agents Syndicate List. Mr Newey submits that the effect of purporting to conclude a contract in violation of the express requirements of the Bye-law necessarily results in the contract being void.[28]In support of this submission, Mr Newey has relied on the decision of the Court of Appeal in Phoenix Insurance v Halvanon Insurance [1988] QB 216. That case concerned the effect of provisions of the Insurance Companies Act 1974 which rendered it illegal, without the authority of the Secretary of State to carry on the business of effecting and carrying out contracts of insurance. The Court held that the effect of this provision was that a contract of insurance entered into by an unauthorised insurance company was void. After considering the relevant authorities, Kerr L.J. summarised their effect at p.273 as follows: (i) Where a statute prohibits both parties from concluding or performing a contract when both or either of them have no authority to do so, the contract is impliedly prohibited: see In re Mahmoud and Ispahani [1921] 2 K.B. 716 and its analysis by Pearce L.J. in Archbolds (Freightage) Ltd v S. Spanglett Ltd. [1961] 1 Q.B. 374, with which Devlin L.J. agreed. (ii) But where a statute merely prohibits one party from entering into a contract without authority, and/or imposes a penalty upon him if he does so (i.e. a unilateral prohibition) it does not follow that the contract itself is impliedly prohibited so as to render it illegal and void. Whether or not the statute has this effect depends upon considerations of public policy in the light of the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations.[29]The authorities cited by Kerr L.J. amply supported the propositions for which he cited them. In particular, where both parties to a contract are prohibited by statute from entering into an agreement, or from carrying on a particular activity, any agreement between them to carry on that activity will normally be void for illegality.[30]Kerr L.J. cited, however, passages from the decision of the High Court of Australia in Yango Pastoral Co. Pty. Ltd. V First Chicago Australia Ltd. (1978) 139 CLR which indicate that the effect of the statute is ultimately a question of interpretation. Gibbs A.C.J. said, at p.413: It is often said that a contract expressly or impliedly prohibited by statute is void and unenforceable. That statement is true as a general rule, but for complete accuracy it needs qualification, because it is possible for a statute in terms to prohibit a contract and yet to provide, expressly or impliedly, that the contract will be valid and enforceable. However, cases are likely to be rare in which a statute prohibits a contract but nevertheless reveals an intention that it shall be valid and enforceable, and in most cases it is sufficient to say, as has been said in many cases of authority, that the test is whether the contract is prohibited by the statute. Where a statute imposes a penalty upon the making or performance of a contract, it is a question of construction whether the statute intends to prohibit the contract in this sense, that is, to render it void and unenforceable, or whether it intends only that the penalty for which it provides shall be inflicted if the contract is made or performed. And Mason J. said, at p.423: The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognised that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question. Primarily, then, it is a matter of construing the statute and in construing the statute the court will have regard not only to its language, which may or may not touch upon the question, but also to the scope and purpose of the statute from which inferences may be drawn as to the legislative intention regarding the extent and the effect of the prohibition which the statute contains.[31]Lloyds Act 1982, pursuant to which the Bye-law is passed, is a public statute. The Bye-law is subordinate legislation. There is no reason in principle why subordinate legislation should not achieve the same effect by prohibiting a contract as primary legislation provided that such effect is not outside the powers conferred by the enabling act. The subordinate legislation must be interpreted having regard to the terms of that statute.[32]The Bye-law was passed pursuant to section 6 of Lloyds Act 1982, which provides: (2) The Council may -(a) make such byelaws as from time to time seem requisite or expedient for the proper and better execution of Lloyds Acts 1871 to 1982 and for the furtherance of the objects of the Society, including such byelaws as it thinks fit for any or all of the purposes specified in Schedule 2 to this Act; and(b) amend or revoke any byelaw made or deemed to have been made hereunder.[33]The earlier Lloyds Acts to which the section refers were concerned with the conduct of insurance business at Lloyds. Schedule 2 of the 1982 Act sets out 43 purposes for which Bye-laws can be passed. Almost without exception they deal with the conduct of business at Lloyds. The most relevant purpose is: (19) For regulating as among and between underwriting members, Lloyds brokers, underwriting agents and any other person transacting with underwriting members the business of insurance (whether as principal or agent) or interested therein, the mode in which insurance shall be effected with underwriting members and the periods at which settlements in respect of insurances so effected shall be made;[34]If Mrs Woolleys contention was correct, any deviation from the terms or form of the agreements scheduled to the Bye-laws would have the effect of depriving managing agents of actual authority to bind Names to policyholders for whose protection they have granted cover. This would be an astonishing result, even if it were intra vires, which we consider to be questionable.[35]It has always been a fundamental principle of Lloyds that the interests of policyholders are paramount. The Bye-law was passed to give effect to the 1987 Report on the Regulatory Arrangements at Lloyds of the Committee of Inquiry chaired by Sir Patrick Neill, QC. That Report included the following statement: The protection of Lloyds policyholders 2.15 In our consideration of Lloyds as an investment medium, we have had firmly in mind that its origin and continuing raison dêtre is as a market in insurance. We have assumed that this fact was implicit in our terms of reference and that we should be careful not to make recommendations that might detract from the current level of protection afforded to policyholders. Not only would it be wrong in principle to disturb arrangements which continue to maintain public confidence, but it would also be disadvantageous to the Names as a whole to make changes which might cast doubt on the security of the Lloyds policy. This is not to imply that we do not recognise that real conflicts may sometimes arise between the interests of Names and of policyholders. In reaching our conclusions we have not sought to challenge the view, which we believe to be correct, that, in resolving such conflicts, first priority must continue to be given to the interests of policyholders and to the payment of valid claims.[36]In chapter 6 of the Report, the Committee made recommendations in relation to the legal relationship between Names, Members Agents and Managing Agents. These included the following recommendations: We recommend that all Names should be put in a position such that they have an unambiguous right to sue both their members' agent and their managing agent for breach of contract. We think that the agency contract should also distinguish clearly between the functions of the two types of agent and that it would be salutary if the respective duties of both were spelt out clearly in a document. We recommend , therefore, that the structure and content of the standard agency and sub-agency agreements should be considered again in detail from the perspective of the Names, taking into account the specific recommendations and comments made in this chapter; attention should also be given to drawing up a direct contract for use as between indirect Names and managing agents and to the mechanisms whereby such contracts could be brought into existence without a great deal of extra paperwork.[37]The Bye-law aims to give effect to these recommendations. It sets out in great detail the terms of the various agreements and provisions designed to ensure that the Names, members agents and managing agents contract on those terms. Failure to do so is a disciplinary offence which can result in disciplinary sanctions. There is no need to go further and to interpret the Bye-law in such a way as to make a contract conferring authority on a managing agent to bind a Name void unless all the requirements of the Bye-law are complied with. Such an interpretation would produce a perverse result in that it would tend to defeat the primary objective of Lloyds, which is the protection of the policyholder.[38]The Judge applied similar reasoning when holding that the alleged breaches of the Bye-law would not have avoided Mrs Woolleys Schedule 3 agreement with KSM. His conclusion was correct.[39]For the reasons that we have given, this appeal is dismissed.[1]The claimants in these proceedings, P&B (Run-Off) Limited (P&B), manage the run-off of Lloyds syndicates, including the Aviation Personal Accident Syndicate 103 for its 1993 year. Syndicate 103 ceased underwriting in 1993, but the 1993 year has not been reinsured to close. P&B are represented before me by Ms S Prevezer QC. The Byelaw a. no managing agent shall underwrite insurance business on behalf of an underwriting member or provide any other services as a managing agent to an underwriting member; and b. no underwriting member shall authorise or continue to authorise a managing agent to underwrite insurance business on his behalf or agree to receive or continue to receive any other services provided by a managing agent in that capacity; otherwise than in pursuance of an agreement in the terms of the standard managing agents agreement entered into in the manner specified in the standard members agents agreement and (except where the managing agent is acting as the members agent of the underwriting member) the standard agents agreement. Standard managing agents agreement is defined as the form of agreement between an underwriting member and a managing agent set out in Schedule 3 to this byelaw, and I shall refer to it as a schedule 3 agreement. Standard agents agreement is defined as the form of agreement between a members agent and a managing agent set out in Schedule 2 to this byelaw, and I shall refer to it as a schedule 2 agreement :(a) no members agents shall arrange for a managing agent to underwrite or continue to underwrite insurance business on behalf of an underwriting member for whom that members agent acts as members agent, or to provide any other services as a managing agent to such an underwriting member; and(b) no managing agent shall arrange or agree with a members agent that the managing agent will underwrite insurance business on behalf of an underwriting member for whom that members agent acts as members agent or in pursuance of such an agreement or arrangement provide any other services as a managing agent to such an underwriting member or continue to underwrite insurance business on behalf of, or provide any other services as a managing agent, to any such underwriting member; otherwise than in pursuance of an agreement in writing in the form and terms of the standard agents agreement. (a) By clause 2, which is headed Appointment and authority of the Agent, it is provided: 2.1 The Name hereby appoints the Agent, and the Agent hereby agrees, to provide the services and perform the duties set out in this Agreement in respect of the Business and the Names affairs at Lloyds 2.2 The Name hereby authorises the Agent on behalf or the Name: (a) to allocate the whole or part of the Names overall premium limit in such amounts as the Name and the Agent shall from time to time agree among those syndicates in which the Name and the Agent shall agree from time to time that the Name is to participate; (b) to enter into an agreement on the terms of the Standard Managing Agents Agreement with the managing agent of each of the syndicates in which the Name and the Agent shall from time to time agree that the Name is to participate (other than any Direct Syndicates) and from time to time agree with each of those managing agents in accordance with the relevant Agents Agreement its remuneration on a basis and at a level agreed between the Agent and the Name; and(c) and the Agent undertakes with the Name to enter into an agreement in the form of the Standard Agents Agreement with the managing agent of each of the syndicates in which the Name and the Agent shall from time to time agree that the Name is to participate (other than any Direct Syndicates). 2.3 In relation to those syndicates (if any) in respect of which the Agent is the managing agent and in which the Name and the Agent shall from time to time agree that the Name is to participate, the Name hereby agrees to appoint the Agent, and the Agent hereby agrees that it will act, as the Names managing agent on the terms of the Standard Managing Agents Agreement, with such allocation of the Names overall premium limit, and for a remuneration on such basis and at such level, as shall from time to time be agreed between the Name and the Agent in accordance with clause 3. (A Direct Syndicate is, of course, a syndicate the managing agent of which acts is the Names members agent.) (b) By clause 3, which is headed Syndicate List, it is provided: 3.1 By signing a Syndicate List in respect of any year of account to which this Agreement applies: (a) the Name and the Agent will be deemed to agree in respect of that year of account the syndicates in which the Name is to participate and in relation to which the Agent is to act as his members agent, the allocation of the whole or part of the Names overall premium limit among those syndicates and the basis and level of the remuneration of the managing agent of each such syndicate, in each case as specified in the Syndicate List; and (b) if the Agent is a managing agent, the Name will be deemed to appoint the Agent as his managing agent (or, in the case of a Direct Syndicate of which the Name is already a member, to agree that the appointment of the Agent as his managing agent is to continue), and the Agent will be deemed to agree to act (or to continue to act) as the Names managing agent, in respect of each of the Direct Syndicates (if any) on the terms of the Standard Managing Agents Agreement and with such allocations of the Names overall premium limit, and for a remuneration on such basis and at such level, as are specified in the Syndicate List. (c) Clause 6.1, under the heading Duties of the Agent, provides: 6.1. The Agent undertakes to the Name that it will comply with Lloyds Acts 1871 to 1982 and with the requirements of the Council, and will have regard to the codes of practice from time to time promulgated or made by the Council, which are applicable to it as a members agent at Lloyds.(d) Clause 7.1, under the heading Powers of the Agent, provides: The Name hereby authorises the Agent to exercise on his behalf such powers as are necessary or expedient for the provision by the Agent of the services and the performance by the Agent of the duties set out in this Agreement including (without limitation) the power: Power of attorney (h) to sign and execute on behalf of the Name and as the attorney of the Name, in his name or otherwise, all deeds and documents relating to the Business or the Names affairs at Lloyds which the Name may be required by the Council to sign or execute or which the Agent may consider it necessary or expedient for the Name to sign or execute Miscellaneous (p) generally to enter into such contracts and arrangements as are necessary or expedient for the purposes of or in connection with the Business or to discharge any of the functions of the Agent under this Agreement, and for this purpose to incur and discharge or cause to be discharged such expenses as are necessary and reasonable.(e) Clause 11.1 provides that the Agreement shall have effect when executed (f) Mr Davis refers to clause 12, which is headed Waiver of confidentiality: 12.1 In so far as is necessary for the purposes of the exercise by the Council of powers contained in Lloyds Acts 1871 to 1982 or in byelaws or regulations made thereunder, but not further or otherwise, the Name hereby: (a) consents to the persons listed in paragraphs (a), (b) and (c) of clause 12.2 providing to the Council any information or documents relating to the Business or the Names affairs at Lloyds or any part thereof, whether or not in response to a request by the Council; and (b) authorises and directs the Agent to waive on its own behalf all duties of confidentiality owed to the Agent by either of the persons listed in paragraphs (b) and (c) of clause 12.2 in respect of such information or documents. 12.2 The persons referred to in clause 12.1 are: (a) the Agent (b) any managing agent with whom the Agent on behalf of the Name has entered into a Managing Agents Agreement on relation to the Business or any part thereof; and (c) any auditor appointed by the Agent or by any such managing agent as is referred to in paragraph (b) above.(g) Finally, reference should be made to clause 13.1 whereby the Name appoints the managing agent of each syndicate (other than a Direct Syndicate) of which the Name shall become a member through the agency of the [members] Agent under this agreement as his attorney on his behalf to act as stipulated. Clause 2 is headed Appointment of the Managing Agent and clause 2.1 provides as follows: The Members Agent and the Managing Agent agree that by signing an Agents Syndicate List in respect of any year of account to which this Agreement applies: (a) the Members Agent will be deemed to confirm that it has entered into a Members Agents Agreement and a Premium Trust Deed with each of the Names and that each such Members Agents Agreement and Premiums Trust Deed remains in full force and effect; (b) the Members Agent on behalf of each of the Names will be deemed to appoint the Managing Agent as the managing agent of that Name , and the Managing Agent will be deemed to agree to act as the managing agent of that Name in respect of the syndicate or syndicates in which that Name is shown as participating in the Agents Syndicate List for that year on the terms of the Standard Managing Agents Agreement, with such allocation of the Names overall premium limit and for a remuneration on such basis and at such level, as are specified in the Agents Syndicate List. b) A number of terms used in Clause 2.1 are defined in the interpretation clause, clause 1. Agents Syndicate List is defined as a schedule prepared in respect of a year of account listing the Names who are members of the syndicate of a managing agent and other stipulated details. Managing Agents Agreement is defined as an agreement between a Name and a managing agent of that Name in the terms of the Standard Managing Agents Agreement. Members Agents Agreement is defined as an agreement between a Name and a members agent in the form of the Standard Members Agents Agreement. c) At clause 5 of the Agents Agreement, it is provided that, This Agreement shall take effect when executed (a) It stipulates that the Name appoints the agent and the agent agrees to provide specified services. It also provides that the Name authorises the agent to exercise stipulated powers, including (at clause 5.1(r)) the power to exercise the power of attorney conferred by clause 13.1 of the Members Agents Agreement between the Name and the Names Members Agent . (b) Clause 7 is headed Obligations and acknowledgements of the Name and clause 7.1 provides that the Name shall ensure that at all times there are available sufficient funds subject to the trusts of the Premiums Trust Deed [a trust deed which a Name and his Members Agent have to sign to constitute a fund for all premiums received by or on behalf of the Name] and held by or under control of the Managing Agents Trustees to enable them to pay all claims and all necessary and reasonable expenses and outgoings made or incurred in connection with the Underwriting and shall comply with any request by the Agent to make such funds available . It also provides for interest to accrue from day to day upon any sums not paid by the due date (as defined) at the rate of two per cent. per annum above the base rate of such London clearing bank as the Agent may select. (c) Clause 11 is headed Commencement and termination and provides at clause 11.1: This agreement shall take effect : if the Managed Syndicate is not a Direct Syndicate, on the date of signature of an Agents Syndicate List under clause 2 of the Agents Agreement between the Names Members Agent and the [managing] Agent Unlike the schedule 1 agreement and the schedule 2 agreement, the form of the schedule 3 agreement does not contemplate execution of the agreement either by seal or otherwise. a) written schedule 1 agreements between Names and Members Agents; b) syndicate lists signed by Names and Members Agents: it is accepted by both P&B and Mrs Woolley that by signing a list the Name and the Members Agent agree that the Name is to participate on syndicates as specified in the list in the relevant year of account; c) written schedule 2 agreements between the Members Agent and the Managing Agent of any syndicate in which the Name is to participate; d) Agents Syndicate Lists whereby Managing Agents are deemed to be appointed to act on behalf of Names, and which are, as P&B and Mrs Woolley agree, to be signed by both the Members Agent and the Managing Agent. schedule 3 agreements made between Names and the Managing Agents. Until the introduction of the standard agency agreement, there was no mandatory standard form of agency agreement. On 11 March 1985 the Agency Agreements Byelaw No. 1 of 1985 was passed which stipulated that from 1 January 1987 insurance business could not be underwritten in the Lloyds market unless the Name had entered into a Standard Agency Agreement. The Standard Agency Agreement governed the relationship between the Name and his/her member agent (or a combined agent acting as member agent). Where that members agent or combined agent delegated some or all of the underwriting to a managing agent a Standard Sub-Agency Agreement contained the terms of that delegation. There was no direct contractual relationship between a Name and his/her managing agent, unless the members agent also acted as managing agent. (The position changed in 1990 with the implementation of the Agency Agreements Byelaw (No.8 of 1988) which prescribed standard form agency agreements and introduced a direct contractual relationship between the Name and his/her managing agent). However, the House of Lords in Henderson v Merrett Syndicates Ltd [1994] 3 WLR 761 [also [1995] 2 AC 145 ], upheld the decision of the Court of Appeal that the delegation of the conduct of underwriting business did not remove the implicit promise by the members agent that the work of the managing agent would be carried out with reasonable care and skill. In addition, the managing agents were under a similar, non-contractual duty to Names to exercise reasonable care and skill The Issues a) It is agreed that KUL and Mrs Woolley duly entered into a schedule 1 agreement, although only the appendix to it has been found. It is the agreement dated 30 September 1992, to which I have referred. b) It is agreed that a Names Syndicate list was signed by Mrs Woolley and KUL whereby it was agreed that Mrs Woolley should participate for the 1993 year of account on various syndicates, including syndicate 103 with a £20,000 line. It was signed by Mrs Woolley on 20 January 1993 and on behalf of KUL on 14 January 1993. c) No schedule 2 agreement between KUL and KSM has been found. It is P&Bs case that a schedule 2 agreement was duly entered into, but all copies of it have been lost. They also submit that even if no written agreement was entered into, KUL and KSM reached an agreement in the terms of a schedule 2 agreement, and the fact that they did not enter into a written agreement, though a contravention of the Byelaw, would not mean that the agreement is void or unenforceable. Mrs Woolley disputes these matters. d) There has not been found an agents syndicate list in respect of Mrs Woolleys participation in syndicate 103 for the 1993 year that has been signed by KSM. There have been produced by B&P two lists signed on behalf of KUL: a list of 60 pages dated 11 February 1993 and signed by a Mr Thompson on behalf of KUL on each page against that date, and a list of 59 pages dated 10 May 1993 and signed by a Mr Gillespie on behalf of KUL on each page against the date of 19 May 1993. Both these documents provided for Mrs Woolley to participate in the syndicate with a line of £20,000, and both lists have a space on each page for a signature on behalf of KSM. It is P&Bs case that copies of those lists were indeed signed by KSM, but that the countersigned copies have been lost. Further, as with the Schedule 2 agreement, they also submit that even if KSM did not countersign the list, nevertheless an agreement for Mrs Woolleys participation in the syndicate was reached between KUL and KSM, and the fact that KSM did not countersign an agents syndicate list, though a breach of the Byelaw, would not invalidate the agreement or make it unenforceable. Again, Mrs Woolley disputes these points. e) P&B acknowledge that there was no written schedule 3 agreement made between Mrs Woolley and KSM. They submit that the Byelaw does not require a written agreement between them. Mrs Woolley submits that the Byelaw does require it, and that without a written schedule 3 agreement there cannot be an effective agreement between KSM and herself. Does the Byelaw require a written schedule 3 agreement? Was a schedule 2 agreement made in writing between KUL and KSM, and was an Agents Syndicate List signed by them both? Although the Claimants primary case is that a standard Agents Agreement was entered into between KUL and KSM which has been mis-placed, the Claimant may rely upon the execution of novation agreements in the alternative. The original Particulars of Claim were not sufficiently clear in that they disclosed two possible arguments. One argument was that the claim relied on an earlier agency agreement between the former Poland members agent and the former Poland managing agent. The other argument was that the claim relies upon a new agency agreement, which was subsequently lost or misplaced, between the Knightstone members agents and the Knightstone managing agents. The Defendant properly sought clarification by a request under CPR 18 dated 28 July 1999. I therefore conducted further research of the archives inherited from the Knightstone companies. Also in August 1999 I was contacted by Mr Quentin Moore, the former manager of Knightstone Syndicate Management who told me that the Knightstone companies did not enter into new agency agreements but novated the original Poland agency agreements. In reliance upon Mr Moores evidence and also in reliance on his explanation of the changes of company names, which had helped to obscure the history of the former Poland group of companies I wish to amend the Particulars of Claim to assert a positive case that the Claimant relies upon novation of earlier agency agreements By an order dated 28 October 1999, P&B were given permission to amend their pleading accordingly. The fact that the two Agents Syndicate Lists dated 11 February 1993 and 19 May 1993 were not signed by any member of the managing agent may be explained because we realised that another was likely to be produced because Names were changing their minds about participation due to large losses rather later in the year than was strictly proper. Accordingly, he apparently accepted that KSM did not countersign the lists. Q: And your position is that there should be new agreements in place? A: That is correct. The reason for that, on my understanding, was that various former Poland syndicates, which were not going to carry on underwriting, were dealt with by novation, but for the Knightstone, the ongoing syndicates with Knightstone, because the intention was to leave the liability with the Poland syndicates behind, new agreements were set up by Knightstone on their formation or the commencement of their underwriting on 1 st of January 1992. It is right to mention that Mr Thompson made it clear that he was not himself involved in the decision about this, and the reasoning behind it is not fully clear from Mr Thompsons evidence. Nevertheless, this evidence is helpful to P&B, both because it makes it clear Mr Thompsons understanding that the decision was that there should be a new schedule 2 agreement between KUL and KSM, and because it explains how Mr Moore might have the impression that KUL and KSM were relying upon the novation of agreements made in 1989. If there was no written agents agreement made, and no syndicates list countersigned by KSM, was there an enforceable agreement between Mrs Woolley and KSM? a) Did KUL have authority from Mrs Woolley to agree with KSM that Mrs Woolley should participate on syndicate 103 for the year 1993 otherwise than by making a schedule 2 agreement with KSM and by having a syndicate list signed by both themselves and KSM? b) Did KUL reach an agreement with KSM that Mrs Woolley should participate in the syndicate? c) If KUL did so agree with KSM, did KUL make the agreement on behalf of Mrs Woolley? d) If KUL did so agree with KSM, what were the terms of the agreement? e) If KUL did so agree with KSM, is the agreement void or unenforceable because of breach of the Byelaw? a) Did KUL have authority from Mrs Woolley to agree with KSM that Mrs Woolley should participate on syndicate 103 for the year 1993 otherwise than by making a schedule 2 agreement with KSM and by having a syndicate list signed by both themselves and KSM? b) Did KUL reach an agreement with KSM that Mrs Woolley should participate in the syndicate? c) If KUL did so agree with KSM, did KUL make the agreement on behalf of Mrs Woolley? d) If KUL did so agree with KSM, what were the terms of the agreement? e) If KUL did so agree with KSM, is the agreement void or unenforceable because of breach of the Byelaw? Conclusion