HC Deb 23 March 1978 vol 946 cc1755-72

Motion made, and Question proposed, That this House do now adjourn.—(Mr. Snape.)

Mr. Speaker

Before I call the hon. Member for Thanet, East (Mr. Aitken) who is fortunate enough to be first on the list, may I say that his debate will end at the time stated on the Order Paper because I allowed in advance for the fact that there would be a Business Statement. However, if the hon. Gentleman or the Minister cares to be briefer, we should all be rejoicing.

12.18 p.m.

Mr. Jonathan Aitken (Thanet, East)

I am grateful for this opportunity to bring to the attention of the House a situation that has given rise to considerable concern in the London insurance market.

Before turning to the specific matter in question, I should like to put things in perspective by beginning with a warm tribute to the London insurance market and particularly Lloyd's for the remarkable contribution it makes to Britain's invisible exports and to our economy generally. For example, the insurance industry, which employs more than 250,000 people in this country, contributed in the last year for which figures are available £740 million to our invisible exports, of which Lloyd's brokers and underwriters earned £434 million worth of invisible exports.

Against that background of commercial success, I hope that: it will be clear that any criticisms of individual situations should not be taken as an implied suggestion in favour of more Government regulation, Government intervention, nationalisation or State control. Those would be the four horsemen of the Apocalypse for the London insurance market and would bring disaster to it.

The price of the insurance market's present free enterprise success is eternal vigilance. That is necessary, above all, to protect the interests of those on whose savings the operation ultimately depends—the small shareholders, the investors and the "names", as they are known in Lloyd's. I shall be arguing for the need for improvements in the self-policing mechanism of the London insurance market, particularly within Lloyd's where its chairman and committee are the official regulatory body with a wide range of self-policing powers at their disposal.

The basic reason for my bringing this matter to the attention of the House is that some days ago an individual, whose views have since been backed by many other individuals, came to ask whether anything could be said or done in Parliament to bring about improvements in self-policing at Lloyd's that would protect their interests and other interests against certain injustices that were felt to have been done and against which the self-regulating authority had declined to offer any protection.

After studying the matter closely, I am bound to say that I felt there was so much substance in the anxieties expressed to me that Parliament should hear about this subject and its wider implications. Therefore, I turn to the specific question, which is an alleged insurance fraud generally known as the "Savonita" claim

This is the story. In November 1974 a car-carrying cargo ship, the "Savonita" sailed from the Italian port of Savona carrying more than 2,000 brand new Fiat cars destined for the American export market. About eight hours after sailing, a fire was discovered on the cargo deck. It was quickly extinguished, but not before some cars were said to have been damaged in various degrees by fire, smoke and water.

The ship returned to port and unloaded 301 allegedly damaged cars, all of which were declared to be a constructive total loss. The cars had been insured by SIAT which was at that time the Fiat-controlled marine insurance company. SIAT had in turn reinsured the cars on the London insurance market, principally with Lloyd's and Institute of London Underwriters' Companies. As a result, the London re-insurers were presented with a substantial claim. It is difficult to be precise about the exact value of the claim because of currency fluctuations, general average adjustment, an additional claim, which was hotly contested, for cleaning all the undamaged cars and other complicating factors. However, in simple, layman's round figures, suffice it to say that the total claim was for approximately £500,000.

For a number of reasons the London reinsurers were immediately suspicious about the claim, and so were the British insurance brokers, Pearson Webb Springbett Limited, who were then handling it on behalf of SIAT. Accordingly, the London underwriters instructed Graham Miller and Co., one of the world's leading firms of international loss adjusters, to investigate the claim. A team of investigators, headed by the managing director of Graham Miller and Co., Mr. Bob Bishop, a former CID officer, went to Italy to make inquiries.

In due course Mr. Bishop and his colleagues produced three detailed reports on the "Savonita" claim and their contents make devastating reading, for Mr. Bishop discovered detailed evidence to show that a serious fraud had in fact taken place. According to his report the 301 cars which had been written off by SIAT as a constructive total loss had been sold to a Fiat dealer in Naples, a Mr. Dotoli, for approximately £65,000, or some 15 per cent, of their brand new value.

Mr. Dotoli, who according to the Bishop Report was aided and abetted throughout this nefarious enterprise by certain senior executives in the Fiat Group, proceeded to sell the majority, and perhaps virtually all, of the so-called damaged 301 cars to various customers at 80 per cent, of their brand new value. The Bishop reports give details of these sales, including owners' identities, chassis numbers, photographs and reports on the near perfect condition of the cars, which contrast dramatically with the original report of their total loss damage and so on. Mr. Bishop even went so far as to purchase, in perfect condition, one of the cars which was documented as having been ruined, thereby getting physical as well as documentary evidence of the alleged fraud.

In short, the Bishop reports provide a convincing picture that the reinsurance claim presented to the London market was a fraudulent one, and on that basis the London underwriters resisted the claim and refused to offer more than 10 per cent, as a generous commercial settlement through Pearson Webb Springbett to SIAT.

At this point in the story, Pearson Webb Springbett, which is a small firm of Lloyd's brokers, took the courageous but undoubtedly correct decision not to press SIAT's claim against the British insurance market.

By this time, pressure was building up. To summarise the situation, I can do no better than to read out a paragraph from a memorandum about the "Savonita" claim written by Mr. Malcolm Pearson, the chairman of Pearson Webb Springbett, to the chairman of Lloyd's, Sir Havelock Hudson, on 13th April 1976, which reads: You will remember that the leading underwriter, Mr. Roy Hill, and I came to see you recently about the above situation. You were somewhat surprised that we should have thought it necessary to discuss the matter with you, and we explained that we were worried that pressure might build up concerning this claim that could have eventually concerned yourself and your committee. Mr. Hill was worried that pressure might have been brought to bear from Italy to have the claim settled, and I was worried that other pressures within Lloyd's might have come into play. You told us to 'bat straight'. Unfortunately a straight bat was not much use to Pearson Webb Springbett for it was suddenly, in effect, given out by the square-leg umpire, because the next thing that happened was that SIAT, surprisingly and most extraordinarily, dismissed Pearson Webb Springbett from handling the claim or having anything more to do with it. SIAT took another unusual step and instructed a much larger firm of Lloyd's Brokers, Willis Faber and Dumas, to collect the Savonita claim for it.

As Willis Faber and Dumas now began processing the London underwriters to settle the claim in full, Mr. Malcolm Pearson, in order to protect the good name of himself and his company, sought and obtained a formal written opinion from the Senior Treasury Counsel Mr. John Mathew, QC. In his opinion the Senior Treasury Counsel made a meticulous analysis of all the available evidence and documents in the case, including the Bishop reports and a significant internal Willis Faber memorandum which set out some arguments in favour of paying the claim in full. After commenting on all these, the Senior Treasury Counsel's view at the end of the day—I quote direct from his opinion—was as follows: We have no doubt that such enquiries as have been made to date disclose such positive indications of fraud that a full professional enquiry by any prosecution authority such as the Fraud Squad would very probably produce the evidence necessary to sustain a provable charge of fraud. The opinion ends with these words: We would therefore suggest, that the right course for Mr. Pearson to take would be to again approach the Chairman of Lloyd's and, we think, the Chairman of the Institute of London Underwriters, finally to inform them of the complete picture to date, so that they can take any steps which they may feel compelled to take to protect the good name of Lloyd's and the Institute and any of their members who are involved. Shortly after receiving that opinion Mr. Malcolm Pearson did as he was advised and sent it to the then chairman of Lloyd's Sir Havelock Hudson, who acknowledged receipt of it in a letter dated 13th August 1976 saying he had "noted the position".

What exactly was the position? The chairman and committee of Lloyd's had in front of them a well-known international loss adjuster's report, together with a legal opinion from the Senior Treasury Counsel, saying in the bluntest possible terms that a serious fraud had been committed and that the reinsurance claim should not be paid.

The chairman and committee also knew that Willis Faber was pressing the underwriters for the full payment of the claim. In addition, the chairman and deputy chairman later received further requests asking the Lloyd's committee to take action in the best interests of the London insurance market.

In those circumstances, what would it have been reasonable to expect the chairman and committee of Lloyd's to do? There were many courses of action that that august body could have taken, because, as the surpreme regulatory authority of the market, the Lloyd's committee has a huge range of powers at its disposal, including the power to send for persons and papers, the power to order internal investigations, a wide range of disciplinary powers and sanctions, including the power to withdraw licences from brokers or underwriters, and, of course, the power to call in the police, which would appear to be the Senior Treasury Counsel's implied suggestion.

However, what did the chairman and Lloyd's actually do? The sad answer is that they did absolutely nothing. They disregarded the Bishop reports and the Senior Treasury Counsel's opinion.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

One matter should be set right at once. Mr. John Mathew is a Senior Treasury Counsel, but does the hon. Gentleman agree that on this occasion he was advising in his private capacity as counsel and not as Senior Treasury Counsel?

Mr. Aitken

I understand that the position is that Mr. John Mathew, who is now no longer the Senior Treasury Counsel, was at the time the Senior Treasury Counsel, and the opinion appears under his name as Senior Treasury Counsel. Those words are there. Whether he was giving the opinion in his public capacity or in his private capacity seems to make little difference.

Why did the committee at Lloyd's disregard all these requests for action, disregarding all these not unimportant facts? Why did they not take any action?

Before deciding to seek this Adjournment debate, I knew that I must put these relevant questions to the Lloyd's committee, for if there was some good explanation why the self-policing powers of Lloyd's were not used, of course there would be no need to have this debate. Accordingly, I went to Lloyd's last week and met the present chairman, Mr. Findlay, his predecessor, Sir Havelock Hudson, who is still a member of the committee, and the deputy chairman, Mr. Gray.

Their answer to the basic questions was that the Lloyd's committee had decided not to intervene in the "Savonita" claim because it was a purely commercial matter. Moreover, there were two views about "Savonita", the committee explained. One was the Senior Treasury Counsel's view which I have already quoted. The alternative view, namely, that the claim was not fraudulent but was genuine and bona fide, had been expressed to them verbally by the other insurance brokers in the matter, Messrs. Willis Faber and Dumas. The chairman of Lloyd's confirmed that the committee had not then seen, or indeed asked for, any written reports or evidence from Willis Faber and Dumas to support their view; nevertheless, on the basis of having received verbal reports from Willis Faber and Dumas the committee had decided not to intervene and to leave the matter entirely to the commercial judgment of underwriters.

In fairness to Willis Faber and Dumas it must be said that they have always let it be known that they have had much more than verbal reports to prove, in their view, that Bishop's report was seriously wrong and that the "Savonita" claim was bona fide. However, such documentary evidence as may exist has never actually been shown to the Lloyd's committee.

The principal document emanating from Willis Faber and Dumas which some underwriters have shown as a reason for agreeing with the view that the "Savonita" claim was not a fraud was a memorandum on which the Senior Treasury Counsel had this to say in his opinion: We have seen a report dated 26th April 1976 by a Mr. Baker of W.F.D. for his deputy chairman, Mr. Prentice, which purports to answer some of Bishop's allegations. There may be some validity in one or two of the points he seeks to make, but we are largely unimpressed by his brief arguments, and we find it quite incredible that this short document can purport reasonably to dismiss doubts as to the validity of this claim as 'quite unfounded'. We can only assume that his views may have been influenced by the fact that his company had by then undertaken to collect the total claim. The chairman and committee of Lloyd's have no doubt read that harsh comment, along with the rest of the opinion.

So where did that leave the regulatory body of Lloyd's? On the one hand, it had been formally presented with an opinion—not just any barrister's opinion, but the opinion of the Senior Treasury Counsel who is, in the hierarchy of the criminal justice, perhaps the most significant legal luminary in the country after the Lord Chief Justice and the Attorney-General—and this opinion said that a provable criminal fraud could be sustained. It also had the international loss adjuster's report. It knew that its own Lloyd's underwriters claims office had refused to approve the "Savonita" claim because of suspicions of fraud. It had requests and exhortations to intervene to protect the good name of Lloyd's. On the other hand, it had a mere verbal report that the "Savonita" claim was not fraudulent, although that verbal report apparently was based on a written report which had already been sharply criticised by the Senior Treasury Counsel.

Mr. John Page (Harrow, West)

Does my hon. Friend know how many substantial disputed claims are swinging around in the orbit of Lloyd's at any time?

Mr. Aitken

I have no idea of the exact figure. No doubt there are frequently doubtful claims and suspicions, but it is rare in the extreme for a claim on which an opinion has been expressed that it is a criminal fraud to be put in the category that it is a claim that can be dealt with on a commercial settlement basis.

I find it very surprising that, given all the circumstances, the regulatory authority of Lloyd's decided to sit on the sidelines and leave this matter as something that could be left exclusively to the commercial judgment of underwriters, not all of whom were ever even circulated with the Senior Treasury Counsel's opinion by Lloyd's. I do not suggest that the honourable body of men who make up the committee of Lloyd's acted improperly, but perhaps they should reflect on the words of Edmund Burke: The only thing necessary for the triumph of evil is for good men to do nothing. What actually happened once the chairman and committee had decided not to use any of their self-policing powers? The underwriters were then left in a very exposed position. In a market which today has an excess of capacity, underwriters from both the companies and the Lloyd's syndicates are desperately anxious to hold on to big accounts and are therefore vulnerable to pressures either to agree to low rates or to agree to questionable commercial settlements. In this case, the underwriters could, and I believe should, have been protected from such pressures either by the regulatory authority in the case of Lloyd's or by the senior management of the individual companies—if indeed any of them had ben notified of the Senior Treasury Counsel's opinion in these matters.

Also, it must be said in defence of the underwriters that apparently one underwriter's solicitors, Willis Faber and Dumas, had issued legal proceedings against them which demanded that the "Savonita" claim should be paid in full. The underwriters' solicitors, Ince & Company, eventually advised that it might be safest for their clients to make a full ex gratia commercial settlement of the claim without going into court—although how that sort of advice can possibly have prevailed over and above the Senior Treasury Counsel's advice that the "Savonita" claim was a provable criminal fraud is mystifying. Above all, some of the underwriters were put under considerable pressure to settle the claim effectively in full, and about 10 days ago they did just that, for the Italians have now received 96 per cent, of the money.

Allegations have now been made that the pressures put on underwriters was, in fact, undue or improper. Those allegations have in turn been strongly denied. I do not wish to comment on those allegations, particularly as it is now known that the police are investigating this whole matter, and also because the Lloyd's committee has at last decided to have its own internal inquiry into the alleged undue pressure aspect of the affair. Naturally, one welcomes those inquiries, but from the point of view of the names in Lloyd's whose syndicates have had to pay out on the "Savonita" claim, and the small shareholders in the insurance companies who also paid out on this claim, such inquiries are merely a case of shutting the British stable door after the Italian horse has bolted with the money.

In short, this whole matter is a salutary story, and one which may have profound implications far wider than the "Savonita" claim, since the actions of certain individuals in the affair give rise to grave doubts about the pattern of other Italian insurance claims which have been paid out by Lloyd's in recent years. However, as this wider field is now also under investigation by the appropriate authorities I shall say no more about it now.

I think that the House should reflect on the lessons and conclusions to be drawn from this matter. As far as the Italian end is concerned, I am sure that the much-respected chairman of Fiat, Mr. Giovanni Agnelli, who is in possession of the Bishop report and the Senior Treasury Counsel's opinion, will take note of the severe criticisms of one or two of his senior employees and associates in those documents and will take steps to put his own house in order, no-doubt with the help of the Italian authorities.

As far as the London insurance market is concerned, I stress once again that the solution to the problem that I have been discussing is not Government intervention or regulation, but better self-regulation and self-policing. It is indeed good to know that the chairman of Lloyd's has now ordered a full internal investigation into the "Savonita" affair, and that means that the committee of Lloyds is now doing its proper self-regulating job. That is enormously to be welcomed, and far from there being a loss of confidence in Lloyd's arising from this debate, I believe that there will, in fact, be renewed and strengthened confidence in Lloyd's now that the regulating body is doing, and is seen to be doing, its full self-policing duty.

I wish to say something about the role of Parliament in this affair, because during the last few days I have received a truly phenomenal amount of advice from various quarters about what I should or should not say in this speech. Indeed, there have been moments when I have felt rather like that over-advised soldier who is described in Macaulay's "Lays of Ancient Rome" as the person to whom those behind cried 'Forward' And those before cried 'Back'". Some people have even said to me that the whole reputation of the City of London will be damaged, that Lloyd's will somehow lose business by being forced to harmonise with EEC regulations, and that the reputation of the capitalist system and free enterprise, and even of the Conservative Party, will somehow be adversely affected just because I make a speech about Lloyd's in this House.

I feel that I must make a very brief answer to those criticisms. As far as the EEC is concerned, I hope that the Minister will give the Brussels Eurocrats a dusty answer and tell them to go away and regulate and harmonise the Italian insurance market before they try tampering with the British market.

As for the reputation of the City of London, the capitalist system and so on, I do not accept that in the long term damage will be done to a highly successful institution such as Lloyd's by a basically friendly voice saying in this House than an individual wrong has occurred and needs to be put right in future by better self-policing. That is surely a moderate and sensible request.

As for the wider issues, let us not forget that Parliament is not just a place for passing laws. We have far too much legislation anyway. Parliament is also traditionally a forum where the small man's problems, difficulties, grievances and sense of injustice can get a hearing on occasions such as Adjournment debates, sometimes with beneficial results.

Let us not forget either that, in this "Savonita" affair, small people were hurt. A small insurance broker lost a lot of business, some small underwriters were pressured into paying out a lot of money to replace motor cars which are being driven around Italy today in good condition, and many small investors may have had their savings whittled away by the alleged fraud.

As one who has always believed in open government and communication and in the accountability of public companies and institutions which enjoy the public trust, I see no harm, and indeed much good, both for the Conservative Party and for the House of Commons, in being seen to speak up for the legitimate interests of the small man against the pressures of the big battalions. That is why I am glad to have raised this issue in Parliament today.

12.41 p.m.

Mr. Tim Renton (Mid-Sussex)

We have all listened with interest and care to my hon. Friend the Member for Thanet East (Mr. Aitken). I appreciate the reasons that he gave for feeling it appropriate to raise this matter.

Lloyd's is above all a self-regulatory and self-disciplining body. I must declare an interest, in that I am an "outside name" at Lloyd's, which means that I am a member of various underwriting syndicates but have no executive or working role at Lloyds.

Self-regulation cannot be a perfect instrument, any more than regulation by Government Department or by legislation ever is. Lloyd's has grown rapidly and successfully in recent years. It has taken on many new and complex risks. My hon. Friend the Member for Christchurch and Lymington (Mr. Adley), during business questions to the Lord President earlier this morning, raised the question of the "Amoco Cadiz". About half of the hull risk on that ship is placed with Lloyd's, which will also have a liability of about $19 million on pollution claims which will probably arise from that tragic crash on the coast of Brittany.

That emphasises the international business of Lloyd's. The hull is American and the pollution premiums are placed with Lloyd's from a variety of sources through the International Tankers Indemnity Association.

In this context of growth and change I do not find it surprising that underwriters and brokers complain to the committee at Lloyd's or to outsiders about things that sometimes go wrong there.

But the role of the committee is analogous to that of the Council of the Stock Exchange. It is not to settle individual claims or disputes between underwriters and brokers. It's role falls into three general categories. The first is general supervision of the conduct and growth of Lloyd's. The second is to admit underwriters and brokers to membership and then, when necessary, to discipline them. The third is to intervene whenever the the public interest or the good name Lloyd's is at risk.

The committee has intervened more frequently in recent years and the chairman of the committee has now decided to hold an inquiry into all the Lloyd's aspects of the matter raised by my hon. Friend. The outside aspects—the allegations of fraud and so forth—are being investigated by the authorities. That is the proper method, and I wish to say no more about that.

In this case. Lloyd's and the insurance companies paid the claims after three years of investigation. The main worry usually is that insurance companies do not pay or have not sufficient reserves to pay. That was the reason for the Policyholders Protection Act. That was not the burden of my hon. Friend's speech. Therefore, policyholders, both at Lloyd's and with the insurance companies, can take comfort because the probity and reputation of Lloyd's rest in the final analysis on paying claims when they are due.

With the general supervision behind it of the Department of Trade, I am sure that Lloyd's has a capacity to increase its international business further in the years ahead. It has made a remarkable contribution to Britain's balance of payments on the invisibles. To grow, Lloyd's must maintain its reputation for good self-regulation. It may be helpful to air this matter as my hon. Friend has done, but I am sure that he will agree that Parliament cannot form a judgment on the technical details—nor, I think, would he wish it to do so.

12.46 p.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

It is a well-accepted practice of the House that an hon. Member should exercise the greatest care and judgment before grave allegations of misconduct are made about named individuals, whether or not Members of this House, particularly if that misconduct is of a criminal nature. An hon. Member speaks here under the cloak of absolute privilege. If, as is possible, the charge to which the hon. Member alludes is mistaken, however innocent the mistake, no redress or recompense is available to the injured party, however gross the damage suffered.

Mr. Aitken

Will the Minister allow me?

Mr. Davis

No, I must get on.

Even if the hon. Member for Thanet, East (Mr. Aitken) believes that the charge is convincingly made out, he knows that police inquiries are being undertaken and that the professional body concerned with the discipline and reputation of its members is itself involved in an investigation. Therefore, I would have thought that it would have been better to resist the temptation to act and to condemn impulsively.

Mr. Aitken

May I correct something that the Minister has said? I was very careful not to name any individual in relation to any criminal activity. I would never do such a thing.

Mr. Davis

The hon. Member did name names. It is within the recollection of the House that he did so. He is drawing a distinction between naming a company and naming an individual, which is not convincing in this context.

I think that there is a risk that premature and ill-considered statements could prejudice the alleged offender but could also provide him with a hand-made plea, in the event of a prosecution, that he has been condemned in advance—not that I am suggesting that in this case a prosecution must inevitably follow. That is a matter for the police, not for me.

Even if an hon. Member is convinced that a scandalous state of affairs has arisen, should he not ask himself what is the best way of taking effective action to deal with the matters of which he complains? For all these reasons, in my experience, hon. Members are reticent about ventilating charges in public before they are sure that they can be made out, that other procedures have been tried and found wanting, that it is in the public interest that they should speak out at that time and that unless they do a scandal could be brushed under the carpet.

Let me make it absolutely clear, in passing, that I would never counsel an hon. Member of this House or allow myself or my Department to be lent to any suppression of the truth or to try to bury a scandal.

But the question is whether the hon. Gentleman has addressed himself properly or sufficiently to these considerations. In my judgment—and I regret to say this—I do not believe that he has. Although I do not want to comment on the merits of the questions that are before the Fraud Squad and the chairman and committee of Lloyd's—because it would not be right for me to do that—I think that the following issues are relevant to whether it was right to air the matter in way in which the hon. Gentleman has done, and whether the fraud in the United Kingdom on the underwriters has been convincingly established.

The hon. Gentleman has given a very full statement of one side of the case. He has not given a full account of the other side of the story. Perhaps it would have been unreasonable to expect him to do so. As I have said—and I must repeat—in my judgment it would be wrong for the House—and here I agree with the hon. Member for Mid-Sussex (Mr. Renton)—to form any final view now of the merits, without hearing what in a court of law would be termed to be the case for the defence.

However, the hon. Member for Thanet, East has asserted that the allegation of fraud on the underwriters has been established convincingly. But is it right, even if one accepts that there is evidence—upon which I must not comment—that gives rise to serious disquiet about what happened on the vessel and subsequently in Italy, to come to that conclusion?

The hon. Gentleman was kind enough to let me see counsel's opinion, from which he has quoted, in advance of the debate. I am grateful for that. It is abundantly plain that Mr. John Mathew was not, in this connection, advising as a Senior Treasury Counsel. He was advising as a barrister retained by a client, in the ordinary way. I am sure that he would have been deeply touched to hear the great distinction conferred upon him by the hon. Member, but I think that even Mr. Mathew would not have been totally convinced of its rectitude.

The hon. Gentleman also showed me his speech notes, for which I am grateful, but he added that he would not be naming names. Although he does not agree, I think that he departed unwisely from that position.

Let me turn to counsel's opinion itself. I recognise, as counsel has indicated, that it would be a very serious matter indeed if insurance brokers persuaded underwriters to settle a claim without disclosing to the underwriters documents which suggested that a claim was based on fraud and that it was bogus. But I want to turn to a passage in counsel's opinion which was not quoted by the hon. Gentleman but which is absolutely crucial: It is, of course, a different matter if underwriters, having been made aware of all the information available, for their own commercial reasons nevertheless wish to pay, because it cannot be a fraud upon them unless they are dishonestly misled. Were the underwriters so aware? As far as I am concerned, the evidence remains to be established. I do not know, and the hon. Gentleman has not said that the underwriters were unaware of the position. All that the hon. Gentleman has said is that they did not have counsel's opinion before them. It was not incumbent upon anyone to provide them with that. It may have been helpful if that had been done, but it was not done. But if the underwriters were aware of this, then, quoting counsel, it cannot be a fraud". That must be a germane consideration which I ought to put before the House in its consideration of this matter.

I have been told that a considerable number of underwriters and insurance companies were involved in this claim, including several of the larger syndicates of Lloyd's underwriters and of British insurance companies. I have been told that the leading underwriters, at least, were aware of the terms of the loss adjuster's report, and some of them were aware of counsel's opinion—perhaps all of them; I do not know. I have not gone into an investigation of this matter. I am merely rehearsing information that has been given to me.

I am told—and this is important, and the hon. Gentleman conceded this—that they obtained legal advice before deciding to settle the claim. Perhaps I may remind the House at this stage that they were bound to settle the claim unless they could establish that it was fraudulent.

I add in parenthesis that, even on the hon. Gentleman's case, Mr. Pearson was advising a 10 per cent, settlement, which, even though that was derisory, did not suggest that the fraud was absolutely convincingly established.

As I have already emphasised, I have made no formal inquiries about the position. I do not wish, therefore, to express any opinion one way or the other whether the chairman and the committee of Lloyd's should have intervened in this matter. If the facts are as the hon. Member suggests, and if the underwriters were not aware of the relevant documents, clearly there would be grounds for deep anxiety about the case. But I am told that the underwriters were aware of the facts and decided to settle on legal advice. If that is right, I should have thought that there were no grounds for criticising them or the committee of Lloyd's.

I understand that the other allegation made here is that the second brokers had used undue pressure so as to persuade underwriters to settle their claim. That was an allegation introduced for the first time last month. I also understand that this is part of the wider dispute between the two brokers involved, who have accepted a suggestion from the chairman of Lloyd's that he should seek to resolve the dispute, and they have agreed to cooperate with him in that.

I think that it was the hon. Member for Harrow, West (Mr. Page) who said that there is obviously a range of cases, from those in which a broker draws perfectly legitimate attention to the commercial consequences of a particular action, on the one hand, to quite improper pressure, on the other hand. The chairman and committee of Lloyd's all have considerable first-hand experience of the market, which gives them a unique insight into problems of this sort.

I hope, therefore, that the hon. Gentleman will now feel that it is appropriate—as I think he accepts—to allow them to complete their inquiries and avoid taking any further action at this stage which might make their inquiries even more difficult.

The matter lies as follows. Serious allegations have been raised and they are being considered by the police. Allegations are being considered by the chairman and the committee of Lloyd's. It is right that these investigations should be allowed to proceed, and proceed they will. I do not think that anyone in the House would wish to see a scandal buried. But as often happens—perhaps I am being too much of a lawyer about this—there are two sides to most situations, and perhaps this is one.

If I have been rather difficult and have offered strictures to the hon. Gentleman because I believe that it is not in the best interests that a situation such as this should be aired at this stage, as I have told him privately and now tell the House, I hope that he will recognise that there is a point of view in that behalf as well.

Mr. Aitken

I recognise, of course, that there are two sides to this case and two views on whether it should be raised in Parliament. However, the truth that must be faced is that it is only since it was known that this would be raised in Parliament that many of these measures, including internal investigation in all its aspects, started to happen. Therefore, I cannot help feeling that the public interest is not being ill-served by my raising this mater on the Floor of the House.

Mr. Davis

As I have said, there are two points of view to every situation. The hon. Gentleman is perfectly entitled to have his view, and I am entitled to mine. There are innumerable occasions when hon. Members write to me or come to see me or my right hon. Friend the Secretary of State about situations in respect of public companies that cause them great anxiety, such as the dismissal of employees, sometimes, who have been, they say, defrauded. Immediately that is done, it is not ventilated on the Floor of the House in the first instance. An opportunity is given to the Ministers concerned to see what the situation really is.

In this instance, the hon. Gentleman, in his judgment, which he is perfectly entitled to follow, decided that he would apply for an Adjournment debate first, without alerting me to the situation. He subsequently did so. He was subsequently very frank and open about what he intended to say in the House. What I have said is that I believe it would have been infinitely better from the point of view of those who are charged and those who are carrying out the investigations if that situation had been allowed to proceed. If then an hon. Member feels that there exists a scandal which the establishment is seeking to avoid and to bury, it is, of course, a matter on which he ought to come to the House and pillory that establishment, and perhaps the Minister if he has been party to that situation. That was not the case here. In those circumstances, I hope that what I have done is to redress the balance a little, without coming to any definitive conclusion.

I thank the hon. Member for Mid-Sussex for the tribute that he paid to Lloyd's. The hon. Member for Thanet, East paid a similar tribute, and I join them both in what they say. Lloyd's is a distinguished organisation which produces great benefit to this country. Its history of self-regulation is exemplary. I am not always in favour of self-regulation in this area, but I say that unhesitatingly about Lloyd's and I hope that it suffers no damage from the criticisms made here today.