§ Motion made, and Question put,
§ That, at this day's sitting, the Lloyd's Bill may be proceeded with, though opposed, until any hour.—[Mr. David Hunt.]
§ The House divided: Ayes 151, Noes 5.
687| Division No. 73] | [10 pm |
| AYES | |
| Alexander, Richard | Dixon, Donald |
| Atkins, Robert(Preston N) | Dorrell, Stephen |
| Baker, Nicholas (N Dorset) | Douglas-Hamilton, Lord J. |
| Beaumont-Dark, Anthony | Dover, Denshore |
| Beith, A. J. | duCann, Rt Hon Edward |
| Benyon, W. (Buckingham) | Dunn, Robert(Dartford) |
| Berry, Hon Anthony | Dunwoody, Hon Mrs G. |
| Best, Keith | Durant, Tony |
| Biffen, Rt Hon John | Dykes, Hugh |
| Biggs-Davison, Sir John | Eastham, Ken |
| Blackburn, John | Eggar, Tim |
| Bottomley, Peter (W' wich W) | Elliott, Sir William |
| Boyson, Dr Rhodes | Evans, John (Newton) |
| Bright, Graham | Eyre, Reginald |
| Brocklebank-Fowler, C. | Fairgrieve, Sir Russell |
| Brooke, Hon Peter | Faith, Mrs Sheila |
| Bryan, Sir Paul | Farr, John |
| Buck, Antony | Fenner, Mrs Peggy |
| Callaghan, Jim(Midd't'n &P) | Fisher, Sir Nigel |
| Campbell-Savours, Dale | Fookes, Miss Janet |
| Carlisle, Rt Hon M. (R'c'n) | Forrester, John |
| Channon, Rt. Hon. Paul | Fraser, J. (Lamb 'th, N'w'd) |
| Chapman, Sydney | Fraser, Peter (South Angus) |
| Clarke, Kenneth (Rushcliffe) | Gardiner, George(Reigate) |
| Clegg, Sir Walter | Garel-Jones, Tristan |
| Crouch, David | Goodhart, Sir Philip |
| Cunliffe, Lawrence | Goodlad, Alastair |
| Cunningham, G.(lslington S) | Grant, Anthony (Harrow C) |
| Dalyell, Tam | Grieve, Percy |
| Davidson, Arthur | Gummer, John Selwyn |
| Davis, Terry (B 'ham, Stechf'd) | Hamilton, Hon A. |
| Dean, Joseph (Leeds West) | Hamilton, Michael (Salisbury) |
| Dean, Paul (North Somerset) | Hamilton, W. W. (C'tral Fife) |
| Hardy, Peter | Nelson, Anthony |
| Harrison, Rt Hon Walter | Neubert, Michael |
| Hawkins, Paul | Normanton, Tom |
| Heddle, John | Osborn, John |
| Henderson, Barry | Page, John (Harrow, West) |
| Howell, Rt Hon D. (G' ldf' d) | Page, Richard (SW Herts) |
| Howell, Ralph (NNorfolk) | Pattie, Geoffrey |
| Howells, Geraint | Penhaligon, David |
| Hunt, David (Wirral) | Percival, Sir Ian |
| Hunt John(Ravensbourne) | Pitt, William Henry |
| Jenkin, Rt Hon Patrick | Pollock, Alexander |
| Jessel, Toby | Prentice, Rt Hon Reg |
| Johnson Smith, Geoffrey | Proctor, K. Harvey |
| Johnston, Russell (Inverness) | Renton, Tim |
| Jones, Barry (East Flint) | Rhodes James, Robert |
| Jones, Dan (Burnley) | Rhys Williams, Sir Brandon |
| Jopling, Rt Hon Michael | Sainsbury, Hon Timothy |
| Kerr, Russell | Shepherd, Colin (Hereford; |
| Kimball, Sir Marcus | Silvester, Fred |
| Langford-Holt, Sir John | Speed, Keith |
| Lawrence, Ivan | Sproat, Iain |
| Lee, John | Squire, Robin |
| Le Marchant, Spencer | Steel, Rt Hon David |
| Lewis, Kenneth (Rutland) | Stevens, Martin |
| Lloyd, Peter (Fareham) | Stewart, A. (E Renfrewshire) |
| Lyell, Nicholas | Thompson, Donald |
| McKay, Allen (Penistone) | Thorne, Neil (Ilford South) |
| MacKay, John (Argyll) | Thornton, Malcolm |
| McNair-Wilson, M.(N' bury) | Tinn, James |
| McNally, Thomas | Townend, John (Bridlington) |
| Madel, David | van Straubenzee, Sir W. |
| Major, John | Viggers, Peter |
| Mather, Carol | Walker, B. (Perth) |
| Mayhew, Patrick | Wall, Sir Patrick |
| Meacher, Michael | Waller, Gary |
| Meyer, Sir Anthony | Watson, John |
| Mills, Peter (West Devon) | Wells, Bowen |
| Monro, Sir Hector | Wells, John (Maidstone) |
| Morgan, Geraint | Wolfson, Mark |
| Morrison, Hon C. (Devizes) | You nger, Rt Hon George |
| Morrison, Hon P. (Chester) | |
| Murphy, Christopher | Tellers for the Ayes: |
| Myles, David | Mr. Tony Newton and |
| Neale, Gerrard | Mr. John Stradling Thomas. |
| Needham, Richard |
| NOES | |
| Cryer, Bob | |
| Hoyle, Douglas | Tellers for the Noes: |
| Maxwell-Hyslop, Robin | Sir Charles Fletcher-Cooke and |
| Moate, Roger | Mr. Richard Body. |
| Thomas, Mike (Newcastle E) |
§ Question accordingly agreed to.
§ As amended, again considered.
§ Sir Nicholas BonsorBefore the vote, I was discussing the merits of an injunction as a remedy against the harm that might be done by the misbehaviour of a future Committee of Lloyd's. I was suggesting that an injunction was not the proper remedy and that it falls short for three reasons. First, it would probably be too late to reverse the damage that might be done. Secondly, no compensation can be awarded under an injunction case. Thirdly, it would be difficult to obtain against a properly constituted regulatory body.
I was halfway through what Lord Justice Denning had to say in the case of Lee v The Showman's Guild of Great Britain, in which he lay down the criteria on which a tribunal would be judged by a court as to whether such a body had behaved effectively and properly. He said that it would see whether a tribunal observed the law, interpreted the rules correctly and applied them to the 688 facts. I went on to say that the Committee of Lloyd's suggests that an injunction is one of the effective remedies and a breach of natural justice is another.
But if a breach of natural justice is another, as any of my hon. and learned Friends will know, it is even more difficult to obtain than an injunction. In the Sunday newspapers this weekend there was reported a case of a teacher who claimed that he had been wrongly dismissed. I do not know whether he had been, but Mr. Justice Comyn, in his summing up, also applied the criteria under which the case of natural justice would be examined by the courts. He said that the same strictness is not expected of regulatory bodies as of a court of law. The court will ask what was a fair hearing from a properly constituted body acting in good faith. If it was such a hearing it would look no further to examine the way in which the hearing had been conducted, or the evidence had been given to it, or the way in which it had seen fit to examine the facts. I do not believe, nor, I am sure, do my hon. and learned Friends backing the amendment, that the remedy that the Committee of Lloyd's says will be adequate will meet the justice of the case. Clearly, it does not.
The Lloyd's case seems to rest on three facts. The Committee claims that the disciplinary powers must be acted upon quickly if they are to be effective. That does not stand a moment's examination. Is the Committee really suggesting that it must be entitled to act negligently or wrongfully, or to libel the person whom it is investigating so as to act quickly and effectively? If so, why should that be? It is saying in effect that the disciplinary hearing should be permitted to be conducted in a manner that will lead to injustice, or may lead to injustice, and that the ordinary law of the land must stand back and allow this to happen, and that no remedy must be allowed to those who have been grievously wronged under it.
Secondly, it says that the only reason why the members who are looking to throw out the immunity clause or who may sue Lloyd's in due course are doing so because they want to spread the risk across the other members of Lloyd's or to spread risk across the wider membership of Lloyd's. They say that Lloyd's is a risk-taking business and because of that members should not have the right to sue the Committee of Lloyd's or to spread risk across the wider membership of Lloyd's.
10.15 pm
That is a superficially attractive argument until one remembers that the only circumstances in which risks could be covered and the burden shared would be those in which in the High Court it had been established that the Committee of Lloyd's had been negligent or acted wrongly. It cannot be correct that that is a risk that members of Lloyd's undertake when they agree to be an underwriter or a name. The risks that they take are the ordinary risks of the market place. Those are the risks to which one can properly refer when talking about Lloyd's as a risk-taking business. It is no part of the exercise of the Committee of Lloyd's Committee or Council to increase the risks by behaving in such a fashion that their negligence, their libel or their wrong adds to the damage done to the members of Lloyd's. That again is a spurious argument against the taking out of clause 14.
689 Thirdly, it was argued that the damage to Lloyd's would be great. I hope that I have dealt with that point. It will be far greater if Lloyd's fails to give the remedy when it is clearly in the wrong.
My new clause would create a filter which would prevent the bringing of blackmailing or vexatious litigation with no merit involved. The Lloyd's Committee and Council have said properly that they are worried about the possibility that such litigation would be commenced against them and that they might be forced into settlements by the expense and dishonour involved for them in the process.
Anyone who has practised at the Bar, who is a solicitor or who has knowledge of the law will be aware that under order 53 of the rules of the Supreme Court the filtering process is already well established in the principal way in which the courts go through their business. The order applies to leave to appeal in many cases whereby preliminary hearings to see whether there is merit in a claim for an appeal are held. It is absurd to suggest that such hearings prejudice the right of either party.
My new clause would safeguard Lloyd's perfectly adequately against blackmailing and vexatious litigation but would not go against the fundamental principles of English law which are so badly broken by clause 14 in its present form.
I close by repeating the words of the Royal Commission in 1909, which I referred to earlier:
There is no rule of law so elementary, so universal and so indispensable as the rule that a wrongdoer should be made to redress his wrong.I ask the House to make sure that that principle of law is upheld in this instance.
§ Sir Charles Fletcher-CookeI shall be brief. My hon. Friend the Member for Nantwich (Sir N. Bonsor) has made a very impressive speech, and it would be folly on my part to repeat it.
Having given the House the benefit of my thinking on a previous occasion, I make only three short points. My hon. Friend is right to say that if the immunity—which is a large but not total immunity—is given, no doubt for the best of reasons, to the regulatory body of Lloyd's there will be a rush of applications for a similar immunity from other regulatory bodies of other trades, professions and callings. One can instance them. There are not only the obvious ones—the Law Society, the Bar Council, the General Medical Council and the Council of the Stock Exchange—but the minor ones—the quantity surveyors, the average adjusters, and so on. There are hundreds of trade and professional associations which no doubt are not exactly in the same case as Lloyd's but which can give similarities to the position of Lloyd's which would be difficult to reject.
In those circumstances, as I said in my recent intervention, we shall be getting back to the state of immunity that was successfully dealt with and removed by the Tudors and the Stuarts, and again in the nineteenth century. We do not want to get back to a position in which great bodies and organisations are immune from the law, even to the extent which is proposed now, which is not, of course a total immunity.
Secondly, I take issue with the remarks made by my hon. and learned Friend the Member for Hemel Hempstead (Mr. Lyell), for whom I have the greatest 690 regard. When we last debated the matter, he envisaged a situation in which the regulatory body would be obliged to act very speedily on inadequate information. He argued that the dangers of loss of confidence in the whole organisation were such that a ruling would have to be made on totally inadequate evidence. I fully agree that that situation might well arise, but if the wrong decision were made in those circumstances, that would not be negligence. If someone does his best when he is obliged to work speedily on inadequate evidence, and gets it wrong, then he gets it wrong, and he is not negligent in so doing. He has fulfilled his duty of care. Therefore, I do not think that that example is a good one.
I am not particularly enamoured of a filter which equates somebody who wishes to sue the regulatory body of Lloyd's—for negligence, defamation, or whatever it may be—with the vexatious litigant. For some reason, in a case against this body—but not in the case against any other body that we know of—it is suggested that the procedure of the vexatious litigant should be followed.
I believe that the suggestion was put forward as of an olive branch to the promoters of the Bill, to see whether somehow a compromise could be reached that would ensure the passage of the Bill—a Bill which, apart from clause 14, I am as anxious to see passed as is anybody else. But that olive branch has been rejected with contumely by the promoters. They say that the filter would make it easier rather than harder to sue for damages in an action for negligence, for defamation, or whatever it might be. They say that it would put the imprimatur of the court on the action and give it somehow a special quality and strength that it would not otherwise have.
I have never heard such a spurious argument in my life. The idea that, when a vexatious litigant comes before the court and at last gets permission from the court to proceed, it somehow influences the judge in the trial of the action is rubbish. If the proposers do not want it, let us not press it. Let us rather accept amendment No. 7, which does the right thing about the clause by seeking to reject it altogether.
§ Mr. John FraserDoes the hon. and learned Gentleman agree that the damage done by the alternative proposed in the amendment would not be damage to the final hearing of the action but damage outside? A court will have decided that there is a prima facie case against a member of Lloyd's and therefore more damage might be done to his reputation overseas than would be the case when a vexatious litigant is given leave to issue proceedings.
§ Sir Charles Fletcher-CookeIt is an exact parallel. No one says that because a vexatious litigant produces a prima facie case on first appearance he must win or he has a stronger case than the ordinary litigant. If we carried to its logical conclusion the theory that we must protect ourselves against the uninstructed foreigner we would never allow an action against any of our institutions.
If the proposers do not want the olive branch, let iis withdraw the offer and carry amendment No. 7, which cancels the immunity altogether.
§ Mr. FairbairnI speak as one who has nothing to do with Lloyd's and little to do with the law of England, but I am immensely disturbed by clause 14, not for any reason connected with Lloyd's, but because of its principle. It 691 seems to grant immunity to an institution for no good reason and an immunity such as has not been granted since the Trade Disputes Act 1906.
The bad reason for the immunity of 1906 was that the then fledgling Labour Party made it the price of its support for the then Liberal minority Government. Whatever loyalties one may have to the institutions of trade unionism, and I am not hostile to them, immense harm has been caused by immunities being given because people are loyal to a Government or institution whose purposes they do not necessarily comprehend.
We are discussing the fundamental right of an individual not to be deprived of his rights under the law. Clause 14 proposes that there are individuals who should be exempted—I had not appreciated that it went as far as defamation, but I see that it does—from their rights if they are wronged, albeit wronged in good faith.
If the community of Lloyd's has, by the misapplication of its rules, its failure to apply those rules or whatever other action, in good faith, wronged a man or many men or bankrupted their families by so doing, there is no remedy. If that community refuses to allow a person to be an active underwriter or costs him his job as such, albeit in what is described as good faith, he has no remedy.
In other words, we are establishing a principle that is contrary to the natural law. It is that negligence in good faith is immune from action. Let no one in the House or outside misunderstand that principle. The clause means that negligence in good faith is immune from penalty and remedy.
§ Mr. NeedhamDoes my hon. and learned Friend accept that those who join the community of Lloyd's know full well that they are giving up that right and that the vast majority of the community has, on three occasions, voted that Lloyd's should do that? Does it not have some bearing on their rights if they voluntarily give them up?
§ Mr. FairbairnThat is a most astonishing doctrine. Until we pass or do not pass this new clause, the concept has not been a part of Lloyd's. It is extraordinary to say that someone who emigrates to Russia does not believe that he is giving up his rights. Until now, there has been no immunity from the effects of negligence in Lloyd's. Why, in 1982, should it be necessary to extend that concept? My hon. Friend's point is meaningless.
We are told that it is only in good faith. If we take the case of the vexatious litigant, all that he must plead is bad faith. The advice that I give to every client is "If you wish to litigate, do not". I know very few people rich enough to take on someone else vexatiously, far less anyone rich enough to take on the community of Lloyd's vexatiously. There is no possibility of doing so. However, the possibility to plead bad faith in order to be allowed to take on Lloyd's vexatiously, and thus to harm its name, is an infinitely greater risk.
What does that do for the name of Lloyd's, which is pled in the opinion that has been circulated, if not signed, by Messrs. Southwell and Philips as the principal reason to object? But there are other reasons. The first is that litigation consumes time and energy. I am surprised that the Bar Council and the Law Society are not represented to plead their case if that is so. Any wise lawyer will tell 692 people not to litigate because the outcome is never certain. Of course it consumes time and energy, but that is no reason to say that no one should be allowed to litigate. I cannot believe that anyone who litigates, such as the National Coal Board or the National Union of Mineworkers, is not equally conscious of time and energy.
Then we are told that people may fear to serve on the council. What of other people? Will a doctor refuse to operate on his patient for fear that he might be said to have been negligent? He must say "I am sorry. I will not have you on my roll, because if I diagnose appendicitis and it turns out to be earache, I am not immune". What of football referees or directors of companies? Are they to be put in a position whereby their shareholders would have no remedy for their bona fide negligence, because it might consume their time and energy? These are fundamental concepts that are dangerous.
We are told in the opinion of contractual cases. My hon. Friend the Member for Nantwich (Sir N. Bonsor) dealt with section 2 of the Unfair Contracts Act. In the opinion, a number of statutes are pled in aid. It is said that they demonstrate an equivalent immunity or an echoed immunity. For instance, members and officers of local authorities and National Health Service authorities are protected against suit in respect of acts done bona fide for the purpose of giving effect to various statutes.
We are told about section 251 of the Highways Act. What does that Act say? It states:
No act or thing done by any member of a local authority or by any officer or other person shall, if the actual thing done was bona fide for the purpose of carrying out the provision, be subject to any claim, liability or demand whatsoever.But subsection (3) states:nothing in this subsection shall be construed to exempt any member of a local authority from liability to be surcharged with the amount of any payment which may be disallowed by the auditor.That is not an analogy. Let us examine the Food and Drugs Act. Section 128 states:An officer of a council shall not be personally liable in respect of any act done … Where an action has been brought against an officer … in respect of an act done … he is not legally entitled to require the council to indemnify him, the council may, nevertheless, indemnify him.The section states earlier:nothing in this subsection shall be construed as relieving a council from any liability".All the legislation quoted has the same effect. It removes from the individual officer the absolute liability, as in the Crown Proceedings Act 1947, and does not exempt the council from that responsibility. That has been the trend and basis of all law for a long time.I was even more amazed that the Post Office Act was pled in aid, as exempting a person from any duty "in the carriage of mail" and
immune from liability for anything done or ommitted to be done in relation to anything in the post.I found that even more extraordinary, because under the Post Office Act 1953 not only is a person not immune from any civil suit under section 59, butany person employed to convey or deliver a mail bag, or a postal package … is guilty of carelessness, negligence or other misconduct whereby the safety of the mailbag or postal bag is endangeredis guilty of a criminal offence.The opinion, which appears to be the basis upon which the matter was accepted, is based on a complete misinterpretation of the statute law quoted. There is no 693 exemption from liability for the communities concerned. There is in some cases a transfer of that liability to the general body that employs a person. In some cases there is an increase in the liability of those who employ.
It is important to understand that tonight we are not arguing about the rules of a club to which some people belong fervently, and believe that they should support fervently, without thought of the principles involved. This is one of the great principles that has been fought over in the House of Commons for centuries. It is the question whether some powerful men should take unto themselves a right to be immune from the law when other men are not.
I am a lawyer and all advice given in the course of litigation is exempt. Perhaps, therefore, it will be said by other lawyers who may speak that I should be the last to speak about immunity. First, it is only advice in foro that is exempt. Advice that is negligent but bona fide and that is given in the course of litigation but not in foro is not exempt. That is subject to any further decision that the House of Lords may make.
The reason why a lawyer in foro is exempted from defamation and negligence is that were he not so every litigant could pursue his case for ever on legal aid, prevent his sentence from being effective or pursue his appeal by saying "If only Fairbairn had asked that other question, or if only he had refrained from asking that other question, which admittedly in bona fide he asked but which was negligent, I would have had a different result."
It is that singular effect which is the reason for the exemption in foro to all counsel. For all others there is no community which regulates the affairs of men that is ultimately immune to the extent that the individual whom they wrong, albeit wronged bona fide, has no remedy. That is something that I should like to see in the House in the name of whomever it was passed.
§ Mr. AitkenI rise with some diffidence, following as I do three such distinguished speeches made in support of the amendment by my hon. Friend the Member for Nantwich (Sir N. Bonsor), who spoke with his customary robustness, and by my hon. and learned Friends the Members for Darwen (Sir C. Fletcher-Cooke) and for Kinross and West Perthshire (Mr. Fairbairn). They are learned in the law and their erudition, expressed as it has been sometimes in Latin, has risen rather above my head. I am a simpler man and I shall take a broad brush approach.
A broad approach is required at this juncture because we are discussing an issue of fundamental importance to Lloyd's and to the public interest in the widest possible sense. For Parliament to be asked to grant immunity from the law to any group of citizens is a momentous issue. Not since the Trade Disputes Act 1906, when Parliament gave immunity from the law to trade unions, have we had a request for a privileged group of citizens to be above the law. It is right that we should be deliberating on this matter with the utmost seriousness.
I deplore certain reports in the press to the effect that the opposition to the clause has been motivated by gangs of old school chums and other mysterious groups. We are discussing a clause that gravely affects the rights of individuals to the fundamental principle of equality before the law. Before we grant it, we must ask ourselves as a House some serious questions. I shall put four such questions to the House.
694 10.45 pm
My questions are in the order of descending importance. First, is the granting of immunity in the best interests of Lloyd's? Secondly, does Lloyd's need the immunity that it is seeking? Thirdly, even if Lloyd's needs that immunity, does it deserve to be granted immunity, bearing in mind the committee's track record in dealing with recent controversies and scandals? Finally, is it in the public interest for Lloyd's to be given the immunity that it is seeking?
First I shall consider whether the granting of immunity is in the best interests of Lloyd's. Obviously, Lloyd's thinks so. It may seem an impertinence to question its judgment on the matter, which is so important to its self-interest, as an outsider who is not a member of Lloyd's. I shall take the risk, not for the first time, of sounding somewhat impertinent about the affairs of Lloyd's. I shall say why I believe that immunity is against even Lloyd's best interests, giving short-term, medium-term and long-term reasons.
I refer to the short-term reasons. It can be fairly said that the big risk that Lloyd's is taking in pressing for the clause is that, if it did not do so, it could have the Bill without further criticism and controversy. I do not wish to deprecate the admirable speeches that have been made on other issues, particularly the tour de force by my hon. Friend the Member for Faversham (Mr. Moate), but I think that we would all agree that immunity is the issue that goes to the heart of the Bill. If Lloyd's had not taken a firm stand and had not rejected all olive branches of compromise over the issue, the Bill would be passed without any serious doubt.
Mr. Peter Green, the chairman of Lloyd's, is something of a gambler, who would stake all on the clause. It would look good if he won all. Not only are there questions about whether he will win all in the Division Lobbies tonight, but there are more fundamental questions to be raised in another place, when the Law Lords sink their teeth into some of the mistakes and errors of thought that lie behind the clause.
Mr. Green and his committee must take the responsibility for the fact that they have, as it were, put all their chips on immunity. Because of the controversy attaching to it, if they lose the Bill, they will look exceedingly foolish in having staked all on the immunity issue. Henri IV said in a different context.
Paris is well worth a mass.If I were a member of the committee of Lloyd's, I would have said that the Bill was well worth giving up immunity for, because there are much more important issues.In the medium term, too, the clause is against the best interests of Lloyd's. If the Bill becomes the law of the land, almost immediately after it is an Act of Parliament, Lloyd's will be embroiled in worse controversies than at present because the immunity exists. For every malefactor and dissident in Lloyd's who is disciplined by the committee, the power of immunity will be used to prevent him from suing in the courts. What will be his reaction? He will immediately and noisily complain in words to the effect of: "I am the victim of an injustice. I would have got justice if only Lloyd's had not used against me the controversial power of immunity. I have been prevented from getting the justice that is the birthright of practically every other Englishman."
Those complaints will be published by the press. Those grievances will be ventilated in the House of Commons.
695 There will be questions in Parliament asking "Is it not about time that the Secretary of State for Trade removed the immunity?" There will be Adjournment debates. There will be one long-running sore of controversy because of the immunity requested by Lloyd's. In demanding the clause, Lloyd's is creating a rod for its own back. It is creating for the future controversy that it has sought to avoid.
In the long term, the prospects are perhaps even gloomier. History shows that immunity is a poisoned chalice. Across the centuries, every institution that has held it seems to have been doomed to destruction. Mention has been made of the Norman barons who had immunity until Henry VII removed it and of the medieval Church which enjoyed benefit of clergy. King Charles I proclaimed the immunity of the Monarch, and had his head chopped off while doing so. More recently, since 1906 the trade unions have enjoyed an immunity which has contributed enormously to their unpopularity today.
§ Mr. LyellI hesitate to stop my hon. Friend in his flight of fancy, but the law courts also enjoy complete immunity. Do they also suffer the terrible problems that he has enumerated for all the other bodies?
§ Mr. AitkenI am surprised that my hon. and learned Friend cannot differentiate between a blanket immunity and immunity for a specific time and place and a specific officer carrying out his duty. A Member of Parliament, for the brief time when he is speaking in the Chamber, has immunity. A judge delivering a judgment from the bench has immunity. But to give an institution a blanket right which would prevent a citizen from going to court to seek the justice that any other citizen may obtain involves a far wider and deeper immunity.
History shows that the institutions which benefit from immunity sow the seeds of their own destruction in the process. This perhaps explains the bizarre paradox of the Opposition's support for the Bill. Why do a number of well-known Left-wing Members support the provision of immunity for Lloyd's? If I were a member of Lloyd's, the support of the Bennite Left for this clause would make me distinctly uneasy.
I believe that the Left support the clause not because they are convinced by the mellifluous arguments of Mr. Peter Green but because they look ahead to the future and see that a Lloyd's privileged by immunity will be a more vulnerable target to hit and perhaps to destroy when the time comes for the Marxist Left to challenge the citadels of capitalism in this country.
§ Mr. John FraserThat really is rather silly and superficial. In discussions within the Labour Party, many of its members, particularly those on the Left, strongly opposed immunity in the form originally proposed. The suggestion that there is some ideological advantage to be gained from the Bill is rubbish. The clause was viewed with the greatest scepticism, but we now take the view—in so far as we take a view at all, as it is private legislation—that the present proposals represent the bare necessity which will enable the Committee of Lloyd's to carry out its task. The hon. Gentleman's analogy is therefore silly and superficial.
§ Mr. AitkenI am entranced by the thought of the hon. Member for Norwood (Mr. Fraser) leaping to the defence 696 of the Bennite Left. I must have touched a nerve. I am sure that the hon. Gentleman speaks for himself and for many members of his party. Nevertheless, if I were a member of Lloyd's, I should be distinctly uneasy about the fact that some Labour Members both above and below the Gangway who are not noted for their sympathy towards capitalist institutions have in a most mysterious and bizarre fashion come out strongly in support of immunity for a group of rich and privileged people to increase their power. It is a strange paradox of the political situation surrounding the Bill.
I turn to the question of whether Lloyd's needs the immunity. Clearly, the hon. Gentleman has studied the arguments and is convinced that it genuinely does. This fundamental question must be dealt with. I noticed that this morning's Financial Times carried what must be almost a definitive article—based, I suspect, on a very authorised briefing—setting out the basic reasons why Lloyd's is so certain that it needs the immunities. The Financial Times states:
Lloyd's says it needs the immunity clause for two basic reasons. The first is that the council must be able to act quickly and decisively when initiating disciplinary action against any member of the Lloyd's community, and that the council should not be inhibited from a particular course of action by fear of suit for damages.I pause after that first reason because the implications of that explanation are profoundly disquieting; it is only fear of legal action which now stops Lloyd's from acting swiftly—some of its critics would say rashly—to initiate disciplinary action. It follows that immunity could well result in positively encouraging Lloyd's to act more quickly, perhaps rashly and impetuously, on such matters which may destroy individual livelihoods. I shall give chapter and verse of the examples I have in mind.Let us consider for a moment some of the after-effects of the troubled Sasse syndicate. When the Committee of Lloyd's suspended Sasse Turnball & Company Limited as an underwriting agent at the end of 1977, the effect was that that company was prevented from carrying on any underwriting activities at Lloyd's. Some months later, Mr. Sasse, one of the directors of Sasse Turnball, managed to find himself a position as an employee of a Lloyd's broker, underwriting on a delegated authority basis for a Lloyd's syndicate.
However, as soon as that news was announced and known to the Committee of Lloyd's, the deputy chairman of Lloyd's instructed the managing agent of that syndicate that it was intolerable and unacceptable that the syndicate should be enabling Mr. Sasse to continue working at Lloyd's. It instructed the syndicate that it should cease forthwith to extend any underwriting authority to Mr. Sasse. Mr. Sasse was, by that means, deprived of his livelihood. I hold no brief for Mr. Sasse; I do not know whether the deputy chairman of Lloyd's was right to intervene in that way. That is a question to be decided by Mr. Sasse's litigation which is now pending against the Committee of Lloyd's.
Looking ahead to what the effect would be if this immunity clause was in operation, one finds a very disturbing story. If Mr. Sasse is right and the deputy chairman of Lloyd's is wrong in intervening in that way, Mr. Sasse will recover damages from Lloyd's to redress his financial loss as a result of his livelihood being destroyed and his being unable to work as an underwriter.
697 However, if Lloyd's is right it and can be shown that the deputy chairman was justified in intervening in that way, of course Mr. Sasse will not recover any damages.
However, it would be absolutely wrong if the issue were never able to be considered by the courts because Lloyd's had immunity. It is useless to say that judicial review takes care of the situation, because Mr. Sasse's only redress would be a declaration, after losing his livelihood through being prevented from working, that Lloyd's was wrong in intervening in that way. This is a clear case where a small man—an individual livelihood—is being destroyed. Whether the small man's name is Smith, Brown, Jones or Sasse, it is Parliament's duty to ensure that individual livelihoods, whether in closed shop situations with trade unions or in a Lloyd's situation, is preserved. We are taking a risk with individual livelihoods if we give immunity to Lloyd's in that way.
The Financial Times gives the second reason why Lloyd's wants immunity and states:
The second and fundamental reason for the clause, Lloyd's says, is that, if a member sues Lloyd's in respect of underwriting losses, the other members of Lloyd's have to foot the bill in the end.That sounds very persuasive, but it never happened in that way. Lloyd's have been sued only in respect of underwriting losses because it was alleged that it acted negligently on its own powers and duties. For example, in the Sasse affair, it was Lloyd's allegedly negligent failure to advise Sasse Turnball to repudiate contracts after Lloyd's had refused to tribunalise Den Har that led to the law suits. It was not underwriting losses per se that led to that but a suit of negligence. If the British Medical Association is sued for negligence, it is the individual doctors, members of the BMA, who have to pay the cost of the suit for negligence. There is nothing special about the position of Lloyd's that needs a special grant of immunity.11 pm
Lloyd's has been deeply worried, I believe, by the argument that it is the equal of the Stock Exchange in all identifiable respects to the outside world and that it therefore needs no more and no less protection than the Stock Exchange. I do not think that people on either side will be convinced by the other's argument. I have listened to the debates with care. I have yet to hear a persuasive case to convince me that the Stock Exchange is in some totally different category and therefore does not need immunity whereas Lloyd's does need immunity.
My third question is whether Lloyd's, even if it needs immunity, deserves to get it. I move to more contentious ground. I assert that the recent track record of the chairman and Committee of Lloyd's in handling disputes and controversies of a disciplinary nature has been deplorable. I go further. I believe that the leadership of Lloyd's in these disciplinary matters has shown itself to be judicially, intellectually and perhaps even morally inferior to any other regulatory body in Britain and certainly inferior to the Council of the Stock Exchange, the most analogous authority it can be compared to.
Those are strong words. In order to justify them, I need to take the House with me through some of the basic facts of the two major scandals that rocked Lloyd's in the late 1970s—the scandal of Sasse and the scandal of Savonita. At the end of these two episodes, I ask the basic question: would Lloyd's have handled itself and the sagas better or 698 worse if it had been in possession of immunity? Savonita is a subject all too well known to me. I raised it in Adjournment debate in the House in 1978. There is no need for me to go into the rights and wrongs in any detail. I wish, however, to touch upon some of the basic facts particularly as they affect the regulatory powers of Lloyd' s.
The facts were that a cargo of cars on the good ship "Savonita" left a port in Italy but was allegedly burnt and totally destroyed by fire. In fact, it was established beyond doubt that the cars were never burnt at all in any material way. They were brought back to land in Italy and sold off in a perfectly excellent state to dealers who re-sold them throughout Italy. Indeed, loss adjusters from Lloyd's managed to skip round and actually acquire large numbers of the cars said to have been destroyed.
There was very little doubt that a serious fraud had been committed. I say that there was "very little doubt" I shall come in a moment to what one of the leading legal authorities in the country said on the matter. As soon as doubts arose about whether the claim, which was insured in London, was genuine, the smaller broker involved in the story, Pearson Webb Springbett headed by Mr. Malcolm Pearson, who has played such an admirable part throughout this saga of the Lloyd's Bill, starting with Savonita, refused to press the claim with British underwriters. Somewhat to everyone's surprise, the claim was taken up? by a larger broker, Willis Faber and Dumas, that pressed the claim in highly controversial circumstances.
There was a situation on the London market in which a probably fraudulent claim had taken place. One broker had refused to press the claim in the belief that it was fraudulent. Another broker was pressing for the claim. The underwriters and the smaller broker who were worried turned to the chairman of the Committee of Lloyd's for guidance and protection as the regulatory body. Before the small broker, Mr. Malcolm Pearson, turned to the chairman of the Committee of Lloyd's, he had the good sense to secure an opinion from the Senior Treasury Counsel, Mr. John Mathew QC. Mr. Mathew wrote a masterly opinion summarising all the facts and all the evidence in the case. His opinion concluded with these words:
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 probable charge of fraud. 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.In other words, one could not have had a dearer demonstration from the senior Treasury counsel that here was a provable case of criminal fraud. The chairman of the Committee of Lloyd's should have intervened to put matters right, and have stopped British underwriters and small British investors in the syndicate paying a fraudulent claim.What did the chairman and Committee of Lloyd's do? They did nothing. The then chairman of Lloyd's, Sir Havelock Hudson, wrote a letter back to Mr. Pearson saying that he noted the position, and did nothing else. As 699 a result, the underwriter, unprotected by the regulatory authority had, albeit under protest, to pay the fraudulent claim.
At this point it seemed to me that the public interest was involved, with the theoretically self-regulating body not performing its duty, so I went to see the then chairman of Lloyd's, Mr. Ian Findlay. I said that I was sufficiently disturbed about the matter to think of raising it either at Question Time or in an Adjournment debate. I began by asking what powers, as chairman of Lloyd's, he had in dealing with the market and abuses of power of the market. He replied, somewhat ironically in view of the Bill, that he had all the powers that he wanted. He had power to withdraw licences and to suspend malefactors, and full regulatory authority over the market.
I then asked Mr. Findlay why he had not used such powers in this case and why he had ignored the senior Treasury counsel's opinion. At that point Mr. Findlay said that he would like to call in the former chairman of the committee, Sir Havelock Hudson, who had dealt with the matter. Sir Havelock came to the meeting and said that he had not felt like intervening because in his judgment it was a purely commercial matter and there was nothing that the chairman of the committee should be doing. This was supported by Mr. Findlay and his committee.
I was astonished by this. Had I been an underwriter of or a small name in Lloyd's, I would at this point have gone to law and sued for negligence. For the chairman and Committee of Lloyd's to turn their backs on opinion from the senior Treasury counsel saying that serious criminal fraud had been committed and something ought to be done about it, and nothing was, is a shameful disgrace.
§ Mr. FairbairnIn mala fide no less than in bona fide.
§ Mr. AitkenI cannot compete with the Latin wisdom, but I am sure that my hon. and learned Friend is right.
The question was not tested, because nobody sued. Had they done so under the Bill, there would have been no question of getting any damages or any redress in the courts, which is another nail in the coffin of the theory that the Bill is a valid piece of legislation.
I raised the matter in the House; a decision which was criticised, but which I am pleased to see is now being praised by such people as by my hon. Friend the Member for Richmond, Surrey (Sir A. Royle). It ended with a call for an approved self-regulation of Lloyd's. After I had raised the matter, all hell broke loose in the columns of the financial press, which strongly critised the chairman and Committee of Lloyd's for not doing their basic duty. When I had done that, Lloyd's announced that it would have its own internal enquiry into the Savoneta affair and, at last started to do some proper self-regulation.
I can only say that that attempt to have an internal inquiry was a farce and a fiasco, and one which did more to harm the good name of Lloyd's than anything that could be said in criticism of it, or anything that was subsequently raised over the Savonita or the Sasse affairs. It is not my opinion saying that. The financial and national press was almost unanimous in its savage criticism of the way in which the regulatory authority of Lloyd's had gone about its business.
On 16 December 1978, The Economist said of the report of the inquiry of Lloyd's into the Savonita affair: 700
The Report is a shoddy document that smacks heavily of kangaroo justice … It is selective, contains inaccuracies, fails to examine substantive issues (like whether there really was evidence of fraud) and omits examination of key witnesses.In The Daily Telegraph of 9 December 1978, the distinguished columnist Mr. Andreas Whittam Smith wrote on the subject of the Savonita board of inquiry's report:The…point to make about the report on the Savonita claim is that it is a sloppy, unconvincing, ill-written piece of work. It carries neither the persuasiveness nor the sense of fairness that informs a report prepared by Department of Trade Inspectors or by the City Panel on Takeovers. It is as if the five gentlemen were trying to play Shakespeare having previously acted in nothing more demanding than the school pantomime.That reference to five gentlemen was to the judges appointed by Lloyd's to sit on the inquiry.Perhaps the most swingeing criticism of all came from the late and great city editor of the Sunday Telegraph, Mr. Patrick Hutber, who wrote in his column on 10 December:
The way in which Lloyd's of London has mishandled the Savonita affair has dealt its reputation the worst blow in living memory, and gravely weakened the position of those of us who believe in the princple of self-regulation. Not to put too fine a point on it, Lloyd's has succeeded in making itself appear both incompetent and somewhat cowardly. Having produced a report which, as we shall see, was, to say the least of it, inadequate, it fell into a blue funk at the idea of publishing it. Before it would release the report it demanded an undertaking from newspapers that they would indemnify the board and committee of Lloyd's in respect of all legal liabilities which might be incurred as a result of publication.All this was decisively rejected by the robust gentlemen of Fleet Street, who published the report and proceeded to tear it to shreds. It was out of the ashes of the Lloyd's own board of inquiry into Savonita that the Fisher report arose, and finally these gentleman moved towards trying to regulate their own affairs in the more thorough way that they should have done.
§ Mr. David Crouch (Canterbury)My hon. Friend has been illuminating us with the story of his meeting in the city with the chairman and the previous chairman of Lloyd's. He has told us what the press thought and what a bad name Lloyd's got by what was not done. What did he think the chairman and the previous chairman thought they were achieving by not intervening? Does my hon. Friend think that those two chairmen thought that they were preserving the good name of Lloyd's because it was a commercial transaction and Lloyd's always paid? Does my hon. Friend think that that is what they were seeking to do?
§ Mr. AitkenIt is very difficult for me to put myself into the mind of the then chairman of Lloyd's. But there is a spirit in Lloyd's—it is shown up in the Sasse claim as well—which is "We are here to pay claims, even sometimes claims that we are pretty sure are fraudulent. If we can shove the whole thing under the carpet and keep quiet about it, so be it." This philosophy was evidently borne out by the Savonita affair and to a considerable extent by the Sasse affair as well. I have no doubt that these are isolated examples and that the vast mass of business in Lloyd's is transacted fairly and honourably. But so long as there are these momentous disasters, why should we as a House of Commons be granting immunity to the chairman and the committee against those who are wounded in those disasters?
One person who was gravely wounded in the Savonita disaster, although he seems to have survived it remarkably well, was Mr. Malcolm Pearson, who as a result of this 701 extraordinary committee's inquiry was gravely libelled all round the world. I do not think that it worried him too much in England, because both sides of the case were put fairly once the national press commented on the quality of the report. But in Lloyd's Listitself it was a different story. Lloyd's List circulates all over the world, and the savage and unfair criticisms—unfair in that they were based on this extraordinary misapprehension, misquotation and travesty of justice in the formation of the evidence—went round the world and might have harmed an international broker severely.
§ Viscount CranborneMy hon. Friend the Member for Canterbury (Mr. Crouch) asked my hon. Friend the Member for Thanet, East (Mr. Aitken) what he thought the motives of Lloyd's might be for not prosecuting the Savonita case a little more thoroughly. Does my hon. Friend the Member for Thanet, East agree with me that all organisations that are a little frightened that their position is beginning to decline a little in the world in which they operate tend to pay fraudulent claims of this kind for fear of losing business? Does my hon. Friend agree that perhaps that rather short-sighted view prompted Lloyd's not to take the long-sighted view that would have gained it more business in the long run, if it had shown itself to be a little more fearsome in prosecuting fraudulent claims?
§ Mr. AitkenI agree with my hon. Friend that that may well have been at the back of the minds of those who were entrusted at that time with the regulation of Lloyd's. I remember now that in the Adjournment debate I quoted the words of Edmund Burke, who said that the only thing necessary for the triumph of evil was that good men should do nothing. What happened here was that good men failed to carry out their regulatory duties and failed to do what they should have done and were entrusted to do.
With regard to the immunity question, I was saying that one effect of the publication of the report of the board of inquiry into Savonita was that Mr. Malcolm Pearson, the small broker, was effectively libelled, or allegedly libelled, all round the world by Lloyd's List, and he felt that his commercial interests were gravely damaged by it. He did not feel it in England because there was already an adequate right of reply, as on the whole every city editor had commented favourably on his behaviour and commented unfavourably on the quality of the report. When Lloyd's List was published all round the world, Mr. Pearson said "I wish to have a right of reply. I feel that I have been libelled. I wish to have my point of view published in Lloyd's List circulating throughout the corners of the globe and to influential people in the insurance world."
The Chairman of the Committee of Lloyd's and the Lloyd's List editor said "Certainly not" at first. Mr. Malcolm Pearson then threatened to go to law and to sue for libel. At that point the walls of Jericho fell and he was allowed his right of reply. I ask myself whether the Savonita affair would have been worse handled or better handled if Lloyd's had had immunity at that time. If Lloyd's had the immunity, it would have given the two-finger sign to Mr. Pearson and not published what undoubtedly was a fair right of reply redressing the balance. The history of the Savonita affair shows clearly that if at that time Lloyd's had had immunity, its dismal 702 handling of the saga would have been considerably worse and resulted in considerably greater injustice for the individuals concerned.
§ Mr. FairbairnWhile my hon. Friend is on that point, I think it is important that we should emphasise why that would have come about. As Lloyd's would have had no risk from any threat of litigation, since it would have been immune from it, it could have said "No" to the publication of the truth.
§ Mr. AitkenAbsolutely. My hon. and learned Friend emphasises only too eloquently the point that I was trying to make.
The Sasse affair has many disturbing similarities with the Savonita affair. In November 1976, the members of syndicate 762 knew that a contract for insurance had gone wrong in America, although they thought that they were reasonably well protected because a valid reinsurance contract existed. However, the chairman and Committee of Lloyd's at that time knew that a horror story existed in America. They knew it because they had refused to tribunalise Den Har, and they had a good opportunity at that moment to advise the Sasse Turnball and Company Limited underwriting team to repudiate the contract. They did not do so. They said, in effect "We will ignore the rights of the names on syndicate 762 and will force them to accept their responsibility in the interests of Lloyd's and the community as a whole."
There was a substantial settlement. Lloyd's agreed to indemnify the names on the 1977 account to the tune of £6.1 million and the names on the 1976 account to the tune of £10 million—about £16 million in all. If I were a name in any of those syndicates, would I have got such justice for what was alleged to be an act of negligence if immunity had existed? Of course I would not.
Immunity will give the regulatory body of Lloyd's an undesirable degree of protection. It will suspend the rights of individuals to get a settlement of negligence claims or the right of reply. To say that as a result of seeing how Lloyd's handled two dramatic scandals we should give it immunity, in the aspiration that it will handle future scandals better, is the triumph of hope over experience. We should not be sanguine about the regulatory body fulfilling its functions better with immunity.
My final question is whether it is in the public interest for Lloyd's to be given such immunity. I take the view so robustly expressed by my hon. Friend the Member for Nantwich (Sir N. Bonsor) that no group in this country should have immunity granted on the scale requested by Lloyd's. If a degree of protection is needed, and I concede that it could be, I have not yet heard an adequate attack on the filter system suggested in the amendment.
Conservative Members will be signing the political death warrant of ourselves and many other individuals if we give away the basic right of equality under the law for those whose livelihoods may be affected by the sort of scandals, clashes and crashes that I have described. We should stick by the right of an individual to have access to the courts and remember the words of Milton:
Whoever knew Truth put to the worse, in a free and open encounter?That free and open encounter in our courts should not be denied to any citizen of our realm, be he a member of Lloyd's or anyone else.
§ Viscount CranborneIt is a privilege to follow my hon. Friend the Member for Thanet, East (Mr. Aitken), 703 who put a case against clause 14 which it will be difficult for any of my hon. Friends or even the hon. Member for Oldham, West (Mr. Meacher) to refute.
Everyone who has spoken in debates on the Bill will allow that we have addressed ourselves to one of the most important Private Bills to come before the House for a long time. No one could deny that.
I have been disturbed by some of the curious allegations flying about the financial press recently. Some were alluded to by my hon. Friend the Member for Thanet, East in his distinguished contribution. We have heard that some of my hon. Friends and I have been pursuing the corporation and chairman of Lloyd's for sport. Some of us have even been accused of pursuing them for the sake of money.
Those rumours and allegations are not mere whispers in the Corridors of the House. They have been made openly, some in the financial press—though not in newspapers as distinguished as those that you, Mr. Deputy Speaker, and I read. Mr. Kenneth Fleet of the Sunday Express comes to mind—saving the presence of my hon. Friend the Member for Thanet, East, who had some connection with that newspaper group in the past. I am sure that if he were still connected with the group no such allegations would have been made. We can only regret the passing of control which my hon. Friend's family held in that newspaper.
Those allegations are extraordinary. They are, perhaps, prompted by the natural association of ideas that arise from the sporting instincts of my hon. Friend the Member for Gainsborough (Sir M. Kimball) who, I am told, is whipping-in in this particular hunt for those who want the Bill passed. I am astonished that my hon. Friends and I should be considered a cross between Lord Scamperdale setting out for the best meet of the hunt and Al Capone of Chicago trying to extract money from the corporation of Lloyd's, who are presented as a feeble bunch of people subject to the ogres of my hon. Friends and I on the Government Benches.
One only has to express that rather curious view to understand the absurdity of those allegations. They do no credit to the seriousness with which Members have addressed themselves during the debates. Everybody has said what a great organisation the Corporation of Lloyd's is and remarked on the astonishing contribution it has made to invisible earnings. That is one thing that makes us all feel that if Lloyd's is to survive and continue to produce the results it has it is incumbent on the House, when presented with a Bill of this importance, to address itself seriously to the matter in hand.
The allegations that I have attempted to describe, which have been put about by I know not whom, do no credit to those who make them and only lower the tone of the debate.
We have come a long way during the Bill's passage. We have addressed ourselves to many matters that seemed defective in the original Bill. The issue of fraud, about which my hon. and learned Friend the Member for Hemel Hempstead (Mr. Lyell) spoke with his usual distinction and clarity of mind, has been settled to everybody's satisfaction.
Divestment was spoken about by many Members of the House, and the tour de force performed by my hon. Friend the Member for Faversham (Mr. Moate) is an exception 704 to the general feeling of the House that the subject was handled with great skill and seriousness in the Committee chaired with such distinction by the hon. Member for Oldham, West.
Although those matters have been disposed of, the question of immunities remains. As my hon. Friend the Member for Thanet, East stated, that goes to the heart of the Bill. The hon. Member for Thanet, East gave his view why immunities would make no difference to the effectiveness with which the Committee of Lloyd's performed its self-regulatory task. I can add nothing to what he said.
I should like to highlight briefly one or two things that emerged during the debate on 3 February. We must ask ourselves why Lloyd's wants the immunities. My hon. and learned Friend the Member for Hemel Hempstead gave clearly in the previous debate, and my hon. Friends who have spoken tonight against clause 14 and in support of the new clause of my hon. Friend the Member for Nantwich (Sir N. Bonsor) have again given clearly, the principal reasons why the Committee of Lloyd's wants those immunities. There are other reasons, which were mentioned notably by my hon. Friend the Member for Harrow, Central (Mr. Grant) on 3 February:
any litigation in Lloyd's is widely publicised. It is used overseas as a criticism of Lloyd's and as a reason for foreign competitors taking away the business.11.30 pmThe same point was made in the speech, commendably brief, of the hon. Member for Norwood (Mr. Fraser). I intervened, as reported at column 395 of Hansard, to cross-question him a little further about what he said. It seemed to me that he was making the same point as my hon. Friend. The hon. Gentleman was arguing by implication that the integrity of Lloyd's, which we all know is one of its greatest assets, could be impugned only in a court of law. That is a remarkable argument. The one place where that integrity can be impugned with least damage and least mischievously is in a court of law, in the controlled atmosphere that does not thrive in the world of rumour and newspaper speculation, a world that certainly exits in the most litigious of all countries, the United States, where not only does Lloyd's do a great deal of its business but where nowadays many of its names hail from.
Therefore, if we want to protect the good name of Lloyd's there are worse ways of doing it than going to a court of law and proving that a piece of litigation is vexatious or otherwise. It would be far worse if immunity were granted and therefore it was impossible for a name to take the Corporation of Lloyd's to court, so that immunity prevented an attempt to scotch the sort of allegations that might well have been flying about in newspapers or, worse, in the market where insurance is broked. How much better to do it in a court of law than to allow rumour to run rife! This argument, of all the arguments deployed in favour of immunities, is specious.
Other arguments have been advanced in support of Lloyd's and the proposed clause 14. My hon. Friend the Member for Harrow, Central said on 3 February:
It would change the whole character of unlimited personal liability if a member through litigation, could pass on his losses to members as a whole."—[Official Report, 3 February 1982; Vol. 17, c. 370.]What my hon. Friend is saying is that because of the story of the Sasse syndicate anybody who loses a large sum of 705 money can sue the Corporation of Lloyd's and if he succeeds he will force the corporation and membership to carry his losses, no matter how he suffered them.That is a remarkable argument. The whole point of suing for negligence is that if the corporation has been negligent at least the members of Lloyd's have some form of redress. As my hon. Friend the Member for Thanet, East so cogently explained, if there is no redress in the courts the corporation can merely hide behind that immunity and, as he so eloquently put it, give two fingers to anybody who has the audacity to sue it. I find this a remarkable argument.
§ Mr. FairbairnMy understanding of the purpose of insurance is that one person who has a loss can pass it on to others, who do not have that loss. Perhaps it would be inappropriate if that was to be a defence for Lloyd's, of all people.
§ Viscount CranborneMy hon. and learned Friend makes a point which I find it difficult to quarrel with. The whole question whether Lloyd's should be able to insure itself against vexatious litigation was covered at length in the Second Reading debate. I am told by the corporation of Lloyd's that this is an interesting subject but that if it attempted to put such a course of action into practice the expense would be so colossal as to break Lloyd's altogether.
My hon. and learned Friend tempts me down a path that I had not previously thought to follow, but I find it difficult to follow that argument. I understand that all underwriters at Lloyd's have to carry personal insurance of this kind. If it is not too expensive for them, why is it too expensive for the corporation of Lloyd's? The experts may be able to explain this more clearly to me; I will do my best to listen and to understand their arguments. None the less those are not arguments that I have found persuasive so far.
§ Mr. Richard Shepherd (Aldridge-Brownhills)Does my hon. Friend recall from the Committee proceedings before the hon. Member for Oldham, West (Mr. Meacher) that the latest electee to the Committee of Lloyd's put forward a powerful argument that there could indeed be an errors and ommissions policy of up to £100 million? He was prepared to take up £10 million of that. If we have substantial affirmation by a significant figure in the market we can take it for granted, because so far as I know it was not repudiated by the Committee of Lloyd's, that it is a possibility. It is a route that the Committee should explore and it should explain to us, perhaps today, why it was not taken.
§ Viscount CranborneI am much indebted, as so often, to my hon. Friend for that intervention. I had forgotten that passage in the reports on the proceedings of the Committee. My hon. Friend has powerfully reinforced the point that I was attempting to make in answer to my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn). As time goes on we might investigate this question further. Perhaps my hon. Friend the Member for Harrow, Central will be able to reply during the Third Reading debate when, or indeed if, we get there.
My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) may not have considered what the cost of such a policy would be. I cannot recall whether the 706 Committee considering the question also considered the cost of the premiums. If I understand the argument put forward by the chairman and Corporation of Lloyd's, the premiums themselves were considered to be too expensive and this was more of a problem than placing the insurance. It might be better for this sort of speculation to take place outside the Chamber, if my hon. Friend will bear with me.
There are one or two other points that need answering before we can proceed to vote on Clause 14. My hon. and learned Friend the Member for Hemel Hempstead, in a typically excellent speech in the debate on 3 February, made the most persuasive case for granting immunities. This in no way surprised me. Partly because of the respect that I bear him but also partly because of the force of his argument, I was momentarily persuaded by what he said, and I quote:
…if one is exposed to claims for damages in the wa) in which the public at large are exposed, …one's opportunity of acting swiftly, firmly and fairly is likely to be greatly inhibited."—[Official Report, 3 February 1982; Vol. 17, c. 396.]I see my hon. and learned Friend nodding. Therefore, he stills holds that view.At column 399, I asked my hon. and learned Friend whether he would speculate that the Committee of Lloyd's had been negligent or might become negligent. If it did become negligent, I asked him how the victims of that negligence could obtain redress if immunity were granted. My hon. and learned Friend said that he was delighted to give way, because it enabled him to hang the remainder of his argument on my Intervention. I listened with considerable care to what my hon. and learned Friend said, but I cannot see, from the remainder of his most distinguished speech, that he said anything that answered my intervention or answered the much more cogently argued point of my hon. Friend the Member for Thanet, East. I hope that my hon. and learned Friend the Member for Hemel Hempstead will catch your eye later in the debate, Mr. Deputy Speaker, because he owes it to us to elaborate a little on his assertions in columns 399 and 400 of Hansard.
§ Mr. LyellI am grateful to my hon. Friend, who utterly disarmed me with his previous remarks. He and are anxious to see that people such as the underwriting names of the Sasse syndicate should not be left without redress. My hon. Friend the Member for Thanet, East (Mr. Aitken) overlooked the fact that it is clear in the Sasse case that the managers and the underwriters of the syndicate would have been liable had they been sued, and that such litigation was not pursued because they were known not to be worth the amount of money that was lost. Consequently, an alternative was sought in suing the Committee of Lloyd's. However, in future such managers and underwriters will be expected to carry the insurance, which will mean that their primary liability will yield the redress for which my hon. Friend is looking. I would have thought that everyone interested in the Bill would agree that the loss should fall where the primary liability lies rather than have to be carried off by a side wind to the Committee of Lloyd's.
§ Viscount CranborneMy hon. and learned Friend again makes his point with great cogency. The Bill grants all sorts of powers to Lloyd's for investigation and disciplinary procedures. As my hon. Friend the Member for Thanet, East said, that was proved to be much needed 707 by the distressing circumstances of the Savonita case. If, for the sake of argument, the Committee of Lloyd's was to repeat what seems to both my hon. Friend the Member for Thanet and myself the solecism that it committed during the Savonita investigation, where it was assuredly negligent, and if the sort of immunity for which my hon. and learned Friend asks and for which clause 14 asks is granted, is it not true that it could not be sued for negligence even if it was negligent?
§ Mr. LyellI note that my hon. Friend immediately shifted his ground after I gave my answer. I mentioned the Sasse case, and he shifted to the Savonita case. The Savonita case, although very important, is not one in which individuals were looking for financial remedy, because the people who paid out did so willingly—[Hon. MEMBERS: "No."] Those who paid out were the names who paid out under pressure, as my hon. Friend the Member for Thanet, East put it, from a powerful underwriting account. The Savonita case raises a question of public policy in getting Lloyd's to press for the investigation of fraud internationally, which both my hon. Friend the Member for Thanet, East and I are keen that it should do. It also raises the question of the ability of the Committee of Lloyd's to act firmly and swiftly against the big boys. It is a matter of judgement, but, in my view, the ability to act against the big boys—
Mr. Deputy Speaker (Mr. Bryant Godman Irvine)Order. The hon. Gentleman has made one or two points during the debate, and his intervention seems very long.
§ Mr. LyellYou are right, Mr. Deputy Speaker. It is a matter of judgment whether granting immunity is likely to make something more effective or less effective.
§ Viscount CranborneMy hon. Friend the Member for Thanet, East answered that point effectively. I accept that the Sasse and Savonita cases are not the same, but if Lloyd's is given immunity and is able to shelter behind it there is no reason to suppose, in view of the human nature of that organisation, that it will not use that power of immunity as a shelter rather than to exercise self-regulation, which is what we all want. Before my hon. Friend takes refuge in his abstruse legal mind and abstruse legal experience, he should consider the wider consequences of his proposal. I should like to pursue that further, but the hour is late and other hon. Members wish to speak. However, I shall allude to other arguments.
The Minister, who has made many distinguished contributions, no doubt has felt increasingly frustrated at the antics of his Back-Bench colleagues. He has uttered dire warnings. In his intervention on 3 February he warned us that, unless the Bill were passed today, it was unlikely that the Government could find any more time for it. The warning was echoed throughout the House by hon. Members who urged us to pass the Bill. That is not a good argument.
If one says "Pass the Bill, even if you do not like it, because otherwise you will not have a Bill at all" the antics of Opposition right hon. and hon. Members on the Standing Committee considering the Oil and Gas (Enterprise) Bill will be in vain. I have the privilege of serving on that Committee and I shall, no doubt, have the 708 privilege of serving all night on it tomorrow. I accept, of course, that it is unlikely that the Opposition could improve it with their antics, given their views.
If everyone agrees that a Bill is needed, and if a number of people say that the Bill is imperfect but that it cannot be passed other than in its existing form, there is no point in going through the antics of the legislative steeplechase. That is absurd.
§ Mr. Ivan Lawrence (Burton)Is my hon. Friend aware that, until I heard that argument, I was in favour of staying out of the Chamber and coming in and supporting those who wanted the Bill as it stood? After hearing that argument, I believe that there must be something wrong with the Bill, and now I support my hon. Friend the Member for Dorset, South (Viscount Cranborne).
§ Viscount CranborneOf course, Mr. Deputy Speaker. My hon. and learned Friend the Member for Burton (Mr. Lawrence) has been most flattering. It is rare in our debates for anyone to say that he has been persuaded or convinced by anything that he has heard in the Chamber. That must be a great parliamentary milestone which all hon. Members, no matter what their view of the clause, will welcome. I hope that it will be emulated as time goes on.
You have urged me, Mr. Deputy Speaker, to return to discussing the new clause. The argument advanced by my hon. Friend the Under-Secretary of State and his colleagues that they must have the Bill is relevant directly to immunity. If the Bill must be enacted with clause 14, if we are to have the Bill at all, the Government are saying "Whatever we feel about immunity does not matter. The Bill is more important." That is a specious argument in the context of the new clause, especially because of the points made by my hon. and learned Friend the Member for Kinross and West Perthshire, who argued most cogently that what is at stake in clause 14 is the fundamental liberty of British citizens.
This is the core of the Bill. This is the core of our objection to it. If my hon. Friend the Under-Secretary of State argues that the only way in which we can have the Bill is by incorporating clause 14 unamended by my hon. Friend the Member for Nantwich (Sir N. Bonsor), we must have grave reservations about passing it. I have listened to your reproof, Mr. Deputy Speaker, with all the respect that is justly your due, but the argument that has been advanced is germane to the issue on clause 14.
Trade union immunities have been raised many times during the debate. They have been pooh-poohed by those who propose to support clause 14 in its present form. They say, among other things, that trade union immunities and the immunities that are proposed for Lloyd's are two different things. Who am I to argue with my hon. and learned Friends and others who advance that argument? However, there is a political issue that we ignore at our peril. No matter what my hon. and learned Friends may say—I regret to say that one of them is my most honourable and respected friend, my hon. and learned Friend the Member for Hemel Hempstead—there can be no doubt that Labour Members, especially those on the Left-wing of the Labour Party, will use the granting of 709 immunities to those who are supposed to be our friends in Lloyd's as the basis for attacking the admirable Bill that has been presented by my right hon. Friend the Secretary of State for Employment.
If anyone doubts me, I need refer only to the debate on 3 February. The hon. Member for Keighley, who I have seen with pleasure taking part in the debates on the Bill, intervened to say:
The hon. Gentleman suggests that the immunities involved in the Bill are necessary to allow Lloyd's to work. Can he tell the House what he will be doing on Monday when the trade union movement will advance the argument that it requires immunities to allow it to work? If he is consistent, will he vote for or against the Employment Bill?"—[Official Report, 3 February 1982; Vol. 17, c. 402-3.]That was an interesting intervention in many ways. It was interesting partly because it was a most able contribution to the new political sport of baiting the Social Democratic Party, one of the distinguished members of which is sitting on the Front Bench below the Gangway—the hon. Member for Newcastle upon Tyne, East (Mr. Thomas).No doubt it was irresistible to the hon. Member for Keighley (Mr. Cryer) to draw attention yet again to the "will he, won't he, will she, won't she" process that we observed with such pleasure as some members of that party came into the Lobbies with us on the important vote the other night and as some did not.
If anyone doubts the veracity of what has been suggested by so many of my hon. Friends, they need only refer to columns 402 and 403 in the Official Report of 3 February 1982, during the proceedings on the Bill. They will see not that what they forecast was just a possibility, but that, with his usual elan, the hon. Member for Keighley had already started doing what my hon. Friends and I so much fear.
I would have considerable sympathy with the hon. Member for Keighley if we were to treat the corporation of Lloyd's in one way over immunities, however different the case, and treat the hon. Member's friends from the trade union movement in another way. That flies against all the principles of equity and law that my hon. Friends—all such distinguished lawyers—have been propounding this evening.
Therefore, I beg my hon. Friends before they advance that argument, let alone the others to which I have alluded, to look carefully before they tread too heavily on that piece of bog.
§ Sir John Biggs-DavisonIn making that comparison, which I am not sure is a true comparison, will my hon. Friend consider against what and for whom the trade union immunities exist and then compare them with the proposed immunities for Lloyd's, which are internal, for the better control of Lloyd's?
§ Viscount CranborneMy hon. Friend tempts me to bore the House for longer than I intended. An immunity is an immunity. There is the question of whether it affects merely the members of Lloyd's or people outside the body that is declared immune. I am willing to accept that my hon. Friend and learned Friend the Member for Hemel Hempstead and my hon. Friend the Member for Epping Forest (Sir J. Biggs-Davison) would not agree with me, but I do not find their argument convincing. I do not think that the electors would find it convincing, however hard my hon. Friends might try to defend it.
710 There are two other matters that should be alluded to. One is the great claim made by the corporation of Lloyd's to the effect that the market is behind the Bill. That has been the authority that the chairman of Lloyd's has claimed and that has enabled him to put forward the Bill to the House. At first sight the authority claimed by the chairman of Lloyd's is fairly convincing. The Wharncliffe meeting passed the Bill in its original form by an overwhelming majority.
Some very curious cracks are beginning to appear in the unanimity of the working names of Lloyd's. I am surprised at the pusillanimity of some working members of Lloyds who have spoken to me on the telephone about whether they support the Bill and in particular the immunity provisions. A letter appeared in the financial press today, and was prominently displayed in the Financial Times. One of the signatories assured me on the telephone not long ago that, although he supported the Bill in public, he was increasingly against it in private. [HON. MEMBERS: "Name him."' He told me that in confidence. I promised not to reveal his name and I shall not do so.
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Before accepting too easily the claims for unanimity, one should consider the curious way in which working members of Lloyd's put their convictions into practice. Having been assured of one thing on the telephone, I then see the same name appended to a letter in the financial press. As I understand it, that person's grounds for acting in that way were that he did not wish to start a quarrel among members of his association. That may be a perfectly respectable judgment. Nevertheless, if such an important man, supported by many others with whom some of us have spoken, makes such an assertion on such an important point, it is incumbent at least upon those who hold positions of authority in Lloyd's to sing the same song in public and in private.
My hon. Friend the Member for Thanet, East went to the core of the question whether immunity would work and I can add nothing to the admirable way in which he expressed the argument. Nevertheless, one peripheral point worried me. We are told that one of the main reasons why Lloyd's needs the immunity so badly is that many of the names now on its books are inhabitants of the most litigious nation in the world, the United States of America, where people indulge in vexatious litigation at the drop of a hat—no doubt encouraged by the practice that I saw all too frequently when I worked there whereby lawyers take a percentage of the damages eventually settled.
A further question requires to be answered. A report in The Economist of 21 November 1981 stated:
Lloyd's of London may yet be forced to drop the outrageous clause 11 from its private parliamentary bill, which comes up for its third reading in the house of commons after Christmas.That was, perhaps, not strictly true. However, it continues:Will foreign names, especially the 1, 300 Americans at Lloyd's, be free to sue in their courts back home? Lloyd's has a $3 billion trust fund (a pool of premiums) managed b) Citibank in New York on which potential litigants might set their sights.As a general principle, courts in the United States do not uphold immunities—even when they are claimed by presidents. In 1974, Mr. Richard Nixon"—whom some hon. Members will remember as a particularly notorious president of the United States—claimed executive privileges when asked to hand over the Watergate tapes but was overruled by the Supreme Court.As I understand it, from reading the article further, 711 Lloyd's asked its New York attorney—a partner in the distinguished firm of LeBoeuf, Lambi, Leiby and MacRae—for his opinion.Obviously, if the suspicions voiced by The Economist have any substance, there seems to be little point, quite apart from the reasons so admirably advanced by my hon. Friend the Member for Thanet, East, in Lloyd's seeking immunity since a principle object of it is to protect Lloyd's from the excessive litigiousness of United States citizens.
I must pay tribute to the chairman of Lloyd's because, during what must have been a most difficult and anxious time, he was the most courteous of men. He sent me a letter dated 17 February in which he tried to answer my question. I hope he will forgive me if I quote from that letter. He said that the worry was that
if judgment was given against the Society, the plaintiff would recover against moneys held, inter alia, in the Lloyd's U. S. Trust Fund.We, too, were concerned about this. Although nothing under United States law ever seems to be as clear cut as one would like it to be"—this is no doubt true—our understanding of this position is that it should be possible to ensure that in such a case the United States court would give jurisdiction to the English court, which, of course overcomes the problem.Although I am reassured by that letter, I am not reassured enough. If possible, I would like to know in a little more detail whether the advice tendered by the United States attorneys acting for the Corporation of Lloyd's was any more specific than that. If it was not, it casts further doubt, over and above doubts so ably cast by my hon. Friend the Member for Thanet, East on whether immunities are even needed.This has been a long and, in many ways, an interesting debate and I hope that my hon. Friends will raise the many points which need examination during the debate. However, the whole point of this Bill, which is so badly needed, is to ensure that the principle of self-regulation works. The burden of argument we have heard is clearly on the side of the doubters of clause 14 as presently drafted. It is incumbent on my hon. Friend the Member for Harrow, Central, before proceeding with the Bill and pushing it through in his usual able manner, to explain to us some of the answers to our questions. As my hon. and learned Friend the Member for Kinross and West Perthshire said, immunities are of fundamental importance, not only in terms of English and Scottish liberties, but in terms, of fundamental political importance, as I endeavoured to show.
I beseech my hon. and learned Friend not to wreck this Bill or give cause to the people waiting to consider it again in another place to do so and to cast the sort of doubts we have heard this evening. At least give us a chance to hear a proper answer.
§ Mr. Anthony GrantI agree with my hon. Friend the Member for Dorset, South (Viscount Cranborne) on at least one aspect; it has certainly been a long debate. I also agree that it has been interesting and I congratulate my hon. Friend the Member for Nantwich (Sir N. Bonsor) on the way in which he introduced the debate, without necessarily agreeing with everything he said.
712 I share the hope expressed by my hon. Friend the Member for Dorset, South in that personalities will not enter the debate. That is the correct course. I never get involved in personalities or anything of that nature.
My hon. Friend the Member for Nantwich sought to convince us that views had changed. He cited confidential remarks. That is a matter that only he knows about. In talking about the Wharncliffe decision, involving 13, 000 votes for and 57 against, and all the other votes that the Committee of Lloyd's has undertaken, I want to stress that, unless there is any evidence to the contrary, hon. Members should accept that the Committee has conducted its affairs completely honestly, with total propriety and within the rules. That must be understood. It would be deeply resented—
§ Mr. Archie HamiltonWill my hon. Friend explain how the clause on immunities, despite an undertaking given by the late Sir Graham Page that it should be placed in the schedule, has now found its way back into the body of the Bill? That undertaking was given to the House on Second Reading.
§ Mr. GrantI explained this matter in our previous debate. The limited immunity—it is limited despite what is sometimes suggested—that is sought by clause 14 is purely an internal one within Lloyd's itself. I accept that it also applies to those who are about to enter or who have left Lloyd's. No one is compelled to become a member of Lloyd's. This does not affect policyholders or the public at all. One might have gained the impression, listening to the eloquent and emotional speeches of my hon. Friends, that one was dealing with poor, downtrodden citizens who were being deprived ruthlessly of rights by large and rich corporations. That is not true.
§ Mr. Fairbairnrose—
§ Mr. GrantI promise to give way in a moment. In the future, policyholders or members of the public can sue Lloyd's and can take Lloyd's to the courts as much as they please. The fact that Lloyd's, assuming that the Bill reaches the statute book, has obtained additional powers, may help policyholders whose interests will be better looked after. If anything, the Bill will enable the Council of Lloyd's to act more speeedily and more efficiently in protecting outside people. I give way to my hon. and learned Friend.
§ Mr. FairbairnI am grateful to my hon. Friend. His point that no one is compelled to join Lloyd's is particularly inadequate. No one is compelled to become a doctor. No one is compelled to become a shareholder. No one is compelled to become an accountant. They do not require the councils that regulate them to have immunity. Why should it be necessary in this case?
§ Mr. GrantThat will become apparent if my hon. and learned Friend will allow me to continue with my remarks. I take up the example that has been cited of a patient suing his surgeon for error. The relationship is absolutely different. The parellel is between the underwriters and the policy holder or member of the public.
The whole basis of Lloyd's is individual responsibility. My hon. Friend the Member for Dorset, South (Viscount Cranborne) referred to an earlier remark in which I stated that it was contrary to that concept that members should be enabled to pass their losses on to the body of members which is the Society as a whole. I stand by those remarks. 713 Much of the debate has revolved around clause 14. The Society has been treated as if it was an entirely separate body from its members. The reality is that the members are the Society. Therefore, it is they, in the event of action being taken who will meet the damages of the member who brings the suit.
§ Sir Nicholas BonsorIs it not a fact that the Society of Lloyd's are the people who will have elected the Council and Committee of Lloyd's and is it therefore not right that, in the event of negligence by those who have been elected, they should bear the brunt of the damages awarded?
§ Mr. GrantThat is not the case. The point I am trying to get over clearly to hon. Members is that the Society—that is, the whole body of members—would bear the damages from the suit taken.
Lloyd's is unique. It is an international trading body that is in the risk business. It is different from the Law Society, the General Medical Council and the Stock Exchange. They are not similar bodies and, with respect for my hon. and learned Friend the Member for Darwen (Sir C. Fletcher-Cooke) I doubt whether there will be a flood of legislation by these other bodies because we have passed the Lloyd's Bill. They understand the differences. If there is to be legislation, then we shall treat each case on its merits.
Every hon. Member will accept that the Fisher committee was a responsible body, headed by a High Court judge and consisting of underwriters and members of Lloyd's. In paragraph 602 the report says:
It is in the public interest that Lloyd's should be efficiently regulated …It would be contrary to the public interest, and inconsistent with the patterns of control established by the Insurance Companies Act, if the Corporation of Lloyd's was to be inhibited in the task of self-regulation by fear of legal proceedings against it. In particular, if the Council and Committee of Lloyd's were to decide that, for fear of possible legal liability, they could not undertake functions designed for the protection of Members, the whole body of Members would suffer.Let us consider what the likely course of legal proceedings would be. These were referred to in the opinion of counsel which has been widely circulated. It has been suggested that the opinion was unsigned and was somehow not authoritative. My copy is signed, but some copies were made available to hon. Members without being signed because it was thought that it would be quicker to copy them in that way. It has been signed, and the two learned gentlemen in question take full responsibility for it.They point out that:
inevitably on occasions Members of Lloyd's will suffer serious underwriting losses. Such losses may occur despite conservative underwriting as a result, for example, of some untoward national disaster. They may result from speculative, or unsound, underwriting. They may involve negligence or breach of duty on the part of underwriting agents or Lloyd's brokers. They may involve a breach of Lloyd's regulations by an underwriter or a broker.Where an individual sustains serious commercial loss there is an increasing tendency both in England and elsewhere,as my hon. Friend the Member for Dorset, South recognised,
particularly in the United States, to look for someone to sue. Professional negligence litigation is a growth industry, fostered by a steady widening by the Courts of the categories of situation in which compensation is awarded for pecuniary loss.714When Members of Lloyd's suffer losses as a result of questionable underwriting, some will be tempted to litigate if even the vestige of a case can be made out. The most obvious defendant in such circumstance is likely to be an underwriting agent or a Lloyd's broker. But there may be scope for adding the Society as a defendent on the basis of an allegation of failure properly to have created or exercised regulatory powers or duties.That is the sort of situation which can arise and against which, if Lloyd's is to perform its task properly, it needs to be proteted. If it is not, the consequences thereof will be a heavy burden on officers and staff and a disproportionate amount of time and energy may be expended. My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) said that the Bar or the Law Society would welcome such a relief from burden. But the big difference is that they are paid to do it, whereas the officers and staff of the corporation of Lloyd's are paid to write insurance rather than to engage in tiresome litigation.There would be undoubtedly a reluctance to act and possibly a reluctance to serve, and the adverse publicity of Lloyd's being engaged in internal litigious wrangles before the courts would be exploited to the full by overseas competitors.
§ Mr. Tim Eggar (Enfield, North)Can my hon. Friend say categorically that, in the event of immunity being given in the English courts, there would be no possibility of action being taken through the courts of the United States of America which might result in litigants in the United States succeeding where litigants in the United Kingdom could not succeed?
§ Mr. GrantThis is a nice point of private international law, and it is a long time since I studied it. My advice is that the likelihood is that a claim that the jurisdiction should be that of the English courts would succeed and therefore the problem would not arise which worried my hon. Friend the Member for Dorset, South (Viscount Cranborne) and about which he wrote to the chairman of Lloyd' s.
I accept that the new clause is a genuine attempt at compromise, and it is superficially attractive, but only superficially. I can tell the House that Lloyd's considered it at a much earlier stage as a possibility, but it rejected it for a number of practical reasons.
I shall relate briefly the objections to what seems to be an attractive proposition. First, the proposal of seeking the leave of the High Court would be a sort of mini-trial, and there is no doubt that a plaintiff would have only to make out the vestige of a case to receive the benefit of the doubt in those circumstances. Therefore, the preliminary granting of leave would not have anything to do with making it easier, but it would undoubtedly attract adverse publicity, which we need to avoid.
The other objection is that the system would encourage plaintiffs to go on what lawyers describe as fishing expeditions to obtain documents to which otherwise they would not have access. Although my hon. and learned Friend the Member for Darwen poured scorn on the imprimatur of a High Court judge, I must say that it would be a valuable weapon in the hands of a plaintiff who was seeking to force a settlement from Lloyd's. That possibility cannot be ignored. Litigation is not always carried through to the bitter end. Frequently it is used to extract a settlement, and a great deal of time, trouble and possibly expenditure results.
§ Mr. BodyI should like to be a supporter of the Bill, but does my hon. Friend say that the two objections which he mentioned apply to an action for libel or slander? Does not he agree that qualified privilege already attaches to any disciplinary proceedings by the committee of Lloyd's and will apply also to the council of Lloyd's. Why is it necessary to go beyond qualified privilege in the clause?
§ Mr. GrantIt probably does attach to that situation, but I do not think that the other points, concerning the adverse publicity, fishing expeditions and discovery, are overcome in that way. Those would still all occur. Therefore, I believe that Lloyd's is right in saying that the disadvantages of the proposal outweigh any advantages that it may have, and that it does not get over the problem with which Lloyd's seeks to deal.
We are dealing here with a question of balance of judgment on the whole issue—probabilities and possibilities. Of course, there are possibilities that some person, some member of Lloyd's or of a syndicate, will have an action which would suffer as a result of immunity. I believe that it is a remote possibility. On the other hand, I believe that the probabilities are that without the clause Lloyd's would be inhibited in the work of self-regulation that it wants to do, and that it would find itself involved in litigation of a sort which would do great harm to Lloyd's and probably to the public and to policy holders at large.
We have heard a great many quotations from the press. The Daily Telegraph is not always my most compulsive reading—it is on some occasions—but today I do not think I can do better than quote from the leader. At the end it says:
In essence this question of immunity"—speaking of reforming Lloyd'sis a conflict between two views of the public interest. The greater good, surely, is that Lloyd's, one of the country's most valuable commercial assets, should be well regulated. The Bill now before the House of Commons adequately sees to that.On that basis I hope that the Bill will make progress, and I advise my hon. Friends to reject the new clause.
§ Mr. EggarWith the possible exception of one of my hon. Friends, I think that everybody in the Chamber wants to see the Bill go to another place and to be passed, because we all recognise that the way in which Lloyd's is regulated needs to be tightened up. But when we are talking of an issue as important as whether a section of the community is to be given immunity from the common law of the country, there has to be an overwhelming case put forward by those who are asking for that immunity.
I have no possible interest to declare. I did not even go to that school which is on the wrong side of the M4 opposite Slough. But I have listened very carefully to the arguments that have been put forward. First, there was the argument relating to libel, which my hon. Friend the Member for Harrow, Central (Mr. Grant) mentioned. The only way in which I think this can possibly be justified is when we are talking about using the disclosure of documents in a libel case as a way of getting and taking proceedings against the Council of Lloyd's, which would not otherwise be possible.
In my judgment—and it is surely only a matter of judgment—that so-called fishing argument simply does not justify and cannot justify immunity from libel proceedings. It is too far-fetched. But the main argument tonight has focused around the question of negligence. I have heard two arguments put forward by the Council of 716 Lloyd's. The first is that the very existence of law suits calls into question the efficient operation and the standing of Lloyd's. I understand that in the historical context. Until the Sasse litigation there had been no serious attempt to interfere with the functioning of Lloyd's or to challenge the council's decisions through the courts. Just because the Sasse case was the first, it attracted enormous attention throughout the world.
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When I was kindly given lunch by the chairman of Lloyd's recently, it was put to me that one of the effects of the litigation was that banks in the United States seriously wondered whether insurance policies at Lloyd's were valid as security. They were worried about the standing and financial propriety of Lloyd's. That was put as an argument for not permitting law suits to take place, but that argument must be answered by education. It is up to Lloyd's to explain to the world's banking and financial communities what a law suit in the United Kingdom involves and the implications of a law suit succeeding.
Unfortunately, we have to get used to a growth of litigation. English courts are slowly following the American courts and we are having more litigation. We have to accept that, and Lloyd's should not be allowed to insulate itself against that development. As I said, it is a matter of judgment and, on balance, the commercial arguments put forward on behalf of Lloyd's do not seem to be overwhelming.
The other argument is that a limited number of undesirable characters are operating in the market of Lloyd's, from whom the community of Lloyd's needs to be protected. I am surprised that the Lloyd's Committee takes that view, because it is an argument not in favour of granting immunity, but against self-regulation in the market. I am sure that we all wish Lloyd's to continue as a self-regulating market.
§ Mr. AitkenMy hon. Friend is making an interesting point. There are individuals within Lloyd's who sometimes use undesirable tactics that lead to the sort of troubles that we have heard described. Indeed, the principal villain in the Sasse affair was nicknamed "the sewer rat" long before the affair blew up. But surely, instead of seeking to deal with such problems through immunity, Lloyd's ought to tighten up on the vetting procedures that take place before it allows someone to become a member of Lloyd's and a broker and, thereby, to have powers such as that to sign binding authorities. Is that not a weakness that needs to be corrected?
§ Mr. EggarAbsolutely. As usual, my hon. Friend has anticipated my next point. The argument is for Lloyd's to tighten up its self-regulation rather than that it should rush to the House for immunities.
If there are undesirable characters operating in the market, is it not right that the names who may not be able to identify those characters have a right to try to force the Lloyd's Committee to take action against the individuals or syndicates involved? The fact that names can sue for negligence should be used to persuade the Lloyd's Committee to take action when it might not otherwise be willing to do so.
It is a finely balanced argument and there are strong feelings throughout the Lloyd's community. I feel strongly that the case has not been made out. I say "so be it" to those members of Lloyd's who do not want the Bill at all if they 717 do not have immunity. If that is the stance they wish to take, very well, but they should realise that if they go down that road the chance is that sooner or later—and I suspect it will be sooner—Parliament will regulate and they will lose their powers of self-regulation.
§ Mr. Richard Body (Holland with Boston)I have an interest in the Bill as a member of Lloyd's.
I support the Bill and would wish to see it on the statute book. A year ago I should have said that it was high time that Lloyd's had legislation and could put its house in order. I regret the intransigent attitude of certain people in Lloyd's during the negotiations.
I regret, above all, clause 14 in the way in which it is framed, although it is immeasurably better than that in last year's Bill. Some progress has been made, but it does one thing which I believe is appalling. It extends the law of privilege when for 30 years the House, assisted by the courts, has been seeking to curb that law.
Some of us who practised at the Bar years ago remember stories of plaintiffs who sought to take proceedings against a Government Department when a civil servant had been negligent or done something wrong. We had to advise that there was no remedy because the law of privilege prevailed. That kind of privilege has not been curbed as other kinds of privilege have been curbed. The clause puts that process in reverse in an obnoxious way. It does not use the word "privilege"; it talks of "a restraint on suit", which is a euphemism.
Several of my hon. and learned Friends are present. We never needed to use the phrase "restraint on suit" years ago. For hundreds of years lawyers were able to speak of privilege and then the word "immunity" crept in. I am sorry to see certain distinguished lawyers in the House using it. That word crept in, historically speaking, only recently in our courts. It is a rather good word which suggests a healthy state of affairs. It is a medical term, not a legal term.
The correct word to use is "privilege". We are being invited to extend the law of privilege to Lloyd's. The House should think carefully before it agrees to that. As for clause 14, "privilege" is the appropriate word to use. It means being above the law, and that is what we will make the Council of Lloyd's in several important respects. We are giving it something which other institutions have to work without.
The term is appropriate also because it is well understood in the law of libel and slander which, I believe, gives cause for concern.
§ Mr. MoateBefore my hon. Friend turns to the question of libel and slander, I believe that earlier he stated that the proposition of immunity was reversing the trend of 30 years. Does that not suggest that one might be starting a new trend by encouraging other organisations with an equal need to regulate and discipline to seek a similar privilege? Does he not fear that that will lead to other propositions coming before the House?
§ Mr. BodyI think that that will undoubtedly be so. Only a short time ago a letter was sent to the editor of The Times from the chairman of the Stock Exchange, or someone else speaking on behalf of the Stock Exchange, expressing the wish that the Council of the Stock Exchange should have the kind of powers that the Committee of 718 Lloyd's hopes to obtain from the House. I do not want to talk about trade union privileges or immunities, but they are another example.
Any disciplinary body in any profession would like to have the powers. For a time I was associated with the Bar Council, and I think that the Bar Council might well like to have the privilege that the Committee of Lloyd's now seeks. Some of the other professions would also like to have it, but that would be objectionable.
I realise that anyone feeling aggrieved will still be able to obtain an injunction, but that is no remedy for someone who has suffered an act of defamation. The only remedy in libel and slander is one of damages. I cannot think of any plaintiff believing that he has been defamed who has sought merely an injunction. The proper remedy is one of damages, because it provides some compensation for having lost one's good reputation. It also acts as an effective deterrent to those who may be rather loose-tongued.
We in the House are familiar with absolute privilege. We are among the very few to have it. But what Lloyd's is seeking is something near to absolute privilege. It is certainly a degree of privilege greater than that of qualified privilege.
It would be possible under the Bill still to bring proceedings for libel and slander, but only if the plaintiff could show "bad faith". With the inclusion of those words the Bill is an improvement upon its predecessor of last year, but so far as I know the term has never been judicially defined. However, "good faith" has been so defined. It was defined in 1892 in the Chancery Court by Mr. Justice Kekewich. He said:
What does 'good faith' mean? What is meant by those two English words which are the exact equivalent in every sense of the expression, which is perhaps more commonly used, though not more correctly or properly, 'bona fides'? I think the best way of defining the expression, so far as it is necessary or safe to define it, is by saying it is the absence of bad faith—mala fides.Therefore, we have no help from the courts as to what "bad faith" can mean.So far as I know, in a decision on a question of qualified privilege the issue of bad faith has never been considered. Goodness knows what the courts would make of that phrase. With all respect to those who drafted clause 14 in its present form and allowed the term "in bad faith" to be incorporated, they are inviting a great deal of litigation and therefore a great deal of unnecessary hardship. All we know is that it limits in some indefinable way the extent of the defence of absolute privilege. Clause 14 does not, therefore, erect a barrier to an action for libel or slander.
The Council of Lloyd's will have a sufficient barrier without clause 14 in any action for libel or slander. It will have the defence of qualified privilege. The Stock Exchange Council, the Bar Council, the Law Society, the General Medical Council and, indeed, every disciplinary body presiding over any profession or occupation has that privilege. It extends to all the functions of any disciplinary body.
The defence of qualified privilege is well established. It has been clearly defined over the years. Plaintiffs and defendants and those who advise them are well aware of what it means. The law in that respect is as certain as it can be.
§ Sir Marcus Kimball (Gainsborough)rose in his place and claimed to move, That the Question be now put.
Question put, That the Question be now put: —
§ The House divided: Ayes 107, Noes 0.
| Division No. 74] | [12.46 am |
| AYES | |
| Alexander, Richard | Lyell, Nicholas |
| Baker, Nicholas (N Dorset) | Lyons, Edward (Bradf'd W) |
| Beaumont-Dark, Anthony | MacKay, John (Argyll) |
| Benyon. W. (Buckingham) | Major, John |
| Berry, Hon Anthony | Marshall, Michael(Arundel) |
| Best, Keith | Mates, Michael |
| Biffen, Rt Hon John | Mather, Carol |
| Biggs-Davison, Sir John | Mayhew, Patrick |
| Blackburn, John | Meacher, Michael |
| Boscawen, Hon Robert | Mills, Peter (West Devon) |
| Bottom ley, Peter (W'wich W) | Monro, Sir Hector |
| Bright, Graham | Morrison, Hon C. (Devizes) |
| Brooke, Hon Peter | Murphy, Christopher |
| Buck, Antony | Myles, David |
| Bulmer, Esmond | Needham, Richard |
| Campbell-Savours, Dale | Nelson, Anthony |
| Carlisle, Rt Hon M. (R'c'n) | Neubert, Michael |
| Chapman, Sydney | Newton, Tony |
| Cope, John | Normanton, Tom |
| Cryer, Bob | Osborn, John |
| Dorrell, Stephen | Page, John (Harrow, West) |
| Douglas-Hamilton, Lord J. | Page, Richard (SW Herts) |
| Dover, Denshore | Pattie, Geoffrey |
| Dunn, Robert (Dartford) | Penhaligon, David |
| Elliott, Sir William | Percival, Sirlan |
| Eyre, Reginald | Renton, Tim |
| Fairgrieve, Sir Russell | Rhodes James, Robert |
| Farr, John | Rhys Williams, Sir Brandon |
| Fenner, Mrs Peggy | Sainsbury, Hon Timothy |
| Fisher, Sir Nigel | Shepherd, Colin (Hereford) |
| Fraser, J, (Lamb'th, N'w'd) | Silvester, Fred |
| Gardiner, George (Reigate) | Speed, Keith |
| Garel-Jones, Tristan | Spicer, Jim (West Dorset) |
| Gilmour, Rt Hon Sir Ian | Sproat, Iain |
| Glyn, Dr Alan | Squire, Robin |
| Goodlad, Alastair | Stevens, Martin |
| Gow, Ian | Stewart, A, (ERenfrewshire) |
| Grant, Anthony (Harrow C) | Stradling Thomas, J, |
| Grieve, Percy | Thomas, Mike (Newcastle E) |
| Gummer, John Selwyn | Thompson, Donald |
| Harrison, Rt Hon Walter | Thorne, Neil(Ilford South) |
| Heddle, John | Viggers, Peter |
| Henderson, Barry | Walker, B, (Perth) |
| Howell, Ralph (NNorfolk) | Wall, Sir Patrick |
| Hunt, David (Wirral) | Waller, Gary |
| Hunt, John (Ravensbourne) | Watson, John |
| Jessel, Toby | Wells, Bowen |
| Johnson Smith, Geoffrey | Wells, John(Maidstone) |
| Jopling, Rt Hon Michael | Wheeler, John |
| Kellett-Bowman, Mrs Elaine | Wolfson, Mark |
| Kimball, Sir Marcus | Younger, Rt Hon George |
| Kitson, Sir Timothy | |
| Lang, Ian | Tellers for the Ayes: |
| LeMarchant, Spencer | Mr, Michael Hamilton and |
| Lester, Jim (Beeston) | Mr, Paul Hawkins, |
| Lewis, Kenneth (Rutland) | |
| NOES | |
| Mr, Roger Moate and | |
| Tellers for the Noes: | Mr, Jonathan Aitken, |
§ Question accordingly agreed to.
§ Question put accordingly, That the clause be read a Second time:—
§ The House divided: Ayes 18, Noes 71.
720| Division No, 75] | [12, 58 am |
| AYES | |
| Aitken, Jonathan | Crouch, David |
| Beaumont-Dark, Anthony | Dover, Denshore |
| Blackburn, John | Dunn, Robert(Dartford) |
| Body, Richard | Eggar, Tim |
| Bottomley, Peter (W' wich W) | Fairbairn, Nicholas |
| Fletcher-Cooke, Sir Charles | Moate, Roger |
| Henderson, Barry | Sainsbury, Hon Timothy |
| Kellett-Bowman, Mrs Elaine | |
| Lawrence, Ivan | Tellers for the Ayes |
| Lennox-Boyd, Hon Mark | Mr, Archie Hamilton and |
| Mayhew, Patrick | Viscount Cranborne, |
| NOES | |
| Alexander, Richard | Mills, Peter (West Devon) |
| Baker, Nicholas (NDorset) | Monro, Sir Hector |
| Benyon, W, (Buckingham) | Murphy, Christopher |
| Biffen, Rt Hon John | Myles, David |
| Biggs-Davison, Sir John | Nelson, Anthony |
| Bright, Graham | Neubert, Michael |
| Buck, Antony | Newton, Tony |
| Bulmer, Esmond | Normanton, Tom |
| Campbell-Savours, Dale | Osborn, John |
| Carlisle, Rt Hon M, (R'c'n) | Page, John (Harrow, West) |
| Chapman, Sydney | Page, Richard (SWHerts) |
| Cope, John | Pattie, Geoffrey |
| Cryer, Bob | Penhaligon, David |
| Dorrell, Stephen | Percival, Sir Ian |
| Elliott, Sir William | Rhodes James, Robert |
| Eyre, Reginald | Rhys Williams, Sir Brandon |
| Fairgrieve, Sir Russell | Shepherd, Colin(Hereford) |
| Fenner, Mrs Peggy | Silvester, Fred |
| Fisher, Sir Nigel | Speed, Keith |
| Fraser, J, (Lamb 'th, N'w'd) | Spicer, Jim (West Dorset) |
| Gardiner George(Reigate) | Sproat, Iain |
| Garel-Jones, Tristan | Squire, Robin |
| Gilmour, Rt Hon Sir Ian | Stevens, Martin |
| Glyn, Dr Alan | Stewart, A, (ERenfrewshire) |
| Grant, Anthony (Harrow C) | Stradling Thomas, J, |
| Gummer, John Selwyn | Thompson, Donald |
| Harrison, Rt Hon Walter | Walker, B, (Perth) |
| Hunt, David (Wirral) | Wall, Sir Patrick |
| Hunt, John(Ravensbourne) | Waller, Gary |
| Jessel, Toby | Wells, Bowen |
| Johnson Smith, Geoffrey | Wheeler, John |
| Le Marchant, Spencer | Wolfson, Mark |
| Lester, Jim (Beeston) | Younger, RtHonGeorge |
| Lyons, Edward (Bradf'dW) | |
| MacKay, John (Argyll) | Tellers for the Noes: |
| Major, John | Mr, Michael Hamilton and |
| Mates, Michael | Mr, Paul Hawkins, |
| Meacher, Michael |
§ Question accordingly negatived.