HC Deb 22 February 1982 vol 18 cc679-86


  1. `(1) No member of the Lloyd's community shall begin an action which is, or includes, a claim against the Society for damages whether for negligence or other tort, breach of duty or otherwise, in respect of any exercise of or omission to exercise any power, duty or function conferred or imposed by Lloyd's Acts 1871 to 1982 or any byelaw or regulation made thereunder—
    1. (a) insofar as the underwriting business of any member of the Society or the costs of his membership or the business of any person as a Lloyd's broker or underwriting agent may be affected; or
    2. (b)insofar as relates to the admission or non-admission to or the continuance of, or the suspension or exclusion from, membership of the Society; or
    3. (c)insofar as relates to the grant, continuance, suspension, withdrawal or refusal of permission to carry on business at Lloyd's as a Lloyd's broker or an underwriting agent or in any capacity connected therewith; or
    4. (d)insofar as relates to the exercise of, or omission to exercise, disciplinary functions, powers and duties; or
    5. (e)insofar as relates to the exercise of, or omission to exercise, any powers, functions or duties under bye-laws made pursuant to paragraphs (21), (22), (23), (24) and (25) of Schedule 2 to this Act;


  1. (i)The act or omission complained of was done or omitted to be done in bad faith; or
  2. (ii)Leave to begin such an action has been granted by the High Court in accordance with the provisions of section (Actions in respect of section (Limitation of the Liability of the Society, etc.)) of this Act.—[Sir Nicholas Bonsor.]

Brought up, and read the First time.

Sir Nicholas Bonsor (Nantwich)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this it will be convenient to discuss new clause 3—Actions in respect of section (Limitation of the liability of the Society, etc.)—and the following amendments:

  • No. 7, in page 18, line 8, leave out clause 14.
  • No. 8, in Clause 14, page 18, line 17, leave out paragraph (iv).
  • No. 9, in page 18, line 18, leave out paragraph (v).
  • No. 10, in page 18, line 19, leave out paragraph (vi).
  • No. 11, in page 18, line 21, leave out paragraph (vii).
  • No. 12, in page 19, leave out lines 11 and 12 and insert 'unless the act or omission complained of:
  • (i)was done or omitted to be done in bad faith; or
  • (ii)was that of an employee of the Society and occurred in the course of the employee carrying out routine or clerical duties, that is to say duties which do not involve the exercise of any discretion'.
No. 13, in page 19, line 12, at end insert— `Provided always that the Society shall also be liable for damages in an action in which a member of the Society, in his capacity as such member, has brought an action against an underwriting agent and has joined the Society as a defendant to that action.'. No. 14, in page 19, line 14, after 'respect', insert 'of defamation, or'.

Sir Nicholas Bonsor

First, I declare my interest as a name in Lloyd's. I wish to remind the House that I have an interest in Mr. Postgate's syndicate and also in Mr. Kiln's syndicate, but that does not affect my judgment on the amendments that I have tabled. What I have to say comes from me and from no one else.

The clause is designed to replace clause 14. Its purpose is to give a filtering ability to the Lloyd's Committee and Council so that no case can be brought against it unless it has first had a preliminary hearing in the High Court, which seeks to establish damages for negligence or tort. Before I consider in detail the proposals in the new clause, it is necessary for the House to consider in some depth the proposals that are contained in clause 14. Without question, clause 14 gives a blanket immunity to the Committee of Lloyd's. It is intended to give it complete cover against any suit for damages brought by a member of the Lloyd's community. Those suits include those concerning libel and slander as well as negligence and any form of wrongful act. Clause 14 is a wide immunity clause. It is wider than any provision which has been enjoyed by any other similar body. In the letter that the proposers of the Bill have been circulating to hon. Members they refer to a limited immunity clause. There is nothing whatsoever that is limited about the immunity, which is far too wide.

No other regulatory or investigatory body has ever sought, let alone achieved, any equivalent immunity. The Bar Council, the Law Society, the General Medical Council and the Royal Institute of British Architects do not have such immunity. The list of bodies with similar powers to those of the Committee and Council of Lloyd's, which do not have similar immunity, is boundless. Not a single one has yet claimed to be given the privilege sought by Lloyd's. If my hon. Friend the Member for Gainsborough (Sir M. Kimball) were here I would be tempted to add to my list the Jockey Club, as that might be of interest to him.

Such a blanket immunity is too great. I do not believe that any hon. Member would wish lightly to impose such a condition upon the membership of Lloyd's or the Lloyd's community who may seek to achieve damages because their livelihoods, their jobs, their homes and everything that they possess has been lost, through negligence, libel, slander or a tort committed upon them by the Lloyd's Committee and Council. It would be wrong for the House to give such a power to that body of already powerful men.

Without question, in all the principles of English law the greatest is that there is no power without responsibility. There is no right without a corresponding duty. Where the Lloyd's Committee has the power to discipline and control what occurs in the Lloyd's community, it also has a duty to do so properly and with due care. The clause would enable it to do so without any redress being given to those whom it has harmed.

I find it difficult to reconcile the words of the Under-Secretary of State for Trade my hon. Friend the Member for Birmingham, Hall Green (Mr. Eyre), who spoke on behalf of the Government in the previous debate on the Lloyd's Bill, with those of the Under-Secretary of State for Employment my hon. and learned Friend the Member for Clitheroe (Mr. Waddington) who spoke on behalf of the Government on the Employment Bill a week last Monday. My hon. and learned Friend said that it was wrong in principle to set trade unions above the law. He said that it was absurd that they should be given immunities that were not offered to their officers. He said that they did not need such immunity. Absolutely correctly he attacked the Liberal Government, who introduced the Trade Disputes Bill with the Labour Party in 1906. He said that on one night the Solicitor-General in the Liberal Government argued frequently and powerfully that no immunity should be granted to the trade unions. The next day he changed his mind.

There is a distinction between one member of the Government saying two opposite things on successive days and two members of the Government saying opposite things with the separation of one week. Whatever the distinction, the similarity is too close.

I wonder why on the Labour Benches there is support for clause 14. Why is the hon. Member for Keighley (Mr. Cryer) present, almost alone on the Labour Benches? Is it because the hon. Gentleman supports the Lloyd's community, or because he feels strongly that the Committee of Lloyd's needs the power that is proposed, or is it because he sees the similarity between the trade unions' position and that of the Committee of Lloyd's? Why is it that others of his hon. Friends have taken the same view over the past two or three months while the matter has been considered by the House? It is certainly not love of the City or love of the capitalist system, nor even a love of liberty or justice being seen to be done. It is because it is virtually impossible for a Government to propose powers of immunity for a City institution while simultaneously trying to remove similar powers from the trade union movement.

The other day, my hon. and learned Friend the Member for Clitheroe quoted the Royal Commission report on the Taff Vale case. I shall quote the report as it puts my point of view better than I could. It says: 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. That is precisely the position in which the House should stand. We must take the view that the Committee of Lloyd's should be forced to redress any wrong it may commit. Although I accept that there are differences between the position of Lloyd's and that of the trade unions, they are similar in that both abrogate that fundamental principle of law. In no circumstances should the House grant the immunities being sought. I accept that others do not take so robust a view of the principles of law in this country, but I do not believe that anyone would disagree that such a principle must be abided by unless there are overwhelming reasons to the contrary.

The Committee of Lloyd's argued, as it is perfectly entitled to do, that it has established such an overriding reason, which can be summed up in a nutshell as a reason of commercial necessity. It argues that, without such safeguards against wrongdoing which the Committee of Lloyd's might commit, it will be unable to fulfil its task of properly regulating this large and important financial institution. That argument was put forward in some detail in what is called an opinion by Mr. Southwell and Mr. Philips of counsel. In my view, it is not an opinion at all. It is an unsigned statement of the case and in no way a balanced assessment of the merits of this important argument. I submit that it is also fully rebutted by Mr. Michael Mann in an opinion which he gave in answer to the details of the case. It is important that the House should examine details of the Lloyd's argument and the reasons why, in my view, it should not be followed.

It is argued that the community of Lloyd's has already voted on clause 14—or clause 11 as it was at the Wharncliffe meeting. At that time, Mr. Peter Miller, a member of the Committee of Lloyd's and a barrister, gave evidence to the Select Committee. He said that even to him as a qualified lawyer the terms of clause 11 were not clear. I think that the word he used was "unclear". It is not right that the House should think that what is unclear to Mr. Miller was clear to the 20, 000 members of Lloyd's when they considered the Bill. Most of them have no legal qualifications. Furthermore, the Wharncliffe meeting only took account of the views of the members of Lloyd's. It did not take account of the views of the Lloyd's community as a whole and it is the Lloyd's community as a whole which is affected by the immunities which the House is being asked to grant.

The community is much wider than merely the members of the society of Lloyd's. It is defined in some detail in clause 14(2)(c).

Clause 14 provides:

  1. "(1) This section shall only exempt the Society from liability in damages at the suit of a member of the Lloyd's community.
  2. (2) For the purposes of this section a member of the Lloyd's community shall be:—
  3. (a) a person who is:—
    1. (i)a member of the Society;
    2. (ii) a Lloyd's broker;
    3. (iii) an underwriting agent;
    4. (iv) an annual subscriber;
    5. (v) an associate;
    6. (vi) a director or partner of a Lloyd's broker or an underwriting agent;
    7. (vii) a person who works for a Lloyd's broker or underwriting agent as a manager"
I pause there because the phrase "as a manager" is important in the light of the description in the preamble of what constitutes a manager. The description is not what might spring to the mind of anyone hearing that word. It appears that 'manager' in relation to a Lloyd's broker or underwriting agent, means a persons who exercises managerial functions under the immediate authority of the board of directors, or any member thereof, or of the partners, or any one of them, as the case requires, of the Lloyd's broker or underwriting agent". That is an extremely wide description which could cover any one of a number of employees who at any time was acting directly under an order of a partner or director of a broking firm.

9.45 pm

As 72, 000 people are employed in the community of Lloyd's, under that definition it must follow that the clause affects as many of them as of members of Lloyds itself. Yet not one of them was consulted about the Bill. The argument advanced by those who favour the clause—that it has been considered by those whom it affects most—does not stand examination.

Mr. Southwell also argues that Lloyd's is a unique institution which stands alone and it is therefore right that it should be accorded privileges afforded to no other similar body because no other body can properly be equated with it. I submit that most of the bodies that I mentioned earlier can properly be equated with it in terms both of their quasi-judicial functions and of their regulatory powers.

One body stands out above most others as being more directly on all fours with Lloyd's—the Council of the Stock Exchange. My hon. and learned Friend the Member for Hemel Hempstead (Mr. Lyell), in an excellent speech in the previous debates on this matter, said that in his view the Stock Exchange and Lloyd's were entirely different and that attempts to equate them were mistaken.

Sir Peter Vanneck, who has been Lord Mayor of London and is now a member of the European Parliament, and who has also been a member of the Stock Exchange, did not agree. Speaking as an ex-member of the Stock Exchange Council, he wrote to The Times pointing out that, although the Stock Exchange Council did not have those powers, that was not to say that it would not like to have them. In his view, it would like to have the powers and probably should have them.

If we consider giving these powers of immunity to Lloyd's, it will not be long before other bodies claim exactly the same powers for exactly the same reasons, giving precisely the same definition of their need as has been given by Lloyd's.

The similarity between the Stock Exchange and Lloyd's is very great. For example, there are 270 Lloyd's broking firms and 234 Stock Exchange broking firms. The Stock Exchange has 4, 099 members, which roughly equates with the number of working members of Lloyd's. The Stock Exchange has about 18, 000 employees and a turnover in buying and selling in the United Kingdom alone of £5, 288 million in 1981. That is an enormous amount of money and the Stock Exchange, both in this country and abroad through its agents and branches, is a huge financial institution.

It is suggested that there is the distinction that in Lloyd's there is unlimited liability whereas the Stock Exchange is not a risk business. Yet a member of the Stock Exchange is not allowed to be a member of Lloyd's precisely because both involve risk and every member of the Stock Exchange has unlimited liability on all his possessions covering his partnership in his firm. Therefore, in my view, there are close connections between the Stock Exchange and Lloyd's and there is no excuse for giving one of them powers which have so long been denied to the other.

Mr. Jonathan Aitken (Thanet, East)

My hon. Friend referred to Sir Peter Vanneck's letter. Lest the House be left with the impression that that rather jejune contribution to the columns of The Times represented the views of the Stock Exchange, I should point out that Sir Nicholas Goodison effectively corrected that view by making it clear that the Stock Exchange has only ever sought or needed a very limited degree of qualified privilege.

Sir Nicholas Bonsor

I am grateful to my hon. Friend for his assistance. I agree that this is the case. There is no question of the present Stock Exchange Council seeking the powers that Lloyd's sees fit to seek. That is not to say that, were we to grant it to Lloyd's, there might not be a future Council of the Stock Exchange that would seek similar powers.

Messrs. Southwell and Philips allege that to give the Council and Committee of Lloyd's the same degree of duty under the law and the same degree of responsibility under the law as everyone else enjoys would be injurious to the interests of Lloyd's as a community in three ways. First, they say, it would waste the time and energy of the officers. Secondly, they say, it may inhibit the willingness of fit people to serve on the Committee of Lloyd's. Thirdly, they say, it might damage the reputation of Lloyd's. I believe the first two arguments to be so spurious that I shall not waste the time of the House upon them. It cannot seriously be argued that one of the most fundamental principles of English law should be abrogated in this fashion because the time and energy of officers of the Lloyd's community would be wasted in following up claims against the Council of Lloyd's.

The question whether it would inhibit the willingness of proper people to serve can be easily solved by looking at similar bodies. The Committee and Council of Lloyd's, like those I have mentioned, will be in an extremely prestigious office, carrying responsibilities and giving power and prestige within that community. Without question, people will be willing to serve on it despite the fact that they, like everyone else in this community, will be under the ordinary rules of law that subject them to the need to take reasonable care in the exercise of their duties.

I ask the House to consider what would be more injurious to the reputation of Lloyd's—if someone, feeling grievously wronged by the actions of the Committee and the Council, were to say so vocally in the community of Lloyd's, which is itself something of a hotbed of rumour, as most City and similar institutions are and if he were to grouse and complain in the international community that he has been wronged but has had no remedy, or if someone alleges that he has been wronged, takes Lloyd's to court and it is found that Lloyd's has committed no wrong?

Mr. Fairbairn

I think that the House should consider this point. If he is prevented from any action of defamation against the Council, it would not be prevented from any action of defamation against him.

Sir Nicholas Bonsor

I am extremely grateful to my hon. and learned Friend. That is so. It would certainly be an imbalance of law that he was prevented from speaking about what he considers a genuine grievance and yet the Council of Lloyd's, which has committed that grievance, is fully protected in so doing.

There is no doubt that the reputation of Lloyd's, built up over the centuries on the word of the members being as good as their bond, will not be enhanced should the Committee and Council of Lloyd's be seeking to hide behind an artificial and unique defence if someone alleges that they have been wronged by them.

The logic of the argument of the proponents of the Bill is full of flaws. It is particularly so in this instance because they claim, in the same breath, that a suit in damages will harm the reputation of Lloyd's but that the remedies of injunction and breach of natural justice remain. Therefore, they argue, remedies are accessible even though the negligence and tort and libel suits are protected. That is not true. Whereas the actions for injunction or for breach of natural justice would be equally damaging to the reputation of Lloyd's, they do not give and never could give the same remedies as those available under the ordinary common law that this statute seeks to get round.

As a positive claim, the two eminent counsel who gave this opinion for the Lloyd's Committee claim that there are seven precedents for the unique treatment that they wish to have given to the Lloyd's Council and Committee. The seven precedents are that section 2 of the Unfair Contracts Terms Act 1977 is similar, that trade unions have similar immunities, that there are judicial exemptions that stand in the same light, that the Armed Forces also have special exemptions, as do some elements of the National Health Service, the Post Office in the carriage of mail, and ship owners.

I do not believe that any of those parallels have a remote connection with that which the House is being asked to examine today. I shall deal briefly with only two. Section 2 of the Unfair Contract Terms Act 1977 does not allow negligence with impunity. It expressly excludes negligence in contractual clauses, and allows them only in the event of the court finding that in exceptional circumstances it is reasonable for them to be imposed. That is very different from asking for an immunity to be given in all actions to cover the authority of Lloyd's.

I have already said something about the trade unions. I remind the House that when dealing with this question in March 1906, F. E. Smith pointed out that the immunities given to the trade union movement at that time—and immunities in section 2 of the Trade Disputes Act 1906 include immunities from libel and torts—were powers that the people of England had fought for 1, 000 years to remove from the feudal barons. That sets one tier of people under a separate law from all the others. It gives powers to people already in positions of power whereby they can abuse their existing power with impunity at the expense of those who serve under them.

Sir Charles Fletcher-Cooke (Darwen)

It was not the feudal barons, it was the medieval Church.

Sir Nicholas Bonsor

I am quite sure that my hon. and learned Friend is correct. The medieval Church was equally at fault, and could invoke powers that not even the Committee of Lloyd's would seek.

Viscount Cranborne

I hesitate to add to the intervention of my hon. and learned Friend the Member for Darwen (Sir C. Fletcher-Cooke), but my hon. Friend will perhaps recall that in many cases the medieval Church was a feudal baron in its own right.

Sir Nicholas Bonsor

I am also grateful to my hon. Friend. I cannot help feeling that it is possible that the Committee of Lloyd's may be the nearest thing to a feudal barony that we have left, but I do not want to pursue that point too far.

Having put forward these positive cases in an attempt to justify the giving of a particular power to the Committee of Lloyd's, Messrs Southwell and Philips in effect admit that they have failed to make a positive case by relying on the claim that even if the immunities are granted, no harm will be done by them because other adequate remedies will be available. They are the remedies of injunction and breach of natural justice.

I am sure that all my hon. and learned Friends, with their deep knowledge of the law, will hesitate before putting any such argument before the House. As they well know, an injunction is not an adequate remedy for three reasons. First, it may well be too late to avert the damage that has already been done before an injunction can be sought. If someone has been libelled, and his reputation tarnished, no amount of injunction will undo the harm that has already been done. If he has lost his job in a business, such as the underwriting of Lloyd's—which relies upon personal contact and prestige—because he has been libelled, no amount of injunction will compensate for the wrong that has been done to him, if he has lost his job wrongly through the negligence of the Committee of Lloyd's or the way in which it has talked about him. In those circumstances, an injunction is not an adequate remedy.

It is not an adequate remedy in circumstances similar to the Sasse case, whatever the merits of that case may have been. If the Committee of Lloyd's is negligent in the pursuit of its powers and the duties placed upon it, it is quite wrong to deprive those whom it has harmed of damages resulting from that harm. No compensation can be awarded in an action for an injunction. An injunction will be precious little use if a man has already been ruined by the actions of which he complains.

Thirdly, it is very difficult to obtain an injunction. The ruling by Lord Justice Denning, as he then was, in the case of Lee v the Showman's Guild of Britain laid down the criteria on which the court will consider the way a tribunal exercises its powers.

Lord Denning said that the court would ask whether a tribunal has observed the law, has interpreted the rules correctly and applied them to the facts. If the tribunal has done that, the court will not interfere with the decision it has reached, consider the conduct in which the hearing was carried out or consider whether all the available evidence was sought or produced and the way in which the—

It being Ten o'clock, further consideration of the Bill stood adjourned.