ASHMORE AND OTHERS v CORPORATION OF LLOYD'S (No 2) QUEEN'S BENCH DIVISION (COMMERCIAL COURT) [1992] 2 Lloyd's Rep 620 HEARING-DATES: 5, 6, 7, 11, 12 May, 2 July 1992 2 July 1992 CATCHWORDS: Contract — Duty of care — Names at Lloyd's suffered losses on insurance contracts — Allegations that Lloyd's owed names duty of care — Whether Lloyd's owned names implied duty to alert names on matters which might affect their underwriting interests — Whether Lloyd's under duty to impose a premium monitoring system — Whether Lloyd's immune from suit by virtue of s 14 of the Lloyd's Act 1982. HEADNOTE: The plaintiffs became names at Lloyd's at various times between Jan 20, 1971 and Dec 30, 1981. Each of the plaintiffs with others became a member of one or more syndicates managed by Oakeley Vaughan (Underwriting) Ltd ("OVU"). The relationship between Lloyd's and a name ie an underwriting member of Lloyd's organized in syndicates, was governed by the constitution of Lloyd's, by documents presented by Lloyd's to an applicant for membership and by written agreement between Lloyd's and each name. The name was personally liable to the limit of his fortune for all underwriting effected in his name and undertook with Lloyd's that his premium income would not exceed in any calendar year a sum specified in the undertaking. If a name pursued his underwriting business as a member of a syndicate, the business had to be carried on by a managing agent approved by Lloyd's and the name must not interfere. The relationship between a name and a managing agent was governed by a written agreement between them. The plaintiffs claimed damages from Lloyd's for losses on insurance contracts entered into by OVU as managing agent in 1980, 1981, 1982 and 1983. On Aug 28, 1987 the plaintiffs issued their writ and on Nov 26, 1987 served points of claim. In August 1990, the plaintiffs obtained leave to make extensive amendments to the points of claim and the trial began on Apr 22, 1991. During the trial the plaintiffs obtained leave to make further substantial amendments to the points of claim. Lloyd's had resisted the application. Lloyd's submitted that since substantial further amendments had been allowed and the trial consequently interrupted and prolonged, preliminary points of law should be ordered to decide whether in law Lloyd's owed to each plaintiff any, and if so which, of the duties of care alleged in the points of claim and to decide the extent and application of the immunity from suit conferred on Lloyd's by s 14 of the Lloyd's Act 1982. The specific duties contended for by the plaintiffs were (a) a duty to take reasonable steps to alert the plaintiffs Names about matters which might seriously affect their underwriting interests and (b) a duty to impose a premium income monitoring system even if it was only an ad hoc system of monthly monitoring of the syndicates managed by an agent in trouble. The plaintiffs contended that these terms were implied in the contract in that such implied term would give business efficacy to the contract; if an officious bystander had suggested the terms both parties would have unhesitatingly said "Oh, of course"; and such terms were implied in law. The plaintiffs also argued that such terms were imposed by statutory duty pursuant to s 4 of the Lloyd's Act 1911. -- Held, by QB (Com Ct) (GATEHOUSE J), that (1) neither of the terms contended for by the plaintiffs came within the "business efficacy" test; very many thousands of people over the years had been or were now names at Lloyd's under the same contractual arrangements and it was impossible to say that without the implied terms the contract would not work; the same result followed with the officious bystander test (see p 672, col 2); -- The Moorcock, (1889) 14 PD 64, considered. (2) with regard to the alleged duty to alert the question posed was so complex it was impossible to contemplate an officious bystander being capable of thinking up such a question; a term implied in the bystander's question had to be precise and obvious; the term as now pleaded was so complex there was no possibility of both parties answering the question posed with an immediate "Yes of course, that is so obvious it goes without saying" (see p 627, col 2; p 628, col 1); (3) the suggested premium income monitoring obligation was imprecise and on the facts did not come within the officious bystander test (see p 629, cols 1 and 2); -- Shirlaw v Southern Foundries (1926) Ltd, [1939] 2 KB 206 considered. (4) the submission by the plaintiffs and the terms were to be implied by law would be rejected; the contract between Lloyd's and each name was unique in the sense that there was no category into which it could be placed; every one of those contracts was in identical terms; it was not part of a genus, it was sui generis and there was no authority which suggested that the principle had any application in such a case; it was implicit in all the relevant authorities that a genus had to be established before the principle could be founded upon (see p 631, cols 1 and 2); -- Lister v Romford Ice and Cold Storage Co Ltd, [1956] 2 Lloyd's Rep 505, considered. (5) the Lloyd's Act did not impose any express duty on Lloyd's; if what was referred to as the primary object of Lloyds' ie "the advancement and protection of the interests of members of the Society" imposed an implied duty to protect the interests of members, there equally had to be an implied duty to advance those interests and that could not be right; Lloyd's was authorized by its constitution to exercise supervisory regulatory and disciplinary powers over its members; and if the contract between the name and Lloyd's did not impose any such implied obligations it was difficult to see how the statutory framework of the Lloyd's Acts and Byelaws could do so; the defendants did not owe to the plaintiffs either of the duties now alleged (see p 632, cols 1 and 2; p 633, cols 1 and 2); (6) as to whether s 14(3) exempted the defendants from liability in damages at the suit of a member, the words were clear and unambiguous; subject to the express exceptions immunity was first given over the whole field of tort by the words "whether for negligence or other tort" . . .; the next words "breach of duty" could not refer to tortious duty and breach of statutory duty was generally regarded as a tort so that "breach of duty" in s 14(3) could only mean contractual duty; the words "breach of duty" were wide enough to cover both contractual and statutory duty and even if this was wrong the following words "or otherwise" were to be given their natural meaning as a sweeping up provision and the only other breach of duty apart from tortious and statutory breach was contractual breach; s 14(3) was intended to extend Lloyd's immunity from a claim for damages to contractual causes such as those relied on by the plaintiff (see p 634, cols 1 and 2); (7) on the evidence s 14(3) came into force on the date of the Royal assent, July 23, 1982; the submission by the plaintiffs that the section only came into force on Jan 5, 1983 when the first meeting of the new Council took place would be rejected the immunity was an immunity to the Society; it had nothing to do with the election of the new Council and there was no reason why its operation should not take effect until the first meeting of the Council (see p 635, col 2; p 636, col 1). CASES-REF-TO: Comptoir Commercial Anversois v Power Son and Co, (CA) [1920] 1 KB 868; Davis v Radcliffe and Others, (PC) [1990] 1 WLR 821; Lister v Romford Ice and Cold Storage Co Ltd (HL) [1956] 2 Lloyd's Rep 505; [1957] AC 555; Liverpool City Council v Irwin, (HL) [1977] AC 239; Luxor (Eastbourne) Ltd v Cooper, (HL) [1941] AC 108; Moorcock, The (CA) (1889) 14 PD 64; Mosvolds Rederi A/S v Food Corporation of India, [1986] 2 Lloyd's Rep 68; Parker v Great Western Railway Co, (1844) 7 Scott (NR) 835; Rex v Paddington and St Marylebone Rent Tribunal ex parte Bedrock Investments Ltd, [1947] KB 984; Scales v Pickering, (1828) 4 Bingham Reports 448; Scally v Southern Health and Social Services Board, (HL) [1992] 1 AC 294; [1991] 3 WLR 778; Shell UK Ltd v Lostock Garage Ltd, (CA) [1976] 1 WLR 1187; Shirlaw v Southern Foundries (1926) Ltd, [1939] 2 KB 206; Sim v Rotherham Metropolitan Borough Council, [1987] 1 Ch 216; Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank (PC) [1985] 2 Lloyd's Rep 313; [1986] AC 80; Weinberger v Inglis, (HL) [1919] AC 606; Yuen Kun Yeu and Others v Attorney General of Hong Kong, (PC) [1988] AC 175. INTRODUCTION: This was an action by the plaintiffs Patricia Ashmore and other underwriting members of Lloyd's ie Names, against the defendants the Corporation of Lloyd's alleging that Lloyd's owed each of the plaintiffs duties of care and were in breach of those duties so that the plaintiffs suffered losses on the insurance contracts entered into by the managing agent. COUNSEL: The Hon Peregrine Simon, QC, Mr Paul Walker and Mr Matthew Reeve for Lloyd's; Mr Michael Lyndon-Stanford, QC, and Mr Paul Griffin for the plaintiffs. JUDGMENT-READ: Judgment was reserved. PANEL: Gatehouse J JUDGMENTBY-1: GATEHOUSE J JUDGMENT-1: GATEHOUSE J: The relationship between the parties and the nature of the plaintiffs' claim against Lloyd's are summarized in the speech of Lord Templeman when this case was before the House of Lords on an interlocutory appeal: [1992] 2 Lloyd's Rep 1; [1992] 1 WLR 446. But for convenience, I repeat extracts from the speech as an introduction to this judgment. The first passage starts at p 3, col 1 p 449B: My Lords, the defendant Lloyd's is a society of individual underwriters incorporated by statute and authorised by its constitution to exercise supervisory, regulatory and disciplinary powers over its members. The plaintiffs are "names", underwriting members of Lloyd's organised in syndicates. The relationship between Lloyd's and a member is governed by the constitution of Lloyd's, by documents presented by Lloyd's to an application for membership and by written agreement between Lloyd's and each name. The name is personally liable to the limit of his fortune for all underwriting effected in his name and undertakes with Lloyd's that his premium income will not exceed in any calendar year a sum specified in the undertaking. If a name pursues his underwriting business as a member of a syndicate, the business must be carried on by a managing agent approved by Lloyd's and the name must not interfere. The relationship between a name and a managing agent is governed by a written agreement between them. The plaintiffs became names at various times between Jan 20, 1971 and Dec 30, 1981. Each of the plaintiffs, with others, became a member of one or more syndicates managed by Oakeley Vaughan (Underwriting) Ltd ("OVU"). The plaintiffs claim damages from Lloyd's for losses on insurance contracts entered into by OVU as managing agent in 1980, 1981 and 1982 and 1983. Then at p 4, cols 1 and 2; pp 450F and 451B, the text reading: By par 15 of the re-amended points of claim, the plaintiffs assert that Lloyd's owed to each plaintiff: (a) a duty imposed by statute, "pursuant to its constitution," to perform duties thereafter set forth in pars 16, 16A, 17, 18 and 19; (b) a duty of care imposed by common law "so to exercise its powers under its constitution that the interests of the plaintiffs, as members of Lloyd's would be adequately protected," (c) A duty imposed by an implied term "of the membership agreement made with each of the plaintiffs or, in the alternative, of the general contractual relationship between Lloyd's and each of the plaintiffs," that Lloyd's would perform the specific duties set forth in pars 16, 16A, 17, 18 and 19. Any duty owed by Lloyd's must have been imposed by statute, by common law in tort, or by contract. Paragraph 15 asserts all three possible origins of the duty and seeks to introduce some other vague origins. Paragraph 15(b) appears to be a particular duty which is not contained in pars 16, 16A, 17, 18 and 19 but is a duty to take care to protect the interests of each plaintiff, remarkable for its vagueness and novelty. Paragraphs 16 to 19 ascribe to Lloyd's various duties in the widest terms but these can I think be distilled and in any event mainly consist of two important duties said to be owed by Lloyd's to each plaintiff. First, there is said to be a duty on Lloyd's to take reasonable care to ensure that a managing agent obeys the rules of good underwriting and does not commit a breach of his contractual obligations to the name. Secondly, it is said that there is a duty on Lloyd's to inform a name of any serious breach of the duties owed by the managing agent to the name whenever Lloyd's discovers the breach, or with reasonable diligence could have discovered the breach. The preliminary questions of law which I need to determine are as follows: 1. That the following questions or issues be tried as preliminary issues in this action namely: (a) duty of care. (i) Whether, on the basis of the primary facts alleged in paragraphs 1 to 22 of the reamended points of claim (ie excluding paragraphs 15, 16, 16A, (except for particulars (1), (2) and (3)), 17 to 19 inclusive and 20(b)), answer 8 and the schedule to the further and better particulars of the points of claim served on 13 January 1989 and paragraphs 3 of the schedule 1 to the amended points of defence and counterclaim, the defendant owed to the plaintiffs any, and if so which, of the duties alleged in paragraphs 15, 16, 16A, 17, 18 and/or 19 of that pleading and, if so, then (ii) whether the position would be different (and, if so, how) if the allegation in paragraph 20(b) of that pleading that "the plaintiffs . . . did rely upon Lloyd's to exercise appropriate and satisfactory supervision of the market so as adequately to safeguard and protect their interests" were proved at trial. (B) Immunity. If Lloyd's did owe a duty of care then is it immune from suit in respect thereof by virtue of section 14 of the Lloyd's Act 1982 and, if so, from what date? All the primary facts specified in par 1(a)(i) are admitted by Lloyd's. The reliance mentioned in par 1(a)(ii) is not admitted by Lloyd's' hence the difference between the two questions (a)(i) and (a)(ii). However, question 1(a)(ii) no longer arises, I have never understood how the existence of a legal duty can depend on whether the other party relied on its being carried out. Mr Lyndon-Standord, QC, for the plaintiffs confirmed that such reliance, even if proved, could make no difference. Then he said that reliance might be relevant where the question whether the term was to be implied or not was marginal, ie nicely balanced, in which case such reliance would tip the balance in favour of implication. I do not accept that. The fact of reliance may be a necessary link in the chain of causation between breach of duty and damage: it does not assist in determining whether a duty is to be implied by contract or statute or in tort. Paragraph 15 of the points of claim sets out the three sources of the alleged duties, namely (a) statutory duty (arising out of the Lloyd's Act, 1871, s 10 as amended by the 1911 Act, s 4), (b) the common law duty of care, (c) as an implied term of the membership agreement or the "General contractual relationship" between Lloyd's and each plaintiff. (b), above, was not pursued before me. The law is now clearly settled following Tai Hing Cotton Mill v Lui Chong Hing Bank, [1985] 2 Lloyd's Rep 313 at p 321, col 2; [1986] AC 80 at p 107, and the plaintiffs accept that if they do not succeed in contract they cannot do so in tort. In propose to consider (c) and (a) in reverse order because the plaintiffs' primary contention and the bulk of their written and oral submissions was devoted to the implied contractual duty of care. Although the nature of the alleged duties was pleaded in very wide terms in pars 16 to 19 of the points of claim, these have become progressively narrower since the service of that document in November, 1987. There now remain only two specific duties contended for, the first much more elaborately argued than the second. The first can be summarized as a duty to take reasonable steps to alert the plaintiff Names about matters of which Lloyd's becomes aware which might seriously affect their underwriting interests. The second is a duty to impose a premium income monitoring system -- . . . even if it is only an ad hoc system of monthly monitoring of the syndicates managed by an agent in trouble . . . [-- I quote from the formulation in par 34 of the plaintiffs' skeleton argument]. The first, the "duty to alert", has gone through a series of formulations -- I think approximately eight -- since it was first pleaded, the last four versions being par 16 of the skeleton argument and then three further refinements substituted in the course of the hearing. I do not propose to burden this judgment by rehearsing the intermediate changes but I set out the original version, pleaded as an absolute duty, and the final version, for comparison. As originally pleaded the implied term was a duty to: . . . notify the Plaintiffs of any matter which came to the attention of Lloyd's which merited or called for investigation by the Plaintiffs for the better protection of their interests. The final version is based on the question supposedly asked by Lord Justice Mackinnon's "officious bystander" (see Shirlaw v Southern Foundries (1926) Ltd, [1939] 2 KB 206 at p 227) and is now formulated in two alternative ways, containing the same contextual introduction, as follows: . . . if at the Rota meeting to admit a new Member, an officious bystander hadinterrupted the proceedings and said, "You Lloyd's are asking this applicant underwriting member to engage in a high risk business and, in effect, entrust his entire personal fortune to an underwriting agent approved by you with whom he is not to interfere, and whom you know he relies on and is by the system you impose forced to rely on: [Question] what if something professionally discreditable is or becomes known to Lloyd's about the underwriting agent which might prejudice the member's underwriting interests, other than matters which in Lloyd's reasonable opinion are not capable of being seriously prejudicial to the member's underwriting interests, would you Lloyd's be obliged to take reasonable steps to alert the applicant, if thought necessary, in confidence, and tell the underwriting agent within a reasonable time thereafter what you have done? Alternatively, the question (with the same introduction) would be . . . What is something professionally discreditable is or becomes known to Lloyd's about the underwriting agent, in the following categories: (a) any disciplinary measures concluded against the underwriting agent or any of its officers or employees; (b) the findings of an investigation resulting in any such disciplinary measures; or (c) an embargo imposed by Lloyd's on new Names joining the syndicate or syndicates of the underwriting agent due to a lack of confidence in the abilities of the underwriting agent or its staff, which might prejudice the members' underwriting interests, other than matters which in Lloyd's reasonable opinion are not capable of being seriously prejudicial to the members' underwriting interests, would you Lloyd's be obliged to take reasonable steps to alert the applicant, if thought necessary, in confidence, and tell the underwriting agent within a reasonable time thereafter what you have done? It is contended by the plaintiffs that if the question had been asked in one or other of these forms, the answer of both parties -- assuming them to be reasonable people -- would have been an unhesitating. "Oh, of course! That is something so obvious that it goes without saying". It will be necessary to review the circumstances in which every person is placed who wishes to become an underwriting member of Lloyd's, including the factual matrix known to him or her and Lloyd's, at the time of the Rota Committee meeting which is an essential precursor of admission. For the moment, I only comment that the prolixity of, and the qualifications which have by now become added to the implied term contended for, do not sit easily with Lord Justice Mackinnon's test; or with -- . . . the general principle that an implication must be precise and obvious (see per Viscount Simonds in Lister v Romford Ice and Cold Storage Co Ltd [1956] 2 Lloyd's Rep 505 at p 515, col 1; [1957] AC 555 at p 574). I was not intending to be flippant when I commented to Mr Lyndon-Stanford that the reasonable person's answer to the question as finally contended for was likely to be not, "Oh, of course . . ." but, "Would you mind putting that in writing because I haven't followed it." The other implied term contended for concerned the case where a Name's underwriting agent had committed him or her to insurances in excess of the Name's premium income limit for the time being. As originally pleaded it read, again as an absolute obligation: It was further Lloyd's duty to each of the Plaintiffs to ensure that the Plaintiffs' underwriting agents duly complied with the requirements of Lloyd's and that the Plaintiffs: (a) should keep their premium income within the premium income limit . . . This was amended in August, 1990 to substitute for the absolute duty "to ensure . . ." a duty "to exercise reasonable care to ensure . . .", but in this case no further modifications were suggested. During the hearing the officious bystander's question was submitted in this form -- (par 34A of the plaintiffs' skeleton argument): What if Lloyd's discover premium income excesses which in Lloyd's reasonable opinion are serious and which are made by an underwriting agent whose competence is in doubt in Lloyd's reasonable opinion -- would Lloyd's obliged to take reasonable steps to impose a reasonable premium income monitoring system on the syndicates of such underwriting agent? Before considering the principles of law relating to the implication of contractual terms, I need to set out those facts admitted by Lloyd's for the present purpose and forming the background against which each plaintiff entered into a contractual relationship with Lloyd's. In order to be eligible to underwrite insurance at Lloyd's, an individual must apply and be accepted as a member of Lloyd's. An application is made through an underwriting agent, with the sponsorship of an existing member of Lloyd's to whom the potential member is well-known. The potential member must also be known to at least one other member, who may be his proposed agent. The applicant is given, first, a brochure which contains a full but readily intelligible description of Lloyd's (the copy before me is dated January, 1979, when membership was only some 17,000 odd and the Means Test much lower than it became in later years); secondly, an application form for underwriting membership requiring answers to 13 questions; thirdly, a two page "Confirmation" to be signed by the applicant; fourthly, a Certificate of Means, also for signature; and, fifthly, a Standard Form of Undertaking, which begins: I offer myself for election as an underwriting member of Lloyd's and, in consideration of my being elected, I undertake and agree with the Society of Lloyd's as follows . . . There then follow a large number of separate paragraphs containing detailed terms as to what the applicant, if elected, undertakes to do or not to do. There are two forms of this undertaking before me, the later being somewhat more extensive than the earlier, but nothing turns on the differences. Both the plaintiffs and the defendant agreed that these were the principal documents governing the contractual relationship but the plaintiffs also wish to add, sixthly, the underwriting manual issued by Lloyd's to underwriting agents; seventhly, the agency agreement which governs the relationship between a direct Name and underwriting agent; and, eighthly, the sub-agency agreement governing the position where the (member's) agent delegates the underwriting function to another agent who is to be the underwriting agent for the (indirect) Name. The last two agreements are not in common form but they nevertheless contain, respectively, many terms which apply as between all direct Names and members' agents and as between all members' agents and sub-agents. In their particular form (ie tailored to each individual Name, as appropriate) they can be said to form part of the "general contractual relationship" common to all the plaintiffs and Lloyd's, but I think that nothing significant turns on these two agreements. The underwriting manual was referred to in the plaintiffs' amended points of claim and skeleton argument, although I doubt whether any Name actually knows of its contents at the time when the application is made to become a member. It adds nothing that is not an agreed fact for present purposes. By the terms of par 16 of the general undertaking, the Name agrees to adhere to a number of other more or less esoteric agreements but these, too, add nothing. Although I doubt whether many (if any) applicants are actually award of the statutory provisions of the Lloyd's Acts and the Byelaws made thereunder, these also form part of the factual matrix which, I think, it must be taken to be known to them. Finally, so far as not covered by these various documents, the defendant admits all the primary facts pleaded in pars 1 to 22 of the points of claim (as well as certain particulars of the various plaintiffs referred to in the first preliminary question of law, but which the immaterial for present purposes). Every aspiring Name is made unequivocally aware of certain matters from the moment he or she first reads the brochure. If my mischance that document has not been read or properly assimilated, these are made clear in the simple questions asked and answered in the application form, particularly question 9 and 12, and further reinforced by the confirmation document. These basic matters can be summarized as follows: (1) Underwriting is a high risk business which can bring losses instead of profits. (2) Every Name has unlimited liability with respect to his share of all policies he underwrites and will be assessed to the entire amount of his personal fortune to pay any valid claims against him. (3) Every Name is required to appoint an underwriting agent or agents to whom there must be a complete delegation of all underwriting business and who will therefore have complete control over it and absolute discretion as to the acceptance of risks on behalf of the Name. These are obviously factors which make Lloyd's a unique institution and they are relied upon by the plaintiffs as pointing to the necessity to introduce the obligations of Lloyd's for which they contend. They point to the fact that there is nowhere to be found in the contractual documents any express obligation undertaken by Lloyd's. There are some further factors on which reliance is placed and which, I think, stem from the three crucial ones set out above. These are: (4) That underwriting agents have to be approved, and are only approved after satisfying the Committee that they possess sufficient knowledge, experience and integrity to manage the affairs of their Names in a proper manner; (5) That the underwriting agent, in addition to having complete control over and discretion as to the risks written on behalf of the Name is also responsible for advising the Name as to which syndicate or syndicates to join and what maximum premium income to accept on each syndicate; and also for conducting the Name's Lloyd's business and keeping him or her fully informed of the progress of his underwriting activities. The process of becoming a member of Lloyd's is set out in par 6 of the brochure. This emphasizes, inter alia, the importance of the Means Test (pars 6.3 and 6.4) and the choice by the applicant of his underwriting agent (par 6.6). Paragraph 6.5 states: If the Means Test is passed and the other aspects of the potential member's application are in order, he will be asked to travel to London to be interviewed by members of the Committee of Lloyd's who form the Rota Committee. Among other things, the Rota Committee enquire as to and assure themselves of the applicant's awareness and understanding of the concept of unlimited liability. They request the applicant to reaffirm that he is possessed of the assets set forth in his application. Additionally, the Rota Committee will assure themselves that the applicant appreciates that there is no guaranteed return and that he understands that underwriting is a high risk business which can bring losses instead of profits. Those applicants who are approved by the Rota Committee must thereafter be elected by the full Committee of Lloyd's. The applicant will have completed and signed his Application Form and he will also have signed the form of Confirmation, his Certificate of Means and the Undertaking, which is an offer. The contract is concluded when the offer is accepted by Lloyd's on election of the applicant to membership by the full Committee. All the plaintiffs became members of Lloyd's before the 1982 Lloyd's Act which replaced the old Committee with the new Council, which is why references in this judgment are to the Committee, not the Council. Implied contractual terms There are three bases on which a term can be implied into a contract. The first two, which the plaintiffs describe as "implications in fact" both depend upon the presumed joint intention of the parties and arise under either (i) the well-known doctrine of The Moorcock, (1889) 14 PD 64 -- the "business efficacy" test, or (ii) the equally well-known "officious bystander" test, based on Lord Justice Mackinnon's judgment in Shirlaw, sup. The third, described as a term "implied in law" does not depend on the presumed joint intention of the parties, but upon the principle derived, as the plaintiffs say, from Liverpool City Council v Irwin, [1977] AC 239. Strictly, I think the principle emerged much earlier and Liverpool v Irwin is merely an example of its application. It was recognized by Lord Wright in Luxor (Eastbourne) Ltd v Cooper, [1941] AC 108 at p 137, and again, in rather more detail, by Viscount Simonds and Lord Tucker in Lister v Romford sup, at pp 516 and 524; pp 576 and 594 respectively. It would seem to be applicable where the relationship between the parties is one of a particular type or category but is "incomplete" in that the parties have failed to express a term which the law will then imply as a necessary term of all contracts within the category; unless, of course, the parties have expressly excluded it or it is otherwise inconsistent with the express terms of their contract. The plaintiffs say that the terms they seek to imply in this case can be justified on all three bases. The doctrine of the Moorcock is contained in the judgment of Lord Justice Bowen (1889) 14 PD 64 at p 68, the passage which begins: Now, an implied warranty, or, as it is called, a covenant in law, as distinguished from an express contract or express warranty, really is in all cases founded on the presumed intention of the parties, and upon reason. The implication which the law draws from what must obviously have been the intention of the parties, the law draws with the object of giving efficacy to the transaction and preventing such a failure of consideration as cannot have been within the contemplation of either side; and I believe if one were to take all the cases, and they are many, of implied warranties or covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have. In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances. The "officious bystander" test appears in Lord Justice Mackinnon's judgment in Shirlaw, sup, at page 227: Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common, "Oh, for course." At least it is true, I think, that if a term were never implied by a judge unless it could pass that test, he could not be held to be wrong. The Liverpool v Irwin test, as it was called, is summarized in Chitty on Contracts, 26th ed, vol I at par 903, the passage starting: Terms implied by law. The implication of a term is a matter of law for the court, and whether or not a term is implied is usually said to depend upon the intention of the parties as collected from the words of the agreement and the surrounding circumstances. In many classes of contract, however, implied terms have become standardised, and it is somewhat artificial to attribute such terms to the unexpressed intention of the parties. The court is, in fact, laying down a general rule of law that in all contracts of a certain type -- for example, sale of goods, landlord and tenant, employment, the carriage of goods by land or sea -- certain terms will be implied, unless the implication of such a term would be contrary to the express words of the agreement. Such implications do not depend on the intentions of the parties, actual or presumed, but on more general considerations. The first two tests will often overlap and, indeed, have in the past been regarded as a single test embodying both aspects. See, for example, Lord Tucker's speech in Lister at page 594. But they are in fact distinct tests with the result that a term may sometimes be implied on the basis of one but not the other. A striking example is the decision of Mr Justice Steyn in Mosvolds Rederi A/S v Food Corporation of India, [1986] 2 Lloyd's Rep 68. Whichever of the three tests the Court is considering, implication is a matter of necessity, and the necessity test is a stringent one. Pronouncements to this effect are legion in cases where the Courts were considering implication on the Moorcock or Shirlaw tests, and some striking examples are collected in Lord Salmon's speech in Liverpool v Irwin, sup, at p 262. Thus, Lord Justice Scrutton, in Comptoir Commercial Anversois v Power Son and Co, [1920] 1 KB 868: The court ought not to imply a term merely because it would be a reasonable term to include if the parties had thought about the matter, or because one party, if he had thought about the matter, would not have made the contract unless the term was included. It must be such a necessary term that both parties must have intended that it should be a term of the contract and have only not expressed it because its necessity was so obvious that it was taken for granted. And see per Lord Goddard, CJ in Rex v Paddington and St Marylebone Rent Tribunal Ex parte Bedrock Investments Ltd, [1947] KB 984: No covenant ought even to be implied unless there is such a necessary implication that the Court can have no doubt what covenant or undertaking they ought to write into the agreement. Lord Salmon himself, on the same page, commenting on an earlier speech of Lord Reid, said: I am confident that Lord Reid meant no more than that unless a warranty or term is in all the circumstances reasonable there can be no question of implying it into a contract but, before it is implied, much else besides is necessary. For example, that without it the contract would be inefficacious, futile and absurd. Those last words were, perhaps, directed to the Moorcock "business efficacy" test, and if I consider that test first, I am driven to the conclusion that neither of the terms contended for by the plaintiffs comes within measurable distance of passing it. Very many thousands of people over the years have been or are now Names at Lloyd's under the same contractual arrangements and it is obviously impossible to say that without these implied terms the contract will not work. Turning to the officious bystander test, in my judgment the same result follows. With regard to the alleged "Duty to alert", I have already remarked on the complexity of the question posed, in its final and alternative form, and the successive versions put forward in the process of reaching it. I sympathize with the plaintiffs' legal advisers, striving to formulate a term which is at the same time sufficiently circumscribed to qualify as both reasonable and necessary, but also sufficiently wide to cover the actual events alleged in the remainder of the points of claim and on which the remedy of damages and indemnity is founded. One of a number of examples of this refining process can be seen in comparing one part of the original par 16 of the plaintiffs' skeleton argument with the final version. In the original, the question began, . . . What if Lloyd's discovers "something unsatisfactory" about the underwriting agent . . .? That phrase was obviously too wide and had to be modified, It became: . . . What if something "professionally discreditable" is or becomes known to Lloyd's about the underwriting agent . . .? Another example was the perceived need to insert the qualification -- . . . other than matters which in Lloyd's reasonable opinion are not capable of being seriously prejudicial to the member's underwriting interests . . . The need to ensure that the question was no wider than necessary and was sufficiently precise led to the alarmingly complicated formulation which now appears in par 16A of the skeleton argument, with its three alternative categories of "professionally discreditable" matters. The plain fact is that the more the plaintiffs advisers strove to bring the implied term within the bounds of reasonableness and necessity, the more divorced from reality the question became. To start with, I find it impossible to contemplate an officious bystander at the Rota Committee being capable of thinking up so complex a question; one which has taken a team of skilled lawyers so long and so many attempts to formulate. Even if he could, the answer of both parties would certainly not be, "Oh, of course! That is something that is so obvious that it goes without saying". If Lloyd's had not dismissed the suggestion out of hand, the Rota Committee would at least have required the question to be written down for detailed consideration, no doubt with their lawyers' advice. The eventual answer would, I believe, have been an uncompromising, "No". At least, I am wholly unpersuaded that it would have been, "Yes, of course": and certainly such acceptance would not have been given unhesitatingly at the time the question was asked. Mr Lyndon-Stanford, while accepting that the term implied in the bystander's question must be precise and obvious (per Viscount Simonds in Lister v Romford at p 515, col 1; p 574) contended that it was not necessary that it should be uncomplicated. I do not agree. The more complicated the question, the less obvious it becomes. In summary, the original way in which the implied "duty to alert" was pleaded was too wide to be reasonable, let alone a matter of necessity. This was recognized by the Plaintiffs' Counsel and successive attempts were made to overcome these difficulties. These inevitably made the term progressively more complex and less likely to satisfy the simple officious bystander test. There is no possibility of both parties answering the question posed (assuming the bystander could construct it) with an immediate, "Yes, of course, that is so obvious that it goes without saying". The other term sought to be implied was that relating to premium income monitoring. No additional argument was addressed to me beyond that which appeared in the plaintiffs' skeleton argument, par 34 of which read: Premium income monitoring. This subject is more difficult due to the constraints on background information imposed by the preliminary issues. It is accepted that premium income limits are a very important protection for Names. It is accepted that the setting of premium income limits are the only means by which a Name can do anything to limit his total amount of underwriting. This again has a direct bearing on his exposure to additional risks in what is already a high risk business. He is liable to the insured for whatever his agent writes, even if the agent writes more than 100 per cent in excess of his authority. Particularly in the context of an underwriting agent "in trouble" for other reasons and where the agent's competence, if not worse, is very much in question, when premium income excesses also come to the attention of Lloyd's there must be come obligation on Lloyd's (for the Name himself is not allowed to interfere) to impose a monitoring system, even if it is only an ad hoc system of monthly monitoring of the syndicates of the troubled agent. In the course of the hearing the officious bystander's question was added as par 34A and I have set this out above. This alleged implied term has not suffered the various refinements and qualifications of the other term I have been considering, but it raises a number of serious difficulties. In the first place, there appears to be a contradiction between the obligation contended for in par 34 and the obligation which, it is said, both parties would unhesitatingly accept in response to the question asked in par 34A. In the former, Lloyd's obligation would arise only where three factors co-existed: (i) overwriting, by an agent (ii) who was "in trouble" (whatever that may encompass) for other reasons -- ie reasons other than overwriting, and (iii) whose competence (if nor worse) is "very much in question" (again, whatever that means). In par 34A, factor (ii) has disappeared; factor (i) has become narrowed to overwriting which in Lloyd's reasonable opinion is serious and (iii) has become changed, to apply to any agent whose competence is in doubt in Lloyd's reasonable opinion. If this comparison appears to be nit-picking, the reason I make it is to highlight the imprecision which, in my view, surrounds this question. Which leads to the next difficulty: the repeated use of the word "reasonable". In certain circumstances it will provide sufficient precision. Thus, in Liverpool v Irwin, sup, the House of Lords, after considering various alternatives, agreed that the implied obligation on the Council was "to take reasonable steps to keep the means of access in reasonable repair". See also s 14(1) of the 1893 Sale of Goods Act, which presumably codified the common law rule relating to reasonable fitness for purpose. These are situations where the Court will be able to decide on specific facts whether the "reasonable" test has been passed -- though it may often be a difficult decision. Here, the alleged obligation is to "take reasonable steps" to impose a "reasonable premium monitoring system" but only if Lloyd's has formed the "reasonable opinion" that the premium income excesses are serious and the further "reasonable opinion" that the agent's competence is in doubt. The contrast is obvious. Each of these separate matters raises it own problem for Lloyd's. I consider later how both the implied terms contended for conflict with Lloyd's regulatory function: for the moment I am concerned with the imprecision of the suggested premium income monitoring obligation. One of the facts accepted by Lloyd's for present purposes is that the observance of the premium income limits is a very important protection for the Names. Premium income limits are the only means by which the Names can do anything to limit the total amount of underwriting which they are prepared to undertake. A number of points arise. First, for various reasons the premium income limit of a syndicate (and correspondingly the limits of the individual Names on that syndicate) may be exceeded by a perfectly competent underwriter -- which I assume is probably why the implied obligation is only alleged to arise where his competence is in doubt. A Name may be exposed to the risk of greater losses (but, more likely, the opportunity of making greater profits) than he anticipated. Secondly, the premium income limit is not sacrosanct and the General Undertaking envisages the situation where the underwriting agent has exceeded limits, in which case the Name may be required to provide additional security: see cl 11. Thirdly, the obligation contended for does not, unlike the other term I have been considering, contain any requirement to alert the Name once Lloyd's has discovered excesses and gone through the processes of coming to a reasonable conclusion on matters of opinion, but it may be that a system for informing Names is intended to be part of the general words of the obligation. This raises a central question, which applies equally to the "discreditable conduct" obligation and to the overwriting by the agent. It is to the agent that the Name must look for compensation where losses are suffered by reason of the agent's failure to carry out his duties to his principal. It seems to me a novel conception that where one principal (the Name) undertakes contractual obligations to another principal (Lloyd's) and agrees that his obligations shall be discharged through an agent, the other principal is under a duty to supervise the agent and/or inform his opposite number if he learns that the agent is failing in his duties. Finally, on the question of premium income monitoring, it is one thing to pose the question (as in par 34A): it may be an entirely different matter to put the answer into practice. I have no facts to guide me as to what would be involved in devising a suitable premium income monitoring system. It may involve complex inquiries, particularly of an accounting nature. It may impose a very heavy administrative burden on Lloyd's or its officers. An "ad hoc monthly" monitoring system may be unworkable in practice. All I know is that, by August, 1984, the new Council of Lloyd's acting under its regulatory powers contained in the 1982 Act made a byelaw of some complexity called the Syndicate Premium Income Bylaw, and thereafter a Syndicate Premium Income (Monitoring) Regulation, both of which have been subsequently amended. I think I am entitled to infer that both must have taken a good deal of time and effort to produce: time and effort contributed in all probability by a number of skilled individuals, committees and draughtsmen, involving extensive debate and accommodating diverse opinions on matters both of substance and detail. The Monitoring Regulation, incidentally, provides for quarterly statements to be produced within eight weeks after the end of each quarter, showing cumulative syndicate premium income credited up to the end of that quarter. Where there is actual or anticipated overwriting, the managing agent is required to give full written details to the Members' Solvency and Security Committee. This may, but will not necessarily, result in further statements and explanations being sent to Names. The system is complicated and I have summarized only parts of it, and those only briefly, because it is easy enough for the plaintiffs to say (as they do in par 34 of their skeleton argument): . . . there must be some obligation on Lloyd's . . . to impose a monitoring system even if it is only an ad hoc system of monthly monitoring . . . to devise a workable system may have been an entirely different matter. In my judgment, this alleged implied obligation fails both the Moorcock and the Shirlaw tests. The third basis for implying a term, referred to by the plaintiffs as the "implication in law", arises where the Court is prepared to lay down -- . . . a general rule of law that in all contracts of a certain type -- for example, sale of goods, landlord and tenant, employment, the carriage of goods by land or sea -- certain terms will be implied unless the implication of such a Term would be contrary to the express words of the agreement [-- the quotation is taken from Chitty on Contracts, 26th ed, par 903 --]. There can be no doubt that here, too, necessity and not only reasonableness is an essential requirement. The principle emerges clearly from the speeches of Viscount Simonds and Lord Tucker in Lister v Romford, sup, at pp 516, col 1 and 525, col 2; pp 576 and 594 respectively. Viscount Simonds said: Nor was it suggested that in the present case there were any features which distinguished the relation of the appellant and the respondents from that of any other driver and his employer. That is why at the outset of this opinion I said that this appeal raises a question of general importance. For the real question becomes, not what terms can be implied in a contract between two individuals who are assumed to be making a bargain in relation to a particular transaction or course of business; we have to take a wider view, for we are concerned with a general question, which, if not correctly described as a question of status, yet can only be answered by considering the relation in which the drivers of motor vehicles and their employers generally stand to each other. Just as the duty of care, rightly regarded as a contractual obligation, is imposed on the servant, or the duty not to disclose confidential information (see Robb v Green), or the duty not to betray secret processes (see Amber Size and Chemical Co Ltd v Menzel), just as the duty is imposed on the master not to require his servant to do any illegal act, just so the question must be asked and answered whether in the world in which we live today it is a necessary condition of the relation of master and man that the master should, to use a broad colloquialism, look after the whole matter of insurance. If I were to try to apply the familiar tests where the question is whether a term should be implied in a particular contract in order to give it what is called business efficacy, I should lose myself in the attempt to formulate it with the necessary precision. The necessarily vague evidence given by the parties and the fact that the action is brought without the assent of the employers shows at least ex post facto how they regarded the position. But this is not conclusive; for, as I have said, the solution of the problem does not rest on the implication of a term in a particular contract of service but upon more general considerations. Lord Tucker, at p 525, col 2; p 594, said: Some contractual terms may be implied by general rules of law. These general rules, some of which are now statutory, for example, Sale of Goods Act, Bills of Exchange Act, etc, derive in the main from the common law by which they have become attached in the course of time to certain classes of contractual relationships, for example, landlord and tenant, innkeeper and guest, contracts of guarantee and contracts of personal service. Contrasted with such cases as these there are those in which from their particular circumstances it is necessary to imply a term to give efficacy to the contract and make it a workable agreement in such manner as the parties would clearly have done if they had applied their minds to the contingency which has arisen. These are the "officious bystander" type of case, to use Lord Justice Mackinnon's well-known words. I do not think the present case really comes in that category, it seems to me to fall rather within the first class referred to above. Liverpool City Council v Irwin, sup, is, so it seems to me, an example of the application of the Lister v Romford principle in the field of landlord and tenant law, limited to a particular area of that field involving landlords of high rise or multi-storey dwellings. See, eg, per Lord Wilberforce at p 251F -- (it may be that the particular area of the landlord and tenant field should be more narrowly limited by adding further qualifications such as "multiple occupancy" or "where the landlord retains control of the common parts", etc, but the decision is, in my view, clearly an application of the principle to a well-established category of case). Sim v Rotherham Metropolitan Borough Council, [1987] 1 Ch 216 and the similar cases decided by Mr Justice Scott is another example in the field of employer/employee relationships, as is Scally v Southern Health and Social Services Board, [1992] 1 AC 294. It is here that the plaintiffs, in my judgment, run into an insuperable difficulty. The principle applies to certain broad categories or types of relationship where the individual contracts within the category will vary infinitely in their terms. In some categories the appropriate term will be implied into every contract within the category (unless expressly excluded). Examples appear in Viscount Simonds' speech in Lister v Romford, sup, for example, the servant's duty not to disclose confidential information, or to betray his employer's secret processes; the employer's duty not to require his servant to do any illegal act. Or a term may be implied into a more limited class of contracts, eg only those employer/employee contracts where certain circumstances obtain, as in Scally's case [1991] 3 WLR 778, per Lord Bridge at pp 787/788, or, indeed, Liverpool v Irwin itself. The contract between Lloyd's and each Name is unique, in the sense that there is no category into which it can be placed. Mr Lyndon-Stanford argued that there were so many of these contracts -- obviously very many thousands -- that this ipso facto created the category to which the principle would apply. I do not accept this. Every one of these contracts is in identical terms apart from the contracting party's name and individual premium income limit inserted in cl 11 or cl 13. It is not part of a genus: it is sui generis. There is no authority which suggests that the principle has any application to such a case. On the contrary, I think it is implicit in all the relevant authorities that there must first be established a genus, however various the individual contracts within it may be, before the principle can be founded upon. See, for example, per Lord Denning in Shell UK Ltd v Lostock Garage Ltd, [1976] 1 WLR 1187 at pp 1196 and 1197 where, referring to Liverpool v Irwin the Master of the Rolls said: The second category comprehends those cases which are not within the first category. These are cases not of common occurrence in which from the particular circumstances a term is to be implied. In these cases the implication is based on an intention imputed to the parties from their actual circumstances (see Luxor v Cooper, per Lord Wright). Such an imputation is only to be made when it is necessary to imply a term to give efficacy to the contract and make it a workable agreement in such manner as the parties would clearly have done if they had applied their mind to the contingency which has arisen. These are the "officious bystander" types of case; see (Lister v Romford). In such cases a term is not to be implied on the ground that it would be reasonable but only when it is necessary and can be formulated with a sufficient degree of precision. This was the test applied by the majority of this court in Liverpool City Council v Irwin and they were emphatically upheld by the House on this point. There is this point to be noted about Liverpool v Irwin. In this Court the argument was only about an implication of the second category; in the House of Lords that argument was not pursued. It was only the first category. And then the particular passage: Into which of the two categories does the present case come? I am tempted to say that a solus agreement between supplier and buyer is of such common occurrence nowadays that it could be put into the first category, so that the law could imply a term based on general considerations, but I do not think that this would be found acceptable. Mr Simon, QC argued that this contract did fall within a genus, type or category -- which he described as that of regulator and regulated; and he gave examples: travel agents, the Stock Exchange and, more particularly, the bodies falling within the scope of the Financial Services Act, 1986. In fact, he said, the category applied to any business in which Parliament has left it to the business itself, or the business association itself, to regulate that business. He pointed to ss 7 and 8 of the Act and to the various "Self-Regulating Organisations" listed in Tolley's Company Law at p 185/10. This led to the limited proposition that it is the duty of a regulator to exercise its powers and discretions in good faith and that where the regulator secures for itself contractual powers and descriptions it is a necessary legal incident of such contract that (unless expressly excluded) the regulator will exercise its power and discretions in good faith. A well-known example is Weinberger v Inglis, [1919] AC 606, in which this proposition was assumed by the House of Lords. The duty extends no wider, said Mr Simon. Whether an attempt expressly to exclude any duty of good faith could survive the Unfair Contract Terms Act, 1977 was not canvassed and, in any case, does not arise; Lloyd's accepted (obviously correctly) an unqualified duty to act in good faith. But I know very little about the self-regulating bodies which, it was claimed, constituted a type or category of contractual relationship and I do not feel able to say that there is such a type, of which Lloyd's contract with a Name is an example. I remain of opinion that the Lister v Romford principle has no application. Finally, on question 1, I consider the plaintiffs' contention based upon statutory duty. Mr Lyndon-Stanford emphasized that his case primarily depended upon the implication of terms into the contract between a Name and Lloyd's. The alternative, the existence of a statutory duty, was very much a subsidiary argument. Section 4 of the 1911 Act, repealing and replacing s 10 of the 1871 Act, provides: The objects of the Society shall be: The carrying out on by Members of the Society of the business of insurance of every description including guaranteed business; The advancement and protection of the interests of Members of the Society in connection with the business carried on by them as Members of the Society and in respect of shipping and cargoes and freight and other insurable property or insurable interests or otherwise; The collection publication and diffusion of intelligence and information; The doing of all things incidental or conducive to the fulfilment of the objects of the Society. The first difficulty that the plaintiffs have to face is that the Statute does not impose any express duty upon Lloyd's: it speaks only of "objects". The argument appears to progress as follows: (i) the primary objection is said to be the second one listed, namely, "The advancement and protection of the interests of members of the Society", (ii) the emphasis is on the interests of the members, not of the Society itself, (iii) "object" should be interpreted as "duty"; therefore (iv) "There is a statutory duty imposed on Lloyd's 'to take reasonable care'", as it is phrased in the opening words of par 36 of the plaintiffs' skeleton argument, or: . . . to alert the Plaintiff Names about information which is acquired . . . (par 39). Obviously, this is a reference to the alleged duty to speak. It is not explained in the written argument, nor did Counsel mention in oral argument, how the Statute imposed a duty to institute a premium income monitoring system -- presumably in the circumstances predicated in par 34 of the skeleton argument. No authority was referred to in which a plaintiff was held to have a cause of action for breach of an implied statutory duty. If what is referred to as the principle object of Lloyd's imposes an implied duty to "protect" the interests of the members, there must equally be an implied duty to "advance" those interests. That cannot be right. Above all, Lloyd's is authorized by its constitution to exercise supervisory, regulatory and disciplinary powers over its members. I was referred by Mr Simon to the two recent cases in the Privy Council which were concerned with claims by depositors, who had lost their money, against respectively the Attorney-General of Hong Kong acting on behalf of the Commissioner of Deposit-Taking Companies (Yuen Kun Yen and Others v Attorney-General of Hong Kong, [1988] AC 175) and in the second case against certain members of the Finance Board of the Isle of Man (Davis v Radcliffe and Others, [1990] 1 WLR 821). The defendants in each case were responsible for the licensing of deposit-taking companies or banks, and it was said that there were important similarities between those two cases and the present; in particular that the respective defendants exercised regulatory functions. There are certain similarities but comparisons need to be made with considerable caution. Although the claim in the first case was apparently pleaded alternatively on the basis of a breach of statutory duty, this was not argued and the decision turned entirely on the question of negligence. The second case was held by their Lordships to be indistinguishable from the first, and virtually the whole of the Board's judgment is also devoted to the claim in negligence. The only reference to breach of statutory duty is at p 830 where Lord Goff said: The [Judge of first instance] also dismissed in a terse paragraph, an alternative plea based upon breach of statutory duty, on the principles set out in Cutler v Wandsworth Stadium Ltd [1949] AC 398. Their Lordships entirely agree with [the Judge's] conclusion on this point, which was plainly right. Neither of these two authorities is of direct assistance in determining the issues now before me, though they lend no support to the plaintiffs. I think there is a broad consideration which militates against the imposition of any statutory duty upon Lloyd's in favour of the plaintiffs. It is a most important function of the Corporation to regulate the Lloyd's insurance market, primarily for the protection of the policy holders. When this case was before Mr Justice Phillips on an interlocutory application he said -- and I respectfully agree with him: In my judgment, the public undoubtedly has an interest in the proper exercise of the statutory powers and duties conferred on Lloyd's though not primarily for the reasons advanced by Mr Lord Proper regulation of the insurance market is primarily necessary for the protection of the policy holder. The entire British insurance market is subject to statutory regulation which is principally aimed at the protection of the policy holder. Lloyd's constitutes an important section of that market and has been permitted to be largely responsible for its own regulation. It is in the public interest that Lloyd's makes effective use of its power of self-regulation. It seems to me that it would greatly inhibit the proper discharge of those powers if those who exercised them had constantly to be looking over their shoulders because of a supposed duty to safeguard the interests of one section of the market. Mr Simon put forward several additional arguments against the alleged duty to alert Names, whether the duty was to be implied by contract or by statute. Two of these need short consideration: the problems for Lloyd's of "confidentiality" and "evaluation". As to the first, he asked forensically what would be the position if the information was passed to Lloyd's in confidence? This led to the second amended form of par 16 of the plaintiffs' skeleton argument, where the words were added, ". . . if thought necessary, in confidence". That seems to be to be no answer to the problem: if information is given to Lloyd's in confidence, it must be a breach of that confidence to pass it on to Names, and no less a breach by trying to impose a similar restriction on the recipients. As to "evaluation", there would be obvious and serious dangers to Lloyd's if it were to act on market rumour or otherwise without checking the truth of the information it received. This led to the complicated formulation of the duties spelled out in the alternative par 16A of the skeleton argument, where the scope of the duty is much confined, in order to try to meet this. But this formulation has now become a complete tangle. I had thought that the phrase: . . . would you Lloyd's be obliged to take reasonable steps to alert the applicant . . .? was a drafting error and that "applicant" should read "member", since no duty can arise on any view until the applicant has become a member. On reflection, however, I think that this was not an error, and that this is an attempt to impose a duty to warn off applicants from joining a particular syndicate -- see the reference to "new Names" in limb (c) of the question. If my interpretation is wrong, then I do not know precisely what situation is envisaged. I add these comments -- limb (a) is unnecessary: the information is posted in the room; limb (b) is, in my view, unnecessarily wide, given the publication of the results of disciplinary measures, and "lack of confidence in the abilities of the underwriting agent or its staff" is not necessarily professionally discreditable. If the contract between a Name and Lloyd's does not impose any implied obligation on the latter of the kinds now contended for, I do not see how the statutory framework of the Lloyd's Acts and Byelaws can do so. I think the plaintiffs were right to advance this as only a subsidiary argument. In the result, I hold that the defendant did not owe to the plaintiffs either of the duties now alleged. I turn to the second question, that of immunity. Section 14 of the Act exempts the defendant from liability in damages at the suit of a member of the Lloyd's community, defined in sub-s (2) which includes a member of the Society and, therefore, each of the plaintiffs in this action. Two questions arise: first, does the immunity cover the causes of action relied upon here and, secondly, if so, from what date? As to the first, s 14(3) is the crucial sub-section. It provides: Subject to subsections (1), (4) and (5) of this section, the Society shall not be liable 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 -- (a) in so far as the underwriting business of any member of the Society . . . may be affected . . . unless the act or omission complained of -- (i) was done or omitted to be done in bad faith . . . Subsection (1) limits the immunity to suits instituted by a member for damages, sub-s (4) excludes immunity in respect of death or personal injury and sub-s (5) excludes immunity in respect of defamation. It is not in dispute that the immunity covers, as from the relevant date, any acts or omissions arising from the Lloyd's Acts or byelaws, etc, but the plaintiffs make three principal submissions. First, they say that they rely on a duty imposed by the implied terms of their contract with Lloyd's and not a duty imposed by statute, byelaws or other regulations. Alternatively, they say that the word "contract" is conspicuous by its absence; that it would have been simple enough to have included an express immunity from liability for damages for breach of contract, had the legislature so intended, and that on two principles of construction of private Acts of Parliament, such immunity is not covered. The first principle is, by analogy with the rule applied in the field of contract, that a party seeking to rely on an exclusion clause must show that the exclusion clearly applies. The second is the somewhat similar "contra proferentum" principle that the Courts apply to the promoters of a private Act, and I was referred to Craies on Statute Law, 7th ed at p 565 and following, and to two examples, Scales v Pickering, (1828) 4 Binghams Reports 448 at p 452, and Parker v Great Western Railway (1844) 7 Scott (NR) 835 at p 870. Thirdly, the plaintiffs say that "breach of duty" means only breach of statutory duty because, on the same principle, the legislature could have but did not expressly include breach of contractual duty. They say that the addition of the words "or otherwise" refers back to the statutory cause of action, such as liability under statute but not for breach of duty and an example is given, namely, s 56(3) of the Land Registration Act, 1925. A further, subsidiary, point was made by comparing the words "or otherwise" with the phrase used in s 15(2)(b) -- "any other document or arrangement whatsoever; . . .". As I understood him, Mr Lyndon-Stanford contended that the position might have been different if the words in s 14(3) were ". . . or otherwise howsoever". I cannot accept these arguments. Taking them in reverse order, the words "or otherwise" are in themselves wide enough, in the context of the whole phrase which precedes them, to exclude liability for every kind of damage (except as provided in sub-s (4) and (5)) and the addition of some word like "howsoever" adds nothing to their width. I decline to read the word "statutory" into the phrase "breach of duty" so as to cut down its meaning when Parliament has not done so. But this insertion is necessary, on the plaintiffs' argument, not only to exclude immunity from breach of contract, but also to give a very restricted meaning to the words "or otherwise", ie only an immunity from damages which are recoverable under statute but not by reason of a breach of statutory duty. This is a most tortuous construction to place upon the simple words of the Act. I am not persuaded that the strict construction "contra proferentum", (or the analogous approach to exclusion clauses in the field of contract) does apply to the Lloyd's Act, even though it is a private Act. That approach is clearly applied to an Act which interferes with private rights for the benefit or financial gain of the promoters of a private Act. Such considerations can hardly be applied here. But even if they can be, in my view, the words are clear and unambiguous. Subject to the express exceptions, immunity is first given over the whole field of tort by the words ". . . whether for negligence or other tort . . .". The next words "breach of duty" therefore cannot refer to tortious duty. Breach of statutory duty is generally regarded as a tort. If this is correct, then "breach of duty" in s 14(3) can only mean breach of contractual duty. If not, "breach of duty" is wide enough to cover breach both of statutory and contractual duty. Even if this is wrong and "breach of duty" refers only to breach of statutory duty, the following words "or otherwise" are to be given their natural meaning as a sweeping-up provision, not the artificial and strictly limited meaning for which the plaintiffs contend. The only other breach of duty, apart from tortious or statutory breach, must be contractual breach. On any legitimate approach, it seems to me that s 14(3) was intended to extend Lloyd's immunity from a claim for damages to contractual causes of action such as those relied upon by the plaintiffs, despite the absence of express reference to contract. If that was the legislative intention, it would be remarkable if the addition of the final words of the subsection -- "in respect of" etc -- had the effect of removing the immunity. In my view, this is a false point. The terms on which applications for membership are to be admitted are for Lloyd's to determine in the exercise of a power, duty or function conferred upon Lloyd's by its statutory constitution. So, it is not surprising to find this specifically referred to in the sub-section. It would be very surprising if immunity were intended by the legislature to be withheld in respect of contractual liability as between the Corporation and its many thousands of underwriting members. The second question is: when did s 14 come into force? The Act was passed on July 23, 1982 when it received the Royal Assent. Both sides agree that the transitional provisions of Schedule 4 came into force on that date. As I understand the arguments, they are agreed that, by necessary implication, Schedule 1 also came into force on that date, whereas Schedule 3, dealing with repeals, did not come into force until the first meeting of the (new) Council, which took place on Jan 5, 1983. The plaintiffs contend that s 14 did not come into force until this latter date; the defendant submits that July 23, 1982 is the relevant date. Curiously, the Act contains no express provision dealing with this, in contrast to the great majority of statutes. The defendant principally relies on s 4 of the Interpretation Act 1978, which, by s 21, applies to all Acts whether public or private and provides: An Act or provision of an Act comes into force -- (a) where provision is made for it to come into force on a particular day, at the beginning of that day; (b) where no provision is made for its coming into force, at the beginning of the day on which the Act receives the Royal Assent. Lloyd's was incorporated by the first Lloyd's Act in 1871 which begins with a long historical preamble. Prior to incorporation the management of Lloyd's had been in the hands of a "Committee for managing the affairs of Lloyd's". Under that Act, a new committee was established, simply called "the Committee" which, by s 29, was to have the management and superintendence of the affairs of the Society. The Society itself had power to make byelaws covering a wide variety of regulatory matters (s 24). There was a somewhat cumbersome power of expulsion (s 20). The Lloyd's Act, 1911 inter alia widened the objects of the Society to cover all kinds of insurance business, not merely marine, and by s 12 gave the Committee power to suspend a member. This, too, appears to have been a cumbersome procedure, particularly with regard to the process of appeal from a resolution of the Committee suspending a member. The principal purposes of the 1982 Act appear to have been as follows: (i) the establishment of a Council of Lloyd's consisting of working members, external members and nominated members, to take over from the former Committee the management and regulation of the affairs of the Society, (ii) the transfer to the Council of the Society's former power to make byelaws, subject to certain safeguards; (iii) the setting-up by the Council of a Disciplinary Committee and Appeal Tribunal, coupled with the repeal of the particular processes of expulsion and suspension provided for in the earlier Acts; (iv) the separation of the activities of managing agents and brokers (ss 10, 11 and 12); (v) the granting of immunity by s 14. I note in passing that the date when the Act came into force is not only important to the issues in the present action: it is of importance to managing agents and brokers who at the date of commencement of the Act were exercising dual functions or were associated, and who were allowed five years "from that date" in which to complete their divorce from each other. Although not relied upon in argument, it seems to me that this is a significant pointer to the date when the provisions of the Act itself came into effect. Unless that was the one specific date expressed, ie the date of the Royal Assent, it would be difficult for the Council, as well as for the agents and brokers concerned, to know where they stood under the basis prohibitions contained in ss 10(1) and 11(1). And the need for that divorce, as well as the ascertainment of the five year period, are wholly independent of the coming into operation of the new Council on some future and uncertain date. The plaintiffs rely strongly on par 9 of the 4th Schedule, which provides: Until the first meeting of the Council, Lloyd's Acts 1871 to 1951 shall, subject to the provisions of this Schedule, continue to have effect as though this Act had not been passed. But there is no obvious connection between either the immunity granted to the Society or the five year dispensation granted to brokers and managing agents carrying on a dual function, etc and the first meeting of the Council. In my judgment, the correct approach to timing is this. Obviously, Schedule 4 came into force on the passing of the Act and provided the procedure and timetable for electing the new Council. By implication from par 2 of Schedule 4, Schedule 1 also came into force on that date, the old Committee being charged with the duty of setting-up the new register, without which the Council could not be elected. Schedule 2 is unhelpful on this issue: it merely provides for byelaws to be made by the Council once the Council has been elected. Schedule 3, "Repeals", though its operation is not expressly deferred to a later date, must by implication take effect only (at the earliest) from the date when the Council is in existence. There is, of course, no distinction between the various statutory provisions repealed, and they must all cease to have effect from the same date, whenever that is, subject only to Part II of the 4th Schedule. The most significant repeals are of ss 11 and 29 of the 1871 Act which respectively set up the (old) Committee and gave to it the management and superintendence of the affairs of the Society. Until the new Council was in operation those provisions had necessarily to continue, so as to avoid any lacuna in the management of Lloyd's. The expulsion and suspension provisions of the 1871 and 1911 Acts had to continue beyond the time when the Council came into existence: they had to continue in force until a Disciplinary Committee and the Appeal Tribunal were established. There are two other points to note. First, s 15(1)(a) provides that: Subject to the provisions of Schedule 4 to this Act [ie the transitional provisions] the enactments specified in Schedule 3 to this Act are hereby repealed to the extent specified in that Schedule. This brings in the necessary continuity of management and the preservation of the old disciplinary processes until the new ones are in place, as mentioned above. But, as Mr Simon points out, the opening words of reservation in s 15(1)(a) are absent from s 14. Secondly, he also points to par 3 of the 4th Schedule, which provides: In lieu of the general meeting of members of the Society which would be held in November 1982 but for this Act . . . (I emphasise those words -- as showing that the Act must have come into force before November 1982.) Finally, the immunity given by s 14 is an immunity to the Society. It has nothing to do with the election of the new Council and there is no reason why its operation should not take effect until the first meeting of the Council. To summarize, I see no express provision to support the plaintiffs' contention. Apart from Schedule 3, the Act, and in particular, s 14, came into force as provided by the Interpretation Act, 1978 on the date of the Royal Assent (July 23, 1982). DISPOSITION: Judgment accordingly SOLICITORS: NP Demery; Michael Freeman & Co