Court of Appeal hand down judgment in P&B (Run Off) Ltd v Woolley

On 7 February 2002, the Court of Appeal handed down judgment in P&B (Run Off) Ltd -v- Woolley.

P&B are the run-off managers of Syndicate 103. Mrs Woolley was a Syndicate 103 name. She refused to pay cash calls relating to the 1993 underwriting year of account. She argued that her membership of Syndicate 103 was not validly constituted. The Lloyd's Act 1982 permits the Council of Lloyd's to pass byelaws regulating, amongst other things, the relationship between Names, their Members Agents and Underwriting Agents. This case concerned the Agency Agreements Byelaw (No 8 of 1988). This prescribes standard form agreements to be entered between Names and Members Agents (a Schedule 1 Agreement), between Members and Managing Agents (a Schedule 2 Agreement) and between Names and Managing Agent (a Schedule 3 Agreement).

In Mrs Woolley's case, no Schedule 2 or 3 Agreements could be found. She argued that they had never been executed, and accordingly, although she had signed a Schedule 1 Agreement appointing and authorising her Members' Agent, and had agreed the Names' Syndicate List including Syndicate 103, she was not a validly constituted Name on 103 for 1993. Both the High Court and the Court of Appeal accepted that the requisite Agreements had been properly executed, but had been lost. Mrs Woolley was therefore unsuccessful on the key question of fact. Nevertheless, the Court of Appeal took the opportunity of commenting on the consequences of breach of a Lloyd's byelaw.

Mrs Woolley had argued that breach of a byelaw totally vitiated the underwriting relationship. This was based on the wording of the Agents Agreements Byelaw which expressly prohibits a name from authorising a managing agent to write business on that Name's behalf otherwise than on the terms of the three scheduled Agreements. The Agreements themselves make clear that they must be in writing. The Court rejected this argument. It restated the fundamental principle of Lloyd's that the interests of policyholders are paramount, and emphasised that the byelaw was passed to protect Lloyd's policyholders. The Court agreed that breach of a byelaw is a disciplinary offence which can result in disciplinary sanction, but such a breach does not undermine the validity of the contract to underwrite.

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