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Member, Beacon International Group, Ltd.
LONDON-Lloyd's of London has claimed another victory against its dissenting members after a court decision last week that allows the market to force those names to pay their dues.
In a High Court test case involving two members who refused to sign up for Lloyd's reconstruction and renewal plan, Justice Colman ruled that "the defendants have failed to establish that any of the grounds which have been argued before me represent arguable defenses or, if these actions were permitted to go to trial, would have any realistic prospect of success."
Dennis Leighs and David Wilkinson had argued that because they had not signed up, they were not liable to pay the reinsurance premium to close their Lloyd's liabilities into Equitas Ltd., the runoff reinsurer of all Lloyd's pre-1993 liabilities. About 1,300 members rejected Lloyd's R&R proposals.
In addition, Messrs. Leighs and Wilkinson argued that Lloyd's had acted fraudulently by concealing information about the scale of losses while encouraging members to underwrite in the market. This issue will be judged separately in a High Court hearing next month.
London-based lawyer Michael Freeman, who represented the two members, said the judge had made his decision based on the "pay now, sue later" principle. "He has said that even if (Lloyd's) is fraudulent, (members) must pay their premiums now and claim them back later," Mr. Freeman said. The members have until March 10 to produce evidence supporting their fraud allegations.
But Philip Holden, head of Lloyd's financial recovery department, called the decision a victory and warned members, "Our pursuit (of outstanding debts) will be vigorous and, by virtue of this judgment, will be effective."