Firms look to stay Lloyd's trials in hope of settlement

Solicitors acting for Lloyd's Names action groups whose court actions start in the next few months are applying for adjournments of their trials in order to await more details of the Lloyd's Corporation's £2.8 billion settlement plan.

At least three action groups applied last week to adjourn, including the 1,250-member Wellington Names group, advised by DJ Freeman. Others may follow if those applications are successful.

Wellington Names' negligence claim by 900 Names against a members' agent, managing agent and the syndicate's auditors Ernst & Young runs into "tens of millions".

DJ Freeman partner Dorothy Cory-Wright says: "The whole purpose of an adjournment is to consider the settlement without spending the money on court and lawyers' fees. I think there will be a settlement offer and very much hope that it's one that my Names will be able to accept."

The Wellington adjournment application follows the Commercial Court's rejection of DJ Freeman's proposal for a 'global moratorium' on litigation for all litigants, after opposition from some lawyers acting for Names whose cases are already part-through and where, in some cases, they are just awaiting judgment on quantum.

By delaying until next year, Wellington Names would be able to consider further details of Lloyd's Corporation's reconstruction plan, due in October and expected to be finalised in spring 1996.

In October, Lloyd's will give initial details of Names' premiums for Equitas, the new insurance company which will take on Lloyd's old liabilities and reserves. The premiums will be charged for off-loading Names' liabilities into Equitas. Only those who are bankrupt or owed compensation are likely to receive any cash.

Another advantage for Wellington Names is that they will have the benefit of a judgment in the Merrett Names case, a £400 million claim against a managing agent and auditors Ernst & Young, which has some "overlap" with the long-tail cases like Wellington, says Cory-Wright. The trial is currently under way, with More Fisher Brown acting for Names.

Optimism among lawyers over the settlement varies.

SJ Berwin partner Richard Slowe, advising Cuthbert Heath Names and other groups, says "goodwill and open-mindedness" from all sides over the settlement proposal could end litigation costing around £100 million a year. "But that does not mean that those jockeying for position should let down their guard," he adds.

Many other Names' lawyers reject the proposed settlement as drafted as well as the idea of adjourning their trial dates. This is because of the Court of Appeal judgment on the successful Gooda Walker case heralding a "first come first served" principle on recouping damages from limited funds.

Philip Rocher, of Wilde Sapte, thinks the adjournment move is "misconceived".

"I don't think there is anything concrete enough [in the settlement proposals] to justify adjourning the litigation."

Rocher says: "Lloyd's has to persuade a lot of interested parties to contribute as much as possible to the settlement. During that phase, it seems bizarre to take the pressure off people by putting litigation on hold."

Rocher, whose Gooda Walker case, winning £325 million plus quarterly hearings for future losses, is the first and biggest action group victory to date, adds: "I think you should continue the pressure on the other side until there is an 'in principle' offer from Lloyd's."

Mark Connelly, Richards Butler head of litigation advising the 1,640 Feltrim Names awaiting damage assessment this autumn, says his clients considered the adjournment issue, "but decided that it's not in their interest, and are keen to press on".

A lawyer for another group awaiting trial in October says Names foresee problems such as risk and extra cost with a moratorium or adjournment.

He also says adjournment is seen as a "godsend" for Names who are short of funds and cannot yet start their action.

Most lawyers say Lloyd's apparent lack of interest in adjourning its own Central Fund litigation against Names refusing to pay up is another reason to press ahead with actions.

Norton Rose partner Tim Maloney is advising the Sturge Action Group to press ahead and seek a trial date after a preliminary hearing last week, because of the 'first past the post' ruling.

Other lawyers unlikely to seek adjournments are those recently winning judgments on liability and damages against agents that have gone bust, and are now suing the agents' Errors and Omissions insurers under the Third Parties (Rights Against Insurers) Act 1930.

Reid Minty's Christopher Stewart-Moore, whose clients are suing Federation General, the Oakley Vaughan lead insurer, says: "I don't think the offer for Oakley Vaughan Names will be sufficient."

Names suing insurers have too much at stake to consider the settlement. An appeal lodged on the Charter Re judgment, due to be set down in September, will have a significant effect on reinsurers' liabilities and therefore likely funds available for pay-outs. The potential £3.9 billion extra funds riding on the case makes litigation for Names more worthwhile, say lawyers.