The Supreme Court yesterday overruled a High Court judge and found he should allow Lloyds underwriters to implement a settlement of its long-running legal dispute with associated companies of Superwood Holdings plc.

The case originally arose out of a decision by four insurance companies to repudiate compensation claims following a fire at the Superwood premises at Bray, Co Wicklow, in October 1987.

Superwood sued Lloyds, Sun Alliance Insurance Group, Prudential Assurance Company Limited and Church and General Insurance Company Limited. The original High Court hearing lasted 116 days. The judgment of retired Mr Justice Rory O'Hanlon ran to 423 pages and the transcripts of the trial to over 8,500 pages. Mr Justice O'Hanlon dismissed Superwood's claim.

In June 1995 the Supreme Court reversed Mr Justice O'Hanlon's decision and sent the matter back to the High Court to assess Superwood's losses.

The new hearing before Mr Justice Smyth has been in progress for 88 days, 55 of which have been devoted to cross-examination of Superwood chairman, Mr Richard Bunyan. That cross-examination is not yet complete.

During the course of the hearing, Mr Justice Smyth dismissed an application on behalf of the Superwood companies for an order to extend the time for accepting a lodgement in court of monies made by Lloyds.

The High Court judge considered that all the claims, causes of action, the amount of the damages and who was to pay the enormous legal bill were inextricably linked. The Superwood companies appealed this decision to the Supreme Court.

Yesterday, the Chief Justice, Mr Justice Hamilton, giving the Supreme Court decision, said the contract of insurance entered into by Lloyds was separate to that entered into by the other insurance companies. It appeared the contract was only with Superwood Ltd, Superchip Ltd and Superwood Exports Ltd. It did not appear to include Superwood Holdings plc.

The four insurance companies' liability on foot of the policies was: Sun Alliance 30 per cent; Prudential 20 per cent; Church and General 10 per cent and Lloyds 40 per cent.

Mr Justice Hamilton said Lloyds was granted separate legal representation in the course of the current High Court case and this appeared to have resulted in the settlement of the Superwood companies' claims in so far as they related to Lloyds.

The other insurance companies did not, and indeed could not, challenge Lloyds' right to settle the claim brought against it by the Superwood companies, he said.

The insurance companies did object to payment to the Superwood companies of monies lodged in court by Lloyds in satisfaction of portion of the Superwood companies' claim against it. They argued there could be no payment until the costs issue was decided.

The Chief Justice said the Superwood companies and Lloyds were the only parties to the proceedings who had "any possible proprietorial interest" in the monies lodged in court. In those circumstances and in the absence of any conflicting interest, Mr Justice Hamilton said he believed the Lloyds monies should be dealt with by the High Court judge in such a manner as the Superwood companies and Lloyds had directed.

He was satisfied there was no rule of law, nor did the interests of justice require, that there should be any impediment to the implementation of a desired settlement of even portion of these long-protracted proceedings.

The other members of court were Mr Justice O'Flaherty and Mr Justice Murphy.