PETER DAVID KELLEY Appellant

v.

THE SOCIETY OF LLOYD'S Respondent

IN THE HIGH COURT OF JUSTICE IN THE CHANCERY DIVISION IN BANKRUPTCY

NO. 182 SD 1999

Royal Courts of Justice

Thursday 27th January, 2000

B e f o r e: MR. JUSTICE LLOYD

2000 WL 1027169

Transcribed by BEVERLEY F. NUNNERY & CO.,

Official Shorthand Writers and Tape Transcribers

Quality House, Quality Court, Chancery Lane, London WC2A 1HP

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MR. L. JONES ( instructed by Messrs. Grower Freeman & Goldberg) appeared on behalf of the Appellant. MS. L. HILLIARD ( instructed by Lloyd's Legal Department) appeared on behalf of the Respondent.

J U D G M E N T

(As approved by the Judge)

MR. JUSTICE LLOYD: I have before me an appeal from a judgment of Mr. Registrar James given on 9th December 1999 dismissing an application by Mr. Kelley to set aside a statutory demand issued and served on him by the Society of Lloyd's. Mr.Kelley is an accountant and a Name at Lloyd's and one of those very many unfortunate people who were caught up in the huge losses that affected the Lloyd's market in the later 1980s and early 1990s. He was a recipient of the Lloyd's settlement offer document in the summer of 1996 by which Lloyd's sought to, and in the event in large part achieved, finality for many of its Names by an overall settlement whereby those Names who accepted the offer had a line written under their liabilities, so to speak, as at 1992 by reinsuring the outstanding liabilities into Equitas.

The issue which is raised by the present proceedings is whether Mr. Kelley was an accepting Name or not. With very little by way of exception, Lloyd's have treated him since 28th August 1996 as an accepting Name. He contends that he is not. The statutory demand served on him proceeds on the footing that he is an accepting Name and is therefore bound by the figures in the offer that was put to him. If that is right, then he has no defence to the sums set out in the statutory demand. He contends that his acceptance was conditional, not unequivocal and was therefore in the nature of a counter offer which Lloyd's never accepted or never complied with the condition in relation to it.

I am relieved from the need to go into the details of the offer and the process for acceptance generally by the fact that that has been the subject of a considered judgment of Mance J. (as he then was) in a case reported as Manning v. Society of Lloyd's [1997] C.L.C. 1411. In the cases reported there, Mance J. was considering I think six cases where Lloyd's contended that the Name was not an acceptor and the Names were, in a variety of circumstances, arguing that there was a binding contract between them and Lloyd's. In some cases they said this was on the terms of the settlement offer put to them but in certain other cases they contended that they had made a counter offer to Lloyd's which had been accepted by it. I can deal with the general circumstances of the offer and the acceptance form and procedure and the way that acceptance forms were processed by Lloyd's simply by referring to what Mance J. said in that judgment.

The circumstances of the present case are different and possibly unique, certainly not particularly likely to be replicated in other instances. Iunderstand from the documents put before the court that Mr. Kelley was facing not only the severe difficulties presented by Lloyd's losses but also other financial problems to do with matters that had arisen in the course of his practice and possibly matters to do with the decline in property values and increases in rates of interest. There was, under the settlement offer, a provision for what was called tranche 4 debt credit, which was directed towards helping those Names whose standard of living would be reduced to an unacceptably low level through payment of their finality bill in full. The finality bill which had been communicated to Mr. Kelley on an indicative basis showed that he was going to have to pay 100,000 in order to achieve the release from the other outstanding liabilities. His position was that he was simply not able to pay such a sum and he applied for a review of that position. By July 1996 the position had been reached that, Lloyd's having contracted out, so to speak, the review of his circumstances, Messrs. Dibb Lupton Broomhead, solicitors, informed him that they were recommending to the relevant department, the Assistance and Recovery Department of Lloyd's, that a sufficient tranche 4 allocation should be made to reduce his bill to finality with his funds at Lloyd's to 40,000. So that would have led to him being required to pay no more than 40,000 to achieve finality.

Even that was not something that Mr. Kelley was very happy with and he continued in correspondence about the figures. The final position before the original deadline for acceptance of the settlement offer was that on 23rd August Lloyd's wrote to him to inform him that provided the reconstruction and renewal plan was adopted by Lloyd's as a whole, he would be allocated a sufficient debt credit from tranche 4 to reduce his finality bill to an amount of 60,000 after the use of his funds at Lloyd's. So that was clearly a further disappointment to Mr. Kelley. He had already had his finality bill for the purposes of the settlement offer but by the letter of 23rd August he was assured that he would only be required to pay the sum of 60,000 towards the bill.

The terms of the settlement offer were originally that it had to be accepted, or not, by midday on 28th August 1996. The time for acceptance was later extended to 11th September. Nothing turns on that.

The offer was accompanied by a form for acceptance which was sent in blank to Names but with provision intended to assist Lloyd's to process it on its return, including the printing on the reverse of the name and address and various figures that no doubt had to do with identifying him, and a bar code, and a set of boxes at the bottom of the form marked "For Lloyd's use only" for use in the process of checking. The document is headed "Lloyd's Settlement Offer, Acceptance, Assignment, and Attorney Form". There are various words of caution such as that the document is important and requires immediate attention and should be read in connection with the finality statement and the settlement offer document and so on.

The substance of the form is in three sections. The main section, which continues on to the second page, is headed "Acceptance of the Settlement offer". I will read what it says. There are in effect two substantive paragraphs as follows:

"I have carefully read the Settlement Offer Document, including the Settlement Agreement set out and described therein. In consideration for the mutual covenants and agreements and other good consideration, I hereby irrevocably accept the settlement offer, agree to be bound by the terms and conditions set out in the Settlement Agreement, make all releases, waivers, assignments and other dispositions and grant all powers of attorney, authorities and appointments thereunder.

"I hereby confirm my agreement that my share of any monies recovered in connection with my Lloyd's litigation pursuant to a judgment or award or related settlement (including interest) held by solicitors shall be paid to Lloyd's, or at Lloyd's direction, and that my signature below constitutes my instructions to any such solicitor to make payment forthwith on written demand by Lloyd's, subject to the conditions set out in clause 2 of the Settlement Agreement being fulfilled."

Below that there is the form providing for execution. It is to be executed as a deed with the following words "Signed and delivered as a deed by", and then spaces for the signature and for the signatory's name. Then there are some boxes which do not matter in the present case. Then there is a blank for the date, a blank for the contact telephone number of the signatory, and then there is provision for two witnesses providing for their signatures, their names and their addresses, with various references for special execution in certain cases not relevant.

Over the page there is a provision for execution before a notary, which is only relevant to execution in the United States of America. Then the balance of the second page includes the two other sections. Section 2 is resignation, with a cross-reference to the relevant part of the settlement offer document. The words are:

"I hereby give notice of my resignation from membership of Lloyd's."

There is a box which the member may tick if he wishes. Section 3 is headed "Payment Form" which has another cross-reference to the settlement offer document and the words are:

"I do NOT intend to return a Payment Form."

Again, there is a tick box for completion if the Name wishes.

On 28th August Mr. Kelley signed the form that had been sent to him and wrote his name under his signature, wrote the date 28th August in, wrote his contact telephone number in, and that was all witnessed by a B. Whitehead and an R.F. Tyler, both of whom signed and wrote in their names and addresses. On the reverse side Mr. Kelley ticked the resignation form and the payment form, so that he did give notice of resignation and stated that he did not intend to return a payment form.

Then, at 11.09 in the morning, he sent to Lloyd's by fax the front page of that form so executed. That was duly received. It seems that within a matter of minutes he had thought better of this. At 11.14 he sent a further fax to Lloyd's. This consisted of two pages, whereas his first fax had been simply the one page consisting of the front of the acceptance form in its then condition. At 11.14 he sent to Lloyd's by fax a letter bearing the date 28th August in the following terms:

"I am enclosing my acceptance of the Lloyd's settlement offer faxed today at 12 noon, duly signed and witnessed.

"My acceptance is, therefore, subject to the following condition in that I am allocated a tranche four credit of not less than 10,000.

"This morning I received a letter from Financial Recovery Department in connection with my appeal for a tranche four debt credit under Lloyds Reconstruction and Renewal Plan. My appeal was lodged on the 25th July and subject to a request for further information by Lloyds on 8th August and replied to on the 14th August. Lloyds letter dated 23rd was prompted by my telephone call to Miss Lynda Tickner, Financial Recovery Department, on Friday 23rd August."

The 23rd being a Friday, as he says, the next working day would have been Tuesday 27th, and the 28th was the Wednesday. What he is saying is that the letter of 23rd August from Lloyd's notifying him of a 60,000 net finality bill after tranche 4 debt credit had been received that very morning.

So that is his letter, and that was one of the two pages that were sent by fax. The other page was the front page of the acceptance form but with some additional words written on it. At the end of the first paragraph in the acceptance of the settlement offer section, he had written in the words:

"Subject to conditions set out in accompanying letter attached."

It is now common ground between the parties that those two documents were what he sent by fax at 11.14 and not some other documents. He also put the letter and of course the whole of the acceptance form in its then condition into the post, and it was received by Lloyd's the following day, the 29th, and, indeed, bears a date and time stamp which the evidence shows was put on automatically at 11.39 on 29th August.

The page first faxed at 11.09, which bears a fax transmission note of its receipt shows that it was received at 11.10 on 28th August and that the fax consisted of only one page. It also bears a manual acceptance or receipt stamp dated 28th August as well as having had written on it some numbers which I take to be Lloyd's internal reference number for Mr. Kelley.

The hard copy of the amended form of acceptance sent through the post bears not only the automatic date stamp of 29th August but also a manual receipt stamp dated 28th August. The explanation for that put forward in the evidence is that that particular rubber stamp had not been changed from the 28th to the 29th by the time that it was imposed on the document.

Lloyd's, having received the original of the acceptance form and having stamped it as I have indicated, made a copy of it, stamped that copy and returned it to Mr.Kelley. So much is common ground, as I say, now.

Mr. Kelley did not pay the sums that would have been due from him under the settlement agreement as an accepting Name within the due time. On 16th January 1997 Messrs. Dibb Lupton Alsop (as the firm of solicitors had by then become) wrote to him on behalf of Lloyd's referring to the settlement offer and saying:

"... the terms of which you accepted by returning your Acceptance Form duly signed and completed. By returning this form to Lloyd's, you agreed to be bound by the terms of the Settlement Agreement ..."

They said that under the terms of the agreement he agreed to pay sums due in respect of the finality statement, adjusted where appropriate, in accordance with the terms set out in the settlement offer document which he had already received. They set out details in a schedule and said that no such payment had been made by him and that the purpose of the letter was to put him on notice that in the event that payment was not made in seven days it was to be anticipated that proceedings would be commenced without further notice.

The sums set out in the schedule were 100,034, which was the amount indicated in the finality statement before deducting or taking into account funds at Lloyd's. The funds at Lloyd's were by then stated to be 40. But, in addition, there was said to be due credits lost as a result of non-payment in the sum of over 53,000. Those were credits which would have been available to Mr. Kelley under the settlement offer as an accepting Name but only if he paid in accordance with the terms of the offer. So the total sum said to be due was 153,286.

He replied to Dibb Lupton Alsop saying that the letter and the schedule was incorrect because he had not been allocated a sufficient debt credit from tranche 4 to reduce his finality bill. What he did not say was that he was not an accepting Name and that he was not bound by the settlement offer.

Correspondence continued. There are a number of letters to and fro, some of which appear to have been the result of or the correction of mistakes by Lloyd's. There is a letter, for example, of 28th August 1997, not, I think, in this case a letter sent by mistake, referring to interest credited to his funds at Lloyd's and to the fact that those funds were not capable of being released as they might have to be off set against his tranche 4 debt credits. Tranche 4 debt credits are only available to an accepting Name and, strictly speaking, they may only be available on condition that payment is made in time. It is a feature of the correspondence between Mr. Kelley and Lloyd's thereafter that Lloyd's showed itself willing to consider an accommodation and to enter into discussion about allowances and figures even though in strictness Lloyd's position could have been that a bargain had been struck, Mr. Kelley was in breach of the terms having not paid in time, he had forfeited the benefits that would otherwise have accrued to him and there was nothing for him to do but to pay the full amount promptly.

Nevertheless, as I say, there is correspondence passing between Mr. Kelley and Lloyd's in the course of which the accuracy of the figures and the appropriateness of the figures was discussed. But, despite this, Lloyd's strict position, as indicated in Dibb Lupton Alsop's letter before action, was that Mr. Kelley had accepted the offer, was bound by the settlement agreement, had failed to pay and was due to pay a large sum of money.

On 8th July 1998, Lloyd's sent to Mr. Kelley a further letter enclosing a draft statutory demand. The letter referred to his position as an accepting Name bound by the terms of the settlement agreement and his failure to pay, and the statutory demand in draft detailed a then current liability of 174,889, payment of which was said to be required. They warned Mr. Kelley that unless full repayment was arranged or adequate security provided a formal demand would in due course be served as a preliminary step towards his bankruptcy. They invited him to make contact in writing or by telephone with one of a number of individuals in order to formulate proposals for settlement.

Mr. Kelley wrote back a letter which is undated but bears a received stamp on 3rd August 1998, not asserting that he was not bound by the settlement agreement, stating that he remained a member of Lloyd's and asking if it would be possible to meet in order to settle matters on the basis of a sensible formula to be paid off over time.

It seems that some letters or correspondence may have gone astray but eventually, by a letter of 3rd September 1998, Mr. Kelley sent to Lloyd's some further documentation with a view to, as it were, a bid to be allowed to pay less than the full amount due.

On 8th October Mr. Kelley, following inconclusive correspondence, wrote to Lloyd's, to Miss Merchant of the Financial Recovery Department, enclosing a financial declaration and supporting documentation and ending up by saying:

"So as not to prejudice other creditors, some of them judgment creditors I am prepared to stand by my original offer of a contribution of 10,000. A cheque is enclosed in full and final settlement."

On 15th October, Miss Merchant replied, acknowledging the letter, seeking clarification of a number of matters and, as regards the cheque, saying this:

"Please find enclosed your cheque for 10,000 which Iam returning to you. It will not be possible to consider your offer in settlement of your Reconstruction & Renewal liabilities until all requested information had been received. Whilst your offer will be forwarded to the Executive Panel for its consideration it is by no means certain that it will be accepted."

So that matter remained outstanding.

Then on 24th November 1998 Miss Merchant wrote again to Mr. Kelley, a letter in the following terms:

"I write further to your recent correspondence with the Financial Recovery Department regarding the cost of finality under the Lloyd's Reconstruction & Renewal Plan (R & R).

"Your case has now been considered by Lloyd's and, based upon the financial information supplied by you, it has been decided that it would be inappropriate to reduce your outstanding R & R liabilities.

"As you have not accepted the Settlement Offer, you are now required to pay the full amount due as set out in your Finality Statement without the various credits from which you would have benefited had you accepted R & R.

"Payment of the full amount should be made within 21 days. Failure to pay this amount by the due date will result in Lloyd's continuing legal proceedings for the amount set out in the draft Statutory Demand dated 8 July 1998 together with interest and legal costs."

That was the first and, so far as I can see, the only document in which Lloyd's described Mr. Kelley as a person who had not accepted the settlement offer. Evidence has been put in explaining that Miss Merchant set out to reject the claim for further relief and to send to Mr. Kelley in effect a "pay up or else" letter, and pressed on her computer the wrong button or combination of buttons resulting in him being sent a letter in a form appropriate for those who had not accepted rather than for those who had accepted.

Mr. Kelley acknowledged that letter without comment on the question of whether he had accepted the offer or not, and asking to meet a senior person to discuss the matter. Eventually a meeting took place in December 1998.

After that letter Mr. Kelley wrote again to Lloyd's on 12th January 1999 going again into the question of the appropriateness and accuracy of the figures in his finality statement, and in particular, as Mr. Jones on his behalf draws to my attention, referring to his stop loss cover. The point about that is that stop loss cover was irrelevant to accepting Names because the entire benefit of any stop loss cover under the settlement offer was assigned to Equitas. Despite that irrelevance in the case of an accepting Names, on 19th January Lloyd's replied to his letter and made a number of comments about the stop loss figures. The correspondence then continued inconclusively until, on 8th March, Lloyd's issued the statutory demand and asserted that Mr. Kelley owed the sum of 138,084.42. That was then followed by his application to set aside the demand.

Immediately after the date of this demand--and I am not quite sure whether it had come to his hands by this time; I suspect not--on 11th March Mr. Kelley wrote to a Mr. Crust at Murray Lawrence Members Services, who I take to be his members' agent, commenting on a letter that he had received from Mr. Crust and including in some comments about stop loss the following paragraph:

"You state that I lose the benefit of Debt Credit Tranche 3 although somehow the Stop Loss Underwriters have the benefit of this. I think this is incorrect. As a non-acceptor, I am not party to R & R nor do Itherefore have an agreement with the Stop Loss Underwriters pursuant to that agreement. Thus, the Debt Credit of 3,454 comes out the reconciliation."

That is, so far as I can see, the first time in which Mr.Kelley described himself as someone who had not accepted the settlement offer. Mr. Crust replied to his letter on 17th March saying that he himself had confused matters and saying:

"As a Non-Acceptor, the loss to you of the Tranche 3 Debt Credits does of course mean that they cannot be factored into the Stop Loss calculation. I apologise for the fact that my comments indicated otherwise."

Then he goes on to deal with the figures.

As I say, Mr. Kelley then applied to set aside the statutory demand and he instructed Messrs. Grower Freeman & Goldberg, and directions were given for evidence. There was some discussion as to what those directions should be. A particular position was taken in the evidence in support of the application which is no longer maintained in quite the same way as a result of it becoming clear precisely what documents were sent to Lloyd's by fax on the morning of 28th August.

On 26th April 1999 Lloyd's wrote to Messrs. Grower Freeman and Goldberg in response, in effect, to the case made in the affidavit of Mr. Freeman and the exhibits to that affidavit sworn in support of the application to set aside the statutory demand. Lloyd's enclosed three documents, the second of which was a copy of Mr. Kelley's acceptance form dated 28th August 1996. Mr. Jones tells me, and I accept, that that was a copy of the form as received by Lloyd's through the post and therefore the amended form.

Mr. Crust wrote to Mr. Kelley a letter of 15th July 1999 which Mr. Kelley then exhibited to a witness statement. In Mr. Crust's letter, which follows a letter of 6th July and a subsequent brief meeting on the day of the letter itself, described as:

"... concerning the matter of whether or not you are regarded as having accepted the terms of the R & R Plan Settlement Offer."

He says this:

"... I have now reviewed our files and these confirm the view I expressed in our meeting which was that Lloyd's initially considered you an acceptor of the R & R Plan (albeit on a conditional basis) but that, subsequently, it altered your status to that of Non-Acceptor.

"Your acceptance conditions were, in common with many Names, that you had accepted on the basis you would receive an allocation of tranche 4 Debt Credits to help you meet your finality bill. This conditional acceptance status continued until late November 1998 when your negotiations to secure Debt Credit tranche 4 assistance ceased. At this point Lloyd's regarded you as a Non Accepting Name. Our files were noted accordingly following receipt of a copy of a letter, dated 24th November 1998, to you from Lloyd's Financial Recovery Department which clearly stated you to be a Non-Accepting Name."

Having seen this letter when it was used in evidence in these proceedings, Lloyd's wrote to Mr. Crust asserting, among other things:

"Every feed of data sent to Murray Lawrence Members Services Limited by Lloyd's Central Services Unit ('CSU') concerning Mr. Kelley's acceptance status (of which there were many during the period September 1996 to March 1997) will have shown Mr. Kelley to be an accepting Name, i.e. somebody who accepted the Settlement Offer without conditions."

And also stating that:

"The only record which [Mr. Crust's firm] can possibly have of Lloyd's ever stating that Mr. Kelley was not a valid acceptor is a copy of Julia Merchant's erroneous letter of 24 November 1998."

Mr. Crust answered that letter on 11th August and said, among other things, that he confirmed:

"a) the data feeds received by our Agency from the MSU did show a 'Y' indicator against Mr. Kelley's acceptance status, and

"b) the only record we have ever received to indicate that Mr. Kelley was considered a Non-Acceptor of the R & R Plan was Julia Merchant's letter of 24th November 1998."

That is the state of the correspondence.

It is right that I should say this. Mr. Kelley's letter of 28th August 1996 saying that he was imposing a condition that he was allocated a tranche 4 credit of not less than 10,000 is said by him to be not only a mistake but a mistake that would have been obvious to anyone in Lloyd's who was reading it on a remotely informed basis in the context of the correspondence that had been passing, and in particular the letter that Mr. Kelley himself referred to of 23rd August. On the face of it, he was imposing a condition that he be allocated a credit of not less than 10,000. The letter of 23rd August showed that he was being allocated a credit of not less than 40,000 so as to reduce his finality bill to 60,000.

At some point after writing and sending the letter to Lloyd's, he altered the figure 1 in 10,000 to 9, thereby, he says, correcting the false impression that the 10,000 gave and bringing it into line with the meaning that any informed reader would have assumed, namely that he was to be allocated a tranche 4 credit sufficient to reduce his finality bill to no more than 10,000. It is fair to say that because he had been arguing that even 40,000 was too much, it is somewhat surprising, if it be the case, that he should be saying: "Iam accepting this only on condition that the credit given to me is at least 10,000".

The matter came before the learned Registrar, as Isay, and on 9th December he gave judgment in favour of the Society, rejecting the claim to have the statutory demand set aside. He gave a fully reasoned written judgment running to 18 pages in which he reviews the facts, reviews the way that the matter had been presented in the evidence as it evolved, and the arguments put before him on that occasion by Mr. Freeman on behalf of Mr. Kelley. In the last four pages of his judgment he explains his reasons for rejecting the application.

In essence it was argued by Lloyd's that Mr. Kelley had communicated an unconditional acceptance of the settlement offer to Lloyd's by means of the 11.09 fax and that, unless Mr.Kelley could show a genuinely triable issue to the effect that the acceptance had been waived by Lloyd's by its words or conduct, there was no answer to the claim based on the proposition of an unconditional acceptance of the settlement offer by Mr.Kelley. The Registrar reviewed the arguments and the evidence and rejected the arguments for the reasons that he gives.

Subject to one question which Mr. Jones has raised as to whether the Registrar was right to say that if there was to be a representation that the first fax would not be relied on it must have been made to Mr. Kelley before the second fax was sent, as to which I am prepared to accept that that may be debatable, I can find nothing to take exception with in the Registrar's judgment.

But it seems to me that the matter can be looked at in an even more simple and straightforward way, albeit by reference to a point which had not been taken, so far as I can see, in the correspondence and the evidence before today. The acceptance form is a deed. It was executed as a deed in the form in which the front page was sent to Lloyd's by fax at 11.09. After execution Mr. Kelley altered it by inserting the words that I have read out and which appear in the hard copy received by Lloyd's on the 29th, in the copy of that sent back to Mr. Kelley by Lloyd's and of course also in the faxed copy of the front page sent to Lloyd's at 11.14. But it was not re-executed, even if it would have been open to Mr. Kelley to re-execute it, having already executed it once and communicated it to Lloyd's by sending the front page to Lloyd's by fax.

In those circumstances, it seems to me the amendment to the deed after execution and without re-execution is a complete legal irrelevance. It has no more relevance than if Lloyd's had written something on or if Mr. Jones had written something on or if one of the witnesses had written something on it. The deed was complete, was executed in its original form, and matters written on thereafter without re-execution do not qualify or alter its effect in any way.

That being so, it was of course right for Mr. Kelley to send the document to Lloyd's as he did by post. It was sent with the additional words written on but those words are, as I say, of no force or relevance. Although no one focused then on the point of the difference between the two forms of the one document, it seems to me that legally Mr. Kelley's acceptance of the settlement offer was indeed complete when he executed the document and delivered it and communicated it to Lloyd's as he did at 11.09 or 11.10 in the morning, and that which was done thereafter cannot possibly qualify the effect of what he had done up to that point.

It seems to me that that position could only have been varied if Lloyd's had agreed to accept the second state of the document in place of the first state of the document. I note that in the Manning case one of the acceptance forms had been signed but had not been executed as a deed, the relevant parts of the deed being omitted and no witnesses having attested the execution. Mance J. said that that was a point which had not been taken at the time and that Lloyd's would no doubt have been entitled to reject the purported acceptance on that ground but the point had not been taken and he said, had it been the only point available to Lloyd's, questions of waiver might have required further examination. It did not because there were many other points taken by Lloyd's of a different nature.

But in order to secure Lloyd's agreement to the acceptance of the altered form, it seems to me that it must have been necessary for the parties to have addressed that point and to have dealt with it in an unequivocal way. Since the point was never addressed it has never been dealt with in an unequivocal way or at all and it seems to me that for this additional reason, quite apart from those relied on by the Registrar which, with the one exception that I have mentioned, I would endorse and adopt as my own, it seems to me that there is no possible defence to the Lloyd's claim and that the Registrar was right to refuse to set aside the statutory demand and that I must dismiss the appeal accordingly.

MS. HILLIARD: My Lord, thank you very much. The petition has been presented and therefore I do not need to ask you to direct that one be presented. We did pass to Grower Freeman and Goldberg today a statement of costs of the appeal. That was not filed in court in time. I do not know whether you want to deal with the matter of costs now. It is very short.

MR. JUSTICE LLOYD: I would wish to deal with the question of costs now. Whether I can deal with it by way of summary assessment if you have not lodged your schedule in time is another matter.

MS. HILLIARD: Yes, I know, my Lord. Perhaps if I can just hand a copy up to you.

MR. JUSTICE LLOYD: Yes. (Same handed). Yes. Well, you invite me to make an order that Mr. Kelley pay the Society's costs.

MS. HILLIARD: Yes, I would invite you to do that, my Lord.

MR. JUSTICE LLOYD: And you would ask me to assess them summarily on the basis of this schedule?

MS. HILLIARD: Yes, please, my Lord. It has been done at the previous hearings, both the application before Registrar James and the application that was made to restrain presentation of a petition.

MR. JUSTICE LLOYD: Yes.

MS. HILLIARD: I cannot say much about the costs other than they are reasonable. In fact they do not, I think, include ... (Counsel conferred). I am being instructed that the solicitors costs of today are on the basis that there is a one day hearing today because that is what it was listed for.

MR. JUSTICE LLOYD: So that is the five hours?

MS. HILLIARD: Yes.

MR. JUSTICE LLOYD: So we can cut that down a bit. And Lloyd's cannot recover VAT?

MS. HILLIARD: Well, my Lord, this issue has come up before. In fact the assistant solicitor dealing with this particular case is, in effect, if you like, hired out to Lloyd's from Hammond Suddards, and Hammond Suddards charge VAT on their charge-out rate to Lloyd's.

MR. JUSTICE LLOYD: So they charge Lloyd's VAT?

MS. HILLIARD: Yes, they do.

MR. JUSTICE LLOYD: But Lloyd's is presumably not a VAT-registered person?

MS. HILLIARD: Yes, it is.

MR. JUSTICE LLOYD: It is. Then it can recover its VAT? (Counsel conferred).

MS. HILLIARD: I am not able to say to what extent we are able to recover it.

MR. JUSTICE LLOYD: But it is VAT-registered?

MS. HILLIARD: I am instructed it is VAT-registered, yes.

MR. JUSTICE LLOYD: Then I shall assume that it can recover its VAT.

MS. HILLIARD: Well, I am not able to tell you otherwise.

MR. JUSTICE LLOYD: Yes. If you want to raise that point on future assessments, you had better get some clear instructions.

MS. HILLIARD: Yes, I had better find out what the position is.

MR. JUSTICE LLOYD: So, subject to that and to reducing the time for the solicitor's attendance at hearing, you invite me to assess on the lines of that schedule?

MS. HILLIARD: Yes, my Lord.

MR. JUSTICE LLOYD: Mr. Jones, what do you say?

MR. JONES: My Lord, I have really nothing much to add. It is late; we have just considered it. Subject to those reductions, in other words, the hearing, 500 be halved, and the VAT removed, then I can say no more.

MR. JUSTICE LLOYD: Very well. I will order Mr. Kelley to pay the Society's costs of the appeal, which I will assess summarily in the amount of 3,000.

MS. HILLIARD: Thank you, my Lord.

MR. JUSTICE LLOYD: Is there any other matter I need to deal with?

MR. JONES: My Lord, no.

MR. JUSTICE LLOYD: You do not wish to apply for permission to appeal?

MR. JONES: My Lord, I will make that formal application.

MR. JUSTICE LLOYD: I think since it would be a second appeal, even though I have introduced a matter not raised before, but since I am upholding the Registrar's reasons, it is a matter on which, if you wish permission to appeal, you must apply to the Court of Appeal.

MR. JONES: So be it, my Lord.

MR. JUSTICE LLOYD: Thank you for your assistance.