Current Law Cases



Lloyds names; reinsurance premium; contract clause prohibiting counterclaim or set off; clause did not preclude setting aside of a statutory demand


Garrow v Society of Lloyd's


(CA) Court of Appeal




October 13, 1999


Robert Walker, L.J.; Brooke, L.J.; Morritt, L.J.


Insolvency Rules 1986 (SI 1986 1925) r.6.5(4)


[2000] C.L.C. 241; [1999] B.P.I.R. 885; [2000] Lloyd's Rep. I.R. 38; (1999) 96(42) L.S.G. 40


Times, October 28, 1999


SL served a statutory demand on G, a former Lloyd's name, in respect of his liability to pay a reinsurance premium. G accepted that the debt was due and owing, but applied to set aside the demand on the basis that he had a counterclaim for fraudulent misrepresentation for a commensurate sum. G's application was successful, and the demand was set aside under the Insolvency Rules 1986 r.6.5(4). SL appealed, relying on v Leighs [1997] C.L.C. 1398, [1997] C.L.Y. 3149, to contend that cl.5.5 in the original contract with G precluded any attempt to raise a counterclaim or set off in respect of the liability.


Held, dismissing the appeal, that the clause did not prevent G from raising the counterclaim.


Unlike the situation in Leighs, G did not dispute his liability for the reinsurance premium but was seeking a discretionary remedy under r.6.5(4) to set aside the statutory demand. The clause attempted to preclude any cause of action arising until the liability had been met in full, and further to prohibit names from issuing proceedings, "in connection with" their liability to pay the monies due. If it was assumed that G's application to set aside the statutory demand constituted the issue of proceedings, it could not be said to be "in connection with" his liability to meet the premium within the ambit of cl.5.5(b) if that clause was given a purposive construction in line with the approach adopted by the court in, Arbuthnott v Fagan [1996] L.R.L.R. 135, [1996] C.L.Y. 3583.




Contract terms, Counterclaims, Lloyds Names, Setting aside, Statutory demands


For G: Charles Purle Q.C. and Lawrence Jones. For SL: Edward Bannister Q.C. and Lexa Hilliard


For G: Grower Freeman & Goldberg. For SL: Society of Lloyd's


CHBKF 99 0597 3

Cases cited

Society of Lloyds v Leighs [1997] C.L.C. 1398, [1996] C.L.Y. 3583, [1997] C.L.Y. 3149

Arbuthnott v Fagan [1996] L.R.L.R. 135, [1996] C.L.Y. 3583