Current Law Cases



bankruptcy; statutory demands; delayed payment under Lloyd's hardship scheme; debt disputed


Debtors (Nos.4449 and 4450 of 1998), Re v Society of Lloyd's


Ch D) Chancery Division




December 2, 1998


Carnwath, J.


Insolvency Rules 1986 (SI 1986 1925) r.6.4(4)


[1999] 1 All E.R. (Comm) 149; [1999] B.P.I.R. 548




M was a member of Lloyd's and following the failure of his business he applied to Lloyd's for assistance under its hardship scheme. A proposed hardship agreement was agreed by M but the agreement of the bank that had acted as M's guarantor was not given, causing a withdrawal of the offer. In the meantime, M had been sent a settlement offer and finality statement by Lloyd's requiring payment by September 1996. M accepted the settlement offer but no payment was ever made resulting in letters of demand from Lloyd's. M contacted Lloyd's and referred to the hardship application and his attempts to make progress with the bank. Lloyd's sent M promissory notes indicating its willingness to pay the finality bill if the promissory notes were signed and returned and M used his best endeavours to finalise the hardship agreement. Lloyd's also confirmed that the proposals set out in the earlier hardship agreement remained open. M accepted the proposal and returned the signed promissory notes. The bank again held up completion of the hardship agreement and negotiations broke down. Statutory demands were served on M and he applied to set them aside. The registrar dismissed the application and M appealed.


Held, allowing the appeal, that the reconstruction and renewal settlement provided for payment of the sum due without set off, counterclaim or other deduction but it could not restrict the court's power to set aside a statutory demand under the Insolvency Rules 1986 r.6.4(4). M had substantial grounds for disputing the alleged debt based on the letter from Lloyd's offering to assume responsibility for payments under the finality statements.


Insolvency Keywords Lloyds, Statutory demands




For M: In person. For SL: John Briggs


For SL: Philip Coldbeck


4449/98; 4450/98

Sub nom

McAllister v Society of Lloyd's