Statutory demands were served on seven former names at Lloyd's under s 268(1) of the Insolvency Act 1986. The demands were made in respect of monies payable under judgments obtained by Lloyd's against the names on various dates between March 1998 and October 2000. The names counterclaimed, seeking to rely on issues raised in proceedings heard in the Commercial Court in March and April 2003 (see  All ER (D) 349 (Apr)) (the April judgment). The issue in those proceedings concerned whether the names could amend their pleadings to claim for misrepresentations said to have been made by Lloyd's at the times when they joined and in subsequent years. The judge refused applications to amend although he indicated that he would allow in principle applications to amend by names who had previously notified the court of a claim for negligent misrepresentation made to them in a Lloyd's brochure after October 1981 and relied upon in concluding arrangements prior to July 1982, those dates being of significance for purposes of the Limitation Act 1980 and the Lloyd's Act 1980. Permission to appeal the April judgment was refused by the judge but, at the time of the hearing of the instant case before the judge below, an application for permission to appeal the April judgment was pending before the Court of Appeal. The judge concluded that because the appeal process was on foot, and that Lloyd's did not contend that taken as a whole, the appeal could be dismissed as frivolous, it could not be said that the names had no claim under r 6.5(4)(a) of the Insolvency Rules 1986 (SI 1986/1925). He accordingly set aside the statutory demands. Lloyd's appealed. The appeal was heard at the same time as the application for permission to appeal from the April judgment (see  All ER (D) 392 (Dec)).
Rule 6.5(4)(a) of the 1986 Rules provided that an application to set aside a statutory demand could be allowed if '(a) the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt or debts specified in the statutory demand; or (b) the debt is disputed on grounds which appear to the court to be substantial ...'