THE SOCIETY OF LLOYD'S v (1) GEOFFREY GEORGE TWINN (2) GAIL SALLY ANNE TWINN (2000)
INSURANCE - INSOLVENCY AND BANKRUPTCY - CONTRACT - BANKING
LLOYD'S NAMES LITIGATION : SETTLEMENT SCHEME : REDUCED LIABILITY : DEBT CREDITS ON FINALITY STATEMENTS : LLOYD'S NAMES : FINAL DATE : PAYMENT NOT MADE : WHETHER SETTLEMENT SCHEME ACCEPTED : UNEQUIVOCAL ACCEPTANCE : CONDITIONS ATTACHED : FULL LIABILITY : UNENFORCEABLE PENALTY : PENALTIES : RELIEF AGAINST FORFEITURE : NO PROPRIETARY INTEREST IN SETTLEMENT FUND : STATUTORY DEMAND : BANKRUPTCY ORDERS : INSOLVENCY ACT 1986 : STATUTORY BANKRUPTCY CODE : ADHERENCE TO
Lloyd's Names who had accompanied their signed acceptance forms for the Reconstruction and Renewal Settlement Agreement with a letter asserting their inability to pay had accepted the Settlement Agreement. Paragraph 38, Appendix 2 of the Settlement Agreement did not constitute a penalty or a forfeiture provision. * Leave to appeal to the House of Lords refused.
Appeal by the Society of Lloyd's ('Lloyd's') from the judgment of Jacob J on 11 May 1999 setting aside bankruptcy orders made by Mr Registrar James against the respondents ('Mr and Mrs T'), who were Lloyd's Names. The Registrar found that they had accepted the Reconstruction and Renewal Settlement Agreement extended by Lloyd's to Names in July 1996 by completing the acceptance form, although they did not return the accompanying payment forms. They did not pay the sums due by the specified deadline of 30 September 1999. Lloyd's therefore pursued them by serving a statutuory demand following bankruptcy proceedings for the full amount of their underwriting liabilities, based on Lloyd's rights under the Settlement Agreement. No application had been made to set aside the statutory demands. Jacob J held that Mr and Mrs T had not accepted the Settlement Agreement as the letter dated 23 August 1996 accompanying the signed acceptance forms from Mr T so hedged the acceptance around with conditions as not to constitute an effective acceptance at all. In that letter Mr T asserted that neither he nor his wife would be able to pay the net sums due from them under their respective finality statements. On appeal Mr and Mrs T also argued that paragraph 38, Appendix 2 of the Settlement Agreement, under which the settlement credits were lost if the net sum shown due in the finality statement was not paid by 30 September 1996, constituted a penalty or alternatively a forfeiture provision and was unenforceable.
HELD: (1) The true effect of the letter of 23 August was that Mr T was following up unconditional acceptances with an attempt to obtain concessions as to the means by which his and his wife's payment obligations under the Settlement Agreement might be discharged. This was borne out by subsequent correspondence. (2) An acceptance which sought an indulgence would be effective if it was clear that the offeree was unconditionally accepting the offer. Whether an acceptance was truly unconditional, with the counter-offer being collateral to the concluded contract, or whether the counter-offer was a condition of the acceptance was an issue which would depend on the facts of the particular case. The intended effect of a purported acceptance must be judged objectively from the language used and the surrounding circumstances. (3) On the facts of the case the probabilities favoured strongly the conclusion that the acceptances were unconditional. The judgment of the Registrar would be restored on the acceptance issue. (4) The substance of the Settlement Agreement was that the Name was offered a benefit, ie the settlement credits against his underwriting liabilities, provided he paid the balance by a specified date. If he did so, he discharged his liability. If he did not do so, his original liability revived. That was the reverse of a penalty. It was a conditional benefit. (Jones v Lloyd's : Standen v Lloyd's (1999) TLR 2/2/2000 approved). (5) The doctrine of relief against forfeiture was applicable only where the alleged forfeiture was of some proprietary interest (Jones (supra) approved). If the Name failed to pay his finality bills by 30 September 1996, nothing was forfeited. The Name simply did not fulfil the contractual condition upon which his entitlement to the credits depended. (6) Equitable relief from forfeiture was always on terms that the applicant complied with the contractual term the breach of which had led to the forfeiture. There had been no tender by Mr and Mrs T of the net sums that, under the finality statements, were payable by 30 September 1996. (7) Neither the penalty nor the forfeiture point was of any substance. (10) The points raised by Mr and Mrs T in contesting their indebtedness to Lloyd's on which the bankruptcy petitions were based, ought to have been raised on applications to set aside the statutory demands in the manner envisaged in the 1986 bankruptcy code (Insolvency Act 1986 and Insolvency Rules 1986).
Appeal allowed. Bankruptcy orders reinstated.
* The House of Lords refused applications by Geoffrey Twinn and Gail Twinn for leave to appeal in this case on 21 February 2001.
Edward Bannister QC and Mr J Briggs for the appellant. Ms C Mackenzie-Smith for the respondents.
LTL 23/3/2000 : TLR 4/4/2000
Document No. AC8600703