LLOYD’S - SERVING STATUTORY DEMANDS ON NAMES

(McAllister v Society of Lloyd’s, 1999, unreported; Garrow v society of Lloyd’s, 1999, unreported)

Two decisions of the Chancery court in recent months have shown some sympathy towards Lloyd’s Names who have been unable to meet their obligations under the terms of the Reconstruction and Renewal Settlement of 1996 and who have been faced with bankruptcy by reason of the service of statutory demands by Lloyd’s for the outstanding premiums. As is well known, under the settlement Lloyd’s Names were required to pay reinsurance premiums to a dedicated run-off company, Equitas, established to take over the underwriting liabilities of the market for the years 1988 to 1992. That obligation was held by the Court of Appeal in Society of Lloyd’s v Leighs [1997] CLC 759: (a) to be binding on all Names whether or not they had agreed to the settlement; and (b) to be independent of any action that Names might have against Lloyd’s or persons within it in respect of their losses (‘pay now sue later’). In McAllister v Society of Lloyd’s (forthcoming in [1999] Lloyd’s Rep IR) the issue was whether Names who had agreed to the settlement but had expectations of relief from the Hardship Fund could have statutory demands set aside. In Garrow v Society of Lloyd’s (forthcoming in [1999] Lloyd’s Rep IR) the question was whether dissenting Names had the right to have the statutory demands set aside pending the outcome of their actions against Lloyd’s. The latter case in particular is of general significance for the Lloyd’s market.