MARCHANT & ELIOT UNDERWRITING LTD v HIGGINS sub nom HIGGINS v MARCHANT & ELLIOTT UNDERWRITING LTD (1995)

CA (Leggatt LJ, Rose LJ and Roch LJ) 21/12/95

EUROPEAN - INSURANCE - COMPETITION

LLOYD'S NAMES LITIGATION : INSURANCE : ARTICLE 85 EC TREATY

Surprising EC Treaty defence by a Lloyd's name to a claim by his managing agents for payment under the Lloyd's 'pay now and sue later' agreement.

Defendant's appeal by a name at Lloyds against summary judgment for £6,000 with interest and costs for money due under his "Pay now and sue later" agreement with the respondents, who were the managing agents of syndicate 282 at Lloyds. Under that agreement he promised to ensure without question that at all times he had available sufficient funds to enable the respondents to pay all claims. He had received cash calls on 24/6/94 in respect of 1990 and 1991 accounts but had failed to pay. His excuse for not paying was that his promise formed part of an agreement between undertakings which may affect trade between member states of the European Union which has as its object to effect distortion of competition within the common market. The defendant's counsel submitted that the action was tainted by the illegal purpose of seeking to reduce the depletion of the Central Fund, which was itself arguably illegal.

HELD: If the Central Fund was illegal that could not render illegal other methods of discharging the appellant's indebtedness to policy holders, although it did make his reiterated acknowledgement of that liability ring a little hollow. The court could not see how competition between agents could affect trade between member states of the European Union. There was no evidence to suggest that the Lloyd's market was not unique. Managing agents at Lloyd's were in competition with each other but not, in relation to those they represented, with agents outside Lloyd's. Without some "pay now and sue later" obligation Lloyd's could not function. The corollary of that was that if the appellant were to succeed in his defence to the respondents' claim, it would destroy Lloyd's ability to provide insurance and would so destroy Lloyd's itself. In relation to the international insurance market that obligation of a Lloyd's name did not have any effect on competition and could not have been intended to do so. The attempt to invoke Art.85 EC Treaty was bound to fail and the respondents' application for summary judgment was amply justified.

Appeal dismissed.

Mr Vaughan for the appellant.

LTL 21/12/95 : TLR 12/1/96 : (1996) CLC 301

Judgment Official

Document No. AC0003507