higgins.txt January 12 1996 LAW REPORT Pay now sue later clause is valid Marchant and Eliot Underwriting Ltd v Higgins The "pay now, sue later" clause in the standard agency agreement between a Lloyd's name and his managing agents was valid and did not breach article 85 of the Treaty of Rome. The Court of Appeal (Lord Justice Leggatt, Lord Justice Rose and Lord Justice Roch) so held in a reserved judgment on December 21 dismissing the appeal of Dr Andrew Higgins against the decision of Mr Justice Rix on October 24, 1995, giving summary judgment for the plaintiffs, Marchant and Eliot Underwriting Ltd, in the sum of ¦6,000 with costs for their claim in respect of cash calls on the defendant in respect of the 1990 and 1991 accounts. LORD JUSTICE LEGGATT said that the action was to enforce a name's obligation to make funds available to his managing agent so as to enable valid claims to be met on policies that he had underwritten. That did not involve the carrying out of an unlawful agreement or the implementation of an unlawful arrangement. The obligation to pay debts was as old as commerce. The court did not see how competition between agents could affect trade between EU member states. 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 form of pay now, sue later obligation, Lloyd's could not function. If the defendant were to succeed it would destroy the ability of Lloyd's to provide insurance and would destroy Lloyd's itself.