Higgins v Marchant & Eliot Underwriting Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LEGGATT |
| Judgment Date | 12 January 1996 |
| Judgment citation (vLex) | [1995] EWCA Civ J1221-5 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | FC3 95/7551/B QBCMI 95/1613/B |
| Date | 12 January 1996 |
[1995] EWCA Civ J1221-5
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(Mr Justice Rix) 2 applications 1 appeal
Before: Lord Justice Leggatt Lord Justice Rose Lord Justice Roch
FC3 95/7551/B
FC3 95/7542/B
QBCMI 95/1613/B
MR D VAUGHAN QC with MR N GREEN and MR A HAYDON (Instructed by Messrs Grower & Michael Freeman, London W1H 8DQ) appeared on behalf of the Appellant
MR G POLLOCK QC with MR P LASOK QC and MR R JACOBS (Instructed by Messrs Dibb Lupton Broomhead, London EC2Y 5AE) appeared on behalf of the Respondent
Thursday, 21 December 1995
This is the judgment of the Court. The appellant, Dr Andrew James Higgins, is a Name at Lloyd's. By a 'pay now, sue later' clause in his agreement with the respondents Marchant & Eliot Underwriting Ltd, who are the managing agents of syndicate 282 at Lloyd's, he promised to ensure without question that at all times there are available sufficient funds to enable them to pay all claims. It is obvious that unless the Names who are the underwriters at Lloyd's fulfilled that promise, Lloyd's would cease to exist. Yet since he received cash calls on 24th June 1994 in respect of the 1990 and 1991 accounts Dr Higgins has failed to pay. So the respondents issued a writ against him for the recovery of £6,000. His only excuse for not paying is that his promise is part of an agreement between undertakings which may affect trade between Member States, and which has as its object or effect the distortion of competition within the common market. On 24th October 1995 Rix J. gave summary judgment against Dr Higgins for £6,000 with interest and costs. Against that order by leave of the judge he now appeals.
The background facts as well as the dispute itself and the salient arguments on either hand were well summarised by the judge at pages 1–22 of the transcript of his judgment. The wider context of the relationship between the Society of Lloyd's and those who comprise it has been definitively explained by the Master of the Rolls in The Society of Lloyd's v Clementson [1995] C.L.C. 117 at pages 122E-125D. That material we forebear to repeat.
Dr Higgins appeals on the grounds (1) that the dispute is not suitable for determination under RSC, O.14, and (2) that the clause, the Standard Agency Agreement ('SAA') which includes it, and the byelaw under which the Agreement was made are all void under Art. 85 of the Treaty of Rome. The byelaw in question is Lloyd's Agency Agreement Byelaw No.8 of 1988 ('the 1988 Byelaw'). The form of the SAA is set out in Schedule 1 of the 1988 Byelaw. The 'pay now, sue later' clause is clause 7 of the SAA, and so far as material it reads as follows -
"7.1(a) The Name shall ensure that at all times there are available sufficient funds subject to the trusts of the Premium Trust Deed and held by or under the control of the Managing Agents' Trustees to enable them to pay all claims made or incurred in connection with any request made by the Agent to make such funds available; provided however that the Name shall not be obliged to make any payment in or towards the satisfaction of any such request by the Agent for funds unless the Name has first been supplied:
(i) if the request for funds is made for the purpose of satisfying an Audited Closed Year Loss, with an audited annual report prepared as at the date at which the relevant year of account was closed;
(ii) in any other case, with a statement signed by the Agent, accompanied by a report signed by the auditors of the Managed Syndicate, complying with paragraph (b) below.
7.1(d) Any payment requested by the Agent under and in accordance with the provisions of this clause 7.1 shall be made by the Name free and clear from any set-off, counterclaim or other deduction or any account whatsoever and in connection with any proceedings which may be brought to enforce the Name's obligation to comply with any such request for payment by the Agent the Name hereby waives stay of execution and consents to the immediate enforcement of any judgment obtained."
Appearing for Dr Higgins in this Court for the first time Mr David Vaughan Q.C. sought by amendment of the Notice of Appeal and by ancillary applications to adduce fresh evidence and for discovery, to argue that on the true construction of clause 7 the cash calls made to Dr Higgins by the respondents were not validly made under the clause. Since these applications, which were calculated to cause an adjournment, could readily have been made to the judge, we refused them.
Mr Vaughan argues that the only fair way of resolving the issues is at trial. The factual issues are far from clear, and the issues of E.C. competition law are complicated and require expert evidence. A number of assumptions of fact and of economics is involved. Dr Higgins' direct concern with the Central Fund makes Clementson relevant. The factual issues include the interrelationship between Names, managing agents and members' agents, and between all three and Lloyd's itself. The judge assumed that the calls were for valid claims; that the respondents are not parties to the Central Fund arrangements; that the purpose of the Byelaws is to protect Names instead of policy holders; that the obligation to pay could never distort competition; and that the market relevant to trade between Member States was the market for agency services rather than the Lloyd's insurance market as a whole.
Mr Vaughan contends that O.14 is inappropriate because the decision is liable to be treated as a precedent for the enforcement of clause 7 in claims amounting to £1.4 billion against 13,500 Names world-wide; because the present claim was made at the instigation of the Council of Lloyd's; and because some who shared the same interests as Dr Higgins were excluded from the hearing in chambers. The last point is raised not as a matter of substantive law but in order to insinuate that the procedure was inappropriate because it was not in conformity with Art. 6(1) of the European Convention on Human Rights. The judge should have held that under O. 14, r.3(1) there "ought for some other reason to be a trial", namely that there is to be a trial in Clementson. The principles applied in that case would inevitably result in leave to defend. Disputes about market practices necessitate expert and other evidence. Mr Vaughan submits that upon authority the test to apply is whether there is plainly no defence to the claim, and that applying that test, Dr Higgins should have unconditional leave to defend.
We consider that the plea that the proceedings are unsuitable for O.14 cannot be appraised on its own. The considerations raised by it are to be borne in mind particularly when the second ground of appeal has been answered. As an afterthought, first introduced by amendment of the Notice of Appeal, it can appropriately be taken into account at that stage.
Confronted by some limitation in time for oral argument Mr Vaughan has provided in relation to his second (and main) ground of appeal a 53-page skeleton argument filed three working days before the first day of hearing. It elaborates, without refining, the argument presented at trial, and adds some criticisms of the judge's judgment. In essence Mr Vaughan seeks to establish a resemblance between this case and Clementson. He submits that (1) the SAA must be considered as part of the Lloyd's arrangements, which include the Central Fund and the relation of Names to managing agents, and which affect trade between Member States; (2) the SAA obliges all Names to trade only on the basis that they pay now, sue later, and that requirement could not be justified, even if it had been notified to the Commission; and (3) even if the SAA did not restrict competition, it is unenforceable because it is closely connected with the restrictive conditions of the Central Fund, and because clause 7 is being enforced by managing agents only on account of pressure from the Council of Lloyd's.
The respondents' claim will succeed unless it is arguable that it offends against Art. 85. That Article strikes at an agreement between undertakings, which at least potentially affects trade between Member States, and which has the object or effect of distorting competition within the Common Market. For purposes of Art. 85 the Byelaws governing the Central Fund (including the 1988 Byelaw), agreements in furtherance of the 1988 Byelaw (including the SAA), and clause 7, are all "agreements, concerted practices or decisions" of an association of undertakings, namely Lloyd's, as are associated directions or recommendations made by Lloyd's.
Mr Vaughan submits that, whether examined from the perspective of premium income, percentage of overall business written, number of Names participating, or a combination of the three, the effect of the Lloyd's arrangements on trade in Member States other than the United Kingdom is manifest. Each SAA is the implementation, the consequence, the object, the means and the embodiment of the 1988 Byelaw. Mr Vaughan criticises the judge for supposing that Dr Higgins had to show that clause 7 affected trade, rather than that the "agreement" as a whole does so. He argues that the arrangements are arguably connected with the Central Fund and that the SAA is a classic example of an agreement whose effect on trade must be viewed as flowing from the commercial activity (underwriting) with which it is connected. Mr Vaughan also submits that the judge was wrong to look for an effect on trade arising out of a market such as in the...
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