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Harris v. Poland
The plaintiff lives in a flat at 4, Chartfield Avenue, London. In Jan., 1939, she took out a Lloyds
comprehensive policy insuring her against loss by fire, burglary and housebreaking and other causes at
her flat. There was an attempted burglary at her flat during the summer, which made her nervous about
the safety of her jewellery while she was out and the flat was empty. She had jewellery worth about
500. On Dec. 2, she was going out for the day. She had over 100 in banknotes, and, therefore, felt
more uneasy than usual about the safety of her empty flat. It occurred to her that perhaps the least
likely place which a burglar would suspect as a hiding-place would be in the fireplace in the sitting-room
amongst the paper and sticks under the coalite. She was probably quite right. She got a piece of
newspaper and wrapped the money and the jewellery in it. Particulars of the latter are given in the
statement of claim. The notes were in a registered envelope, the pearl necklace was in a soft leather suit
case, the wrist-watch was wrapped in tissue paper, the watch set in diamonds was in a grey leather case
lined with velvet, the links were in tissue paper, and were in a cotton bag along with the wrist-watch,
while the rings were in tissue paper. She wrapped the articles in a newspaper and hid the parcel in the
fireplace under the coalite, mixed up with the paper already there. It may be observed that this care was
very much in the interests of the under-writers on whom would fall any loss suffered from burglary.
The plaintiff returned home late in the afternoon, and, feeling cold, lighted the fire, forgetting all about
what she had done. Early the following morning, she remembered the hiding of her jewellery and
money. Two of the pieces were repairable, but the rest of them and the notes had been completely
destroyed by fire. The plaintiff seeks to recover the loss agreed at 460 from the underwriters. The
relevant words in the policy are to insure her from loss or damage caused by fire burglary,
housebreaking, theft or larceny and various other causes. The plaintiff says that the loss she has
suffered comes within that plain and simple language. Goods insured against loss by fire have been
unintentionally either totally destroyed or badly damaged by fire, and, therefore, she says, her claim
comes exactly within the language used.
The view presented on her behalf is that, while the burning of something intended to be consumed by
fire is, of course, not fire under the policy, the moment one gets the accidental burning of something
not intended to be consumed by fire, there is damage by fire within the meaning of the policy, and,
therefore, if insured property not intended to be consumed by fire is ignited and thereby damaged or
lost, or if insured property is damaged by heat, smoke, water or demolition caused by the burning of
property not intended to be consumed by fire, there is loss or damage by fire within the meaning of the
The underwriters very properly want it to be made quite clear that they are not disputing liability on the
ground of negligence, or on the ground that the loss was due to an act of forgetfulness on the part of
the plaintiff, or on the ground that the loss was the inevitable result of her own act. In their view, the
position is just the same as if a maid instructed by the plaintiff not to light the fire had forgotten or
misunderstood her instructions and lighted it and so caused the loss. They agree that there has been
accidental loss which would be covered by 191
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an all risks policy, but they dispute that this loss is a loss by fire within the meaning of the policy. Their
case and the principle they seek through the defendant to establish is that, where damage is done to
insured property by a fire in a place where fire is intended to be where fire has not broken bounds
the loss is not covered, because such a fire is not a fire within the meaning of the policy. It is said that
there must be ignition where no ignition ought to be in order to create liability. The argument is that
there must be a fortuitous fire somewhere where fire ought not to be, that it is only damage caused by
such an accidental fire which comes within the policy, and that the actual burning of the insured
property does not in itself constitute fire within the meaning of the policy. The idea presented is that
there must be an unintentional coming of fire from its proper place to the insured property and that the
policy is not concerned with the coming of insured property to a fire which is behaving itself with perfect
propriety in a place where it is intended to be.
Counsel for the defendant urges that the first question which I ought to ask myself is whether there was
a fire within the meaning of the policy, and that only if I find that there was does there arise the
question whether or not such fire caused damage to insured property, and he contends that it is
impossible to hold that the fire, intentionally lighted, and burning quite properly in the grate, was a fire
within the meaning of the policy. According to this view, the short and simple words in the policy against
loss or damage caused by fire mean loss or damage caused to insured property by a fortuitous fire of
something not intended to be consumed by fire in a place where fire is not intended to be.
The whole difference between the parties lies in those last few words. Unless there is spontaneous
combustion, and apart from fires caused by electricity or lighting, the unintentional burning of insured
property must, I suppose, always be caused directly or indirectly by, or must be due to, fire created
intentionally of matter intended to be consumed, as, for example, domestic fires, lighted candles, oil
lamps, gas jets, matches, tapers, cigarettes. Of course, one does not insure against the happening of
such intended fires. One insures against the risk of insured property getting burned by unintentional
contact with some such fire, or with fire started by some such fire. A householder has of necessity to
make use of fire in his house for heating and lighting. He knows that fire is a source of danger, not
merely from the escape of fire from its legitimate place but also from things coming in contact with it in
its legitimate place in any of the forms I have just enumerated. I have no doubt that, when the ordinary
man insures against loss by fire, he believes that he is insuring against every kind of loss which he may
suffer from the more or less compulsory use of fire by himself or his neighbour. If he were told that the
words in a Lloyds policy meant only loss from contact with fire where no fire ought to be, many
questions would spring his mind, as they spring to mine. Am I not covered, he would ask, if the wind
blows something say a valuable manuscript or a sheet of foreign stamps into the fire in the grate, or
if a careless servant drops something into the fire, or if my wife stumbles and causes her lace scarf or
silver fox tie to get caught by a flame in the fire grate? To all these questions the answers of counsel for
the defendant is: No. But what if part of the scarf is consumed in the grate and the rest of it is
consumed outside the grate on the hearth-rug? Do I get compensation for the part burnt outside the
grate, though not for the part burnt in the grate? Also, what if the burning scarf burns a hole in the
carpet? That is not the fault of the fire in the grate, which has 192
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not broken bounds. Am I covered for that? Again, what is the position if the lace catches fire by coming
in contact with a lighted candle on the dinner-table? The flame of the candle is in the exact place where
it is intended to be. Is it on a par with the fire in the grate? Moreover, what if the wind blows a curtain
against a lighted gas jet and the curtain catches fire? I imagine that the ordinary man would say: Your
policy is no use to me. I shall never know where I am. I want an underwriter who knows what he means
and says what he means. There certainly ought to be some clear understanding as to the meaning of
these apparently simple words, so that persons insuring may know where they stand, and if the
defendant is right not continue in a fools paradise believing that they have a protection which in fact
they have not.
There are one or two well-settled rules of construction with regard to policies. One is that the
construction depends, not upon the presumed intention of the parties, but upon the meaning of the
words used. In Nelson Line (Liverpool), Ltd. v. Nelson & Sons, Ltd. [(1908) AC 16], LORD LOREBURN, L.C.,
said, at p. 20:
I know of only one standard of construction, except where words have acquired a special
conventional meaning, namely, what do the words mean on a fair reading, having regard to the
whole document.
There is another rule which I find summarised in Hamlyn & Co. v. Wood & Co. [(1891) 2 Q.B. 488],
where LORD ESHER, M.R., said, at p. 491:
I have for a long time understood that rule to be that the court has no right to imply in a
written contract any such stipulation, unless, on considering the terms of the contract in a
reasonable and business manner, an implication necessarily arises that the parties must have
intended that the suggested stipulation should exist. It is not enough to say that it would be a
reasonable thing to make such an implication. It must be a necessary implication in the sense
that I have mentioned.
Another rule of construction is that, as a policy is prepared by the underwriters, any ambiguity therein
must be taken most strongly against the underwriters by whom it has been prepared. If a policy is
reasonably susceptible of two constructions, that one which is more favourable to the insured will be
adopted. Again, in West India Telegraph Co. v. Home & Colonial Insurance Co.[(1880) 6 Q.B.D. 51],
BRETT, L.J., said, at p. 58:
An English policy is to be construed according to the same rules of construction; which are
applied by English courts to the construction of every other mercantile instrument. Each term in
the policy, and each phrase in the policy, is prima facie to be construed according to its ordinary
Guided by these principles, I can see no reason whatever for limiting the indemnity given by the policy in
the way claimed by the defendant. In my judgment, the risks against which the plaintiff is insured
include the risk of insured property coming unintentionally in contact with fire and being thereby
destroyed or damaged, and it matters not whether that fire comes to the insured property or the
insured property comes to the fire. The words of the policy are just as descriptive of one as they are of
the other, and I cannot read into the contract a limitation which is not there. To enable me to accept the
contention of the underwriters, I should have to read something into the contract, some such words as
unless the insured 193
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property is burned by coming in contract with fire in a place where fire is intended to be. Why should I?
What justification can there be for so doing? To what absurdities would it lead? A red hot cinder jumps
from the fire and sets on fire some paper of value. Admittedly, there is liability. A draught from the
window blows the same paper into the same fire. Is that any less an accidental loss by fire? Are the
words in the policy any less applicable to the latter than they are to the former? A draught blows the
flame of a candle against a curtain. Admittedly, there is liability. What if the curtain is blown against the
flame of the candle, however? Surely the result must be the same. If it is not the same, the result is an
absurdity. If it is the same, why should the result be different if one substitutes a fire in a grate for the
lighted candle in a candlestick? Unless I am bound by authority to the contrary, or unless I can find a
consensus of opinion to the contrary among textbook writers indicating a generally accepted
interpretation of these words, I must give effect to the view I have formed.
Counsel for the defendant relies and it is his only prop upon Austin v. Drewe [(1816) 4 Camp. 360], not,
indeed, upon the actual decision, which gives him no help, but upon two sentences to be found in the
summing up to the jury by GIBBS, C.J. The facts of that case were very simple [p. 360]:
This was an action on a policy of insurance against fire. The premises insured were used as a
manufactory for sugar baking. The building was divided into seven or eight storeys. On the
ground floor were pans for boiling the sugar, and a stove to heat them. From the stove a
chimney or flue went to the top of the building, and as it passed each floor, there was a register
in it with an aperture into the rooms, whereby more or less heat might be introduced at
pleasure. The upper floors were used for drying the baked sugars. One morning the fire being
lighted as usual below, the servant whose duty it was to have opened the register in the highest
storey forgot to do so. The consequence was that the smoke, sparks, and heat, were completely
intercepted in their progress through the flue, and were forced into the room where the sugars
were drying. The smoke being perceived below, the alarm was given. One or two men were
suffocated in attempting to open the register; but at last it was opened, and the mischief
remedied. Had it remained shut much longer, the premises would probably have been burnt
down: but in point of fact there never was more fire than was necessary to carry on the
manufacture, and the flame never got beyond the flue. The sugars, however, were very much
damaged by the smoke, and still more by the heat. The loss amounted to several thousand
pounds. The question was whether this was a loss for which the insurance office was liable.
The head note is as follows:
From the negligence of a servant of the assured in not opening a register, smoke and heat
from a stove used in the manufactory are forced into a room and greatly damage goods, without
actually burning any, the fire not being greater than it ought to have been had there been free
vent for the smoke and heat. This held not to be a loss within the policy.
Judging from the head note, the grounds of the decision were the negligence of the plaintiffs servant
and the absence of any burning of any of the insured property. Nowadays 194
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it is well-established that negligence is immaterial, and, in the case with which I have to deal, there was
burning of the insured property. In the direction to the jury, however, GIBBS, C.J., said, at p. 362:
If there is a fire, it is no answer that it was occasioned by the negligence or misconduct of
servants; but in this case there was no fire except in the stove and the flue, as there ought to
have been, and the loss was occasioned by the confinement of heat. Had the fire been brought
out of the flue, and anything had been burnt, the company would have been liable. But can this
be said, where the fire never was at all excessive, and was always confined within its proper
limits? This is not a fire within the meaning of the policy.
There are several sources of damage from fire. There are the flames, the heat generated, and the smoke
and sparks produced. Some might find it difficult to see how it could be said, when in fact smoke, sparks
and excessive heat were forced into the room, that the fire was always confined within its proper limits.
It could only be true of the actual flames. I asked counsel for the defendant what the position would be
if the excessive heat had caused some of the bags to ignite, and the answer was that the loss would be
within the policy and yet it would have been just as true to say that the fire had not been brought out
of the flue. I might put the question in a more awkward way. Suppose that some bags ignited and some
were merely ruined by the heat. There would be liability for the former, but not for the latter, according
to his view, yet the only distinction would be that in the one case there was ignition and in the other
there was not.
The next report of this case to which I will refer is in Holt 126. There one can find little, if any, reference
to this point about the fire escaping from its proper place. According to that report, I think that the
ground upon which GIBBS, C.J., directed the jury was this [pp. 127, 128]:
As no substance, therefore, was taken possession of by the fire, which was not intended to
be fuel for it, as the sparks and smoke caused no mischief, but as the damage arose from an
excess of heat in the rooms, occasioned by the register being shut, I am of opinion that the
plaintiffs are not entitled to recover.
The main point, and the point in the forefront there, is surely that no substance was taken possession of
by the fire which was not intended to be fuel for it.
The editors note about that case is as follows, at p. 128:
It is not to be concluded from this case that an insurer on a policy against fire is exempt
from a loss occasioned thereby, on the ground that the servants of the assured have been
careless or unskillful, and that the fire was occasioned by their negligence and misconduct. An
insurer would unquestionably be answerable in such a case. The spirit of the decision of the
present case is this: that there was no loss by fire, by whatever cause or misconduct produced.
The injury arose from the misdirection of heat, occasioned by the unskillful management of the
machinery in the sugar house. It was not, therefore, in any fair and reasonable construction of
the policy, one of those accidents against which the defendant had engaged to indemnify the
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Therefore, the test of liability according to that report and according to that note is surely whether or
not something has been consumed by fire which was not intended to be consumed.
There was a motion for a new trial in the Court of Common Pleas, and I turn to the report of that motion
in 6 Taunt 436. It is interesting to read the arguments in that case and see how it was dealt with. The
Solicitor-General, said this, among other things, at p. 438:
If actual flame was the cause of the damage, it matters not whether the fire was properly or
improperly lighted, but the question is whether fire occasioned the damage. If any other
criterion be taken, it would in many cases of policies against fire introduce nice and intricate
questions. It cannot be necessary that the fire, to produce a loss within the policy, should be
only such fire as is communicated to some substance not contained in the intended and proper
receptacle of fire.
Then he goes on to give other illustrations. He has put the very point for which counsel for the
defendant contends. GIBBS, C.J., is reported to have said this, at pp. 438, 439:
I think it is not necessary to determine any of those extreme questions. In the present case, I
think no loss was sustained by any of the risks in the policy. The loss was occasioned by the
extreme mismanagement by the plaintiffs of their register. I so directed the jury, and I have no
reason to alter the opinion I then formed.
Then DALLAS, J., said, at p. 439:
I am of the same opinion. The only cause of the damage appears to me to have been the
unskillful management of the machinery by the plaintiffs own servants, and it is therefore not a
loss within the meaning of the policy.
The rule was refused, apparently on the ground of negligence. Be that as it may, it is very difficult to
argue that this case is an authority for the construction put upon it by counsel for the defendant, when
it is said by GIBBS, C.J., in terms, I think it is not necessary to determine any of those extreme
questions, one of them being this very question whether or not it is necessary that the fire should have
taken place in some place other than the place where the fire was intended to be.
There was fourth report of this same case. It is in 2 Marsh. 130, GIBBS, C.J., is reported, at p. 132, in the
same language as I have just read, and DALLAS, J., said:
His Lordships direction appears to me to have been perfectly right, and the jury have drawn
a perfectly correct conclusion from it. There was nothing on fire which ought not to have been
on fire; and the loss was occasioned by the carelessness of the plaintiffs themselves.
Then PARK, J., concurred. The words There was nothing on fire which ought not to have been on fire
suggests that the test of liability is that there must be the ignition of something which ought not to be
ignited. In that case, there was no ignition of anything but the fuel, and, therefore, there was no liability,
and no fire within the policy. The test is there laid down by DALLAS, J., and concurred in by PARK, J. That is
exactly the case for which the plaintiff here contends - namely, that there was ignition here of
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have been ignited, newspaper, sticks of wood, banknotes, cotton, leather, jewellery, and so on.
The next case to which I was referred was Everett v. London Assurance (1865) 19 CBNS 126. That was a
claim on a policy of insurance against fire. There had been an explosion about a quarter of a mile away
which had damaged the plaintiffs premises, so that the windows had been blown in and other damage
sustained, and a claim was made that this was damage caused by fire within the meaning of the policy.
The argument as to the effect of Austin v. Drewe is not without interest. It took the form of a quotation
from MARSHALL ON INSURANCE, Vol. 2, Book IV (a), p. 790, which is as follows:
In MARSHALL ON INSURANCE, Vol. 2, Book IV (a), p. 790 (Edn. 1823), it is said that
by the terms of the usual policy, the insurers undertake to pay, make good, and satisfy to the
insured all loss or damage which may happen by fire during the term specified in the policy... In
order, therefore, to bring the loss within the risk insured against, it must appear to have been
occasioned by actual ignition; and no damage occasioned by mere heat, however intense, will
be within the policy.
In support of that proposition, Austin v. Drewe was relied upon. It ended up with a quotation with
reference to Austin v. Drewe that the sugar was damaged not by the smoke but by the excessive heat:
but nothing took fire. Those last words, nothing took fire, are in italics, showing that those were the
words intended to be taken as the test. In that case, BYLES, J., said, at p. 134:
The expression in the policy which we have to construe is loss or damage occasioned by fire.
That is exactly the expression which I have to construe in this case, except that I have the word caused
instead of the wood occasioned. Then BYLES, J., continues as follows, at p. 134:
Those words are to be construed as ordinary people would construe them. They mean loss
or damage either by ignition of the article consumed, or by ignition of part of the premises
where the article is: in the one case, there is a loss, in the other damage, occasioned by fire.
LORD BACON says: It were infinite for the law to judge the causes of causes, and their impulsions
one of another; therefore it contented itself with the immediate cause, and judged the acts by
that, without looking to any further degree.
It is a little too wide, because it is clear that there need not be ignition of part of the premises where the
article is if the loss is, occasioned by the ignition of premises in the near neighbourhood, but the result is
the same.
There is one other case to which I was referred, and that is Upjohn v. Hitchens [(1918) 2 K.B. 48]. During
the argument in that case, SCRUTTON, L.J., said, at p. 61:
It has been held, however, that fire within the meaning of a fire policy means fire which
has broken bounds, so that damage caused by excess of fire heat in an ordinary grate is not
damage by fire within the policy.197
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I do not think that I can attach very much weight to an intervention of that kind with no argument
about it, but there is something which I think is a little more relevant in the judgment of PICKFORD, L.J., at
p. 53. In that case, there was a covenant to insure premises against loss or damage by fire, and the
question was whether such damage was within, a policy which did not cover the premises for damage
caused by enemy aircraft. PICKFORD, L.J., said,
Nor am I impressed by the other case put where it has been held that the ordinary policy
against fire does not cover damage caused by overheating from a fire in an ordinary grate. There
the damage was held not to be damage by fire, but damage by heating, damage caused by an
ordinary domestic fire not being covered unless it sets fire to the house.
He must have used the word house because he was dealing with a case of fire in a house.
Substituting the words insured property, again I find the same test laid down by HALLETT, J., in a similar
case. The weight of authority seems to me to be strongly in favour of the test contended for by counsel
for the plaintiff, and I think that the true test is whether or not there has been an ignition of the insured
property which was not intended to be ignited. If there has been, the loss is one caused by fire. That is
to say, has insured property been damaged otherwise than by burning as a direct consequence of the
ignition of other property not intended to be ignited? In other words, I base my view in substance on
what DALLAS, J., said in Austin v. Drewe.
I was referred to textbooks, including one very old one, MARSHALL ON INSURANCE, a quotation from which I
read in Everetts case. The next, I think, was BUNYON ON INSURANCE. There is no suggestion in Bunyons
book of this limitation about the fire being restricted to places where fire is not intended to be. There is
a paragraph describing his view of the risk insured against, at p. 161:
The risk must now be construed as applicable not only to loss by fire, but also to loss by
the agency of the other perils insured against. In the case of loss by fire, there must, of course,
be actual ignition, not necessarily of the property itself, but of some substance near to it.
He refers to Austin v. Drewe and continues as follows, at p. 162:
It is not, of course, necessary that the property must be itself on fire, since losses by smoke
and water, when the fire has not touched the objects insured, are familiar to all managers of
insurance offices. All that appears to be necessary is, that something should have caught fire,
and damage have been thereby occasioned to the insured property.
The next was MACGILLIVRAY ON INSURANCE, which was the one textbook in which counsel for the
defendant could find any support for his contention, because the author says, at p. 809:
Fire within the meaning of a fire policy means fire which has broken bounds. There must be
actual ignition where no ignition ought to be. Damage caused by 198
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excess of fire-heat in its proper place, or by smoke from a fire in its proper place, is not
damage by fire. Thus, where articles are destroyed in process of manufacture by the excessive
application of heat, whether by negligence or pure misadventure, the damage cannot be
recovered as damage by fire, unless they have actually ignited.
I do not know exactly what that means, but at any rate there is some suggestion there on the lines of
the argument of counsel for the defendant. In my view, however, a careful examination of the one
authority on which that rests really negatives his argument that that case is an authority for his
Then, as a matter of interest, I was referred to WELFORD AND OTTER BARRY ON FIRE INSURANCE, 2nd Edn., p.
Any loss, therefore, occasioned by such a fire, whether by the burning of any property in the
fire itself, or by the scorching or cracking of any property adjacent to it owing to its intense heat,
if unaccompanied by ignition, is not covered by the contract, since the cause of the loss cannot
be regarded as a peril insured against.
That line in particular, whether by the burning of any property in the fire itself, was strongly relied
upon by counsel for the defendant. However, the answer was to refer to WELFORD AND OTTER BARRY ON
FIRE INSURANCE, 3rd Erd., p. 59. Before one refers to what is said there. I want to refer to the preface to
the third edition:
Many questions in fire insurance are not covered by direct authority, and may still be
regarded as open. In discussing such questions, an attempt has been made to answer them...
Another example, which is discussed for the first time in this edition, is the question whether an
article which accidentally falls into a domestic fire and is burned there is destroyed by fire within
the meaning of a fire policy.
There is a statement by an author that whatever may have been said in the second edition was not the
result of a discussion or consideration of this particular question, and then he says, at p. 59:
So long as the fire is burning in the grate or furnace, it is fulfilling the purpose for which it
was lighted. If, therefore, property adjacent to the fire is merely damaged by scorching or
cracking, owing to its proximity to the fire, the loss is not covered; though the element of
accident may be present, there is no ignition of the property, and nothing is on fire which ought
not to be on fire. If, however, the fire breaks its bounds and, by throwing out sparks or
otherwise, causes ignition to take place outside the grate or furnace, there is at once a loss by
fire within the meaning of the contract. The question then arises, what is the position where
property is accidentally burned in an ordinary fire, such as a domestic fire: the fire never breaks
its bounds, but something which was never intended to be burned falls or is thrown by accident
into the grate and is burned. In this case, equally with the case where the fire breaks its bounds,
there is an accident and something is burned which ought not to have been burned. The only
distinction between them is that in the one case it is the fire which escapes out of its proper
place and comes into contract with the property destroyed, whereas in the other case it is the
property which gets out of its proper place and comes in contact with the fire. This distinction
does not appear to be 199
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sufficient to make any difference in the result. The object of the contract is to indemnify the
assured against accidental loss by fire, and so long as the property is accidentally burnt, the
precise nature of the accident seems to be immaterial. It may be therefore concluded that the
loss in both cases falls equally within the contract.
In the textbooks, there is no clear consensus as to the meaning of these words which might force one to
say that they have acquired an authorised meaning to which one can give effect. The most which
counsel for the defendant can get out of the textbooks is perhaps a difference of opinion or an
ambiguity. However, ambiguity is not his case, because the interpretation of those words which is most
favourable to the insured must be adopted, and it seems to me that, if the underwriters wish to avoid
liability, they must put words to that effect in their policy. In my judgment, the plaintiff is entitled to
succeed. It is, of course, an unusual case. It has not been suggested that the loss was due to the
negligence of the plaintiff. The underwriters have made it clear that they wish to stand or fall on the
principle for which they have contended. I give judgment for the plaintiff for the agreed amount of

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Kasim Ali Bulbul v. New India Assurance Co.
AIR 1968 J & K 39
J.N. BHAT, J. The plaintiff, Kasim Ali Bulbul, carries on business in wood carving and paper machine
under the name and style of K.A. Bulbul in Lambert Lane, Residency Road, Srinagar. On 8th June 60 he
got his stock-in-trade consisting of wood carving, paper machine, business furniture and two pieces of
carpet contained in the shop insured with the defendant company for one year from 8th June 60 to 8th
June 61 for a sum of Rs. 30,000.
A policy No. 155860356 was issued in his favour by the defendant company. The plaintiffs shop caught
fire on the night between 4/5th February 1961 while he was asleep in Zadaibal. Next morning he came
on the scene and found that the shop had been taken possession by the local officials of the defendant
company and the police. It was sealed. The plaintiff gave tentative information of this fire to the
defendant company. The plaintiffs books were seized by the police. The police inquired into the matter
and declared the fire accidental. Later on a Surveyor was deputed by the defendant company who made
a report. The loss that he sustained on this account was Rs. 27340.31.
2. The shop remained in possession of the defendant company when on the night of 3rd November 61
another fire broke out which destroyed the remaining articles in the shop. There were some un-insured
goods of the value of Rs. 564.50. The total claim of the plaintiff thus comes to Rs. 27,904.81.
3. According to the plaintiff, on the basis of the insurance effected on his goods, the defendant company
was liable to make good the loss to him, but did not do so. As the keys of the shop remained with the
defendant upto 3rd November 61, the defendant was further liable for the loss of uninsured goods
valuing Rs. 564.50. The plaintiff therefore claimed a decree for the above-mentioned amount, i.e., Rs.
4. In defence the defendant company has taken a number of pleas. They are that the defendant has not
been properly sued; the plaint is not properly verified and the suit is time-barred. All the benefits under
the policy and the suit stand forfeited because (1) the claim is fraudulent; (2) A false declaration has
been made in support of the claim; (3) the loss or damage was occasioned by the wilful act and
connivance of the plaintiff; (4) the plaintiff has not complied with the terms and conditions of the policy;
(5) the plaintiff is not entitled to any relief as the suit was not commenced within three months after the
rejection of his claim by the defendant company; and (6) the plaintiff did not comply with condition 11
of the policy and did not submit any claim within the period of 15 days from the date of the alleged loss.
Condition 11 is quoted in extenso in the written statement. The plaintiff was notified by letter dated 25-
2-61 that as the claim was not submitted in accordance with this condition, his claim could not be
5. On facts the defendant did not deny the insurance of the articles of the plaintiff with the defendant
company as alleged by the plaintiff. But the defendant alleged that this contract was entered into by the
defendant on the basis of false representation and suppression of material facts by the plaintiff which
vitiated the whole contract. It was admitted that the plaintiff informed the defendant company at
Srinagar on 5.2.61 that his shop had been gutted 149
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on the night between 4/5th February 61. On 5.2.61 the plaintiff was asked to submit his claim, account
books, pass books and submit his claim form. He was reminded by another letter dated 16.2.61. But the
plaintiff did not do anything. It is admitted that the defendant company locked the shop but the
plaintiffs lock also was there. On 25.2.61, the defendant rejected the claim of the plaintiff. The plaintiff
did not submit his account books, nor submit his claim in writing. The plaintiff replied the letter of the
defendant of 25.2.61 that he could not ascertain the damages as the account books and other
documents were lying with the police. By letter dated 28.2.61 the plaintiff was again referred to the
letter of the defendant dated 25.2.61. On 27.6.61 the Chief Regional Manager of the defendant
company New Delhi notified the plaintiff that he had forfeited all benefits under the policy and his claim
stood rejected. The conclusion of the police that the fire was accidental was not correct. Mr. Sarin of
Messrs. V.N. Sarin and Co. was appointed as the Surveyor. The survey report was also against the
plaintiff. There was further correspondence between the parties. On 9-5-61 the plaintiff submitted a list
of goods destroyed by fire but that was beyond time. The plaintiff had been guilty of suppression of
facts in the proposal form while replying questions 8(a) and (b) in the proposal form. He had formerly
insured the same goods in the year 1957 with the Ruby General Insurance Co. Ltd. and the shop was
gutted in that year and the plaintiffs claim which was a huge amount was settled by that company at Rs.
14860/-. The plaintiff had not complied with conditions 11 and 13 of the policy. Therefore he was not
entitled to any amount. The presence of the uninsured goods in the shop was also denied. Even if there
were any such goods the defendant was not liable for the loss alleged to have been caused to the
plaintiff by the fire of 5.11.61.
6. On these pleadings my learned predecessor-in-office framed the following issues in the case:
(1) Is the suit properly stamped? OPP
(2) Is the plaint properly verified? OPP
(3) What was the value of the goods lying in the shop of the plaintiff at the time of the fire on
the night of 4/5th February 1961 and what was the value of the goods damaged or destroyed by
the fire?
(4) Is the plaintiffs right to claim extinguished by lapse of time?
(5) Is the plaintiffs suit not within time?
(6) Has the plaintiff been guilty of suppression of material facts and false representation at the
time of obtaining the policy from the defendant and as such is the policy of insurance void and
unenforceable and not binding on the defendant?
(7) Has the plaintiff not filed claim within the time stipulated in the policy and as such he has
forfeited all rights and claims under the policy?
(8) Is the claim of the plaintiff fraudulent?
(9) Was the fire occasioned by the connivance or wilful act of the plaintiff?
(10) Has the plaintiffs goods of the value of Rs. 500/- been damaged or destroyed in the fire of
November 1962 in the same premises and if so, is he entitled to get the sum of Rs. 500 from the
(11) Is the plaintiff not entitled to any relief as he has not filed the suit within 3 months of the
rejection of his claim by the defendant as provided in the policy?
(12) To what relief is the plaintiff entitled?150
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7. One additional issue was framed by order of this court dated 4.10.62 which is to the following effect:
(13) Is the declaration made in support of the suit claim made by the plaintiff true and correct
and if not has he forfeited all the benefits under the policy?
11. Before me some of the issues were not at all pressed. For instance, issues 1 and 2 were not at all
discussed before me. Therefore, they will be deemed to have been waived. The third issue relates to the
value of the goods lying in the shop of the plaintiff at the time of the fire on the night between 4/5th
February 61 and the value of the goods damaged or destroyed by fire. The plaintiff in support of this
issue has produced the following witnesses:
12. Ama Shah states that the value of goods which were gutted by fire on the night between 4/5th
February 1961 in the shop of the plaintiff at Lambert Lane was of the value of thirty to thirty-two to
thirty-five thousand rupees. This witness states that he has been carrying on the polishing of the wood
carving articles of the plaintiff for a number of years. Mohd. Shaban, who is a broker, states that the
goods that were gutted by fire on the relevant night were worth about Rs. 30,000/-. Similarly G.M. Mir
who supplied paper machine goods to the plaintiff states that the value of the goods destroyed by fire in
the shop of the plaintiff was between Rs. 25 to 30 thousand rupees. The plaintiffs son also places the
value of the gutted goods between 25 to 30 thousand rupees. The plaintiff also in his own statement
places the same valuation. The evidence of these witnesses is based on their own estimate of the
valuation of the goods. No witness has or could possibly state the correct value of the goods gutted. The
plaintiff has produced some books, i.e., the sale book, the stock book and the Counter-foils of certain
cash memos. According to the plaintiff on the basis of these documents he has fixed the valuation of the
goods gutted as given by him in the plaint. Although this evidence is not full proof, yet there is no direct
evidence produced by the defendant to contradict this evidence. The surveyor produced by the
defendant Mr. V.N. Sarin proprietor of Messrs. V.N. Sarin and Co. puts the estimated loss of goods at Rs.
6508.20, and the furniture at Rs. 150/-.
13. The learned counsel for the defendant has criticized the account books produced by the plaintiff and
has stated that they were not genuine. They were prepared for the sake of this case. The plaintiff from
the very beginning had an evil design of setting fire to this shop which contained a small quantity of
goods, and to inflate and bolster up his false claim he got those account books prepared. He has argued
that the account books start right from the date the insurance was effected. He has at length cross-
examined the plaintiffs son who has admitted that he writes the accounts of the plaintiff alongwith
another clerk, Mohd. Ishaq. According to the learned counsel for the defendant the accounts have been
prepared at one time, being in the same ink and hand though covering a sufficiently long period of time.
This argument of the learned counsel for the defendant is not without force, but in view of the ultimate
fate that the case is to meet at any hands, I do not think I should very seriously probe into the matter of
the valuation of the goods that were gutted. I must therefore accept the figure of loss sustained by the
plaintiff as put by him as correct. Therefore issue 3 is decided in favour of the plaintiff.151
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15. The case of the defendant is that under the terms of the policy of insurance the plaintiff had to
intimate the details of the loss to the defendant company within 15 days of its occurrence. Further he
had to institute a suit within three months of the rejection of the claim by the defendant. The fire broke
out admittedly on the night of 4/5th February. 61 The plaintiff did in fact inform the defendant
companys branch at Srinagar on the morning of 5
February. The then SHO Kothibagh Mr. Abdul Rashid
seized the books of the plaintiff from his house on 5-2-61 and prepared a seizure list Ex. PW2/2. The
books remained in the custody of the police till 5-5-61. When the plaintiff moved the ADM Srinagar on
3-6-61; the books were returned to him by means of a receipt Ex. PW 1/2 on 5-5-61, vide the statement
of Shambu Nath Head Constable Thana Kothibagh PW 1. It is therefore conceivable that the plaintiff was
not in a position to give a detailed list of the articles which were burnt to the defendant company within
15 days. The plaintiff has however given a detailed list of the loss caused to him on 9th May 61. The
defendants contention was based on condition 11 of the policy which runs as under:
On the happening of any loss or damage the insured shall forthwith give notice thereof to
the company and shall within 15 days after the loss or damage or such further time as the
company may in writing allow in that behalf, deliver to the Company.
(a) A claim in writing for the loss or damage containing as particulars an account as may be
reasonably practicable of all the several articles or items of property damaged or destroyed, and
of the amount of the loss and damage thereto respectively, having regard to their value at time
of the loss or damage not including the profit of any kind.
(b) Particulars of all other insurances, if any the insured shall also at all time at his own
expense produce, procure and give to the company all such further particulars, plans,
specifications, books, vouchers, invoices, duplicate or copies thereof, documents, proof and
informations with respect to the claim and the origin and cause of the fire and the
circumstances under which the loss or damage occurred, and any matter touching the liability or
the amount of the liability of the company as any, be reasonably required by or on behalf of the
company together with a declaration on oath or in other legal form of the truth of the claim and
of any matters connected therewith.
No claim under this policy shall be payable unless the terms of this condition have been
complied with.
16. According to the defendant the plaintiff did not supply the detailed list within 15 days of the
occurrence of the fire, and therefore the plaintiff forfeited his right under the policy. Emphasis was laid
on the last portion of this condition which says that no claim under this policy shall be payable unless
the terms of this condition have been complied with. But I think it was physically impossible for the
plaintiff till the 5th of May 61, to give a complete and detailed list of the loss sustained by him as his
books were with the police. Therefore to that extent the plaintiff has an explanation or a justification in
not supplying the detailed list to the company within 15 days of the damage. But there is the second
part of this matter which is covered by condition 13 of the policy. This condition runs as under:152
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If the claim be in any respect fraudulent or if any false declaration be made or used by the
insured or anyone acting on his behalf to obtain any benefit under this policy, or if the loss or
damage be occasioned by the wilful act or with the connivance of the insured, or if the claim be
made and rejected and an action or suit be not commenced within three months of such
rejection, or in case of an arbitration taking place in pursuance of the 18th condition of this
policy within three months after the arbitrator or arbitrators or umpire shall have made their
award, all benefits under this policy shall be forfeited.
17. In this case we have it in the evidence of Mr. Jaipal Bahadur D.W. 2 Chief Regional Manager of the
defendant company Northern India that the claim of the plaintiff was rejected by means of a letter of
the company dated 25.2.61. The same thing has been testified to by Mr. R.N. Dubash D.W. 5 who has
been an employee in this concern from 1957 and is now the O/c of the Company at Srinagar. According
to him the company rejected the claim of the plaintiff on 25.2.61. There are a number of letters also
which reiterate and refer to the initial letter of the defendant dated 25.2.61. All these letters are signed
by Mr. K.B. Pestonjee who was then incharge of the Srinagar branch and is now in Manila and therefore
incapable of appearing before the court. His signatures have been identified by Mr. R.N. Dubash.
18. The suit was instituted on 1-2-62 which is clearly about a year after the rejection of the claim of the
plaintiff by the defendant. Therefore in terms of this policy the right of the plaintiff to recover the suit
amount is extinguished. In the proposal form Ex. D.W. 4/1 the condition is that the declaration made in
this form shall be the basis of the contract between the parties. The insurance company agrees to
compensate the insured only subject to the conditions mentioned in the policy which appear on the
back of the policy.
19. An argument has been advanced that the condition of instituting legal proceedings within three
months of the rejection of the claim of the insured by the insurance company is against section 23 and
28 of the Contract Act. Section 28 reads as under:
Every agreement, by which any party thereto is restricted absolutely from enforcing his rights
under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or
which limits the time within which he may thus enforce his rights, is void to that extent.
20. Section 23 of the Contract Act makes the following agreements as unlawful: If they are forbidden by
law or are of such a nature that if permitted would defeat the provisions of any law, or are fraudulent,
or involve or imply injury to the person or property of another, or if the court regards them as immoral
or opposed to public policy. A list of illustrations is appended to this section.
22. Section 28 makes all agreements in restraint of legal proceedings void.
23. It is argued that such an agreement is immoral and opposed to public policy and further it curtails
the ordinary period of limitation. I need not consider these sections in detail because the matter is
completely covered by authority. It will surely be a waste of time to embark on a discussion of the points
raised. The following authorities may be mentioned:153
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In Porters Law of Insurance (6th Edn.) page 195 it is stated that insurance may lawfully limit the time
within which an action may be brought to a period less than that allowed by the statute of limitation
and that the true ground, on which the clause limiting the time of claim rests and is maintainable is that,
by the contract of the parties the right to indemnity in case of loss and the liability of the Company
therefor do not become absolute, unless the remedy is sought within the time fixed by the condition in
the policy. In AIR 1924 Cal 186 some English cases were discussed and condition No. 13 of the policy as
in the present case was there. The condition amongst other things stated:
If the claim be made and rejected and an action or suit be not commenced within 3 months
after such rejection and in the case of arbitration taking place in pursuance of the 18th condition
of this policy within three months of the arbitration when the arbitrator or the umpire shall
have made the award, all benefits under the policy shall be forfeited.
In this case an action commenced after the stipulated period of three months was held to contravene
neither section 23 nor section 28 of the Contract Act.
27. The latest authority on the subject is AIR 1966 All 385 wherein according to a clause in the loss-
cum-fire insurance policy the insured had to file within 15 days of the loss a complete claim giving full
particulars. The loss occurred on 18-8-47. Insured sent a telegram on 21-8-1947 as sugar is looted.
Please note. The company replied on 25.8.47 asking for policy number and circumstances of loss. The
insured sent reply on 8.9.47 giving some particulars. Even this did not give all particulars. The company
ultimately rejected the claim. On these facts it was held that the communication was beyond 15 days.
The mere fact that the application under section 13 of the Displaced Persons (Debts Adjustment) Act
1951 regarding the claim of the insured who was a displaced person was within time, would not entitled
him to get any relief in respect of the loss.
28. In this case even if the plaintiff was entitled to any relief he had forfeited all rights under the policy
when he failed to bring his suit within three months of 25th February 61 when his claim was rejected by
the insurance company. The claim was not rejected only once, but the basic stand taken by the company
in its letter of 25.2.61 was repeated in a number of letters, for instance, D.W. 5/2 dated 28.2.61, D.W.
5/3 dated 27.12.61, D.W. 5/4 dated 21.11.61 and D.W. 2/1 dated 27.6.61. The plaintiff had no
justification to wait till 1.2.62 to file the suit. By that time his right had been completely extinguished.
29. In this way issues 4, 5, 7 and 11 are decided against the plaintiff. His suit is clearly time-barred.
30. The second group of issues that can be conveniently taken up together is Nos. 6, 8, and 13. The case
of the defendant is that the plaintiff has been guilty of suppression of material facts and has made a
false representation at the time of obtaining the policy from the defendant. His claim cannot therefore
be entertained. Emphasis on this aspect of the case is laid on the reply of the plaintiff to question 8(a)
and 8(b) of the proposal Ex. D.W. 4/1 which is as under:
8 (a) Has the property been insured in the past or at the present time? If so, give full
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8(b) Have you sustained loss. Give full particulars.
To both these queries the plaintiff has said No.
31. The contention of the learned counsel for the defendant is that the plaintiff had insured the goods of
his shop with another insurance company in the year 1957 namely, the Ruby General Insurance Co.
During that year also his shop was gutted by fire. He made a claim for Rupees 25,000/- from the
Insurance Company, but his claim was settled at Rs. 14807/-. According to the Manager of the Ruby
General Insurance Co., Mr. D.N. Chopra, the settlement was arrived at on 24.2.58. The shop of the
plaintiff had caught fire on 24.4.57 and the policy of insurance with that company had come into force
for one year from 9.10.56 to 9.10.57. The plaintiff and his son admitted this previous insurance, but their
case was that the plaintiff is an illiterate person who does not know English. He only know how to sign
K.A. Bulbul and at the time of entering into the present contract he was not explained the terms of the
proposal form or of the insurance policy. D.W. 4 Abdul Ahad Sheikh, Inspector of the New India
Assurance Co. has deposed on solemn affirmation that he filed in the form Ex. D.W. 4/1 on 5th June 60
and the answer that he entered against each query in the proposal form was at the instance of the
plaintiff. He made the plaintiff understand all the questions and recorded his answers. Col. No. 8 was
also filled at the instance of the plaintiff. The plaintiff signed the proposal form after knowing the
contents thereof. The plaintiff however tried to negative this evidence by the statement of Gulla Khan
who says that the plaintiff is an illiterate person. In view of the statement of Abdul Ahad Sheikh and
reading in between the lines the statement of the plaintiff himself, it is difficult to hold that the plaintiff
was not put a specific question whether he had not insured this property with another insurance
company earlier. I feel that the plaintiff purposely withheld this information from the insurance agent
because when previously he had insured the goods of the shop with the Ruby G. Insurance Co. and his
shop had caught fire he had claimed Rs. 25000 but was given only Rs. 14000 and odd. Feeling somewhat
apprehensive about the state of affairs then, he wilfully suppressed this fact from the defendant
insurance company. So on facts it is proved that the plaintiff has made a false statement in reply to
question No. 8.
32. Now we have to see what is the legal effect of this false statement. The law on this point is so well
settled both in England and India that it does not require any elaborate discussion. Anyhow the
following authorities may be mentioned.
33. The effect of non-disclosure or misrepresentation is that the insurers have the right to repudiate,
that is to say, to avoid contract.
34. Where, however, insurers answer a claim by repudiating the policy on the ground of fraud,
misrepresentation or non-disclosure, they are not bound to offer a return of premium
39. The matter has again been fully discussed in AIR 1962 SC 814 where a policy holder who had been
treated a few months before he submitted his proposal for the insurance of his life with the insurance
company by a physician of repute for certain serious ailments as anaemia, shortness of breath and
asthma, not only failed to disclose in his answers to the questions put to him by the insurance company
that he suffered from these ailments but he made a false statement to the effect that he had not been
treated by any doctor of any such serious ailment, it was held that judged by the standards laid down in
section 17 Contract Act, 155
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the policy holder was guilty of a fraudulent suppression of material facts when he made his statements,
which he must have known were deliberately false and hence the policy issued to him relying on those
statements was vitiated. In the circumstances of the case it was held that no advantage could be taken
of the Explanation to section 19 of the Contract Act. In this case it was further held:
Where, according to terms of the life insurance policy, all moneys that had been paid in
consequence of policy would belong to the insurance company if the policy was vitiated by
reason of a fraudulent suppression of material facts by the insured, and the contract is bad on
the ground of fraud, the party who has been guilty of fraud or a person who claims under him
cannot ask for a refund of the money paid. It is a well established principle that courts will not
entertain an action for money had and received where, in order to succeed, the plaintiff has to
prove his own fraud. Further in cases where there is a stipulation that by reason of a breach of
warranty by one of the parties to the contract, the other party shall be discharged from the
performance of his part of the contract, neither S. 65 nor S. 64 of the Contract Act has any
40. In view of all these authorities, it is clear that the plaintiff simply on the ground that he gave a false
reply to questions 8(a) and (b) in the proposal form cannot claim any compensation for fire having been
caught by the goods in his shop. In this case the question was very material and withholding of the real
information from the insurance company would automatically absolve the insurance company from any
liability under the contract. As already remarked, the Privy Council has gone to the length of holding that
the answers to a question being material or immaterial, would not make any difference. The plaintiff's
suit would therefore fail on this account alone.
41. Issue 8 is not very clear but I have grouped it with issues 6 and 13. In my opinion this issue is based
on the fraud alleged to have been committed by the plaintiff in suppressing the material information
regarding the previous insurance of the goods of his shop with the Ruby General Insurance Co. in the
year 1957. But if this issue is construed as suggesting that the claim of the plaintiff is not bonafide, I
have given my finding already that all the weaknesses that the plaintiff's case may have, it can be safely
held that it is proved that he lost goods of the valuation mentioned in the plaint during the fire. So these
observations dispose of issues 6, 8 and 13.
42. The learned counsel for the defendant has laid great stress on the fact that the fire was caused by
the wilful act of the plaintiff. No doubt the plaintiff's conduct is somewhat not above suspicion.
According to the plaintiff and his witness Ama Shah, his son Safdar Ali and the plaintiff himself they
closed the shop as usual at about 7.30 in the evening. The shop caught fire in the night. The plaintiff or
anybody on his behalf did not repair to the scene of occurrence till 10 the next morning. The plaintiff
says that he did not know about the occurrence. Although this statement would seem improbable, but
there is nothing on the file to clearly contradict this statement of the plaintiff. The police registered the
case as a suspicious one and conducted investigation but later on the police also discovered that the fire
was accidental (Vide the statement of Abdul Rashid P.W. 2). The defendant has led no positive evidence
to show that the plaintiff himself set the goods of his shop on fire. The 156
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defendant's case is based on certain suspicious entries in the account books of the plaintiff and on the
conduct of the plaintiff. But that by itself is not sufficient to hold that the plaintiff himself wilfully set his
shop on fire or connived at it. In my opinion this issue should be decided against the defendant.
43. The plaintiff claims Rs. 564.50 as the value of uninsured goods which caught fire on November 3,
1961 because according to him the keys of the shop were still with the defendant company. In the first
place the plea of the plaintiff that the shop remained under the possession and lock and key of the
defendant up to 3rd November 61 is not established. Apart from that fact unless it is shown that the
destruction by fire of this uninsured goods was the result of the negligence of the defendant, no
responsibility can be fastened upon the defendant. If the plaintiff's case were that he was present on
the scene of occurrence on November 3, 1961 to salvage his merchandize, but for the fact that the shop
was locked by the defendant, there was some case for the plaintiff. But there is no such suggestion on
the part of the plaintiff. Even if the shop was under the lock and key of the defendant and it caught fire
which was accidental the defendant would not by the mere fact of the destruction of the goods therein
be liable for the damage. Therefore, in my opinion, the plaintiff cannot even claim this amount.
44. From the finding on the issues recorded above, the plaintiff's suit has to be dismissed and is hereby

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Union of India
Sri Sarada Mills Limited

Case No : C.A. No. 1045 of 1967 (Arising as an appeal by certificate from the judgment and decree Dt. 4 January
1966 of the Madras High Court in Appeal No. 129 of 1961.)
Bench : Hon'ble Mr. Justice A.N. Ray, Hon'ble Mr. Justice I.D. Dua, Hon'ble Mr. Justice Kuttyil Kurien Mathew
Citation : 1972 Indlaw SC 345, (1972) 2 SCC 877, AIR 1973 SC 281, [1973] 43 Comp Cas 431, [1973] 2 S.C.R. 464
Summary : Land & Property - Transfer of Property Act, 1882, ss. 135 and 135 A - Insurance - Transfer of Property -
Assignment of rights - (A) Marine insurance policy - Subrogation - In whose name insurer is entitled to sue - (B) Fire
insurance claim by Mill satisfied - Insurer subrogated to rights of Mill - Suit by Mill against Railway Administration,
if barred - Held, insurer on subrogation is not entitled to sue in his own name and it can only sue in insurer - Not
barred, but accountable to return from money recovered - Appeal dismissed.

The Judgment was delivered by: A. N. Ray, J.
1. 1 .We have had the advantage of reading the judgment written by our learned brother Mathew.
2. The question which falls for determination in this appeal is whether the respondent mill on recovering Rs.
32,254-6-9 from the Indian Globe Insurance Co. Ltd. and assigning all rights against the Railway
Administration in favour of the insurance company as a subrogee was competent to institute -and maintain
the suit against the Railway Administration. We agree with the reasoning and conclusion of our learned
brother Mathew that subrogation does not confer any independent right on underwriters to maintain in their
own name and without reference to the persons assured an action for damage to the thing insured. The right
of the assured is not one of those rights which are incident to the property insured.
3. Counsel for the appellant contended that by reason of the assignment to the insurance company of all
rights against the Railway Administration the respondent mill did not have any cause of action against the
Railway Administration. In aid of that contention the decisions in King v. Victoria insurance Company Limited
[1896] A.C. 250 and Compania Colombiana De Seguros v. Pacific Steam Navigation Co., [1965] 1 Q.B. 101 were
relied on.
4. In the Victoria Insurance Company case (supra) the Bank of Australian effected an insurance with the
insurance company of certain goods to be shipped to London. Before the cargo left Australia it was damaged
or destroyed through the negligence of the defendant King, an employee of the Queensland Government. The
bank claimed a sum from the company which was duly paid. The company took an assignment by deed of all
the rights of the bank against King subject to a stipulation that the bank's name should not be used in legal
proceedings. The questions raised on appeal in that case were (1) the plaintiffs have no right of action at all;
(2) they have no right of action in their own name. The Supreme Court of Queens-land held that mere
payment by the insurance company did not subrogate them to the rights of the bank to the, extent that they
could sue in their own names. The Supreme Court of Queens-land held that the assignment was covered by
the Queens-land Act which corresponded to the English Judicature Act of 1873. The Queens-land Supreme
Court construed the term 'legal chose in action' to include all rights the assignment of which a Court of Law or
Equity would before the Act have considered lawful.
5. On that ratio, the right covered by the assignment in Victoria Insurance Company case (supra) was held to
be a right of that kind. The Judicial Committee upheld the decision and said "They rested their judgment on
the broader and simpler ground that a payment honestly made by the insurers in consequence of a policy
granted by them and in satisfaction of a claim by the insured is a claim made under the policy which entitles
the insurers to the remedies available to the insured". The Judicial Committee on this view said that "the
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highly artificial defence of the Queens-land Government fails." It should be noted here that the phrase 'legal
chose in action' was said in the Victoria Insurance Co. case (supra) to mean 'lawfully assignable' chose in
action. A legal chose, in action is something which is not possession, but which must be sued for in order to
recover possession of it. A legal chose in action does not include a right of action, such as, for instance, a right
to recover damages for breach of contract, or for a tort, for it that were so, such a right would be assignable.
They would materially affect the law of champerty and maintenance.
6. In the Pacific Steam Navigation Co. case (supra) the Pacific Steam Navigation Company by a bill of lading
acknowledged the shipment of 183 drums of electric cable at Liverpool for carriage to and delivery at a port in
Colombia to the Colombiana Telephone Company. The insurance company paid the telephone company in
respect of the particular average loss. The telephone company on receipt of the payment handed to the
insurance company two documents. By the first document, the telephone company ceded and endorsed to
the, insurance company "all rights which we have or which we may acquire in the future to claim
reimbursement thereof from the third parties who may be responsible for loss or damage." By the second
document the telephone company waived in favour of the insurance company "any rights he may have or has
against others possibly responsible for the damages or losses indemnified by this payment, and we agree not
to carry out any act that might in any way hinder the carrying out of such rights by the insurance company".
7. The insurance company alleged that the documents went further than a form of letter of subrogation and
constituted a valid assignment by the telephone company to the insurance company of the telephone
company's claim against the defendants. The Court found that the language of the documents was that of
assignment. The question was whether the Court would permit the enforcement of the claim in the name of
the assignee or whether the assignment would be of a bare cause of action to defeat assignment and its
8. The decision in May v. Lane 64 L.J.Q.B. 236 was referred to in the Pacific Steam Navigation Co. case (supra)
for the proposition that a legal chose in action is something which is not in possession, but which must be
sued for in order to recover possession of it. A legal chose in action does not include a right of action,such as,
for instance, a right to recover damages for breach of a contract, or a legal right to recover damages arising
out of an assault. Again, in Torkington v. Magee [1902] 2 K. B. 427 it was said that the words "other legal
chose in action" mean right which the common law looks on as not assignable by reason of its being a chose
in action, but which a court of equity deals with as being assignable.
9. In the Pacific Steam Navigation Co. case (supra) the insurance company was found entitled to sue upon the
bill of lading. A bill of lading confers title to sue because it is a form of property. The reason for allowing the
insurance company to sue in that case was that equity before the Judicature Act allowed the enforcement of
subrogation because equity never regarded subrogation as the enforcement of a bare cause of action, but as
the enforcement of a cause of action legitimately supported by the underwriter's interest in recouping
himself in respect of the amount of the loss which he had paid under the policy as a result of the acts,
neglects or defaults of the actual contract breaker or tortfeasor. The assignment in that case was held to
amount to assignment of the benefit of the contract with the ship-owners.
10. It is indisputable that an insurance company can sue in its own name where the marine policy has been
transferred by assignment u/s. 52 of the Marine Insurance Act 1963. That is not the present case.
11. It is equally indisputable that an insurance company is entitled to subrogation in accordance with the
provisions of s. 79 of the Marine Insurance Act, 1963. Subrogation does not allow the subrogee or the
underwriter to sue in its own name, In the present case, the insurance company has not enforced its claim by
virtue of subrogation.
12. S. 130 of the Transfer of Property Act however speaks of transfer of actionable claim. Actionable claims
under the Indian law include claims recognised by the Court either as to, unsecured debts or as to beneficial
interests in moveable property not in possession. A debt is an obligation to pay a liquidated or certain sum of
money. A beneficial interest in moveable property will include a right to recover insurance money or a
partner's right to sue for an account of a dissolved partnership or a decretal debt or a right to recover the
insurance money or the right to claim the benefit of a contract not coupled with any liability.
13. S. 6(e) of the Transfer of Property Act states that a mere right to sue cannot be transferred. A bare right of
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action might be claims to damages for breach of contract or claims to damages for tort. An assignment of a
mere right of litigation is bad. An assignment of property is valid even although that property may be
incapable of being recovered without litigation. The reason behind the rule is that a bare right of action for
damages is not assignable because the law will not recognise any transaction which may savour of
maintenance of champerty. It is only when there is some interest in the subject matter that a,. transaction can
be saved from the imputation of maintenance. That interest must exist apart from the assignment and to)
that extent must be independent of it.
14. A chose in action for breach of contract was not assignable at law but was assignable at equity. A chose in
action in tort was assignable neither in law nor in equity. A bare right of' action is not assignable. When
however the right of action is one of the incidents attached to the property or contract assigned it will not be
treated as a bare fight of action.
15. In Ertel Bieber & Co. v. Rio Tino Co., [1918] A.C. 260 Lord Summer treated a cause of action for damages
for breach of contract as chose in action, a form of property. The reason for holding a cause of action for
damages for breach of contract to be a form of property is that the assignee is seeking to enforce a right
which is incidental to property or a right to a sum of money which theoretically is part of the property.
16. The common law was not inclined in favour of assignments of contractual rights and liabilities, A person to
whom rights In equity both legal and equitable choses in action have been subject to assignment. Contractual
rights being legal choses in action could generally be assigned. It is on these seasonings that the term 'thing in
action' in the Law of Property Act has been interpreted in the Victoria Insurance Co. and the Pacific Steam
Navigation Co. cases (supra) to include any right which the common law looked on as not assignable by
reason of its being chose in action but which a court of equity dealt with as assignable. In the present case,
the insurance company has not sued to enforce any assignment. The document which is described as-letter of
subrogation also uses: the words of assigning rights against the Railway Administration. It is not necessary to
express ,-any opinion whether the letter of subrogation amounted to an assignment in the present case,
because the insurance company not sought to enforce any assignment.
17. The respondent mill will give a valid discharge to the Railway Administration in respect of loss and
damages. This decree will be a bar to the institution of any suit by the insurance company in respect of the
subject matter of the suit. The respondent mill is answerable and accountable to the insurance company for
the moneys recovered in the suit to the extent the insurance company paid the respondent mill.
18. The High Court expressed the view that even if the assignment 'is valid the right of action residing in the
assignor has not ceased. The respondent mill sued the Railway Administration for breach of contract of
carriage and damages for negligence. The letter of subrogation did not divest the mill of its cause of ,-action
against the Railway Administration for loss and damages.
19. The defence of the Railway Administration was that the mill realised from the insurance company the
damages and "as such the plaintiff (meaning thereby the respondent mill) has no right to claim any sum in this
action". If the specific plea of assignment had been taken in the written statement the respondent mill would
have impleaded the insurance company. The Court could 'have in those circumstances been in a position to
afford full and complete relief to the parties.
20. In the present case the insurance company and the mill proceeded on the basis that the, insurance
company was only subrogated to the rights of the assured. The letter of subrogation contains intrinsic
evidence that the respondent would give the insurance company facilities for enforcing rights. The insurance
company has chosen to allow the mill to sue. The cause of action of the mill against the Railway
Administration did not perish on giving the letter of subrogation. For these reasons, we regret our inability to
agree with our learned brother Mathew that the respondent mill has no cause of action. We agree with the
decision of the High Court that the suit should be decreed. The appeal is therefore dismissed,. with costs.
21. MATHEW, J. This is an appeal by certificate, against the judgment of the High Court of Madras allowing an
appeal preferred by the plaintiff against the decree of the trial court dismissing the suit instituted by it for
recovery of damages.
22. The plaintiff, Sri Sarada Mills Ltd., instituted the suit against the Union of India as representing the Central
and Southern Railways for damages to 100 bales of F. P. cotton consigned through their agents from Nagpur
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to Podhanur under a railway receipt issued by the Central Railway. The goods had to pass through, several
stations along the two railways, namely, the Central and the Southern, before it arrived at Podhanur. When
the goods arrived at Podhanur, it was found that 87 bales out of the 100 were burnt and charred and that 13
bales were loose and short in weight. When the plaintiff applied for open delivery, the railway authorities at
Podhanur got the damage surveyed, and issued a certificate of damage and shortage.
23. The plaintiff claimed damages against the Railway Administration. But the Chief Commercial
Superintendent, Southern Railway, informed the plaintiff that the consignment was involved in a fire accident
at Sirpur Kagaznagar on the Central Railway, that the cause of the fire was unknown and that the Railways
were not liable for the damage caused to the goods as there was no negligence or misconduct. The plaintiff,
therefore, instituted the suit for damages alleging that the Railway Administration was negligent.
24. The defendants contended that the plaintiff was not entitled to institute the suit as it had insured the
goods with the Indian Globe Insurance Co. and had received the total loss from the Company, that the
damage to the goods was caused by fire, which was beyond the control of the Railways and, therefore, the
defendants were not liable. for damages. The trial court found that the fire which caused the damage, to the
goods was not due to any cause beyond the control of the Railways that the damage was due to their
negligence. It, however, held that the suit was not maintainable as the Indian Globe Insurance Co., with whom
the goods were insured under a marine insurance policy, had paid the plaintiff an amount of Rs. 32,254-6 for
total loss of the goods and was subrogated to all the rights ,and remedies of the assured in respect of the
subject matter and so the plaintiff was not competent to institute the suit and hence dismissed the suit. The
plaintiff appealed to the High Court of Madras. The Court reversed the decree holding that the plaintiff was
entitled to maintain the suit and that, damage to the goods was on account of the negligence of the Railways.
In this appeal, two submissions were made on behalf of the appellants :
25. (1) that there was no evidence to show that the Railway Administration was negligent in dealing with the
goods and (2) that the suit was not maintainable. As regards the first contention, the finding of the trial court
as well as of the High Court is that the Railway Administration was negligent. The liability of a Railway is that
of a bailee and it is not for the plaintiff, in the first instance, to prove, when the goods consigned were
destroyed or damaged, as to how the loss ,or damage occurred. It has, no doubt, to satisfy the court that the
Railway Administration was negligent but, the duty of showing how the consignment was dealt with during
the transit lay on the Railway Administration as it was a matter within their conclusive knowledge. The trial
court found that the fire which caused damage to the goods was due to the negligence of the Railway
Administration and the High Court was not persuaded to come to a contrary conclusion.
26. The burden was on the Railway Administration to show how the goods consigned were dealt with during
transit and, when that has not been done to the satisfaction of the Court, the Court was entitled to presume
negligence on the part of the Railway Administration. I see no grounds to interfere -with the concurrent
findings on this point.
27. The second question which was argued at considerable length relates to the maintainability of the suit. It
may be noted at this stage that the Globe Insurance Co. paid the total loss to the plain,tiff on August 3, 1956;
the assured assigned all its rights, including the right to sue to the Insurance company on July 31, 1956; and
the present suit was filed on June 14, 1957. It was submitted on behalf of the appellant that the view of the
High Court that the suit was maintainable overlooked the clear provisions of section 135- A of the Transfer of
Property Act, as that section was a bar to the suit by the assured. Section 135-A was as follows (this section
has since been deleted from the T.P. Act and incorporated in the Marine Insurance Act, 1963)
"135-A(1) Where a policy of marine insurance has been assigned so as to pass the beneficial interest therein,
the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any
defence arising out of the contract which he would have been entitled to make if the, action had been brought
in the name of the person by or on behalf of whom the policy was effected.
"(2) Where the insurer pays for a total loss, either of the whole, or, in the case of goods, of any apportion able
part, of the subject matter insured, he thereupon becomes entitled to take over the interest of the insured
person in whatever may remain of the subject- matter so paid for, and he is thereby subrogated to all the
rights and remedies of the insured person in and in respect of that subject-matter as from the time of the
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casualty causing the loss.
"(3) Where the insurer pays for a partial loss, he acquires no title to the subject- matter insured, or such part of
it as may remain but he is thereupon subrogated to all rights and remedies of the insured person as from the
time indemnified by such payment for the loss.
"(4) Nothing in cl. (6) of s. 6 shall affect the provisions of this section."
28. The section was inserted in the Transfer of Property Act, 1882 by the Transfer of Property (Amendment)
Act, 1944. Before the amendment, the assignment of rights under both marine and fire insurance policies was
governed by s. 135. What the amendment did was to take marine insurance policies out of s. 135 and provide
for them in the new section 135-A. The Bill that become the Transfer of Property (Amendment) Act, 1944,
stated the objects and reasons as follows :
"The rules and principles governing a marine insurance policy being materially different from those governing
a fire insurance policy, it is very unsatisfactory to accord the same treatment in the matter of assignment of
both categories of policies. To take but one instance a fire insurance policy is not assignable after loss, but the
nature of a marine insurance contract is such as to require that marine insurance policies should be assignable
even after loss. In the United Kingdom, assignability of marine insurance policies after loss is placed beyond
doubt by s. 50 of the Marine Insurance Act. But in the absence of a similar provision here, it is doubtful if
Courts in British India would hold that they are so assignable."
29. It was the contention of the appellant that when the Globe Insurance Co. paid the assured the total loss, it
became subrogated to all the rights and remedies of the assured in respect of the subject matter and that
thereafter the Insurance Company alone could file a suit for recovery of damages against the Railway
30. The application of the doctrine of subrogation to policies of marine insurance is based upon the
fundamental principle that the contract of insurance contained in a marine policy is a contract of indemnity,
and of indemnity only. The expression "subrogation", in relation to a contract of marine insurance is no more
than a convenient way of referring to those terms which are to be implied in the contract between the
assured and the insurer to give business efficacy to an agreement whereby the assured, in the case of loss
against which the policy has been issued, shall be fully indemnified, and never more than fully indemnified.
31. The right of the insurer against the person responsible for the Doss, does not rest upon any relation of
contract or of privity between them. It arises out of the nature of the contract of marine insurance as a
contract of indemnity, and is derived from' the assured alone, and can be enforced in his right only.
32. Sub-s. (1) of s. 135-A corresponds to s. 50(2) of the (English) Marine, Insurance Act, 1906 and sub-ss. (2)
and s. 79 of that Act. In Yorkshire Insurance Co. Ltd v. Misbet Shipping Co. Ltd. [1962] 2. Q.B. 380, Diplock, J.
as he then was had to deal with the question of subrogation. He said that the doctrine of subrogation in
insurance law requires one to imply in contracts of marine insurance only such terms as are necessary to
ensure that, notwithstanding that the insurer has made a payment under the policy, the assured shall not be
entitled to retain, as against the insurer, a greater sum than what is ultimately shown to be his actual loss. As
Cotton, L. J. said in Castellain v. Preston It Q.B.D. 380, 395 " . if there is a money or any other benefit received
which Ought to be taken into account in diminishing the loss or in ascertaining what the real loss is against
which the contract of indemnity is given, the indemnifier ought to be allowed to take advantage of it in order
to circulate what the real loss is.
33. So the only term to be, implied to give business efficacy to the contract between the parties is that
necessary to secure that the assured shall not recover from the insurer an amount greater than the loss which
he has actually sustained. The insurer has contracted to pay to the assured the amount of his actual loss and
if, before the insurer has paid under the policy, the assured recovers from some third party a sum in excess of
the actual amount of the loss, he can recover nothing from the insurer because he has sustained no loss, but
it has never been suggested that the insurer can recover from the assured the amount of the excess. Lord
Blackburn in his speech in Burnard v. Bodocanachi, Sons & Co. 7 App. Cas. 333, 339 said:
"The general rule of law (and it is obvious justice) is that where there is a contract of indemnity (it matters not
whether it is a marine policy, or a policy against fire on land, or any other contract of indemnity) and a loss
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happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the
indemnifier is bound to pay; and if the indemnifier has already paid it, than, if anything which diminishes the
loss comes into the hands of the person to whom he has paid it, it becomes an equity that the person who has
already paid the full indemnity is entitled to be recouped by having that amount back."
34. That the insurer is entitled to recoupment only for the loss for which he has paid and to the extent of his
payment is clear from what Lord Atkin said in Gien Line v. Attorney General [1930] 46 I.L.R. 451.
"Subrogation will only give the insurer rights upto 20 s. in the pound on what he has paid". In King v. Victoria
Insurance Co. Ltd. [1896] A.C. 250, 255-6., Lord Hobhouse, made it quite clear that, under the doctrine of
subrogation an insurer was entitled to recover from the assured only "to the extent of the payment' made to
the assured by the insurer under the policy. As between the insurer and the assured, the insurer is entitled to
the advantage of every right of the assured whether such right consists in contract, fulfilled or unfulfill ed, or in
remedy for tort capable of being insisted on or already insisted. But as stated 'by the Privy Council in King v.
Victoria Insurance Co. Ltd. [1896] A.C. 250, 255-6. "Subrogation by act of law would not give the insurer a right
to sue in a Court of Law in, his own name. "
35. Subrogation is concerned solely with the mutual rights and liabilities of the parties to the contract of
insurance; it confers no rights and imposes no liabilities upon third parties who are strangers to that contract
and, the insurer who has paid a loss gets no direct rights or remedies against anyone other than the assured
nor can sue such parties in his own name (see Simpson v. Thomson [1877] 3 App. Cas. 279].
36. It was argued on behalf of the appellant that cl. (4) of section 135-A would indicate that the legislature
intended to make a departure from the common law of England and to confer a right of suit upon the
subrogee against third persons. I do not think that cl. (4) has any such effect. It only says that nothing in s. 6
(c) of the Transfer of Property Act will affect the provisions of that section. An assignment of marine insurance
after loss would sound in the realm of an assignment of a mere right to sue and the legislature wanted to put
it beyond doubt that s. 6 (c) is no bar to such an assignment. It is doubtful whether cl. (4) has any operation
upon cls. (2) and (3) of section 135-A. Though the payment by the insurer of the total or partial loss is an act
of party, subrogation is effected by the operation of cls. (2) and (3) of the section viz., by operation of law. S. 6
(c) is concerned with a transfer of a mere right to sue by act of parties. If this is so, it would be incongruous to
say that cl. (4) will have any effect on the operation of cls. (2) and (3) of the section.
37. In Indian Trade and General Insurance Co. Ltd. v. Union of India A. I. R. 1957 Calcutta 190 1955 Indlaw CAL
38. Mitter, J. had occasion to consider the question in detail and, after referring to the English law, he come to
the conclusion that, although by sub-s. (2) and (3) of s. 135-A, an insurer is subrogated to all the rights and
remedies of the assured in respect of the subject matter, it has no independent right of action in its own
name, but can only sue in the name of the insured. The learned judge referred to the decision in M. V. F.
Marakkyayar & Sons v. Banians & Co. 1925 Indlaw MAD 384 and said that the rule of English law which never
permitted a subrogee to institute a suit in its own name has been followed in India and is a sound rule.
39. In Alliance Insurance Company Ltd. v. Union of India I. L. R. [1950] 1 Calcutta, 544. it was held that an
insurance company which has paid to the consignee the total loss, was entitled to maintain a suit in its own
name against the carrier for reimbursement of the amount paid to the insured for the loss. The Court pointed
out that although cl. (e) of S. 6 of the Transfer of Property Act provides that a mere right to sue cannot be
transferred, subs. (4) of s. 135-A has removed the bar and made a deliberate departure from the English rule
of procedure which lays down that an insurer who pays for a total loss cannot sue independently in his own
40. The Court did not, however, refer to the judgment of Mitter, J.
41. In Indian Trade and General Insurance Co. Ltd. v. Union of India A. I. R. 1957 Cal. 190 1955 Indlaw CAL 132.
For the reasons already given, I do not think I can agree with the reasoning of this case. In Textiles and Yarn
(P) Ltd. v. Indian National Steamship Co. Ltd. A. I. R. 1964 Calcutta 362 1964 Indlaw CAL 176 which was a suit
filed by the insurer on payment of total loss for recovery of damages for loss of goods in the course of transit
from Madras to Calcutta by a steamship, Mitra, J. held that the insurer cannot maintain an action in its own
name unless there was an assignment of the claim by the assured in favour of the insurer. In the Asiatic
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Government Security Fire and General Assurance Co. Ltd. v. The Scindia Steam Navigation Co. Ltd. 1964
Indlaw KER 54, M. S. Mennon, C. J. in a well reasoned judgment sad that the insurer, on subrogation, is not
entitled to sue in its own name. In Vasudeva Mudaliar v. Caladonion Insurance Co. and Another A. I. R. 1965
Madras 159 1964 Indlaw MAD 29420, the Madras High Court said :
"But subrogation does not ipso jure enable him to sue third parties in his own name. It will only entitle the
insurer to sue in the name of the assured, it being an obligation of the assured to lend his name and assistance
to such an action."
42. I think the High Court was right in its conclusion on this point.
43. The second contention as regards the maintainability of the suit was that there was an assignment by the
assured of all the rights, including the right to sue the Railway Administration, by virtue of which the Globe
Insurance Co. could file a suit and that precluded the assured from suing. The assignment, as already stated,
was before the institution of the suit, and is in the following terms :
"In consideration of your paying to us the sum of Rs. 32,254-6-9 only in full settlement of our claim for damage
by fire under Policy No. 49757 issued by you on the undermentioned goods, we hereby assign transfer and
abandon to you all our rights against the Railway Company or other persons whatsoever caused or arising by
reason of the said damage or loss and grant you full power to take and use all lawful ways and means in your
own name and otherwise at your risk and expense to recover the said damage or loss and we hereby subro-
gate to you the same rights-as we have in consequence of or arising from the said loss or damage.
"And we hereby undertake and agree to make and execute at your expense all such further deeds,
assignments and documents and to render you such assistance as you may reasonably require for the purpose
of carrying out this agreement."
44. The High Court held that the assignment was of a mere right to sue and it was not, therefore, valid under
S. 6(e) of the Transfer of Property Act. The question is, whether what was assigned was a mere right to sue or
something which the law of insurance recognises as assignable.
45. In King v. Victoria Insurance Company Ltd. [1896] A.C. 250, a consignment of wool was insured by the
Bank of Australasia during its transportation by a ship from Townsville to London. The wool was damaged in
transit. The bank claimed against the insurance company tinder the policy for a loss of 920pound. The
insurance company paid that amount and took a formal assignment from the bank of all its rights and causes
of action against the Government, the bank stipulating that the assignment would not authorize the use of its
name in legal proceedings. The insurance company sued the Government for the negligence of their officers
and servants in not properly mooring and watching their punts which had caused the collision of the ship
carrying wool resulting in damage to the consignment. The Government contended that the assignment of a
mere right to recover damages was illegal. Lord Hobhouse, after stating that subrogation would not give the
insurer a right to sue in its own name, said:
46. "But that difficulty is got over by force of the "press assignment of the bank's claim, and of the Judicature
Act, as the parties must have intended that it should be when they stipulated that nothing in the assignment
should authorize the use of the bank's name. "Their Lordships do not express any dissent from the views
taken in the Court below of the construction of the Judicature Act with reference to the term 'legal chose in
action'. They prefer to avoid discussing a question not free from difficulty, and to express no opinion what
limitation, if any, should be placed on the literal meaning of that term. They rest their judgment on the
breaded and simpler ground that a payment honestly made by insurers in consequence of a policy granted by
them and in satisfaction of a claim by the insured, is a claim made under the policy which entitles the insurers
to the remedies available to the insured.
47. On this view the highly artificial defence of the Queens-land Government fails, and the appeal must be
dismissed with costs."
48. The question whether there could be an assignment of such a right was considered in Campania
Colombiana de Seguros v. Pacific Steam Navigation Co. [1965] 1 Q. B. 101, 121 in that case, the assignment by
the assured in favour of the Insurance Company was in the following terms :
"For loss and/or damage to the goods having received payment from the Compania Colombiana de Seguros
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for the foregoing, we cede and endorse to the said insurance company all rights which we have or which we
may acquire in the future to claim reimbursement thereof from the third parties who may be responsible for
such loss or damage."
49. The insurance company alleged that the document went further than a form of letter of subrogation and
constituted a valid assignment by the assured to the insurance company of the assured's claim against the
defendants. For the defendants it was argued ". . . . An assignment by the insured to the insurance company
of the right of action is ineffective. The reason is that a bare right of litigation cannot be assigned... The only
decision to the contrary is that of the Privy Council in King v. Victoria Insurance Co. Ltd. which should not be
50. The Court overruled the argument and held that the decision in King v. Victoria Insurance Co. Ltd. [1896]
A. C. 250. 480 correctly lays down the law. After reviewing the case law on the subject, Roskill, J. speaking for
the Court observed :
"So much, then for the authorities. What is the principle to be adduced from them ? I think it can be stated in
this way. Where, before 1873, equity would have compelled the assignor to exercise his rights against the
contract breaker or tortfeasor for the benefit of the assignee, those rights can, since 1873, be made the subject
of a valid legal assignment and, subject to due compliance with the requirements of the statute as to notice,
can be enforced at law. Equity always, before 1873, compelled an assured to lend his name to enforce his
underwriter's rights of subrogation against a contract breaker or tortfeasor. It follows, therefore, that the only
possible objection to such rights being now enforceable at law is that such enforcement would involve the
enforcement of a bare cause of action in contract or in tort. But as Mr. Littman urged upon me, if that is so,
why did equity act as equity did act before 1873 in relation lo the enforcement of subrogation right ? I think
the answer is because the enforcement of such rights was never regarded as the enforcement of a bare cause
of action, but as the enforcement of a cause of action legitimately supported by the underwriter's interest in
recouping himself in respect of the amount of the loss which he had paid under the policy as a result of the
acts, neglects or defaults of the actual contract breaker or tortfeasor."
51. In Anson's Law of Contract, it is stated that although an assignment of a bare right to litigate has been held
invalid, the principle is necessarily subject to qualification. One such qualification is :
"Suppose an insurer, who has indemnified his insured under a policy of insurance and in consequence been
assigned the insured's right of action in respect of a breach of contract, sues to enforce this right of action
against the contract-breaker. Could he be met by the plea that he is the assignee of a bare right of action ? In
Compania Columbiana de Seguros v. Pacific Steam Navigation Co., Reskill, J. held that the enforcement of such
a right is not the, enforcement of a 'bare right of action', but of a right of action legitimately supported by the
insurer's interest in recouping the loss sustained by paying out on the policy."
52. In the Law of Contract by Cheshire and Fifoot the case of Compania Columbiana de Seguros v. Pacific
Steam Navigation Co. (supra) is quoted an authority for the proposition that if goods shipped on a vessel are
delivered in a damaged condition, the consignee, after being indemnified for his loss by the insurers can
assien to the latter his right to recover damages from the owner of the vessel.
53. The real reason why a mere right to sue cannot be assigned is that such an assignment would offend the
rule of champerty and maintenance. Now, as in this case where an insurance has been subrogated to all the
rights and the remedies of the assured by virtue of s. 135-A, the reason for the rule against assignment of a
mere right to sue does not obtain, because the insurance company is clothed with all the rights and remedies
of the assured and the only thing lacking is the capacity to sue in its, own name. If the right is capable of being
assigned, and is assigned, it would Twenty-third edition, edited by A.B. Guest, p. 417. no longer be logical to
say that the assignor can still sue for, whatever right the assignor had in the subject matter had passed to the
assignee. It is impossible to understand, how, after the assignment, the assignor can still maintain a suit.
54. This question was considered by the Madras High Court in Vasudeva Mudaliar v. Caledonian Insurance Co.
and Another A. I. R. 1965 Madras 159 1964 Indlaw MAD 29420 and the Court said:
"However, an assignment or a transfer implies something more than subrogation, and vests in the insurer the
assured's interest, rights and remedies in respect of the subject matter and substance of the insurance. In such
a case, therefore, the insurer, by virtue of the transfer of a mere right to sue are permissible and are to
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maintain a suit in his own name against third parties. (22 Halsbury's Laws of England, Simond Edn. paras 512-
513 and Shawcross on 'Motor Insurance'). "Normally, an assignment of a right of action for a tort is not valid
under s. 6(e). But cases of subrogation as applied to insurance for indemnity are an exception to the rule and
assignments by the assured to the insurer of his rights and remedies being more than a transfer of a mere
right to sue are permissible and are valid. But express assignment by the assured of all his rights is necessary
and subrogation by itself will not enable the insurer to sue in his own name)."
55. It is regrettable that the attention of the High Court was not drawn to the above decision.
56. Correct, that the assignment conveyed to the insurance company, the entire right in respect of the subject
matter of the insurance, including the right of the assured to sue in its own name and that, after the
assignment, the assured had no cause of action to institute the suit against the Railway Administration for
recovery of damages. I would allow the appeal and set aside the judgment and decree of the High Court and
restore the decree passed by the Subordinate Judge, Coimbatore, dismissing the suit, without any order as to
57. In accordance with the opinion of majority the appeal is dismissed with costs.
Appeal dismissed.
2013 Thomson Reuters South Asia Private Limited

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*101 Becker, Gray and Company Appellants; v London Assurance
Corporation Respondents.
In the House of Lords.
29 October 1917
[1918] A.C. 101
Earl Loreburn, Lord Dunedin, Lord Atkinson , Lord Sumner, and Lord Wrenbury.
1917 Oct. 29.
Insurance (Marine)GoodsConstructive Total LossRestraint of PrincesDeclaration of
WarMenofWarPeril of CaptureShip putting into Neutral Port to avoid Risk of
CaptureBritish Goods on German ShipLoss of AdventureMarine Insurance Act, 1906 (6
Edw. 7, c. 41), ss. 55, 60.
The plaintiffs shipped goods on board a German ship for carriage from Calcutta to
Hamburg and insured them on that voyage with the defendants against the usual perils,
including men-of-war, enemies, and restraints of princes. While the goods were at sea
war broke out between Great Britain and Germany, and the master, on being informed
of that fact, put into a neutral port to avoid the risk of capture by hostile cruisers and
with the intention of suspending the further prosecution of the voyage until after the
termination of the war, and the voyage was thereupon abandoned. The plaintiffs gave
notice of abandonment to the defendants and claimed as for a total loss. There was no
evidence that the ship had been chased by any hostile cruiser, but, in the opinion of the
Lords of the Admiralty, she would have been in peril of capture if she had proceeded on
her voyage:
, that the frustration of the adventure was caused, not by a peril insured against, but by
the voluntary act of the captain *102 in putting into a port of refuge to avoid risk of
capture, and that the plaintiffs were not entitled to recover.
Observations of Lord Sumner as to the causa proxima rule.
British and Foreign Marine Insurance Co. v. Sanday & Co. [1916] 1 A. C. 650
Decision of the Court of Appeal [1916] 2 K. B. 156affirmed.
APPEAL from a decision of the Court of Appeal
affirming a decision of Bailhache J.

In June, 1914, the appellants, a firm of British merchants, sold in Calcutta to German
buyers 500 bales of jute for shipment to Hamburg upon the terms that the property was not
to pass until the arrival of the goods at the port of destination and payment of the price. In
part fulfilment of their contract, at the end of June and the beginning of July they shipped
218 bales on board the German steamship Kattenturm for carriage from Calcutta to
Hamburg, and they insured the goods for the voyage with the respondents by a policy of
marine insurance dated July 28, 1914. The clause warranted free from capture, seizure,
&c. was struck out in consideration of an extra premium. The perils insured against
included men of war . enemies . takings at sea, arrests, restraints and detainments of
all kings, princes and people of what nation, condition or quality soever.
The ship sailed from Calcutta for Hamburg and arrived at Malta on August 1, 1914. She left
Malta on August 3. At 11 P.M. on August 4, war, which had already broken out between the
German Empire and France, was declared between Great Britain and the German Empire.
On August 6 the master put in to Messina, then a neutral port, to avoid the risk of capture,
and after lying there for about a month proceeded to Syracuse.
On September 1, 1914, the appellants gave notice of abandonment to the respondents,
stating that the 218 bales of jute were a constructive total loss through consequence of
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hostilities, and on the following day the respondents declined to accept the notice, but
agreed to the appellants being in the same position as if a writ had been issued.
On October 28, 1914, the Italian Government made a decree, which came into operation on
November 5, 1914, forbidding the export of raw jute. *103
On November 11, 1914, the appellants (through the British Consul at Rotterdam and with
the sanction of the Board of Trade) communicated with the Hansa Company at Bremen, who
were the owners of the ship, in order to ascertain whether they would be willing to deliver
up such portions of the cargo as belonged to the plaintiffs and upon what terms. On
November 20, the company replied that the German Government had issued a prohibition
against delivering goods to British subjects, and this reply was forwarded to the
respondents on November 30. On December 16, 1914, the appellants through their
solicitors gave a second notice of abandonment founded on the reply of the German
company, and on December 17, on the refusal of the respondents to accept the
abandonment, the appellants commenced this action against the respondents, claiming the
sum of 1380l. as for a total loss under the policy of insurance.
Eventually the jute was sold to an Italian company for 1051l. and the purchase-money was
duly paid, but by arrangement the steps taken for obtaining and disposing of the cargo in
Italy were taken without prejudice to the rights of the parties.
At the trial of the action, by agreement between the parties, a letter dated June 28, 1915,
from the Admiralty to the appellants' solicitors was put in and was treated as evidence in
the case. It was in the following terms:
With reference to your letter of the 22nd instant, relative to proceedings in the
High Court of Justice by your clients Messrs. Becker, Gray & Co. against the
London Assurance Corporation in respect of certain bales of jute forming part of
the cargo of the German s.s. Kattenturm stated to have been bound from
Calcutta to Hamburg in August last and to have taken refuge at Messina and
afterwards at Syracuse in order to avoid capture by British or French warships, I
am commanded by my Lords Commissioners of the Admiralty to inform you that
any German steamer proceeding on or after the 5th August last through the
Mediterranean on a voyage to Hamburg would, in their Lordships' opinion, have
been in peril of capture by British or allied warships when outside neutral
territorial waters.

Bailhache J. held that the goods were not lost by any peril insured against, but that the loss
arose from steps taken by the captain to avoid a peril which had not begun to operate, and
his judgment was *104 affirmed by the Court of Appeal (Swinfen Eady L.J., Pickford L.J.,
and Bankes L.J.).
1917. March 19, 20, 22, 23; July 12. Sir John Simon, K.C., and R. A. Wright, for the
appellants. 1. This adventure was frustrated by a restraint of princes. The declaration of war
between Great Britain and Germany was a restraint of princes, and the effect of it was
thenceforward to render illegal the adventure of sending these British-owned goods to
Hamburg. The declaration of war dissolved the contract of affreightment - Karberg & Co. v.
Blythe, Green, Jourdain & Co.
- and was the immediate and direct cause of the destruction
of the subject-matter of the insurance: British and Foreign Marine Insurance Co. v. Sanday
& Co.
It is true that in that case the ships were British, but the nationality of the ship has
nothing to do with the destruction of the adventure of the goods. The reason why the
adventure has become frustrated by the declaration of war is not because the ship is an
enemy ship, but because the goods are going to an enemy destination. The adventure
necessitates commercial dealings between the appellants and a German shipowner in a
German port, and that is illegal. There was here, therefore, an effective restraint of princes
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preventing the prosecution of the adventure: Nobel's Explosives Co. v. Jenkins & Co.
also referred to Dixon v. Reid
and Nickels & Co. v. London and Provincial Marine and
General Insurance Co.
2. There was a constructive total loss of the goods by peril of capture. When the ship put
into Messina she was in the zone of danger and was in actual imminent peril of capture. The
master put into a port of refuge under the stress of an existing and operating peril of
capture and not as a voluntary act to avoid entering the sphere of peril: Geipel v. Smith
Rodocanachi v. Elliott.
As regards getting out of the Mediterranean there was on August 6
just the same kind of restraint as there was in Rodocanachi's Case
as regards getting out
of Paris, and there was not in any relevant sense any voluntary act at all. It is not necessary
for the peril to operate *105 that the master should go on and get captured. Kacianoff v.
China Traders Insurance Co.
is distinguishable, because there the vessel had never started
at all. Upon the construction of a policy of marine insurance there must be a close
connection between the peril and the loss - that is what is meant by saying that it is the
proximate cause which must be looked at; but this has been proved here by the letter of the
Admiralty: The Knight of St. Michael
; Ionides v. Universal Marine Insurance Co.
; Butler
v. Wildman
; Reischer v. Borwick
; Phillips on Insurance, 5th ed., vol. 1, par. 1115, p.
655. In Hadkinson v. Robinson
it was held that the ship put into a neutral port to avoid a
peril which had not begun to operate, but in weighing that decision it must be remembered
that modern conditions of warfare have enormously increased the liability to capture. [They
also referred to Wilson Brothers, Bobbin & Co. v. Green
and Arnould on Marine Insurance,
9th ed., vol. 2, s. 822.]
3. There was a constructive total loss by enemies, in that the captain refused to deliver up
the goods to the appellants in obedience to the orders of the German Government.
Leslie Scott, K.C., and Adair Roche, K.C.(with them T. Mathew), for the respondents. As to
loss by enemies, the refusal of the captain to give up the goods in neutral territory was a
civil wrong and he could have been compelled to give them up. As to peril of capture, there
are concurrent findings of fact by the Courts below that the vessel was turned aside to avoid
loss by the peril and was not within the operation of the peril at the time, and unless those
findings are plainly wrong this House will not interfere with them. There is a definite
distinction between loss by an insured peril and turning aside to avoid the peril, and this
distinction has been recognized in cases of marine insurance for more than a century.
Apprehension of peril is not enough; there must be certainty in fact. Even in the case of an
effective blockade, if a vessel turns aside that does not justify a notice of abandonment.
Geipel v. Smith
has no application, because that was not a case *106 of a policy of
assurance, which by our law is dealt with on a special footing: Arnould on Marine Insurance,
9th ed., vol. 2, s. 804. In Hadkinson v. Robinson
there was an actual impossibility of
entering the port of destination, but it was held that there was no loss because the captain
decided not to bring himself within the danger; and the reason for that decision was that
any departure from the salutary rule of causa proxima would be to penalize the
underwriters by making them liable for a loss for which they were not liable by the terms of
the policy and to penalize the assured by raising the premiums. The application of that
doctrine is a recognized mark of distinction between a policy of marine insurance and a
contract of affreightment. The test is whether the operation of the peril upon the subject-
matter of the insurance has reached practical certainty. Loss by capture means that the ship
must be captured; it does not mean loss by danger of capture. This is illustrated by Lubbock
v. Rowcroft
, Forster v. Christie
, and Nickels & Co. v. London and Provincial Marine and
General Insurance Co.

Hadkinson v. Robinson
was expressly followed in the United States by Story J. in Smith v.
Universal Insurance Co.
, and it has been recognized as an authority by Pickford J. in
Kacianoff v. China Traders Insurance Co.
, by Stirling L.J. in Miller v. Law Accident
Insurance Co.
, and by Serjeant Marshall in his Law of Marine Insurance, Part I., c. 7 , s. 2.
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Reischer v. Borwick
was wrongly decided. Assuming that there was a constructive total loss
by peril of capture, the voyage was abandoned when the ship put in at Messina, and
therefore the notice of abandonment was not in time. As to loss by restraint of princes,
British and Foreign Marine Insurance Co. v. Sanday & Co.
is distinguishable, because in
that case both the ships were potentially though not physically restrained. Mere illegality is
not a restraint of princes, and that case does not so decide. Here the only restraint on the
cargo was exercised by the captain himself. The arrival of the goods at Hamburg was not
hindered because it was illegal for the cargo *107 owner to take the goods there, for he
had no control over them, and goods are not lost if they are in an enemy country: Moore v.

Sir John Simon, K.C., in reply, referred to Thames and Mersey Marine Insurance Co. v.
Hamilton, Fraser & Co.
, The Xantho
, Hamilton, Fraser & Co. v. Pandorf & Co.
, and
Watts, Watts & Co. v. Mitsui & Co.

The House took time for consideration. Oct. 29. EARL LOREBURN.
My Lords, I agree with the order appealed from because it seems to me that both parties
have accepted as sufficient the Admiralty statement that a German steamer would have
been in peril of capture if she proceeded on or after August 5 on a voyage to Hamburg.
They have left that evidence there without more. It is therefore the measure of the danger
which the ship would have run in proceeding on this voyage. That will not be enough for the
plaintiffs' case. I should have thought that capture would have been a certainty, but I have
no right to act upon my own beliefs or conjectures upon a question of fact when there is
evidence on which the parties rely. And there may be very good reasons of which I am
unaware for being content with the Admiralty view.
My Lords, I think that the facts of the case, and the law applicable thereto, were so clearly
and accurately stated by Bailhache J., the trial judge, that in truth there is little left to add.
His judgment was confirmed unanimously by the learned judges of the Court of Appeal.
If there were no decisions on the point, and the expression men-of-war, enemies and
restraints of princes, as used in a policy of insurance, had to be considered for the first
time, it might not be difficult to say that the adventure in this case was frustrated by the
outbreak of war and, that being so, to hold that it fell within the words as above. This
indeed is the result at which the jurists of the Continent and of America have arrived. Thus
Phillips on *108 Insurance (c. 13, sec. x., par. 1115), after stating the question Whether
a loss consequent upon the imminency of a capture, arrest, restraint, or detention, is within
the risk assumed by insurance against such perils, cites Emerigon and other foreign jurists,
and pronounces the correct rule to be as follows:
Where, after the risk has begun, the voyage is inevitably defeated by blockade,
or interdiction at the port of departure, or destination, or by a hostile fleet being
in the way, rendering the proceeding upon it utterly impracticable, or capture or
seizure so extremely probable that proceeding would be inexcusable, the risk
continues till the vessel has arrived at another port of discharge adopted instead
of that originally intended: and also that an assured on the cargo has a right to

The English authorities have not adopted this rule. They have followed the view of Lord
Alvanley expressed in the case of Hadkinson
in 1803. The current of authority is
unbroken, and the case of Kacianoff
may be taken as a modern example. We are asked to
construe an expression in a mercantile document of ancient origin, interpreted by decisions
that have stood for more than a century. In such a case the only safe rule for a Court is
Stare decisis. I do not cite the cases, because that has been done in the Courts below.
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In accordance with the English rule the question to be asked is, Was the frustration of the
adventure due to a peril, or to something done in order to avoid a peril? The onus to show
that the loss was due to a peril is on the appellants. How do they seek to show it? What
they really urge may be reduced to two things: first, the fact of the master putting into
Messina instead of going on; second, the statement by the Admiralty that in their opinion a
vessel proceeding on or after August 5, 1914, through the Mediterranean on a voyage to
Hamburg would have been in peril of capture by the allied fleets.
Now the first fact is equally consistent with conduct to avoid a peril as with the existence of
a present and actual peril; and the second fact is far short of proof of actual peril to the
ship. The letter is entirely vague - indeed it could not be otherwise - as to when the peril
would begin or become imminent. I am of opinion, therefore, *109 that the appellants fail
to discharge the burden upon them, and that is enough; though if I had to decide positively
I should decide as Bailhache J. did - that the captain went into Messina to avoid a peril and
not under the stress of an actual peril.
There remains the argument founded on the decision of this House in Sanday's Case.
direct application of that case fails for the simple reason that this was a German ship, and
that there was no illegality in the master continuing the voyage if he thought fit. He did not
think fit, and his action it was that terminated the adventure. Sanday's Case
was not
intended to decide, and did not decide, that by the mere declaration of war all goods in
transitu to a German port or town were constructively totally lost. It was urged that in this
case in terms of the policy the risk continued till the goods were delivered to the consignee,
and as the consignee could not get delivery without paying freight to the German captain -
which would be trading with the enemy - that constituted a loss of the adventure of the
same character as in Sanday's Case .
The answer lies in the facts. It was not the
impossibility of paying freight but the conduct of the captain that actually put an end to the
adventure. The same doctrine of causa proxima which decides the first point decides this
I think the appeal should be dismissed.
My Lords, I have not found any reason to change the opinion I ventured to express in
Sanday's Case
to the effect that the old cases of Hadkinson v. Robinson
and Lubbock v.
established the principle which has since then been consistently applied in this
country, that what is insured against in policies of assurance such as that effected in the
present case is the peril of actual capture, not the mere apprehension of capture. I do not
attempt to give a general definition of what amounts to actua capture. It may vary in each
case with the circumstances, the discoveries of science applicable to navigation, and the
operations of ships of war in naval warfare; but I fully concur with the judgment about to be
delivered by or on behalf of my noble and learned friend Lord Sumner in this as on all other
points dealt with by him, that *110 nothing approaching to anything that could be
considered actual capture was proved to have occurred in the present case.
My Lords, the Kattenturm left Malta, westward bound, on August 3, 1914. The next that is
known of her is that the captain took her into Messina on the 6th, saying that he did so to
avoid capture. Between the 3rd and the 6th he had found out that Germany was at war.
How or when he learned this, why he chose Messina as his port of refuge, whether he so
much as saw a hostile vessel or was seen by one, we do not know. To sail direct from Malta
to Messina need not have taken three days. No doubt, after proceeding some substantial
distance on his course, he turned back, but anything beyond that is guesswork. He may
have counted on a short war and have expected to go on again soon, but I think he
abandoned the voyage to Hamburg when he bore up for Messina. No point, however, has
been made that, with the abandonment of the voyage, the voyage policy also determined so
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as to discharge underwriters from a loss only caused thereafter, and I will not pursue the
subject. There is evidence of the existence of peril of capture from August 5 onwards, but it
is carefully limited. The Admiralty's reply to an inquiry made on the plaintiffs' behalf, which
is not before us, has been accepted as admissible evidence. It states that any German
steamer proceeding on or after the 5th August through the Mediterranean on a voyage to
Hamburg would have been in peril of capture . when outside neutral territorial waters.
That is all. We know nothing of the actual numbers of the possible captors or of their
particular positions: we do not know if the presence of the Kattenturmwas known to any of
them. Memory may tell us that some of them at any rate had other things to think of just
then, but I suppose we must act as if we knew nothing about it. I lay no stress on the words
on a voyage to Hamburg, although during some part or possibly the whole of August 5 the
Kattenturm was on a voyage to Messina and was no longer on a voyage to Hamburg. That
she would have been in peril of capture conveys by implication that she would have had a
chance of escape, but here again the plaintiffs give us no information. At any rate, there is
no evidence of any peril of capture before August 5. As to the subsequent period, we know
*111 nothing of the ship's speed or equipment, or of the state of her bunkers. I have no
doubt that the opinion of the Admiralty was sound, and I should have been a good deal
surprised (and, may I say? disappointed) if she had gone on her way and had escaped
capture, but when or where that fate would have overtaken her no one can tell. Certainly,
no one who realizes the vast size of the ocean and its multitudinous vicissitudes can doubt
that she might well have evaded capture for many days, and for all we know she might
have been lost by fire or stranding or some cause unconnected with hostilities before ever
any enemy hove in sight.
In these circumstances the plaintiffs' argument was rested mainly on (i.) loss by capture or
some consequence of hostilities or, (ii.) alternatively, by restraints of princes. The sequence
of events under the first head was as follows. Peril of capture outside neutral territorial
waters led the captain to the reasonable conclusion that having got safely into Messina he
had better stay there. This involved the frustration of the commercial adventure of carrying
the cargo to Hamburg and there delivering it under the bills of lading, whereby, in law, the
cargo became a loss. On the second head the point was that from the outbreak of war the
plaintiffs were by English law restrained from trading with the enemy or doing any acts in
furtherance of such trading. Hence, as they could not, durante bello, lawfully pay freight
against delivery of the goods in Hamburg, their adventure came to a sudden and untimely
end on the outbreak of war and their cargo was forthwith constructively a loss. In neither
case does the argument avail, if the loss was one which is not proximately caused by a
peril insured against (6 Edw. 7, c. 41, s. 55, sub-s. 1).
My Lords, if there is any real distinction to be drawn between a loss by perils insured
against and a loss by successfully avoiding them, between a loss by capture and a loss by
the fear of it, one might think that it arises in this case. It was self-restraint, not restraint of
princes, that hindered the captain from putting to sea. I do not say that he ought to have
done otherwise, but the plain fact is that he could do as he liked. On both contentions, if the
captain had chosen to go on, the plaintiffs could not have prevented him. He might have
picked his own time; he might have weighed his chances at leisure; reasonable delay would
not amount to abandonment *112 of the voyage. Even an early peace was not wholly
beyond the bounds of possibility. Accordingly, the plaintiffs further argued that the captain's
election was not the proximate cause of the loss, because to have done otherwise would
have been mere folly; that he had no real choice at all; and that British subjects, whom the
law forbade to trade with the enemy in futuro by paying freight to this German ship in
Hamburg, if ever she arrived, were in law restrained in praesenti, so that a loss of their
cargo proximately resulted. The possibility that in the meantime events might occur, which
might legalize the act and avert a loss, such as the conclusion of peace or the grant of the
Royal licence to pay the freight in order to get the goods, was, they said, of no significance.
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My Lords, these contentions have involved some criticisms of the rule of proximate cause,
or rather of its true application in insurance cases, which, I venture to think, proceeded
from a misapprehension of what this rule really is. There is no mystery about it. Cause and
effect are the same for underwriters as for other people. Proximate cause is not a device to
avoid the trouble of discovering the real cause or the common-sense cause, and, though it
has been and always should be rigorously applied in insurance cases, it helps the one side
no oftener than it helps the other. I believe it to be nothing more nor less than the real
meaning of the parties to a contract of insurance. I venture to say so, because eminent
judges have sometimes seemed to differ on the point. Lord Denman, speaking of this rule in
De Vaux v. Salvador
, says: Such must be understood to be the mutual intention of the
parties to such contracts. In Reischer v. Borwick
Lindley L.J. says the same thing. In
Leyland Shipping Co. v. Norwich Union Fire Insurance Society
, on the other hand, Scrutton
L.J. doubts this and considers the rule to be a judge-made rule. I daresay few assured have
any distinct view of their own on the point, and might not even see it if it were explained to
them; but what they intend contractually does not depend on what they understand
individually. If it is implicit in the nature of the bargain, then they intend it in law just as
much as if they said it in words. I think that it is so implied. Indemnity *113 involves it
apart from decisions. In effect it is the act of the parties.
I am not aware that any branch of the law of contract attaches importance to remote
causes as such, though, where human responsibility is material, it may be necessary to go
beyond and behind the mere event which caused the loss or damage. This is why a carrier is
liable for losses by perils excepted from his contract to carry and deliver, where the
previous default of those for whom he is responsible has brought that peril into injurious
operation. His express stipulation for exemption has to be reconciled with his implied
undertaking to have the carriage performed with care: Grill v. General Iron Screw Collier
, per Willes J.; Hamilton, Fraser & Co. v. Pandorf & Co.
, per Lord Halsbury. So in
marine insurance, where the loss is attributable to the wilful conduct of the assured
(Marine Insurance Act, 1906, s. 55, sub-s. 2 (a)) after the loss by perils insured against has
been proved the question still remains whether the assured's wilful conduct caused them to
operate. In other cases the insurer is liable for any loss proximately caused by a peril
insured against, even though the loss would not have happened but for the misconduct or
negligence of the master or crew: s. 55, sub-s. 2 (a). In a contract of sale or carriage or
service the contractor promises to do something for a price, a freight, or a wage, and his
liability depends not simply on the question whether something has happened or failed to
happen, but whether more remotely it happened or failed to happen owing to his breach of
his obligation. In a contract of indemnity (and a contract of suretyship is very analogous)
the insurer promises to pay in a certain event and in no other, namely, in case of loss
caused in a certain way, and the question is whether the loss was caused in that way, and
whether the event occurred, and the remoter causes of this state of things do not become
material. If contracts of marine insurance were still regarded, as once they were, as
aleatory bargains, this would be plain on the face of them. One need only ask, has the
event, on which I put my premium, actually occurred? This is a matter of the meaning of
the contract, and not, as seems sometimes to be supposed, of doing the liberal and
reasonable thing by a reasonable assured. This is why, as it seems to me, the causa *114
proxima rule is not merely a rule of statute law, but is the meaning of the contract writ
large. This is also why the reasonableness of the conduct of the Kattenturm's captain and
the unreasonableness of suggesting that he might have done otherwise are alike off the
point. So long as his action was voluntary it was his action and not that of the captain of a
British man-of-war, and the policy insures against the second, but against the first only
when it amounts to barratry. There is no case here of duress nor opportunity for saying that
his will was not free, except upon grounds too theological to be worth pursuing.
It must be admitted that the terminology of causation in English law is by no means ideal. It
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would be the better for a little plain English. I think direct cause would be a better
expression than causa proxima. Logically, the antithesis of proximate cause is not real
cause but remote cause. Lord Ellenborough uses causa causans as its equivalent in Gordon
v. Rimmington
; Abbott C.J. speaks of immediate cause in Walker v. Maitland
; Lord
FitzGerald of direct and immediate cause in Cory v. Burr
; and my noble and learned
friend Lord Loreburn of direct cause in Sanday's Case.
Many similar expressions might
be quoted.
Again, it is important that the same word should mean the same thing when used in a
mercantile contract, whether that contract be of one description or another. Perils of the
seas do not mean one thing in a bill of lading and something else in a policy; restraints of
princes do not bear a different interpretation in the one or in the other, but this is not the
question. Restraints of princes may excuse non-delivery of cargo under a contract of
carriage, and yet not cause a loss of cargo, recoverable under a contract of insurance. It is
settled now that mere apprehension that a restraint of princes will come into operation is
not the same thing as its existence or available for either purpose. There is also authority
for saying (Nobel's Explosives Co. v. Jenkins & Co.
) that if restraint of princes is in being
and reasonably likely in the long run to prevent performance of a contract if its further
performance is proceeded with, any further performance is forthwith excused, although the
direct *115 operation of the restraint has not yet occurred. This is because the contract of
carriage, truly construed, so stipulates. It has no bearing upon the question whether a
refusal of further performance, though excusable, is the effect of the carrier's exercise of
judgment or the effect of the restraint of princes.
Many cases have been cited to your Lordships, but none to the contrary of this. In
Rodocanachi v. Elliott
the Germans had prevented all communication between Paris and
other places from September 19 down to the date of the writ. Events before September 19,
it was held, might give rise to some claim against carriers, but could afford no defence to
underwriters if, as was the case, a loss by restraint of princes then occurred and
thenceforward continued. The contention that some direct action on the goods was
necessary was rejected. There was no question of election or volition on the part of those in
charge of the goods. How this case helps the appellants I cannot see. That in Rodocanachi's
the goods were ashore and here were afloat makes no difference. It is said that
regard must be had to changes in the mechanism of war, and that cruisers at Gibraltar as
truly shut up this jute in Messina in 1914 as the German besiegers shut in the silk at Bercy
in 1870. I do not suppose that any rule can be laid down to fix the distance from which an
encircling force may be said to besiege a beleaguered city, or from which a hostile force
may be said to restrain its enemies. I doubt if changes in the speed of ships or the
possibility of signalling by wireless telegraphy or otherwise affect the matter. They help the
hunter no more than the quarry. Miller v. Law Accident Insurance Co.
was a case in which
a f. c. & s. clause warranted the policy free of certain perils and their consequences. It was
held that beyond doubt there was a loss by restraint of princes under the policy apart from
the warranty; the only question was whether it was also caused by perils included in the f.
c. & s. clause so as to be taken out of the insurance. Stirling L.J. expressly says
that the
captain did not act voluntarily. The frustration of the adventure was caused by the direct
operation of an order, which was an act of State and was backed by the existence of
available force though its employment proved to be unnecessary. *116
I will not review the cases generally or discuss the differences between the English and the
United States authorities, but I will refer to a decision of Lord Mansfield, which shows at
how early a date a strict construction was applied to causation in policies of insurance. It is
Jones v. Schmoll.
The policy was on prime slaves, male and female, to pay for mortality
by mutiny exceeding 10 per cent. A mutiny occurred and was suppressed; much blood was
shed. Lord Mansfield allowed the value of those slaves who died of wounds or jumped
overboard when fired on, as being losses by mutiny, but not the value of such as, being
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baffled in their attempts, in despair chose a mode of death by fasting, or died through
despondency, because this is not a mortality by mutiny, but the reverse; for it is by failure
of mutiny. The cases down to that of Kacianoff v. China Traders Insurance Co.
all follow
one uniform and logical line. If any is illogical it is Butler v. Wildman
, for there the dollars
went to the bottom, and that by the prompt decision of the master. The adventure of which
they formed part was captured, and so they may be said to have been lost to their owners
by capture though the Spanish captors never got them. The immediate and actual control,
which the captors possessed by armed force over the whole adventure, was equally a
capture of the part, and perhaps it is the best way of putting it to say that the captors
captured the whole adventure but the captain baulked their profiting by a part of it, though
as the owners did not get their dollars back their loss by capture was not adeemed.
My Lords, British and Foreign Marine Insurance Co. v. Sanday & Co.
is, I think,
distinguishable. There both ship and goods were British, and your Lordships' judgments
were based on the fact that the ship abandoned the voyage as the proximate result of the
outbreak of war. It was held that no distinction could be drawn for the purpose of causation
between the event which called the subject's duty into existence and the subject's
obedience to that duty. So high was the obligation that an act done in performance of it did
not causally bear the character of a voluntary act or of a new intervening cause. Such a
decision does not support the contention that the abandonment of the voyage by a ship,
*117 which was under no such obligation, is other than the captain's voluntary act or that
the obligations of a purely passive cargo owner can divest that voluntary act of the
character of a new intervening cause, which it would otherwise bear.
My Lords, if it were otherwise, some remarkable consequences would follow. At 11 P.M. on
August 4, 1914, all the world over, every parcel of goods owned by His Majesty's subjects
and laden on board of German vessels or of neutral vessels bound for German ports, for
freight not prepaid, suddenly became, on this view, a total loss. Both ships and goods might
be safe and sound and likely to remain so; cargo owners and shipowners, captains and
crews, might all be ignorant of the outbreak of war. The assured, for want of advice that
their goods were afloat, might have made no declarations to underwriters under floating
policies, and the underwriters might be quite unaware that they were at risk. None the less
on that day and at that hour the ocean became suddenly full of constructive total losses
securely laden in uninjured ships. British underwriters are entitled to sue and labour for the
defence, safeguard, and recovery of the goods insured or to endeavour to salve them for
the benefit of whom it may concern, but they, equally with British cargo owners, would be
forbidden to pay freight to German shipowners for that purpose. Indeed, unless by British
capture they could come by their own again, the cargo owners would have to let their goods
remain in enemy hands and that at the expense of British underwriters. Where the ships
belong to His Majesty's subjects, such is the law: your Lordships have so decided; but I
should be loth to carry that decision beyond its true ratio decidendi. The language of my
noble and learned friends, Lord Loreburn
, Lord Atkinson
, Lord Parmoor
, and Lord
, shows that the illegality of any further prosecution of the voyage, both ship
and master being British, was the ground of the decision.
In truth, in the present case, the outbreak of war imposed no practical disability on the
British cargo owners then and there beyond what already existed. Their obligations as
British subjects had nothing to do with the actual termination of this adventure. The
declaration of war, at the time when it was made, only *118 prohibited acts which the
plaintiffs were in any case already powerless to perform. If it frustrated the adventure, it did
so eventually, but at the same time, though for different reasons and in a different way, the
captain of the Kattenturm frustrated it forthwith. If he had continued the adventure and had
proceeded, the cargo owners might have sustained a recoverable loss by other perils
insured against without any illegality on their part.
The appellants' other contentions may be shortly disposed of. This is not a case in which the
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subject-matter of the insurance was abandoned on account of its actual total loss
appearing to be unavoidable within s. 60. Neither is it a case of loss by any other peril
that shall come to the hurt of the cargo similar to enemies, as in The Knight of St.
It is said that there was a direct loss by enemies when the German captain
refused to deliver to the plaintiffs' representative at Messina except on payment of freight,
which he had not earned, and of charges, which were not due. To be sure he said that he
did so by order of his Government, but I do not see why we should believe him. Bailhache J.
did not, and it does not appear what motive he had for speaking the truth. Committed in
neutral waters his act was a mere civil wrong, and not one falling within the cause of loss
called enemies in the policy. For these reasons I think that the appeal fails and should be
dismissed with costs.
EARL LOREBURN. My Lords, I am authorized to say that my noble and learned friend Lord
Wrenbury has come to the same conclusion.