North British Insurance Company - Lord Advocate (Jeffrey) v. John Barker - Murray [1833] UKHL 6_WS_323

UKHL

North British Insurance Company - Lord Advocate (Jeffrey) v. John Barker - Murray

[1833] UKHL 6_WS_323 · 1833-03-05

A life insurance company lent a sum on condition that the debtor should insure his life with their office to the amount of the debt, and assign to them the policy of insurance; and they took the debtor and his cautioner bound to pay the principal and interest and premiums of insurance. After the debtor's death, they charged the cautioner to pay the sum lent, on the allegation that the policy had been allowed to fall by nonpayment of the premiums; and the cautioner alleged that the manager of the company had accepted from the debtor a bill for the premiums, and agreed to renew the policy. The Court of Session suspended the charge, but the House of Lords remitted, with directions to investigate the facts.

In May 1825 the late Mr. James Lyon, writer in Edinburgh, applied to the appellants for a loan of 2,500 l ., which they agreed to upon the following security:—first, of the personal engagement of himself and the respondent, John Barker, for payment of the debt; second, of an assignation of a remote and partly a contingent interest in the reversion of the succession of a Mr. Thomas Ferguson lately deceased, but which could be of no avail during the lifetime of his widow; thirdly, of an assignation of a policy of insurance upon Mr. Lyon's own life for 2,500 l . In accordance with this arrangement,

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“I, James Lyon, solicitor before the Supreme Courts of Scotland, grant me instantly to have borrowed and received from the North British Insurance Company, incorporated by royal charter under that title, the principal sum of 2,500 l . sterling, whereof I hereby acknowledge the receipt, renouncing all exceptions to the contrary; which sum of 2,500 l . sterling I, the said James Lyon, as principal, and I, John Barker, surgeon in Edinburgh, as cautioner and surety, and full debtor for and with the said James Lyon, hereby bind and oblige ourselves, conjunctly and severally, and our respective heirs, executors, and successors, to repay and again deliver to the said North British Insurance Company, or to the assignees of that incorporation, and that at the term of Martinmas next, with the sum of 500 l . of liquidated penalty, in case of failure, and the legal interest of the said principal sum from the date hereof to the foresaid term of payment, and thereafter during the notpayment of the said principal sum,”

&c. It is then stated that “it was part of the treaty for the said loan that I (the said James Lyon) should insure my life during its whole period for the amount of the said loan, and should assign the policy of insurance to the said North British Insurance Company in farther security thereof; and I, having, in implement of the said arrangement, effected a policy of insurance upon my life for the remainder

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In 1827 there was an arrear due to the appellants of

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Under these circumstances the appellants charged the respondent to pay the amount of the bond, and he brought a suspension. The Lord Ordinary made avizandum on cases to the Court; and the Court, before answer, ordained the appellants to give in a condescendence, stating the practice, as well in England as in Scotland, in transactions of that nature; and this having been complied with, the Court, on 2d July 1831, sustained the reasons of suspension, and found expenses due. *

Against this interlocutor the Insurance Company appealed.

Appellants .—The respondent, by becoming a party to the bond, incurred an effectual obligation to pay the

Footnote

* 9 S. D. 869.

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By the bond there were provided to the appellants four different sources for obtaining repayment of the sum which they advanced to Mr. Lyon: Mr. Lyon's own personal obligation to pay that money; a similar obligation undertaken by the respondent; Mr. Lyon's claim upon Ferguson's estate, which was assigned in security to the appellants; and the policy of insurance which Mr. Lyon himself effected upon his own life, and which also was assigned in security to the appellants, with a guarantee by Lyon and the respondent that the policy would be kept up during the subsistence of the loan. But implement of the obligation has not been obtained from any of these sources; and in particular, the policy of insurance was extinct before Lyon's death, he and the respondent having, in contravention of their obligation to preserve it from being lost during the subsistence of the loan, failed to preserve it in subsistence for more than two years. *

It was no doubt alleged by the respondent, that the premium had been duly paid, but this was denied by the appellants, and thus the parties were directly at issue on a matter of fact.

Respondent .—The contract entered into between the appellants and the respondent was of a somewhat anomalous description. On the one hand, the respondent

Footnote

* Macqueen v. Fraser , Fac. Coll. 11th June 1811; Erskine, b. iii. t. 3. s. 66; Dalrymple, No. 167; Bankton, b. i. t. 10. s. 204–5; b. i. t. 23. s. 43; Stair, Alexander v. Gordon , 6th Dec. 1671; Stair, Allan v. Paterson , Dict. v. i. p. 125–6.

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The respondent had no concern with any policy of insurance, or with any conditions expressed therein, which were not contained in the bond. The absolute and unconditional obligation under which he came to the appellants for the payment of the premium of 73 l . 0 s . 5 d . yearly, in addition to the legal interest, while the principal sum remained unpaid, rendered it impossible that the counter obligation of insurance incumbent on the appellants could fall or become void as to him, and supersede, so far as the respondent was concerned, any conditions which might be inserted in the policy, or which might have been privately entered into with Mr. Lyon, whereby the insurance or the obligation of the appellants might have fallen by neglecting to pay the premium within a certain time, and therefore the claim now made is in contravention of the bona fide meaning of the agreement into which they and the respondent entered.

The respondent was merely a cautioner for Mr. Lyon, having no personal interest whatever in the advance

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Besides, the appellants or their secretary, by taking and retaining the bill from Mr. Lyon for 140 l ., must be held to have received payment of the premium of insurance in question, as it is impossible to conceive for what purpose the secretary of the appellants could receive and retain this bill, unless for the payment of the interest and of the premium of insurance.

Lord Wynford .—My Lords, the appellants in this case are the North British Insurance Company, who had instituted proceedings on a bond which had been given to them by Mr. Lyon and Mr. Barker for the sum of 2,500l. It appears that they had two or three securities for the payment of this money, but that, not being satisfied with those securities, they required Mr. Lyon, for whose benefit the money was originally advanced—Mr. Barker, the respondent, being merely what we

Footnote

* Case of Want, 11th Feb. 1810, East's Rep. xii. 183; Marshall on Insurance, ii. 695; Fleming v. Thomson , 23d May 1826, ante vol. ii. p. 277; Mackenzie v. Macartney , Aug. 1831.

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“Mr. Lyon having deprived the chargers of one of the securities upon which the loan had been made to him, and having also failed to pay the interest which fell due at Whitsunday 1827, became alarmed lest the chargers should call up their money. In the hope of saving himself and his cautioner from such a demand, he, on the 24th June 1827, being a month after the contract of insurance was at an end, waited upon their secretary, Mr. Brash, and offered to leave Mr. D. S. R. Dickson's acceptance, which is mentioned by the suspender, with Mr. Brash, as an additional security for the arrears of interest, and as an earnest of his intention to apply for a revival of the policy some time afterwards on his return from London.”

Now, to be sure, if that is the true state of the case, there is an end of it; there is nothing like payment—it is not tendered as payment, it is tendered as an earnest that payment is at a future time to be made. They then state farther,—“Mr. Brash refused to take the acceptance, or any thing but cash, even as a payment of the interest, but consented to allow the document to remain in his hands on the footing which has been mentioned.” What is that footing? not upon the footing of payment, but upon the footing of an earnest of payment in future. Now, the allegations in the answer to this article, it is said, are denied.

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The Court of Session have not thought fit to inquire whether they are true or false. If those allegations are true there is an end of the cause; if the tenth statement, which contains something very important, be true, as to the view of the case taken by the respondent as well as Mr. Brash, there is an end of the cause. “The suspender, as well as Mr. Lyon himself, failed to take any steps in order to obtain a renewal of the foresaid policy within three months after its expiry. Three months afterwards the suspender, however, was in the full knowledge of Lyon having failed either to renew it within three weeks after 4th May 1827,”—that is the twenty-one days,—“or to apply for a revival of it within three months thereafter. Indeed Mr. Brash, on the 25th May 1827, the very day the policy expired, wrote a note to the suspender mentioning the circumstance. This was not an official notice (which the chargers did not require to give), but only a private communication which Mr. Brash made to the suspender in consequence of the latter having requested as a favour that the former, with whom he was personally acquainted, would inform him whether Mr. Lyon took care to pay the premium at that term. Next day the suspender called on Mr. Brash, and thanked him for the information.” To be sure, if that be true, there is an end of the case. There is no payment; and so far from that, this man, who comes to your Lordships and asks to have the proceedings upon this bond suspended, was told, “Unless you do something more, there will be an end of your claim in regard to this policy of insurance.” But it has been argued, and argued with great talent and ingenuity, by Mr. Murray, on the part of the respondent, in support

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There is not a scintilla of proof of that having been ever contemplated by either of these parties. If the company went into the market and sold the bill, saying, “We will not make ourselves liable upon it,” I do not think they would have received enough to pay the interest. This was the only way in which Mr. Murray could put it—a very ingenious way undoubtedly, but I conceive it is not well founded. I believe the law in Scotland, in respect of bills, is this,—that unless it appears that the bill is expressly taken in payment, it is never considered a payment until it becomes actually paid. In the present case this bill, except in the manner I have stated now, would not be actual payment till seven days after the time that the payment ought to have been made. It was left in their hands, but if they used ever so much diligence, they never could have transferred the proceeds of this bill till seven days after the payment ought to have been made, and till the policy was gone. It is upon this part of the case I have great difficulty, and I wish the question should be considered by the Court below, for they have never looked at the deed of copartnership by which this company is formed. I think it is highly desirable that it should be seen whether there is any thing in the deed of copartnership giving power to the directors beyond that they ordinarily possess; if not, I am not quite sure, not only that this gentleman, Mr. Brash, had not power to take this bill, but that the directors had not, and that the moment the three weeks had expired the policy was gone —that it was void. You cannot improve a thing which is void; you may set up a thing that is voidable, but you cannot deal with a thing that is void; you must make a new policy. You cannot ask the

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My Lords,

it appears to me there is another question which has not been much considered. If Mr. Brash had done anything which he had not authority to do, he might be personally responsible, but they might lose his benefit of the bill; but the renewing the benefit of the policy is quite another question, which appears to me not to have been considered. Under all the circumstances of the case, I should submit to your Lordships that this case is scarcely ripe for final decision, and that it will be more satisfactory it should go down again. It had occurred to me at one time that it would be fit it should be sent down, with a direction that it should be sent to a jury, to ascertain first whether Mr. Brash had any such authority as it is supposed he acted under in this case; but perhaps it would be better to leave that to the Court, whether they will send it to a jury, or examine into it themselves by examining Mr. Brash. They will be best able to determine what is the most satisfactory mode. I should therefore submit to your Lordships that it will be proper this interlocutor should be reversed, and that this case should be sent down to the Court of Session with directions, which directions I will take care shall be put upon your Lordships minutes before it is remitted, to examine Mr. Brash according to the practice which prevails in Scotland—to examine into his authority to do that which it is denied that he ever did; to ascertain, first, whether he ever did it; and next, whether, if he did, he had any authority to do it. Perhaps it may not be necessary to go farther than that; but if it is, I am of opinion that they ought to look into the deed to see whether that would be done in such a case as this, without calling together the members of the company and obtaining their consent. I

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The House of Lords ordered and adjudged, That the several interlocutors complained of in the said appeal be and the same are hereby reversed: And it is further ordered, That the cause be remitted back to the Court of Session, to consider whether it is consistent with the law and practice of Scotland to examine John Brash in this cause, and if they find that it is so consistent, then to ascertain, by the examination of the said John Brash, and from such other legal evidence (if any) as they may find applicable to the case, for what purpose the bill for 140l. in the pleadings mentioned was received by him, and particularly whether the said bill was received as payment of the premium which fell due on the 4th day of May 1827, for the continuance of an insurance for 2,500 l . on the life of James Lyon, for one year from and subsequent to the said 4th day of May 1827, and which bill, being dated the 21st day of June 1827, and payable fifty days after date, fell due at a period subsequent to the expiry of three months from the time at which the said premium was payable; and in case the said Court shall find that such bill was received by the said John Brash as payment of the said premium, then the said Court shall consider and find whether the said John Brash had any and what authority so to receive such bill, and upon what instrument or evidence such authority (if any) is founded; and in case the said Court

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Solicitors: Moncreiff, Webster, & Thomson— J. Butt, Solicitors.