021-NLR-NLR-V-36-SERIF-v.-BRITISH-PARK-INSURANCE-CO-.LTD.pdf
97
Sheriff v. British Pdrfc Insurance Co., Ltd.
1934Present: Macdonell C.J. and Garvin S.P.J.
SHERIFF v. BRITISH PARK INSURANCE CO., LTD.
344—D. C. Kandy, 38,581.
Insurance—Car insured against loss by fire—Hire-purchase agreement—Joint
insurance by owner and hirer—Action by hirer for loss of car destroyed
by fire—Measure of loss.
Plaintiff was the hirer of a motor car on a hire-purchase agreement,one of the conditions of which was that the car should be insured andkept insured during the continuance of the agreement and that suchinsurance should be effected in the joint names of the owner and thehirer.
In accordance with the agreement, the car was insured with the defend-ant company by the owner and the plaintiff for their respective rightsand interests.
The car was destroyed by fire five months after the agreement whena sum of Rs. 1,978.50 was due by way of instalments to the owner.
Plaintiff was relieved from the necessity of paying the instalments byreason of the destruction of the car by fire, which was held to be purelyaccidental. It was agreed that the value of the car at the time ofdestruction was Rs. 2,750.
Held (in an action brought by the plaintiff to recover his loss under thepolicy of insurance), that the measure of his loss was determined byhis interest in the car which was ascertained by the value of the car lessthe amount of the instalments due by him.
A PPEAL from a judgment of the District Judge of Kandy.
N. E. Weerasooria (with him Choksy and D. W: Fernando), for defendants,appellant.
H. V. Perera, for plaintiff, respondent.
Cur. adv. vult.
36/10
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MACDONELL C.J.—Sheriff x>. British Park Insurance Co., Ltd.
February 26, 1934. Macdonell C.J.—
In this case the plaintiff-respondent had obtained on a hire-purchaseagreement from the United Motor Finance Company a Pontiac car to beused by him for hiring, at a price of Rs. 4,320, on the terms that he wasto pay for it by twelve instalments of Rs. 247.50 per month. It was infact the ordinary hire-purchase contract and the car itself was to remainby the terms of the agreement the property of the company until thelast instalment was paid. At the time of the execution of the hire-purchase agreement the car was insured with the defendants-appellantby the plaintiff-respondent and by the United Motor Finance Companyfrom whom he was purchasing the car for Rs. 4,050, “ for their respectiverights and interests ”. One of the risks insured against was loss of theinsured vehicle by fire up to the value of the vehicle at the time of the fireor the value stated in the schedule, viz., Rs. 4,050, whichever was less.The plaintiff-respondent took possession of the car and drove it as ahiring car for five months, paying monthly instalments for those fivemonths. At the end of that time the car was destroyed by fire and afterlitigation on the matter the Supreme Court held that the fire was acci-dental. It is clear therefore that the defendants-appellant, the insurers,must pay, as they themselves admit, and the only question is, how much.
It is admitted by all parties that the value of the car at the time it wasdestroyed was Rs. 2,750. This is a lesser sum than that for which it wasinsured, and this lesser sum Rs. 2,750 is therefore the total amount thatcan be recovered from the defendants under the policy of insurance. Atthe time the car was destroyed by fire the plaintiff-respondent had paida premium on the fire insurance, also a deposit and instalments towardsthe purchase of the car, in all a sum of Rs. 2,581.50, and at the time ofits destruction he owed for instalments a sum of Rs. 1,978.50. (Thedebris of the car after the fire realized Rs. 200 to the United MotorFinance Company.) The judgment of this Court, which held that thefire which destroyed this car was accidental, also exonerated the plaintiff-respondent from any further payment of instalments to the United MotorFinance Company on his contract to purchase this car. The article, thesubject of the contract, had perished and the rule res domino peril applies.There was a total sum recoverable under the contract, as has been said, ofRs. 2,750, the admitted value of the car at the time it was destroyed, andthe insurers, the defendants-appellant in this case, claim that as theplaintiff-respondent is exonerated from payment of further instalments,namely, Rs. 1,978.50, that sum must be deducted from the Rs. 2,750payable under the policy of insurance, and that only the balanceRs. 771.50 is payable to the plaintiff-respondent.
I think that this contention is correct. The contract of fire insuranceis a contract of indemnity. The party or parties' insured in such acontract are entitled to be indemnified up to the amount of his or theirloss in respect of his or their respective interest in the article insured andthen lost by fire. He or they bargain for “ the payment of a sum ofmoney …. representing his ” or their “ interest in such objectin the event of its loss” (Welford & Otter-Barry on Fire Insurance,3rd ed., p. 13). “ The assured is, as a general rule, precluded from recover-ing more than the value of his interest in the subject-matter, since the
MACDONELL C.J.—Sheriff v. British Park Insurance Co., Ltd.
99
measure of his loss is the interest in respect of which he has been prejudiced,and if he was permitted to recover a greater sum he would be receivingmore than was requisite for a full indemnity.” Ibid. p. 292. U weapply this principle to the present case, then the value of the interest ofthe plaintiff-respondent, the insured, in the subject-matter, the car, is itsvalue at the time it was destroyed, less any “ sum of money or other benefitfrom a third person which has the effect of diminishing or extinguishingthe loss.” Ibid. p. 351. In the present case the insured receives a“ benefit ” in the shape of exoneration from the payment of the furtherinstalments towards purchase of the car. To permit him to retain this“ benefit ”, and also the full value of the car at the time it was destroyed,would be to permit him to recover " a greater sum ” than the “ value ofhis interest in the subject-matter ”, since he would then be recovering“ more than was requisite for a full indemnity ”. It can be put in thisway. If he were permitted to receive the whole Rs. 2,750, he would be atrustee for the insurance company, the defendants-appellant, to theextent of the Rs. 1,978.50, the instalments on the car from payment ofwhich he is exonerated; see London and North-Western Railway v. GlynHe could not retain that sum as against the insurance company becauseto allow him to do so would be, in effect, to pay him twice over in respectof the sum of Rs. 1,978.50, which would be a clear departure from theprinciple that the contract of fire insurance is one of indemnity. Thenthe contention of the defendant-appellants is correct, and the amountrecoverable in this case by the plaintiff-respondent is the value of the carless the unpaid instalments.
The learned trial Judge in his judgment has stated correctly that thecontract of insurance against fire is a contract of indemnity, but, with allrespect, has proceeded on figures and payments not applicable to thequestion. In his judgment he has taken account not of what wasrecoverable under the policy, namely, the admitted value of the car at thetime of the fire, but of the amount which the insured, plaintiff-respondent,had paid by way of instalment and otherwise towards becoming theowner of this car. He has then taken a proportion between the amountstill due by way of instalment to the United Motor Finance Company andthe amount Rs. 4,050, the sum named in the policy as that for which thecar was insured, and has awarded that proportion, which he makes outat Rs. 1,620, to the plaintiff-respondent. This does not seem to be thecorrect way of applying the doctrine of indemnity.
In argument for the plaintiff-respondent it was urged that to allow theinsurers, the defendants-appellant, the full amount of Rs. 1,978.50 wouldbe to give them an immediate payment of money some of which wouldonly be due in the future, and that there must be a deduction accordingly;it was even suggested that a reduction from the Rs. 1,978.50 and acorresponding addition to the Rs. 771.50 bringing the amount recoverableby jojaintiff to some Rs. 850 would be a fair compromise. This line ofargument however disregards the terms of – the agreement betweenplaintiff and the United Motor Finance Company. These were that heshould pay instalments amounting at the time the car was destroyed byfire to Rs. 1,978.50, and there is nothing in the agreement suggesting that
* I El. A EL 652; ISO E. R. 1054.
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GARVIN S.P.J.—Sheriff v. British Park Insurance Co., Ltd.
he could have claimed a reduction on this amount by paying it in one sumin advance—the contract was that he should pay that amount and notany less sum. If so it is difficult to see how any deduction from thisRs. 1,978.50 in the plaintiff’s favour can, on the facts of this case and onthe agreement between the parties, be made. If so, the United MotorFinance Company is entitled to have the whole of that sum taken intoaccount, and consequently the plaintiff is entitled to the Rs. 771.50 andno more. The defendant-appellants having succeeded must have thecosts of this appeal.
With regard to the cost of the trial, it will perhaps be best to orderthat each side pay its own costs, except those of July 13, 1932 which,having been specifically awarded to the defendant, he should be allowedto retain.
Garvin S.P.J.t—This was an action on a policy of insurance in which one of the riskscontemplated is fire. The subject of the insurance is a motor car whichis valued in the policy as Rs. 4,050. The car was destroyed by fire andbecame a total loss save that upon salvage a sum of Rs. 200 was realized.The plaintiff was at the time a person who was the possessor and had theuse and control of the car—rights which accrued to him under a hire-purchase agreement entered into with the owner of the car, the UnitedMotor Finance Co. The agreement is dated February 2, 1929, and wasmade in consideration of the payment at the time of the agreement of asum of Rs. 1,350 and the undertaking to pay the balance sum of Rs. 2,970by 12 instalments, the first of which payments to be made on March 4,
It was a condition of the agreement that the vehicle should beinsured and kept insured during the continuance of the agreement andthat such insurance should be effected in the joint names of the ownerand the hirer with such company as the owners may determine. Inaccordance with this term of the agreement the policy earlier referred towas entered into by which the defendant-company agreed to indemnifythe United Motor Finance Company and the plaintiff “ for their respectiverights and interests ” in respect of this car.
Plaintiff brought this action praying for judgment for the sum ofRs. 4,050 the full sum for which the car was insured. The defendant-company filed an answer denying liability and praying for a dismissal ofthe plaintiff’s action for the following among other grounds: (a) Thevehicle was being driven in an unsafe or in a damaged condition;(b) Reasonable care in the protection and use of the said vehicle was notexercised; (c) The plaintiff’s agent or servant wrongfully refrained fromtaking any steps to extinguish the said fire or to lessen the damageconsequent thereof.
The record of these proceedings shows that there was pending at thetime another action instituted by the Motor Finance Company againstthe present plaintiff for the recovery of the balance sum payable on a hire-purchase agreement. It would seem that in that action the principalissue between the parties related to the circumstances under which thefire occurred. That action resulted in a judgment in favour of thepresent plaintiff which was based upon the finding that the fire was
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GARVIN S-P.J.—Sheriff v. British Park Insurance Co., Ltd.
purely accidental and that he as the hirer was relieved from the liabilityto pay any further hire. In consequence of this decision, which wasaccepted by both parties to this action, the answer was amended and thedefendant, after taking certain other pleas, alleged that, in any event,the plaintiff in respect of his interests in the car was not entitled to claimanything in excess of Bs. 771.50. At a later stage the plaintiff himselfrestricted his claim to the sum of Rs. 2,581.50.
At the trial all other defences were abandoned, and the sole questionsubmitted for the determination of the Court was the assessment of theamount recoverable by the plaintiff under the policy in respect of thedestruction of this car by fire.
In so far as this is a policy of fire insurance, the ordinary liability of aninsurer is to indemnify the insured for the loss of the subject-matter.Consequential loss is not recoverable unless specially insured against.There is no such special insurance in this case. The sole liability thereforeof the defendant-company under this policy is to indemnify the insuredfor the loss of the property insured, and the amount so recoverable is thevalue of the subject-matter at the time of the fire. There are exceptionalcases in which it has been held that the liability cannot be determinedpurely upon the basis of the value of the subject of insurance at the dateof the fire and extends to the cost of reinstatement. This however is notsuch a case. The actual value, therefore, of the motor car at the time ofdestruction is the measure of the liability of the defendant-company.Moreover, it is specially provided in this policy that the limit of theliability of the defendant shall be the actual value of the car at the timeof the fire or the declared value, whichever shall be less. The parties areagreed that the value of the car at the time of its destruction by fire wasRs. 2,750. If the plaintiff were the owner of the car he would clearly beentitled to judgment for that amount. But the plaintiff is not the ownerand in terms of the very policy upon which this action is based he andthe Motor Finance Company are both insured each for their respectiveinterests in this car. It becomes necessary, therefore, to determine thevalue of the plaintiff’s interest. His interest is clearly not as extensiveas the interest of an owner. The combined interests of the plaintiff andthe Motor Finance Company would amount to the interests of an owner,and together they are entitled to the sum of Rs. 2,750. The proportionof that sum payable to the plaintiff must therefore depend upon the valueof his interest in the car. In terms of the hire-purchase agreement theplaintiff could only clothe himself with full rights of ownership uponpayment of all the instalments. At the date of the fire there were stillinstalments to the aggregate amount of Rs. 1,978.50 payable by him.His rights therefore in the car, whatever they may be, could only havebeen converted into full ownership by the expenditure of a sum ofRs. 1,978.50. Since this car at the date of the fire was of the value ofRs. 2,750 it is impossible to value his interest therein at any higher figurethan the sum of Rs. 2,750 less the amount of Rs. 1,978.50 which he wouldhave had to expend before he could claim that his inerests were that ofan owner. Those interests which he needed to complete the ownershipof the car were vested in the Motor Finance Company. That companyremains the owner in terms of the hire-purchase agreement until all
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GARVIN S.P.J.—Sheriff v, British Parfc Insurance Co., Ltd.
payments have been made. But its ownership is undoubtedly subject tothe limitation that the agreement gave to the plaintiff the right to becomethe owner by the payment of the balance of the instalments on the car.They remain the owners of the car subject however to the right of theplaintiff to acquire their rights by the payment of the balance hire, i.e.,Rs. 1,978.50.
The Motor Finance Company were entitled to be paid these instalmentsunder the agreement, but the plaintiff as hirer of the car is by reason ofthe destruction of the car by fire which was purely accidental relievedfrdm the necessity to make those payments. The amount of the hirepayable immediately before its destruction would therefore seem to bethe measure of the loss sustained by the Motor Finance Company whowere the owners of the car. The respective interests therefore of theplaintiff and the Motor Finance Company in the car which was the subjectof this insurance are capable of exact assessment. The plaintiff’s interestwith which alone we are concerned clearly does not.extend beyond thevalue of the car Rs. 2,750 less the amount of Rs. 1,978.50 which he wouldhave had to pay before he could claim that his interests were those of anowner. The difference which amounts to Rs. 771.50 is all that is recover-able by him under this policy.
It was urged, however, that from the sum of Rs. 1,978.50 which wasthe aggregate of the instalments still payable under the hire-purchaseagreement, some deduction should be made when assessing the value ofthe Motor Finance Company’s interest in the car. It was said thatinasmuch as that sum was payable over a period of 8 months and wasnot due and payable at the date on which this fire occurred the interestof the Motor Finance Company should not be valued upon the basis thatthe whole of the sum was payable at the date of the fire. There is noevidence before us as to what deduction, if any, the plaintiff would beentitled in the event of his having elected to pay the full amount of theseinstalments at once. Nor is it clear that he was entitled to any deductionat all in the event of his deciding to make immediate payment instead ofavailing himself of the right to pay the sum by instalments. Nor indeedis there any evidence before us as to the sum, if any, which should bededucted from the aggregate of these instalments in consideration of theimmediate payment of all sums payable under the agreement. It wasadmitted in the course of the argument that assuming a case had beenmade out for such a deduction the amount could hardly exceed Rs. 60 orRs. 70. But as already stated the plaintiff has shown no right to claimany such deduction nor has he adduced evidence to show what thededuction should be even if it be assumed that he had such a right.
The order under appeal must therefore be set aside and judgment willbe entered for the plaintiff for the lesser sum of Rs. 771.50. The defend-ant is entitled to the costs of this appeal.
It remains to consider what order should be made in respect of thecosts in the Court below. The plaintiff was compelled to come into Courtas the defendant-company disclaimed all liability and refused any pay-ment whatsoever. Eventually the parties confined the trial to the singleissue whether the plaintiff’s interests should be valued at Rs. 771.50 asthe defendant contended or at the larger sum claimed by the plaintiff.
GARVIN S.PJ.—Siimathangachy v. Poopathy.
103
The conclusion arrived at in appeal is that the defendant should havesucceeded at the trial which ultimately took place on September 21, 1932,in his contention that the plaintiff was not entitled to anything in excessof the sum of Rs. 771.50. In these circumstances I think that eachparty should be left to bear his own costs of the proceedings had in theCourt below, save only that the defendant will retain the order for costsof July 13, 1932 made in his favour by the District Judge.
Judgment varied.