Goldsbrough Mort and Company Limited v Maurice [1937] HCA 71

Goldsbrough Mort and Company Limited v Maurice [1937] HCA 71 - HCA 1937 case summary — Zoe

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entitled to be paid under such a policy the whole value of the goods if they are destroyed. This is the case even where the person in possession of the goods was not bound by any obligation to insure, As Lord Campbell said in Waters v. Monarch Fire and Life Assurance Co. (1), "I think that a person entrusted with goods can insure them without orders from the owner, and even without informing him that there was such a policy. It would be most inconvenient in business if a wharfinger could not, at his own cost, keep up a floating policy for the benefit of all who might become his customers. The last point that arises is, to what extent does the policy protect those goods. The defendants say that it was only the plaintiff's personal interest. But the policies are in terms contracts to make good 'all such damage and loss as may happen by fire to the property hereinbefore mentioned.' That is a valid contract ; and, as the property is wholly destroyed, the value of the whole must be made good, not merely the particular interest of the plaintiffs. They will be entitled to apply so much to cover their own interest, and will be trustees for the owners as to the rest. The authorities are clear that an assurance made without orders may be ratified by the owners of the property, and then the assurers become trustees for them." In the case from which this quotation is made the policy was similar in its terms to the policy now under consideration. The policy protected against losses or damage by fire goods " the property of the assured or held by them in trust or on commission " and in certain specified places. In London and North Western Railway Co. v. Glyn (2) the Court of Queen's Bench had to deal with a fire-insurance policy on goods described as being goods " their" (plaintiffs') own and in trust as carriers." In that case it was held that, the goods having been destroyed, the plaintiffs were not limited to recovering the value of their own particular interest in the goods which they, as carriers, had in the warehouse when it was burned. It was held that they were entitled to recover the full value of the goods. Reference was made to Waters v. Monarch Fire and Life Assurance Co. (3), and it was said that that case decided that the

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insurance company was liable to the plaintiffs to the amount of the full value of the goods although "the utmost interest that the plaintiffs themselves had in the goods was to the extent of their warehouse charges, for which they had a lien upon them" (1). Thus, the position is that the defendant was entitled to recover from the insurance companies the value of the goods destroyed. Having received the policy moneys from the insurance company, representing the market value of the goods, the defendant is entitled to deduct any charges for services actually rendered in respect of the goods for which it had a lien upon the goods and in respect of which it therefore has an interest in the goods. So much is clear. The plaintiff contends that the defendant then holds the whole of the balance in trust for the plaintiff. It is however, contended for the defendant that the result of accepting this view would be that the plaintiff would obtain more than the real value of his wool as it was upon the floor, not lotted, not valued, and not sold, at the date of the fire, and that therefore the plaintiff would receive more than an indemnity if payment is made to him upon the basis of his claim. In my opinion this is not the case. The amount which the plaintiff will receive will be only such an amount as will enable him to go into the market and buy the same quantity of wool of the same quality as he had at the time of the fire. Prima facie the amount to be paid under an insurance policy when goods insured are destroyed by fire is the market value of the goods (See Halsbury's Laws of England, 2nd ed., vol. 18, p. 497; see also American authorities cited in MacGillivray on Insurance Law, 2nd ed. (1937), pp. 837-839): The cost of procuring the sale of an article should not be regarded as a deduction in estimating the value of the article (See Elder's Trustee and Executor Co. Ltd. v. Deputy Federal Commissioner of Tacxation (2) ). The value of a commodity is determined by what a purchaser is prepared to give for it. Expenses incurred in finding a purchaser, that is, expenses incidental to selling, should not be deducted when an estimate of value is being made, though such expenses are plainly a proper deduction when it is sought to ascertain, not the market value of the commodity, but the profit made by the vendor upon a

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ance companies have limited their risk to wool for the loss of which the defendant would be liable in law to the true owners (North British and Mercantile Insurance Co. v. Moffatt (1) ; Engel v. Lancashire and General Assurance Co. Ltd. (2) ). But it is said that the subject matter of the insurance is merchandise, " and though that is to be construed liberally as covering any interest in the merchandise it cannot be construed as covering an interest " in commission and charges that might arise from handling or selling the wool (Lucena v. Craufurd (3); Anderson v. Morice (4) ). Charges in respect of which a lien existed were admittedly covered by the words of the policies. Expected commissions and other charges, though they might be insured eo nomine, were. it was argued. beyond the liability undertaken by the insurance companies. But the argument should not. I think, succeed. ' Interest," said Lawrence J. in Lucena v. Craufurd (5). " does not necessarily imply a right to the whole, or a part of the thing. nor necessarily or exclusively that which may be the subject of privation, but the having some relation to, or concern in the subject of insurance, which relation or concern by the happen- ing of the perils insured against may be so affected as to produce a damage. detriment, or prejudice to the person insuring. . . . To be interested in the preservation of a thing, is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction." Or, to use the language of Chambre J., "there appears to me to have been great propriety in establishing the contract of insurance wherever the interest declared upon was in the common understanding of mankind a real interest in or arising out of the thing insured or so connected with it as to depend on the safety of the thing insured and the risk insured against, without much regard to technical distinctions regarding property, still how- ever, excluding mere speculation or expectation, and interests created no otherwise than by gaming " (Lucena v. Craufurd (6) ). It is on this basis that profits and expected commission may be insured.

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insured but that is on the ground that they form an additional part of the value of the goods, in which the party already has an interest." The subject matter of the insurance must be properly described, but the nature of the interest may, in general, be left at large (Crowley y. Cohen (2); Mackenzie v. Whitworth (3) ). Parsons on Marine Insurance, 1868 ed., vol. 1, p. 201, asserts that a commission merchant may insure for the full value of the goods consigned to him and may recover not only what will indemnify him for the loss of his commis- sion but the full value. But he would be accountable to his principal for the proceeds of the insurance "on the principles which would have applied to the proceeds of the sale of goods" (De Forest v. Fulton Fire Insurance Co. (4); Bennett's Fire Insurance Cases, vol. 1, p. 238). Profits which have been ascertained at the date of insurance need not be separately specified (See Welford and Otter-Barry on Fire Insurance, 1st ed. (1911), p. 31; Equitable Fire Insurance Co. vy. Quinn (5) ). But in the case of prospective or anticipated profits "the destruction of the property out of which profit is expected to be earned cannot be said to carry with it as a necessary consequence the loss of such profit, for the profit might never be earned even though the property were not destroyed " (Welford and Otter-Barry on Fire Insurance, 1st ed. (1911), p. 31). Different considerations apply, I think, to commissions and charges payable according to the ordinary course of business or the agreement of the parties. The rates are known, and the commission and charges are capable of estimation. The proceeds of the insurance take the place of the goods and the full value of the goods if so insured. In such a case the commission merchant's interest in the goods is direct and not merely a prospective advantage to be derived from their safety. That the commissions and charges may not have been earned in the case of the loss of the goods is immaterial, for it is against their loss that the insurance on the goods has been effected. The authorities are, I think, consistent with

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The plaintiffs accepted a draft against shipping documents. After- wards the acceptance was paid and the shipping documents handed over, but in the meantime the ship with the cotton on board was lost at sea. The question was whether the plaintifis were entitled to insure and recover the full value of the cotton or were limited to their own beneficial interest in the goods. The court was equally divided, but the former view was sustained. " The bill of exchange being drawn by the shippers." said Bovill C.J., with whom Den- man J. agreed, "and accepted by the plaintiffs against the consignment, that consignment immediately became an equitable security to the plaintiffs for the amount of the acceptance; and they would have been entitled in equity to have the cotton appro- priated for their reimbursement. . . . The plaintiffs would further be entitled to their commission on the sale of the goods, and also to be reimbursed the cost of the insurance, and their other expenses in respect of the consignment ; and it was their business to sell, manage, and dispose of the cotton as consignees. The equitable interest of the plaintiffs, after coming under acceptance against the shipment, was not in any particular portion of the cotton, but in the whole and in every part of it. . . . The plaintiffs, having an interest in every part of the cotton, would, as it appears to us, stand in the same position in equity as a strict mortgagee in a court of law, and would clearly be entitled to insure themselves against the loss of the cotton, as affecting not only their security for reimbursement of the amount of their acceptance, but also their commission on the sale" (1). Brett and Keating JJ.. on the other hand, were of opinion that the plaintiffs were only entitled to insure the cotton to the extent of their own beneficial interest. "It" (the cotton and position of affairs), said Brett J., " gave a present interest in the cotton to the plaintiffs, that is to say, a right by an existing contract to have the bill of lading indorsed to them on pay- ment of their acceptance, so as to enable them to sell the cotton to pay themselves £3,000 and their expenses, and to earn their com- mission and to hold the surplus proceeds as agents " for the owners (2). They had an insurable interest " because they had an existing contract with regard to the cotton, by virtue of which they had an (1) (1873) L.R. 8 C.P., at pp. 607, 608. (2) (1873) L.R. 8 C.P., at p. 635.

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In the absence of any contract between them controlling the matter, it is clear that the bailee is entitled to recoup himself for his entire loss in respect of the goods, so far as it is covered by the insurance, before he can be called upon to pay over any sum to the bailor (Martineau vy. Kitching (1) ). But the nature of the claims which he may deduct as representing his loss has not been defined or worked out. In Ebsworth v. Alliance Marine Insurance Co. (2) Bovill C.J. cites from Parsons on Insurance (1868), p. 201, the following statement with respect to consignees for sale: "A commission merchant may insure for the full value of the goods consigned to him, and may recover not only what will indemnify him for the loss of his commissions, but the full value ; so much of that value as is not needed to indemnify him being recovered by him for the benefit of the owners of the goods, provided he intends to insure for them, and the terms of the insurance are wide enough to cover their interest, and he has their previous authority to insure or their subsequent ratification of his act." The difference of opinion in that case depended at bottom upon the circumstance that the insured were not in possession of the goods, a shipment of cotton which had not arrived, and the bills of lading had not been delivered to them or to anyone on their behalf. Brett J. and Keating J. were of opinion that the consignees could not recover from the insurers the full value of the goods. Brett J. said that, being only con- signees to sell, under advance, and with a contract right to earn commission, but not being the legal owners of the cotton, they could only properly insure, so as to recover in their own name, the amount for which they were liable upon their acceptances against the goods and any commission they would have earned by selling (3). But he decided that, although the policy was on the goods and was intended to cover the consignors' interests as well as those of the insured, they could apply the insurance to their own use to the extent of their own insurable interest and recover to that extent (4). Keating

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or as he should direct. The course of business between the parties is described in detail in the special case. The appellant, in its own name, entered into a policy of fire insurance which was expressed to be effected " on interest as more particularly described in" the schedule. The more particular description was : " On merchandise the assured's own property or held by them in trust or on commission for which they may be liable in the event of loss or damage by fire." The © respondent's wool, which the appellant held for weighing, lotting, valuing and selling, was included in the merchandise described in the schedule. The moneys paid by the insurer to the appellant included the sum of £1,980 0s. 7d., which was equal to the gross selling price, as estimated by appraisers, that the respondent's wool, which was burned, would have realized if it had been weighed, lotted and valued for sale in the appellant's store, and sold by it at auction immediately before the fire. It was lawful for the appellant, although its interest in the subject matter of the policy was a special interest only, to effect the policy in its own name for the full insurable value of the subject matter of the insurance and to indemnify itself out of the moneys received by it from the insurer for the loss of any insurable interest of its own to which the policy attached. The appellant was liable to pay the balance to the respondent. The appellant claimed the right to indemnify itself out of the sum of £1,980 0s. 7d. for the loss of its charge for weighing, lotting and valuing the wool, and of its commission for selling it. The respondent disputes the appellant's right to an indemnity under the policy for these losses. The appellant's right to this indemnity out of the: moneys received under the policy turns upon the question whether it was the intention of the policy to insure the interest which the appellant had in the lost remuneration. As the appellant's charges for weighing, lotting and valuing and its commission were to be paid out of the moneys realized by the sale of the wool, it had a direct pecuniary interest in the wool. In my opinion this was an insurable interest (Lucena v. Craufurd (1); Wilson vy. Jones (2), per Lord Blackburn). The description of the subject matter of the policy does not specifically refer to this insur- able interest, but that omission is not material if this insurable

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Judgment (202 paragraphs)