Royal Insurance Company Limited v Mylius [1926] HCA 49

Royal Insurance Company Limited v Mylius [1926] HCA 49 - HCA 1926 case summary — Zoe

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covenant to insure the insurer's obligation in case of insurance apply the insurance money in rebuilding or repairing, the covenant did run with the land, because it was in effect a covenant to repair to the extent of the insurance money. Obviously that could ni be so held against the tenant unless he could compel the insurer to perform the statutory duty explicitly. Abbott C.J. says (1): " The effect of that statute is, to enable the landlord, by application to the governors or directors of the insurance office, to have the sum insured | laid out in rebuilding the premises." Bayley J. and Holroyd J. both said the money must in law be laid out on the premises. Best J. (2) said that the "request" was "compulsory on the directors" (see also Smith's Leading Cases, 12 ed., vol. 1., p. 77). As stated by Wood V.C. in Simpson v. Scottish Union Insurance Oo, (3), the object of the statute is in the interest of the public. Tt is not merely in the individual interest of the person empowered to make the request, though his individual right under the statute is also protected and must be given effect to, if only as a means of carrying through the wider object of the legislation. The Vice-Chancellor agreeing with the argument of Sir Hugh Cairns that the rebuilding

of course apart from the relieving conditions - must be done by the office in order to prevent frauds, indicated by his reference to mandamus, how fully he understood the absolute nature of the insurer's obligation. Soin Ex parte Gorely; In re Barker (4), inthe following year, Lord Westbury, with Simpson's Case before him, so far from questioning what was said, used language which, in my opinion, supports it. The Lord Chancellor said: " And having arrived at the conclusion that the 83rd section of the Act of 14 Geo. III. c. 78 applies to the present case, it follows that I must hold the insurance money upon this particular house applicable, for the benefit of the lessor, to the purpose of reinstating the premises." It must be observed as to Gorely's Case, as pointed out in the note (1) to In re Quicke's Trusts ; Poltimore v. Quicke (5), that, though the money had been paid by the office, it had been paid under an arrangement reserving the rights of the parties, so that a possible

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Consequently the direct point as to compelling the insurer so to apply the money did not arise. But the opinion of the Lord Chancellor is not left in doubt. He says (1), as part of his reasoning in differentiat- ing the fixtures from the building, that the section "gives to the insurers the right, and puts them under the obligation, of applying the money in the ' rebuilding, reinstating or repairing' of 'houses or other buildings.'"' In Rayner v. Preston (2) Cotton L.J. said that, where it applied, "the Act only gives a right to insist on the money being so applied." In 1902, in Wimbledon Park Golf Club Ltd. v. Imperial Insurance Co. (3), Wright J. gave what at first sight might appear to be a decision inconsistent with what is so far said, both as to the duty and the remedy. It was much relied on, though it may be regarded as the least authoritative of all the relevant decisions. On careful examination - which, in the circumstances, it must have - that case will be found to be no authority against the views already expressed. There were, as Wright J. says, two distinct grounds of claim: the first, as to the sufficiency of Straker's bond under the statute; the other, as to a mandamus against the insurance company. Straker had covenanted with his tenant, the plaintiff company, to keep the main walls and timbers, and the outside of the clubhouse in good order during the term. The plaintiffs had covenanted to keep the interior in good repair - damage by fire excepted. Straker had insured the clubhouse against damage by fire in £4,000. The tenant, that is, the plaintiff company, had proceeded under the section to compel the insurance company to reinstate up to £3,750. It is clear that, according to previous authorities here cited, the company was bound to reinstate the old building, that is, to replace it as it previously was, unless the Golf Club gave a security to do it. But on the principle of Vernon v. Smith (4) Straker was, as between him and the Golf Co., bound to apply the money to reinstatement. Consequently, as apparently he was willing to undertake that duty instead of the insurance company, and, as both he and the company agreed to some departure from the old building, it became a mere question of

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learned Judge. On the other hand, so far as mandamus was | concerned, the potent fact was that no one desired simple replacement, but they wished to have some different sort of building, though they could not agree on what should be built, and, therefore, no one desired a mandamus for simple replacement of the old building. Obviously that was a case outside the statute as far as mandamus - was concerned. It is difficult to see how on that basis the question ; of Straker's security could be considered as within the statute, for, ' if the request was for simple reinstatement, the obligation existed - and the reasons given for refusal were inapplicable, and, if for something else, then the security was, strictly speaking, beside the question. But the important branch of the case is the mandamus - branch ; and as to that it turns on the difference between the building destroyed and the building desired. Wright J. says (1): " Neither party wished to have a similar building erected; there was no agreement as to what should be built " &c. Clearly, except for the mere purpose of replacing the old building, the insurance company could have no authority to enter on the land and effect alterations that either the landlord or the tenant did not want. As to that part - of the case he therefore decided, as he was bound to decide, against the plaintiff. As to the security it stood over, probably to enable the matter to be placed definitely on a statutory footing. The case cannot be regarded as weakening the previous decisions, which say that if the conditions predicted by the statute exist, the obligation of the insurer is absolute and can be enforced by mandamus. In Sun Insurance Office v. Galinsky (2) the Wimbledon Park Golf Club Case was referred to. Vaughan Williams L.J. expressed no opinion, but stated the decision of Wright J. in what, with deep respect, appears to be an incomplete way. Lord Wrenbury (then Buckley L.J.) also declined to express an opinion about it, but used words which showthe real point of the matter. His Lordship said (3) it was a very serious question whether in the circumstances mentioned a lessor could by notice under the section enable the insurance company to enter on _ the lessees' premises " and there execute such works as the insurance

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company may think right and proper." Kennedy L.J., however,

did more closely examine the case. He thought that the special " circumstances may have influenced the decision. As already said, the special circumstances did apparently influence the decision. Kennedy 1.3. quoted Simpson's Case (1), and, as one would infer, with a belief in its accuracy. Its authority is unshaken. On the whole, it is very plain that, while the person whose interests are or may be injured by the fire is given by the statute the right to protect his interests by making the " request," yet that is the only way contemplated by the statute. He is not empowered to compromise with the other parties by dividing the insurance moneys, unless that compromise is " to the satisfaction and approbation " of the insurer also. And the company is not permitted to refuse its duty and substitute performance of some agreed course of conduct outside the enactment. So that, both on independent interpretation and on authority, the statutory duty is, not only explicit, but it is in law exigent, unless one or other of the two specifically named exculpating events come into existence. The first of those events is a mere substitution of personality to perform the same duty - restoration ; the second is regarded as a sufficient safeguard both against individual loss by fraud, since the injured person must agree (see Sinnott's Case (2)); and against public wrongdoing, since the insurer, though unable to actually prove fraud, must positively assent to the distribution of the money. Apart, then, from displace- ment by one or other of those two events, the command of the Legislature must be followed, and cannot be commuted or bartered for damages. To prevent misapprehension, it should be added that, if as between themselves (the contending parties) the position is that one has no rights, he may be disregarded (see Reynard v. Arnold (3)). The obligation of the Insurance Company on the facts before us is primarily absolute and imperative to comply with the request of 20th June 1924, and that is subject only to the qualifying conditions of the section.

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Shaw said: " If there be a duty arising from statute or the exerci of a public function, there is a correlative right similarly arising." His Lordship proceeds to illustrate the proposition appositely this case. The principle was clearly stated by Lord Hall (A (1)). Then the right being established, the maxim of the law is, Ubi jus ibi remedium. " Tf the right exists, the presumption is that there is a Court which can enforce it, for if no other mode of enforcing it is prescribed, that alone is sufficient to give jurisdiction to the King's Courts of justice" (per Viscount Haldane for the Privy Council in Board vy. Board (2)). "The right," then, not some substitute for it, must, on general principles and apart from authority, be enforced as the Legislature intends for the double object of protecting private and public interests. It is clear that the object of the enactment might easily be frustrated, if, for instance, the company could refuse to comply and leave the requesting party to recover damages as if the Act were a mere personal covenant. Apart from the possible difficulty of proof of the quantum of damage where an interest is fractional or not immediately enjoyable, it would involve the payment over of the balance of the insurance money in specie to the possible incendiary, for the company could not keep it and no one else might have any claim to it. It is consequently a question of applying the appropriate remedy. If the attitude of the insurance company were one of flat refusal to discharge its duty, mandamus or its equivalent, a mandatory order, would be the appropriate remedy to apply at once. In R. v. Wheeler (3) Lord Hardwicke ©.J., speaking of mandamus, said: " The reason why we grant these writs is to prevent a failure of justice, and for the execution of the common law, or of some statute, or of the King's charter, and never as a private remedy to the party." That is to say, it is not granted where it would be merely a private remedy. But where the private remedy is the means of compelling performance of a public duty, as, for example, by "the execution

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Ricu J. The whole case depends upon what is meant by the wor in sec. 49 of the Imperial Acts Application Act 1922, " to car the money for which such house or building has been insured by the occupier thereof or by any other person to be laid out and expend as far as the same will go towards rebuilding reinstating or repairing such house or other buildings so burned down demolished or damaged by fire." What is the money for which " such house or building" has been insured? It cannot mean the amount expressed in the policy, for this is only the limit of the insurer's liability to indemnify. The section in question is speaking both of demolition and damage. The damage may only be equal to a very small portion of the amount expressed in the policy. The words I have quoted must be under- stood to describe a sum of money which the persons upon whom the section operates are liable to pay over in respect of the demolition or damage. The initial words of the section relating to governors and directors, &c., together with the final provisions of the section, show that the Legislature was speaking of a sum of money in the hands of the officers of the insurer awaiting disposition and was directing how it should be disposed of. The Legislature speaks of the claim being adjusted. This must mean a net sum which has been or must be unconditionally appropriated to answer the damage. In the case of the insurance of a mortgagee, which the insurance in question has come to be, no such sum can arise. The true liability of the insurer, when finally worked out, is to indemnify the mortgagee against the loss of his mortgage debt by destruction of part of his security (see Excelsior Fire Insurance Co. v. Royal Insurance Co. of © Liverpool (1) ). The insurer may be liable to appropriate a sum ; of money to answer the loss of part of the security for the mortgage debt. But the provision of this sum gives the insurer a corresponding equitable interest in the debt, and the amount of the mortgage debt

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Judgment (150 paragraphs)