Caledonian Insurance Company v Gilmour
| Jurisdiction | England & Wales |
| Judgment Date | 16 December 1892 |
| Date | 16 December 1892 |
| Docket Number | No. 3. |
| Court | House of Lords |
Ld. Chancellor (Herschell), Lord Watson, Lord Ashbourne, Lord Field.
Arbitration—Arbiters not named—Determination of arbiters a condition precedent to obligation—Fire insurance.—
The rule that a reference to unnamed arbiters is ineffectual to exclude the jurisdiction of the Courts of law does not apply where the determination of arbiters is a condition precedent to the constitution of an obligation.
A policy of fire insurance provided, inter alia:—‘Where the company does not claim to avoid its liability under the policy on the ground of fraud or non-fulfilment of any of the conditions herein set forth, but a difference at any time arises between the company and the insured as to the amount payable in respect of any alleged loss or damage by fire, every such difference, when and as the same arises, shall be referred to the arbitration of’ persons to be chosen by the parties. …‘And it is hereby expressly declared to be a condition of the making of this policy, and part of the contract between the company and the insured, that where the company does not claim to avoid its liability under the policy on the ground of fraud or non-fulfilment as aforesaid, the party insured or claimant shall not be entitled to commence or maintain any action at law or suit in equity on this policy till the amount due to the insured shall have been awarded as herein before provided, and then only for the sum so awarded, and the obtaining of such award shall be a condition precedent to the commencement of any action or suit upon the policy.’
Held (in rev. judgment of the First Division) (1) that the policy was to be construed as making the determination of the arbiters a condition precedent to the obligation to make any payment under the policy; (2) that the reference to the unnamed arbiters was valid; and (3) that until the determination of the arbiters was obtained no sum was due under the policy.
(In the Court of Session July 18, 1891, 18 R. 1219.)
On 21st April 1891 Andrew Gilmour, merchant, Blantyre, brought an action against the Caledonian Insurance Company, Edinburgh, on a policy of fire insurance taken by him with the company over certain buildings in Blantyre, which had been destroyed by fire in February 1891.
The company in defence pleaded;—(1) The present action is excluded by the clause of reference in the policy. (2) In any view, the action ought to be sisted, pending the decision of the pursuer's claim by arbitration in terms of the policy.
By the terms of the policy the company agreed with the insured,’ subject to the conditions on the back hereof, which are to be taken as part of this policy,’ to pay or make good such loss or damage to an extent not exceeding £1700.
The 13th condition was in these terms:—‘Where the company does not claim to avoid its liability under the policy on the ground of fraud or non-fulfilment of any of the conditions hereinbefore set forth, but a difference at any time arises between the company and the insured, or any claimant under this policy, as to the amount payable in respect of any alleged loss or damage by fire, every such difference, when and as the same arises, shall be referred to the arbitration of one person to be chosen by both parties, or of two independent persons,’ who should choose an umpire. ‘And it is hereby expressly declared to be a condition of the making of this policy, and part of the contract between the company and the insured, that where the company does not claim to avoid its liability under the policy on the ground of fraud or non-fulfilment as aforesaid, the party insured or claimant shall not be entitled to commence or maintain any action at law or suit in equity on this policy till the amount due to the insured shall have been awarded as hereinbefore provided, and then only for the sum so awarded, and the obtaining of such award shall be a condition precedent to the commencement of any action or suit upon the policy.’
On 23d June 1891 the Lord Ordinary (Stormonth Darling) repelled the first and second pleas in law for the defenders.
On 18th July the First Division adhered to the Lord Ordinary's interlocutor.
A proof was allowed by the Lord Ordinary on the 16th of October 1891. On the 7th of November 1891 the appellants asked leave to appeal to this House against the interlocutors of the 23d of June and the 18th of July. On the 10th of November 1891 leave to appeal was refused—19 R. 64.
After a proof had been led the Lord Ordinary, on the 2d of December 1891, found £1500 to be payable by the appellants in full of the sum sued for and interest. This decision was affirmed by the First Division on the 9th of March 1892.
The insurance company appealed.
After consideration,—
Lord Chancellor.—The simple question raised in this case is, whether the respondent was entitled to recover from the appellants, under a policy of insurance against fire, the amount of damage which he might prove that he had sustained within the sum of £1700, or whether, by reason of one of the conditions indorsed upon the policy, the respondent was precluded from bringing an action in respect of loss sustained by fire until he should have obtained an award in the manner provided by that condition, determining the amount due to him.
It was contended on behalf of the respondent, and the Court below has yielded to that contention, that inasmuch as the clause relating to arbitration provided for a reference to unnamed arbitrators the jurisdiction of the Courts was not ousted, and that the arbitration provision could not be set up in answer to the pursuer's claim.
It cannot be disputed that it is well settled law in Scotland that a mere agreement to refer disputes that may arise to unnamed arbitrators does not of itself oust the jurisdiction of the Courts, and would not prevent the enforcement in a Court of law of a claim arising under other parts of the same contract, even though that claim were in dispute, and the party seeking to enforce it had refused to concur in an arbitration.
But it is to be observed in the present case that, under the policy, the only contract on the part of the appellants to make any payment at all is a contract to pay the sum ascertained in a particular manner, viz., by the arbitration provided for by the 13th condition of the policy. This condition is expressly incorporated in the body of the policy, and must be read into that part of it which alone provides for the payment of money by the company with the same effect as if it had been specifically inserted there, and the obligation had been in terms qualified by it.
I think this circumstance was overlooked in the Court below. The question is not whether, where a contract creates an obligation to pay a sum of money, it is a good answer to an action to recover it that disputes have arisen as to the liability to pay the sum, and that the contract provides for the reference of such differences to arbitration; but whether, where the only obligation created is to pay a sum ascertained in a particular manner, where, in other words, such ascertainment is made a condition precedent to the obligation to pay, the Courts can enforce an obligation without reference to such ascertainment. If they could do so they would not be enforcing the contract made by the parties, but one of a different nature.
I have had the opportunity of reading the opinion about to be delivered by my noble and learned friend Lord Watson, and I find that he has so fully dealt with the Scotch authorities on this point that it is not necessary for me to do so. I was satisfied at the close of the argument, not only that there was no authority in the law of Scotland for the proposition that in the case of such a contract as I have indicated the Courts would disregard the qualified character of the promise, and enforce the obligation as if it had been an unqualified one, but that there was weighty authority the other way. Subsequent consideration of the authorities has confirmed me in this view.
I may add that the reasoning of the noble and learned Lords who took part in the decision of Scott v. Avery, 1856, 5 H. L. Ca. 811, appears to me completely applicable to the present case. Its cogency is not affected by any of the distinctions which then existed between the law of England and that of Scotland in relation to arbitration clauses.
I entirely concur in the reasons expressed by my noble and learned friend in his opinion, and I think the interlocutors appealed from must be reversed.
With regard to the question of costs, it is to be observed that the question whether the condition relating to arbitration would be an answer to the action was raised and determined at an early stage of the action. After its determination, but not immediately after, application was made on behalf of the present appellants to stay further proceedings in the action until there had been an appeal from those interlocutors, pursuant to the leave of the Court, against the decision of the Court of Session. That application was refused by the Court, but not on the ground that it was not an application proper to have been considered and acceded to if it had been made at the proper time, but on the ground that, inasmuch as that application had been delayed until the parties were close upon the proof, it was not right at so late a stage to accede to the application then made. There can be no doubt, I think, that if the application had been made earlier the Court would have acceded to it, and the subsequent costs in the action might have been avoided. There does not appear to have been any very great difference between the parties as to the amount which the plaintiff ought to recover upon this policy, and I imagine there can be no doubt that this appeal has been proceeded with and argued at your Lordships' bar, not by reason of the importance of any difference between the parties as to...
To continue reading
Request your trial
-
Ennia General Insurance Company Ltd Appellant v J. Astaphan & Company (1970) Ltd Respondent [ECSC]
...from; BOARD OF TRADE v. CAYSER IRVINE & CO. LTD. (1927) A.C. 610, in which Lord Atkinson referred to, Scott v. Avery, to CALEDONIAN INSURANCE CO. v. GILMOUR (1893) A.C. 85, TRAINOR v. PHOENIX FIRE ASSURANCE CO. (1891) 65 L.T. 825, and SPURRIER v LA CLOCHE (1902) A.C. 446; LUXOR v. COOPER (1......
-
John O'Connor v George Alfred Isaacs and Others
...to pay the sum awarded, my covenant has not been broken, and no right of action has arisen' or again by Lord Herschell in Caledonian Insurance Company v. Gilmour: 'Under the policy, the only contract on the part of the appellants to make any payment at all is a contract to pay the sum ascer......
- Ertel Bieber & Company v Rio Tinto Company ; Dynamit Actien-Gesellschaft v Rio Tinto Company ; Vereinigte Koenigs and Laurahuette Actien-Gesellschaft v Rio Tinto Company
-
Central Electricity Board v Halifax Corporation
...by the award of an arbitrator". 17 (p. 616). Then he quotes well known passages from Scott v. Avery 5 H.L.C. 811, and Caledonian Insurance Co. v. Gilmour [1893] A.C. 85, which make it clear that there cannot be a cause of action until a liability exists and that in such cases the effect of ......