Cowan v Jeffrey Associates
| Jurisdiction | Scotland |
| Judgment Date | 05 March 1998 |
| Date | 05 March 1998 |
| Docket Number | No 53 |
| Court | Court of Session (Outer House) |
OUTER HOUSE
Lord Hamilton
ContractInsuranceFire insuranceInsurable interestPursuer director and sole shareholder of companyPursuer granting personal guarantee of company's liabilities to bankCompany purchasing heritable propertyPursuer contemplating purchase of property from company and signing insurance proposal formProperty destroyed by fireWhether pursuer had insurable interest
A director and sole shareholder of a company took out insurance against damage by fire to heritable property purchased by the company. The company had purchased the property in 1994. The pursuer in that year had signed a personal guarantee to a bank against the liabilities of the company. The company received a director's loan from the pursuer to purchase the property. The pursuer carried out work for the company. Payment was not effected for that work causing the pursuer to decide to purchase the property in order for the purchase price to abate the sums due to him by the company. The pursuer was offered loan facilities from a bank to purchase. A condition of the grant was that the pursuer would insure the property for its reinstatement value. The pursuer made use of the property in the running of his businesses. The pursuer never became the proprietor of the property. The property was damaged by fire. The pursuer claimed on the policy of insurance effected against that risk but the insurers refused to pay up on the basis, inter alia,that the pursuer had had no insurable interest. The pursuer then brought an action against, inter alia, his insurance brokers.
Held (1) that at the material time, the pursuer had been prospectively a purchaser of the property but had neither acquired them nor entered into an enforceable contract to acquire them; and (2) that as a prospective purchaser the pursuer had entered into borrowing arrangements which had anticipated the grant by him of a security which had never been effected but his characters as a creditor of the company, its sole shareholder, its guarantor and his use of the property when he had no right to use did not instruct an insurable interest; and actiondismissed.
Macaura v Northern Assurance CoELR [1925] AC 619applied.
Observed that although decisions of the House of Lords in English and Northern Irish appeals were not binding upon an Outer House judge, in the law of insurance, such decisions were highly persuasive and ought to be followed unless there were principles of Scots law or conditions local to Scotland which dictated an alternative approach and changes were a matter for the legislature or a higher court.
David Cowan brought an action against, inter alios,his insurance brokers who had acted in the completion of a proposal form for fire insurance over heritable property known as and forming The Schoolhouse, Old Pentland, Loanhead, Midlothian which had been structurally damaged by fire on 8 June 1996 and had subsequently been demolished.
The cause called before the commercial judge (Lord Hamilton) on parties' preliminary pleas in law.
Cases referred to:
Arif v Excess Insurance Group Ltd 1987 SLT 473
Constitution Insurance Co of Canada v KosmopoulosUNK(1987) 34 DLR 208
Glengate v Norwich Union [1996] 1 LILR 629
Lucena v CraufordENR (1806) Bos & Pul (NR) 269
Macaura v Northern Assurance CoELR [1925] AC 619
Mark Rowlands Ltd v Berni Inns LtdELR [1986] 1 QB 211
Mitchell v Scottish Eagle Insurance Co Ltd 1997 SLT 793
Petrofina Ltd v Magnaload LtdELR [1984] 1 QB 127
Pettigrew v The Grand River Farmers Mutual Assurance Co (1877) UCCP 70
Sloans Dairies Ltd v Glasgow CorporationSC 1977 SC 233
Springfield Fire and Marine Insurance Co v Allen(1870) 43 NY 391
Stock v InglisELR [1884] 12 QBD 564
Tomlinson (A) (Hauliers) Ltd v HepburnELR [1966] AC 451
Textbooks, etc referred to:
MacGillivray on Insurance Law (9th edn), para 1116
Wolffe, Insurable InterestTime for a Change 1989 SLT (News) 103
At advising, on 5 March 1998, his Lordship dismissed the action.
LORD HAMILTON'SopinionOn 18 April 1996 the pursuer signed a proposal form for insurance against damage by certain perils, including fire, to business premises at The Schoolhouse, Old Pentland, Loanhead, Midlothian. The defenders acted as his brokers and participated in the completion of the proposal form. Cover was put in place with effect from 12 April 1996. On 8 June 1996 fire occurred at the premises causing serious structural damage with the result that the buildings were ultimately demolished. The insurers subsequently repudiated liability under the policy. Their ground for doing so was non-disclosure in the proposal form of certain matters held to be material. The pursuer attributes that non-disclosure to certain failures by the defenders whom he sues in this action for damages.
The insurers, although repudiating liability on the ground of non-disclosure, intimated that they were, in any event, not satisfied that the pursuer had an insurable interest such as to entitle him to recover under the policy. It is accepted by the pursuer that, in order to recover damages against the defenders in the present action, he must establish that he had an insurable interest such that, had there been appropriate disclosure, he would have been entitled to recover against the insurers under the policy. A debate was held as to the relevancy of the pursuer's averments of insurable interest.
The material averments for the pursuer in that respect are: The pursuer is a director and sole shareholder in the company, Premier Fruit & Vegetables Limited (Premier) which has a registered office at 10 Edinburgh Road, Bathgate, West Lothian. Premier was incorporated on 8 December 1993. On or about 17 February 1994 the pursuer signed a Personal Guarantee in which he unconditionally guaranteed payment or discharge of all money and liabilities owing or incurred by Premier to the Bank of Scotland up to a total amount of 30,000. Said Personal Guarantee was relied upon by the Bank of Scotland as security when offering Term Loan and Overdraft facilities to Premier on 11 April 1994. Said offers were accepted by Premier on 5 May 1994. In or about February 1994 Premier purchased The Schoolhouse, Old Pentland, Loanhead, Midlothian. Premier operated from said property until 8 June 1996. Said property was owned by approximately 26,000.00 when purchasing said property. During 1994,1995 and 1996 the pursuer trading as Nuwalls undertook work for Premier.
Invoices rendered in respect of said work were never settled. In addition the pursuer made further loans to Premier from time to time. In February 1996 said loans and...
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