Tomlinson (A.) (Hauliers) Ltd v Hepburn

The Plaintiffs in this action and Respondents in this appeal are road hauliers carrying on business in Nottingham. For many years they have been carrying cigarettes manufactured by Players, a business now owned by the Imperial Tobacco Co. Latterly the arrangement has been that the Respondents hire their lorries to Players but supply their own drivers. Two of these lorries in accordance with the usual practice left Nottingham with loads of cigarettes on the morning of 24th May 1961. They arrived at Players' warehouse in the City Road London in the evening after working hours and were admitted to the warehouse by members of Players' staff who were still on duty. They were driven in to unloading bays and left there for the night and in ordinary course the cigarettes would have been unloaded from the lorries next morning by Players' staff and the Respondents' drivers. But the cigarettes were stolen during the night. The gate through which these lorries were admitted to the warehouse ought to have been properly secured after their entry but Players' staff failed to do this and during the night thieves were able to drive the lorries with their loads of cigarettes out of the warehouse. The cigarettes have never been recovered.

The goods were insured under a Lloyds policy Form J and the question in this case is whether the Respondents are entitled to recover under that policy in respect of this loss up to the limit set out in the policy. The Appellant maintains that they are not so entitled because the policy only indemnifies the Respondents against their own loss and the Respondents have suffered no loss; but the Respondents maintain that the policy entitles them to recover in respect of loss up to the limit expressed in the policy so that they can pay over the money recovered to Players who were the owners of the cigarettes. Both Roskill J. and the Court of Appeal have upheld the Respondents' contention.

The printed part of the policy provides that the underwriters bound themselves "to pay or make good to the assured or to the assured's executors or administrators or to indemnify him or them against all such loss, damage or liability as hereinafter provided". Then follows the schedule which is filled in in typescript as follows:

" Goods in Transit Policy

The first point taken by the Appellant is that this is a goods in transit policy and that the cigarettes were no longer on risk when they were stolen because the transit had come to an end when the lorries were driven in to Players' warehouse and left there for the night. But the words in the policy are—whilst being carried and/or in transit anywhere in the United Kingdom "including loading and unloading". So I need not consider what the result would be if the word "transit" stood alone. Here it is defined as including loading and unloading. Counsel attempted to argue that there were two separate periods of risk, the period of transit and the period of loading or unloading and that in this case the period of transit had come to an end and the period of unloading had not commenced when the theft took place. But in my opinion that is quite inconsistent with the wording of the policy which must mean that the period of transit during which the goods are on risk is extended so as to include unloading and only comes to an end when the unloading is completed. I am therefore clearly of opinion that the goods were still on risk when stolen.

The Appellant's main defence is that all insurances of this kind are contracts of indemnity, that the Respondents have suffered no loss and have incurred no liability to Players as a result of the theft, and that therefore the Appellant cannot have any liability under the policy. The Respondents do not argue that they acted as Players' agents in contracting with the Appellant. They rely on their own insurable interest: they say that they were entitled to and did insure for the full value of the goods up to the limit set out in the policy, that they are entitled to recover such value and that they will be bound to pay to Players any sum which they recover from the Appellant.

The case must in my view depend on the true construction of the policy but before considering its provisions I think it best to consider the principles of law applicable to such cases. There can be no doubt that a bailee has an insurable interest in goods entrusted to him, and it has not been denied that the Respondents were bailees of the cigarettes when they were stolen. I think that the law was accurately stated by Lord Campbell in Waters v. Monarch Insurance Co. (1856) 5 E. & B. 870. In that case a bailee, a wharfinger, had insured against fire not only his own goods but also goods "in trust or on commission" in his warehouse and this was held to include goods of customers which he held there. Lord Campbell said:

"They were so entrusted with the goods deposited on their wharfs; I cannot doubt the policy was intended to protect such goods; and it would be very inconvenient if wharfingers could not protect such goods by a floating policy. Then, this being the meaning of the policy, is there anything illegal in it? It cannot now be disputed that it would be legal at Common Law; and Mr. Lush properly admits that it is not prohibited by the terms of any statute. And 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 plaintiffs' 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 herein before 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."

In no case cited to us has there been any adverse criticism of that passage. A bailee can if he chooses merely insure to cover his own loss or personal liability to the owner of the goods either at Common Law or under contract and if he does that of course he can recover no more under the policy than sufficient to make good his own personal loss or liability. But equally he can if he chooses insure up to his full insurable interest—up to the full value of the goods entrusted to him. And if he does that he can recover the value of the goods though he has suffered no personal loss at all. But in that case the law will require him...