Cornell University Law Library The Moak Collection PURCHASED FOR The School of Law of Cornell University And Presented February 14* 1893 IN riEnoRY OP JUDGE DOUGLASS BOARDMAN FIRST DEAN OF THE eCHOOL By his Wife and Daughter A. M. BOARDMAN and ELLEN D. WILLIAMS .^ Cornell University Library KD 1864.C91 The aw of life insurance with a chapte 3 1924 022 392 496 The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924022392496 THE LAW LIFE INSURANCE, A CHAPTER ON ACCIDENT INSURANCE. BY CHARLES CRAWLEY, M.A., OP Lincoln's inn, esq., eabeist«e-at-law, and fellow DOWNING COLLEGE, CAMBRIDGE. LONDON: WILLIAM CLOWES AND SONS, Limited, 27, FLEET STREET. 1882. . LONDON : PKmTE,. «V >VILL,AM CLO^'EB ANl. SONB, LIMITED, PRINTED I^^^_^^_^^ ^^^^^^ ^^^ ^^^^^^^ ,^,,. PREFACE. Numerous works on the subject of Life Insurance have appeared in recent years in America, but in this country the valuable work of Mr. Bunyon, the first English writer of importance on the subject, still stands practically alone. The long period that has elapsed since the last edition of his work, the voluminous legislation of 1870-1872, the numerous cases decided during the last fifteen years, and the growing importance of the subject, would seem a sufficient justification for other labours in the same field. The chapter on Accident Insurance, a branch of in- surance which is rapidly developing, will, it is hoped, be found useful. Besides the English decisions, the principal American cases on the same subject are there collected. In addition to the-work of his predecessor Mr. Bunyon, the writer has had the advantage of consulting the American works of Mr. Bliss on Life Insurance, the 2nd edition of which was published in 1874, and of Mr. May on Insurance, the 2nd edition of which was published at the beginning of the present year. Strictly speaking, no doubt, life is assured, while pro- perty is insured, but considering the popular use of the term " life insurance," a distinction of so little practical moment did not seem worth preserving. CONTENTS. PAQE Table op Statutes cited ....... ix Table of Cases xi INTEODUCTION. Historical Sketch of Eise of Life Instjbance herb and ABROAD .... 1-18 PART I. The Contract, its Eequisites and Form, its Assignment, its Performance, its Ayoidance . . 19-159 Chapter I. The Contract . . 19-56 Definitions, 19 — Capacity of parties, 21 — The Insurable Interest, 22— The Form of the Contract, 32 — The Proposal and Declaration, 35 —The Policy, 41— The Conditions, 49 Chapter II. Assignment op the Contract . 57-96 Assignment of Policies at Law, 57 — in Equity, 58 — ^by Statute, 62 — Notice, 59 — Voluntary Assignments, 65 — their Form, 66 — when invalidated, 70 — ^Assignments on Sale, 74 — Settlement, 77 — Mortgage, 79 — Debtor and Creditor Policies, 86 — Bankruptcy, 88 — Bequests of Policies, 91 — Stamps, 92 — Succession Duty, 94 Chapter III. Premiums, Salvage and Lien 97-100 Chapter IV. Performance of the Contract 101-115 Breach, 101 — ^Damages, 101 — Specific Performance, 102 — Payment of Claims, 103 — Interest, 108 — Eeceipts, 104 — Conflicting Claims, 106 — Payment into Court, 106 — Interpleader, 107- Proof of Death, 112— Evidence, 114. ,i CONTENTS. FAQE Chapter V. Avoidance of the Contract 116-139 Mistake, 116— Rectiflcation, 118— Fraud, 119— Innocent Misrepre- sentations, 124 — Semhle, Life Assurance not a Contract uberrimae fidei, 129— Special Conditions, 134 — Effect of War, 136— Return of Premiums, 138. Chapter VI. Accident Policies . . 140-159 Form, 141 — Construction, 143 — What is an Accident, 147 — Evi- dence, 154 — Arbitration, 155 — American Cases, 157. PART II. The Instjeerb — Constitution and CLASBiifiCATiON of Life Com- panies — Directors and Agents — Amalgamation and Nova- tion — Winding-up 160-262 Chapter VII. Constitution op Companies 160-184 Sketch of Rise of Modern Company, 161 — The Companies Act, 1862, 165 — Classification of Life Companies— Mutual, proprietary, mixed, 171 — Incorporated, unincorporated, 176 — Legislation of 1870, 177. Chapter VIII. Government Insurance — Friendly Societies .... 185-192 Chapter IX. Diebctobs and Agents . 193-206 Contracts by Agents, 194 — Powers of Directors, ibid. — of Insurance Agents, 196— Misrepresentations in Prospectuses by Agents, 200— Liability of Company, its Nature and Extent, 202— of Agent, 205. Chapter X. Amalgamation and Novation 207-234 Amalgamation, 207 — when intra vires, 208— Provisions of Act of 1870, 210— Dissolution out and out, 212— ira^er sodos, 215— Novation, iftirf.-Written Assent required by Statute, 216— Former Law, Decisions in Chancery, 217— before Lord Cairns, 223— before Lord Westbury, 227. Chapter XI. Winding-up . . 236-263 , Winding-up under Companies Act, 1862— of registered Companies, 235 —of unregistered, 235— of illegal Companies, 236— Under Act CONTENTS. vii of 1870, 238— Practice, 240— Reduction of Contracts 242— Valua- tion of Policies, 244 — Limited and unlimited Assets, 252 — Con- tributories, 255 — Participating Policy-holders are not, 256 — Semble, none in Mutual Company, 259 — In Mutual Company with mixed business, who are, 260. APPENDIX:, Statutes and parts of Statutes relating to Life Assurance 265-304 Insurances without interest, 14 Geo. c. 48 . . . 265 Policies of Assurance Act, 1867, 30 & 31 Vict. c. 144 . 266 Life Assurance Companies Act, 1870, 33 & 34 Vict. c. 61 . . . . . . . .268 1871, 34 & 35 Vict. c. 58 . 287 1872, 35 & 36 Vict. c. 41 . 288 , 1870-1872, Board of Trade Kules 293 Judicature Act, 1873, s. 25, subs. 6 . . . .296 Companies Act, 1862, s. 38, subs. 6 ; s. 44 ; ss. 209, 210 297 Married Women's, Property Act, 1870, 33 & 34 Vict. 0. 93, s. 10 299 Stamp Act, 1870, 33 & 34 Vict. o. 97, ss. 117, 118, 119,124 300 Succession Duty Act, 16 & 17 Vict. c. 51, s. 17 . , 302 Income Tax Exemption, 16 & 17 Vict. c. 34, s. 30 . 303 c. 91 . . 304 Short Forms under the Conveyancing and Law of Pro- perty Act, 1881 . . . . . . 305-313 Assignment on Sale of a Policy . . . . 305 Mortgage of a Policy 306 Further Charge by Supplemental Deed . . . 308 Settlement of a Policy 309 List of Life and Accident Companies with date of formation and constitution under general or special Act ...... 315-319 List of Life Assurance Companies .... 315 List of Accident Insurance Companies . . . 319 TABLE OF STATUTES CITED, And see Index under " Statutes." 13 Eliz. 0. 5 27 Eliz. o. 4 43 Eliz. c. 12 6 Geo. 1, c. 18 9 Geo. 2, c. 36 19 Geo. 2, c. 37 14 Geo. 3, c. 48 6 Geo. 4, c. 91 . 1 & 2 Will. 4, c. 58 3 & 4 Will. 4, c. 42 4 & 5 Will. 4, c. 22 4 & 5 Will. 4, c. 94 6 & 7 Will. 4, c. 86, 7 Will. 4 & 1 Vict, c I & 2 Vict. c. 110 7 & 8 Vict. 0. 110 8 & 9 Viot. c. 109 9 & 10 Vict. c. 93 10 & 11 Vict. c. 96 II & 12 Vict. c. 45 12 & 13 Viot. o. 108 13 & 14 Vict. c. 97 15 & 16 Vict. c. 86 16 & 17 Vict. c. 34 16 & 17 Vict. c. 91 16 & 17 Vict. c. 45 17 & 18 Vict. c. 125 19 & 20 Vict. c. 47 19 & 20 Vict. c. 97 37 73 PAGE 71, 72 72 11 172 47 23 3, 143 162 107 103 100 162 ]12 162, 176 . 71 162, 165, 176 23,32 157 106 237 237 92 104 100 100 185 155 164 222 20 & 21 Vict. 20 & 21 Vict. 22 & 23 Vict. 23 & 24 Vict. 23 & 24 Vict. 25 & 26 Vict. 27 & 28 Viot. 27 & 28 Vict. 30 & 31 Vict. 30 & 31 Vict. 31 Vict. c. 4 32 & 33 Vict. 33 & 34 Vict. 33 & 34 Vict. 33 & 34 Viot. 33 & 34 Vict. 34 & 35 Vict. 35 & 36 Vict. 36 & 37 Vict. 38 & 39 Viot. c. 38 & 39 Vict. 39 & 40 Vict. 39 & 40 Vict. 43 & 44 Viot. 44 & 45 Vict. 57 80 3.5 126 145 89 18 43 23 144 71 35 61 97 93 58 41 66 113, 77 60 22 36 42 41 78, 44, 62 ( 59, 61, PAGE 221 164 80, 97, 105 107 82 165 et seq. 94 185 33 et seq. 74 73,89 100 178, 269 32, 44, 92 21, 73, 76 178, 287 178, 288 . 63, 90, 110, 111, 116, 122, 156, 296 . 90, 106, 109 111, 123, 244, 249 . 187 et seq. . 190, 276 . 190, 276 . 140, 156 . 74, 80, 81, 82, 86, 105 TABLE OF CASES. Accidental Death Insurance Co., Ee 252 Braunstein v. 154, 155 Pitton V. . 149 Gramble v. . 145 Hooper v. . 144 ' Lawrence v. 152 Reynolds v. 151 Shilling V. 26, 38, 143 Simpson v. 49, 145 Smith V. . 149 Winspear v. 151 Accumulative Life Assurance Co., King V. .... 46 Acey V. Pernie . . 50, 197, 198 Adams v. Claxton ... 85 Lethbridge v. . . .46 Adderley v. Dixon . . . 102 Addie, Western Bank of Scotland V. . . . 203,204,205 ^tna Co. V. Prance . . .26 Agar V. Athenffium Co. . . 195 Agra Bank, £x parte, In re Wor- cester ..... 62 Agra and Mastermatfs Bank, In re. Anderson's Case . , . 250 Agriculturist Cattle Co., Be . 252 Airey v. Hall .... 67 Albert Assurance Co. Cook's Policy 243 Albert Average Association, Be . 173 Life Assurance Co. v. Eagle Insurance Co. . . . 250 Albion Life Society, Be . 256, 257 Brown's Case 257, 261 Sander's Case 257 PAGE Albion Steel Wire Co. . . 249 Alcenius -y. Nygrin . . . 137 Allen's Case .... 224 AUetson v. Chichester . . 62 AUeyne v. Darcy ... 72 Alliance Assurance Co., Hayes v. 68 AUkins v. Jupe . . . 139 Amicable Society v. Bolland ' . 52 Assurance Office, Pear- 66, 67 . 91 . 91 . 208 21, 218, 219 . . 34 . 250 . 24 33, 35, 40, 128, 134, 138, 145 174, 175, 237 . 226 24, 29 . 112 son V. . Amis V. Witt . Witt V. . Anchor Case Assurance Co., Be Co. Notman, v. Anderson's Case Anderson v. Edie V. Fitzgerald ■ Smith V. . Andrew's Case . Andrews, Ux parte . Doe «. . . . Angerstein, Tidswell v. Anglesey, Parker v. . . i Anglo-Australian Oo.'s Indemnity Case . . . . . — Horn V. 24 ,99 Aplin V. Gates . Arkwright v. Newbold Armstrong v. Turquand Arthur Average Association Arthur v. Wynne Ashbury v. Eiche Ashley v. Ashley Ashton, Provident Society v. Athenaeum Co., Be . . __ Ex parte Eagle Co. 209 . 52 . 109 120, 200 . 121 173, 174, 175, 236 78,79 166, 193 . 29 . 164 45, 46, 47 195 TABLE OF OASES. PAfiE Athenasum Co., Agar v. , . 195 Atherton, Udall v. . 119, 203, 205 Atkins, In re . . . . 191 Atkinson, Be . . . .60 Attenborough v. St. Katharine's Docks Co. . - . . . 108, 109 Attorney-General, March v. . 47 v. Ray . 135,138 V. Wilson . 205 Attwell, Eeese River Co. v. . . 109 Audland, Bignold v. . . . 109 Wardu. ... 67 Avery, Scott v. ... 155 Aveson v. Lord Kinnaird . .114 B. Bagshaw, Ex parte . . . 208 Baldwin, Hamilton v. . . 91 Balfour's Case . . . 225, 226 Balfour v. Ernest . . . 194 Ball i-. Ball . . . .78 Bank of London &c., Association, Be 235 V. National Provin- cial Insurance Association Part's Case Bankes, Floytr v. Bannister, Brice v, Barber v. Morris Baring, Traill v. Barker, McAndrew v, Barnard, Gengall v. Barnes' Case Barnett, Fortescue v. Barrack v. McCullooh Barrow, Edwards v. Barr's Trusts, Be Barry v. Barry • V. Crosskey Barwick v. English Bank . Bashford v. Cann Bassil V. Lister . Batchelor, West of England Bank V 64 Bates, Ex parte . . 89, 250 Baylis, Chowne v. . . .58 V. Travellers' Co. . . 158 . 165 , 215 . 95 . 64 . 28 120, 121, 132, 133, 134 . Ill . 91 212, 214 66, 67, 70 . 71 . 114 . 60 . 76 . 100 Joint Stock . 203, 205 Beauchamp v. Winn Behn v. Burness Bell's Case . Bell, Weir v. . Bendir v. Oyle FAOZ . 117, 123 . 124 101, 244, 245, 248 . 204, 205 . 12 Benham v. United Guarantee Co. 136 Beresford v. Beresford . 78, 97 Berridge, Nesbitt v. . . .86 Best, National Assurance Society v. 83 Betteley, Hamlyn v. Bignold V. Audland Evans v. Parsons v. Poniifex v. Bill V. Oureton . Black, Cook v. . Paterson v. Blacker, Hinds v. Blackwell, Henson Blakeley v. Brady Bland, Wainwright v. Blood, Ex parte Blundell's Case 219, Blunt, Want v. Boehm, Carter v. Boldero, God sail v. BoUand, Amicable Soi Bolton V. Ferro . Bordieu, Lowry v. Borrodaile, Dormay v. ■ V. Hunter 110 . 109 24, 26 . 119 . 205 . 72 54, 57, 58, 59 . 112 . 80 . 25,28,29 . 66 24, 26 . 219 220, 227, 229, 230 . 49 . 126, 138 . 27, 28, 129 iciety V. . 52 . 139 . 75 . 31,53,54 Boston, Lawrence v. . . .93 Bott, Parkes v. . , . .76 Bourne, Hawken v. . . . 195, Bousteed v. West of England Co. 50, 197, 198 Bowden, Esposito v. . . . 137 Bower, Cargill v. . . 204, 205 Bowes V. Hope Life, &c., Co. 235, 237 Bowring's Case . . . 225 Howyer & Stock's Case . . 194 Bradburn v. Great Western Rail. Co. . . . 28, 156, 157 Brade, Freme v. . . 29, 87 Bradford v. Symondson Bradshaw, Ross v. Brady, Blakeley v. Brame, Insurance Co. v. Branford v. Saunders Braunstein v. Accidental Co. . . . 42 39 66 156 24 Death 154, 155 TABLE OF OASES. PAGE Brazilian Eailway, New Hamburg V. 110 Bremridge, Hoare v. . . . 122 Breton's Estate, Be . . .68 Brice v. Bannister ... 64 Bridges, Be . . . 90, 245 British Commercial Co. v. Magee 22, 30 Empire, Shearman v. . 99 &c., Co., Whiter. 55,56 Webster v. 65, 103, 104 Equitable Co., Cazenove v. 40,139 V. Great Western Bail. Co. . 64,123,127 Guardian Co. . 202, 253 Soholefield's 254 253 Case ..... William- son's Case .... Imperial Assurance Corpo- 249 ration, Farr's Claim — Mutual Life Assurance So- ciety, Southall V. . . 169, 209 Nation, &c., Co. Indemnity Case . . . 208,209,254 Brough V. Oddy . . .102 Broughton, Jennings v. . . 201 Brown's Case . . 251,257,261 Brown v. Freeman . . .87 V. Price .... 83 V. Railway Passengers Co. 159 Browne, Expmte , Pfieger v. Brownlie ■;;. Campbell Bruce v. Gxirden Bucliner's Case Budden's Case . Burford, Dix v. Burley, Gilly v. Burnes v. Pennell Bumess, Bebn v. Burridge v. Row Butler's Case . C. Cadogan, Sloan e v. Caldwell, Ex parte . In re Currie 249 . 100 120, 127, 132 . 88 . 226 . 223, 225 . 78 . 76 . 194, 200 . 124 . 98 . 224, 225 66 60 60 Caldwell v. Dawson ■, Taylor v. PAGE 92,95 78, 145 Caledonian Insurance Co., Curtiusf. , Norris v. Calisber v. Forbes Campbell's Case Campbell, Brownlie v, Cann, Basbford v. Carbis, Ex parte Carden v. Cemetery Co, Cardwell, Hornby v, Cargill V. Bower Carpmael's Case Carr's Case Carr v. Griffiths Carter ■;;. Boelim V. Hubbacli 120, 127, 105 99 62 249 132 204, 62 111 111 205 . 230 213, 215 . 175 126, 138 . 86 . 109 Cates, Aplin v, Cazenove v. British Equitable Co. 40, 139 Cemetery Co., Carden v. . . Ill Champlin ■;;. Traveller's Co. 157, 159 Chapman v. Fraser . . . 139 Charnley, Woodford v. . .67 Chattock V. Shaw ... 38 Chichester, Alletson v. . .62 Chowne v. Bay lis ... 58 Church V. Imperial Gas Co. . 193 City of Glasgow Bank, Be . . 203 Houldsworth 203, 204 ■ Tennent v. 123 Life Co., Crossley 65, V. . . . . Clack V. Holland Clark V. Hundred of Bly thing Clarke's Case . Clarke v. Cookson Spencer v. Claxton, Adams v. Clegg's Case Clift V. Schwabe Cookerell, Stuart v. . Cocker's Case . Coghlan's Case Cohen v. Mutual Life Insurance Co, Cole, Pordage v. . . . Collett V. Morrison . 26, 118, 201 Collins, Taylor v. . . .189 Collinson v. Pattrick ... 69 Colonial Assurance Corporation, Be 211 — Mutual Society, Be . 180 104 . 97 . 28 . 226 . 123 . 65 . 85 . 226 53,54 . 60 . 213 227, 230 103 155 TABLE OF GASES. PAGE Colonial Life Co. v. Home and Colonial Co., Limited . . 167 Colthurst, Hawkins v. . . 76 Commercial Bank of New Bruns- wick, Mackay v. . . 203, 205 Commissioners of Inland Revenue, Potter V. . . . . 92 Sanvilie v. 94 Compton, Peter v. . . .33 Connecticut Mutual and New York Bail way Co. . . . .156 Conquest's Case . 217, 219, 221, 230, 231, 244 Consolidation Investment Assu- rance Co., Jones v. . . 55, 59 Cook's Policy . . . .243 Cook V. Black . . 54, 57, 58, 59 Oookson, Clarke v. . . . 123 Cope's Case .... 48 Copp V. Lyncli . . . .197 Cottle, Withy v. . . . 102 Coulson, Mackenzie v. . . 119 Count D' Alto's Case . . .227 County Life Insurance, lie . 195, 196 Courtney v. Ferrers ... 76 Cousin V. Nantes ... 22 Coventry, Evans v. • . 47, 243 Cowan, Stokoe v. . . 71, 72 Cox V. Hickman . . . 256 Craig, Penn v. , . . . 121 V. Phillips . . .119 Cranch, Gottlieb v. . , . .87 Crawford, Lucena v. , . .22 Croft, Darcy v. . Crokatt v. Ford Crosskey, Barry v. Crossley v. City of Grlasgow Croucher, Jones v. Slim V. Cureton, Bill v. Curie wis, Desborough Curtis V. Jellicoe Worthington v, Curtius V. Caledonian 65, Co. D. Da Costa v. Scandrett Daintree, Ex parte 112 200 104 72 132 72 29, 139 . 106 24, 29 insurance . 105 . 121, 139 .40, 120, 128 Dalby v. India and London Life Assurance Co. . . 20, 27 Dale's Case . . . .225 Dalglish V. Jarvie . . 126, 127 Dallman v. King . . . 154 Darcy, Alleyne v. . , .72 V. Crofts . .99 Dartmouth, Howe v. . . . 91 Davey v. Shannon ... 33 Davies v. London &g., Co. 120, 124, 125 Davis, Insurance Co. v. Dawson, Caldwell i;.' . Row V. Deas' Case Dearie v. Hall ., Delbridge, Richards v. Delhi Bank Case Demandray v. Metcalf Denton, Fairlie v. V. McNeil Desborough v. Curlewis Everett v. V. Harris . Lindenau v. Digby's Case Dix V. Burford . Dixon, Adderley v. Dodds, Norcutt v. V. Shepherd Doe V. Andrew . Donaldson v. Donaldson Donellan, v. Read Doolan i;. Midland Rail. Co, Dormay v. Borrodaile Dornlng's Case . Dougan's Case . Dowdall, Hallett v. Downing, Gill v. Dowse's Case Driver, Pooley v. Dryden, Stobart v. Drysdale v. Pigott Duckett, Wilson v. Dufaur v. Professional Life Co. 52, 55, 59 Duffield V. Elwes . . , 91 Duke of Leeds, Pugh v. . .43 Dunman, Saunders v. . . 99 Dupre's Executors . . .226 Durham's Case . . . .46 Dwarris, Wood v. . . 38, 201 138 92,95 . 58 . 232 . 59 68, 69 . 249, 250 . 85 . 57 . 200 29, 139 40, 41, 120 . 104, 108 25,126, 127, 128, 131 212 78 102 71 111 , 112 66,70 . 33 . 237 , 75 226, 227 . 208 . 48 . 98 213 . 173 . 114 . 87 . 139 TABLE OF OASES. Dwyer v. Edie . Dyson v. Morris PAGE . 24 81,82 E. Eagle Insurance Co., Albert Life Assurance Co. v. — '■ Loomis u East and West India Dock Co. v. Littledale Eastwood, Phillips v. . Edie, Anderson v. Dwyer v. . Edmonds, Ex parte . Penn v. Prudential v. Case Bdney, Pitchers v. Edwards o. Barrow V. Jones V. Martin . Eoberts v. . Robertson v. Eley V. Positive Assurance Co, Elliott, Good V. Ellison V. Ellison Grey v. . Elwes, Duffield v. Empire Assurance, Dougan'i England v. Tredegar . English and Irish. Society Joint Stock Bank, wick V. Era Assurance Co. Ernest, Balfour v. V. NiohoUs Esposito V. Bowden . Etherington, Tierney v. European Assurance Co., Re Evans v. Bignold V. Coventry Even's Claim . Everall, Holt v. . Everett v. Desborough P. Pagan's Case . . . .224 Fairlie v. Denton ... 57 Family Endowment Co. Be 217, 218, 237 , Pott's Case . 220 250 26 109 71,91 24 24 191 108 112 108 114 67 62 76 33 31 66 84 91 208 . 112 251, 256 Bar- 203, 205 . 208 . 194 194, 208 . 137 . 34 . 238 . 26 47, 243 . 222 . 63 40, 41, 120 Fane v. Fane . Farr's Claim Farrel, Jones v. Feise v. Parkinson Fenn v. Craig . V. Edmonds Fernie, Acey v. , Huckman v. Ferrers, Courtney v, Ferro, Bolton v. Fitch V. Jones Fitton V. Accidental Death Insur- PAOB 132 249 65 138 121 108 50, 197, 198 39,41 76 88 32 ance Co. Fitzgerald, Anderson v. Fitz-William v. Price Fleming's Case . Floyer v. Bankes Forbes, Calisher v. Ford, Crokatt v. V. Ryan . V. Tynte . Fortescue v. Barnett Foster, Jackson v. V. Eoberts V. Thaokery 95 62 112 104, 105, 109 81,86 66,70 58 86 30 Powkes V. Manchester Co. 34, 35, 38, 40, 49, 128, 131, 134 Fowler v. Scottish Equitable Society 117, 138, 197 . 149, 150 33, 35, 40, 128, 134, 138, 145 84 222 France, jEtna Co. v. , Swire v. Fraser, Chapman v. Freeman, Brown v. V. Pope 26 203, 205 . 139 . 87 . 72 29,87 . 34 . 222 . 85 21,95 . 122 Freme v. Brade French, Robertson v. Frere's Case Prere, Talbot v. Fryer v. Morland Fuller, Scottish Amicable v. G. Gale V. Lewis .... 62 Galsworthy, Lawrence v. . 71, 91 Gamble v. Accidental Death In- surance Co. . . . . 145 Gandell, Rodick v. . . .58 Garden, Bruce v. . . .88 Gardiner's Case . . . 232 TABLE OF CASES. 224, Gardner, Gurnell ■;;. Garner v. Moore Garrett, Goddard v. Geach v. Ingall Gengall v. Barnard German Life Uo. Gerussi, Eivaz v. Gibson v. Overbury Gill V. Downing Gilly V. Burley . Glanfield's Case Glazebrook's Case Gloag's Case Glyn V. Locke . Goddard v. Garrett Godsall V. Boldero Good V. Elliott . Gottlieb V. Oranch Grain's Case Graving Docks Co., Harrington v. 197 Gray, Ottley v. . . 104, 109 Great Britain Mutual Society, -fie 174, 237, 238, 242, 259 , Ru- dow V. . : . . . 236 Great Western Railway, British Equitable v. . . 64, 123, 127 PAGE 58 24,98 23 38 91 225 . 126 . 59 . 98 . 76 . 233 . 225 249, 250 106, 109 . 23 129 31 87 27, 28, burn V. 28, 156 Han 157 gex V. . . . 203 Green v. Ingham , 59 Gresham Life Assurance Co., Manby v. , 196 Grey v. Ellison 84 Griffith's Case . .' 220 221 Griffiths, Carr v. . 175 Grissell's Case . 262 Gurnell v. Gardner . 58 Gurney, Peek v. 205 H. Halford v. Kymer 24 Halket v. Merchant Traders 47 Hall, Airey v. . 67 , Dearie v. . 59 Hallet V. Dowdall . 48 Hallett, North British Insurance Co. ■!;. . . . 62 Hamerton, Roebuck v. Hamilton v. Baldwin . Hamlyn v. Betteley . Hammond v. Messenger Hampton, Marriott v. Hancock v. Macnamara Hanham, Wayne v. . Hanson, Mitcalfe v. PASE . 31 . 91 . 110 . 57 . 113 44, 136 . 81 82,89 Harding, Prince of Wales' Co. v. 51, 196 — V. Town of Townsend . 156 Hardisty, Wheelton v. 3S, 41, 120, 127, 129, 130, 131, 135, 201 Hare, Eummens v. . . 67, 70 Harle, National and Provincial Bank v. . . . . 64 Harman's Case . . 212, 222, 232 Harrington v. Graving Docks Co. 197 Harris, Desborough v. Harvey, Strong v. , Turner v. , Wing V. Haselfoot's Estate, Be Hassel v. Merchant Trader Hawken v. Bourne Hawkins v. Colthurst V. Woodgate Hawtrey's Case Haycock's Policy, Be Hayes v. Alliance Assurance po. Hebdon v. West Hendricks v. Montagu Henkle v. Royal Exchange ance Co. Henson v. Blackwell . Hercules Insurance Co., Be Hewitt, Vandyck v. . Hey V. Wyche . Heyworth, Moens v. . Hickey, .fie Hickman, Cox v. Higgins V. Sargent . Hill V. Trenery Hinds V. Blacker Hingston, Parnell v. . Hinton, Lea v. Hoare v. Bremridge Hobday v. Pettrs Hodson V. Observer Insurance Co. Holdich's Case Holland, Clack v. 104, 108 . 173 . 73 122, 197 . 85 . 48 . 195 . 76 . 88 . 225 106 68 25,27 134, 167 Assur- . 118 25, 28, 29 . 169 . 139 . 83 . 126 . 61 . 256 . 103 78,97 . 80 . 67 24,87 . 12vi 78,97 26 244, 245 . 97 TABLE OF CASES. FAOE Holme's Case .... 224 Holt V. Everall ... 73 Home and Colonial Co. Limited, Colonial Life Co. v. . . 167 Hooper v. Accidental Death Co. . 144 Hope Life &c. Socy., Bowes v. 235, 237 Horn V. Anglo- Australian Co. . 52 Hornby v. Cardwell . . . Ill Hort's Case 48, 172, 212, 213, 219, 231, 233, 244 Hosier's Trusts, Be . . . 107 Hoskins, Eeid v. . . . 137 Hougtton, Ex parte ... 24 Houldsworth v. City of Glasgow Bank .... 203, 204 How's Executors . . .226 Howard, Sir R., Be . . 13, 43, 160 Howe V. Lord Dartmouth . . 91 HoweU's Case . . , .224 Hubback, Carter v. . . .86 Huckman v. Femie . . 39, 41 Huguenin v. Eayley , . . 145 Hull Plate Glass Co., Smith v. 194, 196 Hulse V. Peters ... 93 Hundred of Blything, Clark v. . 28 Hunt's Annuity . . .243 Hunter, Borradaile v. . 34, 53, 54 Hutton V. Waterloo Co. . . 40 Ibbetson, Ex parte ... 88 , In re Moore . 91 Imperial Gas Co., Church v. .193 India and London Life Co., Be 220, 221 — Dalbyi). 20,27 Indemnity Case Ingall, Geach v. Ingham, Green v. , Eogers v. Ingilby, Walburn v. Insurance Co. •;;. Brame V. Davis V. Mosley V. Bearer V. Tweed International Life Socy. Claim . lonides v. Pender 209 38 59 113 176 156 138 159 158 158 Be 46, 252 Mclver's 47, 251 . 126 Irvine, Macdonald v. Isaac, Morland v. Isaacs, Solomon v. Jackson v. Foster Jarvie, Dalglish v. Jeffery's Policy Jellicoe, Curtis v. Jenkins, McFadden v. Pugh V. PAGE 76, 91, 98 . 87 55 126, 127 86 106 70 31 201 Jennings v. Broughton Jones V. Consolidated Investment Assurance Co. . . 55, 59 V. Croucher ... 72 , Edwards v. . . .67 V. Farrel ... 65 , Fitch V. ... 32 V. Look ... 67, 70 V. Provincial Insurance Co. 129 V. Eegan . . . 108 V. Smith ... 85 Jorden v. Money . ' . . 136 Jupe, Allkins v. . . .139 Justice V. Wynne . . 66, 70 K. Kearney, Sunderland Marine Co. v. 47 Kearns u. Leaf . . . 46,215 Keeley, Winch v. Keen v.Millwall Dock Co. . Kekewich v. Manning . ( KeUogg V. Railway Co. Kelly's Case .... Kelsey v. Universal Life Insurance Co Kennedy's Case Kennedy v. Panama Co. Kenny v. Wexham . Kensington Station Act, Be Kent Mutual Society, Be . Kettle's Case .... King, Ex parte ... — — V. Accumulative Life Assur- ance Co. .... , Dallman v. . . . , Lewis r. . , Sewell V. ' . 57 140 3,68 158 214 114 219, 223 . 117 . 102 48, 111 254, 258 . 220 . 88 46 154 88 67 TABLE OF OASES. Kinnaird, Aveson v. Kisch,Venezuela Co. v. Kitohin, Young v. Knox's Case Enox V. Turner Kymer, Halford v. Kynnersly, Marriott v. FAOE 114 200 64 224 87 24 98 Lackersteen v. Lackersteen , . 76 Lamb, Solicitors Co. v. . ,55 Lambert, Thompson v. . .74 Lancaster's Case 21, 101, 225, 245, 248 Lancey's Case . . . 212 Lankester, Be . . . 250, 251 Law Life Insurance Sooy., Copp v. 197 Law V. London Indisputable Life Policy Co. . . 20,27,45,46 Law Union, Macdonald v. . 33, 135 Lawrence v. Accidental Death In- surance Co. ■ V. Boston 113. . V. Galsworthy Layton's Policy Lea V. Hinton . Leaf, Kearns v. . Leah's Case Leather v. Simpson . Lefevre v. Boyle Lethbridge d. Adams Lewine's Case . Lewis, Gale v. . V. King . Parker v. Life Association of Scotland v. McBlaine Lindenau v. Desborough 152 . 93 71,91 . 97 24,87 46, 215 . 232 . 132 119 46 198 62 88 205 25, Line's Case Linford v. Provincial, &c., Co. Lister, Bassil v. . . . Littledale, East and West India Dock Co. u Lock, Jones v. . Locke, Glyn v. . Pahner v. . 122 126, 127, 128, 131 . 232 197 98 109 Lookyer v. OfBey . . London Assurance v. London and Westminster Assurance Co. Ltd. 67,70 106, 109 . 61 . 42 London Assurance v. Mansel 40, 121, 128, 129 Motteux V. . 118 , &c., Co., Davies v. 120, 124, 125 Indisputable Life Policy Co., Law V. . . 20, 27, 45, 46 Life Assurance Co., Dalby and Manchester Industrial Association .... 241 Marine Insurance Asso- ciation ..... 173 Monetary Co. v. Smith . and Provincial Life Co. v. 167 London and Provincial Joint Stock Life Co. . . . 167 and Provincial Co. v. Sey- mour 122 and Southwark Insurance Cc'sCase . . . .211 Loomis V. Eagle Co. . . .26 Lord, Mihoy v. . . 68, 70 Lovegrove, Phipps v. . . 62 Lowry v. Bourdieu . . .139 Lucena v. Crawford ... 22 Lynch, Copp v. ... 197 M. McAndrew v. Barker . McBlaine, Life Assurance of Scot land V. ... McCarthy v. Travellers Co, McCreight, Eobson v. McCuUoch, Barrack v. Macdonald v. Irvine . V. Law Union V. Macdonald 111 122 158 46 71 17, 91, 98 33, 135 . 244 . 70 90, 245 . 122 251 McFadden v. Jenkins Macfarlane's Claim . McGuinness, Pritchard w. Mclver's Claim Mackay v. Commercial Bank of New Brunswick . . 203, 205 M'Kee v. Phoenix Co. , . 101 Mackenzie v. Coulson . . 119 Macnamara, Hancock v. . 44, 136 McNeil, Denton v. . . . 200 Macpherson, Urquhart v. . . 123 TABLE OF OASES. PAGE Magee, British Co. v. . 22, 30 MaJioney «. Widows' Life Assur- ance Fund .... 114 Mainwaring, Watson v, . .38 Mair v. Eailway Passengers' Co. 143, 144 Mallory v. Travellers Co. . . 159 Manbyw. Gresliain.Life Assurance Society . . . .196 Manchester and London, &c., Co. 217, 220, 233 Powkes V. 34, 35, 38, 40, 49, 128, 131, 134 Manning, Kekewich 'v. . 66, 68 Mansel, London Assurance v. 40, 121, 128, 129 March «. Attorney-General . 47 V. Pigott ... 42 Marine and General Travellers' In- surance Society, Perrins v. . 144 Maritime Passengers' Assurance Co., Sinclair v. . . . 147 Marriott v. Kynnersley . . 98 Marshall, Norrish v. . . .59 Martin, Edwards v. . . .62 V. Travellers' Insurance Co. . . . . .149 V. West of England Co. 25, 26, 119 Matthews v. Northern Assurance Co. . . . . .106 Maynard v. Ehodes . . 41, 120 Mealor v. Talbot . . .. 108 Mellor's Trusts, Se . . .77 Merchant's and Tradesman's Mutual Life Association, Se . 173, 222 Merchant Banking Co. of London V. Merchant Joint Stock Bank . 167 Merchant Traders, Halket v. . 47 Hassel v. . 48 Merchants Society, Pritchard v. 42, 50, 146 Messenger, Hammond v. . . 57 Metcalf, Demandray v. , .85 Midland Bail.. Co., Doolan v. . 237 Miller's Case . . . .219 Miller, Se, Ex parte Wardley . 89 Pennellt;. . . 86,99 Millwall Dock Co., Keen v. . 140 Milroy v. Lord . . . 68, 70 Minifie v. Eailway Passengers' As- surance Co. ..... 156 Mitcalfe v. Hanson . Moens v. Heyworth . Money, Jorden v. Montagu, Hendricks v. Mooney's Case . Moore,. Garner v. V. Woolsey Moorhouse, Todd v. . Morgan v. Pebrer Morland, Fryer v. V. Isaac- Morris, Barber v. Dyson v.. Morrison, Collett v. . V. Muspratt PAGE 82, 89 . 126 . 136 . 134,167 . 227 24, 98 . 52 . 98 . 31 21, 95 . 8T . 28 81, 82 26, 118, 201 . 40 . 213, 215 . 159 Mosely's Case . Mosley, Insurance Co. v. Mostyn v. West Mostyn Coal and Iron Co 117 Motteux V. London Assurance . 118 Moxsy, Sewell v. . . .66 Murdoch v. Taylor . . . 108 Murray, Winthrop v. . . 75 Muspratt, Morrison v. . .40 Mutual Life Insurance Co., Cohen v. 103 Myers v. United Guarantee Co. . 109 N. Nantes, Cousin v. . . .22 National Assurance Society v. Best 83 Bank, Se . . . 251 Funds Insurance Co., Se 241, 253 Guardian Assurance So- ciety, Towle V. . . . 136 and Provincial Bank v. Harle 64 ; — Provincial Insurance As- sociation, Bank of London v. . 165 Provincial Soey., Kettle's Case . . , . 219,220 Neale, Ex parte . . , 245 Neele, Preston v. . , . 87 Nesbitt V. Berridge ... 86 Newbold, Arkwright v. . 120, 200 New Hamburgh v. Brazilian Rail- way 110 Newport Coal Co., Yorkshire Waggon Co. w. . . . Ill XX TABLE OF CASES. FAQG New York Continental Co. . . 180 Life Co. V. Statham . 97 Nioliolls, Ernest «. . . 194,208 Noroutt V. Dodds ... .71 Norris v. Caledonian Insurance Co. 99 Norrish v. Marshall . . 59 Nortli British Insurance Co. v. Hallett .... 62 Northern Assurance Co., Matthews V. 106 Northern Counties, Re. Macfar- lane's Claim . . . 90, 245 Northrup v. Eailway Passengers' Co 159 Notman v. Anchor Co. . . 34 Nygrin, Aloenius v. . . . 137 0. Cakes v. Turquand . Observer Insurance Co., Hodson v. Ookenden, Ex parte Oddy, Brough v. Offley, Lookyer v, Ottley V. Gray . Overbury, Gibson v. Oyle, Bendir v. 121 26 85 . 102 . 42 104, 109 . 59 . 12 Padstow Total Loss Association, Se 175, 287, 238 Palmer v. Locke . . • Prince of Wales Co. v. Panama Co., Kennedy v. Parker v. Anglesey . V. Lewis Parkes v. Bott . Parkinson, Peise v. , Parlby's Case . Pamell ■«. Kingston . Parsons v. Bignold Part's Case Paterson v. Black V. Powell Pattison, Willisou v. . Pattrick, CoUinson v. Pawson V. Watson Pearson, Be 61 II, 139 117 86,99 205 76 138 84, 243, 250 . 67 . 119 . 215 . 112 31, 139 . 137 . 67 119, 129 . 72 Pearson v. Amicable Office . Pebrer, Morgan v. Peek V. Gurney Pelly V. Royal Exchange Co. Pender, lonides v. Pennell, Bumes v. V. Millar Perrins v. Marine and PAGE Assurance 66,67 . 31 . 205 . 34 . 126 194, 200 86,99 General Travellers' Insurance Co. Perry v. Provincial Co. Peter v. Compton Peters, Hobday v. Hulse V. Pfleger v. Browne Phene's Trusts . Phillips, Craig v. V. Eastwood Phipps V. Lovegrove . Phcenix Assurance Co. Co., M'Kee v. Co., Sheridan v. Pickard v. Sears Pigott, Drysdale v. — March v. Pitchers v. Edney Pole, WooUey v. Pontifex v. Bignold Pooley V. Driver Pope, Freeman v. Pordage v. Cole Positive Assurance Co., Eley v. Pott's Case Potter V. Commissioners of Inland Eevenue Powell, Paterson v, Power's Case Pownall's Case Pratt's Case Preston v. Neele Price, Ex parte. In re Lankester Brown v. . Fitzwilliam v. Prince of Wales Co. v. Harding 51 V. Palmer 121 . 92 31, 139 . 227 . 212 232, 233 . 87 259 83 84 196 139 . 122 44, 50, 146 Professional Life Assurance Co,, Be 252 . 144 . 158 . 32 78,97 . 93 96, 100 , 112 . 119 71,91 . 62 . 194 . 101 . 51 . 146 . 87 . 42 . 108 . 114 . 205 . 173 . 72 . 155 . 33 . 220 Pritchard v. M'Guinness V. Merchants' Co. ' Co., Dufaur v, 52, 55, 59 Promoter Life Co., Sweeney v. . 146 TABLE OF CASES. XXI FAGS Provincial C!o., Jones v. . . 129 — Linford v. . . 197 Perry v. . . 158 Provident Society v. Ashton . 164 Co., Schneider v. . 144 Pugh V. Duke of Leeds . . 43 V. Jenkins ... 31 Prudential Co. v. Edmonds . . 112 B. Railway Passengers Co., Brown v. 159 Kellogg V. . 158 Mair v. 143, 144 Minifie v. . 156 ' Northrup v. 159 Bipley v. . 159 Shader v. . 144 Southard v. 158 Theobald v. 153 Tooley v. . 159 Trew V. 151, 154, 155 Eamsey's Case .... 255 Banger v. Great Western Bail. Co. 203 Bawlins V. Wickham . 121,134 Bay, Attorney-General v. . 135, 138 Bayley, Huguenin v. . . . 145 Bead, Donellan v. . . .33 Beed v. Boyal Exchange Co. . 24 Bees V. Scottish Equitable Society 201 Beese Biver Co. v. Attwell . . 72 V. Smith . 120, 200 Began, Jones v. . . .108 Eeid V. Hoskins . . .137 West?; 99 Eeynell v. Sprye . . 120, 121 Eeynold's Case . . . 151, 152 V. Accidental Death In- surance Co. . . . .151 Bhodes, Maynard v. . . 41, 120 Bichards v. Delbridge . 68,6 9 V. Silvester . . .200 Biche, Ashbury v. . . 166, 193 Bipley v. BaUway Passengers' Co. 159 Eivaz'sCase . . . .224 Eivaz V. Gerussi . . . 126 Eivington's Case . . .207 Eobert's Case . . . .198 V, Edwards ... 76 Eoberts, Poster v. Bobertson ■;;. French Bobson V. McCreight Eodick V. Gandell Boebuck v. Hamerton Bogers v. Ingham Boss V. Bradshaw Eossiter v. Trafalgar Eow, Burridge v. V. Dawson Boyal Exchange Assurance Henkle v. . . . , • Pelly V. . Beed v. Taunton v. PAGE . »6 . 34 . 46 . 58 . 31 . 113 . 39 197, 198 . 98 Co., 58 118 34 24 196 195 British Bank v. Turquand Naval Society's Indemnity Case .... 210,214 Budow V. Great Britain Society . 236 Rummens v. Hare . . 67, 70 Bussell's Policy Trusts, Be . .60 Byan, Ford v. . . 104, 105, 109 Sadler's Case St. James' Club, i?e . St. Katharine's Dock Co., borough V. . Sander's Case . Sanville v. Commissioners land Revenue Sargent's Policy Higgins V. . Saunders, Branford v. V. Dunman Saxon Life Co., Be Anchor Case Scandrett, Da Costa v. Schneider v. Provident Co. Scholefield's Case Schwabe, Clift v. Scott's Case V. Avery Scottish Amicable v. Puller Egtuitable Society, Fow- ler v. . . . 117,138,197 Bees V. 201 Sears, Pickard v. . . . 146 Seaver, Insurance Co. v. . . 158 254 237 Atten- 108, 109 . 257 of In- 94 72 103 24 99 215 208 139 . 144 . 254 53,54 230, 233 . 155 . 122 117, 121, TABLE OF CASES. PAGE Sewell V. King . . ... 67 V. Moxsy ... 66 Seymour, London and Provincial Co. «. . . ■ . . . 122 Shader v. Railway Passengers' Co. 144 Shannon, Davey v. . . .33 Shaw, Ohattock v. . . 38 Shearman v. British Empire Co. . 99 Shepherd, Dodds v. . . . Ill Sheridan v. Phoenix Co. . . 51 Shields Marine Insurance Associa- tion, Be . . . .173 Shilling V. Accidental Death Co. 26, 38, 143 262 200 Sillitoe, Ex parte Silvester, Richards v. . Simpson v. Accidental Death In^ surance Co. . V. Lord Howden Leather v.- . 145 120 132 71 Sims V. Thomas Sinclair v. Maritime A^urance Co. . . ~ . 147 Slim\ Croucher . . .132 Sloane v. Cadogan Smith's Case . . . .233 Smith V. Accidental Death Insur- ance Co. . . y. . 149 V. Anderson . 174, 175, 237 ir. Hull Plate Glass Co. 194, 196 Jones V. . ... .85 London Monetary Co. ■;;. . Reese River Co. v. . 120, 200 Solicitors and General Co. v. Lamb 55 Solomon v. Isaacs ... 89 South Atlantic Steamship Co., Be 236; 237 Southall V. British Mutual Society 169, 209, 237 Southard v. Railway Passengers' Co. Speirs, Thompson v. Spencer's Case . V. Clarke Sprye, Reynell v. Staniforth, Tarleton v. State Fire Insurance Co. Statham, New York Life Co. v. Stobart v. Dryden Stokoe V. Cowan Streeter, Ex parte 158 59,62 219, 220 . 65 120, 121 . 49 45, 46, 252 97 114 71,72 111 FAOE Strickland v. Turner . , .117 Strong V. Harvey . . . 173 Stuart V. Oockerell . . . 60 Sunderland Marine Co. v. Kearney 47 Sutton's Trusts . . . .106 Sweeney v. Promoter Life Co. . 146 Svrift'sCase .... 214 Swift V. Winterbotham . . 200 Swire v. Francis . . 203, 205 Symondson, Bradford v. . .42 Tait's Case Talbot's Case . Talbot V. Frere . Tarleton v, Staniforth. Taunton v. Royal Insurance Co. Taylor v. Caldwell V. Collins Murdoch v. Tennent v. City of Glasgow Bank Thackery, Foster v. Theobald v. Railway Passengers Assurance Co. Thomas v. Griffiths Sims V. . 199 48, 233 85 108 49 196 78, 145 189 108 123 30 Thompson v. Lambert V. Speirs 153 90 71 74 59, 62 Thornhorough, Whittingham v. 12, 121, 139, 160 59 24 34 69 219 213 98 159 Thorp, Williams r. . Tidswell v. Angerstein Tierney v. Btherington V. Wood Times Life Co., Be . Mosely's Case Todd V. Moorhouse . Tooley v. Railway Passengers Co. Towle V. National Guardian Assur ance Society . . . .136 Town of Townsend, Harding v. . 156 Trafalgar, Eossiter «. . •. 197,198 Traill v. Baring . 120, 121, 132, 133, 134 Traveller's Co., Baylis v. . . 158 Ohamplin v. 157, 159 — McCarthys. . 158 — Mallory v. . . 159 Martin v. . . 149 Tredegar, England u. ., . . 112 TABLE OF CASES. FAGE Tredegar v. Windus . . . 114 Trenery.Hillv.. . . 78,97 Trew V. Rail. Passengers Insurance Co. . . . 151, 154, 155 Tucker, Warburg v. . . .89 V. Wilson ... 81 Turner v. Harvey ... 73 Knox«. . . . 87 Strickland v. . . . 117 Turquand, Armstrong v. . . 121 , Oakesv. . . .121 Royal British Bank v. . 195 Turtle, Wroughton «. . . . 93 Tweed, Insurance Co. v. . . 158 Tylden'sCase . . . .251 Tynte, Ford v. . . . 81, 86 U. UdaU V. Atherton . 119, 203, 205 United Gruarantee Co., Myers v. . 109 Benham v. 136 Ports Co., Even's Claim . 222 Universal Life Insurance Co., Kel- sey V. . . . . . 114 Urquhart v. Macpherson . . 123 Vanderzee v. Willis . . 85 Vandyck v. Hewitt , . 139 Venezuela Co. v. Kisch . 200 Vivian's Case . 226,233 Vyse V. Wakefield . . 75 w. Wainwright v. Bland . . 24, 26 Wakefield, Nyse v. . . .75 Walberg's Case . 244, 246, 249, 250 Walbum v. Ingilby . . ' . 176 Want V. Blunt ... . .49 Warburg v. Tucker . . .89 Ward V. Audland ... 67 Warne'sOase . . . 220,224 Warrant Finance Co.'s Case . 248 Waterloo Life Co. iJe . . . 165 Waterloo Life Co., Carr's Case Hutton V. Watson V. Mainwaring Pawson V. — Willesford v. Watt's Case Waugb's Trusts Way's Trusts . Wayne v. Hanbam Webster v. British Empire Co. PAGE . 213 . 39 38 li9, 120 155 248, 249 . 98 . 70 . 81 65, 103, 104 204, 205 224, 226 Weir V. Bell , Werninck's Case West of England Bank, Ex parte Brown 249 V. Batohelor 64 Co., Bousteed v. 50, 197, 198 West, Hebdon v. . . 25, 27 Martini;. . . 25,119 V. Eeid .... 99 Mostyn Coal & Iron Co., Mostynv 117 Western Bank of Scotland v. Addie 203, 204, 205 Westminster Palace Hotel Case . 196 Wexham, Kenny v. . . . 102 Wheelton v. Hardisty 38, 41, 120, 127, 129, 130, 131, 135, 201 White V. British Empire &o. Co 55,56 Whitehaven Bank Case . . 223 Whittingham v. Thornborough 12, 121, 139, 160 Whyte, Yates «. ... 28 Wickham, Eawlins v. . 121, 134 Widow's. Life Assurance Fund, Mahoney v. . . . .114 Willesford v. Watson. . . 155 Williams v. Thorp ... 59 Williamson's Case . . 253, 254 Willis, Vanderzee v. . . .85 Willison V. Patteson . . . 137 Wilson's Case . . . 219, 230 Wilson, Attorney- General v. . 205 V. Duckett . . .139 Tucker v. . . .81 Winch V. Keeley ... 57 Windus, Tredegar v. . . .114 Wing U.Harvey , . 122,197 Winn, Earl Beauchamp v. . 117, 123 TABLE OF CASES. Winspear's Case 11. Accidental. Death surance Co. . Winstone's Case Winterbotliam, Swift Winthrop v. Murray Withy i;. Cottle. Witt V. Amis . ^-^ Amis V. , Wood's Case Wood Be V. Dwarris , Tierney v. Woodford v. Uharnley Woodgate, Hawkins v. WooUey v. Pole In- FAGE 152 174, 151 ,257 . 209 . 75 . loa . 91 . 91 214, 226 . 73 38, 201 . 69 . 67 . 88 . 114 Woolsey, More v. Worcester, Be . Worthington v. Curtis Wright V. Wright Wroughton v. Turtle . Wychie, Hey v. . Wynnp, Arthur v. — Justice V. PAGE . 52 . 62 24,29 58,65 . 93 . 83 78,79 66,70 Yates V. Whyte Yorkshire Waggon Co. v. Newport Coal Co. .... Young V. Kitchin 28 HI 64 THE LAW OF LIFE INSUKANCE. INTEODUCTIOK. Many fruitless endeavours have been made to pierce the obscurity that rests on the early beginnings of insurance. It has been attempted, with astonishing ingenuity, to extract a meaning from passages in Livy and Cicero which may support the view that the contract of marine insurance was known to the Romans as the contract of maritime loan (nauticum fenus) undoubtedly was. No trace of this contract can, at any rate, be found in their laws, though Emerigon treats this merely negative evi- dence as of little value, considering the fragmentary state in which Eoman law has come down to us. The consolato del mare^ however-^the earliest known code of maritime law, and dating from the year 1075, or earlier-^is equally silent on the subject. The maritime laws of the town of Wisbuy, in Sweden, the earliest extant edition of which was published in 1505, and which M. Pardessus believes to have been pro- mulgated at some date earlier than 1320, are said to have contained the first regulations on maritime insurance (a), and a passage is quoted by M. Pardessus from a Dutch author, stating that the Count of Flanders established a chamber of insurance at the request of the inhabitants of (a) Emerigon, p. xxxviii. ; Valin, ii. 54. B 2 INTRODUCTION. Bruges in the year 1310 (a). M. Pardegsus, howeyer, states that he has searched for aay trace of the chamber , alluded to in vain, and shews that the laws of Wisbuy contain no reference whatever to the subject of insurance, the idea being based on a mistranslation of a single passage in those laws (6). It has even been concluded that insurances upon lives were referred to in this same passage, apparently on the anthority of Valin (c), who, in commenting upon a state- ment in the Guidon de la Mer, to the effect that coun- tries which had permitted life assurance had at length been forced to prohibit it, observes that such could not have been the case at the time of the ordinance of Wisbuy, as might be seen from the 66th article at the end, any more than it was then the case in England {d). The better opinion seems to be that the contract of insurance did not 6ome into use much before the 15tb century, the earliest extant ordinance on the subject being that of Barcelona in 1435, followed by that of Florence, 1523 (e). Resting, however, on the custom of merchants, insurance may well have been practised for a considerable time before it obtained distinct recognition by the laws of the state. It seems tolerably clear that its earliest development was in the direction of marine insurance, which is said to have been invented by the Jews, to have been adopted by the Lombards, aind by them introduced into England, and the clause in old marine policies that this policy shall be of the same force as any other issuing out of (a) Pardessus, Lois Maritimes, i. 356. ' (&) Ibid. i. 432. (c) Valin, ii. 54. , (d) Park on Insurance, ii. 907. (e) Marshall on Insurance, p. 13. HISTORICAL SKETCH. 3 Lombard Street supports the view that insurance is one of the many conveniences of commerce and civilization that we owe to that remarkable people. Insurances upon lives seem to have first arisen as a branch of and in connection with marine insurance, and probably a century later. Indeed, the little information we possess on the subject must be looked for in codes of maritime law or in scattered passages in the works of writers on that subject. The transition was an easy one from the insurance of ships and merchandise for a particular voyage to the insurance of the lives of the captain or passengers, and life insurance in its early stages took the shape of insurances against the risks of a long and dangerous voyage, being in truth and substance an insurance against accident, and not directed to meet the risk of death from natural causes, even where that risk was in fact included. We soon find lenders availing themselves of the new operation for the purpose of securing, by means of a tem- porary insurance, advances made upon appointment to or to enable the borrower to purchase an office, and repay- able by instalments out of its emoluments; but the modern conception of life insurance in its most useful form, that is, insurance by a man upon his own life as a means of saving and making a provision for his family, will be looked for in vain. It is clear, at any rate, from the Guidon de la Mer, already referred to, a book relating to maritime law, published for the use of the merchants of Eouen, and ascribed by M. Pardessus to some date between 1556-1584, that life insurance was well known elsewhere than in France considerably before the middle of the 16th century. It is there said that " les assurances faites par les autres B 2 4 INTRODUCTION. nations sur la vie des hommes en cas qu'ils decedassent estant sur leur voyage de payer telles sommes a leurs beritiers ou creanciers .... etaient toutes pactions re- prouvees par les bonnes mceurs et coutumes dont 11 arrivait une infinite d'abus et de tromperies " (a). Indeed, in the Italian towns and in the Low Countries a reaction seems to have already set in against it, and it was considered important enough to require regulation, if not dangerous enough to demand suppression, by the state. At Genoa in 1588, wager policies were absolutely prohibited, and insurances on the lives of public men or other eminent persons were forbidden to be made without the leave of the senate (6). The ordinance of Philip II., of 1570, prohibits all life assurance, Art. 32 : " Pour empecher les abus, fraudes, dols et crimes commis a I'occasion des assurances sur la vie des personnes et des gageures sur voyages et autres inventions semblables, nous les avons prohibees et defendues, les (a) Guidon, svi. 5 ; Pardessus, Lois Maritimes, ii. 422. (l) Pardessus, Lois, iv. 533. " Sine licentia senatus non possint fieri seouritates, vadimonia, seu partita super vita pontificis, neque super vita imperatoris, neque super vita regum, nee cardinalium, neque ducum, prinoipum, episcoporum, neque aliorum dominorum, aut personarum ecolesiasticarum, seu secularium in dignitate constitutarum. " Non possint etiam fieri super acquisitione, amissione, seu mutations dominorum, statuum, regnorum, provinciarum, ducatuum, civitatum, terrarum, seu locorum. " Non possint similiter fieri super felici seu infelici suocessu exercituum, classium, seu expeditionum, neque eorum adventa, neque recessu, neque super expugnatione, aut defensione aliqua. " Non possint fieri super matrimoniis contrahendis, vel non contra- hendis, super uxoribus ducendis, aut non : neque super partu mulierum, neque navium aut aliorum appulsu aut recessu. " Non possint fieri super futura vel non futura peste aut bello, neque super electione ducis aut magistratuum reipublioae; et demum super aliis quibusvis habentibus speciem seu formam vadimonii, seouritatis, seu partiti ; sed omnia intelligantur et sint prohibita." ITALY AND TEE LOW COUNTRIES. 5 prohibons et defendons comme nuisibles au bien-etre general et de mauvais exemple " (a) ; and the customs of Antwerp of 1582, the ordinances, of Amsterdam in 1598 (art. 24), of Middleburgh in 1600 (art. 2), and of Botter- dam in 1604 (art. 10), all place insurances upon lives and wagers in the same category, and forbid them both in the most absolute terms (fe). Curiously enough, art 4 of the Customs of Antwerp shews that life insurance was legal when the article was first framed, for it provides for payment of the sum insured upon admission of the signa- ture of the policy, and upon proof of the loss of the ship or merchandise, or of the death of the person the subject of the assurance (c). By modern Dutch and Belgian law, insurances upon lives on which the insured has an interest are valid, and, when on the life of another, may be effected without the consent or even the knowledge of the life {d). In Scaccia de Commerciis, a book on mercantile law, of which we have an edition, apparently not the first, published in the year 1620, the author says : "Et demum potest assecurari vita et superviventia hominis pro certo tempore," and gives examples of cases where it is allowed, where, for instance, a creditor will lose his debt if the debtor does not live for a certain time, or in the case of a loan to a bishop elect to pay the expenses of his appoint- ment, and repayable out of the revenues which may be secured by an insurance of his life with a merchant for four or five years, or in the case of a loan to an expectant heir, which may be secured by an insurance of his life against his father's, and he quotes an action on a policy (a) Pardessus, Lois, \v, 116. (6) Ibid. iv. 131, 183, 156. (c) Ibid. iv. 183. \d) Dutch Code, 1838, art. 302 ; Belgian law, 1874, art. 41. b INTRODUCTION. for 3000 scudi at a -premium of 4 per cent., the defence to which was fraud, the assured being old and infirm and the premium grossly inadequate, as a case of rescission on the ground of fraud to the extent of half the value of the contract (a). The following form of a life policy in use at Florence at the beginning of the 17th century, which it will be observed is without any exceptions or limitations, may have some interest (b) : — " Nomine D, lo. Baft. Seminiq. &e., de ordine D. Camilli Florentiarum pro computo D., &e,, super vita et persona M, D. equitis Fratris Fernandi, ineipiendo risioum in solutionibus feriae Augusti praesentis anni 1610, Floren- tiae celebrandis, et duret usque in solutionibus feriae appari- tionis anniproximeventuri, 1611, Florentiae celebrandis, et quatenus dicto tempore durante, d. B. Frater Fernandus de- eederet, seu vita careret ex quavis morte, tarn naturali, quam aocidentali, quam etiam quovis alio modo quo did, imaginari, seu cogitari possit nemine excluso (quod Beus avertat) tali casu infra scripti assecuratores solvere teneantur d. D. lo. Baptistae seu personae legitimae pro eos intra tres dies, (a) Soaocia, p. 26, n. 133, p. 422, nn. 51, 52. " Explica vitae hominis assecurationem de quo obiter looutus sum in hao deolaratione, practicari quando creditor nou est recuperaturua debitum, nisi ejus debitor aliquo tempore supervivat, ut in casu relate et similibus ; ut puta electus ad episcopatum petit a me mutuo 1000 quibus buUarum expeditionem solvat, ego mutuo et quia, si episcopus ante adeptam episcopatus posses- sionem, vel post, priusquam e reditibus mihi satisfacere possit, moriatur, ego 1000 mutuatos perderem, mutuo hacconditione, ut mercator aliquis assecuret episcopi vitam post obtentum episcopatum per quatuor, vel quinque annos, quia ex illorum annorum reditibus mihi satisfaciet: idem continget, si filius familias petit a me peouniam mutuam et quia si is moriatur ante patrem, ego non recuperarem mutuum, secus si prius moriatur pater, mutuo ea conditione ut mercator assecuret ejus vitam post mortem patris." (5) Scaccia, De Commerciis, p. 26, n. 142. FLORENTINE POLICY. 7 proxime ventures, seouturos a rCotifieatione dietae mortis, si sequeretur, sine ulla contradictione, summas pecuniarum, per eos infra scribendarum respective, omni exeeptione et contradictione remotis, &e., et possit d. D. B. Eques Fer- nandus iota d. tempore durante, stare, ire, et morari, anteeedere et retrocedere in quavis mundi parte, tarn via terrestri, quam maritima ad ejus libitum, nullum generando praejudicium praesenti securitati. Nee d. D. lo. Baptista teneatur, nee dbligatus sit ad ostensionem, nee ad aliquamfidemfaciendam de praesenti risico ipsis DD. Gamillo. Sehastiano, et Antonio spectante, sed quod credatur, et stari debeat soli verba d. D. lo. Bapt., seu personae pro eis, quia ita declararunt per praesentem appodixiam securitatis quibusvis in contrarium facientibus non obstantibus. Et praesens securitas valeat, et teneat, neo contra earn aliquid apponi possit, renuneiantes infra scripti assecuratores omnibus et quibusvis statutis, in contrarium facientibus, qui quidem infra scripti assecura- tores teneantur solutioni praesentis securitatis, ut supra dictum est d. D. lo. Baptistae Semino, quatenus intra dictum tempus sequeretur d. mors ; de qua morte stetur fidei faciendae per testes, etiam minus legitime receptos, et ad formam statuti de causis breviorihus in inexactionibus securitatum, &c, Be- nwrmantes, &c., Dantes, &c., Bemittentes, <&c., Sub, &c., Jurantes, &c. Acto, quod adveniente casu mortis, non possint assecuratores aliqwid dicer e, opponere, nee excipere, nisiprius facta iniegra, olutione summae,per eos respective assecuratae, et ita cum juramerdo promittunt, et ohligant, et absolutionem a juramento non peiere, nee impetrare, &c. Et declarato ad cautelam quod d. risicus incipiat in dictis solutionibus feriae Augusti Placentiae ut jiniat in d. foro apparitionis Placentiae, quia sic, &c., et seu in solutionibus dietae feriae apparitionis, dtc, bO Nov. 1609, die 17 Augusti notata per me Julium Pasqua gubernatorem Cabelae securitatum, &c.. 8 INTRODUCTION. et per me To. Steph. Carderinum notarium, &c., et dictae Cabellae seribam., &c. J. N. asseatiro seudi treeento de lire quattro e sono pagato a tre, e tre quarti per cento, che Iddio faccia salvo. So. 300. J. N. assecuro scudi trecento de lire quattro e sono pagato a tre quarti per cento. Nostra Signore lo salvi, J. N., &c. Die 24 Sept. 1609, registrata pro scutis tribus millihus de 3 et tribus quartis pro centenario solverunt de numerato lo. Bapt. Laur. et Benedict., Vernalia N. Capserio lihras 60 etprout in mandato <&c., relai. &a., per me d, Julium, et per d. lo. Stephanum, dc." Eoccus again states that men's lives may be insured, and reports a case of an insurance upon the life of one man for the benefit of another in the year 1641, where he successfully maintained the validity of the policy before the Florentine Court {a). It was argued for the insurers that a policy on the^life of another was invalid unless he consents, since it may lead to practices against his life ; for the insured, that it was a valid contract depending on a future event, and good by the custom of merchants, and evidence of Neapo- litan merchants was produced to the effect that such insurances were in general use, the premium being 10 per cent., and were commonly called Scomesse, with the clause (e Bio le dona vUa lunga) a wish that was equally sincere on both sides ; on the side of the insurers that they may not become liable to pay the sum insured, on the part of the insured on account of his presumed interest, which, however, by the conditions of the contract, was generally taken as admitted. (a) Koccus, De Asseo. p, 239, n. 74, p. 293, resp. 23. FBANCE. . ■ 9 In France the prohibition of life insurance contained in the Guidon, re-appears in the Ordinance of 1681, tit. 6, Art. 10 : " Defendons de faire aucune assurance sur la vie des personnes." Art. 11 of which, however, goes on to say, •' Pourront neanmoins ceux qui rachetent les captifs faire assurer sur les personnes qu'ils tirent de I'esclavage le prix du rachat que les assureurs seront tenus de payer si le tachet^ faisant son retour est repris, tue, noye, ou s'il perit par autre voie que par la mort naturelle." This prohibition seems to have been founded upon an old maxim, libervm corpus asstimationem non recipit, it being contrary to propriety and public decency to put a price upon the lives of men (a). France long remained under the dominion of this idea, and the works of the great French writers on insurance in the 18th century, Emerigon, Valin, and Pothier, add nothing in consequence to our knowledge on the subject of life insurance. Emerigon, writing in 1783, says, " At Naples and Florence, in England, and in various other places, it is permitted to make insurance upon the lives of men. But these kinds of insurance are not properly termed so, they are really wagers, fiimt per viam spon- sionum vulgariter dictarum seomesse, as observes Eoccus, in the place cited, Nos. 47 and 74 and resp. 23. These wagers, improperly termed insurances, are prohibited in Holland and in several other countries; from an early period they had been prohibited in France: Guidon. Man cannot be estimated at a price says the law, li- herum corpus asstimationem non recipit; the life of man is not an object of commerce, and it is odious that his death should form matter of mercantile speculation ; and, as Grivel remarks, these kind of wagers are of sad augury, (a) Pothier, Oeuvres, iv. 447, n. 27. 10 INTRODUCTION. and may occasion (irimes. ' Hae oonditiones sunt plenae tristissimi eventus et possunt invitare ad delinquendum : suntque contra bonos mores: cum incivile sit et turpe liberi hominis casum adversum expectare ' " (a). The lives of negroes, who were considered merely as subjects of property, might be insured (like any other pro- perty) even in countries where life insurance in general was strictly prohibited. Such insurances, as well as insurances on the lives of ransomed prisoners to the amount of the ransom, which in fact is nothing else than an insurance by a creditor on the life of his debtor, bear more resemblance to a modern accident policy than a life policy, since death from a natural cause was excepted from the risks insured against by the application of the rules drawn from marine insur- ance that losses arising from the inherent defect of the thing assured are not payable (6). A decree of the council in 1787 authorized the creation of a royal insurance company, but the Revolution soon swallowed up the young institution, which was suppressed by a decree of 1793, and the French codes are significantly silent on the subject. Art. 334 of the Code de Commerce, speaking only of the assurance of things " estimables a prix d'argent " with an evident reference to the doctrine above alluded to. Though life insurance gradually came into use in France, its legality was contested even in quite recent (a) Emer., Meredith's translation, p. 157. (J) Ordinance of 1681, art. 11 ; Potbier, Oeuvres, iv. 465, n. 66. For instance, if animals or negroes die a natural death, or even if negroes in despair kill themselves, the insurer is not hound, for these losses arise from the nature or defect of the thing. It would be otherwise if they had been drowned in a tempest or killed in a battle. ENGLAND. 11 years (a), nor was it distinctly recognised in French legis- lation till the year 1867, when life insurance companies were expressly excepted from the provisions of the law freeing " soeieies anonymes " in general from the necessity of obtaining Government authorization (6) ; and in the year 1868 a system of state life insurance was established. The only earlier allusion to life insurance in the French statute-book appears in a revenue law of the year 1850, providing that companies and all insv/rers of lives may compound for the stamp duties payable on contracts of insurance. Though insurance, both marine and life, was trans- planted from Italy to England at an early date and found there a congenial soil, the positive law on the subject is more scanty and of less antiquity than elsewhere. The creation of the Court of Policies of Assurance by 43 Eliz. c. 12, called " An Act concerning matters of in- surance used among merchants" (c), withdrew the cases of marine insurance from the cognizance of the ordinary tribunals ; and of this Court, which fell into disuse some two centuries ago, in consequence of decisions that the ordinary Courts had a concurrent jurisdiction with it, not a single record now remains, and even the place where it held its sittings is completely forgotten. There can be little doubt that marine insurance was known in England at the beginning of the 16th century (cs) Pardessus, Cours de Droit Commercial (1836), p. 278 ; Couteau, Traits des Assurances (1881), i. 63. (J) Art. 66: " Les associations de la nature des tontines et les sooi^tfe d'assurances sur la vie mutuelles ou a primes restent soumises k I'autorisation et k la surveillance du gouvernement," and see Code de Commerce, art. 37. (c) Eepealed Stat. Law Rev. 1863. 12 INTRODUCTION. and insurances upon lives probably came into use in the second half of the same century. The earliest case to be found in the books relating to life insurance is the case of Bendir or Benyr v. Oyle, before the King's Bench in the year 1649, reported in Style, 166, 172, where a prohibition was issued to the Court of Poli- cies against proceeding on a case of life insurance because the statute related to things merchantable only. The policy there had been effected on the life of a captain of a ship going to Barbados by two persons who were bail for him in an Admiralty action brought against him for freight, and Holl, O.J., on the first hearing seems to have thought that the Court of Policies had jurisdiction, ob- serving that the insurance of a man's life was not within the statute as upon the buying of an office, but " where he is going to sea upon merchant's affairs his life may be assured as well as the safe return of the ship he goes in." An anonymous case of the year 1678 is also quoted in Viner's Abridgment, vol. xvi., 402, as authority that " assurances may be made on men's heads as well as ships and goods; as if a man is going from the streights or to any part of the Mediterranean Sea, and is in danger of being taken by the Moors or Turkish pirates and so made a slave, whereby a ransom must be paid for his re- demption, they may advance a premium accordingly upon a policy of insurance; and if he be taken the insurers must answer the ransom secured." Assurances for the ransom of captives are said to have been much earlier in date, a company called " The Casualty Assurance " having, it is said, been established in London in the year 1800. In 1690 we find the Court of Chancery setting aside a life policy on the ground of fraud : Whittingham v. Thorn- btirgh, 2 Vern. 206, evidence of previous frauds by the EABLY CASES. . 13 insured being produced, and in 1697 the Court di^ueen's Bench adjudicated on the construction of a life policy in Sir E. Howard's ease. Policies at this time were effected with merchants, the risk being divided among the several persons who under- wrote the policy ; the first life insurance company was established in the year 1706, when Queen Anne granted a charter to Thomas Allen, the Bishop of Oxford and others under the name of the Amicable. The scheme of the Amicable Society was merely to to raise a fixed annual contribution from the members and to divide the surplus of the year after paying expenses among the representatives of those who had died within the year. Any person between the ages of twelve and forty-five, whatever his state of health, was eligible as a member, and all were admitted at a uniform rate. In the year 1720 the Eoyal Exchange and London Assurance were empowered to extend their objects to life insurance ; in 1762 the Equitable Company was established under a deed of settlement enrolled in Chancery, its application for a charter having been refused on the ground that its terms were not suflSciently high. The Westminster fol- lowed in 1792 and the Pelican in 1797, eight companies in all being in operation before the year 1800. A curious account may be read in Francis's Annals of Life Assurance of all the assurance projects of the Bubble era. There were " little goes of assurance " at the Cross Keys in Wych Street, where for 5s. fortnightly sub- scription £200 could be assured at death ; at Koll Court, in Fleet Street, there was an office of insurance on mar- riage, another was the baptismal office of insurance where every member paying 2s. &d. for every infant baptized was entitled to £200 on the baptism of an infant of his 14 INTRODUCTION. own. The ' Fortunate ' Office offered £200 as a marriage portion to subscribers of 2s. a quarter. Others even offered to insure against purgatory or female want of chastity (a). Down to the middle of the 18th century, before the publication of the Northampton Tables, compiled by Dr. Price from observations on the comparative mortality at different ages taken at Northampton and Chester, life insurance at its best, where the insured had a substantial interest in the existence of the life, always bore the character of a wagering contract, since so far from resting, as it now does, on exact and infallible mathematical cal- culations, the premium was fixed merely by rule of thumb, and no scale graduated according to age existed (6). At this time however wager policies were opened on every possible event, everything it was said is insurable at a premium, and no considerations of humanity or decency were any restraint on the mania for speculation. Writing in 1753 Magens says : " Men's lives with good reason are and may be insured to secure to a creditor the reimbursement of a sum advanced to his debtor for a post or place out of the income of which he may have a suffi- ciency besides his maintenance, expenses, interest, and premium to pay off yearly a part of the capital. How- ever the lender ought not to insure the life of the borrower without his consent. In some places insurances are not (fl) Annals, &c., of Life Assurance, by John Francis : London, 1853. (5) There are some curioas observations on the expectation of life at different ages in Soaocia, de Judiciis, where he is discussing the right of rescission of a contract for fraud to the extent of half its value, and gives rules for finding out the value of a contract depending on life : Soaccia, de Jud. bk. ii. cap. 2, n. 477, 2nd ed. 1669. The 1st edition was pub- lished in 1617. TEE BUBBLE ERA. 15 permitted on the lives of persons at the head of the government, but in London people take the liberty to make insurances on any one's life without exception, and the insurers seldom inquire much if there are good or bad reasons for such an insurance, but only what the person's age is and whether he be of good constitution. The common premiuni on a good life from twenty to fifty years of age is 5 per cent., and from fifty to sixty years old 6 per cent." (a) Wager policies were made on the return of George II. from Dettingen, on the Pretender's life, on the fate of the rebel Jacobite lords, or of ordinary felons, on the fall of a minister, on Wilkes in the Tower, on the Duchess of Kingston's trial for bigamy, and on the sex of the Che- valier d'Eon. In 1765, 800 German emigrants were encamped in the open air in Goodman's Fields, and the opportunity of wagering how many would die within the week was not lost. At length, in 1774, the legislature intervened, as had been done at Genoa two centuries before, and prohibited all insurances on lives without interest (6). Since that date life insurance has expanded in its legi- timate sphere, and has made rapid and continuous progress. Before 1800 eight companies only, were in existence, there were thirty-nine such companies in the year 1824, and the Act of 1825 repealing the Bubble Act gave a new impulse to their formation, and 105 companies.were added between 1824-1844. The Companies Acts of 1844 and 1862 acted still more strongly in the same direction, and 272 new companies were established between the years 1844-1869. The progress of life insurance must not (a) Magens, i. 32. (6) 14 Geo. 3, o. 48. 16 INTRODUCTION. however be judged merely by the number of companies which those Acts called into existence. Many of them were dishonest in their inception, and many more unsound, and we have the striking facts that, of the 272 companies formed between those dates, twenty-nine only survived in 1880, while of the 105 companies formed between 1824 and 1843 thirty-eight had then ceased to exist, and of the thirty-nine companies formed before 1824, ail but one survives. It was evident that some control over the formation of life insurance companies and the conduct of their business was absolutely necessary. A committee of the House of Commons had reported in favour of exceptional legislation with regard to such companies so long ago as 1853, and legislation of this character seemed to be justified by the nature of their business, and the large funds and important interests in their keeping. The legislation of 1870 was the result, and even now the control exercised by the State is less strict in England than in many other countries. In America where life insurance of late years, since the Civil War, has developed so extensively that even England is now outstripped, the laws on this subject are especially stringent, at least in most of the States, for life insurance not being considered a matter of commerce which is controlled by the national government is regu- lated by the legislatures of the separate states. Strict limitations are placed upon the mode of investment of the funds of companies, and there is in each state a super* intendent of insurances who has to value all life companies from time to time by the legal standard, the tables and rates differing in the various states, but most states adopt- ing the nett premium method, and it is his duty at once to wind up any company which cannot stand this test. STATE CONTROL. 17 In New York and some other states forfeiture by non-pay- ment of premiums is not allowed, and the surrender value of policies and the grant of paid-up policies to an amount corresponding to the premiums paid is regulated by law, provisions which are considered by many an encourage- ment to the healthy lives to retire, which is dangerous to the stability of companies. In France life insurance companies require special authorization from, and are subject to special supervision by, the Government. This authorization is revocable, and is only given after the code by which the company is to be governed has been submitted to and approved by the Council of State, to which any modification of the code must be similarly submitted for approval ; companies must send in statements of their position every six months, and they must pay the expenses of the Government super- vision, not exceeding a certain sum (a). Foreign companies carrying on business in France are subject to these laws, but a general authorization of all companies properly constituted according to the laws of their own state may be obtained under a law of 1857, and has been obtained for English companies by virtue of the convention of April, 1862, between the English and French governments (b), so that, in point of fact, they escape from the control afforded by a special authorization and approval of the articles or other instrument by which they are governed, while the Government supervision to which they are nominally subject is not actually exercised, and perhaps could not be exercised with any effect, A French company called The Lion, formed in 1880, even adopted the expedient of forming itself as an English (fi) Oouteau, ii. 16 et seq. ; Oouteau, ii. 63 et seq. (b) Printed in Buckley on the Companies Acts, p. 572. C 18 INTRODUCTION. company for the purpose of escaping from the delay and difficulty of obtaining a special authorization (a). The magnitude of the interests involved in the stability of life insurance companies and the security of life insurance contracts may be judged from the statistics of life insurance in this and other countries. In France there are twenty companies assuring £80,000,000, in Germany there are fifty companies assuring £100,000,000, while in America, in the State of New York alone, there are thirty companies assuring £295,000,000, and, finally, in England, where in the year 1853 the total amount assured was £150,000,000, at annual premiums amounting to £5,000,000, there are at the present date 107 companies furnishing returns to the Board of Trade, and assuring £425,000,000, and 10^ millions were paid in losses during the past year (6). (a) Couteau, ii. 73. (i) White's Insurance Register, 1882. DEFINITIONS. 19 PART I. CHAPTER I. . THE CONTKACT. Definitions — Capacity of Parties — The Insurable Interest — The Form of the Contract— The Proposal and Declaration— The Policy — The Conditions; IlfSUfiANCE in general has been variously defined : Definitions " Assecuratio est conventio de rebus tuto aliunde trans- insurance in generaL ferendis, pro certo premioj seu est aversio periculi vel contractus indemnitatis pro certo pretio :" Stypmannus, Part ir. cap. 7, n. 262. " Assecuratio est contractus quo quis alienae rei peri- culum in se suscepit obligando se sub certo pretio ad eum compensandum si ilia perierit :" Boccus, p. 144, n. 1; A contract whereby one party in consideration of a stipulated sum, undertakes to indemnify the other against certain perils or risks to which he is exposed, or against the happening of some event: Marshall on Marine Insurance, p. 1. The essence of such contracts and the leading idea of definitions of them is that they are contracts of indemnity to which insurances upon lives, though so construed for many years in accordance with the supposed analogy of marine and fire insurance, have at length been con- clusively decided to bear no resemblance {infra, p. 26). c 2 20 THE LAW OF LIFE INSURANCE. Definitions applicable to marine or fire insurance will consequently be inapplicable to insurances upon lives, and analogies drawn from the law relating to insurances of the former class must be applied with caution to those of the latter. Contract Insurance upon life has been defined as " a contract of life ,,,,.„ .J insurance, whereby the underwriter for a certain sum proportioned to the age, health, profession, or other circumstances of that person whose life is the object of insurance, engages that the person shall not die within the period limited in the policy, or if he do, that he will pay a sum of money to him in whose favour the policy was granted :" Park on Insurance, 8th ed. ii. 905. " A contract in which one party agrees to pay a given sum upon the happening of a particular event contingent upon the duration of human life in consideration of the immediate payment of a smaller sum or certain periodical payments by another :" Bunyon, Life Insurance, p. 1. " The contract commonly called life assurance is, when properly considered, a mere contract to pay a certain sum of money on the death of a person, in consideration of the due payment of a certain annuity for his life ; the amount of the annuity being calculated in the first instance according to the probable duration of the life, and when once fixed it is constant and invariable :" per. Parke, B., Dalby v. India and London Life Assurance Co. (15 C. B. p. 887). " A life policy is simply a contract that in consideration of a certain annual payment the company will pay at a future time a fixed sum calculated by them with reference to the value of the premiums which are to be paid in order to purchase the postponed payment : per Wood, V.C., Law V. London Indisputable Life Policy Co. (IK. & J. 223). DEFINITIONS. 21 " It is a purchase of a reversionary sum in consideratioa of a present payment of money, or, as is generally the case, on the payment of an annuity during the life of the person insuring :" jper Jessel, M E., Fryer v. Morland (3 Oh. D. p. 685). " It is a contract by which the insured is under no obligation to pay the premiums, and the company is under no obligation to continue its business, but by \yhich the company undertake that if the person will pay the fixed premiums from year to year, the funds of the company for the time being, including the unpaid capital, shall be answerable in proper order to pay the sum insured on the falling of the life, and on proper proof of that event being given to the company:" per Lord Cairns, Lancaster's Case (Alb. Arb. Eeilly, p. 89). " A policy of insurance is not exactly a new contract every year, but is a contract made once for all with a condition to be performed de anno in annum, and if the condition is not perforn^d in any year the contract is at an end : " per Hatherley, L.O., Anchor Assurance Company (5 Oh. p. 688). The above definitioi^s sufficiently indicate the general Parties. nature of the contract. The parties to the contract are the person granting the insurance, who is called the insurer, and the person effecting it, who is called the insured. The constitution and capacity to contract of insurance companies, by whom the granting of insurance upon lives is in practice entirely carried on, will be con- sidered hereafter (see infra, Pt. II.). ■ ' The general incapacity of infants, married women, and lunatics to contract extends of course to contracts of life insurance. But by the Married Women's Property Act, 1870, s. 10 : " A married woman may effect a policy of 22 THE LAW OF LIFE INSURANCE. insurance on her own life or on the life of her husband for her separate use, and the same and all benefit thereof if expressed on the face of it to be so effected (a) shall enure accordingly, and the contract in such a policy shall be as valid as if made with an unmarried woman," and these provisions are extended to Scotland by the Act of 43 & 44 Vict. 0. 26, s. 1 (J). Beside| general capacity to contract, it is essential that the person effecting the insurance should have an insurable interest in the life assured. w^ager At common law wagers and wager policies not obnoxious iT'aTat ^^ public policy were all legal : Cousin v. I^antes (3 Taunt. common 515), where the Court considered it to have been solemnly deterpiined in Ifucenct, v. Crawford (2 B. & P. 75), without even a difference of opinion among the judges, that wager policies or insurances without interest were lawful at common law, and that it was impossible to say that any wager not contrary to public policy was not a legal con- tract; see also British Commercial Co. v. Magee (1 Oooke ^ Alcock,- 182). Marine Policies of marine insurance, however, are contracts of interest or indemnity, and an interest was therefore prima facie no intoiest. essential, but it was held that this was a condition for the benefit of the insurers, and could be dispensed with by them by an express proviso that the contract was " inte- rest or no interest " (c). (a) In the unreported case of Ohlaen v. United Assurance Co., Coleridge, O.J., seems to have decided that a separate use policy was valid though not go expressed. Feb. 7 1 881. (b) The Married Women's Property Bill, now before Parliament, gives power to a married woman to effect a policy on her own life for the benefit of her husband, or her husband and children. (c) Interest or no interest policies did not gain a footing in this country till after the Eevolution of 1688, and were looked on with interest. THE INSURABLE INTEREST. 23 Interest or no interest or wager policies are now, how- prohibited ever, prohibited by statute, and made null and void, as to ^^ «'■''*"*«• insurances upon ships and goods and merchandise laden on board by 19 Greo. 2, c. 37 (1746), as to insurances upon lives or other events by 14 Geo. 3, c. 48 (1774), while wagers in general are made null and void and incapable of being enforced, though not prohibited or rendered illegal by 8 & 9 Vict. c. 109, s. 18. The Act of 14 G-eo. 3, c. 48, after stating in the preamble i4 Geo. 3, that " it hath been found by experience that the making ^he insur- insurances upon lives and other events wherein the assured ?^]^ shall have no interest hath introduced a mischievous kind of gaming," enacts that " no insurance shall be made by any person or persons, bodies politic or corporate on the life or lives of any other person or persons or on any other event or eivents whatsoever, wherein the person for whose use, benefit, or on whose , account such policy or policies shall be made, shall have no interest or by way of gaming or wagering ; and that every assurance made contrary to the true intent and meaning hereof shall be null and void to all intents and purposes." The 2nd section provides that " it shall not be lawful to make any policy or policies on the life or lives of any person or persons without inserting in such policy or policies the person or persons' name or names interested therein, or for whose benefit or on whose account such policy is so made or underwrote." By s. 3 " In all cases where the insured hath interest in such life or lives, event or events, no greater sum shall great jealousy evea when they began to be supported. In the year 169;^ it is treated as settled law that such policies were invalid : Ooddard v. Garrett, 2 Vern. 269 ; Park on Marine Insurance, 8th ed. p. 552. pecuniary. 24 THE LAW OF LIFE INSURANCE. be recovered or received from the insurer or insurers than the amount or value of the interest of the insured in such life or lives or other event or events." By the 4th section marine insurances are excepted from the operation of the Act. Must be It has been decided on this statute that the insurable interest required by the statute must be a pecuniary one, and that accordingly a father, as such, has no interest in the life of his son : Ealford v. Kymer (10 B, & C. 724) ; see Worthington v. Curtis (1 Ch. D. 419). Every person is presumed, however, to have an interest in his own life, and in every part of it, and to any amount : Wairvwright V. Bland (1 M. & Rob. 488), and a wife is presumed to have an interest in the life of her husband : BeeA v. Boyal Exchcmge Company (Peake, Add. Oases, 70). An executor has, in respect of his interest in the assets of the testator, a sufiScient insurable interest in the life of a grantor of an annuity to his testator: Tidswell v. Anherstein (Peake, 204), and see Gamer v. Moore (3 Drew. 277) ; and both the trustee and the cestm que trust have an insurable interest in the trust property : Ex parte Houghton (17 Ves. 253) ; the dictum to the contrary in Ex parte Andrews (1 Mad. 575) cannot be supported. A creditor has an insurable interest in the life of his debtor : Anderson v, Edie (Park on Insurance, 8th ed. 915), unless the debt is illegal, e.g., a promissory note given for gaming losses: Dwyer v. Edie (Park, 914); so has a surety in the life of his principal : Lea v. Rinton (5 D. M. & G. 823) ; and one of two joint obligors of a bond has an insurable interest in the life of the other to the extent of half the amount secured by the bond : Branford v. Saunders (25 W. R. 650). A bare promise creating no legal obligation that the TEE INSURABLE INTEREST. 25 creditor will not, during his life, enforce the debt, does not give the debtor an insurable interest in his creditor's life : Hehdon v. West (3 B. & S. 579) ; but a binding pro- mise to pay the debts of another within five years, gives the promisee an insurable interest in the life of the pro- miser during the term : Lindenau v. Deshorough (3 0. & P. 353). A contract to employ a person as a clerk at a salary for a term, has been held to give the clerk an insurable interest in the life of the employer up to the amount of the salary, for so much of the term as was unexpired at the date of effecting the insurance : Hebdon v. West (ubi swpra) ; and an assignment by the husband and wife of the wife's chose in action as security for the husband's debt, gives the creditor an insurable interest in the life of the wife : Henson v. Elachwell (4 Ha. 434). A contract for a loan gives the lender an insurable interest in the life of the borrower, though its completion is prevented by the borrower's death : Martin v. West of England Insurance Co. (4 Jur. (N.S.) 158). The interpretation of the statute has been much more liberal in America, where the doctrine appears to be that | an insurable interest exists wherever there is a reasonable probability that the insured will gain by the existence of the life or lose by its dropping. It must be noted that the statute, having been passed about the time of the commencement of the Eevolution, was not universally adopted, but insurances without interest are, in almost all the states, considered void as agaiast public policy, even if not prohibited by local statutes. It has been there held that a parent has an insurable interest in the life of his child, and vice versa, and a brother in the life of his sister " upon considerations of strong morals and force of natural 26 TEE LAW OF LIFE INSUBANOE. affection between near kindred operating often more efficaciously than those of positive law :" Loomis v. Eagle Co. (6 Gray, 399) ; Mtna Co. v. France (Otto E., U. S. 4, 561) (a). An insurance effected by a man on his own life and in his own name, but actually effected with the money and intended for the benefit of another, is a fraudulent evasion of the statute and is void under s. 1, and also, as it seemss, under s. 2, as the name of the person really interested in the policy does not appear on its face : Waiwuoright v. Bland (1 Moo. & R. 481) ; Shilling v. Accidental Death Insurance Co. (1 F. & F. 116, and 2 H. & N. 42). The name of the person interested must be inserted as such in all policies on the life of another : Hodson v. Observer Assurance Co. (8 Ell. & Bl. 40) ; and of all the persons, interested : Evans v. Eignold (4 Q. B. 622). In the latter case the husband was primarily, and the wife ultimately, interested in the policy, which was in the wife's name, and it was accordingly held void, as not containing the names of all the persons interested. A policy granted to one person in trust for another, where both names appear, is good : Collett v. Morrison (9 Ha. 162) ; and so is a policy in the name of the trustee alone ; and where a wrong name appears by mistake, the policy will be rectified : Martin v. West ofEnglamd Insurance Co. (4 Jur. N. S. 158). Need not lu the well known case of Godsall v. Boldero (9 East, in ™for°"' ^^)» ^° action against the Pelican Life Insurance Com- life insur- pany ou a policy effected on the life of Mr. Pitt by one of ance is not ^ -i ^ •> a contract ^^^ j^ Holland and Belgium an Interest is necessary, but the consent pity. or even the knowledge of the life is immaterial. In France and Prussia no insurable interest is required, but in the latter country, with some few exceptions, no man can insure the life of another without his consent. In practice the consent of the life is everywhere required, since a medical examination is insisted on. LIFE INSURANCE NOT AN INDEMNITY. 27 his creditors, who had an insurable interest at the time of effecting the policy, but had been subsequently paid in full, the question arose whether the interest required by the statute should be a continuing one, and Lord Ellen- borough held that life insurance, like every other insur- ance valid in law, was essentially a contract of indemnity, and that, no damage having been sustained, the plaintiffs had no subsisting cause of action. This case was decided in the year 1806, and was treated as law down to the year 1854, when it was overruled by the unanimous decision of six judges in the Exchequer Chamber in the case of Dalhy v. The India and London Life Assurance Oo. (15 C, B. 365), that the contract of life insurance was what it purported to be, merely a con- tract to pay a given sum at death, and had nothing in common with a contract of indemnity, which marine and fire insurances purported to be, and undoubtedly were, the premiums on the one side and the sum payable on the other being fixed and invariable. Such a contract was held to be valid at common law, and the effect of the statute was only to limit the sum recoverable to the amount of the interest at the time of effecting the insurance. But the insured can recover no more whether upon one policy or many, and accordingly, where several policies had been effected, payment on one up to the amount of the insurable interest was held a bar to an action on another : Hebdon v. West (3 B. & S, 579) ; and the amount of the interest is estimated by the loss which the happen- ing of the event insured against would involve, not according to the chances of its occurrence : Law v. London Indisputable Go. (1 K. & J. 223). The decision in Qodsall v. Boldero remained unchal- 28 THE LAW OF LIFE INSURANCE. lenged so long because it was disregarded in practi'^e and never acted upon by the insurance offices. In Barber v. Morris (1 Moo. & Rob. 62) it was shewn to be the prac- tice of the same office (the Pelican) which resisted pay- ment in Oodsdll v. Boldero, to pay ia all cases without inquiring into the existence of an insurable interest, and evidence was given to the effect that after that decision their business suffered so severely that they changed their practice, and the Court accordingly, upon this evidence, refused to set aside the sale of a policy, the interest in which had ceased, on the ground of fraudulent concealment of the fact by the vendor. The case con- sequently seldom came before the Courts, except inci- dentally and where it was immaterial to discuss it, and was then rather acquiesced in than approved of : Barber V. Morris (1 Moo. & Kob. 62) ; Senson v. Blaehwell (4 Ha. 434). An attempt was made in the case of Law v. London Indisputable Life Policy Co. (1 Kay & J. 223), in the following year, to distinguish the policy in that case, which was for a term only, from the policy in Dolby v. India and London Life Assurance Co., which was for life, and it was laid down by Page Wood, V.C, that the insur- able interest required is an interest existing at the time of effecting the policy co-extensive with the amount insured, and that the insured can recover that full amount, though the interest has terminated. The converse of the doctrine of Godsall v. Boldero, viz., that payment by the insurer defeated the right of the creditor to recover from the debtor was never held : Clark V. Hundred of Blyihing (2 B. & C. 254); Yates v. Whyte (4 Bing. N. C. 272) ; and see Bradburn v. Great Western Baihvay (L. R. 10 Ex. 1), a case of an accident policy. In INTEREST NOT CONTINUING. 29 Ex parte Andreivs (1 Madd. 573) the creditor to whom a life interest had been assigned upon trust for payment of the debt, and who had insured the life and received the insurance moneys, was not allowed to prove for his whole debt, on the ground that it would be a case of a trustee taking advantage of his trust. The statute only applies to the original parties to the statute contract, not to assignees, who need not have any interest bet'ween in the life, or even have paid any consideration : Ashley °^^f^^f V. Ashley (3 Sim. 149). only ; The statute is a defence to the insurers only, and if and is they pay in their own wrong on a void policy, the title to to insurer the money is determined as if the statute did not exist : ''^^^' Worthington v. Curtis (1 Ch. D. 419), see also Benson v. Blachwell (4 Hare, 434); Freme v. Brade (2 De G. & J. 682). In the former case the moneys received on a policy effected on the life and in the name of the son by and for the benefit of the father, were claimed by the cre- ditors of the son in an administration action against the father as his son's administrator, and the claim was dis- allowed by the Court of Appeal, on the above ground, and also on the ground that, even if this were not so, in an illegal transaction the maxim melior est conditio possi- dentis must apply. It is presumed, however, that insurers paying in ignorance of the want of interest, might recover, the above maxim being inapplicable and the transaction amounting to fraud. It appears doubtiul whether an action for the delivery up of a policy on the ground of want of interest is not demurrable ; it certainly is,' unless it contains an offer to repay premiums : Desborough v. Curlewis (3 Y. & C. 175). By 29 & 30 Vict. c. 42, the provisions of the Act of 30 THE LAW OF LIFE INSURANCE. 14 Geo. 3, c. 48, were for the first time extended to Ireland, where it had been previously held by the Ex- chequer Chamber that the Act was not declaratory, and that wageriDg policies on lives were good at common law, even though not expressly declared to be interest or no interest: British Insurance Co. v. Magee (1 Cooke & Alcock, 182). To what Though the title of the Act extends only to insurances wagers or upon Kves, the words of the preamble and the enacting Act clauses are extremely sweeping, and include policies on extends Meaning of ^'^®^ °'' ^^ ^^1 ot^^r event or events whatsoever, wherein " policy." t]ie persons secured have no interest, or by way of gaming or wagering, so that at first sight it would appear that taking the word " policy " to mean a promise and not ne- cessarily a written one per Lord Mansfield in Foster v. ThacJceray (cited in Good v. Elliott (3 T. E. p. 702)), all idle wagers, i.e, wagers made on events in which the parties have no interest, are prohibited by it, and this was the view of BuUer, J., in the case of Good v. Elliott (3 T. E. 693), where the majority of the Court held otherwise (a). The first case after the statute was Boebuch v. Hamer~ ton (Cowp. 737), where a wager on the sex of the Chevalier d'Eon was held bad under the statute, Lord Mansfield observing that it was called a policy, indorsed as a policy, and opened as a policy. In Good v. Elliott a wager that A. had bought a waggon of B. was held good at common law and not prohibited by the statute (BuUer, J., dissenting) ; Mr. Justice Grose considered the (a) The word " policy," however, means a written document, and is derived through the hase Latin from polyptychum (multas plicas hdbens), a register : see Littr6 under the word "police," Ducange under the word "polyptychum." WAGERS. 31 meaning of the statute to be that all insurances on lives or on any events wherein the insured had no interest should be void, whether effected in the form of a policy or by way of gaming or wagering, while Lord Kenyon was of opinion that the Act related wholly to policies, and contemplated written instruments, since the names of the persons interested were directed to be inserted. It must be observed that the subject of the wager in both these cases was not, strictly speaking, an event or the future issue of a transaction but an unascertained fact (a). Paterson v. Powell (9 Bing. 320) was the case of a con- tract in consideration of 40 guineas to pay 100 guineas if Brazilian shares were done at a certain price after a certain date ; the wager was in the form of a policy and was held within the statute, and the Chief Justice observed that the Act applied to events ia which the party insuring had no interest, not merely to cases where there was a subject-matter of insurance exposed to peril. In Morgan v. Pebrer (3 Bing. N. S. 457), a wager as to the price of foreign stocks was held good at common law, and the Court expressed a strong opinion that the statute only applied where a wager assumed the form of a policy of insurance. The circumstances of the case, however, appeared to shew that the insured were interested in the event, nor was there any statement that the bargain was in writing. In Good v. Elliott the wager was not in writing, in both Boebuch v. Hamerton and Paterson v. Powell it was. Upon the whole, it may be safely concluded that all written contracts in the form of policies of insurance are within (a) In Pugh v. Jenkins, 1 Q. B. (Ad. & Ell. N. S.) 631, a wager on a past unascertained fact (the result of the Derby after it had been run), was held not within 9 Anne, c. 14. 32 THE LAW OF LIFE INSURANCE. the Act, and it is highly probable that unwritten contracts relating to matters which are ordinarily the subject of in- surance are equally within the statute, the opinion of Grose, J., in Good v. Elliott, where he points out that the Act aimed at two forms of insurances, those in the form of a policy and ■those by way of gaming or wagering, supports this latter view (2 Smith, L. C, 8th ed. p. 295), and such contracts would probably be invalidated on general principles as fraudulent evasions of the statute. 8 & 9 Vict. Since the Act of 8 & 9 Vict. c. 109, s. 18, which enacts that all contracts or agreements, whether by parol or in writing, by way of gaming or wagering, shall be null and void, and that no action shall be brought upon them, these questions are unlikely to arise, they are still how- ever of some importance, as wagers within the Act of Geo. 3 aie illegal, those within the Act of Victoria are merely invalid, and the ordinary presumption that the holder of a negotiable instrument is a holder for value applies to bills or notes given for money due on an invalid contract, that is for no consideration at all, while in the case of bills or notes given for money due on an illegal contract, that is for an illegal consideration, this presump- tion is excluded : Fitch v. Jones (5 E. & B. 238). The policy. Contracts of life insurance are in practice always entered writo^'is ^^^^ ^y ^^ instrument in writing called a policy, and by necessary, the Stamp Act, 1870, a penalty is imposed on any person receiving or taking credit for any premium or considera- tion for any contract of insurance who does not within one month make out and execute a duly stamped policy (see infra, p. 44). Moreover, the Act of Geo 3 provides that no policy shall be made without inserting therein the names of the persons interested. But it does not appear that a contract of life insurance not reduced to Writing THE POLIOT. 33 would be invalid (a) unless it would come within the Statute of Frauds as a contract not performable within the year, but the current of authority is against holding contracts dependent on the duration of life as within the statute : Mey v. Positive Assurance Go. (1 Ex. D. 20) ; Davey v. Shannon (4 Ex. D. 80) ; and, moreover, the con- tract is executed on the side of the insured : Bonellan v. Mead (3 B. & Ad. 899), and see notes to Peter v. Compton (1 Sm. L. C. 851). Such contracts are obviously within the mischief aimed at by the statute, for it is not that their performance may by accident or circumstances be postponed beyond the year, but that they are not intended to be performed within the year unless the insured die within the year or decline to continue the insurance. The policy is sometimes a mere contract in writing and sometimes under seal. It is executed by the insurers only, but the insured is equally bound by its provisions, for it cannot be said that he inay accept and adopt the contract, though he has not put his hand to' it, and then reject some of its terms: Macdonald v. Law Union Co. (9 Q. B. p. 330). " It should be framed so that he who runs may read. It ought to be framed with such deliberate care that no form of expression, by which on the one hand the party assured can be caught, or by which on the other the com- pany can be cheated, shall be found upon the face of it ; nothing ought to be wanting in it, the absence of which may lead to such results :" per Lord St. Leonards in Anderson v. Fitzgerald (4 H. L. 0. p. 510). Since, however, it is prepared and executed by the in- Prepared surers alone, and not even seen beforehand by the insured, construed (a) See 30 & 31 Vict. c. 23, s. 7. No contract for sea insurance shall be valid unless the same is expressed in a policy. D against the insurers. 34 THE LAW OF LIFE INSURANCE. Policies of insurance are to be construed by the same rules as other in- struments. it will be construed strictly against the insurers, who had it in their power to protect themselves by proper provi- sions, according to the maxim, Verba chartarum fortius accijaiuntur contra proferentem: Notman v. Anchor Co. (4 Jur. (N.S.) 712) ; Anderson v. Fitzgerald (4 H. L. C. p. 507) ; Fowkes v. Manchester, &c., Co. (3 B. & S. p. 917) ; Borradaile v. Hunter (5 M & G. 639). It has been said that the contract of insurance is founded on broad equitable principles (Park on Marine Insurance, p. 3) ; that it is to be construed according to the intention, and not according to the strict literal meaning : that it is to be construed largely for the benefit of the insured, or for the benefit of trade : Ihid. p. 46 ; Tierney v. Ether- ington, cited in Felly v. Boyal Exchange Co. (1 Burr. 348). Notwithstanding these and similar expressions which might lead to a contrary conclusion, the case of Robertson V. French (4 East, 130), is an express authority that con- tracts of insurance are governed by the same rules of construction as all other contracts. In that case, which was one of marine insurance, but the principle of which applies it is conceived equally to contracts of life insur- ance, Lord EUenborough said: "In the course of the argument it seems to have been assumed that some pecu- liar rules of construction apply to the terms of a policy of insurance which are not equally applicable to the terms of other instruments and in all other cases. It is, there- fore, proper to state on this head that the same rule of construction which applies to all other instruments applies equally to this instrument of a policy of insurance, viz., that it is to be construed according to its sense and mean- ing as collected in the first place from the terms used in it, which terms are themselves to be understood in their plain, ordinary, and popular sense, unless they have gene- ITS CONSTRUCTION. 35 rally in respect to the subject-matter, as by the known usage of trade or the like, acquired a peculiar sense, dis- tinct from the popular sense of the same words, or unless the context evidently points out that they must in the particular instance and in order to effectuate the imme- diate intention of the parties to that contract be under- stood in some other special and peculiar sense." The first step towards effecting an insurance is for the The pro- person intending to effect it to iill in a form of proposal containing a number of searching questions as to his age, health, mode of life and habits, and to sign a declaration varying in form in the different companies, but generally to the effect that the answers are true, and that the declaration shall be the basis of the contract, and that any untrue statement, omission, or suppression shall avoid it ; and frequently providing in addition that the premiums paid shall in such a case be forfeited to the company. The declaration is generally incorporated in the policy The decla- by reference, but whether this is so or not, when in this form it must be construed with the policy, and together they form the contract : FowJces v. Manchester, &c., Co. (3 B. & S. 917, 927). A declaration of this kind makes truth a condition Its strin- gency. precedent to liability, and any mis-statement, innocent or not, material or not, avoids the policy : Anderson v. Fitz- gerald (4 H. L. 0. pp. 502, 509). The greatest caution should therefore be exercised in filling up the proposal, and in the absence of specific knowledge the declarant should speak as to his belief only ; this will be particularly necessary where the insurance is on the life of another, and the facts are consequently not within the declarant's own knowledge. Where the insurance is on his own life mis- statements of material facts will in general be fraudulent. D 2 36 THE LAW OF LIFE INSURANCE. The effect of conditions of this kind and of innocent misrepresentation or suppression, in the absence of special provisions, will be more fully considered hereafter (see infra, p. 124 et seq.) Observa- The diflSculty,:of course, is to reconcile the conflicting Lord St. objects of due security to the insured and proper protec- ^^erfm^ tiou to the insurerts, and the remarks of Lord St, Leonards V. Fiti- on this point in Anderson v. Fitzgerald (4 H, L. 0. p. 507) are well worthy of attention. " The Courts of law observing how often such companies have been subjected to frauds, have advised them to pro- tect themselves by a sufiBcient provision against the com- mission of fraud, and that has led to such stringent provisions as those which we find in this case, provisions which, I am boimd to say, unless they are fully explained to the parties, will lead a vast number of persons to sup- pose that they have made a provision for their families by an insurance on their lives, and by payment of perhaps a very considerable portion of their income, when in point of fact, from the very commencement, the policy was not worth tbe paper it was written on. " In some cases, and it is so in the present, the companies take care to go beyond the law, and to protect themselves by a stipulation that a statement which is not a warranty but a representation, if made contrary to the fact, shall avoid the policy. At law, if that statement, though un- true, was not untrue to the knowledge of the party making it, the assured is entitled to recover the sums which he has paid. So that, although provision for the family is not obtained, yet there is no actual damage to the fortune of the man. He is disappointed in his object, but the money which he has accumulated and paid for the insur- ance is repaid to the family. This company, however, has STRINGENT PROVISIONS. 37 taken care that no such consequence shall ensue, but provides that if any statement within the contract has not been truly made the man's family shall not only lose the beaefit of the policy, but shall not be able to recover a single shilling of the premiums paid however numerous they may have been." .... " If it is an impertinent or irrelevant question, how likely it is that the assured, the man who is bargaining for his policy, will have his prudence and caution lulled asleep, and will not be so alive to the duty of answering truly as he would be, meaning to act honestly in regard to matters which he could not help feeling were essentially necessary to be answered in order to enable the company to form a judgment on the subject. " I think that your Lordships and every Court of justice should endeavour to give such a construction to a poliey of this nature as will afford a fair security to the person with whom the policy is made, that, upon the ordinary construction of language, he is safe in the policy which he has accepted. I am quite sure if policies of this nature are to be entered into, and such doubts are to be raised as have been raised in this case, that that very important branch of insurance, life insurance, will become very dis- tasteful to people, and that no prudent man will effect a policy of insurance with any company without having an attorney at his elbow to tell him what the true con- struction of the document is." It may be observed however that the harshness and apparent injustice of stringent conditions of this kind is mitigated in practice by the custom of the leading insur- ance companies, who, acting on considerations of self- interest as well as of justice, seldom insist on the letter of their bond except in cases of suspected fraud, but either 38 THE LAW OF LIFE INSURANCE. return the premiums or pay the policy money with an abatement equivalent to the increased premiums which would have been payable had the true state of the facts been known. indisput- Some companies preclude all questions of this kind, and policies. invite business by issuing policies which are indisputable except on the ground of fraud. Such policies would, of course, be disputable on the ground of illegality. The issue of prospectuses stating that policies are indisputable except for fraud may control the declaration, and be taken advantage of by the insured : Wood v. Dwarris (11 Exch. 493) ; Wheelton v. Eardisty (8 El. & Bl. 262, 276). Construe- On the construction of the questions contained in the proposal, pioposal, it has been held that "disorder tending to shorten life," means a disorder which generally has that tendency, not any disorder of which the assured may after- wards happen to die : Watson v. Mainwa/ring (4 Taunt. 763). " AfHicted with or subject to fits," means habitually or constitutionally afflicted with fits, liable to fits from some peculiarity of temperament natural or contracted, not that the insured never had a fit : Chatiock v. Shaw (1 Ma & R. 498). Painting fits are not deemed fits by the faculty so as to be within the words " epileptic or other fits " : Shilling v. Accidental Death Co. (1 F. & F. 116). . " Afflicted with gout," means sensibly afflicted with gout, not that the assured has had symptoms which to an expe- rienced medical man indicated gout in the system : Fowkes V. Manchester, <&e., Co. (3 F. & F. 440). - " Spitting of blood " means a spitting of blood as a symptom of a disease tending to shorten life, and does not include spitting of blood from an ulcerated throat or accidental cause : Geach v. Ingall (14 M. & W. 95). TEE PROPOSAL. 39 In that case the statement was that the insured was not afflicted with any disorder tending to shorten life, and had not had spitting of blood, cough, or other affection of the lungs, and the judge having left it to the jury whether the insured had had such a spitting of blood, and such an affection or cough as would have a tendency to shorten life, it was held a misdirection. The question is designed to secure the company against the existence of such a disorder in the frame, and the insured was bound to have stated the fact that company might inquire whether it was the result of the disease called spitting of blood. A warranty that the life is a good one means that the general state of health is good, not that there are no seeds of disorder in the system, and concealment is less material in a policy thus warranted, for the insured takes the onus of proving general good health : Boss v. Brad- shaw (1 W. Bl. 312). A reference is also required to an intimate friend and Reference to the usual or ordinary medical attendant of the life to an inti- assured, of whom inquiries as to the life may be made. Jl^?^\ ^^^ This is designed to extract who is the medical attendant ^^^ ^^"^^ _ _ medical best able to give an account of the constitution of the attendant. assured at the time, and if there is no usual medical at- tendant the assured must mention the name of a medical attendant who can give such information:. Buckman v. Fernie (3 M. & W. 505, 518), where the insured, who had been married less than a year, gave the name of A., who was her husband's doctor, and had prescribed once or' perhaps twice for her for some trifling ailment as her usual medical attendant, instead of that of B., who had attended her for many years and down to her marriage, but had recently retired from practice, and it was held 40 THE LAW- OF LIFE INSURANCE. that it should have been left to the jury, not whether A. was her usual medical attendant, but whether he was her medical attendant at all. It is important, however, to the insurers to be placed in communication with the last medical attendant : Morrison v. Muspratt (4 Bing. 60) ; and the reference should be to a person who is, not to a person who has been, the medical attendant, even where he is a quack doctor : Everett v. Desborough (5 Bing. 503). In Sutton V. Waterloo, &c., Co. (1 F. & F. 735), a reference to one who was the family doctor, but had not been called in for some time, instead of to another doctor who had been recently attending the insured, was held to be an untrue representation, though iona fide. In Cazenove v. British, dtc., Co. (6 C. B, (N.S.) 437), the insured was asked as to any illnesses he had had, and the reference required was to the usual and last medical attendant, that given was to a medical man who had attended the insured in a recent illness which he mentioned, but no mention was made of a subsequent relapse when his life was in great danger, nor of three other doctors who then attended him, and the statements were held to be untrue, and the policy void under a condition to that effect, on the prin- ciple of Anderson v. Fitzgerald (4 H. L, C. 481), though the jury had found that no material information had been withheld. The circumstance whether the life has been accepted or declined elsewhere is most material, and is a thing on which insurance companies place great reliance : Anderson V. Fitzgerald (4 ,H. L. 0. p. 514) ; London Assurance v. Hansel (11 Ch'D. 370). In this last case and in the case of Fowkes V. Manchester, dtc, Co. (8 F. & F. 440), the policy was vitiated by untrue answers to this question. See also Ex parte Daintree (18 W. K. 396). THE REFEREES. 41 It was at one time considered that where a policy The Ufe is is effected on the life of another the life is the agent .""theme'dT- of the asured, and that the knowledge of the life was ''*'' °'' the knowledge of the assured, who was responsible for referee the false statements made by the life ; and this point was ex- afsmed. pressly decided in Maynard v. Bhodes (5 D. & E. 266), and Everett v. Beshorough (5 Bing. 503). In Huohman v. Fernie (3 M. & W. 503), the doctrine was limited by hold- ing that the life was not the general agent of the assured to effect the policy, but merely to answer questions, and that the assured, therefore, was not responsible for false statements made by the life not in answer to questions. The case of Wheelton v. Hardisty (8 El. & Bl. 262) has, however, now decisively settled that the life is not the agent of the insured to effect the insurance. He is merely a person to whom the insurers are referred for information, and is as much their agent as the agent of the insured. The same reasoning applies to the medical and general referees, and false statements by them, if not collusive and in the absence of a condition that any untrue state- ments shall avoid, will not affect the contract (a), A medical examination of the life by one of the com- Medical pany's doctors is also necessary, and, if satisfactory, the tfon™'°*" insured is informed that the risk is accepted, and will begin, as soon as the premium is paid. A valid policy must state the subject-matter of insur- Requisites ance, the risk, its beginning and ending, the name of the ° P"^"'?- person interested, the premium, the date of execution, and must be duly stamped. The existence of a subject-matter of insurance exposed Subject- matter (a) The medical referee cannot recover any fee for the information ^f P"^^'' *" unless there is some agreement: see Bimyon, p. 40, and County Court cases reported in the Appendix to his wort, p. 478. 42 THE LAW OF LIFE INSURANCE. to risk is ordinarily an implied condition of the contract, but this implication may be excluded by the words "lost or not lost," which are often inserted in marine policies. And such a policy is perfectly valid if the insured has an interest and both parties are in ignorance of the fact whether it exists or not, or even if the insurer or both the parties know that the subject-matter is lost : Bradford v. Symondsm (7 Q. B. D. 456, 462) ; Park, p 37. In such a case the fact that the subject-matter is no longer at risk does not destroy the insurable interest. Bradford v. Symondson (ubi supra), a case of a marine insurance policy, where the company reinsured a vessel which was supposed to be lost when she was in fact already safe in port, and their possible liability was held to give them an insurable interest. There seems no reason in principle why a life policy " lost or not lost," if so expressed, should not be equally valid, and in the Earl of March v. Pi^ott (5 Burr. 2803), a case of a bet, where Mr. Codrington and Mr. Pigott " ran " their fathers against each other, each betting that his father would survive the father of the other party, and Mr. Pigott's father was dead at the time, though neither party knew it, the plaintiff, who had taken Mr. Cod- rington's place, recovered the money, though there was nothing to shew that such a contingency was contem- plated ; (and see Pritehard v. Merchants Society (13 0. B. (N.S.) 612). In practice a medical examination is always required, and life policies of this kind are never entered into. Termina- The loss must occur during the continuance of the risk : Lochyer v. Offley (1 T. E. 252). " Suppose an insurance of a man's life for a year, and some short time before the tion of risk. TEE BISK. 43 expiration of the term he receives a mortal wound of which he dies after the year, the insurer would not be liable," per Willes, J., at p. 260. In Sir B. Howard's Case (1 Ld. Kaym. 480), the policy was for one year from the day of the date ; the policy was dated September 3rd, 1697, and Sir K. Howard died on September 3rd, 1698, at one in the morning, and it was held that the policy had not expired, since from the day of the date is exclusive, from the date is inclusive, and also because the insurers were bound to insure for a whole year, and the year would not expire till the end of the day, as the law makes no fraction of a day. In Pugh v. Duke of Leeds (Cowp. 714), however. Lord Mansfield held that from the date and from the day of the date mean the same thing, and are inclusive or exclusive according to the context and subject-matter. The words the " first and last days included " are sometimes inserted, but the usual form is " if the insured shall die at any time previous to, &c," and avoids all question. In all policies on the life of another the name of the person interested must be inserted as such (supra, p. 23). The date of the contract is highly necessary for the purpose of detecting fraud. The usual practice is for the insurers, on accepting the proposed insurance, to notify to the proposed that on payment of the premium he will be insured as from its receipt pending the preparation of a formal policy, which is then dated on the day of the receipt of the premium, and the acknowledgment of payment contains a statement to this effect. The contract is therefore always executed on the part of the insured, for it does not come into existence till the premium is paid. Though the receipt is unconditional, the insurers are 44 THE LAW OF LIFE INSURANCE. (entitled to every defence which would have been open to them had the policy been issued : Hancock v. Macnamara (I. K. 2 Eq. 487) ; and accordingly where, after payment of the first premium and issue of a receipt stating the life would be insured till a proper policy was issued, the company subsequently refused to issue a policy alleging that the declaration was false, an action by the repre- sentative of the insured claiming damages for the breach of contract was restrained at the suit of the company, since had the policy been issued the declaration would have been made the basis of the contract : Ibid. The acceptance of the risk constitutes an agreement to insure, and if the company refused to carry out the insurance damages would be recoverable if any had been sustained, e.g., if the life had deteriorated or become un- insurable, but it is difiBcult to see on what footing they should be assessed. A penalty is imposed for failing to make out a duly stamped policy within a month after receipt of the premium for insurance, or for making any payment upon a policy not duly stamped : 33 & 34 Vict. c. 97, ss. 117, 118, 119 (a). If issued since the Act of 1867 the policy must state the principal place of business of the insurers where notices of dealings with policies may be sent: 30 & 31 Vict. c. 144, s. 4. Contract The leading insurance companies are established on the of thTfunds principle of unlimited liability, and, indeed, previous to the year 1862 insurance companies were unable to obtain tbe privilege of limited liability, except in virtue of a special Act or under letters patent, and the policy accord- (a) See Appendix, p. 300. charge. PAYMENT OUT OF FUNDS. 45 ingly generally takes the form of an engagement to pay out of the funds of the company. The operatiye part of the policy declares that the capital stock and funds of the company shall be subject and liable to pay the amount insured, and is followed by a proviso that the funds of the company shall alone be answerable, and no proprietor or shareholder shall be liable for the amount insured beyond the sum unpaid on his shares. The effect of these and similar provisions has been the creates no subject of much discussion in the Courts, both of common law and of equity. At one time it was supposed that they created a charge on the property of the company in favour of policy-holders : Law v. London Indisputable, &c. Co. (1 K. & J. 223) ; Re Athenseum Society, Ex parte 'Prince of Wales, &c., Society (Joh. 633); Evans v. Coventry (8 D. M. & Gr. 835). It is now, however, clearly settled that such a form of policy creates no lien or charge on the property of the company, and that consequently policy- holders have no priority over general creditors or inter se : State Fire Insurance Go. (1 De G. J. & S. 634), where Lord Justice Turner observed, that the reason for the introduction of this wording was the state of the law, by which every shareholder would be liable on all the con- tracts of his company, and it was introduced to limit the legal liability and not to create a charge; a contrary construction would lead to the greatest inconvenience, since every claim might be the foundation of a suit in equity. The learned judge commented on the three last- mentioned cases, remarking that the word "charge" was undoubtedly unguardedly used in those cases, both by the Vice-Chancellor Sir W. Page Wood and himself. 46 THE LAW OF LIFE INSURANCE. It does It does not amount to a covenant to carry on the equitable business and keep the funds available, at least it will not right to an support an action for damages at law by the holder of a injunction '■ '^ '^ •' to prevent current policy : King v. Aeeumulative Life Assurcunce Co. TirQgtp or breach of (3 p. B. (N.S.) 151). But the insured has a right against trust. ^i^g particular assets, and if malfeasance is threatened or feared a Court of equity can interfere in such cases to prevent waste or breach of trust, and appoint a receiver : State Fire Insurance (ubi sujpra) ; Law v. London, <&e. (uhi supra) ; Bobson v. MoCreight (6 W. E. 385) ; Be Aihenmum Society (Joh. 80) ; Kearns v. Leaf{l H. & M. 681), where a policy-holder was held entitled to an injunction restrain- ing the insurers from carrying out an amalgamation with a transfer of its funds to another company in a manner not warranted by its deed of settlement. Itintro- It introduces limited liability by contract, and the limHed ' shareholders cannot directly or indirectly be subjected to liability by g^jjy further or greater liability to the insured : Lethhridqe contract. j a j a y, Adams, Ex parte International Society (13 Eq. 547), either on the ground that the clause amounts to an implied engagement that the property should be duly applied, and that it has, in fact, been wasted and mis- applied : Be Athenmum Society (3 De Gr. & J. 660) ; or on the ground that the policy is not in accordance with and less favourable to the assured than the deed of settlement : Durham's Case (4 K. & J. 517 ; Lethlridge y. Adams (13 Eq. 547). If the policy is ultra vires, the assured cannot sue on it, if intra vires he cannot import into it from the deed provisions in his favour which it should have contained : Durham's Case (ubi supra). In Lethlridge v. Adams the directors had carried on business in contravention of the deed of settlement after more LIMITED LIABILITY BY CONTRACT. 47 than one-fourth of the capital had been lost, and it was held that even if this were a breach of trust for which the directors might be made responsible, it could not extend the liability of the shareholders. In a case where the proviso ran that the funds of the company after satisfying all insurances previously pay- able, and all other prior charges, should alone be liable for the sura insured, it was held that the words must be read " as all prior charges and policies previously payable if they are charges," and that the policy-holders had no priority inter se : Be International Society, Mclver's Claim (5 Ch. 424). Nor is a policy in this form within the provisions of the Mortmain Act (9 Geo. 2, c. 36), though the assets out of which it is payable consist in part of real estates : March v. Attorney-General (5 B. 433). The mention of the amount of the capital of the com- pany in the policy. Be Athenseum Society (3 De Gr. & J. 660) or in a prospectus, Evans v. Coventry (2 Jur. (N.S.) 557) is not a representation that it is all taken up. In the case of an incorporated company, a contract to pay out of its funds is as regards the company absolute : Sunderland Marine Co. v. Kearney (16 Q. B. (Ad. & El. JSr.S.) 925); LindJey, 4th ed. i. 378. As regards the members of the company, the funds of the company and the property of its members are easily distinguishable, and such a contract precludes the insured from any remedy at law against individual shareholders, even though there are funds available in the shape of uncalled capital, and accordingly in the case of a company registered under the Companies Act of 1844, it was held that a judgment creditor could not issue execution against individual share- holders under ss, 66 and 68 of that Act : Ealket v. Merchant 48 TEE LAW OF LIFE INSURANCE. Traders Association (13 Q. B. (Ad. & El. N.S.) 9P0) ; Hassel v. Merchant Traders Association (4 Excb. (W. H. & G.) 525) though in equity shareliolders will be com- pelled to pay up the amount unpaid on their shares : Talhofs Case (5 De G. & Sm. 386; Cope's Case (1 Sim. (N.S.) 54). A contract to pay out of the funds exonerates shareholders from personal liability, not from liability as members of the company to pay up their shares : Cope's Case {Ibid.) In the case of an unincorporated company, there can be. no remedy against individual shareholders if there are no funds iayailable ; if there are, it seems an action at law would now lie against individual shareholders to enforce contribution and the application of the funds: Hallet v. Bowdall (18 Q. B. 2) ; Lindley, 4th ed. i. 382, where an action against shareholders in such a company failed on the grounds that there was no joint contract, and see the remarks on this case in Mart's Case (1 Ch. D. p. 322) ; though the same result would be more easily attained by proceedings for a winding-up. The Statute of Limitations does not begin to run till there are assets in existence: Kensington Station Act (20 Eq. 197). The policy generally also contains a declaration that it is granted subject to the deed of settlement, articles of association, special Act, or other document forming the code of the company, and that if the signed declaration is untrue, or the conditions indorsed on the back of the policy are broken, the policy shall be void — thus making the truth of the declaration and the performance of the conditions a condition precedent to liability ; but the proposal and declaration, if made the basis of the con- tract, must be construed with the policy whether expressly THE CONDITIONS. 49 incorporated or not: Fowkes v. Manchester, &o., Co. (3 B. & S. 917, 927). The conditions provide that the policy shall be forfeited by non-payment of the premiums ; by suicide, death by duelling, or the hands of justice, except in the hands of third persons and to the extent of their hona fide interest therein ; or by doing certain specified acts likely materially to affect the risk, without the license of the company ; e.g. going out of Europe or within thirty degrees north or south latitude, serving as a soldier or sailor, or going within the limits of military operations. The first condition generally runs that if the premium The insured remains unpaid for a certain number of days after the own* risk date appointed for payment, which are called the days of during the grace, the policy will be avoided unless the insured (being grace, and alive and in good health) pay the premium together with from his a fine within a further period. cannot''be Under these and similar conditions the insured is at accepted. his own risk during the days of grace, the policy expires at the date when the renewal premium becomes due, and the condition operates as a personal license to the insured to restore the policy on simple payment during the days of grace, and on payment, with proof of good health during the further period : Tarleton v. Staniforth (5 T. E. 695) ; Want v. Blunt (12 East, 183) ; Simpson v. Acci- dental Death Insurance Co. (2 0. B. (N.S.) 257), where the condition was that the premium should be paid within twenty-one days from the time when first due, and that if paid within twenty-one days the policy should not be void, notwithstanding the happening of the event or events upon the happening whereof the sum insured by the policy should, according to the terms thereof, become payable, and it was held that the condition gave no right 50 TEE LAW OF LIFE INSURANCE. to the executors of the insured to tender the premium within the twenty-one days, and that, if tendered, the com- pany might refuse to accept it ; and see 3 C. B. (N.S.) 612. The general custom of companies in the case of the death of the insured during the days of grace before pay- ment of the premium is to pay the sum insured less the premium due, and the condition is sometimes so framed, or a memorandum to this effect indorsed on the policy. Payment to a country agent after the days of grace, even where he has been debited with the premium by the company, on the assumption that it had been paid, is no payment to the company : Aeey v. Fernie (3 M. & W. 151) ; Busteed v. Wed of England Co. (5 Ir, Ch. E. 553). The rule of the company in Acey v. Fernie was that the premium should be paid within fifteen days of the ap- pointed date, and that the agent should give notice, if it was not so paid, and that, if no notice was given, the agent would be debited with the amount. The premium which was due on the 15th of March was not paid till the 12th of April to the country agent, who gave a receipt for it. No notice of non-payment had been given to the company, and they had debited the agent with the amount. It was held that the mere debiting the agent with the premium could not be considered a payment to the company by the insured, and that, as the agent had no authority to contract for the company, his receipt of the money, and the entry against him were no evidence of a new contract between the company and the insured. Where two insurance companies were in the habit of re- insuring with each other, and the course of business was to strike the balance of the premium account periodically, the creditor company always giving a receipt for pre- miums as they became due, and the life dropped between PAYMENT OF PREMIUMS. 51 the dates of the receipt and the periodical settlement; it was held that the premium was paid at the date of the receipt, and therefore within the days of grace : Prince of Wales Co. v. Harding (E. B. & E. 183). If the premium is annual, payable by quarterly instal- ments, the policy should shew whether the insurance is for a year certain or not, and if it is, should contain an agreement by the insured to pay the premiums. In Sheridan v. Phoenix Co. (28 L. J. (Q.B.) 94), the policy, which was headed : " Sum assured £1000 ; Annual pre- mium, £33 ; Whole term ; Payable by quarterly instal- ments of £8 5s.," after reciting that the insured had paid £8 5s. as premium for the said insurance till the 2nd of November, 1856, witnessed that if the insured should die within twelve months, or surviving the twelve months should before the expiration of the twelve months, or of each succeeding twelve months, pay the annual amount of premiums, the funds of the company should be liable to pay the £1000, and there was a proviso that if the insured died before the quarterly payment for the year in which he had died should be payable, the insurers might deduct from the sum insured so much as would satisfy the whole of the premiums for the year reckoning from the 2nd of August. The insured died after the third instalment was due, but before it was paid, and it was held that the policy was a yearly not a quarterly one and that he was entitled to recover. The policy contained no agreement to pay the instalments, and they were not a debt, but it was observed that any other construction would render the provision for deducting premiums in- sensible, and that no instrument should receive a more liberal construction than a policy. If the risk is determined by the felonious act of the The deter- ^ o mination of 52 THE LAW OF LIFE INSURANCE. the risk insured the policy is avoided, and a condition that in such feknious ^^ event the policy shouhi remain good is void on the act of the plainest principles of public policy : Amieahle Society v. avoids the Bollund (4 Bligh, K. S. 194), an action on a policy on grounds of the life of Fauntleroy, the banker, who was executed for po"'"^ forgery in the year 1824. " Suppose that in the policy itself the risk had been insured against; namely, that the party insuring had agreed to pay a sum year by year upon condition that, in the event of his committing a capital felony, and being tried, convicted, and executed for that felony, his assignees shall receive a certain sum of money — is it possible that such a contract could be sustained ? Is it not void on the plainest principles of public policy ? Would not such a contract (if available) take away one of those restraints operating on the minds of men against the commission of crimes, viz,, the interest we have in the welfare and prosperity of our connections " ? Ibid, per Lyndhurst, L.O. But the objection on grounds of public policy would have no application in the case of policies on the life of another, and a condition preserving the policy to the extent of any bond fide interest acquired therein by third persons is unobjectionable on this score : Moore v. Woolsey (4 El. & Bl. 243, 255) ; Bufaur v. Fro- fessional Life Co. (25 B. 599), and there is no principle of public policy avoiding an insurance on suicide during insanity. " A man may insure against the consequences of his own insanity in whatever unhappy form it may develop itself, just as he may insure against any other calamity by which his life may be determined:" jper Wood, V.C., Horn v. Anglo-Australian Co. (30 L. J. (Ch.) Determina- 511), whcro the policy Contained no condition on the event^by** subject, and the insured committed suicide during tem- the non- porary insanity ; nor is there any implied condition in ' SUICIDE. 53 the contract of life insurance that if the insured deter- act of the red ; not. mine the event by his own non-felonious act, the policy doeTn*^ shall be void : Horn v. Anglo-Australian Co. {Ibid.), Borradaile v. Hunier (5 M. & G. p. 658). In the former case it was said that if the insured determine the event by such an act, for instance, as suicide during insanity, it is as much an accident as anything else, and the object of life insurance is to secure a provision for the family of the insured against the fatal consequences of his decease. The meaning of the expressions " die by his own hands," " commit suicide," was much discussed in the cases of Borradaile v. Hunter (5 M. & G. 639), and Clifi v. Sehwahe in the Exchequer Chamber (3 C. B. 437 ; 17 L. J. (C.P.) 2), where the question arose whether they extended to cases of suicide during insanity (non-felonious suicide), and they were held to include all cases of voluntary self- homicide by a man capable of understanding the physical consequences of his act. In Borradaile v. Hunter, which was the case of a policy on the life of the Kev. W. Borradaile, vicar of Wands- worth, who threw himself from Vauxhall Bridge during a fit of temporary insanity, the proviso was that if the insured should die by his own hands, or by the hands of justice, or in consequence of a duel, the policy should be void. The jury found that the insured voluntarily threw himself off the bridge with the intention of destroying life ; but that at the time of committing the act he was not capable of judging between right and wrong. It was admitted that the words could not be taken literally, that on the one hand they would include felonious suicide by the act of the party, though not strictly by his hands, and that en the other hand they would not include mere accidental destruction of life by the party, where the party was not 54 TEE LAW OF LIFE INSURANCE. conscious of the physical consequences of his act, e.g., tearing off bandages during delirium, and so bleeding to death, walking in sleep, &c. The majority of the Court, Maule, J,, and Erskine, J., diss. Tindal, C.J., held that the words extended to any " voluntary and wilful act of a man able to understand the physical consequence of his act, and intending to cause his own death," and that it was immaterial whether he could appreciate the moral quality of the act. Maule, J., observed that " the condi- tion should be so construed as to include those cases of self-destruction in which, but for the condition, the act might have been committed in order to accelerate the claim on the policy and to exclude those in which the consequences, supposing the policy to have been uncondi- tional, would shew that the act could not have been com- mitted with a view to pecuniary interest, A man who drowns himself voluntarily may do it to found a claim to the policy, though not thinking it wrong to do so." In Clift V. Schwabe, the proviso ran " commit suicide or die by duelling or the hands of justice ;" the insured had voluntarily taken sulphuric acid being at the time of unsound mind, and it was held that the word " suicide " meant homieidiv/m sm ipsius, not merely felonious suicide, and the expression was co-extensive with that in Bor- rodaile v. Ewiter, and included every case of "self-de- struction by a man knowing the probable consequences of his act and doing the act voluntarily and intending such consequences to follow." Rights of The proviso that the policy shall remain in force to assignees, ^.jjg extent of any hona fide interest acquired by a third person, is introduced for the benefit of the insured to render the policy marketable ; Cooh v. BlacJs (1 Ha. 393), and to the , extent of the interest subsisting at the time _ maETS OF ASSIGNEES. 55 when the policy becomes a claim, the company are bound, though the payment may enure to benefit the estate of the insured: Solieitors and General Life Assurance Society V. Lamb (10 Jur. (N.S.) 739 ; White v. British Empire, &G. Co. (7 Eq. 394). Where the policy contained a proviso that the policy should be void if the insured committed suicide " unless legally assigned," a mortgage by equitable deposit was held an assignment within the proviso, " legally " being interpreted validly and effectually, since policies at that time were unassignable at law: Dufaw v. Professional Life Assurance Go. (25 B. 599), Gooh v. BlacTe {uhi supra) ; and where the words were " unless assigned for value six months before death," a letter charging the policy with a floating balance three years before was held suflScient as an assignment in equity, where alone it was possible : Jones v. Gonsolidated Investment Assurance Go. (26 B. 256). Assignment in such provisoes means assignment by con- tract not by operation of law, and the assignee in bank- ruptcy of the insured has no claim : Jackson v. Foster (5 Jur. (N.S.) 547). In Moore v. Woolsey (4 EI. & Bl. 243) a policy effected by a husband on his own life and in his own name, and delivered to the wife's trustee, as security for the payment by the husband of a sum which he was liable to pay for the benefit of the wife, but never assigned to him, was held good in the hands of the trustee (the husband having committed suicide), as a person " having a hand fids interest by way of equitable lien " within a condition expressed in those terms. In Solicitors a/nd General L. L Society v. Lamb (10 Jur. (N.S.) 789), the proviso was that the policy should be good to the extent of any bond fide interest therein vested 56 TEE LAW OF LIFE INSURANCE. in third persons ; the assured mortgaged the policy, to- gether with other property amply sufficient to satisfy the debt, and afterwards committed suicide, the company paid the policy moneys to the mortgagee and filed a bill in equity against him as the personal representative of the assured claiming repayment or contribution oat of the other mortgaged property and payment of the defi- ciency out of the general assets of the insured ; the bill was dismissed by Wood, V.-C, and his decision affirmed in the Court of Appeal, where it was held that the company was not a surety, but a principal debtor for what was due on the policy, and had paid no more than what in la^ and equity they were bound to pay ; and in White V. British Empire, <&e. Co. (7 Eq. 394), where the circumstances were very similar, except that the company was itself the mortgagee of the policy, the policy was held to be as valid in the hands of the company to the extent of the mortgage debt as in the hands of third persons, and the policy moneys being sufficient to satisfy the company's debt the company were ordered to reassign the other securities which they held to the plaintifi"? ASSIGNMENT OF POLICIES. 57 CHAPTER 11. ASSIGNMENT OF THE CONTRACT. Assignment of Policies at Law — in Equity — by Statute — Notice — Voluntary Assignments — their Form — when invalidated — As- signments on Sale — Settlement — Mortgage — Debtor and Creditor Policies — ^Bankruptcy — Bequests of Policies — Stamps — Succession Duty. The general rule, founded, in the opinion of a recent Choses in learned writer, rather on the yiewof contracts as creating assignable a purely personal obligation between the parties to them *' '*"• than, as Lord Coke suggests, on any idea of discouraging litigation (Pollock on Contracts, 3rd ed. p. 224), tIz., that choses in action were not assignable at common law, so that the assignee could sue in his own name, except to or by the Crown, applied of course to policies of insurance : Cooh V. Blach (1 Ha. 390). The assignee of a legal chose in action has, however, long been allowed to sue at law in the name of the assignor: Winch v. Keeley (1 T. E. 619), and Courts of Equity would interfere if the assignor refused the use of his name or endeavoured, to prevent the assignee from recovering, but not otherwise: Hammond V. Messenger (9 Sim. 327). If, however, the debtor assented to the transfer of the debt the assignee could bring an action against him at law on the implied promise to pay: Fairlie v. Denton (8 B. & C. 395). In equity, choses in action have been assignable for Assign- value from a very early period, nor is any particular form ^u°ty° 58 TEE LAW OF LIFE INSURANCE. of words necessary: Bow v. Dawson (1 Ves. 331), or indeed any writing: Gurnell v. Gardner (4 Giff. 626, 6 Jur. (N.S.) 1220) (a), the test being whether or not an intention is shewn to transfer or appropriate the chose in action to or for the use of the assignee : Chowne v, Baylis (31 B. 351); RodicTc v. Gam.dell (1 De G. M. & G. 763). Operate as Such an assignment operates by way of agreement to minis. transfer, and is enforceable in equity like any other agreement : Wright v. Wright (1 Ves. 412) (b). In Chowne v. Baylis (31 B. 351), a letter to the com- pany saying, " Please take notice that I wish to transfer my interest in the policies to C. D." was held a good equitable assignment even against a subsequent assignee in possession of the policies, and it was observed that no formal instrument was required, it being only necessary that the document should express an intention to transfer, and that if the letter under consideration merely expressed unfulfilled desire, there was nothing for the oflSce to take notice of, and in Coolt v. Black (1 Ha. 390), Wigram, V.-C, said, that " a transaction whereby the assured gives to a person lending money to him a right to be repaid out of the money to become due on the policy is, in truth, an assignment." A deposit of a policy with a letter agree- ing to assign it, a letter charging a policy with a floating balance, and a simple deposit of a policy, have all been held valid assignments in equity within the clause avoid- (a) It was there lield that the words " There is the Wool at Doncaster, go sell it, pay B. the balance due to him, and keep the remainder :" created a valid equitable lien by parol. (6) The Policies of Insurance Act, 1867, gives equitable assignees of policies by written assignment, who have given written notice, the right to sue in their own names, and the Judicature Act passes the legal right to the policy to such persons with some restrictions ; see post, pp. 62-64. Its import- ance. ASSIGNMENT OF POLIGIES. 59 ing policies in the event of suicide unless assigned : Cook y. Black (1 Ha. 390) ; Jones v. Gonsolidated Insurance Co. (26 B. 256) ; Bufaur v. Professional Life Assurance Co. (25 B. 599). The circumstances however under which a deposit is made may point to the creation of a mere lien not of an equitable right to receive the money : Gibson V. Ov&rhury (7 M. & W. 555); Green v. Ingham (L. R. 2 C. P. 525); though after the decision in Green v. Ingham it is difficult to conceive a case to which Gibson v. Overbury is ever likely to apply. Nor is it necessary to the validity of the assignment as Notice between the assignor and assignee that it should be per- fected by notice to the debtor : Cook v. Black (1 Ha. 390) ; Bufaur v. Professional, &c. (25 Beav. 599), though the omission to give notice may seriously affect the position of the assignee by enabling the assignor to obtain payment to himself, which, if made without notice, will completely discharge the debtor : Norrish v. Marshall (5 Madd. 475), or by enabling subsequent assignees giving prior notice to obtain priority : Bearle v. Hall (3 Euss. 1), or finally, under the bankruptcy law previous to 1869, by enabling the assignees in bankruptcy of the assignor to seize on the fund as being within the order and disposition of the bankrupt at the time of his bankruptcy with the consent of the true owners : Williams v. Thorp (2 Sim. 257) ; Green V. Ingham (L. E. 2 C. P. 525) ; Thompson v. Speirs (13 Sim. 469). The Bankruptcy Act of 1869 made a sweeping change in the law by confining the order and disposition clause to traders, and excepting from it things in action other than debts due to the bankrupt in the course of his trade or business, and since a policy of insurance is clearly a thing in action within the meaning of this clause, Ex parte 60 THE LAW OF LIFE INSURANCE. Ibheteon, In re Moore (8 Ch. D. 519), notice is no longer material for this purpose as between the assignee and the trustee in bankruptcy of the assignor. Assignees It was a matter of some doubt whether, notwithstand- luptey "^S ^^^ order and disposition clause, the particular ^^^^ assignee could obtain priority over the assignees in give notice, bankruptcy by giving notice after the bankruptcy, but before the assignees in bankruptcy had given any notice: Stuart V. Coeherell (8 Eq. 607) ; Ex parte Caldwell, In re Currie (13 Eq. 188) ;. In re BusselFs Policy Trusts (15 Eq. 26). The better opinion would seem to be that expressed by Sir J. Bacon in Ex parte Caldwell, that if the policy be within the order and disposition of the bankrupt at the date of the bankruptcy, subsequent notice cannot affect the title of the assignees. The case is different, however, if the dispute is between a particular assignee subsequent to the bankruptcy and the assignees in bankruptcy. In such a case the omission of the latter to give notice of the bankruptcy enables the bankrupt to commit a fraud, and the title of the subsequent assignee who has given notice will be preferred: Be Barr's Trusts (4 K. & J. 219), and on this ground In re Bussell's Policy Trusts may also be supported. It seems that under the present bankruptcy law, as under the old bankruptcy law apart from the order and disposition clause, the trustee in bankruptcy takes an equitable chose in action, subject to all the equities to which it would be subject in the hands of the bankrupt, and must, like any other assignee, protect himself, and perfect his title by notice ; for bankruptcy is not notice to all the world : Be Atkinson (2 D. M. & G. 140), a case under the Act of 1 Geo. 4, e. 57 ; Palmer v. Locke (18 Ch. D. 381, 386), a case under the Act of 1869. The NOTICE. 61 decision of Jessel, M.R., in Palmer v. Locke, is express on this point, though the Court of Appeal declined to say more than that the question was at all events too doubtful for a title depending upon it to be forced on a purchaser, and it was observed by Lush, L.J,, that it may be a matter for serious consideration whether the words " deemed to be assignable in law " contained in sect. 22 of that Act, enlarge the right or only the remedy {a). At all events notice is most important for the protec- tion of the assignee against the assignor or subsequent assignees. Numerous cases have arisen, chiefly on the order and Sufficiency disposition clause, with regard to the sufficiency of the notice, which are authorities as to the notice necessary to acquire priority, though a notice may sometimes be suffi- cient to take the policy out of the order and disposition clause, though not sufficient to determine priority as between particular assignees : Re Hiehey (10 1. E. Eq. 117), where the posting of a notice of assignment which never reached the office was held sufficient to exclude the con- sent of the true owner. Independently of statutory provisions on this head, the result of the cases is to establish that the notice need not be in writing nor directly in a transaction with reference to the policy, provided that it was given formally, not in casual or social conversation, and that if given to an officer of the company it was given to him in that character : (a) 33 & 34 Vict. c. 71, s. 22, enacts that where any portion of the property of the bankrupt consists of things in actioQ, any action, suit, or other proceeding for the recovery of such things, shall be instituted by the trustee in his official name as in the Act provided, and such thino-s shall for the purpose of such action, suit, or other proceeding be deemed to be assignable in law, and to have been duly assigned to the trustee in his ofBcial capacity. 62 THE LAW OF LIFE INSUBANOE. North British Insurance Co. v. Hallett (7 Jur. (N.S.) 1263) ; Alletson v. Chichester (L. E. 10 C. P. 319) {a). See also Edwards v, Martin (L. R. 1 Eq. 121) ; Ex parte Agra Bank, In re Worcester (L. R. 3 Ch. 555) ; and that he was authorized to receive it {uU supra) ; Gale v. Lewis (9 Q. B. {LA. & El. (N.S.) 730) ; Ex 'parte Carbis (4 D. & C. 354). The notice must be actual, not constructive, and the knowledge of a shareholder is not the knowledge of the company : Thompson v. Speirs (13 Sim. 469). These difficulties are avoided for the future by the pro- visions for written notice, which alone entitles to the privileges of the Act of 1867 and of the Judicature Act, 1873. Where two capacities are united in one person, notice received in one capacity for the purpose of being trans- mitted to the other is an effectual notice in both capa- cities : Gale v. Lewis (9 Q. B. 744) ; and where the notices are simultaneous, assignments take effect according to priority of date : Calisher v. Forbes (L. R. 7 Ch. 109). If the company itself is an assignee, it will have priority over any subsequent assignees, as it cannot give notice to itself : Phipps v. Lovegrove (L. R. 16 Eq. 80). Assign- In course of time several exceptions to the old rule of sta°ute^ the common law were established by custom or statute, and by the Policies of Assurance Act, 1867 (30 & 31 Vict, c. 144) (6), assignees of policies possessing at the time of action brought a right in equity to receive and give a discharge for the moneys thereby assured, are enabled to (a) In. the former case verbal notice to the resident director as such was Jtield sufficient, though not entered nor communicated ; so in the latter was verbal notice to the actuary in the course of an interview on other business. (b) Appendix, p 266. STATUTORY ASSIONMENT. 63 sue at law in their own names (s. 1), but no assignment is to confer a right of action until written notice of the date and purport of the assignment has been given to the insurers at their principal place of business ; the date of the receipt of the notice is to regulate priorities ; and hona fide payment before receipt of the notice is to have the same validity as before the Act (s. 3). The principal place of business where notices may be given must be specified on all policies issued after the passing of the Act (s. 4), and an acknowledgment of the receipt of notice must be given if required and is conclusive evidence of such notice having been received (s. 6). The statute provides also that as- signments may be made either by indorsement on the policy or by a separate instrument in the words or to the effect set forth in the schedule (s. 5), and finally, policies or contracts for payment of money on death entered into under the 16 & 17 Vict. c. 45, and 27 & 28 Vict. c. 43 (the Grovernment Insurance Acts), or engagements for payment on death by any friendly society, are excepted from the operation of the Act (s. 8). Sect. 2 allows a defence or reply on equitable grounds to be pleaded in the same manner and to the same extent, as in any other personal action. Sect. 7 contains the interpretation of terms. The Judicature Act, 1873 (36 & 37 Vict. c. 66), intro- duced a more sweeping modification of the rule, enacting by 8. 25, sub-s. 6 (a), that any assignment of a chose in action shall be effectual in law to pass the legal right thereto, subject to all equities affecting it if certain speci- fied conditions are fulfilled, viz., if it be absolute, not by way of charge only, if it be in writing, if it be of a legal chose in action, and lastly, if express notice in writing has (o) Appendix, p. 296. 64 THE LAW OF LIFE INSURANCE. been given to the debtor. The effect of the statute is to create a legal right modelled upon the equitable right, and carrying with it the same incidents. Neither Act affects the old rule that assignees of choses in action take subject to all equities : West of Englani Banking Co. v. Batchelor (51 L. J. (Ch.) 199). These words " not by way of charge " will probably be construed as referring to assignments out and out, not to transactions which, whatever their form, are in substance assignments by way of security only : National Provincial Bank v. Earle (6 Q. B. D. 626). It has been held that the section extends to debts accruing due under a contract: Brice v. Bannister (3 Q. B. D. 569), and equities between the debtor's cre- ditors, such as a right to set off damages for breach of contract against money due under it, will be enforced against the assignee : Young v. Kitchin (3 Ex. D. 127). An assignee having a legal title under the Judicature Act cannot oust the right of a person having a lien on the policy : West of England Banking Co. v. Batehelor (51 L. J. (Ch.) 199), where it was held that mortgagees of a policy who had given notice to the oflBce could not compel a solicitor who had a lien upon it, of which he had not given notice, to deliver it up. The Act of 1867 only enables assignees who have given notice to sue in their own names, it does not pro- vide that assignment with notice shall pass the legal right, and the assignee of a policy still takes subject to all equities, though there is no provision, as in the Judicature Act, expressly preserving them : British Eqmtable Co. v. Great Western Railway Co. (17 W. R. 43), where it was said that the sole object of the Act was to do away with delay by enabling the assignee to sue at law in his own STATUTORY ASSIGNMENTS. 65 name, and that it did not in other respects improve the position of the assured. The Act is retrospective, and is wider in its operation than the Judicature Act, extending to every assignment, absolute or not, of any interest legal or equitable in a policy of insurance. Any equitable assignee of a debt is a person having the right in equity to receive and give an effectual discharge for it : Jones v. Farrel (1 De G. & J. 208), but the Act does not include every dealing with a policy which would be enforced • in equity as a valid assignment. It clearly contemplates assignments in writing only, though not in express terms confined to them, and it has been decided that it refers to actual assignments, and that a deposit of a policy with a creditor and a request to him to instruct his solicitor to prepare the necessary assignment is not within the Act : Orossley V. City of Glasgow L. A. Co. (4 Ch. D. 421), nor is an agreement to assign upon request, Spencer v. Clarke (9 Ch. D. 137), nor a simple deposit, Webster v. British Empire Co. (15 Oh. D. 169), and notice acknowledged of what is not an assignment within the Act confers no legal title or priority : Spencer v. Clarke {ubi supra). It seems that the Act does not enable companies com- pletely to disregard informal notice, for in the absence of a written notice bona fide payment by the company is as valid as it would have been before the Act (s. 3) and no farther, so that such a paymeint after receipt of an informal notice sufScient in equity independently of the Act, will be no discharge to the company (a). It has been observed that assignments of choses in action Gifts of operate by way of agreement enforceable in equity : Wright ^° '°'^^ " v. Wright (1 Ves. 412) ; and since the rule is well settled (a) See Bunyon, p 242. P 66 THE LAW OF LIFE INSURANCE. that equity will not assist a volunteer, Ellison v. Ellison (6 Ves. 656), it would seem on principle that a voluntary assignment of a chose in action is incapable under any circumstances of being enforced in equity : Sewell v. Moxsy (2 Sim. (N.S.) 189). 1. By as- Such howevcr is not the case, and equity admits two signment. *■ 2. By de- Well recoguisod methods of making a gift of a chose in oA'rast" action, viz., assignment and declaration of trust. Assign- ments of equitable choses in action, if perfect and complete so far as the settlor can make them so, although they pass nothing at law, are indubitably valid, and will be enforced at the instance of the volunteer against the assignor or his representatives : Sloane v. Cadogan (Sug. V. & P. 14:th ed. pp. 719, 816) ; Kekewich v. Manning (1 De G. M. & Gr. 176) ; and see Donaldson v. Donaldson (Kay, 711). They are a complete transfer of the whole of the interest of the assignor, and amount to constituting the person or persons in whom the legal interest is vested, trustees for the assignee. Whether legal choses in action stand on the same foot- ing, and whether a Court of equity will enforce a voluntary assignment of a legal chose in action against the assignor or his representatives, is a question which has been much dis- puted and on which the decisions are somewhat conflicting. The validity of such an assignment was recognised and enforced in Forteseue v. Barnett (3 My. & K. 36) against the settlor himself, though the policy had remained in his hands and he had subsequently surrendered it for value; in Blahely v. Brady (2 Dru. & Walsh, 311), (a case of the assignment of a debt), and in Pearson v. Amicable Assurance Office (27 B. 229) against the assignor's representatives : and in Justice v. Wynne (12 Ir. Ch. Eep. 289), where it was remarked that Forteseue v. Barnett was VOLUNTAS r ASSIGNMENTS. 67 considered a satisfactory and binding authority, against a subsequent volunteer ; and finally in Sewell v. King (14 Ch. D. 179), where a letter undertaking to execute an assignment of policies in favour of volunteers, and stating that till the settlement was executed the settlor was to be bound by the agreement as if the settlement had been actually received, was forwarded to the proposed trustee with the statement : " Enclosed is the formal letter of assignment previous to a deed, and as bind- ing," was held to be a valid assignment, though the letter and the policies had by the death of the trustee got back into the hands of the assignor. It was denied in Ward v. Audland (8 B, 201), and Edwards v. Jones (1 My. & Cr. 238). An assignment by parol, if clearly established, would, it is conceived, be binding, at any rate a parol gift of a policy passes the right to the document, so that the legal owner cannot maintain trover, even if it does not pass the right to the money secured by it : Bummens v. Hare (1 Ex. D. 169) ; and vide Jones v. Loch (L. E. 1 Ch. 25). Some confusion has arisen from assignments being An imper- sometimes treated as declarations of trust, as in Airey v. ment^can"' Hall (3 Sm, & G. 315), and Parnell v. Einqston (3 Sm, & ''"t ^e ^ ^ \ supported G. 337), where the assignments were to trustees upon as a deciai- trust for volunteers, and it was said that they operated as trust. complete declarations of trust, and were not invalidated by the interposition of an assignment which was ineffectual at law. In Woodford v. Gharnley (28 B. 96), however, a case of a similar assignment, it was observed that the settlor professed to act by assignment not by declaration of trust, a distinction very important to be borne in mind : see Pearson v. Amicable Assurance Office (27 B. 229) ; and it is now clearly settled that an imperfect assignment F 2 68 THE LAW OF LIFE INSVBANCE. cannot operate as a declaration of trust : Milroy v. Lord (4 De G. F. & J. 264) ; Biehards v. Belhridge (18 Eq. 11). The same rule prevails as it seems between husband and wife, though he is incapable of making a gift to his wife by assignment: Hayes \, Alliance Assurance Co. (8 L. R. Ir. 149) ; and see also In re Breton's Estate (17 Ch. D. 416). Upon the whole the balance of authority appears to be in favour of limiting the rule that equity will not assist a volunteer, to those cases where something remains to be ' done and can be done by the settlor to complete his gift, and that where everything has been done by him which the subject of the gift is in its nature susceptible of, the voluntary assignment, whether it be of a legal or equit- able chose in action, will be enforced. The judgments in Kekewich v. Manning/ (1 De G. M. & G. p. 188), and Milroy V. Lord (4 De G. F. & J. p. 274), though the interests in question in those cases were equitable, appear to support this view. In Kekewich v. Manning it was said : — " As it is upon legal and equitable principles, we ap- prehend, clear that a person sm juris acting freely, fairly, and with sufficient knowledge ought to have, and has it in his power to make, in a binding and effectual manner, a voluntary gift of any part of his property, whether capable or incapable of manual delivery, whether in possession or reversionary, and howsoever circumstanced, so on the other hand it is clear generally if not universally that a gratuitously expressed intention, a promise merely volun- tary, or to use familiar phrase nudam pactum, does not, the matter resting there, bind legally or equitably." In Milroy v. Lord Lord Justice Turner said : — •' I take the law of this Court to be well settled that in VOLUNTAS r ASSIGNMENTS. 69 order to render a voluntary settlement valid and efifeotual the settlor must have done everything which according to the nature of the property comprised in the settlement was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the persons for whom he intends to provide, and the pro- vision will then be effectual, if he transfer the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for these purposes, and if the property be personal the trust may, as I apprehend, be declared either in writing or by parol ; but in order to render the settlement binding one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an im- perfect gift. The cases, I think, go further, to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred the Court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust." A similar principle applies to declarations of trust Deciava- which are considered in a Court of equity as equivalent tru"t.° to a transfer of the legal interest in a Court of law, and if everything has been done so far as depends upon the settlor to constitute an executed trust, if he has deprived himself of his beneficial ownership, either by constituting himself a trustee, or directing others to hold his property upon trust for the donee, the trust will be carried into execution by the Court : ColUnson v. Pattriek (2 Keen, 123) ; Tierney y. Wood (19 B. 330) ; Richards v. Delhridge 70 THE LAW OF LIFE IN^UBANGE. (L. R. 18 Eq. 11); and it may be declared by parol: McFadden v. Jenkins (1 Ph. 253 ; 1 Ha» 458) ; Jones v. Loch (L, E. 1 Ch. 25), and observations in Milroy v. Lord ; et vide Bwnmens v. Sare (1 Ex. D. 169). Notice. Nor is notice to the trustee or debtor necessary to perfect a voluntary gift of a chose in action, as between the donor and the donee, whether made by assignment, Forteseue v. Barnett (3 My. & K. p. 43), or by declaration of trust, Donaldson v. Donaldson (Kay, 711) (a). la Way's Trusts (2 De G. J. & Sm. 365), a voluntary assign- ment by deed of an equitable reversionary interest in stock, of which no notice was given to the trustee of the deed, or to the eestm que trust, or the original trustees of the stock, and of which no one appears to have known except the settlor, and the solicitor who prepared it, was held an effectual disposition of the fund, though the deed was retained by the settlor and subsequently destroyed by him. Payment to the donor, however, without notice of the, assignment will of course discharge the debtor or trustee, and a subsequent assignee for value may obtain priority by giving notice first ; but giving notice does not affect priorities between volunteers : Justice v. Wywne (12 Ir. Ch. E. 289). A subsequent voluntary assignee perfecting his title at law by notice under the Judicature Act would, however, be preferred. Are gifts Gifts of policies, however, even though valid as between wiSiin""'' the donor and donee, may be made under such circum- 13 Eiiz. stances as to be void against creditors. (a) It was considered that notice was not an act to be done by the assignor, but it may be a question whether, since the Judicature Act, in cases where assignment with notice gives a legal title, and the assignor has power thus to perfect his gift, the omission to give notice ought not to render the gift imperfect, and so unenforceable. THE STATUTE OF ELIZABETH. 71 The statute of 13 Eliz. c. 5, invalidates voluntary dispositions of goods and chattels made with intent to delay or defraud creditors, but it only operates on pro- perty seizable in execution, and not therefore on choses in action, Sims v. Thomas (12 Ad. & E. 536 (a) ), except after the death or bankruptcy of the settlor, when the creditor but for the gift might obtain payment out of any property of the debtor by means of administration, or under the Bankruptcy Act : Norouit v. Dodds (Or, & Ph. 100). The Act of 1 & 2 Vict. c. 100, s. 12, made money, banknotes, cheques, bills of exchange, promissory notes, bonds, specialties, and other securities for money seizable in execution, and in Siokoe v. Cowan (29 B. 637), a policy in the ordinary form conracting to pay out of the funds of the company was held to be a security for money within 1 & 2 Vict. c. 110, and consequently within 13 Eliz. c. 5, as property seizable in execution (see also Barrack v. MeGuUoeh (3 K. & J. 110). That decision was based on the view which has since been overruled (State Fire Insurance Go. (1 De Gr. J, & S. 634), that such policies created a charge on the funds. It might, however, be supported on independent grounds, since policies have been treated as securities for money in Phillips v. East- wood (1 LI. & Go. 291, 2), a case on the construction of a will, and Lawrence v. Galsworthy (3 Jur. (N.S.) 1049), a case of a mortgage of personal estate, except book debts, and securities for money, where policies were held within the exception, and in any case, a policy if made by deed would be a specialty within the meaning of the same (a) Compare Grogan v. Cooke, 2 B. & B. 230, where Lord Chan- cellor Manners thought that an assignment of policies by a person much in debt was not fraudulent as against creditors within the Irish Statute 10 Car. 1. 72 TEE LAW OF LIFE INSURANCE. statute, 1 & 2 Vict, c. 110, In Eeese Biver Co. v. Aitwell (7 Eq. 348), a Toluntary settlement of property, part of which consisted of a policy, was set aside under the statute. A mere debt is not seizable in execution, and therefore not within 13 Eliz. c. 5 : Harrison v. Paynter (6 M. & W. 392), Sembie not. But it has been held in Ireland that a policy of insur- ance effected by a debtor on his own life that has not matured into a claim, is not a security for money seizable by the sheriff under a f,. fa. within 3 & 4 Vict. c. 105, s. 20 (the Irish statute corresponding to 1 & 2 Vict, c 110), or 16 & 17 Vict. c. 113, s. 131, the Irish Common Law Procedure Act, 1853 ; Sargent's Poliey (7 L. R. Ir. 66), following Alleyne v. Barcy (5 Ir. Ob. K. 50), a decision of Lord Chancellor Brady, in preference to StoJcoe v. Cowan {uhi supra). It was observed in Alleyne v. Darcy that those Acts enable the sheriff to seize securities for money, and to sue on them upon receiving a proper indemnity, but he cannot sell them, nor can he pay the premiums on a policy, or indeed make it available in any way, and there seems much force and good sense in this reasoning ; whether a policy which has become a claim, and can be sued on, is seizable, was left expressly open. The true test whether a voluntary disposition is fraudu- • lent within the statute is whether from all the circum- stances the Court can infer that it was made with the intent, actual or constructive, of delaying or hindering creditors : Freeman v. Pope (5 Ch, 538) ; Be Pearson {3 Ch. D. 807). Gifts of They are not within 27 Eliz. c. 4, which only applies to not w1thin° land, and are consequently valid as against subsequent ^^^^''^- . assignees for value : Jones v. Croucher (1 S. & St. 315) ; Bill V. Cureton (2 My. & K. 512). TEE BANKRUPTCY ACT. 73 Voluntary dealings with policies may also be invali- May be dated under the Bankruptcy Act, 1869. Ihf BTnt" A gift of a policy made whether by a trader or non- ''"pt<=y A<=t- trader in contemplation of bankruptcy, or under circum- stances which, assuming it to be seizable in execution, would make it void under 13 Eliz. c. 5, is fraudulent, and an act of bankruptcy within s. 6, subs. 2, of the Act : Be Wood (L. E. 7 Oh. 306), and a voluntary settlement by a trader is void as against the trustee in bankruptcy if the settlor becomes bankrupt within two years, or even within ten years, unless in the latter case it can be proved that he was solvent at the time without the aid of the property settled : s. 91. This section is modified by s. 10 of Married Women's Property Act, 1870, and an insurance effected by an insol- vent trader will be valid under that Act subject to any lia- bility there may be to repay the premiums paid in fraud of his creditors ; even though effected in exchange for a sub- sisting policy if that policy bore no sale or surrender value at the time : Eoli v. Everall (2 Ch. D. 266). There an insolvent trader surrendered a policy effected before the Act on which one premium had been paid and received a new one for the separate use of his wife at the same premium, and it was held that the policy given up _ being practically of no value, the new policy was valid, not- withstanding the bankruptcy of the husband, and that the premiums having been paid out of the wife's separate estate, the trustee in bankruptcy was not entitled to receive the amount of the premiums out of the insurance moneys. A purchaser in general is not bound to disclose facts Sale of unknown to the vendor which enhance the value of the Con'^'e"! property, but a single word tending to mislead will pre- ™ent. vent this principle from applying : Turner v. Harvey (Jac. 179), and if the purchaser conceal the fact of the 74 THE LAW OF LIFE INSURANCE. death of a person of which the vendor is ignorant, and by which the value of the property is increased, equity will set aside the contract {Ibid), and even at law if a man seeking to buy a life policy conceal his knowledge of the extreme danger in which the life is, he cannot maintain any title to the policy: Jones v. Eeene (2 Mo. & E. 348) (a). But a sale of a policy is not invalidated by mere know- ledge and non-communication by either party of facts which might influence the other, active misrepresentation or active concealment, that is to say intentional suppres- sion of a material fact, must be shewn. Accordingly where, pending a contract for the sale of a policy, the life met with an accident which had no effects serious or dangerous to life, and he was afterwards attacked with a disease of long standing, from which he died, but from which no danger was apprehended till after completion, it was held that the contract could not be rescinded, though the vendee knew of both the accident and the illness, and communi- cated neither : Thompson v. Lambert (I. E. 2 Eq. 433). Since the Sales of Ee versions Act, 31 Vict. c. 4, sales of policies cannot be set aside merely on the ground of undervalue. Form of ^ assignment by indorsement or according to the form assignment, jjj ^ho Schedule to the Act of 1867 is not adapted for Covenants. * ordinary use, since it does not admit of the usual cove- nants for title, and the covenants implied in a conveyance for value other than a mortgage on the part of a person con- veying, and expressed to convey as " beneficial owner " by virtue of the Conveyancing and Law of Property Act, 1881, 8. 7, do not include the covenant that notwith- standing the acts of the assignor the policy is valid and subsisting, to which an assignee for value is entitled, and (a) See also Dart, V. & P. 5th ed. 106 ; Sugden, V. & P. 14tli ed. pp. 5, 243. FORM OF ASSIGNMENT. lb which is very important for his security. Moreover, if the assignor is himself the cestui que vie, the assignment should contain a covenant by him not to vitiate the policy, and to pay the increased premiums if any become payable by his act or default. (See App. p, 305.) The covenant should be in the negative form, a merely affirmative covenant to do all things necessary for keeping the policy on foot is not broken by forfeiture occasioned by suicide : Bormay v. Borrodaile (5 0. B. 380), (10 B. 335). A Court of Equity would perhaps restrain a breach by injunction : see Lumley v, Wagner (1 De G. M. & Gr. 604) ; Fry on Spec. Perf. 2nd ed. pp. 370, 376. It will not relieve against the consequences of a breach of such a covenant even where the assignee has procured the revival and consequently sustained no damage : Winthrop v. Murray (8 Ha. 214), where the agreement was that pay- ment of the debt should not be required so long as the policy was kept on foot, and the policy having lapsed the Court refused to restrain the creditor from proceeding against the debtor though he had revived the policy four days after its lapse. But where a life had covenanted to appear for insurance and not to do anything afterwards to avoid the policy, it was held that no damages were recoverable for a breach avoiding the policy unless the covenantor had notice of the terms of the policy, or at all events that a policy had been effected with a particular office : Vyse v. Wakefield (6 M. & W. 442). The measure of damages for the breach o'f such a cove- nant is the present value of the policy to be assessed by an actuary, taking into consideration, if such is the case, that the defendant covenanted to pay, and should pay, 76 THE LAW OF LIFE INSUBANCE. the premiums : Hawkins v. Colihurst (5 B. & S. 343), a case of forfeiture by leaving Europe. Bonuses. An assignment, settlement, or bequest of a policy will carry bonuses: ParJces v. Boit (9 Sim. 388), Boherts v. Edwards (38 B. 259): see also Courtney v. Ferrers (1 Sim. 137), and bonuses must in the case of a settled policy be added to capital, and not applied in reduction of premiums, Macdonald v. Irvine (8 Oh. D. 101), unless the intention is that they should be so applied : LacJcersteen V. Lachersteen (30 L. J. (Ch.) 5), where on parol proof to that effect a voluntary settlement of a policy was rectified to admit of bonuses being so applied. In only V. Burley (22 B. 619), where a policy to be effected for £2500 was settled, it was held that the settlement included bonuses, but that the settlor had the option of applying them in reduction of premiums, and not having so applied them they went as accretions of the capital. An appointment good at the time when made cannot be made bad by subsequent events, therefore an appoint- ment under a non-exclusive power of the proceeds of a settled policy among the children except one, leaving a small residue unappointed, is not invalidated by the fact that the donee by the negligence of the trustees is after- wards enabled to borrow considerable sums on the policy from a purchaser without notice, so that the sum ulti- mately available falls considerably short of the amount appointed : Barry v. Barry (Jr. K. 10 Eq. 397). Married Settlement policies can be effected under the provisions p^roperty "^ ^^^ Married Women's Property Act, 1870, s. 10, which Act, s. 10. enacts that : " A policy of insurance effected by any married man on his own life, and expressed upon the face of it to be for the benefit of his wife and children, or any SETTLEMENT. 77 of them, shall enure and be deemed a trust for the benefit of his wife and for her separate use, and of his children or any of them according to the interest so expressed, and shall not, so long as any object of the trust remains, be subject to the control of the husband, or to his cre- ditors, or form part of his estate. When the sum secured by the policy becomes payable, or at any time previously, a trustee thereof may be appointed by the Court of Chancery in England or in Ireland according as the policy of insurance was effected in England or Ireland or in England by the judge of the County Court of the district, or in Ireland by the chairman of the Civil Bill Court of the division of the county in which the insurance office is situated, and the receipt of such trustee shall be a good discharge to the office. If it shall be proved that the policy was effected and premiums paid by the husband with intent to defraud his creditors, they shall be entitled to receive out of the sum secured an amount equal to the premiums so paid." If the policy does not define what interests the wife and children are to take, the Court will appoint a trustee and direct the policy moneys to be settled on the usual trusts for the widow for life for her separate use without power of anticipation, with remainder to the children at twenty- one or marriage : Be Manor's Trusts (6 Ch. D. 127) ; or if the income would be insufficient to maintain them, it may under special circumstances direct the money to be distri- buted as in the case of intestacy : S.C. (7 Ch. D. 200). A settlement of a policy which, if effected at the time, Settlement. should be in the name of the trustees to avoid the neces- sity of assignment and notice, should if made for value, in addition to the usual covenants for title, contain covenants not to vitiate the policy (if on the life of settlor), to restore 78 TEE LAW OF LIFE INSURANCE. it if voidable, or if void to effect or enable the trustees to effect a new one in substitution for the old and to pay the premiums, and should empower the trustees to apply the trust funds, if any, in keeping up the policy, and if there are no funds available for the purpose to sell or surrender the policy, with a proviso protecting the trustees against responsibility for neglecting to enforce the covenant for payment of premiums or to keep up the policy. The ordinary trustees indemnity clause would not be sufficient for this purpose, and they would be liable unless the covenantor was bankrupt, and they were without funds : Ballw. Ball (11 Ir. Eq. E. 370); Eolday v. Peters (28 B. 603) ; and see Bix v. Burford (19 B. 409). A sale will be authorized by the Court under special circum- stances, even where there is no power : MiU v. Trenery (23 B. 16) ; Beresford v. Beresford (23 B. 292) ; and where there is, the trustees can further protect them- selves if they desire to do so by obtaining the advice of the Court as to a sale on petition under 22 & 23 Vict. c. 35, s. 30. (See App. p. 309.) A covenant to insure is absolute, and is not discharged by the health of the covenantor becoming so bad that no office will take him : Arthur v. Wynne (14 Ch. D. 603) ; and to such a case the principle of Taylor v. Caldwell (3 B. & S. 826), that where performance depends on the continued existence of a person or thing the perishing of the person or thing shall excuse from performance, does not apply. In that case the covenantor had had nearly two years in which he might have performed his covenant, and just before the expiration of the time limited for its performance he became so ill that performance was impossible. It may be questioned whether it is not an implied MORTOAQE. 79 condition of such a contract that the life should be in- surable at the time it is entered into. In Arthur v. Wynne the damages were settled by arrangement, the measure of damages would seem to be the present value of a paid-up policy of the agreed amount. Policies of insurance are frequently effected in mort- Mortgage. gage transactions as a collateral security where money is advanced on terminable or contiugent interests in pro- perty, or as a primary security in cases where the borrower has none other to give, though possibly in the receipt of a competent income actual or assured, in the shape of salary, or profits from a trade or profession. Insurance companies, moreover, lay themselves out to secure business and to combine the profits of insurance and loan trans- actions, by offering advances on mortgages of life and other terminable interests to be secured by policies effected with them. A mortgage of a policy generally takes the form of an assignment subject to redemption, followed by a declara- tion of ^trust of the policy moneys when received for pay- ment of expenses, and satisfaction of the debt, and of the surplus for the mortgagor, with a power to the mortgagee to give a good discharge to the office. It contains a power of sale after notice requiring payment of the mortgage money and default in .payment for six months, or whenever the interest is three months in arrear, with the usual ancillary clauses protecting purchasers from irregularities in the sale, giving the mortgagee power to give receipts, and declaring the trusts of the moneys realized by sale. The mortgagor covenants for payment of the principal and interest, and also not to do anything to avoid the policy, to restore it if it becomes voidable, or 80 THE LAW OF LIFE INSURANCE. if void to effect, or enable the mortgagee to effect, a new policy in substitution for, the old, to pay the premiams, and hand over the receipts to the mortgagee, and, in default, to permit the mortgagee to pay them and to repay him any sums so expended, and, till repayment, to allow them to be a charge on the property mortgaged. The mortgagor also gives the ordinary absolute covenants for title, including a covenant that the policy is valid and subsisting. These covenants for title, with the exception of the last, are implied in a mortgage by deed of a policy by a person conveying and expressed to convey as " bene- ficial owner," by virtue of the Conveyancing and Law of Property Act, 1881, s. 7. (See App, p. 306.) If a policy is assigned by way of mortgage and there is no covenant to pay the debt, a Court of Equity cannot make a personal decree for payment against the mort- gagor ; it can declare that the sum is due and well charged on the security, which may be realized : Hinds v. Blacker (I. E. 11 Eq. 322). Power of In order to be able to sue in his own name under the receipts. Act of 1867, the mortgagee must have the right in equity to give an effectual discharge for the policy moneys, but the statutory powers of giving receipts con- ferred by Lord St. Leonards' Act, 22 & 28 Vict. c. 35, s. 23, and, more recently, by the Conveyancing and Law of Property Act, s. 22 (which is retrospective), effectually supply the place of the clause usually inserted in the mortgage deed for this purpose. 22 & 23 Vict. c. 35, s. 23. " The Una fide payment to and the receipt of any person to whom any purchase or mortgage money shall be payable upon any express oi implied trust shall effectually discharge the person pay- ing the same from seeing to the application or being MORTGAGE. 81 answerable for the misapplication thereof, unless the con- trary shall be expressly declared by the instrument creating the trust or security." 44 & 45 Vict. c. 41, s. 22. " 1. The receipt in writing of a mortgagee shall be a sufficient discharge for any money arising under the power of sale conferred by this Act, or for any money or securities comprised in his mortgage or arising thereunder, and a person paying or transferring the same to the mortgagee shall not be concerned to inquire whether any money remains due under the mortgage. " 2. Money received by a mortgagee under his mortgage or from the proceeds of securities comprised in his mort- gage, shall be applied in like manner as in this Act directed, respecting money received by him arising from a sale under the power of sale conferred by this Act ; but with this variation, that the costs, charges, and expenses payable shall include the costs, charges, and expenses ptoperly incurred of recovering and receiving the money or securities, and of conversion of securities into money instead of those incident to sale." By the interpretation clause, s. 2 (vi.) " mortgage " in- cludes any charge on any property for securing money or money's worth. A mortgagee of chattels, or of a policy, or other chose in Power of action, has, as incident to his security, a right of sale on reasonable notice without judicial process : Tucker v. Wilson (1 P. Wms. 261) ; Fisher on Mortgages, i. 486 ; Kent, Commentaries, 12th ed. iv. 582. He has also a judicial remedy by sale : Dyson v. Morris (1 Ha. 413 ; 11 L. J. (N.S.) Oh. 241); Ford v. Tynte (41 L. J. (Oh.) 758 ; or foreclosure : Wayne v. Hanham (9 Ha. 62) ; but the ordinary frame of the trusts of the policy-moneys, 82 TEE LAW OF LIFE INSUBANOE. when received, to pay tlie surplus after satisfaction of the debt to the mortgagor, has been held to negative the right to a decree for sale : Dyson v. Morris (1 Ha. 413). The power of sale given to mortgagees by Lord Cran- worth's Act, 23 & 24 Vict. c. 145, only applied to mortgages of real estate, " hereditaments of any tenure." The Con- veyancing and Law of Property Act, 1881, however, which repeals and re-enacts with some extensions this portion of Lord Cranworth's Act, defines property as " real or personal property, or any estate or interest in any property real or personal, and any debt, and any thing in action, and any other right or interest," and mortgage as " any charge on any property," and gives to mortgagees, wherever the mortgage is by deed, a power of sale embodying the usual provisions, but in a form rather more favourable to the mortgagee, since the power arises on default for three months after notice requiring payment, or when the interest is three months in arrear, or whenever there has been a breach of some provision contained in the mort- gage deed or in the Act to be observed by the mortgagor other than the covenant for -payment of the mortgage- money and interest : ss. 19-21. This power only applies to mortgages made after its commencement, and so far as a contrary intention is not expressed in the d%ed. In view of the decision in Dyson v. Morris (1 Ha. 413), an express power of sale extending to a sale by surrender to the office, should be inserted in a mortgage of a policy, or the power of sale given by the above Act should be expressly incorporated in the mortgage. CoTenant A Covenant to pay premiums is not a contingent liability, to pay . . I -I * premiums, it IS an absoluto coveuant to pay as long as life lasts, Measure of ^hich glvcs a right to compensation in damages according to the injury sustained : Mitcdfe v. Hanson (1 H. L. 242) ; COVENANT TO PAY PREMIUMS. 83 any premiums actually paid by the creditor may be re- covered as damages : Eey v. Wyche (12 L. J. (Q. B.) 83) ; but compensation is given for actual not possible loss, and if no damage is shewn, nominal damages only will be given for the breach of the covenant : National Asswrance Society v. Best (2 H. & N. 605, 27 L. J. (Ex.) 19) ; Brown V. Priee (4 Jur. (N.S.) 882 ; 27 L. J. (C.P.) 290). In National Assurance Society v. Best the plaintiffs were mortgagees of policies issued by themselves, and the mort- gagor had covenanted and failed to pay the premiums. In such a case " the damage is the possible loss which the plaintiffs have escaped, like the case of a covenant to insure a ship for a particular voyage which the cove- nantor neglects to do, and the ship arrives in safety," per Pollock, C.B., National Society v. Best (uhi supra), and again " it is clear that the amount of premiums is not the criterion of damages, the premiums not having been paid by the covenantors, if the covenantees had paid them in order to keep up the policy or had effected another policy for their own security, there might have been ground for substantial damages, but here there was nothing but a loss of security, and it does not appear that any injury was sustained by the plaintiffs in consequence of that :" Ibid. In Brown v. Price the plaintiffs, trustees of the Norwich Union, were mortgagees of policies effected with that office. The mortgage contained covenants by the mort- gagor to pay the premiums, and that on his default the mortgagee might pay them and add them to his debt, but there was no covenant to repay the premiums. The mortgagor only paid one premium, and the office debited him and credited themselves with the subsequent pre- miums in the books of the company, and the Court of 84 TEE LAW OF LIFE INSURANCE. Common Pleas, without expressing an opinion as to whether this amounted to payment, decided that there having been no loss, nominal damages were only reco- verable ; and further, that the parties had defined their remedy, and there being no covenant for repayment the plaintiff^ could not recover in damages. But in a mort- gagee's suit in Chancery relating to the same transaction, it was held that the office were entitled by the terms of the mortgage deed to be allowed the sums so debited in account. " The policy was in existence, was redeem- able on payment of the sums charged against it, and had been preserved by means of a concurrence in the obliga- tion to pay and the right to receive in the same persons :" ^er Stuart, V.C, FitzwilliamY. Price (4 Jur. (N.S.) 889) ; and on this ground, the case was distinguished from Qrey V. Ellison (1 "Giflf. 438), where an insurance company purchased an annuity and took an assignment of a life interest as security, with a proviso that if they insured the life of the grantor the premiums should be a charge on the property assigned. No policy was ever made out, and it was held that they were not entitled to deduct premiums charged by the insurance department to the annuity department, the company having, in fact, been their own insurers or made no insurance, but taken the risk. A proviso in a memorandum of deposit of a policy that the company may deduct and retain sums advanced out of the amount insured without any other express provi- sion for payment, does not amount to an agreement to look only to the sum insured : Parlby's Case (Alb. Arb. Eeil. 48 ; 15 Sol. J. 654). Tacking. It seems that a mortgagee, or pledgee, of personalty may tack subsequent debts, that is to say, may hold the TACKING. 85 mortgaged property as security for subsequent debts, against the mortgagor : Demandray v. Metcalf (2 Vern. 690) ; Adams v. Glaxton (6 Ves. p. 229) ; Story, Eq. Jur. §§ 1034, 1035, and 415. Such at least was the rule of the Civil Law, which has been largely adopted in England with regard to the law of personalty, though it has bad little influence on the law of realty, and the cases usually cited in support of a contrary opinion are all cases of mortgages of realty : Ex parte Ockenden (1 Atk. 236) ; Jones V. Smith (2 Ves. jun. 372) ; Vanderzee v. Willis (3 Bro. Ch. C. 21) ; Fish. ii. 616 ; Kent, Commentaries, 12th ed. ii. 585, where it is said that the better opinion is that a mortgagee of chattels may not retain his pledge against other debts. Tacking is undoubtedly allowed against the executor of the mortgagor, where the estate is solvent, to avoid circuity of action: Fish. 616. It is not allowed, how- ever, against creditors or assignees for value: Adams v. Claxton (6 Ves. 229), nor against the executor of the mortgagor where the estate is insolvent ; and consequently a mortgagee vi^ho has received the amount due on policies on the life of the mortgagor is a trustee for the balance for his executor, and cannot where tlie estate is insolvent retain it in payment of a simple contract debt due to him by the mortgagor, and so gain a preference over the other creditors: Talbot y. Frere (9 Ch. D. 568), overruling Be Easelfoot's Estate (18 Eq. 327). A mere possessory lien gives no right of retainer. A surety paying the debt is entitled to all securities held by the creditor, and accordingly an insurance com- pany cannot set off a debt due to them by the principal debtor, of which the surety has no notice, against moneys payable on policies which they hold as security for a debt 86 TEE LAW OF LIFE INSURANCE. which the surety had paid : Jeffery's Policy (20 W. E. 857). Where a sale of mortgaged policies was set aside on the ground of undervalue, and the purchaser had allowed the old policies to lapse and had substituted new ones, it was held that his acts must be taken as acts on behalf of the real owner of the equity of redemption, who might adopt them if he pleased and redeem the substituted policies : Nesbitt V. Berridge (4 D, J. & S. 45), but where a mort- gage of a reversionary interest and policies is set aside on similar grounds the vendor is not chargeable with the premiums paid by the purchaser : Pennell v. Millar (23 B. 172), and conversely, the vendor can lay no claim to the policy-moneys. There being no contract the purchaser must be held to have kept them for his own pleasure: Foster v. Roberts (29 B. 467). Where a mortgage of policies to an insurance com- pany was impeached by the assignees in trust as a breach of trust to the knowledge of the company, the plaintiffs were refused discovery of the mortgage deed on the ground of want of sufficient interest, but they were held entitled to production of the policies as being their title- deeds : Carter v. Euhbaek (24 W. E. 354). A mortgagee of a life estate and policies having subse- quent judgments against the life estate, and being paid his mortgage out of the life estate, cannot consolidate against the intervening incumbrancers on the life estate who are entitled to be paid out of the policies on the principle of marshalling : Ford v. Tynte (41 L. J. (Ch.) 758) (a). Policies In the absence of contract, express or implied, a creditor on Creditor effecting an insurance on the life of his debtor in life of debtor, (oj) Tiie right of consolidation, in the absence of express contract, is taken away by the Conveyancing and Law of Property Act, 1881, s. 17. BEBTOR AND CREDITOR POLICIES. 87 his own name effects it for his own benefit : Brown v. when a Freeman (4 De G. & Sm. 444) ;'i?Veme v. Brade (2 De G. TnTwiTeu & J. 582) ; and it belongs to him even though the debt be °°'- made up in part of the sums required for the insurance : Freme v. Brade (uhi supra). Before the repeal of the Usury Acts loans at a high rate of interest frequently took the form of the purchase of an annuity absolute or redeemable for the life of the grantor, and the grantee secured himself by effecting an insurance on the life of the grantor in his own name. Such a trans- action is treated as, what it purports to be, a transaction of purchase and sale, and the grantee is entitled to the proceeds of the policy even though the annuity is calcu- lated by the interest on the purchase-money and the amount of the annual premiums : Gottlieb v. Cranch (4 De G. M. & G. 440) ; Knox v. Twrner (5 Oh. 515) ; Preston V. Neele (12 Oh. D. 760). The premiums are compensation for the risk, and whether the grantee expends them in effecting an insur- ance or runs the risk is immaterial to the grantor. If, however, the relation of debtor and creditor subsists and the policy is effected with the privity of the debtor, and it is agreed or can be inferred that it is intended as a security, it will belong to the debtor after payment of the debt : Lea v. Einton (5 De G. M. & G. 823) ; Mor- land V. Isaae (20 Beav. 389) ; though the creditor has paid all the premiums : Drysdale v. Pigott (8 De G. M. & G. 546), where it was said that " a creditor preserving a pledge preserves it for the benefit of the owners subject to his lien for the debt and for the expenses incurred in preserving the pledge ;" and that " the mere non-payment by a mortgagor of a charge attributable to the mortgaged property is not to have the effect of foreclosure." 88 TEE LAW OF LIFE INSURANCE. The test is, whether the debtor can be charged with the premiums or not : Bruce v. Garden (5 Oh. 32) ; the cre- ditor will not lose his right to the policy by charging the premiums against the debtor unless he has assented to the charge (uli sitfra). If there is a right to redeem, the creditor though not bound to keep up the policy, must not surrender it for his own profit : Hawkins v. Woodgate (7 B. 565). If the debtor has the option of purchasing the policy, and fails to exercise it, the Court will not assist him : Lewis V. King (44 L. J. N.S. (Ch.) 259) ; Bashford t. Cann (33 B. 109). Bank- A mortgagee of a policy who, on the bankruptcy of the >ip "7- mortgagor, proves for the balance of his debt, less the assessed value of his security, cannot profit by the unex- pected falling in of the life, but is bound to pay over to the trustee the difference between the assessed value and the sum actually realized : Ex parte King (L. E. 20 Eq. 273). So in Bolton v. Ferro (14 Ch. D. 171), where a secured creditor, holding a policy on his debtor's life, had received a composition of 10s. in the pound on the balance of his debt, after allowing for the value of his security under the provisions of the composition deed, it was held that the proceeds of the policy, which had soon after fallen in, after payment to the creditor of the sum at which he had valued his security, and the premiums he had paid, with interest, belonged to the debtor's estate. The deed was a contract that in consideration of the present payment of a composition the policy should remain a security for the value only. In BoA-lter v. Anglesey (20 W. E. 162) the creditor proved for his whole debt, the value of the policy being inappre- PROOF IN BANKBUPTCY. 89 ciable, and it was teld that he had not abandoned his security. Liabilities such as that on a covenant to pay premiums, Liability which creates a succession of liabilities on successive con- nant to pay tingencies, were not provable in bankruptcy under the Act pi'«™"^™s of 1849 : Warburg v. Tueher (5 B. & B. 884) ; Mitealfe v. proveabie. Hanson (1 H. L. 242) ; but the certificate, though no bar to the liability on this covenant, was a bar to the liability to repay premiums paid by the covenantee : Mitealfe v. Sanson (1 H. L. 242). By the Act of 1861 they were made proveabie at the option of the covenantee (see Solomon v. Isaacs, 27 L. T. N.S. 624) ; and under the present Act all such liabili- ties must be valued, and the assessed value is proveabie as a present debt, and the creditor is entitled to dividends thereon : Bankruptcy Act, 1869, s. 31 ; General Eules, 1870, rule 77 ; and when made, the proof must be taken both by the creditor and the trustee for better or for worse : Ex parte Bates (11 Ch. D. 914), where it was held by the Court of Appeal that trustees who had received a dividend on the assessed value of a covenant by the bank- rupt to pay to them an annuity during the life of his wife for her separate use could not be called upon, the wife having died shortly afterwards, to refund the excess of the dividend over the sums which in the event would have been payable. In Be Miller, Ex parte Wardley (6 Oh. D. 790), which was distinguished in Ex parte Bates as resting on peculiar circumstances, and which seems hardly consistent with the decision in that case, a dividend had been declared on the assessed value of a covenant by the bankrupt to pay pre- miums on settled policies on his life, and the bankrupt having died before payment of the dividend, it was held 90 TEE LAW OF LIFE INSURANCE. that the settlement trustees were not entitled to receive the whole declared dividend, but only the amount they had actually paid for premiums, with such interest as the dividend had been making. The proof, however, may be corrected before it is finally allowed. And where a contingent liability ripens into an actual debt during the continuance of the bankruptcy the actual amount due may be proved for : Bankruptcy Act, s. 31 ; General Eules, 1870, r. 77 ; Be Northern Counties, Macfarlane's Claim (17 Oh. D. 337), and sect. 10 of the Judicature Act imports the same rule into the winding-up of companies : Macfarlane's Claim (ihid.), and into the ad- ministration of insolvent estates : (Be Bridges 17 Ch. D. 342). It may be observed that this was the existing rule in administration before the Judicature Act : Thomas v. Griffiths (2 De G. F. & J. 555, 562). In Be Bridges a testator had covenanted to pay to his daughter an annuity of £100 during the joint lives of himself and his wife and the life of the survivor, and a sum of £5000, within one month of his wife's death, and the wife dying while the administration of the estate was proceeding before certificate, after proofs for the annuity and the gross sum had been admitted, it was held that the daughter might prove afresh for the full sum of £5000, less £4 per cent, discount, for the interval between the judgment and the death of the widow, and for the arrears of the annuity, less a similar discount on those accrued since the date of the judgment. Assign- Policies are assignable by operation of law on marriage, deration bankruptcy, or death ; they may be bequeathed by ^ill, of law. Qp jjjg^y form the subject of a good donatio mortis causa. Policies belonging to a woman at the time of her marriage will belong to her husband if reduced into BEQUEST. 91 possession by payment or surrender during the marriage, subject to her equity to a settlement where her interest in the policy is equitable, and if not so reduced will belong to the wife if she survives him, and to the husband if he survives as her administrator. Policies belonging to a bankrupt at the time of his bankruptcy or devolving on him during its continuance will, like his other property, be divisible among his creditors j they are, however, excluded from the reputed ownership clause : Bankruptcy Act, 1869, s. 15 ; Ex parte Ihhetson (8 Ch. D. 519). Policies in the ordinary form will pass by the Word Bequests. " debentures " in a will, being an engagement to pay out of a given property : Phillips v. Eastwood (1 LI. & G. 291, temp Sugden); and will come within the words " securities for money " : Lawrence v. Qalworthy (3 Jur. N.S. 1049). If the policy forms part of residuary estate bequeathed to persons in succession the principle of Howe v. Lord Dartmouth (7 Ves. 137) will apply in the absence of any indication of a contrary intention, and the policy must be converted : Macdonald v. Irvine (8 Ch. D. 101) ; Qengall V. Barnard (5 B. 245). A policy of insurance on the life of the donor will pass by delivery as a donatio mortis causa : Witt v. Amis (1 Best & Sm. 109 ; Amis v. Witt (33 B. 619); the delivery' creates a trust which equity will execute : Duffield v. Elwes (1 Bligh, N.S. 497, 543). A bequest of an annuity does not pass a policy on the life of the cestui que vie effected by the assignee of the annuity. It is a compensation for the premature death of the cestui que vie ; it is not part of the annuity : Hamilton V. BaUwin (15 B. 232). 92 TEE LAW OF LIFE INSURANCE. Stamp The case of Caldwell v. Dawson (5 Ex. 1) decided that sales and a policy of life insurance was property within 55 Geo. 3, Sp'ohc^r ^' ^^^' ^^^ subject to duty on naortgage ; and it was laid down in PoUer v. Commissioners of Inland Bevenue (23 L. J. (Ex.) 345), which decided that the goodwill of a business was property was chargeable with duty on sale within 13 & 14 Vict. c. 97, that the Stamp Act applied to any sale for money of any subject of property which could be the subject of bargain ; and that since Caldwell v. Dawson it was clear that the assignment of a judgment debt or of a policy of insurance whether on sale or mortgage was subject to duty (a). The present Stamp Act, 33 & 34 Vict. c. 97, defines conveyance upon sale as every instrument (a term which includes every written document) and every decree and order of any Court or of any commissioners whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser, or any other person on his behalf or by his direction : sect. 70 ; and a duty is imposed by the schedule upon a conveyance or transfer upon sale of any property (except as therein mentioned) of 6d. for every £5, or fraction of £5, of the consideration money, and there is no doubt that policies are property within the present Act, and that every assignment in writing of a policy upon sale requires an ad valorem stamp. For the duty upon any conveyance (a) These cases definitely overrule the case of Warren v. Howe (2 B. & C. 281), where the assignment of a judgment debt was held not to be an assignment of property within 5 Geo. 3, c. 184. In Pooley V. Ooodwin(A: A. & E. 94), however, an assignment of a simple contract debt had already been treated as requiring an ad valorem stamp within the same Act, and in Blandy v. Eerhert (9 B. & C. 396), Lord Tenterden seems to have considered that a marine policy on which a loss occurred would be property within the Act. STAMPS. 93 or transfer by, way of security of any property (except as therein mentioned) or of any security we are referred to the title " Mortgage," where a duty is imposed upon a transfer, assignment, disposition, or assignation of any mortgage, debenture, covenant) &c., being a security for the payment or repayment of money, of 6d. per £100 of the amount transferred. The assignment or sale of a policy under seal might come under this head as a con- veyance of a security, viz., an assignment of a covenant for the payment of money ; assignments not under seal are however clearly chargeable with duty as conveyances on sale, and in practice duty is paid under this head on all assignments on sale of policies, whether by deed or not. Mortgages are charged with a duty of 2s. 6d. per £100 of the amount secured. Under the earlier Stamp Acts a covenant by the mort- gagor to repay sums advanced for keeping up a policy of life insurance, which in the meantime were to be charged on the mortgaged property, was held to make the mort- gage one for an unlimited amount and chargeable with the maximum duty, £25 : Hulse v. Peters (2 B. & Ad. 807) ; and see Wroughton v. Turtle (ll-M. & W. 561) ; and Lawrence v. Boston (7 Ex. 28). The Act of 1870 excludes any increase in the duty charged on this ground by providing that no money to be advanced for keeping up any policy of life insurance comprised in the security, or for effecting in lieu thereof any new policy, shall be reckoned as forming part of the amount in respect whereof the security is chargeable with ad valorem duty : sect, 107, sub-sect. 3, It was held under 13 & 14 Vict. c. 97, that a settlement On settle- of the moneys insured by a policy was not a settlement of "0™*^!^ a definite and certain sum so as to be subject to ad valorem 94 TEE LAW OF LIFE INSURANCE. duty within the meaning of the Act : Scmville v. Commis- sioners of Inland Revenue (10 Ex. 159). Settlements of policies were made chargeable with duty by the repealed Act, 27 & 28 Vict. c. 18, s. 12 ; and by the Stamp Act of 1870 they are charged with an ad valorem duty of 5s. per £100 of the sum settled, a duty which if the settlement contains no provision for keeping up the policy is charged only on its value at the time of settlement : sect. 124. "Sect. 124 : Where any money which may become due or payable upon any policy of insurance, or upon any security not being a marketable security, is settled or agreed to be settled, the instrument whereby such settle- ment is made or agreed to be made is to be charged with ad valorem duty in respect of such money. " Provided as follows : " (1) Where in the case of a policy of insurance no provision is made for keeping up the policy, the ad valorem duty is to be charged only on the value of the policy at the date of the instrument. " (2) If in any such case the instrument contains a state- ment of such value, and is stamped in accordance with such statement, it is, so far as regards such policy, to be deemed duly stamped, unless or until it is shewn that such statement is untrue, and that the instrument is in fact insufficiently stamped." Succession The Succcssion Duty Act, 16 & 17 Vict. c. 51, charges ''"'y' a duty on every " succession," and defines succession as every disposition of property by which any person becomes beneficially entitled to, and every devolution by law of any beneficial interest in, any property, or the income thereof, upon the death of any person dying after the commencement of the Act ; a policy of insurance is pro- SUCCESSION DUTY. 95 perty within the Act : Fryer v. Morland (3 Oh. D. 686) ; Caldwell v. Dawson (5 Ex. 1). Sect. 17 provides that " No policy of insurance on the life of any person shall create the relation of predecessor and successor between the insurers and the assured, or between the insurers and any assignee of the assured, and no bond or contract made by any person bond fide and for valuable consideration in money or money's worth, for the payment of money or money's worth after the death of any other person, shall create the relation of predecessor and successor between the person making such bond or contract, and the, person to or with whom the same shall be made ; but any dis- position or devolution of the moneys payable under such policy, bond, or contract, if otherwise such in itself as to create a succession within the provisions of the Act, shall be deemed to confer a succession." The Act does not apply to bond fide sales or contracts of purchase, such as a policy, which is a purchase of a rever- sionary sum, and this section is therefore unnecessary, and the provision as to policies was only inserted ex eautela to quiet the fears of persons interested in insurance com- panies, jjer Jessel,M.R.: Fryer v. Morland (3 Ch.D. p. 685). In this view a contract by way of sale for payment of money by a person on his own death will be equally exempt from succession duty, though not within the terms of s. 17 : see Hanson, 3rd ed., 292. The consideration of marriage is not money or money's worth : Fhyer v. Bankes (9 Jur. (N.S.) 1256). Every assignment or settlement of a policy not made for money or money's worth will create a succession be- tween the assignor and assignee, and duty will be payable on the amount insured in the proportion which the pre- miums paid by the assignor before assignment, or subse- 96 TEE LAW OF LIFE INSURANCE. quently by contract, bear to the whole number of premiums paid. It would seem however that a mere voluntary payment of premiums by the assignor after assignment is not such a "disposition of property" as to create a succession, otherwise any voluntary expenditure on the property of another in reversion expectant upon death would create a succession. Mr. Hanson considers that it is immaterial whether the assignor is under any legal obligation to pay the premiums or not, if they are in point of fact paid by him : Hanson, 8rd ed., 293. PAYMENT OF PREMIUMS. 97 CHAPTER III. PREMIUMS, SALVAGE AND LIEN. In payment of preraiams time is of the essence of the Premiums. contract, and equity will not relieve against the forfeiture incurred by non-payment : New York lAfe Co. v. Statham (Otto E., U. S. iii. 24). Where policies are settled or given to persons in Payment succession provision should always be and is usually ^ '"^ ^'"" made, for payment of the premiums by covenant of the settlor or by setting apart a fund for the purpose, and it is the duty of trustees of a settled policy to keep up the policy out of the funds applicable thereto if any, or if none, they may advance or obtain money for the purpose, and for money so advanced or obtained they can acquire or confer a lien on the policy : Clack v. Holland (19 B. 262) ; Layton's Policy (W. N. 1873, p. 49) ; unless having funds applicable thereto they neglect so to apply them : Clack V. Holland (ubi supra). They will not be liable for the loss of the policy if there are no funds to keep it up, nor for abstaining from suing the settlor on his covenant where it would be useless to do so : Hobday v. Peters (28 Beav. 603). Under such circumstances a sale or surrender of the policy will be authorized by the Court : Hill v. Trenery (23 B. 16) ; Beresford v. Beresford (23 B. 292) ; and the advice of the Court can be obtained on petition under Lord St. Leonards' Act (22 & 23 Vict. c. 35, s, 30). If, having funds, they allow the policy to be forfeited, H owners. 98 THE LAW OF LIFE INSURANOE. they will be liable for the loss : Marriott v. Kynnersley (Taml. 470). Compare Garner v. Moore (3 Drew. 277), where an executor dropping a policy on the life of a debtor to his testator without consulting the beneficiaries, was held liable on the death of the debtor for the amount which would have been recoverable. In the absence of any directions on the subject pre- miums will be a charge on the capital, not on the income of the trust fund : Macdonald v. Irvine (8 Oh. D. 101, 120). A direction in a will for payment of premiums on policies of insurance out of the testator's property is not an accumulation within the Thellusson Act (39 & 40 Geo. 3, c. 98) : Bassil v. Lister (9 Ha. 177). By partial If the premiums are paid by a person having an interest in the policy, e.g., tenant for life or remainderman, the payments are in the nature of salvage, and the person paying acquires a lien on the policy : Burridge v. Bow (1 Y. & 0. Ch. 183) ; and see Todd v. Moorhouse (L. R. 19 Eq. 69), and is entitled to be repaid his advances with 4 per cent, interest on the falling in of the policy : Oill v. Downing (17 Eq. 316), where a married woman entitled to a policy for her separate use for life without power of anticipation with remainder as she should appoint, mort- gaged by appointment, and on the falling in of the policy the mortgagee was held entitled to be repaid at once the amount of his advances with interest at 4 per cent. The voluntary payment of premiums on a policy by a mere stranger confers no interest in the policy on the payer : Burridge v. Bow (ubi swpra) ; nor is any lien acquired where the trustees might have retained the premiums out of the income of the trust property : Waugh's Trusts (46 L, J. (Ch.) 629) ; nor where it is to be collected from the whole instrument that the property is intended LMn: 99 to be taken subject to the obligation : Macdonald, v. Irvine (8 Ch. D. p. 108). In Barcy v. Croft (9 Ir. Oh. R. 19), where an annuity and a policy on the life of the annuitant were settled, it was treated as a compound security and the premiums as payable out of the annuity, and the tenant for life entitled for her separate use having paid the premiums acquired no lien. Where the policy is in mortgage the mortgagor of a By moit- policy paying the premiums has no lien : Norris v. Cale- ^^^°^' donian Insurance Go. (L. R. 8 Eq. 127), in accordance with the well-settled principle that moneys paid by the mortgagor for preserving the mortgaged property cannot be claimed against the mortgagee ; the mortgagee has a By mort- lien for such payments : West v. Beed (2 Ha. 249), and ^*^^^' so has the personal representative of a mortgagor for payments since the death, for he is in the nature of a trustee, and the general assets must not be applied for the benefit of one creditor : Norris v. Caledonian Insurance Co. (ubi supra). The case oi Shearman v. British Empire (14 Eq. 4) which appears to conflict with the principle above stated, is explained in Saunders v. Dunman (7 Cb. D. 829) on the ground of the offer to repay the pre- miums made by the mortgagee previously to the action and never withdrawn; but where the security has been set aside, the mortgagee has no lien for moneys spent in keeping up the policies, for the case stands as if he had merely kept them for his own pleasure : Pennell v. Millar (23 B. 172). In Parher v. Anglesey (20 W. R. 162) it was held that a creditor who had effected a policy on the debtor's life for the benefit of himself and another creditor, who was to pay part of the premiums, might foreclose the other creditor for non-payment of his share of the premiums. H 2 100 THE LAW OF LIFE INSURANCE. Premiums not appor- tionable. Exemption from in-i come tax. Where a policy on the life of A. has been taken out in the name of B. and the premiums are paid by A., the onus of proof that it was for B.'s benefit lies on B. : Pjleger v. Browne (28 B. 391). The Apportionment Acts (4 & 5 Will. 4, c. 22, and 33 & 34 Yiet. c. 35), by which all periodical payments in the nature of income are to be considered as accruing from day to day, and to be apportionable in respect of time accordingly, expressly provide that nothing in those Acts shall render apportionable any annual sums made payable in policies of insurance of any description (ss. 3, 6). By 16 & 17 Vict. c. 34, s. 54, and 16 & 17 Vict. c. 91, any person insuring his own life or that of his wife with a company existing on November 1, 1844, or registered under the Act of 1844 (7 & 8 Vict. c. 110), may deduct from the income on which income tax is chargeable any sums paid for premiums not exceeding one-sixth of his whole chargeable income. (See App. p. 304.) BBEAOH OF CONTRACT. 101 receive premiums. CHAPTER IV. PEEFOBMANOE OF THE OONTEACT. Breach — Damages — Specific Performance — Payment of Claims — Inte- rest — Receipts — Conflicting Claims — Payment into Court — Inter- pleader — Proof of Death — Evidence. There can be no breach of the contract on the part of Breach by the assured, for he is under no obligation to pay the "^°™P*°y- premiums, and the contract does not arise till it is exe- cuted on his part. The company may commit a breach of the contract by Refusing refusing to issue a policy after acceptance of the risk, or poiTc^'or by refusing to receive the premiums after acceptance of the risk, or at any time during the currency of the policy, as well as by refusing to pay the sum insured. An action would lie for refusal to issue a policy or receive the premiums : see M'Eee v. Phoenix Co. (28 Mo. 383) ; and the damages should, it is conceived, be esti- Measure of mated on the principle adopted by James, V.C., in Bell's '^™''S^'- Case (9 Eq. 706), for ascertaining the value of a policy in a winding-up, rather than on the principle adopted by Lord Cairns in Lancaster's Case (Alb. Arb., Reilly, 76), and now sanctioned by statute: Life Assurance Act, 1872, s. 5. The former principle being recognised as theoreti- cally more just to the individual policyholder, and the latter being adopted on grounds of practical convenience in carrying out the winding-up which do not apply to an action for damages by an individual policyholder while 102 TEE LAW OF LIFE INSURANCE. the company is a going concern. And the American cases proceed on this principle. It has been held there that the measure of damages for breach of an agreement to issue a paid-up policy on joint lives is the amount it would take to purchase such a policy in a first-rate com- pany, and that the measure of damages for refusal to receive premiums is the value of the policy at the time of refusal with interest : Sedgwick on Damages, 7th ed. i. 549. Whether Agreements to pay money will not in general be speci- to'issvie fically enforced, because damages are an adequate com- P"^'"? „ pensation for the breach : Adderley v. Dixon (1 S. & St. specincally ^ j \ enforced. 610) ; Brough V. OMy (1 E. & M. 55). A contract for sale of an annuity payable out of stock, which is the con- verse of the contract of life insurance, can however be specifically enforced : Withy v. Cottle (1 S. & St. 174) ; Kenny v. Wexham (6 Mad. 355) : because the Court will give the purchaser the very subject of his contract, and damages would be an insufficient remedy for the pur- chaser, though sufficient for the vendor, and the remedy must be mutual ; but it has been thought that the learned judge who decided those cases (Sir John Leach) shewed a tendency to extend too liberally the jurisdiction in specific performance : Fry on Specific Performance, 2nd ed. p. 22. It must be remembered that the contract of life insurance in its ordinary form is not a mere contract for payment of money, but a contract giving rights against particular assets, though not amounting to a charge on these assets. It is a purchase of a reversionary sum payable out of a par- ticular fund, and it may be questioned whether damages would afford an adequate remedy for breach of such. a contract. They certainly would not be an adequate com- pensation in the case of participating policies, and it is SPECIFIC PERFORMANCE. 103 diflScult to see how they could be assessed where the life has subsequently become uninsurable. An action to have a policy declared in force where the company declared it to be forfeited, and refused to receive the premiums, being in other words an action of specific performance, has been supported in America {Cohen v. Mutual lAfe Insurance Co. (50 N. Y. 610) ) on the ground of the peculiarity of the contract of insurance, which is not a mere obligation to pay money. Upon the dropping of the life the policy becomes a Payment of claim payable within a certain period after proof of death, i„tej.gst and it will carry interest from the day fixed for payment if the money is wrongfully withheld, but not otherwise : Wehster v. British Empire, &c. Co. (15 Ch. D. 169). If there has been no default by the insurers, but payment has been delayed by the want of a person to give a legal discharge, no interest will be payable, even though the sum due has been making interest (Ibid). Interest was not recoverable at common law on a claim under a policy of life insurance : Riggins v. Sargent (2 B. & C. 348) ; even if recoverable upon written contracts for payment of money at a day certain in general. By 3 & 4 Will. 4, c. 42, s. 28, a jury may allow interest on all debts or sums certain payable on demand or under a written instrument at a certain time, either from the date fixed for payment, if any, or from demand, giving notice that interest will be claimed, and by s. 29 a jury may allow interest in the nature of damages in actions on policies of insurance made after the passing of the Act. Whether allowed under s. 28 or s. 29, it is allowed as damages, and at the discretion of the Court or of a jury, according to the mode of trial, a discretion which if wrongly exercised may be reviewed by the Court of 104 THE LAW OF LIFE INSURANCE. Appeal: Webster v. British' Empire Co. {vhiswpra). £5 per cent, is generally allowed at law and £4 per cent, in equity : Ottley V. Gray (16 L. J. (Oh.) 512) ; Cros^ey v. City of Glasgow (4 Ch. D. 428). Payment may be made to the insured or in a policy on his life to his legal personal representatives, or to his assignee who by written notice has acquired the right to sue in his own name under the Act of 1867, or has clothed himself with the legal title under the Jud. Act, 1873. Who can Before the Act of 1867, while policies were still un- cei^ts" assignable at law, it was held, that an equitable assignee absolute, or by way of mortgage, with power to give receipts, could give a valid discharge in equity to the insurers without the concurrence of the insured or his personal representative: Ottley v. Gray (16 L. J. (Ch.) 512) ; Ford v. Byan (4 Ir. Ch. Eep. 342) ; and the in- surers filing a bill of interpleader under such circum- stances were visited with the costs. In Beshorough v. Earns (5 De G. M. & G. 439), which was a case of equit- able assignment by way of mortgage, and no power of giving receipts, it was even held that a mortgage implied a power to give receipts, for the insurers cannot go into the state of accounts between the mortgagor and mort- gagee. Where there is no assignment within the meaning of the Act of 1867, and the assignee has an equitable title only, e.g., as in the case of an equitable mortgage by de- posit, the insurers are entitled to require the concurrence of .the legal personal representative of the insured, but the Court has power to dispense with the presence of the legal personal representative under s. 44 of 15 & 16 Vict, c. 86 : Crossley v. City of Glasgow (4 Ch. D. 421) ; but in Webster v. British Empire (15 Ch. D. 169) (where an PAYMENT OF CLAIM. 105 order dispensing with his presence had been made by the M. E.), the Court of Appeal, though the point was not before them for decision, expressed an opinion adverse to the exercise of such a power. There can be no doubt, however, as to the jurisdiction to make, and the propriety of making, such an order ; at all events, where the mort- gage debt is in excess of the sum insured, and when made it is, it seems, a complete protection to the company : Curtius V. Caledonian Fire and Life Insurance Go. (19 Ch. D. 534 ; 51 L. J. (Oh.) 80). The extensive power of giving receipts conferred upon mortgagees by s. 22 of the Conveyancing and Law of Property Act, 1881, would seem to make the receipt of a mortgagee of a policy for the moneys insured a sufficient discharge to the company in all cases, the word " mort- gage " being defined in that Act as including any charge on any property for money or money's worth : see ante, p. 81. Sect. 36 of the Act, which is a re-enactment in a slightly extended form of s. 29 of Lord Cranworth's Act (23 & 24 Vict. c. 145), repealed by s. 71 of the same Act, contains a statutory power to trustees of giving receipts for moneys payable to them under any trust (a) ; and even independently of statute it seems that trustees of policies could give a valid discharge for the policy moneys without the concurrence of their cestuis qne trust : Ford v. Byan (4 Ir. Ch. Eep. 342) ; at all events, where the (a) Sect. 36 : " The receipt in writing of any trustees or trustee for any money, securities, or other personal property or effects payable transferable, or deliverable to them or him under any trust or power shall be a sufScient discharge for the same, and shall effectually exonerate the person paying, transferring, or delivering the same, from seeing to the application or being answerable for any loss or mis- application thereof." into Court. 106 TEE LAW OF LIFE IN8URANGE. trusts were complicated : Qlyn v. Locke (3 Dru. & War. 11) : see also Cwtin v. Jellicoe (13 Ir. Oh. Eep. 180). Both 88. 22 and 36 are retrospective in their operation. Conflicting Where there are confliotinar claims to the moneys in- claims. _ ° *' sured, the insurers may relieve themselves by payment into Court or applying to interplead, or (perhaps) if an action has been brought against tbem by making the other claimant or claimants parties under Ord. xvi., rr. 17, 21, of the Jud. Act, 1875. Payment Powcr to pay into Court is given by s. 25, sub-s. 6 of the Jud. Act, 1873, which provides that debtors having notice of opposing or conflicting claims may pay into Court under and in conformity with the provisions of the Trustee Belief Acts. This section, however, only applies to debts of which there has been an absolute assignment in writing : Sutton's Trusts (12 Ch. D. 175). Previously to this enactment it had been held that insurance com- panies were debtors, not trustees, and could not, in the absence of any trust, pay insurance moneys into Court under the Trustee Belief Acts: Be Haycoek's Policy (I Ch. D. 611) ; Matthews v. Northern Assurance Co. (9 Ch. D. 80). (See App. p. 296.) If insurance moneys have been wrongly paid in, the insurers are liable to the costs unless the petitioner has by petitioning submitted to the jurisdiction, in which case the insurers will be entitled to the costs of payment in and appearance on the petition: Be Haycock's Policy (1 Ch. D. 611); Sutton's Trusts (12 Ch. D. 175). If the policy moneys are subject to any trust, payment in may be made under the Trustee Belief Act, which extends to " trustees, executors, administrators, or other persons having in their hands any moneys belonging to any trust whatsoever." INTERPLEADER. 107 In Be Roster's Trusts (37 L. T. (N.S.) 4'26), where a policy was settled on the usual trusts giving a life interest to the husband after the death of the wife, and, the wife having obtained a divorce, the trustees assigned the policy to her, it was held that the insurers were justified in pay- ing the money into Court, though under the circumstances the husband, by whose fraud the settlement had been obtained, had lost all claim. Previously to the Jud. Act, in cases of conflicting inter- claims to a debt, proceedings in interpleader could be law. taken by the stakeholder or debtor if he claimed no interest in the debt, either by bill in Chancery under its inherent jurisdiction, or at common law by summons at chambers, under the statutory jurisdiction conferred by the Interpleader Act, 1 & 2 Will. 4, c. 58, and the Common Law Procedure Act (1860), 23 & 24 Vict. c. 126, An interpleader summons at common law issued only after action brought, and after declaration, but before plea, at the instance of the defendant debtor, upon an affidavit stating that the defendant Lad no interest in the subject-matter of the action, that the right thereto was claimed by a third party, and that the defendant was not colluding with him, but was ready to pay the sum into Court. The Court could thereupon either order the third party to make himself a defendant in the same or some other action, or direct issues : 1 & 2 Will. 4, c. 58, s. 1 ; or bar the claim of the third party as against the defendant, if he did not appear, or appearing did not support his claim (s. 3) ; or could dispose of the case summarily on its merits (a) by consent ; (J) where the amount was small ; (c) where the question was one purely of law ; or could direct a special case to be stated : C, L. P. Act (1860), ss. 14, 15, 16. 108 TEE LAW OF LIFE INSURANCE. The summary decision of the Court (or judgment in any action or issue so directed) was conclusive : C. L. P. Act, 1860, s. 17. The debtor interpleading was entitled to his costs out of the fund even where the unsuccessful claimant was insolvent : Pitchers v. Edney (4 Bing. N, C. 721), and the successful claimant recovered them with his own from the , unsuccessful claimant. If the second claimant did not appear, each party had to bear their own: Murdoch v. Taylor (8 Scott, 604), and no costs were given if the debtor had refused an indemnity : Jones v. Began (9 Dowl. 581). A lien on the fund itself, not merely as against one of the claimants, is not an interest within the Act and does not preclude interpleader : Attenborough v. St, Katharines DocTc Co. (3 0. P. D. 454). In equity. A bill of interpleader lay in Chancery where there was a conflict between two or more persons claiming the same debt, and where the double claim was not caused by the conduct of the person liable to discharge the debt : Des- iorough v. Harris (5 D. M. & G. 439), and whether any action had been brought or not: Mealor v. Talbot (27 L. J. (Ch.) 165). The debtor's right was to be protected, not only from double liability, but also from double vexa- tion, and therefore any lond fide claim, whether well- founded or not, was sufficient : East and West India Dock Co. \. Littledale (7 Ha. 57); but a mere refusal to assent to payment to another was not, nor did the posi- tion of mortgagor and mortgagee by itself justify inter- pleader : Besborough v. Harris (5 D. M. & Gr. 439), over- ruling Fenn v. Edmonds (5 Ha. 319). No interpleader lay if there was any question to be litigated adversely between the debtors and one of the INTERPLEADER. 109 claimants: BigvM \. Audland (11 Sim. 23). Nor after award in an action, for the money is then safely payable to the plaintiff's attorney : Myers v. United Oimrantee Co. (7 D. M. & G. 112). The debtor was not bound to accept an indemnity: East and West India Dock Co. v. Littledale (7 Ha. 57). Upon an affidavit of no collusion, and payment into Court, the order issued staying all actions and suits by injunction and deciding the right to the fund or putting it in course of decision. If a company sues by its public officer, the affidavit should state that the company does not collude and the company should offer to pay interest if any should be awarded: Bignold v. Avdland (11 Sim. 23). The plaintiff in interpleader obtained his costs out of the fund in Court or against the unsuccessful claimant : Glyn V. Loehe (3 Dru. & Wa. 11), or might retain them out of the debt: A^lin v. Gates (30 L. J. (Ch.) 6). A debtor availing himself of interpleader without cause will be visited with the costs : Ottley v. Gray (16 L. J. (Oh.) 512 J Ford v. Byan (4 Ir. Cb. E. 180). Since the C. L. P. Act, 1860, s. 12, the existence of a personal relation or obligation between the debtor and one of the claimants beyond that arising from the title to the property does not exclude the right to interpleader at Common Law, or, semble, in Equity : Attenhorough v. St. Katharine's Dock Co. (3 C. P. D. 458). By the Jud. Act, 1876, Order i,, r. 2, it is provided, under the that "With respect to interpleader, the procedure and ict!''^*"™ practice now used by Courts of Common Law under the Interpleader Acts. 1 & 2 Will. 4, c. 58, and 23 & 24 Vict. c. 126, shall apply to all actions and to all the 110 THE LAW OF LIFE INSURANCE. divisions of the High Court of Justice, and the appli- cation by a defendant shall be made at any time after being served with a writ of summons and before deliver- ing a defence." And by s. 25, subs. 6, of the Act of 1873 a debtor having notice of opposing or conflicting claims, may, in cases where there has been an absolute assign- ment in writing of the debt, call upon the several persons making claim thereto, to interplead concerning the same. Since the whole jurisdiction of the late Court of Chancery is now transferred to the High Court of Justice (Jud. Act, 1873, ss. 16 and 17), it may be concluded that the Chancery jurisdiction in interpleader, so far as it was wider than that exercised at Common Law, is retained, and that interpleader before action brought now lies in any division of the High Court. It does at any rate in cases within s. 25, subs. 6, where there is an absolute assign- ment in writing: New MamburgJi v. Brazilian Railway (W. N. 1875, p. 239), where the point was raised but not decided. The observations of Lord Selborne in Ramlyn v. Bet- teley (6 Q. B. D. 63), where he distinguishes between an action of interpleader, now substituted for a bill of inter- pleader, and interpleader proceedings in an action, to which alone Order l., r. 2, appears to refer, support this conclusion. In this view an action of interpleader may be commenced in any Division before action brought against the plaintiff in interpleader, and the Chancery practice, so far as it is unaltered by the Jud. Act, wiU in such cases be followed, while in interpleader after action brought the common law practice must be adopted in all Divisions in accordance with Order i., r. 2. The power of payment into Court in cases within INTERPLEADER. Ill s. 25, sub-s. 6 of the Jud. Act will, in a great measure, supply the place of interpleader, but the power of bring- ing in a third party under Order xvi., rr. 17, 21, does not seem adapted for this purpose, since difiSculties may arise as to costs. It is doubtful whether a third party can be made to pay costs, but it is certain that his costs cannot be thrown upon the parties bringing him in : York- shire Waggon Co. v. Newport Coal Co. (5 Q. B. D, 268). In the recent case of Hornby v. Cardwell (8 Q. B. D. 329), the Court of Appeal has decided that a third party may be ordered to pay to an unsuccessful defendant the costs payable by such defendant to the plaintiff. The summary decision in interpleader of a judge at chambers is still final, notwithstanding ss. 19 and 50 of the Jud. Act, 1873: Dodds v. Shepherd (1 Ex. D. 75) ; and see Ex parte Streeter (19 Ch. D. p. 220), and the Appellate Jurisdiction Act, 1876, s. 20. An order on an interpleader issue is an interlocutory order, and an appeal must be brought within twenty-one days : MeAndrew v. Barker (7 Ch. D. 701). The policy is generally in the form of a covenant for statute of payment out of the assets, and at a certain interval after ti™s.^' proof of death. The Statute of Limitations does not begin to run till the money is payable, and no lapse of time will bar the claim till proof of death has been ad- mitted and there are assets to meet it : Kensington Station Act (20 Eq. 197). The statement of claim would be demurrable if it did not allege assets : (Ibid.) ; Carden V. Cemetery Co. (5 Bing. K C. 253). On payment of the claim, the insurers are entitled to have the policy handed over. If it has been lost or destroyed they will be entitled to an indemnity, unless payment is made under a decree, which is an effectual 112 THE LAW OF LIFE INSURANCE. indemnity : GrokaU v. Ford {2 Jjir. (N.S.) 436) ; England V. Tredegar (1 Eq. 344). Where the policy has been assigned or otherwise dealt with, all documents shewing the title of the holder and relating to the policy alone must be handed over, and a covenant given for production of any documents relating to other property as well. Under s. 9 of the Conveyancing and Law of Property Act, 1881, an acknowledgment in writing of the right of production satisfies any liability to give a covenant for production and carries with it the obligation to produce for inspection, and at any trial, and to deliver copies or extracts. Proof of Proof of age, unless already admitted, must be furnished death" ^J Certificate of baptism or birth. A certified copy of the entry of death in the general or district registry, is evidence of death, on proof of the identity of the person to whom it relates : 6 & 7 Will. 4, c. 86, s. 37. This proof is in general furnished by the certificate of the doctor attending the deceased, which most offices require. "Proof satisfactory to the directors" means reasonable proof : Moore v. Woolsey (4 El. & Bl. 254) ; Braunstein v. Accidental Death Co. (1 B. & S. 782 ; see infra, p. 154). If a man has not been heard of for seven years, though inquiry and search has been made amongst those who if he were alive would be likely to hear of him, a presump- tion of law arises that he is dead : Doe v. Andrew (15 Q. B. 751), Prudential Co. v. Edmonds (2 Ap. Gas. p. 509), (see Paterson v. Black (Park, ii. 920) ; though there is no presumption that he died at any particular time within the seven years : Phene's Trusts (5 Ch. 139). In the case of Prudential v. Edmonds, the insured brought an action in 1874 on a policy efiected in 1863. The life, had left his home in 1867 and had not been PROOF OF DEATH. 113 heard of by his relations for more than seven years ; a niece, however, stated that she saw a man at Melbourne, in 1872, in a crowd, whom she believed to be her uncle, the life; the other relatives believed her to be mistaken. On these facts the Judge directed the jury to find for the defendants. The Court of Appeal ordered a new trial for misdirection. On appeal to the Lords, the House was equally divided, and the decision of the Court of Appeal stood affirmed. If the insurers pay in such a case under compulsion of legal process, Marriott v. Hampton (7 T. E. 269), or, if they pay under mistake of law, no action will, in the absence of fraud, lie to recover the money : Loiory v. Bourdien (Dougl. 467) ; but if paid voluntarily, under a mistake of fact, it will be recoverable : Milnes v. Duncan (6 B. & C. 671). Equity, however, will relieve against mistakes in law as well as fact : Stone v. Godfrey (5 De G. M. & G. 90), if there is any ground which makes it under the particular circumstances of the case inequitable that the party who received the money should retaia it : Rogers v. Ingham (3 Ch. D. 357), and see Sm. L, 0. ii. 421. Money paid on a fraudulent policy is, of course, recoverable : Lefevre v. Boyle (3 B. & Ad. 877). Every Court can now give complete relief both legal and equitable in any cause pending before it (Jud. Act, 1873, s. 24) ; and even under the old practice, it was held that a plaintiff having a right to proceed at law or in equity and electing to proceed in equity, submitted his whole case to the jurisdiction of the Court, and could not afterwards proceed at law, and accordingly where a bill by the representative of the insured, claiming that a policy invalid at law should be treated as valid in equity, had been dismissed, an injunction was granted restraining 114 TEE LAW OF LIFE INSURANCE. a subsequent action at law by the same person : Tredegar V. Windus (19 Eq. 607). Evidence. There is no legal privilege exempting from production the report of the medical man, or even of the private friends to whom the insurers are referred for information, though they are stated to be confidential, as between the company and the persons who wrote them, and if the insured makes out a p-ima facie case for inspection, the Court will, in the exercise of its discretion, order their production: Mahoney v. Widows Life Assurance Fund (6 C. P. 252), see Woolley v. Pole (14 C. B. (N.S.) 538). In the case of Aveson v. Lord Kinnaird (6 East, 188), where an insurance had been effected by a husband on the -life of his wife, who was warranted in good health, evidence of the statements of the wife to a friend who found her in bed, as to her health, when she was exa- mined a few days before. Were held admissible, as part of the res gestse, and a sort of cross-examination of her, the doctor having formed his opinion mainly on her satisfac- tory answers to him, evidence of which had been received, and see Edwards v. Barrow (Ellis on Insurance, p. 116), where letters of the insured to a schoolfellow shortly before the insurance, stating her indifferent health, were admitted: Kelsey y Universal Life Insurance Co. (35 Conn. 225), and Stdbart v. Bryden (1 M. & W. 615) ; but statements subsequent to the insurance are, it seems, not admissible : Fraternal Co. v. Afplegate (7 Ohio St. 292). Where the question is whether an insurance was effected hona fide by A. for his own benefit, or substan- tially by B. in the name of A. but not for A.'s benefit, every evidence is admissible which tends to shew who was really the insured; that is everything which was done by either, and evidence of declarations by either in EVIDENCE. 115 reference to the matter is not open to the objection of being hearsay, for words are often acts : Shilling v. Acci- dental Death Co. (1 F. & F. 116). In ^hat case a surgeon who gave certificates before the trial that an injury was caused by a sprain, and stated at the trial that it was caused by disease, was allowed to be treated as adverse. I 2 116 THE LAW OF LIFE INSURANCE. CHAPTER V. AVOIDANCE OF THE CONTBAQT. Mistake — Eectification — Fraud — Innocent Misrepresentations — Semlle, Life Assurance not a Contract uherrimse fldei — Special Conditions — Effect of War — Return of Premiums. The effect of mistake, fraud, or misrepresentation with- out fraud upon a contract of life insurance is now to be considered. With regard to mistake and fraud, life in- surance is governed by the same doctrines as contracts in general, and direct authority would appear to warrant a similar conclusion with regard to misrepresentation with- out fraud, though diota of very great weight and of very recent date may be found in support of treating contracts of life insurance as standing on an exceptional footing in this respect. The almost uniform practice of insurers at the present day is to embody in the contract express stipulations on this head, and the point has consequently never been directly raised in any very recent case. It is proposed here to shortly to summarise the general law on these three heads in the absence of special stipulation, and to illustrate it by its application to the special con- tract under discussion, and then to consider the effect of special stipulations in regard to innocent misrepresen- tation. The rectification, cancellation, and setting aside of written instruments is by s. 34 of the Jud. Act, 1873, specially assigned to the Chancery Division, but any MISTAKE. 117 equity entitling to relief of this nature may be given effect to in an action in any Division so far as it is inci- dental to the defence : Mostyn v. West Mostyn Goal and Iron Co. (1 C. P. D. 145). Mutual mistake of fact affecting the essence of a con- Mistake. tract, e.g., if the subject-matter does not exist, Strickland V. Tv/rner (7 Ex. 208), or if there is a substantial dif- ference between the thing contracted for and the thing ' got : Kennedy v. Panama, &c. (L. E. 2 Q. B. 580), renders the contract void ah initio : Earl Beauehamp v. Winn (4 Ch. 567). In such cases there is no real agreement, and the mistake is a good defence to an action on the alleged contract, and gives a right to have it set aside and cancelled or to recover money paid under it. Where there is knowledge on the one side and ignorance on the other, the case will generally resolve itself into one of fraud. Equity will sometimes relieve against mistake of law, (see ante, p. 113), and a creditor who, relying on the validity of an ultra vires amalgamation, had given up a security he held from the selling company, was remitted to his old rights : Saxon Life Society, The Anchor Oo.'s Case (2 J. & H. 408). In Fowler v. Scottish Hquitdble Life Insurance Society (28 L. J. (Ch.) 225; 4 Jur. (N.S.) 1169), the insured agreed with the agent of the society, who however had no power to bind it, that he should be at liberty to visit in the course of business the ports of Morocco and other ports in the Mediterranean, and on the coasts of Africa and Asia, not residing there for more than three months. This agreement was not communicated to or adopted by the society, and the policy, as drawn up, gave liberty only to visit Tangiers and other Mediterranean ports. The 118 THE ,LAW OF LIFE INSURANCE. premiums were paid for some years, and eventually the insured died outside the limits on the Atlantic coast of Morocco, having resided there less than three months. On a bill to rectify the policy and recover the amount insured, the policy was held void on the ground of mis- take; and the premiums were ordered to be repaid and the policy delivered up to the defendants. Kectifioa- In other oases a real agreement may exist, but a mis- *'""■ take may have occurred in expressing it. On clear proof of a mistake in a policy of this nature common to both parties, the instrument may be rectified so as to agree with the real intentfon of the parties, but the clearest possible proof will be required, especially if the contract is executed : Henkle v. Boyal Exchange Assuranee Co. (1 Ves. sen. 318), a case of a marine policy, where Lord Hardwicke said : " No doubt but the Court has jurisdiction to relieve in respect of a plain mistake in contracts in writing as well as against frauds in contracts, so that if reduced into writing contrary to the intent of the parties on proper proof that would be rectified. But the plaintiff comes to do this in the harshest case that can happen ; of a policy after the event and loss happened, to vary the contract so as to turn the loss on that insurer, who otherwise, it is admitted, cannot be charged ; however if the case is so strong as to require it the Court ought to do it." See also Motteux v. London Assurcmoe Co. (1 Atk. 545). In Collett V. Morrison (9 Ha. 162) there was an agree- ment to issue a policy on the life of B. to A. as trustee for B., and the policy having been issued to A. simply, and being disputed by the company on the ground of A.'s want of insurable interest, it was held that the Court could interfere and deal with the case upon the footing of BECTIFICATION. 119 the agreement, not of the policy, but the plaintiff must shew an actual concluded contract antecedent to the in- strument sought to be rectified : Mackenzie \. Coulson (8 Eq, 375) ; and an instrument can be rectified even though drawn by the plaintiff himself ; but rectification of the declaration was refused where the insurable interest was incorrectly stated, owing, it was alleged, to the mistake of the company's agent; but it was not clear from the evidence that the agent had not acted on information given by the plaintiff himself: Parsons v. Bignold (13 Sim. 518). Where there was an agreement for a loan to be secured by a policy on the life of the debtor in his own name, and the policy was by mistake taken out in the name of the creditor, who received the policy moneys, the debtor having died before the loan was concluded, it was held that the creditor was a trustee of the policy for the debtor : Martin v. West of England Fire and Idfe Co. (4 Jur. (N.S.) Ch. 158). " Fraud," it has been said, " in all Courts, and at Fraud. all stages of the transaction, vitiates all to which it at- taches " : Vdall V. Atherton (7 H. & N. 181), per Wilde, B. ; and again, " by the law of merchants all dealings must be fair and honest, fraud infects and vitiates every mercan- tile contract": per Lord Mansfield, Pawson v. Watson (Oowp. 785). It affords a good defence to an action at law and gives a right to rescission in equity or to recover money paid in ignorance of the fraud in action of assumpsit : Lefevre v. Boyle (3 B. & Ad. 877), and may even be the foundation of an action oi deceit or indemnity : Craig v. Phillips (3 Ch. D. 722). But there is no jurisdiction in equity to order an instrument to be delivered up to be cancelled where the 120 THE LAW OF LIFE INSURANCE. grounds of objection to it appear upon its face : Simpson V. Lord Eowden (3 My. & Or. 97) ; and it is not every fraud that will justify an action of deceit even though it does give a right to rescission: Arlewright v. Newbold (17 Ch. D. 317). A wilful misstatement or wilful" suppression of mate- rial facts relating to the insurance by the party effecting it, or his agent, will avoid the insurance : Pawson v. Watson (Cowp. 785). Wilful misstatements include : 1. Statements false in fact, and either known so to be, or recklessly made with- out a knowledge whether they are true or false : Pawson v. Watson (uhi supra) ; Beese Bmer Co. y.. Smith (4 H. L. p. 79). 2. Statements true when made, or believed so to be, which before the conclusion of the contract become by change of circumstances, or are discovered to have been throughout, untrue, if the change of circumstances is not communicated or the mistake is not corrected : Traill v. Baring (4 De G. J. & S. p. 330) ; Beynell v. Sprye (I D. M. & G. p. 708) ; see also the observations of Lord Black- burn in Brownlie v. Campbell (5 Ap. Ca. at p. 950), and Davies v. London Provincial Co. (8 Ch. D. 469). Semhle, however, that statements of the latter kind would not support an action for deceit: Arlewright v. Newhold (17 Ch. D. pp. 325, 329). The referees, or where the policy is on the life of another, the life, are not the agents of the insured to effect the insurance and their fraud is consequently not the fraud of the insured : Wheelton v. Eardisty (8 El. & Bl. 232), overruling Maynard v. Bhodes (5 D. & E. 266) ; Everett v. Desborough (5 Bing. 503). In Eas parte Baintree (18 W. E. 396) A. who had applied to effect an insurance on an "invalid life," in FBAVD. 121 reply to a question whether the life had been refused elsewhere, stated that he was in negotiation with several offices as the amount was large. In point of fact the risk had been refused by several offices, and was eventually refused by several more with whom A. was then in com- munication. It was held that there had been such an intentional suppression of the facts as to vitiate the policy. And compare London Assurance v. Mansel (11 Ch. D. 363). The fraud must be such as to induce the contract, but if it be once shewn that it was capable of having that effect, the guilty party cannot allege that it was in fact immaterial : BeyneU v. Sprye (1 D. M. & G. p. 708) ; Traill v. Baring (4 De G. J. & S. p. 330). A policy obtained by fraud is not void but voidable at the election of the party aggrieved : Oahes v. Turquand (2 H. L. 325) ; Armstrong v. Turquand (9 Ir. C. L. 325) ; Bawlins v. Wiokham (3 De G. & J. 304) ; and the word " void " in a proviso that the policy if obtained by fraud should be void, has been construed to mean voidable : Armstrong v. Turquand (uhi supra) (a). In an action in the Chancery Division a policy obtained by fraud will be declared void and ordered to be delivered up to be cancelled : Whittingham v. Thornborough (2 Vern. 206) ; Ba Costa v. Scandrett (2 P. Wms. 170) ; Prince of Wales Co. v. Palmer (25 B. 605) ; and the insurers have a better equity if they come at once instead of waiting till the death of the insured : Fenn v. Craig (3 Y. & 0. Ex. 216) ; but the right of rescission may be waived or lost, and receipt of premiums with knowledge of facts render- (a) Cf. the construction of a proviso making a lease void on non- payment of rent : Arnsby v. Woodward, 6 B. & 0. 519 ; Bowsor v. OoWy, 1 Hare, 109. 122 THE LAW OF LIFE INSURANCE. ing the contract voidable, has been held to amount to an election to affirm the contract: Armstrong v. Turquand (tibi supra) ; Wing v. Harvey (5 De Gr. M. & Gr, 265). A jury is the most suitable tribunal for dealing with disputed facts respecting a policy of life insurance : Hoare V. Bremridge (8 Ch. 22) ; and see Life Association of Scot- land V. McBlaine (Ir. R. 9 Eq, 176) ; Scottish Amicable v. Fuller (Jr. R. 2 Eq. 53); and where a bill had been filed for the cancellation of a policy as obtained by fraud, and an action commenced by the insured immediately afterwards, an injunction restraining the action was re- fused on this ground : Hoare v. Bremridge (ibid.) ; but the plaintiff in equity is entitled to have the contract annulled, and the Court would, under the old practice, retain the bill and act on the verdict and judgment when pronounced, and would give the plaintiff, if successful, his costs of the suit to rescind : London and Provincial Co. v. Seymour (17 Eq. 85) ; since a Court of Law had no jurisdiction to order cancellation. Where admission of age was obtained by fraud an injunction was granted restraining the action at law as the admission was dehors the contract, and might operate as a quasi-estoppel : Pritchard v. MoOuinness, cited in Scottish Amicable v. Fuller (ubi swpra). By the Judicature Act, 1873, s. 24, subs. 5, no cause or proceeding in the High Court or Court of Appeal can be restrained by injunction, but whatever might have been ground for an injunction may be relied on by way of defence, or may found an application for a stay of pro- ceedings ; and complete equitable relief of this nature may be obtained by counterclaim in an action in any Division, and it may be doubtful whether the plaintiff in equity under such circumstances would get his costs. FRAUD. 123 Under the present practice the defendant is entitled to have the issues of fact triej^ by a jury, subject to the power of the Court, which will be sparingly used : Clarke V. Cookson (2 Oh. D. 746) ; to direct trial without a jury (Order xxxvi., rr. 3, 26), and the Court also has power to order issues of fact to be tried before a jury if more convenient, the order in the case of actions in the Chancery Division stating its reasons on its face : rr. 27, 29, 29 a. In regard to contracts in general, the right of rescission arising from mistake or fraud will be lost if the contract has been acted upon, so that the parties cannot be re- mitted substantially to their former position : Beauchamp V. Winn (6 H. L. p. 233) ; Urquhart v. Macpherson (3 Ap. Ca. p. 838) ; or if innocent third parties have acquired rights under the contract : Tennent v. City of Glasgow Bank (4 Ap. Ca. 615). In regard to contracts of life insurance, the first of these qualifications of the rule is unnecessary and the second "inapplicable, for, in the first place, the contract is one for purely money payments, a deferred payment on the one side, in consideration of an annuity on the other, and the parties can always be replaced in statu quo ; and, in the second place, the rule that the assignee of a chose in action takes subject to all the equities affecting it, is still in full force in the case of assignments under the Judicature Act by express provision, and in the case of assignments under the Policies of Assurance Act, 1867, because the Act confers no legal title on the assignee, but merely enables him to sue in his own name : British EqwitaUe v. O. W. B. Co. (17 W. E. 43; 38 L. J. (N.S.) Ch. 132, and on appeal, 314). The question as to innocent misstatements or non- 124 THE LAW OF LIFE INSURANCE. Innocent disclosure of material facts is one of more difficulty. misrepre- ._^. , , i i . i i sentation. With regard to contracts m general, subject to the law relating to mistake and to the doctrine of making repre- sentations good in equity, an innocent misrepresentation of, or mere omission to state a material fact, does not affect their validity : Behn \. Burness (3 B. & S. 751) ; Davies v. London, &e., Co. (8 Oh. D. p. 474). Certain con- tracts, however, such as contracts of marine and fire insur- ance, of suretyship, or for sale of land, stand on an anomalous footing, and are treated as involving a special duty of disclosure. Whether contracts of life insurance belong to this anomalous class has been much debated. It must be remembered that there is a wide distinction between conditions, or warranties in the nature of con- ditions, and representations; a condition forms part of the contract and must be literally performed, a represen- tation is a description of the state of the case, it is col- lateral, and independent, and need only be substantially performed, and though sometimes contained in the written instrument, it is not an integral part of the contract, and whether a descriptive statement in a written instrument is a mere representation or a substantive part of the con- tract, is a question of construction for the Court : Belm. v. Bwrness {ubi supra), and see 1 Dougl. 11. The use of the word " warranty " in relation to policies is misleading, for breach of a warranty does not avoid a contract, but gives a right to an independent action, and in policies and charterparties the word " warranty " means condition: Ibid. In Behn v. Bwness a representation is defined as a statement or assertion made by one party to the other before or at the time of the contract, of some matter or circumstance relating to it, and it is said that, apart from INNOCENT MISREPRESENTATION. 125 fraud, " the contract is not broken though the representa- tion proves to be untrue, nor (with the exception of the case of policies of insurance, at all events marine policies, which stand on a peculiar anomalous footing) is such untruth any cause of action, nor has it any efficacy what- ever." In Davies v. London, &c., Go. (8 Ch. D. p. 474), it is said : " Where persons are contracting with one another, each may, unless there be a duty to disclose, observe silence even in regard to facts which he believes would be opera- tive upon the mind of the other, and it rests upon those who say that there was a duty to disclose, to shew that the duty existed :" per Fry, J. However, even " in ordinary contracts the duty of dis- closure may arise from circumstances which occur during the negotiation. Thus, for instance, if one of the negotiat- ing parties has made a statement which is false in fact, but which he believes to be true, and which is material to the contract, and during the course of the negotiation he discovers the falsity of that statement, he is under an obligation to correct his erroneous statement, although if he had said nothing he, very likely, might have been entitled to hold his tongue throughout. So again, if a statement has been made which is true at the time, but which during the course of the negotiations becomes untrue, then the person who knows that it has become untrue is under an obligation to disclose to the other the change of circumstances." Davies v. London, dte. (uhi sv^ra, p. 475). It has been laid down that "Insurance is a contract Does upon speculation, the special facts upon which the con- mentor' tingent chance is to be computed lie most commonly in ^°^-^^- , ° "■ •' closure ojt the knowledge of the insured only ; the underwriter trusts material 126 THE LAW OF LIFE INSURANCE. fact, to his representation, and proceeds upon confidence that however "^ '^ innocent, he doGS not keep back any circumstance in his knowledge the policy ? ^ mislead the underwriter into a belief that the cir- cumstance does not exist, and to induce him to estimate the risk as if it did not exist. The keeping back such circumstance is a fraud, and therefore the policy is void. Although the suppression should happen through a mis- take without any fraudulent intention, yet still the under- writer is' deceived and the policy is void; because the risk run is really different from the risk understood and intended to be run at the time of the agreement : " Carter v. Boehm (3 Burr. 1905) ; and with regard to policies of marine insurance, the rule is, that the insured is bound to disclose everything which would affect the judgment of a rational underwriter governing himself by the principles and calculations on which underwriters do in practice act : lonides v. Pender (L. E. 9 Q. B, 531) ; Bivaz V. Gerussi (6 Q. B. D. 222), The same considerations would appear to apply in a great measure to the contract of life insurance, and there is considerable authority to shew that the same rule applies to all insurances, whether on ships, houses, or lives, namely, that the contract is one uberrima fides, which requires the utmost amount of good faith, and that every circumstance which is material in point of fact, whether known to be so or not, must be disclosed : Lm- denau v. Desborough (8 B. & C. 586) ; Balglish v. Jarvie (2 M. & G. 243) ; Moem v. Heyworih (10 M. & W. 147, 157) ; and in the very recent case of London Asswranee v. Mansel (11 Ch. D. 363), the above cases were discussed and approved as containing a correct exposition of the law by Jessel, M.K., who stated : " I am not prepared to lay down the law as making any difference in substance INNOCENT MISBEPRESENTATION. 127 between one contract of insurance and another, and whether it be life, fire, or marine insurance, good faith is required in all cases, and that though there may be certain circumstances which, from the peculiar nature of marine insurance, require to be disclosed, and which do not apply to other contracts, that is rather, in my opinion, an illustration of the application of the principle than a distinction in principle." The same doctrine is laid down in Brownlie v. Campbell (5 App. Ca. p. 954) per Lord Blackburn : " In policies of insurance, whether marine insurance or life insurance, there is an understanding that the contract is uberrima fides, that if you know any circumstance at all that may influence the underwriter's opinion as to the risk he is incurring, and consequently as to whether he will take it, or what premium he will charge if he does take it, you will state what you know. There is an obligation to dis- close what you know, and the concealment of a material circumstance known to you, whether you thought it material or not, avoids the policy ;" and the judgment of Lord Campbell in Wheelton v. Eardisty (8 E. & B. 270) in the Court below is to the same effect : " Vherrima fides," he says, "is to be observed with respect to life insurances as well as marine insurances. The insured is always bound not only to make a true answer to the questions put to him, but spontaneously to disclose any fact exclusively within his knowledge which it is material for the insurer to know." The case was overruled however on this point in the Court above : see infra, p. 129. It must be observed, however, that the doctrine was not necessary to the decision of any of the cases in which it was thus laid down, except perhaps Lindenau v. Des- lorough («6t supra)- Balglish v. Jarvie, Moens v. Hey- 128 TEE LAW OF LIFE INSUBANGE. worth, and BrownUe v. Gampbell were cases unconnected with life insurance, one of a special injunction ex parte, another of an ordinary mercantile contract, and the third of a contract for the sale of land, and it was used merely as an illustration. In London, Asswrance v. Mcmsel {\1 Ch. D. 363) the insured whose life had been declined by five offices and accepted by two, in answer to an express question whether proposals on his life had been made at other offices, and, if so, whether they had been accepted at Ordinary or increased premium or declined, replied "Insured in two offices for £16,000 at ordinary rates, policies effected last year," and there was a declaration that the particulars were true, and should form the basis of the contract. The case therefore fell within Anderson V. Fitzgerald, and the general doctrine was unnecessary to the decision, and even without any such declaration the decision would, it seems, have been the same, for the answer was either so misleading as to amount to an un- truth, or was an intentional evasion of part of the question, and the case was really one of fraudulent con- cealment : see also Fowhes v. Manchester Gomfcmy (3 F. & F. 440) and Fx-paHe Daintree (18 W. R. 396). Even in Lindenau v. Desborough, which was a policy on the life of the Duke of Saxe-Gotha, whose mental facul- ties were impaired, a fact which was not stated by his physicians and medical referees, whose hona fides however was not disputed, there was a general question, " Is there any other circumstance within your knowledge which ought to be communicated to the directors," and Lord Tenterden based his judgment on the fact that this ques- tion required ipformation of every fact which any reason- able man would think material, though Mr. Justice Bayley laid down the doctrine in the most general terms. INNOCENT MISREPRESENTATION. 129 In Jones v. Provincial Insurance Go. (3 C. B. (N.S.) p. 86) it was said by Cresswell, J., in delivering the judg- ment of the Court, " The proposition as a general rule is indisputable that it is the duty of a party effecting an in- surance on life or property to communicate all material facts within his knowledge touching the subject-matter of insurance, and it is a question for the jury whether a par- ticular fact was or was not material. It is however equally clear that the underwriters may in any particular case limit their right in this respect to that of being informed of what is in the knowledge of the insured, not only as to it^ existence in point of fact, but also as to its materiality." The insured had stated in his declaration that he was not aware of any disorder tending to shorten life; he had had a disorder which, in fact, had that tendency, though he was not aware that it had, and the Court held that the policy was not avoided, the insurers having limited their right to knowledge to facts known by the insured to be material. The above cases moreover, with the exception of London Asswrance v. Mansel and Brownlie v. Oamphell, were decided when the subject of life insurance had been much less discussed and was less understood than it is at present, and when Godsall v. Boldero was still law, and the analogy between marine and life insurance was supposed to be more complete than it has since been held to be. On the other hand, the unanimous decision of the SemUe, judges of the Exchequer Chamber (Martin, Crowder, su*anc"e is Willes, Bramwell, Channel!, and Pollock, C.B.),in Wheelton °°* ^ ™"- ' tract V. Hardisty (8 E. & B. 232) (a) is an express authority vbemmw fidei — (a) Query, whether Wheelton v. ffardisty can be supported on the misstate- principle of Jones v. Provincial Insurance Co., that the parties had by ment or their contract limited their right to information. K 130 TEE LAW OF LIFE INSURANCE. non-dis- that innocent misstatements or non-disclosure do not does not avoid a contract of life insurance, unless there be a con- avoid. dition that they shall, and that the rules above laid down as applicable to marine insurance do not apply to life policies : see also Pollock on Contracts, 3rd ed. p. 504. Wheelton v. Earddsty was an action on a policy effected by the plaintiffs on the life of one Jodrell, to secure a loan which he proposed to effect. The declaration con- tained fraudulent mistatements by the life and his referees, viz., that he had not had fits and that he was a man of temperate habits, when in point of fact he had recently suffered from epileptic fits and was suffering from delirium tremens (at the time) ; the plaintiffs had no knowledge of the fraud, and signed a declaration that they believed the above particulars and statement to be true. There was no condition that the statements were true or that they should be the basis of the contract. The policy recited, among other things, that the life had never had fits or any disease tending to shorten life, and it was contended that the recital was a warranty, and being in point of fact untrue, that the policy was avoided. The Exchequer Chamber held that there was no warranty of the truth of the matters recited in the policy to have been declared in the proposal, nor anything in the con- tract as set out shewing an intention that the truth of these matters should be the basis of the contract. " The cases cited for the defendants to shew that the representations whether fraudulent or not if merely un- true avoided the contract, failed to shew that such a rule applied to life policies unless the policy contained a direct provision that the truth of snch representations was to be the basis of the contract :" per Martin, B. INNOCENT MISREPRESENTATION. 131 " The policy recites a proposal containing certain statements, and that the defendants undertook the insur- ance upon the terms and conditions therein expressed. The defendants contend that one of those conditions was that if any statements by the plaintiff were untrue the policy should be avoided. But the cases they relied on were principally cases of marine policies, and none of the cases established that life policies are to be so construed unless they contain an express condition to that effect. The statement is merely a representation in writing, the untruth of which would avoid the policy if it were false to the knowledge of the party claiming under the insurance, but not otherwise :" per Crowder, J. "No rule can be drawn from the cases cited as to the construction of marine policies. There is nothing unrea- sonable in the defendants giving or the plaintiff accepting a policy not based on the truth of the statements :" jper Bramwell, B. The same view is supported by Blackburn, J. in Fowhes V. Manchester &c. Co. (3 B. & S. p. 929) : " If there be a fraudulent misrepresentation or concealment of a material fact (in marine policies it is immaterial whether the mis- representation or concealment be fraudulent or not) the policy is void," Upon the whole it is submitted that the dicta cited above cannot prevail against the express and unanimous decision of the Court of Exchequer Chamber in a case where the whole question was fully argued and all the authorities cited, and that Lindenau v. Desborough, so far as it is inconsistent with Wheelton v. Hardisty, must be considered overruled, and the contract of life insurance must be treated as governed by the general law. Even assuming, however, that in the absence of special Making _ representa- K ^ tions good. 132 TEE LAW OF LIFE INSURANCE. stipulation innocent misrepresentation does not avoid a contract of life insurance, it may so affect the essence of the contract as to entitle the party misled to avoid the contract on the ground of mistake : Fane v. Feme (20 Eq. 698) ; or it may confer on him an equitable right to have the representations made good : Slim v. Croucher (3 D. F. & J. 518) ; Leather v. Simpson (11 Eq. p. 406) ; where it was laid down by Malins, V.C., that " the rules of this Court are settled that when a representation in a matter of business is made by one man to another calcu- lated to induce him to adapt his conduct to it, it is perfectly immaterial whether the representation is made knowing it to be untrue, or whether it is made believing it to be true if, in fact, it was untrue ; because every man making a representation inducing another to act on the faith of that representation must make it good, if he takes upon himself to represent that which he does not know to be true, and he is equally bound if he made it without knowing it to be untrue." And again, " this occurs where a man is going to deal for valuable consideration with a particular subject, and the value of the return which he is to receive depends entirely upon a particular fact, which is or ought to be in the knowledge of a particular person ; if that person takes upon himself the responsibility of a positive statement, upon the faith of which he knows that the other is going to deal for a valuable consideration, he is bound to make good that assertion:" per Selborne, L.C., Brownlie v. Campbell (5 Ap. Oa. pp. 935, 936). This appears to be the ground of the decision in Traill v. Baring (4 De G. J, & S. 318), where the policy was even set aside as obtained by a representation true at the time, which became untrue afterwards by a change of MAKING REPRESENTATIONS GOOD. 133 circumstances. That was a case of a reinsurance effected by the defendants, an insurance company, with the plain- tiffs, another company. The defendants represented that they intended to retain a third of the risk themselves, a representation which was an important inducement to the plaintiffs to enter into the contract, and subsequently, without any dishonest purpose, changed their intention and reinsured the whole of the risk. The contract was declared void, and the policy ordered to be delivered up to the plaintiffs. It was there laid down that " a contract obtained by an untrue representation inducing the con- tract, intended to be carried into effect at the time but abandoned afterwards and without communication, will be set aside," per Knight Bruce, L.J. And again, " If a person makes a representation by wbich he induces another to take a particular course, and the circumstances are afterwards altered to the knowledge of the party to whom the representation is made, and are so altered that the alteration of circumstances may affect the course of con- duct which may be pursued by the party to whom the representation is made, it is the imperative duty of the party who has made the representation to communicate to the party to whom the representation has been made the alteration of those circumstances, and this Court will not hold the party to whom the representation has been made bound unless such a communication is made : " per Turner, L.J. In British Equitable v. G. W. B. Co. (17 W. E. 43), the insured had given the name of A as his regular medical attendant, and in the interval between the acceptance of the risk and payment of the premium he consulted another doctor, who told him that he had a dangerous illness, and it was held on the authority of Traill v. 134 THE LAW OF LIFE INSURANCE. Baring that he was bound to inform the company of the alteration of circumstances. This class of cases are sometimes Said to involve a technical or legal fraud, though no actual or moral fraud can be imputed : Traill v. Baring (ubi supra) ; Bawlins V. Wickham (3 De G, & J. 304). Such a ^use, however, of the term " fraud " appears in the highest degree incon- venient and undesirable. See Hendriks v. Montagu (17 Ch. D. p. 648). It does if As we have seen, the almost universal practice of such is the . ... ...... , condition insurance companies is to require intending insurers to conti^ t ^^8° ^ declaration containing detailed answers to an elaborate series of searching questions, and stating that the declaration shall form the basis of the contract and is true, and that any untrue statements, omissions, or sup- pressions shall avoid the policy; and in such cases the declaration is expressly or impliedly incorporated witli the policy, and they must be construed together and together form the contract : FowJces v. Manchester, (&c. Co. (3 B. & S. 917) ; and where this is the case truth becomes a condition precedent to liability, and any untrue repre- sentation whether material or not avoids the policy, for it is part of the contract that if a particular statement is untrue the contract is at an end : Anderson v. Fitzgerald (4 H. L. C. 484, p. 504). In that case false answers were given by the insured to two questions in the proposal whether any of his relations had died of consumption, and whether his life had been accepted or refused at any office. Several things were warranted by the insured not including the subjects of these answers, and the policy contained a proviso that "if anything so warranted shall not be true, or if any circumstance material to the insurance shall not have been truly stated or shall have THE DEOLABATION. 135 been misrepresented or concealed, or any false statements made to the company in or about the obtaining or effect- ing of the insurance," the policy should be void and the premiums forfeited. It was held in the House of Lords, reversing the judgments of the Exchequer and Exchequer Chamber in Ireland, that it was a misdirection to leave to the jury whether the answers were material as well as false, and that if not material the plaintiff was entitled, for the representation being part of the contract its truth not its materiality was in question. In Cazenove v. British Equitable Co. (6 0. B. (N.S.) 437) where there was a similar declaration, the policy was avoided by an innocent misstatement, viz., that the insured had had no disease requiring confinement, ante, p. 40. So in Macdonald v. Law Union (9 Q.. B. 328), in an action on a policy effected by the plaintiff on the life of another, which contained a proviso that if the declaration under the hand of the plaintiff delivered at the office as the basis of the insurance was not in every respect true the insurance should be void, it was held that a state- ment on a material matter untrue to the knowledge of the life though not to the knowledge of the insured, avoided the policy : Wheelton v. Eardisty (8 E. & B. 232) being distinguished, on the absence of a proviso there. Ihe case of A. G. v. Bay (9 Ch. 397), where, an annuity granted by the National Debt Commissioners to the Atlas Assurance Company on representations as to the age of the life which, though perfectly bond fide, turned out to be untrue, was set aside, and the money on both sides repaid with interest at £4 per cent., seems to have rested not on the ground of mistake but partly on grounds of public policy and partly on the ground that 136 THE LAW OF LIFE INSURANCE. the case was the same as that of a policy where repre- sentations as to age and health are made the basis of the contract. Where the policy is on the life of the insured, mis- statements of material facts will almost always be fraudu- lent. Where a receipt is issued in the ordinary way for the first premium, stating that the life is insured till a proper policy can be issued, although it is unconditional in form, every defence is open to the insurers resisting the per- formance of the contract which would have been open to them had a policy been issued : Hancock v. Macnamara (I. K., 2 Eq. 487) : see ante, p. 44. But the representation relied on as avoiding the con- tract must be one of existing facts, not of mere intention : Jorden v. Money (5 H. L. 0. 186). Benham v. United Guarantee Co. (7 Ex. 744), a case of a guarantee policy, where the declaration on which it was based contained a statement that the accounts would be checked fortnightly, and it was held a representation of intention merely, and that its incorrectness did not vitiate the policy. But in the very similar case of Towle v. National Guardian Insurance Society (30 L. J. (Oh.) 900), where a guarantee policy was based on representations that the accounts would be checked weekly, and that the collector, whose honesty was guaranteed, would never have more than £200 at a time in his hands, it was held, reversing the decision of Stuart, V.O., who considered, on the authority of the above case, the representations to be of future intentions, not of facts, that the representations being incorrect the policy was avoided. Effect of The civil war in America gave rise to many interesting questions with regard to the effect of war on policies of war. EFFECT OF WAR. 137 life insurance, questions not unworthy of consideration, although they have not as yet been discussed in the Courts of this country. War suspends and interdicts all commercial intercourse with the enemy's country except with the license of the Crown (a) : Esposito v. Bowden (27 L. J. (Q.B.) 17) ; it renders contracts made during its continuance with an alien enemy illegal : Willison v. Patteson (7 Taunt. 439, p. 450) ; it dissolves executory contracts made before war with persons who have thereby become alien enemies, and renders their performance illegal : Esposito v. Bowden {ubi supra) ; Beid v. Hoskins (24 L. J. (Q.B.) 315) (b). With regard to executed contracts it merely suspends the right to sue, which revives on the restoration of peace : Ahenius v. Nygrin (24 L. J. (Q.B.) 19). In the case of life insurance contracts, if the policy is paid up or the premium has been paid for the current year, the contract will continue ia force, but payment of the annual premium is a condition precedent to the lia- bility attaching, and the question arises what is the posi- tion of the insured who is prevented by war from paying his premiums. In America, in some States, it has been held that the policy is forfeited, in others, that it remains in force, and that the insured can recover the sum insured less the amount of the premiums unpaid, with interest, Mr. Bliss, in his work on life insurance, sums up the American cases as establishing — 1. That the contract of life insurance is not an exe- (o) A license only granted at common law under the Great Seal. (6) Every person domiciled in the enemy's country, that is, volun- tarily "resident there animo manendi, is an alien enemy, even as respects the country of which he is a native-born subject : see Marshall on Insurance, 4th Ed. p. 30, and cases there cited. 138 TEE LAW OF LIFE INSURANCE. cutory contract of such a nature as to be ipso faeto dissolved by war between the country of the insurer and the insured. 2. That war excuses non-payment of the premiums, and if the insured or his representatives promptly tender the back premiums after the restoration of peace no forfeiture arises. 3. That an agent's authority to receive premiums on existing contracts is not terminated by war. Since the last edition of his work it was decided in the New YorTc Co. v. Statham (3 Otto (U.S.) 25), that non-payment of the premiums in consequence of war forfeits the policy unless the company waive the for- feiture, and that they cannot be compelled to revive it, since the sick and dying only would apply, but that the insured is entitled to the equitable value of his policy, and in Insurance Co. v. Davis (5 Otto (U.S.) 425), it was recognised, as an exception to the rule that war suspends commercial intercourse, that debts may be paid to the agent of an alien enemy if residing in the same state as the debtor, provided that the parties, the principal and agent, have assented to the subsistence of agency, and that the agency is not continued with the view of trans- mitting the funds to the principal during the continuance of the war. Return of An action will lie for the return of the premiums, premiums. ^^ their return will be ordered if the policy is avoided on the ground of the fraud of the insurers : Park, 456 ; Carter v. Boehm ; or on the ground of mistake : Fowler v. Scottish Eq. (4 Jur. (N.S.) 1169) ; AU.-Gen. v. Bay (9 Ch. 397) ; or for the innocent misrepresentations of the insured : Feisc V. Parkinson (4 Taunt. 740) ; Anderson v. Fitzgerald (4 H. L. C. 484) ; or for illegality, e.g., want of insurable RETURN OF PREMIUMS. 139 interest : Besborough v. Cwlewis (3 Y. & C. (Ex.) 175) ; or as a wagering policy : Paterson v. Powell (9 Bing. 320) ; unless the contract is executed by the event insured against having taken place : Paterson v. Powell (uM supra), in which case the rule in pari delicto applies : Lowry v. Bourdieu (Dougl. 468) ; Vandych v. Hewitt (1 East, 96) ; et vide Allkins v. Jupe (2 0. P. D. 375) (cases of marine policies). The insurers are, however, entitled to retain the pre- miums if the condition of the contract is such, or if the policy is avoided for the fraud of the insured : Chapman V. Fraser (Park, 456) ; Wilson v. DueJcett (3 Burr. 1361), or they will be applied in payment of the plaintiff's costs of the action for setting aside the policy : Whittingham v. Thornborough (2 Yem'. 206) ; Da Costa v. Seandret (2 P. W. 170) J P. of W. Co. V. Palmer (25 Beav. 605). 140 TEE LAW OF LIFE INSUEANCE. CHAPTER VJ. ACCIDENT POLICIES. Form— Construction — What is an Accident — Evidence — Arbitration — American Cases. The introduction of railways led to a new development of insurance by the formation of companies for insurance against death or injury from railway accidents, and this kind of insurance was soon extended to accidents of every description. The passing of the Employers Liability Act, 1880 (43 & 44 Vict. c. 42), has led to a considerable development oi the business of accident insurance, no less than eight new companies which transact this business alone, or in combination with the business of life insurance, having been established since the Act. The Act modifies the doctrine of common employment, and gives workmen with certain limitations the same right to compensation for personal injuries arising from the negligence of the employer or his subordinates as a stranger would have. Three years' earnings is the out- side compensation recoverable, and the service on the employer within six weeks of the accident of a written notice of the injury sustained, its cause and date, is a condition precedent to the right to sue, ss. 4, 7 : Moyle v. Jenkins (41 L. J. (Q. B.) 112) ; Keen v. MiUwall Lock (8 Q. B. D. 482). Accident policies are issued insuring a gross sum pay- able on death and a fixed weekly allowance, as compensa- ACCIDENT POLICIES. 141 tion on total or partial disablement, or either a gross sum or weekly compensation alone. The risks are classiSed according to the nature of the occupation of the insured, and all healthy, temperate adnlt lives between certain ages (18-60) in the same class are insured at a uniform rate. The general characteristics of the contract, and the form which it takes, are very similar to those of the con- tract of life insurance, and it will only be necessary to consider them here so far as they present any special peculiarities. The insured is required to sign a proposal and declara- The pro- 11 1 • posal. tion stating his name, age, address, and occupation, whether he has any disease or physical defect, whether he has ever had accident, whether he is subject to fits, whether there are circumstances rendering him specially liable to accident, whether he is insured against accident already, and whether he has ever proposed for an accident insurance, and whether his proposal, if any, was accepted or declined ; and the proposal and declaration is made the basis of the contract, and any untruth avoids the policy. No medical examination is required. The ordinary form of policy, after reciting that the in- The policy. sured has delivered to the office a signed declaration, and has agreed that it shall be the basis of the contract, and has paid £ as premium for the first year's insurance, provides that if the insured receives bodily injury from accident or violence during the first year, or subsequently during the continuance of the policy, the premium being duly paid within the days of grace, the funds of the company shall be liable to pay to the insured, or his representatives, compensation as follows : if such accident or violence causes death within three calendar months 142 TEE LAW OF LIFE INSUBANGE. after its occurrence £ , such sum to be paid within one month after proof satisfactory to directors of death in manner entitling to its receipt has been furnished ; if such accident or violence shall not cause death as aforesaid, but shall cause bodily injury wholly or partially disabling the insured from following his usual pursuits, then money compensation at the rate of £ per week during total disability, and £ a week during partial disability, such sums to be payable within fourteen days of proof satisfactory to the directors that they are payable. Then follows a proviso avoiding the policy and for- feiting the premiums if the declaration is untrue, or if the policy or its renewal is obtained by any misrepresen- tation, concealment, or untruth. No claim is payable in respect of death or injury by accident or violence unless caused by external and material cause operating on person of insured, and unless, in case of death, death takps place from such accident or violence within three months from the occurrence thereof, and in case of non-fatal injury disability commences within one month. A limit is fixed to the sums payable on any number of accidents within the year, and where death ensues sums paid for disablement are to be deducted. Death by suicide, or death or injury by any breach of the law, or while intoxicated, or by voluntary exposure to unnecessary peril, or by disease caused by injury or injury caused by disease, are excepted from the risks insured against. Travelling out of Europe or engaging in a more haz- ardous occupation without license invalidates the policy. Notice in writing of the claim, with full particulars, must be given within a fixed time, from the occurrence of the accident or violence. CONSTRUCTION OF POLICY. 143 The policy is made subject to the indorsed conditions relating to payment of the premium within the days of grace, to the giving notice of the accident and facilities to the company's medical officer to examine the case, and the furnishing all proper evidence, and providing that the amount of compensation in case of dispute shall be re- ferred to arbitration and the insured shall have no right of renewal. An insurance against death by accident is within 14 Geo. 3, 0. 48, and requires an insurable interest, and a policy effected nominally by a father on his own life, but in reality by his son for his own benefit, is void : Shilling v. Accidental Death Insurance Co. (1 F. & F. 116). Fainting fits are not deemed fits by the faculty, so as to be within the words " epileptic or other fits :" Shilling v. Accidental Death Insurance Co. (uhi swpra), and the fact that the insured, an old man, ruptured, and subject to fainting fits, drives out in a gig, is not a voluntary exposure to obvious risk within the meaning of an exception in the policy in those terms : Ibid. The meaning of the words " wilful exposure to unneces- sary danger " was also considered in Mair v. Railway Passengers Co. (39 L. T. 356). In that case the insured, who had been drinking to a certain extent, rudely accosted in the street a woman whom he did not know, and en- deavouring to put his arm round her waist, was knocked down by a man in company with her, and fracturing his skull on the kerb died three weeks afterwards, and an opinion was expressed by Coleridge, C.J., dulitante Denman, J., that the peril pointed at must be one ejusdem generis with those previously enumerated, viz., entering a carriage in motion, acting in violation of a railway company's by-laws, riding steeple-chases, &c., and 144 TEE LAW OF LIFE INSURANCE. would not include the case of a man either in or out of his senses, and either morally or immorally, going up to a woman and speaking to her and getting knocked down by some one who thought he had a right to protect her. So mere imprudence or ordinary negligence, such as getting on to a train of cars in slow motion, is not sufficient to vitiate a policy under a condition against wilful and wanton exposure to obvious risk : Schneider v. Provident Co. (Am. E. 1, 157 ; 24 Wise. 28). A proviso excepting from the risks insured against, " death, or injury causing death happening while under the influence of intoxicating liquor," means such an influence as to disturb the quiet and equable exercise of a man's intellectual faculties : ]^er Coleridge, C.J. : Mair V. Bailway Passengers Co. {uhi supra). But the proviso relates to the condition of the insured, not to the cause of his death, and intoxication, whether contributing to cause death or not, vitiates the policy : Shader v. B. P. Co. (66 N. Y. (21 Sichel) 441). Where the insured, a solicitor practising at Biggleswade, registrar of the county court and clerk to board of guardians, sprained his ankle severely and was confined to the house, being unable to stand or walk for a consider- able time, though he was able partially to attend to busi- ness by writing letters, studying law books, and giving instructions to clerks, he was held to be " wholly disabled from attending to his usual business " within the meaning of the policy : Hooper v. Accidental Death Insurance Co. (5 H. & N. 546 ; 29 L. J. (Ex.) 340). In Perrins v. Marine and General Travellers Insurcmce Society (29 L. J. (Q.B.) 17, 242) ; where the insured was required to state his profession or occupation, it was held by the Court of Exchequer (diss. Cockburn) reversing CONSTRUCTION OF POLICY. 145 the decision of the Court below, that a description of himself as esquire by the insured, not stating that he was an ironmonger, was not an untrue statement so as to invalidate the policy within Anderson v. Fitzgerald; and see Huguenin t. Rayley (6 Taunt. 186). Where it is a condition precedent to tlie right to Notice. recover on an accident policy that notice giving particu- lars of the accident should be delivered to the head office of the company within nine days, the principle of Taylor V. CaldweU (3 B. & S. 826) does not apply, and the con- dition is not discharged by the fact that the accident resulting in instantaneous death, and no other person knowing of the existence of the policy, notice could not be given. It is not a case of impossibility owing to the act of Grod, the assured might have provided for the con- tingency by informing others of the policy : Gamble v. Accident Insurance Co., Limited (I. R., 4 C. L. 204). In Simpson v. Accidental Death Insv/ranee Go. (2 C. B. (N.S.) 257), the conditions of the policy were, amongst others : — 1. That the premium should be paid within twenty-one days from the time when it first became due, and that if paid within twenty-one days the policy should not be void notwithstanding the happening before the expiration of that time of the event or events upon the happening whereof the amount secured by the policy should, accord- ing to the terms thereof, become payable. 2. That if the premium was unpaid for twenty-one days after it was due the policy should be void, and the insured should forfeit all claim thereunder. 4. In every case where a new pre- mium became payable, the directors were to be at liberty to terminate the risk by refusing to accept the premium. Premiums were payable on the 22nd of January. A. 146 TEE LAW OF LIFE INSURANCE. effected the policy in January, 1851, and paid premiums down to January, 1855. On the 27th of January, 1855, an accident happened to him which caused his death on the let of February. On the 4th of February the insurers had notice of the death, and a correspondence on the subject of the claim ensued ; the premiums had been paid through an agent, and neither party was then aware that the current premium was unpaid, as in fact was the case. The insurers first became aware of the fact on the 8th of February, but did not communicate the fact to the representatives of the insured till the 13th of February, the day after the days of grace expired, when they informed them that the claim had been considered and rejected. The jury found that the insurers had intentionally withheld the fact of non-payment of the premium, that their conduct misled the representatives of the insured into abstaining from inquiries which would have shewn the fact. A verdict was accordingly entered for the plaintiff. On a rule to shew cause why judgment should not be entered for the defendants it was held, — 1. That the principle of Pickard v. Sears (6 Ad. & E. 469) did not apply, and that the defendants having merely ab- stained from informing the plaintiffs of the non-payment of the premium were not estopped by their conduct from . shewing that the premium was in fact unpaid : cf. Sweenmj V. Promoter Life Co. (14 Ir. 0. L. E. 476). 2. That the condition gave no right to the executors of the insured to pay the premium, and that if tendered by them within the twenty-one days the company might have refused to accept it. See Pritohard v. Merchants^ Society (3 0. B. (N.S.) 612), and . 24), and every annual statement after the next investigation, i.e. the first after the Act (s. 3 of the Act of 1872), is to be accompanied by a printed copy of the abstract of the actuarial report. A printed copy of the last deposited statement or abstract is to be sent to every shareholder and policy-holder on application (s. 11). Companies not registered under the Act of 1862, and not having adopted s. 10 of Oomp. Clauses Act, 1845, are to keep a shareholders' address book and supply a copy to every shareholder and policy- holder on application (s. 12) ; companies not registered under the Act are moreover to have their deed of settle- ment printed and similarly supply copies (s. 13) ; ss. 14 and 15 regulate the amalgamation of companies, for which the consent of the Court is required for the future : see infra, p. 210. The Board of Trade may direct any documents re- 182 THE LAW OF LIFE INSURANCE. quired by the Act, or certified copies of them, to be kept by the registrar of joint stock companies, or other officer of the Board, where they may be inspected, and copies procured by any person (s. 16). Deposited documents are made receivable in evidence, and certified copies are receivable as if they were ori- ginals (s. 17). Penalties not exceeding £50 for each day's default are imposed on companies failing to comply with the requirements of the Act, and if default continue for three months after notice of default from the Board of Trade published in one or more newspapers, the company may be wound up on the application of any policy-holder or shareholder (s. 18). Any person signing a statement or other document required by the Act which is false to his knowledge in any particular is liable on conviction on indictment to fine and imprisonment, or, ou summary conviction, to a fine not exceeding £50 (s. 19), and penalties are recoverable and applicable as penalties imposed by the Companies Act, 1862 (s. 20) : see Companies Act, 1862, ss, 65, 66. Sect. 21 and 22 enable holders of current policies or shareholders to wind up a company that is pro- spectively insolvent, or, instead of a winding-up, to obtain an order for the reduction of its contracts: see infra, p. 239 et aeq. The Board of Trade are required to lay the deposited statements before Parliament every year (s. 24), even though not such as required by the Act (see s. 3 of the Act of 1872), and finally Government insurances, through the National Debt Commissioners or the Post Office, under certain specified statutes, 10 Geo. 4, c. 24, 3 & 4 LEGISLATION OF 1810. 183 Will. 4, c. 14, 16 & 17 Vict. c. 45, and 27 & 28 Vict. c. 24, are excepted from the operation of the Act. The Act of 1872, s. 4, contains provisions for the wind- ing up of absorbed companies in conjunction with the company absorbing tbem (s. 4) ; establishes rules for the valuation of policies and annuities in a winding-up (ss. 5, 6), (see infra Winding-up, p. 246) ; and requires novation to be in writing, signed by the policy-holder (see infra, Novation, p. 216). The amending Acts are incorporated with the Act of 1870 (Act of 1871, s. 3 ; Act of 1872, s. 8) ; see App. p. 288. Some of the provisions of the Act, such as those with regard to preliminary deposits, amalgamations, and winding-up, are most valuable ; but it may be doubted whether the exhaustive returns required, though useful as far as they go, go far enough, and whether they are not rather calculated to produce a false sense of security than to afford any substantial protection to the policy- holders or the public. They are little likely to be palatable reading, or, if read, to be easily intelligible to any but professional men, and the valuation of assets and liabilities need not be by any independent person but may be made by any actuary, of which term the Act contains no definition, while the valuator, who would generally be the company's own ofiBcer, is free to select the tables of mortality and to fix the rate of interest upon which his valuation is based. A GoTernment audit, if such an undertaking were properly within the functions of a Government, would probably be equally illusory, while it would almost inspire the confidence of a Govern- ment guarantee. In the debate on the second reading of the Act of 184 TEE LAW OF LIFE INSURANCE. Hansard, 1870, the then Chancellor of the Exchequer suggested vol. 199. ' that the only effectual plan would be to institute a system of Government insurance without profits on terms sufficiently high to prevent the Government from coming into competition with good companies, and intimated that the Government were prepared to take the necessary steps for the purpose if the suggestion were approved of. GOVERNMENT INSURANCE. 185 OHAPTBE VIIT. GOVERNMENT INSURANCE — FRIENDLY SOCIETIES. Apart from the trading companies or commercial under- takings which monopolise, as has been stated, the general business of life assurance, assurances upon lives may also be effected to small amounts within restricted limits and under special conditions and exemptions either with the Grovernment or with certain societies formed for mutual relief and benefit, such as friendly societies, trade unions, industrial assurance companies, and the Customs Fund. Grovernment is empowered to grant life annuities under statutes enacted for fiscal purposes as part of a scheme for the reduction of the National Debt, beginning with 48 Geo. 3, c. 142, in the year 1 808, of which 10 Geo. 4, c. 24, is the principal Act now in force, and it is also empowered to grant life annuities or assurances through the Post Office in connection with savings banks to small amounts and under special conditions as an encouragement to thrift under 16 & 17 Vict. c. 45 (repealing 3 & 4 Will. 4, so far as it related to life annuities) and 27 & 28 Vict. c. 43. By these Acts the National Debt Commissioners are enabled to grant life assurances to persons of either sex between the ages of sixteen and sixty on their own lives for amounts not less than £20 and not more than £100, and annuities on the lives of persons of either sex of ten years old and upwards to an amount not exceeding £50 186 TEE LAW OF LIFE INSURANCE. a year. Assurances and annuities so granted are made chargeable upon the Consolidated Fund. Persons assured who have paid premiums for five years may, if they afterv^ards make default, receive at their option a sum not less than one-third of the premium paid, or a paid-up policy, or an immediate or deferred annuity (27 & 28 Tict. c. 43, s. 8). Policies of five years' stand- ing may be assigned, and an assignment carries all the interest, legal and equitable, of the assignor, including the right to sue (s. 11). Annuities are not assignable except upon bankruptcy or insolvency or by operation of law (16 & 17 Vict. c. 45, s. 25) {a). The Act of 1867 does not apply to policies granted under the provisions of 16 & 17 Vict. c. 45, and 27 & 28 Vict. c. 43 (see s. 8), and the Act of 1870 and its amending Acts do not affect the National Debt Com- missioners acting under the powers of 10 Geo. 4, c. 24, (o) Government insurance is admitted so far to have been a com- plete failure, the total sum for which insurances have been eflfected being less than £500,000. A law of 1868 established in France a similar system of State insurance for persons between 16 and 60, limited to £120 on one risk. These insurances, up to one-half of the sum insured, or £24 at lowest, are not assignable or seizable by creditors. If the insured dies within two years, or from certain excepted causes, the insurance is void, and the premiums are returned with interest at 4 per cent. This system has been even less successful than the English Post OfBce insurances. The total amount insured being less than £26,000, and the number of policies little over 400. Couteau, i. 329, 441. A Select Committee of the House of Commons appointed to consider the advisability of revising the present scheme of insurance and annuities through the Post Office has recently reported in favour of the adoption of the Post Office scheme, viz., that the maximum sum allowed on one risk should be £200, the minimum £10, that the pre- miums should be paid through the savings banks, being credited from time to time out of the deposits in the name of the assured, that the medical examination should be dispensed with, and that no insurance should be valid till two years premiums have been paid. FRIENDLY SOCIETIES. 187 3 & 4 Will. 4, c. 14, 16 & 17 Vict. c. 45, and 27 & 28 Vict. c. 43 (a). Friendly societies, a term which includes, amongst Friendly other things, societies established to provide by voluntary subscriptions of the members with or without the aid of donations for insuring money to be paid on the birth of a member's child, on the death of a member, or for the funeral expenses of the husband, wife, or child of a member, or of the widow of a deceased member (6), are now governed by the Friendly Societies Act, 1875 (38 & 39 Vict. c. 60), and the amending Acts, 39 & 40 Vict. c. 32, and 42 Vict. c. 9. The Act establishes a registry Registra- of friendly societies, and a chief registrar whose functions it defines (s. 10) and permits the registration of any society with the above objects, consisting of seven persons at least, and having rules containing the provisions men- tioned in the second schedule to the Act, that is to say, amongst other things, provisions for keeping a separate assurance fund, for returns of sickness and mortality, for valuations of assets and liabilities, and for the dissolution of the society, either voluntarily or by the award of the (a) 3 & 4 Will. 4, c. 14, seems to have been inserted by inadvertence, since it was repealed, so far as regards life annuities, by 16 & 17 Viot. c. 45. (6) Friendly Societies Act, 1875, s. 8 : The first Act on the subject (33 Geo. 3, c. 54) defined a friendly society as a society for raising a fund for mutual relief and maintenance of members in old age, sick- ness or infirmity, or for the relief of widows and children of deceased members. 4 & 5 Will. 4, c. 40, added the words " for any other pur- pose not illegal," and 9 & 10 Vict. c. 27, contained the words " for the lawful insurance of money to be paid on the death of members to their husbands, wives, children, kindred, or nominees," &c. It was held, that under these Acts an insurance by a man on his own life for moneys to be paid to his executors was not warranted : Eehall v. Tyler (11 Ex. 513). 188 TEE LAW OF LIFE INSURANCE. registrar ; ss. 11, 13 ; with power to the registrar to cancel or suspend the registration (s. 12). The Act does not in- corporate societies registered under it, but merely enables them by registration to obtain certain privileges, while subjecting them to corresponding obligations. Societies subsisting at the time of the passing of the Act, whose rule were registered, certified, or enrolled under any Act relating to friendly societies, are to be deemed registered under the Act, but no other society can be registered that grants annuities of more than £50 a year, or assures a gross sum of more than £200 (s. 6) (a) ; paynjents on death may only be made upon the production of a proper certificate of death (s. 14), and no person may receive in all more than £200 as a gross sum besides bonuses thereon or £50 by way of annuity, whether he is assured with one or more societies (s. 27). Insurances with a registered friendly society by members on the lives of their wives, children, or widows are allowed as a provision for funeral expenses, notwithstanding the absence of an insurable interest (s. 8) ; but with regard to insurances on the lives of children, the strictest safeguards are imposed to prevent an abuse of this dangerous privilege ; no person may receive in all more than £6 on the death of a child under five years or £10 on the death of a child under ten years, and payment can only be made to parents them- selves or their representatives upon production of a certi- ficate or certificates of death numbered consecutively, stating the amount said to be due ; certificates must not be issued for the payment in the whole of any larger amounts than those above-mentioned, nor until the cause (a) The limit of £200 was fixed by the Act of 1855 (18 & 19 Vict. 0. 63), and societies ceasing for the future to grant assurances beyond that amount were admitted to the privileges of the Act (ss. 5, 9). FRIENDLY SOCIETIES. 189 of death has heen previously certified, and where any certificate purports not to be the first, inquiry must be made what sums have been paid on the same death by any other society (s. 28). These privileges and provisions so far as relates to assurances on the lives of children are extended by s. 28, sub-s. 8, to industrial assurance com- panies, a term explained by s. 4 to mean any company as defined by the Life Assurance Companies Act, 1870, which grants assurances on any one life for a less sum than £20, and which receives premiums or contributions by means of collectors in Great Britain and Ireland at less periodical intervals than two months, and by 39 & 40 Vict. c. 22, 8. 2, to trade unions, whether registered or unregistered. Persons assured in friendly societies whether registered or not, and industrial assurance companies receiving con- tributions by means of collectors, cannot be transferred from one society or company to another without their written assent (Si 30, sub-s. 3), and where contributions are so received at a greater distance than ten miles from the registered office or principal place of business, they are entitled to receive on insurance a copy of the rules and a printed policy duly signed at the price of \d. each, and their assurance cannot be forfeited for default in payment of contributions, unless continued for fourteen days at least after notice of the intended forfeiture (s. 30) ; but where payment for a certain time is a condition precedent to acquiring rights over the funds, non-compliance with the rules as to the payment will bar the right to recovery, though no notice is given as required by the Act : Taylor V. Collins (46 L. T. 169). The Act of 1867 does not apply to any engagement for payment on death by any friendly society (30 & 31 Vict. c. 144, s. 8) and registered friendly societies are by s. 2 190 THE LAW OF. LIFE INSURANCE. of the Act of 1870 excepted from the provisions of that Act. A similar exemption is extended to registered trade unions by the Trade Unions Act Amendment Act (39 & 40 Vict, c. 22, s. 7), and to the Customs Annuity and Benevolent Fund by the Customs Consolidation Act (39 & 40 Vict. 0. 36, s. 285). The Friendly Society Act itself, however, embodies several provisions for the protection of members similar to those contained in the Act of 1870, and in the Com- panies Act, 1862. Obiiga- The obligations of a registered society are to have a registered registered oflSce ; trustees duly appointed from time to society. time, all appointments being notified to the registrar ; to have an annual audit of its accounts; to send to the registrar an annual return of receipts and expenditure, distinguishing expenditure in respect of its several ob- jects, a quinquennial return of sickness and mortality, a quinquennial valuation of assets and liabilities with a report of the valuer and an abstract of his valuation ; to allow inspection of the books by the members ; to supply members with copies of the annual return ; and to post in its office a copy of the last balance sheet (s. 14). Its Privileges, privileges are exemption from the Corresponding Societies Acts, from stamp duty on certain documents, including a form of policy ; power to pay moneys due on the death of a member not exceeding £50 to his nominee, or if none and in case of intestacy, to the person who appears to the trustees to be entitled, without letters of administration, a payment which effectually discharges them ; power to obtain a transfer of G-overnment Stock standing in the name of an absentee or bankrupt or otherwise incapable or disqualified trustee by the continuing trustees on the order of the registrar; a preferential right against the FRIENDLY SOCIETIES. 191 estates of deceased or bankrupt ofiScers for money or property belonging to the society in their possession by virtue of their office (words which do not mean money or property which can be specifically identified) : Ex parte Edmonds, In re Athins (30 W. E. 432 ; 46 L. T. 240) ; and power for minors over the age of sixteen years to become members (s. 15). The property of a society is vested in its trustees, and devolves on the continuing trustees for the time being without conveyance or assignment. A society must sue and be sued in the name of its trustees, or in the case of proceedings by members it may be sued in the name of the officer receiving contributions or issuing policies within the jurisdiction of the forum. It may hold land in any county where it has an office, mortgages to the society may be vacated by an indorsed receipt, the mode of in- vestment of its funds is provided for, and restrictions are placed on the amounts of loans to or deposits by members (ss. 16, 17, 18, 21). Disputes between a society and its member^ may be decided in accordance with the rules, or, by consent, by the registrar, and decisions so arrived at are without appeal, and may be enforced in the county court (s. 22). The registrar has power on the application of a certain proportion of the members of a society to appoint in- spectors to examine its affairs or to call special meetings of the society (s. 23). A society may by special resolution change its name, amalgamate with or transfer its engagements to another society or to a company under the Companies Acts, or convert itself into a company under those Acts. Amalga- mation or transfer of engagements shall not prejudice cre- ditors, and shall not be valid unless five-sixths in value. 192 THE LAW OF LIFE INSURANCE. to be calculated as provided by the Act, of the members assent, and the consent in writing of all persons receiving or entitled to any relief, annuity, or other benefit from the funds of the society is obtained or adequate provision made for their claims (s. 24). Societies may dissolve on the happening of the event declared by the rules to be the termination of the society, by the assent of members, and with the consent of all persons receiving or entitled to benefits as in the case of amalgamation, or by the award of the registrar in certain specified cases (s. 25). CONTRACTS BY COMPANIES. 193 CHAPTER IX. DIEECTOES AND AGENTS. Contracts by Agents — Powers of Directors — of Insurance Agents — Misrepresentations in Prospectuses by Agents — Liability of Com- pany, its Nature and Extent — of Agent. CoEPOEATE BODIES have a general capacity of entering Contracts into any contracts not forbidden to them expressly or by 5^1™' necessary implication : Riche v. Ashhury Bailway Carriage Form. Co. (L. E. 9 Ex. 263 ; 7 H. L. 653). See Bath's Case (8 Ch. D. p. 340) J Pollock on Contracts, 3rd ed. p. 158 et seq. ; Lindley, 4th ed, i. 352. At common law a corporation can only bind itself by contract under its common seal, except as to matters in which "convenience amounting almost to necessity," Church V. Imp. Gas, &c., Co. (6 A. & E. p. 861), requires a relaxation of this rule : Pollock, 3rd ed. p. 158. By statute (Companies Act, 1867, s. 37), companies registered under the Companies Act are placed on the same footing as private persons with regard to the form of their contracts, and contracts under their common seal, or made in writing, or by parol, through their agents, have the same validity as contracts in a similar form between private persons. A partnership or a company is not liable on a contract merely because it has had the benefit of it ; but it must refund money received without consideration, e.g., pre- o 194 THE LAW OF LIFE INSURANCE. miums on policy idtra vires: Phoenix Assurance Co., Bowyer and Stock's Case (2 J, & H. 441). Companies j^ company, whether incorporated or unincorporated, their can in general only act through its agents, and the prin- agen s. gipjes of agency, as applied to partnerships and applicable with certain modifications to joint stock companies, become in consequence of the greatest importance. In an ordinary partnership each partner is the general agent of his co-partners for the transaction of the partner- ship business in the ordinary course, but the members of a company, whether incorporated or not, are not the agents of the company : Burnes t. Pennell (2 H. L. C. 497). A company is bound by the acts of its agents acting within the limits of their apparent authority, though there may have been irregularity in its exercise or in their appointment, unless the person with whom they were dealing had notice of such irregularity : Smith v. Hull Plate Glass Co. (11 C. B. p. 927). Diieotois Directors are special, not general agents, and the limits are special, , . i r» i i i • not general of their authority are denned by the instrument consti- ^^^^ ^' tuting the company, which in the case of a company whose regulations are registered under 7 & 8 Vict. c. 110, or under the Act of 1862, is readily accessible to the In what public, and of the provisions of which all persons dealinar cases the *^ ' ^ ,ni .„ ° public has With such a Company are held to have notice : Ernest v. the'confti- Nicholls (6 H. L. C. 401) ; Balfour v. Ernest (5 C. B. tution of /jf.S.) 601 : Smith v. Eull Plate Glass Co. (11 C. B. p. 927), companies, v / ' \ r /' all of which were cases under the Act of 1844. It would seem, however, that the public has no con- structive notice of the regulations of companies unincor- porated, or whose regulations are not registered, as, for instance, companies authorized under 7 Will. 4 & 1 Vict., POWERS OF DIRECTORS. 195 and are entitled to assume that the directors of such com- panies have power to do whatever is necessary for the carrying on of the business of the company in the ordinary way : see Hawken v. Bourne (8 M. & W. 703). Policy-holders in a life insurance company, however Policy- constituted, must, in all dealings with the company subse- have^in all quent to the Life Assurance Act, 1870, be held to have '^***^- notice of the deed of settlement, since s. 13 of that Act provides that every shareholder and policyholder in a company not registered under the Act of 1862 shall be entitled to a printed copy of its deed of settlement on application, and the word " company " is defined by s. 1 as any person Or persons corporate or unincorporate issuing policies or annuities upon human life within the United Kingdom, and the word " policyholder " is defined as the legal holder for the time being of the policy for securing the life assurance, endowment, annuity, or other contract with the company. Accordingly directors cannot bind the company by acts Acts Mra ultra vires themselves, and still less by acts ultra vires in-eguiar. the company, though they can do so by acts intra vires yet irregular, for the maxim omnia jprmsumuntwr, &c., applies, and the validity of their acts depends rather on the power to do them than on the regularity of the manner in which they are done, and where the authority exists if certain conditions are complied with, the public need not inquire whether those conditions have been complied with or not : Royal British Bank v. Tu/rquand (5 E. & B. 248) ; Affary. Athensewm (3 C. B. (N.S) 725) ; Be Athenseum, Ex parte Eagle Co. (4 K. &J. 549) ; a stranger in short has a right to assume that all matters of internal management have been duly complied with : Comty Life (5 Ch. p. 293). 2 196 THE LAW OF LIFE INSURANCE. They have authority to do whatever is necessary for the transaction of the company's legitimate business in the way such business is usually carried on by other people : Lindley, i. 264; Smith y. E. P. a. Co. (11 C. B. 927). In accordance with these doctrines it was held in Be Cownty Life Insurance Co. (5 Ch. 288), that a policy on the face of it consistent with the articles of association and acts incorporating l^e company, effected in the ordi- nary course of business by third persons, bona fide signed by directors de facto, and sealed with what purported to be the company's seal, was binding on the company, though the directors had never been properly appointed, and the company in point of fact had no seal. Similarly, in P. of W. V. Harding (E. B. & E. 183), a policy signed by directors and. sealed with the company's seal was held valid, though no order had been made in accordance with the, deed of settlement that the seal should be affixed. Acts not ultra vires the company may be ratified. Payments ex gratia for losses analogous to the risk insured against have been held within the powers of directors authorized by the deed of settlement to act as best calculated to promote the company's interests : Taunton v. Boyal Insurance Co. (10 Jur. (N.S) (Ch.) 291), and in such cases evidence of usage is most material : Ibid. ; et vide Westminster Palace JSotel Case (8 H. L. C. 718). Where directors have a discretion, and it is exercised hona fide, it will not be interfered with : Manly v. Gresham Life Assurance Co. (29 B. 439; 7 Jur. (N.S.) (Oh.) 383), where a life had been insured at an extra premium, with an agreement that the premium should be reduced if the company were satisfied that the causes which led to a INSURANCE AGENTS. 197 higher premium being charged had been removed, and a demurrer to a bill praying specific performance was allowed. The business of insurance is carried on to a large extent insurance by agents, who solicit business for the company, receive *^^° ^' proposals, and transmit premiums, being paid by a com- mission on the business introduced by them. It is a common practice for ofjces to allow solicitors a Commis- commission on business introduced by them, but it has been quite recently decided in Cop^ v. Lynch and Law Life Assurance Society (26 S. J. 128), that solicitors cannot retain this commission if it was received without the knowledge of their client, on the principle that an agent who has obtained a benefit for himself of which the principal was not aware must account for it to his principal ; and see Harrington v. Graving Docks Co. (3 Q. B. D. 549). An insurance agent is a limited, not a general agent. Merely T 1 i> 1 A agents, to and has no power to contract tor tne company : Acey v. receiTe Fernie (7 M. & W. 151). The ordinary local agent of a IZT^lt- company cannot, therefore, without special authority ""!* P''^- (Bossiter v. Trafalgar, 27 B. 377) bind the company to grant a policy, Linford v. Provincial, &e., Co. (34 B. 291), or as to its terms, Fowler v. Scottish Fquiiable L. A. Society (28 L. J. (N.S.) (Ch.) 225), or waive a forfeiture : Acey V. Fernie (7 M. & W. 151 ; Bousteed v. West of Eng- land Co. (5 Ir. Ch. E. 553) ; but in Wing v. Harvey (5 De G. M. & G. 265), where the agent, on being informed that the life was in Canada, stated that this would not avoid the policy, notwithstanding a proviso for avoidance if the life went out of Europe, and received and transmitted the premiums, it was held on the facts that premiums having been paid on the faith of that representation only, it was 198 TEE LAW OF LIFE IN8UBANCE. the same thing as if the directors had known it, and that the forfeiture was waived. Where the premiums are paid through one of the com- pany's agents, the ordinary practice is for the company to debit him with them as they become due. This is not equivalent to payment by the insured, and where an agent had received the premium after the policy had lapsed, and had been debited in this way by the company, who were unaware of the facts, the policy is forfeited : Acey \.Fernie (7 M. & W. 151). The case was the same where the insured not paying the premiums, the agent had debited himself with these premiums in his quarterly accounts : Bousteed v. West of England Co. (5 Ir. Ch. E. 553) ; but retention of the premiums after the dropping of the life, and knowledge of the facts, might amount to a contract to give the agent a lien for premiums paid : Ibid. In Bossiter v. Trafalgar (27 B. 377), a contract to grant a policy by an agent in Australia of a London company, appointed under seal with special authority to contract, with his printed signature attached in accordance with the usual course of business, by a sub-agent who had given a receipt for the premium and really effected the contract, was held valid. Though he cannot delegate, an agent may employ sub-agents for many purposes : Ihid. Ultra vires An agreement with an agent for continuance of com- with mission on premiums to him after retirement, without any agents. stipulation that he should continue in the agency for a definite time, or that the commission should cease if the policies lapsed, was held ultra vires the directors and unreasonable : Lewine's Case (Alb. Arb., Eeilly, 174). So was an agreement for allowance of the same commis- sion to his wife and children after his death : Ibid. In Boberts Case {Ibid. 166), in the same winding-up, an agent PROSPECTUSES. 199 whose services were retained by the liquidator after the winding-up on the same terms as before, was held entitled to his usual commission on renewal premiums, though these had only been paid on th'e terms of being return- able in full if no reconstruction scheme was carried out. It was necessary to retain the agents in order to keep the business together. A manager entitled by contract to com- pensation, if his services are discontinued, cannot treat a winding-up which is involuntary as a discontinuance: Taifs Case (Ibid. 162.) The wider the area of risk the safer and more profit- Piospect- able, supposing the risks to be prudently selected, does the business of life insurance become, and companies endeavour to extend their business by all the ordinary modes of advertisement, by the issue of prospectuses, the circulation of the annual reports, or by the distribution of circulars setting forth the advantages of life insurance generally, and the exceptional advantages offered by the particular company. The object of such prospectuses and circulars is to invite the public, or the individuals to whom they are addressed, to contract with the company. The effect of misrepresentation in a prospectus inviting contracts has generally been considered in relation to the contract to take shares, and the authorities on this head may be usefully referred to in relation to the contract of insurance, bearing in mind that, on the one hand, insurers are under no special duty of disclosure such as that incumbent on persons proposing to issue shares in a company, while on the other the insured is not, like a shareholder, hampered in his remedies against the company by the fact that he is a partner in it. Persons induced to effect insurances by misrepresenta- Misrepre- sentations 200 TEE LAW OF LIFE INSUBANGE. in pro- tions OP misstatements, written or oral, made by, or con- &c., by ' tained in documents circulated by, the authorized agents ag«i s. p£ ^jjg company, and made or addressed to them either individually or as one of the public: Burnes v. Permell (2 H. L. C. 497), Swift v. Winterbotham (L. E. 8 Q. B. 253), Biehards v. Silvester (L. E. 9 Q. B. 34), will be entitled to relief either against the company or its directors or agents, or both, though the nature and extent of their remedies, whether by action for rescission or for money had and received, or to have the representations made good, or finally for deceit, may vary according to the cir- cumstances of the particular case. It must be remembered that the questions what mala praxis entitles to rescission, and what to bring deceit, are entirely distinct, and the two different wrongs and the two different remedies must not be confounded : Arhwright v. Newbold (17 Ch. D. 317) ; for instance, a representation true when made which becomes false by subsequent events before the conclusion of the contract, will found a case for rescission, but not it seems for deceit : Ihid. Mere exaggeration, high colouring, or glowing accounts of the company's prospects or position will not be suflS- cient : Benton v. McNeil (2 Eq. 352). The representa- tions relied on must be as to matters of fact, they must be wilfully false or recklessly made in ignorance of their truth or falsehood : Beese Biver v. Smith (4 H. L. 79) ; they must be such as to induce the contract ; and to found an action of deceit they must be intended to be acted upon and actually acted upon by the person to whom they are addressed to his injury : Barry v. Crosshey (2 J. & H. 1). It is no answer that the person defrauded might have known the truth by proper inquiry : Company of Venezuela MISREPRESENTATION. 201 V. Kisch (2 H. L. 99) ; but the case is otherwise if having the means of information he uses them and acts on his own judgment : Jennings v. Broughton (5 D. M. & Gr. 126). The prospectus may control the contract, and will be given effect to both in Courts of law and equity : Wood v. Dwarris (11 Exch. 493) ; Collett v. Morrison (9 Ha. 162). In Wood V. Dwarris it was held that the plaintiff might recover, notwithstanding that the declaration was the basis of the contract, and was untrue, since he had contracted on the faith of the statement in the prospectus of the company that policies were indisputable, except on the ground of fraud — these facts being introduced by way of equitable replication. A similar replication was in Wheelton v. Eardisiy (8 El. & B. 262, 276), held bad on the ground that knowledge of the prospectus was not brought home to the insured : diss. Lord Campbell, C. J., who laid it down in the course of his judgment that " a prospectus issued by the authority of an insurance com- pany is not like a parol observation of an officer of the company during the negotiation, but is a solemn under- taking on the part of the company if the policy is really entered into on the faith of the prospectus. I thin,k that in equity the prospectus, though not expressly referred to in the policy, is so far to be considered part of the con- tract that equity ought not to allow a defence to be set up against an undertaking in the prospectus on the faith of which the policy was effected." But this must be taken subject to the general rule that if the policy does not express the real contract it must be reformed, and the plaintiff cannot set up a different con- tract by means of an equitable replication : Bees v. Scottish Equitable Society (2 H, & N. 19). A resolution that for the better security of policy- 202 THE LAW OF LIFE IN8URANGE. holders, 50 per cent, of the premiums on whole life policies shall be invested in Government securities, to which attention is called on the prospectuses issued, creates a trust of that fund for the policy-holders, and non-investment, or application of the funds invested to the general purposes of the company, is a breach of trust which policy-holders may restrain by injunction, or for which they may hold directors liable in the winding-up : British Guardian Co. (14 Ch. D. 335) ; see fod, p. 253. Liability of A Company, as we have seen, can only act by its agents, for fraud of ai^d there is considerable difficulty in determining how far agents. ^ company is liable for the frauds or misrepresentations of its agents. On the whole, it is believed that there is no substantial difference between a company and a natural person in this respect, except in so far as a company, being an abstraction, is incapable of personal fraud either by previous authority to commit it, or subsequent approval of it when committed. The distinction which has been drawn between false statements emanating from the share- holders, that is, having the imprimatur of a general meeting, and similar statements emanating from the directors, cannot, as Mr. Justice Lindley has pointed out, be supported, for the power of a majority to bind a minority, and that of directors to bind the company in . such cases, must be affirmed or negatived on similar grounds. Both depend on the doctrines of agency, and if directors cannot be the agents of a company to commit fraud as lo matters within their competence, neither can the majority be the agents of the minority for a similar purpose. The general principle of law, as stated by Willes, J., is that a principal is answerable for every fraud or other wrong committed by his agent within the scope of his FRAUD OF AGENT. 203 employment, and for his principal's benefit : Barwiok t, English Joint Stock Bank (L. E. 2 Ex. 259) ; Mctckay v. Commercial Bank of New Bnmswick (5 P, 0. 394) ; that is, to the extent to which he has profited by the fraud : Western Bank of Scotland v. Addie (1 H. L., So. 145) ; words which, as Lord Selborne observes in Souldsworth v. City of Glasgow Bank (5 Ap. Oa. p. 829), may require some enlargement or explanation. In such cases the remedy of the person defrauded against the principal is to bring an action to rescind the contract : Western Bank v. Addie (ubi supra) ; Souldsworth v. City of Glasgow Bank (uhi supra) ; or, as it seems, for money had and received : Barwick v, English Joint Stock Bank ; Mackay v. Com- mercial Bank (ubi supra) ; or to abide by the contract and have the representations made good ; or finally for deceit, in form, at any rate, if not in substance, though the dicta on this point if not the decisions are difficult to reconcile. The action of deceit is founded on personal misconduct, Whether in and presupposes actual fraud on the part of the defen- dant, but a fraud by an agent within the scope of his employment by which the principal benefits may be treated as the fraud of the principal, for which he can be made liable in this action, whether he is a natural person or a corporation : Udall v. Atherton (7 H. & N. 172) ; Barwick v. English Bank (L. E. 2 Ex. 259) ; Mackay v. Commercial Bank (5 P. 0. 394, 414) ; and see Swire v. Francis (3 Ap. Ca. 106) ; though, strictly speaking, a cor- poration cannot be guilty of a fraud: Banger v. Great Western Bailway Co. (5 H. L. 0. 86). But the case of a contract to buy shares is, for obvious reasons, an exception to this rule, and a shareholder in- duced to become so by the fraud of the company's agents cannot bring an action of deceit against the company 204 THE LAW OF LIFE INSURANCE. while he remains a partner in the concern : Western Bamk V. Addie (1 H. L., Sc. 145) ; Eouldsworih v. City of Glas- gow {ubi sujpra) ; et vide Cargill v. Bower (10 Ch, D. 502). No doubt the remarks of Lord Cranworth in the former of the above cases in terms extend to all contracts where he says that " An attentive consideration of the cases has convinced me that the true principle is that these corporate bodies, through whose agents so large a portion of the business of the country is now carried on, may be made responsible for the frauds of those agents to the extent to which they have profited from those frauds, but that they cannot be sued as wrongdoers by imputing to them the misconduct of those whom they have employed. A person defrauded by directors, if the subsequent acts and dealings of the parties have been such as to leave him no remedy but an action for the fraud must seek his remedy against the directors personally"; and these observations were reiterated and quoted with approval by Lord Selborne in the later of these cases, who lays it down that the law does not impute the fraud of an agent to his principal, whether a corporation or an individual. But those were cases of actions by shareholders in a com- pany after its winding-up for rescission of their contracts to take shares, or for damages, which involve very different considerations from those which govern other contracts with a company, and the dicta above quoted may be con- fined, and perhaps were intended to be confined, to the circumstances of the particular case, a view which the judgment of Lord Blackburn in Eouldsworih v. City of Glasgow Bamk seems to support. In Weir v. Bell (3 Ex. D. 238), Bramwell, L.J., while admitting the responsibility of a principal for the fraud of his agent acting within the scope of his authority, at FRAUD OF AGENT. 205 least to the extent of the gains of the principal, places it on the ground of implied contract by the principal for the absence of fraud in his agent. It is conceived that a principal who has benefited may invariably be rendered liable in one form or another. In TJdall V. Aiherton, Barwick v. English Bank, Maekay v. Commercial Bank (ubi supra), the principal actually got the benefit of the money obtained by the fraud ; in Swire V. Francis the money went into his account, and was instantly misappropriated by the agent. Whatever the remedy of the person defrauded against Liability of the company, he has of course his remedy against the " agent personally in deceit : Western Bank v. Addie (1 H. L., Se. 158) ; Weir v. Bell (3 Ex. D. 238, 248) ; and the liability of the agents, if more than one, is joint and several, and they may be separately sued: Att.-Gen. v. Wilson (Or. & Ph. 1) ; Parker v. Lewis (8 Ch. p. lOiS) ; but the Court will, if necessary, order the other persons liable to be made parties : Ibid. But the action dies with the person, and the executors of a deceased agent cannot be sued unless his estate has benefited by the fraud : Peek v. Gurney (6 H. L. 377, 393). An agent is not responsible for the fraud of his co- None for agent, unless he does something by which he makes him- ^'g^^*^ °j,*"'" self a principal, that is, unless he either before or after, sub-agent. and either expressly or impliedly authorizes or adopts it : Cargill v. Bower (10 Ch. D. 514) ; Weir v. Bell (3 Ex. D. 238) ; Peek v. Qwney (ubi supra). Nor is he responsible for the frauds of his sub-agent unless he has derived a benefit therefrom : Weir v. Bell (Ibid.) In Pontifex v. Bignold (3 M. & Gr. 1) it was held that a action of deceit lay against the secretary of the Norwich 206 TEE LAW OF LIFE INSUEANOE. Union Company for false representations as to the affairs of the company by which the plaintiff was induced to insure, though no actual pecuniary damage was sustained beyond the payment of the premiums; the false repre- sentations charged were that the provisions of the deed of settlement as to the election of directors, their meeting, and the biennial valuations, the general meetings, and the declarations of bonuses and dividends had been duly observed, when in point of fact the requirements of the deed of settlement had been systematically disregarded. AMALGAMATION. 207 OHAPTEE X. AMALGAMATION AND NOVATION. Amalgamation — "When intra vires — Provisions of Act of 1870 — Dis- solution out and out, inter socios — Novation — Written Assent required by Statute — Former Law — Decisions in Chancery — Before Lord Cairns — Before Lord Westhury. The deed of settlement of an insurance company fre- Amaiga- quently provides for its union or amalgamation with some ".ansfo!"^ other company or its dissolution. The mode of carry- ing it out indicated being sometimes that of a transfer of the goodwill, business, and assets of the selling com- pany to the purchasing company, in consideration of an undertaking by the purchasing company to disch£^^ge its liabilities, and of a purchase of the shares of members of the selling company at a fixed price, payable either in cash or in shares of the purchasing company, sometimes that of a transfer of the goodwill and business, and so much of the assets as may be agreed upon in consideration of a similar undertaking, and a division of the residue of the assets among the members of the selling company. Whatever the mode indicated, it must of course be carried out in strict accordance with the deed. In cases of ultra vires amalgamations, however, lapse of time will be taken as evidence of acquiescence and consent, and a transaction in the nature of 'a contract between two companies will not be annulled, unless there can be a restitutio ad inte- grum : Bivington's Case (L. T. (E. A.) p. 57), where an amalgamation by an unincorporated company with the 208 THE LAW OF LIFE IN8UBANQE. assent of all the shareholders except twenty-three holding 210 shares out of 1200, unquestioned for many years, was held an amalgamation with the consent of all the partners, a transaction within the common law powers of every common law partnership. Ultra iiires The purchase of the business of another company is, in absence of the abscuce of Special powers of amalgamation, ultra vires, power. ^^^ it cannot be justified under general powers of manage- ment, or of acting in the concerns of the society as may seem most conducive to its interests : Ernest v. Nieholls (6 H. L. C. 401) ; Bra Asswranee Co. (2 J. & H. 400 ; 1 H. & M. 672). If a creditor of the transferring company, believing the transfer to be valid, has given up securities be held against the company, the Court can relieve against the mistake in law, and will remit him to his original rights : Saxon Life, Anchor Case (2 J. & H. 408) ; but the transferee company cannot prove against the transferor company for the difference between the assets they received and the liabilities they have had to discharge, for the parties can- not be replaced in their original position : Ihid. JL power to sell the business does not authorize a sale on the terms of shareholders in the selling company re- ceiving shares in the purchasing company : Empire As- surance, DougarCs Case (8 Ch. 541) ; Ex ]parte Bagshaw (4 Eq. 342). Nor does a power to purchase a business on such terms, conditions, &c., as the company should think fit, sanction under the guise of a condition or stipulation something so at variance with the whole constitution and principle of the company, as to make shareholders in the ' selling company with a limited liability of £10 per share shareholders in the buying company with a liability of £50 per share : British Nation, &c., Co. (8 Ch. D. 679). AMALaAMATION. 209 An amalgamation or sale and transfer may be effected, however, even in the absence of any power for the pur- pose, under s. 161 of the Companies Act, 1862, by the machinery of a voluntary winding-up, and a direction to the liquidator to carry out the agreement: Southall v. British Mutual Life Assurance Society (11 Eq. 61 ; 6 Oh. 614) ; that section provides that the liquidator instead of selling for cash may accept shares, 'policies, &c., to be distributed among the members, and it therefore applies to mutual companies, and a policyholder in the selling company may be compelled under it to accept a policy in the purchasing company or the value of his policy in cash (Ibid.). The amalgamation deed generally contains a covenant inciemmty by the transferee company to indemnify the transferor company against all their liabilities. This covenant can- not be unconditional if the transferee company's deed of settlement contains a provision that every contract by the company should be limited, for amalgamation on such terms would be ultra vires : British Nation Co., Indemnity Case (L, T. (E. A.) 4) ; Indemnity Case (Alb. Arb., Eeilly, 17) ; the liability under such a covenant was, however, held to be unlimited where the transferee company's deed pro- vided only that every policy or other insurance should be limited : Anglo-Australian Company's Indemnity Case (L. T. (E. A.) p. 161). It was held by Lord Cairns that the transferor company could not under this covenant charge the transferee company with the costs of the liqui- dation, having no defence they should have paid claims. Lord Westbury, however, decided that the costs of the winding-up of the transferor company, so far as they are incurred by reason of the breach of covenant, are payable by the transferee company, the covenant being one for 210 TEE LAW OF LIFE INSURANCE. indemnity against all proceedings, and winding-up being a proceeding occasioned by the breach : Ibid., and see Boyal Naval Society's Indemnity Case {Ibid. p. 165); and both companies being in liquidation the transferor com- pany may prove against the transferee company for the whole amount of its liabilities, subject to its not receiving more than the whole amount of its assets. The former company is damnified to the amount of the proof against it : Boyal Naval Society (ubi supra). Provisions The amalgamation of life insurance companies is regu- of Act of t , . 1870. lated for the future, and the interests of policyholders are protected by the Life Assurance Companies Act, 1870, 88. 14, 15, which provides that no company shall amalga- mate with or transfer its business to another without the approval of the Court to be obtained on petition, and which is not to be given if one-tenth in value of the policy- holders dissent. Before applying to the Court, a state- ment of the nature of the amalgamation or transfer, an abstract of the agreement or deed and copies of the actuarial reports on which it is founded, must be sent to each policyholder in both companies in case of amalga- mation, to each policyholder in the transferring company in case of transfer, and the deed must be open to inspec- tion at the company's ofiSce for fifteen days after the issuing of the above abstract (s. 14). Certified copies of statements of the assets and liabilities of the two companies, and of the deed and of the statement and reports above-mentioned, must be deposited with the Board of Trade, together with a declaration by the chair- man and managing oflBcer of each company that all pay- ments on account of the amalgamation or transfer are fully set out in the deed (s. 15). (See App. p. 274). On a petition for confirmation of an amalgamation AMALGAMATION ACT OF 1870. 211 agreement under this Act, the Court dispensed with ser- vice of two policyholders interested in less than one-tenth of the amount insured in the transferring company, who were resident out of the jurisdiction, and confirmed the amalgamation, being of opinion that the rights of policy- liolders were sufficiently protected by s. 7 of the Act of 1872 : London and Southwark Insurance Corporation (28 W. E. 565). The petition need not be entitled in the matter of the Companies Acts, and advertisement in the Gazette four days before the hearing was held sufficient, there being no dissentients: Oolonial Assurance Corporation {26 Sol. J. 26). Amalgamation proceedings under the Ac5t appear to be extremely rare. The question has often arisen on the construction of Amalga- powers of this nature whether the deed contemplates a inter socios dissolution merely inter socios, as in the case of the disso- "^ °"* *"'* lution of an ordinary partnership, when the partnership still continues in law until the obligations of the partner- ship are discharged, or dissolution as regards all the world, that is to say, an annihilation effecting a complete dis- charge from all liabilities by their transfer to another company. The way in which the question is answered is of the utmost importance both to shareholders and to policy- holders in the transferring company. On the one hand if the dissolution is inter socios merely, a shareholder who is under the impression that his old shares are annihilated by a sale of them for cash, or by a substitution of shares in the transferee company for them, may find himself still under heavy liabilities as a shareholder in the old company, while the fund which should have met them has been dissipated by the company who undertook to p 2 212 TEE LAW OF LIFE INSURANCE. discharge them : Pownall's Case (L. T. (B. A.) 8) ; Lancey's Case {Ibid. 15), and that the payment he has received, if any, being treated as a return of capital, he is liable for the whole amount of his shares : Dighy's Case (Ibid. 150). On the other hand, if it be a dissolution out and out, a policyholder may suddenly find himself without any power of resistance handed over to a company with which he has not contracted and of which he knows nothing, and the fund which is his security for the performance of the contract with him, paid over to strangers or divided among those who are liable to perform the contract. If the policyholder has a voice in the conduct of the affairs of the company, and the resolutions for amalgama- tion have been duly passed, he has assented and can have no claim, against the transferring company : Harman's Case (1 Ch. D. 327.) Dissolution The deed may in effect authorize a dissolution of the out. company out and out and transfer of its liabilities without the assent of the policyholders, and such a provision, whatever may be said of the danger and hardship to policyholders it may entail {Barnes' Case, L, T. (E.A.) 75 ; Hort's Case, 1 Oh. D. 307), may, considering the indefinite period over which the existence of a life insurance com- pany may, in the absence of provisions of this kind, extend, and the nature of life insurance, and that every life com- pany is substantially and materially a mutual society, the capital being only a guarantee against the insufficiency of the accumulated insurance fund, be a reasonable and proper provision for the safety not only of the share- holders but also of the persons insured: Hart's Case (1 Ch. D. 307; Lord Cairns' and L. J. James' judg- ments). " The amalgamation of two weak companies is far from being a prejudice to the person who claims. It DISSOLUTION. 213 is like putting two hives together to make a strong one, and the combined companies might form a strong com- pany capable of carrying on its business at a profit when the two separately might come to an end " : ^er James, L. J., Daman's Case (3 Ch. D. p. 27). Moreover, the ordi- nary form of policies gives the insured as his security no personal liability whatever, but merely the security of a certain subscribed fund, and he may authorize the guardians of that fund, if he so pleases, to deal with it in that way as greatly to impair his security by handing it over to other persons, or returning it to the original sub- scribers, leaving him only such substituted liability as they may provide : Mosely's Case (Alb. Arb. Min. p. 953) ; Carrs Case (33 B. 543). In such a case the policyholder has entered into a ifautho- contract which is liable to shift ; and where a dissolution poUcy- takes place in strict accordance with the deed of settle- ^"^^fl ^^^ *■ no claim ment, he has no claim except against the transferee com- against the pany : Hort's Case (1 Ch. D. 307); Cocker's Case (3 Ch. D. 1) cimplny.; cf. Be Waterloo Life Company, Carr's Case (33 B. 543) ; Be Times Life Company, Mosley's Case (Alb. Arb. Mins. p. 958) ; provided the amalgamation was made bond fide and in good faith: Daman's Case (3 Ch. D. p. 26) ; and it is immaterial whether the deed of settlement is ex- pressly referred to in the policy or not. A contract in the ordinary form that the funds of the company shall be liable, means liable according to the deed of settlement : Dowse's Case (3 Ch. D. 384). In Hort's Case and in Dowse's Case the policy had been granted by the Eoyal Naval Society, an unincorporated company iTormed under deed of settlement in 1839, and in Cocker's Case, by the Industrial and General Life Com- pany, a company formed in 1849, and registered under 214 TEE LAW OF LIFE INSUBANOE. the Act of 1844. Their deeds of settlement, which were very similar, provided in each case that the company might be dissolved, and that the directors should there- upon pay all immediate claims, and should obtain an undertaking from some other insurance company to satisfy the remainder of the liabilities as they matured, and should cause to be transferred to such company so much of the assets as should be agreed upon as sufficient with the premium income to discharge them, and should divide the surplus among the proprietors. The deed of settlement and the powers, rights, and duties of pro- prietors were to continue in force, so far as necessary, for winding-up the company and satisfying and pro- viding for claims until all claims were satisfied and provided for and a final division of the residue of the assets made. Lord Westbury had, in Swift's Case, Kelly's Case (L, T. (E.A.) 89) on the construction of the Royal Naval So- ciety's, deed, and in Barnes' Case {Ibid. 12), on the con- struction of the Industrial and General Company's deed, held that these provisions authorized a dissolution inter soeios only, and did not enable the society or the company to extinguish its liabilities towards its creditors, and further in Barnes' Case, that, even if it did, a valuation of the liabilities of the transferring companies a,nd an appropria- tion of a sufficient sum to answer them was contemplated as a condition of annihilation {ef. remarks of Lord Cairns in Wood's Case (Reilly, Alb. Arb. p. 58)), and that a mere transfer and mixing with the general assets of the trans- feree company would not be in accordance with the deed. Lord Westbury, however, decided in Boyal Naval So- ciety's Case (L. T. (E.A.) 47) on their deed that no trust was created of the sum handed over for the purpose of DISSOLUTION. 215 meeting their liabilities, but that it became part of the general assets of the recipient company. In Oarr's Case (33 Beav. 543) and Mosley's Case (Alb. Arb. Min. p. 953) the proTision was that such a sum shall be transferred as shall be agreed on, and it was held that if there was hona fides and no fraud the policyholder could not complain of the insufficiency of the sum. Even where the deed of settlement contains no power of amalgamation, but does contain a power in the most general terms of altering the laws of the company, and under this provision a power of amalgamation is after- wards obtained, it seems that holders of policies granted before the alteration will be bound by it when made, and will lose their rights against the transferor company : Doman's Case (3 Ch. D. 21). Where there is a simple sale and transfer of the busi- ness to another company but no dissolution, the rights of creditors are of course untouched : Bank of London, Part's Case (10 Eq. 622) ; and if the amalgamation is ultra vires the transferee company, that company cannot be liable, and the old company is not discharged : Saxon Life (2 J. &H. 408; IDeG. J.& S. 29). If the only dissolution authorized by the deed is one Dissolution inter socios, though it may be intra, vires both companies, '" ^'^ *'"^*" so that the policyholder cannot interfere to prevent it, Kearns v. Leaf (1 H. & M. 681), the transferring company cannot get rid of its liability without the assent in each case of the person with whom it has contracted. The assent of a creditor to substitute one person for another as his debtor is called " novation," both the term and the doctrine being borrowed from the civil law. The tendency formerly was to treat powers of amalga- Novation. mation as authorizing a dissolution inter socios only, and 216 TEE LAW OF LIFE INSUBANCE. to deal with the position of creditors of the absorbed com- pany as if it were a mere question of novation : Grain's Case (1 Ch. D. p. 322), and on this subject there is a mass of judicial decisions not easily reconcilable. The winding-up of the European and Albert Companies, each of which had absorbed twenty or more other companies, many of them the product of more than one preyious amalgamation, so that policy-holders had in some cases been the passive subjects of half-a-dozen transfers, gave rise to many intricate questions of novation. The decisions of such distinguished lawyers as Lord Cairns, the arbitrator appointed by the Albert Company's Arbitration Act, and Lords Westbury and Komilly, the successive arbitrators appointed by the European Com- pany's Arbitration Act, though not strictly binding on the regular Courts, will, of course, be ^titled to the highest respect. These Acts, indeed, gave power to the arbitrator to decide not only in accordance with legal and equitable rights recognised in Courts of Law and Equity, but as in his discretion he might think most expedient : Eur. Arb. Act, s. 8 ; Alb. Arb. Act, s. 11 ; a discretion which Lord Westbury expressly declined to exercise. Assent of For the future the legislature has provided against the TJollCV" holder in difSculties and complexity occasioned by the doctrine of Te^essfry presumptive and inferential novation by s. 7 of the for the i^ife Assurance Companies Act, 1872, enacting that no payment or other act done after the passing of the Act (6th August, 1872) shall constitute novation without a writing signifying that he intends to novate, signed by the policyholder or his agent. The word " policyholder " is defined by the Act of 1870, with which the Act of 1872 is to be read as one. It may be a question whether the words " act done " would apply to an express verbal con- NOVATION IN CEANOEBT. 217 tract ; at any rate, it would seem that a policyholder might so conduct himself as to make it inequitable that he should rely on this enactment. (See App. p. 292.) The doctrines on the subject sanctioned by the Court Decisions of Chancery will first be considered, and the decisions in eery. these arbitrations afterwards briefly reviewed. It will be found, it is submitted, that the doctrines laid down by Lord Westbury accord in the main with those of the Court of Chancery, while those of Lord Cairns, whose views were adopted by Lord Eomilly, present a consider- able divergence. The first question to be decided is whether the new Novation is company is liable at all to the policyholder in the old "^^' ' "' one ; the second, whether, if liable, the liability is substi- tutional or cumulative. In order to constitute novation it must be tripartite, the creditor, the original debtor, and the new debtor must all be parties to it : Manchester and London, &e. (9 Eq. p. 649). The question whether novation has taken place or not andaoues- is one of fact : Family Endowment (5 Ch. 132, 137) ; fact. Conquest's Case (1 Ch. D. 334) ; it may be inferred from the acts or acquiesence of the policyholder with know- ledge of the facts, but the acts or conduct must be un- equivocal, the question always being quo animo the acts were done : Conquest's Case [Ibid.) ; and in this point of view the position of the policyholder is material. Assent may be much more readily inferred in case of a man of business, a lawyer, or one acquainted with insurance business than in the case of a lady, an officer, or a clergy- man ignorant of business {Ibid. p. 345). The cases in general have turned on the nature of the Evidence notice of amalgamation, on the payment of premiums, tionto and the receipts given. Very slight evidence is sufficient ^"^^^be 218 TEE LAW OF LIFE INSURANCE. unequi- in the case of an ordinary partnership to shew that a creditor continuing his dealings after a change in the firm, knowledge of which is brought home to him, accepts the new firm as his debtors instead of the old, but " the union of two companies formed originally under separate deeds, by which the proprietors respectively stipulate for a limited liability, is a very different thing from the ad- mission of a new partner into an existing firm, with all the usual consequences of such an admission ; and the abandonment by a creditor of a written definite contract with one company for an unwritten engagement by a new company, to be arrived at through the medium of very special arrangements between the two companies, is a matter requiring far more cogent and precise proof than the assumption by a continuing- customer of the liability of the firm with which he -continues his dealings, instead of that of its immediate predecessor :" ]per Hatherley, L.C., Family Endowment (5 Ch. 118, 133). The debt being payable out of the assets of the com- pany, not by the debtor to the creditor, more evidence is required to shew that a new contract has been made than where the simple relation of debtor and creditor exists : Anchor Assurance (5 Ch. 632). " Where, on the amalgamation of two companies, notice is given to the policyholder of that fact, and in substance notice is given to him that he has his election whether he will choose to take a policy or liability of the new com- pany in lieu of and instead of the policy of the original company, who were liable to him, even though he does not in terms assent to the novation by taking out a new policy, by having it indorsed, or by entering into an express agreement ; yet, if he acts upon it and takes the benefits which he could only be entitled to receive upon NOVATION IN OHANOJESr. 219 the assumption that he had assented to it, that will be evidence on which the Court may find, and unless there is something to contradict it, ought to find, that he has agreed to take the liability of the new company in sub- stitution for that of the old one :" Mellish, L. J., Spencer's Case (6 Ch. p. 370). " In whatever way the circular may be worded, if it is such as to convey the information to the mind of the policyholder that he is to choose, and then, knowing that he has the choice, and that his choice is to be expressed by payment of his premiums in a particular way, he goes and pays them in that way, there would be enough to fix him:" Conquest's Case (1 Ch. D. 345). Accordingly the receipt of a circular in substance inviting the recipient to elect, the payment of premiums to, and the acceptance of a bonus from, the new company, were held to constitute novation : Spencer's Case (uhi supra) ; Times Life (5 Ch. 381) ; Anchor Assurance (5 Ch. 632) ; the receipt of and acquiescence in circulars of that nature by payment of premiums, would alone have been enough: Times Life (5 Ch. 395); cf. Blundell's Case (L. T. (Eur. Arb.) 45) ; Kennedy's Case (Eeilly, Alb. Arb. 5). Similarly novation is effected by payment of premiums to the new company with notice of amalgamation, and sending in a claim to it on the dropping of the life : National Provincial (9 Eq. 306) (s. v. Wilson's Case, L. T. 158) ; and a fortiori if the policy is indorsed with a memo- randum that the funds of the new company are liable : Ex parte Blood (9 Eq. 316) (s. v. Sort's Case, L. T. (E. A .) 109). An indorsement on the policy that the funds of the new company shall be liable for the payment of the sum assured, provided that the premiums are duly paid to it, is of itself a complete novation : Miller's Case (3 Ch. D. 220 THE LAW OF LIFE INSURANCE. 391). In this case it did not appear that any notice of the amalgamation was given, and there was no evidence as to the circumstances under which the indorsement was made. Merely not answering a circular is no assent : Spencers Case (uhi supra, p. 371) ; see Warne's Case (Alb. Arb. Mere pay- KeiUv, 113) J acting on it is : nor is the bare fact of pay- ment of > . . " premiums lug premmms to the new company and taking receipts enough. ^^"^ them on the face of which notice of the fact of the amalgamation appears, sufficient to effect a novation : Manchester and London (5 Ch. 640) ; see BlvndelVs Case (L. T. (B.A.) 89) ; and a fortiori the mere receipt by an annuitant of the old company of his annuity from the new company and giving an acknowledgment to its directors is no novation : Family Endowment, Pott's Case (5 Ch. 118); National Provincial, Kettle's Case (9 Eq. 306); India and London Life (7 Ch. 651). The new company may well be receiving in the one case and paying in the other as agents of the old : (uli sup-a, accord. BlvmdelVs Case (L. T. (E.A.) 39)). In the National Provincial Society (9 Eq. 306) Malins, V.C, intimated that payment of premiums for a long period would amount to novation by silence, acquiescence, and conduct, though payment of one would probably not {Ibid. p. 316) ; cf. remarks of Lord Hatherley in Manchester and London (1 Ch. p. 642). But in Griffith's Case (6 Ch. 379) James, L.J., stated that he attached little importance to payment of premiums in any case ; and the same judge when V.-C, in Manchester and London (9 Eq. p. 649), said : " It appears to me monstrous that a person having a con- tract of this kind is to be told that he has lost his right under his contract and must take such remedy as he can get from some other office, because he pays his premiums NOVATION IN CEANOEBT. 221 and takes receipts at the place where he is told to do so :" See also Conquesfs Case (1 Oh, D. p. 346). At any rate, whatever may be said as to the effect of Especially where it is continuing to pay premiums tor a great number of years provided where there is a particular contract between the two com- seating panics, it cannot have the slightest operation, Griffith's Case ^°Jj ^.^ (6 CJi. 379) : there the deed of amalgamation expressly shall pay provided that dissenting policy-holders should be entitled company. to keep their policies on foot by paying their premiums to the new company, and it was held that there was no novation, though the policies were sent in to be indorsed, but no indorsement was made, the policyholders declining to assent to or sign the form proposed : similarly, where it was provided that the amalgamation should be without prejudice to the rights of the insured, receipt by an an- nuitant of his annuity from the new company was no novation: India and London (7 Ch. 651). A circular merely stating that an amalgamation has taken place and that premiums must be paid to the new company, does not amount to an invitation to elect, and payment of pre- miums to the new company in such a case will have no effect of novation : Conquest's Case (1 Ch. D. 334). A married woman is incapable of assenting to a nova- tion, as the contract is for payment of a reversionary sum to her: Conquest's Case (1 Ch. D. 334), that is to say, unless the policy was effected subsequently to Malins' Act (20 & 21 Vict. c. 57), in which casQ novation might be made by deed acknowledged with the concurrence of the husband, or unless the policy were effected under s. 10 of the Married Women's Property Act, 1870, in which case she could deal with it as a feme sole. In the case of a mutual society where the insured are Where the members and the amalgamation is intra vires, the policy- ™,™ua" company is or 222 TEE LAW OF LIFE IN8VRANGE. the policy- holder can make no claim against the society ; if the also a relation of debtor and creditor had existed the novation holder would have been complete : Merchant's and Tradesman's (9 Eq. 694) ; cf. Barman's Case (1 Ch D. 317). In a case where upon amalgamation a person who was a policyholder and also a shareholder in the transferring company received shares in the transferee company, which was constituted as a common law partnership, in exchange, it was held that he could make no claim on his policy against the old company, the case resolving into this, that a creditor of a joint stock company had become a member of a partnership which undertook to discharge all the debts of the company including his : Flemings Case (6 Ch. 503). In Frere's Case (Alb. Arb., Eeilly, 211) however Lord Cairns refused to follow Fleming's Case, pointing out that the contract to indemnify the shareholder is limited (a point not argued), and that he has not contracted to pay his own debt out and out, but only to the extent of the sums unpaid upon his shares. Considcra- There is ample consideration for novation upon amalga- mation both between the two companies and between the new company and the policyholder, for the new company has the assets of the old transferred to it aud it receives the premiums of the policyholder : United Ports Co., Even's Claim (16 Eq. 354). There au agreement for amalga- mation and transfer had been made, the policy had been indorsed by the new company, and the life having dropped, the claim had been admitted, after which the amalgama- tion agreement was cancelled for breaches by the trans- feror company, and it was held that, if the indorsement was a guarantee, there was ample consideration between the old company and the new, and the Merc. Law Am. Act, 1856 (19 & 20 Vict. c. 97), made it immaterial tion, NOVATION — LORD CAIRNS. 223 whether it was expressed or not, and if an independent contract, there was ample consideration between the com- pany and the insured since the former would receive the premiums. NOVATION. Lord Cairns Decisions. In the Albert Arbitration Lord Cairns laid down that Payment of the term "novation," though properly applicable in cases of to the annuitants, cannot be rightly used at all with regard to ^„°"f ^^'^' policyholders: Kennedy's Case (Alb. Arb., Eeilly, 5); primd facie Budden's Case (Alb. Arb., Eeilly, 120). In the case of policies payment of premiums is a condition precedent of liability, and the onus lies on the policyholder to shew that he has paid to the right person. The contract is absolute only for the period covered by the premium, for all beyond it is conditional; the question is not one of novation, it is one of fact. Did he pay the premiums to the right person ? If he produces a receipt from the transferee company prima facie he has not, and he must explain the discrepancy, he must shew that the new com- pany received as agents of the old : Kennedy's Case (Alb. Arb., Eeilly, 5) ; Whitehaven Bank Case (Ibid. 62) ; Budden's Case (Ibid. 120). Accordingly novation was held to have taken place where the policyholder paid his premiums to the new company and took their receipts headed with their name, after receiving a circular offering the liability of the new company in substitution for that of the old : Whitehaven Bank Case (Alb. Arb., Eeilly, 62) ; Kennedy's Case (Ibid. p. 5) ; a circular setting out the advantages of amalga- mation and offering to give policies in exchange is such 224 TEE LAW OF LIFE INSURANCE. an offer, and is accepted by payment of premiums accord- ingly : Butler's Case {Hid. 203) ; and that, notwithstand- ing a verbal protest to the agent of the old company against the transfer : Bivaz's Case {Ihid. 104), and notwith- standing the fact that payment was made in consequence of the policyholder being told at the head office of the new company, in answer to objections, that all protests would be unavailing, and that unless the premiums were paid to it the policy would lapse : Howell's Case (Ibid. 116) ; and though the policyholder insisted on having the days of grace allowed by the old company instead of the shorter period allowed by the new : Warne's Case (Ibid. 113). And a fortiori it was held a novation where a similar circular to that above was received and similar payments made and receipts given, and in addition the policy- holder had accepted a bonus by acknowledging the bonus circular and allowing it to be added to the policy : Werninck's Case (Ibid. 101) ; and similarly where he had merely made inquiries as to the declaration of a bonus : Holmes' Case (Ibid. 110). In the absence of any circular announcing the amalga- mation, acceptance of a cash bonus from the new com- pany : Knox's Case {Ibid. 132) ; or allowing a bonus to be added to the policy by leaving the bonus circular unan- swered {Allen's Case, Ibid. 127), will amount to novation. So will acceptance of a bonus even after repeated and urgent protests against the transfer : German Life {Ibid: 189). Payment of " Payment of premiums is a material element in nononX- deciding whether there is novation, but is not conclusive ; s'^6- it is an equivocal act which has to be explained, either for or against the transfer of liability, by the circumstances which preceded the payment " : FagarHs Case {Ibid. p. 183), NOVATION —LORD CAIRNS. 225 where on the facts the circular annonnciDg the amalga- mation was held to have amounted to an offer of the sub- stituted liability of the new company and the payment of premiums to them to an acceptance of that offer. Pay- ment of premiums to the new company where no notice of amalgamation was given, but the first receipt to the form of which the attention of the policyholder appeared to have been directed, stated that the liability of the old company was transferred to the new, was held to effect a novation: Lancaster's Case (Ihid. 95); Glazebrooh's Case {Ibid. 135), where there was the additional circumstance of assent to a bonus by leaving the bonus circular unan- swered. Novation is effected by an exchange of the policy for a new one : Bowring's Case (Ibid. 231) ; by indorsement of the contract with a statement of a liability of the trans- feree company: Balfour's Case {Ibid. 207); Hawtrey's Case (Ibid. 138) ; the former being the case of a policy where no notice of the amalgamation had been received, and there was nothing to shew under what circumstances the indorsement had been made; the latter being the case of an endowment contract, where the payments had all been completed at the date of the amalgamation, notice of which was proved ; (and see Dale's Case (Ibid. 11), the case of an annuity where notice of the amalgamation was proved, and payment, after indorsement, was received from the new company) ; by alteration of the contract, as by turning participating into non-participating poli- cies : Butlers Case (Ibid. 203) ; German Life (Ibid. 189), and changing yearly into half-yearly premiums : Ibid. ; and finally by sending in a claim against the new com- pany after the dropping of the life : Sudden's Case (Ibid. 120), where no notice of the amalgamation had been Q 226 THE LAW OF LIFE INSURANCE. received, but the premiums had been paid to the new company and receipts headed with their name taken. If the policy is in settlement or mortgage the policy- holder can bind the trustee or mortgagee by a novation, for the mortgagee or. trustee has no separate rights where it is left to the mortgagor or settlor to pay the premium and keep up the policy : Werninck^s Case {Ibid. 1 01) ; Andrew's Case {Ibid. 107) ; Balfour's Case {Ibid. 207) ; Vivian's Case (L. T. (E.A.) 169). There is no Payment of premiums under a continuing protest novation i i ^ i • • . . „ where and merely to prevent lapse, negatives any intention oi payment is ^Q^ating : Wood's Case (Alb. Arb., Reilly, 54); especially protest. where the amalgamation deed contained a provision that • the new company should receive the premiums of dissenting policyholders as agents for the old company : Darning's Case {Ibid. 144) ; and where there is such a provision and premiums are paid to the new company, but a substituted policy or a bonus is refused, there is no novation : ClarJse's Case {Ibid. 217) ; Buchner's Case {Ibid. 258). The case was the same where the policyholder was one of a firm of solicitors and agents of the company, who, on notice of the amalgamation, refused to recognise or become agents to the new company : Sow's Executors {Ibid. 245). Or through There can be no novation where the premiums are paid agent. through an agent unless authority is given to him to pay them to the new company, he is agent to pay, not to novate ; Dwpre's Executors {Ibid. 236), where the widow of the holder of an endowment contract paid a premium to the transferee company without the consent of his exe- cutors ; Clegg's Case {Ibid. 266), where the premiums were paid through the same agent before and after the amal- gamation, and the policyholder received no amalgamation circular, and being illiterate could not read the receipts NOVATION— LORD CAIBNS. 227 wbich would have informed her of the change ; and Count d'Alte's Case {Ibid. 253). In this last case the premiums were paid both before and after the amalgamation through the solicitors of the policyholder, who was abroad and had no notice of the amalgamation, and it was held that there was no novation though on his return he had continued the payments to the new company, the amalgamation deed containing no provision, as in Darning's Case (ubi supra). In Power's Case (Ibid. 232) the policyholder had mort- gaged a rent-charge payable by a receiver of the Court of Chancery, and the policy, to the insuring company, and an order had been made that the receiver should pay the premiums and interest to the company ; after the amalgamation, of which the policyholder had no notice, the mortgage was transferred to trustees for the new com- pany and the premiums paid to it by their order, and on these facts it was held that there was no novation. But where the policy and an annuity was mortgaged to trustees for the insuring company, power being given to apply the annuity in payment of premiums, and upon amalgamation the mortgage was transferred to the new company and the annuity applied in payment of pre- miums to it with the knowledge and assent of the mort- gagor, he was held bound in account between himself and the mortgagee by the payments so made, and novation was established : Mooney's Case {Ibid. 241). NOVATION. Lord Wesibury's Decisions. At the outset of the European Arbitration Lord West- Principles bury laid down in BltmdeU's Case and Coghlan's Case westLry. Q 2 228 TBE LAW OF LIFE INSURANCE. Proof required (1) of power to take over policies, (2) of offer to do so, (3) of aoceptanoe of the offer. Difference between Lord Cairns and himself one of evi- dence rather than principle. (L. T. (E. A.) 31 and 39, E. A. Eeilly, 46 and 84), the principles upon which he intended to act in regard to novation, intimating that though he could not legislate so far as to require novation to be made in writing, ho should be guided to a certain extent by the civil law, the origin both .of the doctrine and the term, and by recent legislation (Life Assurance Act, 1872, s. 7), which had adopted the strict doctrine of the civil law for the purpose of excluding those presumptions, implications, and infer- ences which had gone far to destroy the plain sense of contracts, and announcing that to establish novation he should require three things to be proved : 1. That the transferee company had power to grant new policies to the policyholders of the transferor com- pany on the same terms as their existing policies, or to adopt existing policies and indorse them with their acceptance so as to make them analogous to the old policies. 2. That the possession of the power was made known to the policyholder, and that an offer was made to him of a new or an indorsed policy. 3. That this offer was accepted by unequivocal acts. The difference between himself and Lord Cairns in their mode of viewing these cases cannot be better stated than in his own words : — " There is no difference between us in the principle of law that governs these cases. Lord Cairns held it to be a question of novation, and that novation was a question of fact. I hold also that novation is a question of intention, and that an intention is a fact which must be proved. I will not admit of presumptions and inferences as the media from which I will infer that intention, any more than Justinian did when he referred to the uncertainty and NOVATION — LOBD WESTBUET. 229 difficulty that clouded the subject as long as it was possible to introduce those presumptions, and he superseded the presumptions by a plain and direct rule : " BlundeU's Case (L. T. (E. A.) p. 45) {a). He held accordingly that the onus of proof was not on the policyholder to shew that he did not intend nova- tion, which would be quite an inversion of the natural order ; but on the company alleging substitution or nova- tion to prove an agreement by the policyholder to that effect, and, in the absence of any definite written declara- tion, acts that would unequivocally involve evidence of an intention on his part to accept the liability of the new company instead of that of the old; thus payment of premiums to the new company, with notice of the amal- gamation and the receipt of a bonus circular which was (a) Life Insurance Act, 1872, s. 7 : Act of " Where a company either before or after the passing of this Act ■'^^^ . has transferred its business or has amalgamated with another company, ^.^j^ ^f no policyholder in the first-named company who shall pay to the other civil law. company the premiums accruing due in respect of his policy, shall by reason of any such payment made after the passing of this Act or by reason of any other act done after the passing of this Act, be deemed to have abandoned any claim which he would have had against the first-mentioned company on due payment of premiums to such com- pany, or to have accepted in lieu thereof the liability of the other com- pany, unless such abandonment and acceptance have been signified by some writing signed by him or by his agent lawfully authorised." Justinian III. tit. xxix. par. 3 : " Sed cum hoc quidem inter veteres constabat, tunc fieri novationem, cum novandi animo in secundam obligationem itum fuerat, per hoc autem dubium erat quando novandi animo videretur hoc fieri, et quasdam de hoc prjesumptiones alii in aliis casibus introducebant. Ideo nostra processit constitutio, quae apertissime definivit tunc solum novationem fieri, quotiens hoc ipsum inter contrahentes expressum fuerit, quod propter novationem prioris obligationis convenerunt ; alioquin manere et pristinam obligationem et secundam ei accedere ut maneat ex utraque causa obligatio." 230 TEE LAW OF LIFE INSURANCE. acknowledged, is no novation, Coghlan's Case (uli supra), nor is payment of premiums to the new company and acceptance of receipts from it headed with its name : BlundelVs Case (uhi supra). Payment of .Payment of premiums to the new company is in itself primd^^cie equivocal, the policyholder may be paying to it as the tion"*^^' agent of the old, or he may be intending to novate, but unless this intention is proved in the clearest manner, the payment will be referred to the old contract (Ibid. p. 45). A transfer by company A. to company B. involves a power to carry on the business and receive the premiums, and prima faeie B. receives as the agent of A. The usual covenant to indemnify company A. involves its continued existence (Ihid. p. 43). But if the transferee company writes to the policy- holder and offers him a new contract, and he, without answering, goes and pays his premiums to the new com- pany, that is an acceptance of the offer (Ibid. p. 43) ; Conquest's Case (Ibid. p. 69). Novation is effected by payment of premiums to the new company after knowledge of the winding-up of the old company, by which their authority to receive as agents must have been terminated : CarpmaeVs Case (L. T. (E. A.) p. 95) (a), or by alteration of the contract, e.g., an indorsement on the policy of an agreement for reduction of the sum assured in consequence of a mistake in the age of the life : Ibid. (a) Gf.BmrrCs Case (Ilid.Tp. 127), where the continued receipt of an annuity from the new company under similar circumstances was held to have no such eflfeot ; similarly notice of winding up of the old com- pany, and omission to 'prove, was held to amount to ahandonment of any claim against the old company : Per Lord Eomilly, Lines' Case {Ihid. p. 151). NOVATION — LORD WESTBUBT. 231 Payment of premiums to, and acceptance of receipts from the new company, after receipt of a circular stating that the terras of the policies would be unaltered, and that in future bonuses the policyholders of the old com- pany should participate equally with those of the new company, is no novation : Gonc[uest's Case {Ibid. p. 67). Nor is an indorsement that the assured, on payment of an additional premium, may reside abroad : Grain's Case {Ibid. p. 157), nor does a claim against the new company, and its admission, shew that the liability of the old has been abandoned : Wilson's Gase {Ibid. p. 158). Even where the transferee company in addition to the if new general guarantee which it gives to the transferor com- liable, pany contracts directly with the individual policyholder ^^^^^^J to pay the sum insured, it will be a question whether cumulative . not substi- the liability is cumulative or substitutional, and unless tutionai. the policyholder and the transferee met on the footing of making a new contract which should supersede the old, there will be two coherent and concurrent obliga- tions, the existence of the second being perfectly com- patible with the integrity of the first: Scott's, Hort's Case (L. T. (E. A.) pp. Ill, 113) {a). Where a circular was received announcing the amal- gamation, and stating that the terms of existing policies would remain unaltered, and that though policyholders were fully guaranteed by the deeds of amalgamation, they might, for greater security, have an indorsement to that effect, or a policy guaranteeing the existing policy, or a (a) Omnes res transire in novationem possunt. Quodcuuque enim sive verbis contractum est sive non verbis novari potest et transire in verborum obligationem ex quacunque obligatione : dummodo sciamus novationem if a demum fieri si hoc agatur ut novetur obligatio, cxterum si non hoc agatur duee erunt oUigationes : Dig. lib. 46, tit. 2, par. 2. 282 TEE LAW OH LIFE INSURANCE. new policy of the transferee company, and the policy was sent in and indorsed with a statement that the funds of the new company should be liable to pay the sum insured provided the premiums were paid to it, it was held to be a case of additional not substituted liability {Ibid.) The words " with profits " in the former case being held merely descriptive of the policy, which was a participating one, not as giving a right to profits in the new company. The same construction was placed upon the provision in the European Assurance Society's Act, 1859, that the policy- holders should have the same rights against the European as if the policy had been granted by that society : Oar- diner's Case {Ibid. p. 63). And where this cumulative liability exists, the policyholder is entitled to prove, in the winding-up of the several companies, against each com- pany for the full amount of his claim, subject to his not receiving more than 20s. in the pound : Harman's Case ; Pratt's Case (Ihid. 129). Lord Romilly, however, who succeeded Lord Westbury as arbitrator, declined to allow a concurrent proof by the policyholder under similar circumstances, and held that as a matter of convenience there must be one proof only, and that by the official liquidator, against the transferee company under the covenant to indemnify, basing his decision mainly on the powers given by s. 8 of the Euro- pean Arbitration Act, to the arbitrator to decide, not only in accordance with the legal and equitable rights of the parties so recognised in the Courts of Law and Equity, but on such terms and in such manner as in his absolute dis- cretion he should think fit : Lines', Leah's, Leas' Case {Ihid. p. 167) and re-hearing Harman's Case and Pratt's Case, reversed the decision of his predecessor. Indeed, on questions of novation generally he expressly declined NO VA TION— S UMMAR Y. 233 to follow Lord Westbury, and reverted to the view of novation taken by Lord Cairns, stating that he dissented from Lord Westbury in several oases decided by him on this subject, and that he did not consider the doctrine that the three parties must concur in making a new contract in order to constitute novation to be a doctrine to be found in the cases : Talbofs Case, Vivian's Case (L. T. (E. A.) 169), s. V. Manchester & London (9 Eq. 649). The circular was ia these cases very similar to that in Scott's Case and Sort's Case, and Lord Romilly held that the indorsements, which were nearly identical in the former case with that in Pratt's Case, and in the latter with that in Scott's Case and Mart's Case, constituted a complete no- vation, cf. GlanfieWs Case (L. T. (E. A.) p. 173) ; and the result was the same where a similar circular had been sent, premiums paid, and a reversionary bonus declared, but no indorsement had been made : Smith's Case (p. 173). In spite of this conflict of authority, it is submitted Summary that the following principles are conclusively established °^ °^^^^" by the cases : — Novation is tripartite, and requires the concurrence of the creditor, the original and the sub- stituted debtor. It is a question of intention, and in- tention is a fact to be proved. It is on the mode of proof rather than on questions of principle that the divergence between the cases in Chancery and before Lord Westbury and those before Lord Cairns shews itself. The former cases establish that if acts or acquiescence are relied on for proof of novation, they must be unequivocal ; that there must be an invita- tion to elect, and an acceptance of that invitation by acts only referable to election ; that the onus of proof is on the person alleging novation ; and that mere payment of premiums is, if not immaterial, at best equivocal. 234 THE LAW OF LIFE INSURANCE. Lord Cairns shifts the onus of proof, and, insisting on the peculiar character of the contract of h'fe insurance, holds that it is incumbent on the policyholder to nega- tive novation, that payment of premiums to some one other than the original debtor is prima facie evidence of novation, and he appears to have found an invitation to elect in circulars which other minds have interpreted as a mere announcement of the fact of amalgamation. It is to be observed that there are no cases in Chancery establishing cumulative liability. The Act of 1872, as has been seen, requires an assent in writing of the policy- holders to establish novation. WINDING-UP. 235 CHAPTER XI. WINDING-TJP. Winding-up under Companies Act, 1862— of registered Companies— of unregistered — of illegal Companies — Under Act of 1870 — Practice — Eeduction of Contracts — Valuation of Policies — Limited and unlimited Assets — Oontributories — Participating Policy- holders are not — Hemhle, none in Mutual Company — In Mutual Company with mixed Business, who are. The existence of an insurance company may be ter- Winding- minated in the mode, if any, indicated in its deed of "^ settlement, articles, or special Act, subject to the provision of the Life Assurance Companies Act, 1870, with regard to amalgamation and transfer, or by a winding-up under the Companies Act, 1862. The law with regard to the winding-up of companies in general will be found in Part V. of the Act of 1862, ss. 74-173, and, in works like Mr. Justice Lindley's and Mr. Buckley's. It is only pro- posed here to deal with points especially affecting life insurance companies. Life insurance companies registered under the Act of of regis- 1862 may be wound up compulsorily (s. 79 et seq.), volun- companies. tarily (s. 129 et seq,), or subject to the supervision of the Court (s. 147 et seq.). Insurance companies unregistered, of un- a term which includes all legally constituted associations companL. and companies other than companies registered under the Act of 1862, Bowes v. Hope Life, &c., Society (11 H. L. C. 389); Bank of London, <&e.. Association (6 Ch. 425), and consisting of more than seven persons, may be wound up 236 THE LAW OF LIFE INSUBANOE compulsorily under the Act, and wherever a petition for winding up an unregistered company is pending, all the provisions of Part IV. of the Act of 1862 apply, whether a winding-up order is eventually made or not: ss. 199, 201, 204 ; and accordingly proceedings in an action against the company may be restrained under s. 85 : Rudow v. Great Britain, dtc, Society (^17 Oh. U. 600). Illegal Whether a company which, is illegal for want of camfoTbe^ registration can be Wound up at all under s. 199, is a wound up. question on which there is some variance of judicial opinion. Orders have been made for winding up such companies where the question of their legality has not been argued : Arthur Average Association (10 Oh. 512) ; where the M. E. expressed the opinion that an illegal company could not be wound up under the Act, though the objection was not sustainable on motion to vary the chief clerk's certificate. In the subsequent case of the South Atlantic Steamship Co. (2 Oh. D. 763), a winding-up petition by a creditor, the solicitor of the company, who was a party to and a creditor in respect of the illegal formation of the company, was dismissed by Malins, V.O., on this ground, and his decision was affirmed by the Oourt of Appeal, and an opinion was expressed by Bag- gallay, L.J., that a company illegally constituted for the express purpose of evading the Act of 1862 could not be the subject of a winding-up order under it, while James, L.J., intimated that its illegality would be an additional reason for winding it up, and Mellish, L.J., inclined to the view that a winding-up order could be made on the application of an innocent creditor or even of an innocent partner in the illegal adventure. Mr. Justice Lindley supports the view that such a company can be wound up at the instance of creditors. ILLEGAL COMPANIES. 237 not of members : Lindley on Partnership, 4th ed. ii. 1268 ; and in the ver)^ recent case of Padstow Total Loss, &e. (30 W. R. 326), a winding-up order obtained by a member of a mutual insurance company which was held to be illegal for want of registration, was discharged on this ground. At any rate, the association or its members could not allege their own illegality as a means of es- caping from a winding-up order: South Atlantic (2 Ch. D. p. 779) ; Doolan v. Midland Railway Co. (2 Ap. Ca. p. 806) ; and the difficulty may, as we have seen, be got over by registration with a view to a winding-up : s. 180 ; Southall V. British Muttial Society (6 Ch. 114). A dissolved society may be wound up under this section Dissolved so long as rights remain to be adjusted or liabilities to be ca™ "' discharged : Family Endowment Society (5 Cb. 118) ; Bowes V. Hoj>e, &c., Society (11 H. L. 0. 389) ; a case of a company completely registered under the Act of 1844, and which ceased to carry on business in 1855. If the opinion prevails that a pure mutual society is a Pure mere club or benefit society : Smith v. Anderson (15 Ch. D. ^mpany 217) ; Great Britain Society (16 Ch. D. 255) ; and there- ^^^°°°* fore not within s. 4, it would seem to follow that it Companies Act cannot, if unregistered, be wound up under this section, for the words " partnership, association, or company " must be read with some limitation : Be St. James' Club (2 D. Gr. M. & Gr. 383) — a case under the old Winding-up Acts : 11 & 12 Vict. c. 45 ; 12 & 13 Vict. c. 108 ; and the sec- tion can only be intended to apply to companies carrying on business for gain, as in s. 4 {ante, p. 174) ; a petition by a general creditor for winding up a mutual society would, in this view, be unsustainable ; see, however, the Padstow Case, ante, p. 175. A mutual life insurance society can, however, be wound Can under Act of 1870. 238 THE LAW OF LIFE INSURANCE. up on the petition of a policyholder or shareholder under 8. 21 of the Life Assurance Companies Act, 1870, which provides that the Court may order the winding-up of any company in accordance with the Companies Act, 1862, the word "company" being defined by s. 2 to mean " any person or persons corporate or unincorporate " (ex- cluding friendly societies) " who issue or are liable under policies of insurance upon human life within the United Kingdom, or who grant annuities upon human life within the United Kingdom :" Great Britain Society (16 Ch. D. 247, p. 251). The policyholders in such a society are under no liability to contribute to the payment of debts, and all that can be done in the winding-up is, after payment of the costs, to distribute the funds among the policyholders in proportion to their claims : Ibid. Not if That society had been formed under deed of settlement ^^* ■ prior to the Act of 1844 ; but it is conceived that an illegal company could not be wound up under this section ; and the Padstow Case (30 W. E. 326) decides that a mutual society of more than twenty members is so unless registered. Prospec- In Be European Assurance Co. (L. E. 9 Bq. 122) it was solvency held by James, V.C, that inability of a company to pay couu^not j^g ^^^^ ^^jgj. g_ gQ ^f ^^^ ^^^ ^f jgg2^ referred only to sidered debts actually due, and that prospective insolvency could not be looked at for the purpose of making a winding-up order, as being just and equitable within s. 79, subs, 5 ; it must be shewn that the existing and probable assets are insufficient to meet existing liabilities, and possible liabilities or profits in respect of future business will not be taken into account. In estimating the assets, uncalled capital must be taken PROSPECTIVE INSOLVENCY. 239 at its nominal amount in the absence of evidence of in- solvency of the shareholders. In consequence of this decision, and in view of the nature previous to „ ,.„ . , , • 1 . . „ the Life of a life insurance company s business, the definition of Assurance the insolvency sufficient to authorize the winding-up of a aX^is^o^ life insurance company was enlarged by the Life Assur- ance Companies Act of 1870, which enacts by s. 21, that " The Court may order the winding-up of any com- Can since t Tip a pt pany, in accordance with the Companies Act, 1862, on the application of one or more policyholders or share- holders, upon its being proved to the satisfactioa of the Court that the company is insolvent; and in determining whether or not the company is insolvent the Court shall take into account its contingent or prospective liability under policies, and annuity and other existing contracts ; but the Court shall not give a hearing to the petition until security for costs for such amount as the Judge shall think reasonable shall be given, and until a prima facie case shall also be established to the satisfaction of the Judge ; and in the case of a proprietary company having an uncalled capital of an amount sufficient with the future premiums receivable by the company to make up the actual invested assets equal to the amount of the esti- mated liabilities, the Court shall suspend further proceed- ings on the petition for a reasonable time (in the discretion of the Court) to enable the uncalled capital, or a sufficient part thereof, to be called up ; and if at the end of the original or any extended time for which the proceedings shall have been suspended such an amount shall not have been realised by means of calls as with the already invested assets to be equal to the liabilities, an order shall be made on the petition as if the company had been proved insolvent." 240 TEE LAW OF LIFE INSURANCE. By s, 2 the term " company " means any person or persons, corporate or unincorporate, not being registered under the Acts relating to friendly societies, who issue or are liable under policies of insurance upon human life within the United Kingdom, or who grant annuities upon human life within the United Kingdom ; and the term " policyholder " is defined as " the person who for the time being is the legal holder of the policy for securing the life assurance, endowment, annuity, or other contract with the company." Practice A petition under this section is marked with a special tions under fiat referring it to Chambers to ascertain whether there this section, jg a, prima facie case, and what security for costs should be given. No advertisements are issued till a prima facie case is shewn and the ordinary affidavit in support of the petition is not sufficient for this purpose. The inquiry at Chambers is ex parte, and if a prima fa^ie case is esta- blished, the petition comes on in the ordinary way. Where the company has passed a resolution for a voluntary winding-up, no prima facie case need be esta- blished nor any security given : British Alliance Corpora- tion (9 Ch. D. 635). In this case it was held on demurrer that a policyholder petitioning under the Act need not prove a debt of £50 ; that the statement that the com- pany was admittedly insolvent was a sufficient allegation that it could not pay its debts, and that the allegations of fraud and the appointment of the secretary provisional liquidator made a compulsory winding-up order just and equitable. The petition must be entitled under the Act : British Alliance (W. N. 1877, p. 261). The Court is not bound to suspend the proceedings if satisfied at the hearing that the uncalled capital, though nominally sufficient, is not PROSPECTIVE INSOLVENCY. 241 realisable to a sufficient extent : National Funds Co. ( W. N. 1876, p. 239). A provisional liquidator will not be appointed pending the inquiry on the ex parte application of the petitioner : London and Manchester Industrial As- sociation (1 Ch. D. 466). In this case the company were liable on policies insuring £136,543 16s. \d. at premiums amounting annually to over £8685 lis. lid., and on en- dowment policies for short periods insuring £6689 9s. 4id. at premiums amounting to £1319 4s. Zd. There was a subscribed capital fully paid up of £4625, and the whole assets of the company, which had been ten years in existence, consisted of £500 on deposit at the London and Joint Stock Bank, £50 in the Sheffield Bank, £700 in the hands of agents, £664 due on personal security, £1700 due for outstanding premiums, and office furniture, &c., to the value of £135 ; notwithstanding these facts, the Court declined to take prospective liabilities into account for the purpose of considering whether a prima facie case had been made out. But the authority of this case seems very questionable. Test of and the true test of prospective insolvency is, it seems, '°^'' ^^^^7- that suggested by Mr. Buckley — whether the present value of the future premiums minus the loading, together with the realized assets and the realizable uncalled capital, if any, is sufficient to balance the present value of existing and contingent liabilities : see Buckley, 8rd ed. p. 551. A life insurance company may, of course, be wound up independently of this section, where it is commercially insolvent, that is, unable to meet current demands, or where its existing and probable assets are insufficient to meet its existing liabilities. Sect. 22 of the Act of 1870 provides that the Court in Reduction the case of a company which has been proved to be in- tracts. 242 TEE LAW OF LIFE INSURANCE. solvent may, if it thinks fit, reduce the amount of the contracts of the company upon such terms and subject to such conditions as the Court thinks fit, in place of making a winding-up order. K a substantial proportion of the policyholders desire this course to be adopted the Court will, under the pro- visions of s. 91 of the Companies Act, 1862, direct the winding-up petition to stand over that a meeting of policy- holders may be called and their views ascertained : Great Britain Society (16 Oh. D. p. 255). In the case of this society an order for reduction of contracts was made, and it was referred to a special referee to settle a scheme, and, on a special case stated by him for the opinion of the Court, under Ord. xxxvi., r. 34, it was decided (1) that the order for reduction must date from the time from which a winding-up order would have dated if made, that is, from the date of the presen- tation of the petition ; (2) that the scheme for reduction only applies to current contracts, and that persons who were creditors before that date, e.g., outside creditors, policyholders whose claims had then matured into a debt, or annuitants in respect of payments then due, are out- side the scheme, and must be paid in full ; (3) that the contracts of participating and non-participating policy- holders are reducible pari passu, and that all premiums in arrear must be paid in full: Great Britain Society (19 Ch. D. 39). Debts The Companies Act, 1862, s. 158, makes all debts pay- able on a contingency, and all claims present or future certain or contingent, ascertained or sounding only in damages, admissible to proof (a). The old Winding-up (a) S. 158 : " In the event of any company being wound up under this Act, all debts payable on a contingency, and all claims against the proveable. REDUCTION OF CONTRACTS. 243 Acts contained no similar provision, but independently of those Acts policyholders or annuitants were held to be creditors in equity for the estimated value of their claims, and able to prove without establishing them by suit : Hunt's Annuity (1 H. & M. 79) ; Evans v. Coventry (5 De G. M. & G. 911). " The holder of a current policy is entitled on the winding-up, not to a liquidated sum due as a matter of right from the company, nor to damages unliquidated in the first instance but to be liquidated by an action, but to apply to the Court to put a just estimate as at the date of the winding-up order as far as possible on that claim which has not matured, but which at some future time he may have against the company " : iper Lord Cairns, Parley's Case (Alb. Arb, Rail.. 48). The winding-up determines the contract and destroys Winding- the functions of the directors as from the date of the ^^.L ^' presentation of petition (Companies Act, s. 84) and where "™'''^<=*- the days of grace expire after that date, non-payment of the premium within due time does not forfeit the policy : Albert Assurance, Cook's Policy (9 Eq. 703), the case is the same even though the days of grace expire before that date, if there is no hand competent to receive the premiums, and accordingly where the insuring com- pany had amalgamated with another company which subsequently went into liquidation, and the first company had no office or agent, non-payment by a policy-holder company, present or future, certain or contingent, ascertained or sound- ing only in damages, shall be admissible to proof against the company, a just estimate being made so far as is possible of the value of all such debts or claims as may be subject to any contingency, or for some other reason do not bear a certain value." E 2 244 TEE LAW OF LIFE IN8UEANCE. who had not novated was held no forfeiture ; Conquests Case (L. T. (E.A.) 121). But the insured by withholding payment risks the forfeiture of his policy if the petition is dismissed. Valuation The policy must be estimated as a current valid engage- as at wind- ment, according to its value at the date of the winding-up order!" °^^^'^' ^^^ °^ '^^^^> ^- ^^^ ^ General Order, 1862, s. 25; Walberg's Case (B. A., Keil, 65; L. T. (E.A.) 50); the winding-up does not relate back to the presentation of the petition for Ihis purpose (a). Consequently premiums falling due before the winding-up order must be paid before the policy is admissible to proof, whether the days of grace were then expired or not : Ihid. ; and if the pre- mium be an annual one payable by quarterly instalments, payment must be made of all the instalments for the current year: Hort's Case (L. T. (E.A.) 112). Annuitants may prove for instalments due before the presentation of the petition, with interest down to that date, for instalments falling due in the interval between that date and the winding-up order without interest, and for the value of their annuities at the date of the order : Walberg's Case (Eur. Arb., Eeil. p. 83). It will be assumed, till the contrary is proved, that the lives are in a normal state, and that no other change has taken place than that which arises from the advance of age ; if there are any particular circumstances affecting a life they must be taken into account : Bell's Case (9 Eq. p. 719) ; Holdich's Case (14 Eq. p. 80) ; cf. Macdonald v. (a) Gen. Order, 1862, r. 25 : The value of sucli debts and claims as are made admissible to proof by the 158th section of the Act shall, so far as possible, be estimated according to their value at the date of the order to wind up the company. VALUATION OF POLICIES. 245 Maedonald (5 App. Gas. 519) ; Ex ^arte Neal (14 Ch. D. 581, 584). And though the policy must be estimated according to e"e''nts'"*'" its value at the date of the winding-up order, subsequent material as ° '^ ' '■ evidence events, such as the dropping of the life after claim but of value. before proof, may be taken into account as evidence of value : Bell's Case (9 Eq. p. 721) ; and it would seem to follow from a recent decision of Jessel, M.E.., Be Northern Counties, Macfarlane's Clcdm (17 Oh. D. 337), that if the policy becomes a claim at any time before proof, the policyholder may prove for the actual amount due : See also Be Bridges (17 Oh. D. 342). Macfarlane's Claim was a case of a fire policy where the loss occurred after the winding-up, and it was held that the rule in bank- ruptcy was that where a contingent liability ripened into an actual debt during the continuance of the bankruptcy, the actual amount due may be proved for ; that s. 10 of the Jud. Act, 1875, imported this rule into the winding-up of companies, and that r. 25 of the General Eules, 1862, only applied where the amount of the debt could ^not be ascertained without it. The method of valuation to be adopted has been the method's"! subject of conflicting decisions. valuation. The principle adopted by James, V.O., in BelTs Case (9 Eq. 706), and followed by Komilly, M.E., in Eoldieh's Case (14 Eq. 72), was that the value of the policy is the capitalized difference between the actual premiums pay- able and the increased premiums which would now be charged by a solvent office with similar rates and similar capital after examining, if necessary, the state of health of the life. The principle adopted by Lord Cairns in Lancaster's 2i6 THE LAW OF LIFE INSURANOE. Case (Alb, Arb., Eeil. 7ti ; 14 Eq. 73, n.), was that tbe value of the policy is the diflference between the present value of the reversion of the sum insured, and the present value of a life annuity equal to the amount of the pure premium (minus the loading) the rate of interest being taken as £4 per cent., and the rate of mortality as that of Seventeen Offices' Experience Tables. The one principle represents the principle of damages, regard being had to the particular circumstances of each particular case, the other the principle of a uniform valuation. The former is theoretically more just to the claims of the individual policyholder, but the latter, from its cheapness, convenience, and practical working, is better fitted to secure substantial justice between the various claimants in the winding-up ( Walherg's Case). statutory The difficulty has been solved by the Life Assurance Companies Act, 1872, s. 5, which adopts Lord Cairns' method of valuation : — "Sect. 5. Where a life assurance company is being wound up by the Court, or subject to the supervision of the Court, or voluntarily, the value of every life annuity and life policy requiring to be valued in such winding-up ^ shall be valued in manner provided by the first schedule to this Act, hut this section shall not apply to any com- pany the winding-up of which has commenced before the passing of this Act, unless the Court having cognizance of the winding-up so order, which order the Court is hereby ' empowered to make, if it think it expedient so to do, on the application of any person interested in the winding- up of such company. " Sect. 6. The rules in the first and second schedules to this Act shall be of the same force as if they were rules VALUATION OF POLICIES. 247 made in pursuance of the one hundred and seventieth, one hundred and seventy-first, and one hundred and seventy-third sections of " The Companies Act, 1862," as the case may be, and may be altered in manner provided by the said sections, and rules may be made under the said sections for the purpose of carrying into effect the provisions of this Act with respect to the winding-up of companies." First Schedule. Rule for voUuing an Annuity. " An annuity shall be valued according to the tables used by the company which granted such annuity at the time of granting the same, and where such tables cannot be ascertained or adopted to the satisfaction of the Court, then according to the table known as the Government Annuities Experience Table, interest being reckoned at the rate of four per centum per annum." Eule for valuing a Policy. " The value of the policy is to be the difference between the present value of the reversion in the sum assured on the decease of the life, including any bonus or addition thereto made before the commencement of the winding- up and the present value of the future annual premiums. In calculating such present values the rate of interest is to be assumed as being four per centum per annum, and the rate of mortality as that of the tables known as the Seventeen Offices Experience Tables. The premium to be calculated is to be such premium as according to the said rate of interest and rate of mor- tality is sufficient to provide for the risk incurred by the office in issuing the policy, exclusive of any addition thereto for office expenses and other charges." 248 TEE LAW OF LIFE INSURANCE. The 2nd schedule provides that the liquidator shall ascertain the value of policies and give notice to the persons interested, who shall be bound by the value so ascertained, unless they give notice of their intention to dispute it within a time to be prescribed by Eules of Court. (See App. p. 293.) Extra premiums charged for the increased mortality of a tropical climate will not be taken into account in the valuation : Lancaster's Case (Alb. Arb,, Eeil. 76). With In t^6 case of participating policies, no deduction can profits jjg made in valuing the future premiums for that part of premiums or x not de- them which is attributable to the sharing of profits, for the ducted in. • ■, ■< • i • ij^- valuation, msured has taken his chance in a speculative contract and lost : Bell's Case (9 Eq. p. 718) ; Lancaster s Case (Alb. Arb., Eeil. p. 94) ; but contracts will be taken as they stand, and ascertained profits received in cash, or accepted in the shape of diminished premiums or additions to the policy, will not be disturbed : BeWs Case (Ibid.) ; Lancas- ter's Case (Ibid.). No interest In the windiDg-up of an insolvent company no interest after wmd- jg allowed ou proofs after the date of the winding-up order. order : Warrant Finance Company's Case (4 Ch. 643), but in the winding-up of a solvent company annuitants and policyholders are entitled to interest on the ascertained value of their claims from that date : Watt's Case (16 Sol. J. 517). Where an annuity on the life of an Englishman residing in India, to commence in ten years and enjoyable in England, was granted for a consideration calculated on the Indian tables of the company, it was held that it must be valued on the Government Experience Tables, not on the Indian tables of the company which would be too un- favourable to the insured, nor on the European tables of SET-OFF. 249 the company, which would be too unfavourable to the company : Watt's Case (Alb. Arb., 16 Sol. J. 517). Where, however, a fixed sum is payable on the policy Exception at the date of the winding-up, the rules of valuation under fo™aiua-' the Act of 1872 do not apply : British Imperial Assurance ''"''• Corporation, Farr's Claim (47 L. J. (N.S.) Ch. 318), where it was held that a contract to appropriate the premiums of the insured for their benefit to the exclusion of other creditors was good and enforceable in the winding-up. From the moment of the winding-up, e.ff. the presenta- Set-off. tion of the petition, the assets of the company become fixed and inalienable, and are impressed with a trust for the discharge of its liabilities : Delhi Bank Case (Alb. Arb., 15 Sol. J. 923) ; and the Companies Acts contain no special provisions with regard to set-off similar to those contained in s. 39 of the Bankruptcy Act (a) ; and it is conceived that s. 10 of the Jud. Act, 1875, does not import the Bankruptcy Eules as to set-off into the wind- ing-up of companies : Albion Steel Wire Co. (7 Ch. D. p. 547) ; West of England BanJc, Ex parte Brown (12 Ch. D. p. 825, 8. V. Campbell's Case (4 Oh. D. 475). At least the current of recent decisions, which tends to confine the operation of this section, would seem to warrant such a conclusion; and though the winding-up does not relate back for all purposes {Walberg's Case, p. 78), it does relate back for set-off: Delhi Bank Case (ubi supra). On the above principle it would seem that there can be no set-off between policy-holders and the company, unless the right of action and of set-off existed at the date of the winding-up : Gloag's Case (L. T. (E. A.) 82) ; and accord- ingly it was held in the Delhi Bank Case (Alb. Arb., (a) Sect. 101 only applies to set-off between contributories and the company. 250 THE LAW OF LIFE INSUBANOE. 15 Sol. J. 923), that a policyholder cannot set off a debt due from him to the company against the sum assured, unless the sum assured were actually payable at the moment of the winding-up, even though the life may have dropped previously. In that case, however, the holder of the policy was an agent of the company, and indebted to it in that character, so that a peremptory order for payment might have been made against him under s. 100 of the Companies Act, 1862, without action brought, and in the subsequent case of Albert Life Assu- rance Co. V. Eagle Insurance Co. (16 Sol. J. 483), where each of two companies held a policy granted by the other, and the lives dropped before the winding-up, but the sums assured did not become payable till afterwards, the Delhi Bank Case was distinguished on this ground, and it was held that the sums due on the two policies could be set off against each other. In re Progress Assurance Co., Ex ^arte Bates (22 L. T. (N.S.) 430), it was held that where there are ascertained amounts due on both sides, there is a right of set off, even though one of the claims may have matured after the winding-up and that the winding-up makes no differ- ence : cf. In re Agra & Masterman's Bank, Anderson's Case (3 Eq. 337). The holder of a current policy cannot set off loans on his policy or premiums due from him to the company against the value of his policy when ascertained, for nothing was due on the policy at the date of the winding- up, and the subsequent valuation can make no difference : Parlby's Case (Alb. Arb., Keilly, 48; 15 Sol. J. 645); Ohag's Case (Eur. Arb., L. T. 82; 17 Sol. J. 554); Ex parte Price, In re Lankester (10 Oh. 648) ; Walberg's Case (Eur. Arb., Eeilly, 65), nor if the policyholder is bank- SET-OFF. 251 rupt is there any set-off in such a case, as on mutual dealing, within s. 39 of the Bankruptcy Act ; the trustee and the liquidator must each prove, and there will be a set off of dividends when ascertained : Be Lankester (Ibid. p. 651.) Sect 153 of the Companies Act, 1862, avoids all dispo- Payments sitions of the property of the company between the com- mencement mencement of the winding-up and the winding-up order, ofwmdmg- unless the Court otherwise orders. It may be doubted whether payment of a hand fide debt is a disposition of property within this section : National Bank (L. T. (E.A.) p. 93) ; however this may be, the Court in its discretion will protect bond fide transactions entered into and completed before the winding-up order, and a creditor will not be compelled to refund unless he had or might with reasonable diligence have had notice of the petition (and the publishing, a few hours before payment, of the London Gazette is not notice) : National Bank (Ibid.), or unless the payment is a fraudulent preference under s. 164, as payment of a claim to the policyholder's soli- citors, who had no notice of the petition, was held to be in Brown & Tylden's Case (L. T. (E.A.) p. 163 ; 18 Sol. J. 781). All policies are payable pari passu whether they have All policies become claims before the winding-up or not : International l'Zfpass„ Life Society, Mclver's Claim (5 Ch. 424). All policy- ^^^J^rfe holders whether participating or not are, except in the rare cases where policyholders are members of the com- pany (infra, p. 262), payable pari passu with the general creditors, for participation in profits does not make a policyholder a partner: English and Irish Society (1 H. & M. 85). And conversely the creditors are payable pari passu No mar- shalling 252 TEE LAW OF LIFE INSURANCE. of the with the policyholders out of the funds of the company u™imiteT SO far as they will go, even where the former have the *^^''^- security of the unlimited liability of the members, and the latter have only the security of a limited fund. To introduce the equity of marshalling would be contrary to their contract : State Fire Insurance Co. (34 L, J. (Oh.) 436) ; Professional Life Asswance Co. (8 Eq. 668 ; S. 0. 3 Ch. 167) ; International lAfe, do. (2 Oh. D. 476). The expense of the winding-up, however, must be borne exclusively by the members : State Fire, &c. (vM sujpra) ; Professional Life, &c, (ubi swpra), including, the cost of realizing the assets : Ibid ; and Agricultwist Cattle Co. (10 Oh. 1), except perhaps the cost of realizing assets that already exist in specie : Agriculturist, dc. and State Fire, &e. (ubi su^ra). And sums received from shareholders by way of com- promise under s. 160 of the Act of 1862 are not apportion- able between the limited and general assets, so as to be partially applicable to the costs of the winding-up, for the shareholders have no equity under the Act to deprive the policyholders of all the money the Oourt can get from the shareholders till they have paid their calls : Accidental Beath, dc. Co. (7 Oh. D. 568). Sums 80 received are applicable up to the amount unpaid on the shares to making good the limited assets, and the balance only, if any, is attributable to the general assets: International Life Society (36 L. T. (N.S.) 914), where £9 was the amount unpaid on the shares, and calls of £9 and £12 were made, and it was held that sums up to £9 per share received from compromising shareholders went to the policyholders' fund. Liability of A Summary remedy in the winding up of companies winding- agaiust directors or other officers for moneys misapplied up. MISFEASANCE OF DIBECTOBS. 253 or retained, or miafeasance or breach of trust in relation to the company, is given by s. 165 of the Companies Act, 1862, to the liquidator or any creditor or contributory. A policyholder is a creditor within this section, and can apply jointly with the liquidator : British Guardian Co., Williamsons Case (14 Oh. D, 335) ; National Funds Insurance Co. (10 Ch. D. 118), where the directors were held jointly and severally liable for payments to share- holders out of capital ; or, as it seems, either the liqui- dator or a policyholder can apply alone : British Guardian Co. and National Funds Co. (ubi supra) ; and the applica- tion may be against anyone of the directors singly without joining the others, but not against the executors of a deceased director : British Guardian (ubi supra). In this case a limited life insurance company, formed in 1869, had passed a resolution in 1872 that, for the better security of policyholders, 50 per cent, of the premiums paid on whole life policies should be invested in Govern- ment securities in the names of trustees, and prospectuses were issued stating the manner in which this resolution , was carried out. No premiums were invested after 1875, and the sums previously invested were gradually sold out and applied to the general purposes of the company. The company was ordered to be wound up in 1876, and it was held on the joint application of the liquidator and a whole life policyholder that whatever might be the questions as to the application of the money between the different classes of policyholders, there could be no doubt as to the obligatioa to invest, and that the directors were liable, as for a breach of trust, to account for the sums which ought to have been invested during their direc- torate : British Guardian Co. (14 Oh. D. 337) ; and that 254 TE^ LAW OF LIFE INSURANCE. a local director residing at Newcastle was in no better position : British Chard^cm Co., Seholefield's Case (W. N. 1882, p. 22) ; allowance being made for death payments and surrenders, but none in respect of lapsed policies: Williamson's Case and Seholefield's Case (ubi supra). Unlimited Most insurance companies are unlimited in form, but with their deed of settlement generally provides that all con- liabiiitT b ^racts, or at least all policies, shall contain a proviso contract, limiting the liability of the members to the sums they have engaged to contribute to the assets of the company, and the policies take the form of a contract to pay out of the funds of the company, and restrict the liability of the members accordingly. Outside Such companies have two classes of creditors, external creditors. Creditors, with the security of the unlimited liability of the members ; inside creditors, that is, annuitants, holders of policies and endowment contracts, having the limited security of the subscribed or accumulated fund. External creditors will include the creditors for the ordinary supplies required by a company in carrying on its business, clerks and employes : Kent Mutual ■Society (16 Sol. J. 65), and such creditors would not come within the provision for a limited liability in the deed of settle- ment however general its terms : British Nation Indem- nity Claims (L. T. (E.A.) p. 7). The solicitor of the company cannot claim to be an external creditor in respect of his professional services. He is in a fiduciary capacity, and could not have insisted on a stipulation for unlimited liability had his retainer been in writing : Sadler's Case (Alb. Arb. Min. 753). This unlimited liability may, however, be more than nominal, since in one case a covenant for indemnity on C0NTBIBUT0RIE8. 255 an amalgamation involving an amount of £168,000 was held to be unlimited, and it always includes the costs of the winding-up, which fall exclusively on the members in exoneration of the accumulated fund. The persons liable to contribute to the assets of the Coutribu- company in the winding-up will be : (1). In the case of a company formed or registered under the Act, see Bamsay's Case (3 Ch. D. 388), present and past members, members being defined by s. 23 as persons who have agreed to become members, and the liability of members being, in limited companies, confined to the amount unpaid on their shares, or to the amount of their guarantee (s. 38), and past members being only liable as far as existing members prove defaulters, and for one year after they have ceased to be members; but past members in pre-existing companies which register under the Act remain liable for debts contracted during their membership prior to registration (s. 196, sub-s. 5). (2). In the case of unregistered companies, every person who is liable at law or in equity to pay or contribute to the payment of any debt or liability of the company, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members among them- selves, or to pay or contribute to the payment of the costs, charges, and expenses of winding-up the company (s. 200). Nothing in the Act is to invalidate any provision contained in any policy of insurance or other contract whereby the liability of individual members upon any such policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of such policy or contract (s. 38, sub-s. 6) ; see App. p. 297. 256 THE LAW OF LIFE INSURANCE. In unincorporated companies the liability is unlimited, and the persons liable are the existing members and the past members, the debts for which they are liable being those only contracted during their membership, but exist- ing members are generally liable as between themselves and the past members to all the debts of the company whenever contracted : Lindley, 4th ed. i. 376. In companies incorporated by royal charter the indi- vidual members are under no liability whatever, in com- panies incorporated by special Act, or formed under the Letters Patent Act, the liability of members present and past will depend on the special Act or Letters Patent creating them. Paitici- In proprietary or mixed companies having a subscribed policy- or guaranteed capital, the shareholders alone will ordi- are'not narily be the contributories. The participation in profits ordinarily (Joes not make participating policyholders partners: tories. English and Irish, <&c., Society (1 H. & M. 85) ; Albion Life Society (16 Ch. D. 90). " The law of partnership is a branch of the law of agency, and the test of partnership is not simply whether the alleged partner was to receive a share in the profits, but whether he constituted his alleged co-partners his agents for carrying on the business. The receipt of profits is only important as a consequence of such agency, and a ground for inferring it :" ^er Wood, V.G., English and Irish, &e.. Society {ubi supra) ; at vide Cox V. Eickman (8 H. L. 0. 68). Nor will provisions for participating policyholders attending meetings, voting, &c., be sufficient to constitute a contract entirely different from the ordinary contract between the shareholders and policyholders of an insur- ance office. Such provisions are merely intended to give • con- tract. PARTICIPATINa P0LI07E0LDERS. 257 them control over the funds applicable for their policies : per James, L.J., Albion Life Sooiety (16 Oh. D. p. 90). They may of course agree to become members, and in They may the winding-up of the notorious Albion Life Assurance by , Society, which was a proprietary company with a provi- sion for paying off the shareholders and converting it into a mutual society, with a mixed business, it was held on the peculiar terms of the articles [which provided that the company should consist of two classes of members, namely, the shareholders and the assurance members for the time being so long as there should be any shareholders, and afterwards of the assurance members for the time being only, assurance members being defined as participating policyholders registered as members] that the partici- pating policyholders were members and contributories : Winstones Case (12 Oh. D. 239) {a), but that they could not be called upon to contribute till the shareholders had been exhausted : Be Albion Life Society (15 Oh. D. 79 ; S. C. 16 Oh. D. 83). In such a case the ordinary rule that partners contribute to losses in proportion to their share of profits has no application. In another case, in the winding-up of the same company, it was held that a policyholder ceased to be a member on assigning his policy and giving notice to the office, although no other person had been made liable in his stead. The contract was that ceasing to hold the policy should relieve the policyholder from his liability : Brown's Case (18 Ch. D. 639). In Bandar's Case, in the same winding-up, it was held that an assignee of a policy had accepted the liability to become a member of the company by paying a premium (a) The decision in the particular case was perhaps somewhat hard, since Miss Winstone was not even on the register, s 258 THE LAW OF LIFE INSUBANOE. In mutual societies who are contribu- tories. on his policy, but that as the directors had never called for evidence of the transfer in accordance with the articles, the assignee could not be placed on the list of contribu- tories : Bandar's Case (W. N. 1882, p. 37). In the case of pure mutual societies or mutual societies with a mixed business there is considerable difficulty in determining who are the contributories, if any, and the nature and extent of their liability. The almost invariable, if not universal, provision for payment of policies out of the funds of the company alone will exclude any liability other than one to external creditors. The only direct authority on the subject is the case of the Kent Mutual 8oeiety in the Albert Arbitration (16 Sol. J. 65). This was a friendly society established under the Friendly Societies Acts and afterwards registered under 7 & 8 Vict. c. 110 ; the deed of settlement defined members as persons who take out participating policies, and placed the management of the company in their hands and directed that they should be regarded as members. There was a power, however, to issue non- participating policies and annuities. The deed contained the ordinary provision that policies should be payable only out of the funds of the company, and there was no provision for calls on the members. Lord Cairns sitting as arbitrator under the Albert Arbitration held that the participating policyholders would be liable to external creditors for debts contracted during their membership, and that the dropping of the policy put an end to all future liability. Since the company had been united to the Albert Company several years before, and there was no evidence of any external claims, and it was highly im- probable that any such existed, he declined to put any C0NTRIBUT0RIE8 IN MUTUAL SOCIETY. 259 contributories on the list, and the unfortunate annuitant who had obtained the order for a winding-up was left even without the costs of his order. In the recent case, however, of the Qreat Britain Mutual Sembie, Society (16 Oh. D. 246), which was the case of a pure mutu^aT^ mutual society, all policyholders being members, the ^he're are Court of Appeal expressed a strong opinion that such a ^'>^^- society is a mere benefit society or club and incapable of contracting debts, and that the policyholders in such a society are under no liability to contribute, and that all that can be done in the winding-up is to distribute the fund after payment of costs among the policyholders in proportion to their claims. " I think it important to say, for the comfort of the holders of policies in this company and in other similarly constituted mutual societies, .that I do not find there is any liability whatever imposed upon them to contribute one farthing. There is no contract on their part to pay anything. The form of the arrangement come to upon the establishment of the society at the substance of it is this — that all the policyholders shall pay the premiums upon their policies and nothing more ; that, out of the moneys so paid, the current expenses of the society, such as clerks' salaries and servants' wages, and so forth, are to be paid by the directors, and out of the surplus the policies are to be paid as they become claims, and for that purpose and that purpose only the premiums are to be collected and invested by the directors. There is, of course, no obligation upon the policyholder to continue his payments. If he likes to drop his policy or to sur- render it he may do so, and therefore what we have to consider is really the mere question of distribution. That s 2 260 TEE LAW OF LIFE INSURANOE. is, when the company becomes insolvent and is ordered to be wound up, the only matter to be decided, after the payment of the costs of the liquidation, is in what propor- tions the funds and property then belonging to the society shall be distributed amongst the then policyholders :" ]per Jessel, M.R. {Ibid. p. 252). " I desire most unequivocally to state that, in my judg- ment, an association of this kind is incapable of contracting any debt or liability whatever. It is a mere benefit society, the members of which contribute certain sums annually to a fund which is the property of the policy- holders, and all that can be done in the winding-up is to divide the assets of the society amongst the cestuis que trust, the policy-holders, in proportion to the respective values of their claims, subject, I am sorry to say, to the payment of the costs which may be incurred in the winding-up, and which, I believe, have a great deal to do with the presentation of these petitions;" per James, L.J. {Ibid. 255). " I wish also to add that as present advised (I speak with that kind of reserve only because the question has not been argued before us), I have a very strong opinion indeed that no policyholder in such a society as this can be made liable for any debts :" per Lush, L.J. {Ibid. 256). In mutual A mutual socicty that issues policies to'non-members is, withmiied it is Submitted, in a different position. It is a trading business. company carrying on business for profit and capable of contracting debts, and participating policyholders, are, it is conceived, liable to contribute for payment of external creditors. In what proportion they are to contribute is a question of extreme difficulty, whether in proportion to the sum assured, or to the actuarial value of the policy. CONTBIBUTOEIES IN MUTUAL SOCIETY. 261 or in proportion to the sliare of profits, or, finally, ^er capita. In the Albion Life where there were two classes of members, shareholders and participating policyholders, and one-fourth of the profits went to the shareholders and three-fourths to the policyholders, it was held that the ordinary presumption of law that partners share losses in the same proportion as they share profits, had no application, since the profits are carried to an assurance fund and there accumulated, and that fund is applicable to the non-participating policies as well as the participating, and no one can say that any of it will come to the parti- cipating policyholders at all, and that the only possible contribution, unless shareholders were considered prima- rily liable, was the thoroughly unjust and irrational method of contribution per capita: Albion Life (16 Oh. D. 83, pp. 89, 92). Where there is only one class of members, viz., parti- cipating policyholders, and the question is in what pro- portions they are to contribute inter se, the only fair principle would seem to be contribution according to share of profits, difiBcult as it might be to assess the con- tributions by the various series of policyholders. The liability, whatever it may be, ceases with the lapse or assignment of the policy, whether the assignee becomes a member or not, if the scheme of the articles is that holders of policies alone are to be members : Albion Life, Brown's Case (18 Ch. D. 639). The policyholder there had assigned his policy many years before, but ex policyholders would, it is conceived, be subject to the ordinary liability as past members, that is to say, in unincorporated companies to a liability in respect of all debts contracted during their membership, and in companies formed or registered 262 TEE LAW OF LIFE INSURANCE. under the Act of 1862 to a liability, during a year after their ceasing to be members, in respect of all debts pre- viously incurred. The case of the Kent Mutual has generally been treated as that of a pure mutual society, but it is to be observed that the deed of settlement contained a power of issuing non-participating policies, though it does not appear whether any were actually issued, and the view of Lord Cairns may be reconciled with that of the Court of Appeal if it can be treated as a case of a mutual society with a mixed business. Whether Independently however of any liability to contribute, pacing" the position of a policyholder who becomes a member by rid ^ d assurance — e g., of a participating policyholder in a mutual member socicty with a mixed business — with regard to the right of in eompe- proof ou his policy, may be seriously affected by the fact of his membership. tition with non-par- ticipating It ig a ^ell settled rule in bankruptcy that a partner holders. cannot prove in competition with the creditors of the firm, who are in fact his own creditors, since the firm has no separate legal existence : JBa!^a»*fe/8'«ZZ*nd by the authority of the same, as follows : 1. Every sum required by the Life Assurance Companies Payment Act, 1870, to be deposited with the Accountant-General of ™'? Court, , , and orders the Court of Chancery shall „be paid into the Court of Chan- as to sums eery, and orders with respect to the payment of such money deposited into and out of Court, and the investment and return thereof, 33 & 34 and the payment of the dividends and interest thereof, may be from time to time made, altered, and revoked by the like authority and in the like manner as orders with respect to the payment into and out of Court, and the investment of other money, and the applications of the dividends and inte- rest thereof. 2. Section twenty-five of the Life Assurance Companies Amend- Act, 1870, shall be construed as if the words "chapter "g^sof twenty-four " were and had at and from the date of the 33 & 34 passing of such last-mentioned Act been inserted therein in ^"^*- ''■ ^^^ place of " chapter forty-one " ; and Her Majesty's printers shall in all copies of the Life Assurance Companies Act, 1870, which may be printed after the passing of this Act, insert the words " chapter twenty-four " in the place of the words " chapter forty-one " in section twenty-five of the said Life Assurance Companies Act, 1870. 3. This Act shall be construed as one with the Life Assur- Construc- ance Companies, 1870, and that Act and this Act may be *h™t7^ie. Vict. c. 61, 3. 288 APPENDIX. cited together as " The Life Assurance Companies Acts, 1870 and 1871," and this Act may be cited as " The Life Assur- ance Companies Act, 1871." 35 & 36 Vict. c. 41. An Act to amend the lAfe Assurance Companies Acts, 1870 and 1871. [6th August, 1872.] Be it enacted by the Queen's most excellent Majesty, by and with the consent of the Lords spiritual and temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : Deposit by !• Whereas by the provisions of the " Life Assurance Com- Court of '° P^^i^^ •^*'*^' IS^'^ ^^^ 1871," a life assurance company is Chancery, required to pay a sum of money into the Court of Chancery by way of deposit, and the certificate of incorporation of such company is not to be issued unless such deposit has been made, and such deposit is to be returned to the company as soon as its life assurance fund amounts to the sum therein mentioned ; and doubts have arisen as to the construction of the said provisions, and it is expedient to remove such doubts ; be it therefore enacted as follows : The said deposit may be made by the subscribers of the memorandum of association of the company, or any of them, in the name of the proposed company, and such deposit upon the incorporation of the company shall be deemed to have been made by and to be part of the assets of the company. The said deposit shall, until returned to the company, be deemed to form part of the life assurance fund of the com- pany, and shall be subject to the provisions of section four of the Life Assurance Companies Act, 1870, accordingly. The Board of Trade may from time to time make, and when made revoke, alter, or add to, rules with respect to the pay-, ment and repayment of the said deposit, the investment of or dealing with the same, the deposit of stocks or securities in lieu of money, and the payment of the interest or divi- APPENDIX. 289 dends from time to time accruing due on any such invest- ment, stocks, or securities in respect of such deposit. Any rules made in pursuance of this section shall have effect as if they were enacted in this Act, and shall be laid before Par- liament within three weeks after they are made, if Parlia- ment be then sitting, or if not, within three weeks after the beginning of the then next session of Parliament (a). 2. Whereas, by section four of the Life Assurance Com- Separation panics Act, 1870, it is enacted that, " In the case of a com- °^^l pany established after the passing of this Act, transacting other business besides that of life assurance, a separate ac- count shall be kept of all receipts in respect of the life assur- ance and annuity contracts of the company, and the said receipts shall be carried to and from a separate fund, to be called the life assurance fund of the company, and such fund shall be as absolutely the security of the life policy and annuity holders as though it belonged to a company carrying on no other business than that of life assurance, and shall not be liable for any contracts of the company for which it would not have been liable had the business of the • company been only that of life assurance " ; and further provisions were made by the same section, with respect to the application of the above recited part of the said section to existing com- panies, and doubts have arisen with respect to the construc- tion of the said provisions, and it is expedient to remove such doubts ; be it therefore enacted. That the portion of section four of the Life Assurance Companies Act, 1870, above recited shall apply to every company established before the passing of that Act, provided that the Life Assurance Companies Act, 1870, and this Act shall not diminish the liability of the life assurance fund for any contracts of the company entered into before the passing of the Life Assurance Companies Act, 1870. 3. Whereas by section ten of the Life Assurance Companies Deposit of Act 1870.it is provided that "Every annual statement so statement • J. i- 1 n 1 • n and ab- deposited after the next investigation shall be accompanied stract re- (a) See ante, p. 179, post, p. 293. 290 APPENDIX. quired by by a printed copy of the abstract required to be made by Vict. c. 61 section seven " ; be it therefore enacted, that the words s. 10. " next investigation " shall be construed to mean the first investigation after the passing of the said Act. The Board of Trade shall lay before Parliament any state- ment or abstract of report which is deposited with them by any company, and purports to be in pursuance of the Life Assurance Companies Act, 1870, although the Board are of opinion that it is not such a statement or abstract as is required to be prepared by that Act. Winding- 4. Where the business or any part of the business of a life subsidiary assurance company has, either before or after the passing of company this Act, been transferred to another company under an ancillary to arrangement in pursuance of which such first-mentioned winding- company (in this Act called the subsidiary company) or the pnncipal creditors thereof has or have claims against the company to company, which suoh transfer was made (in this Act called the prin- cipal company), then, if such principal company is being wound up by or under the supervision of the Court, either at or after the passing of this Act, the Court shall (subject as hereinafter mentioned), order the subsidiary company to be wound up in conjunction with the principal company, and may by the same or any subsequent order appoint the same person to be liquidator for the two companies, and make provision for such other matters as may seem to the Court necessary, with a view to such companies being wound up as if they were one company ; and the commencement of the winding-up of the principal company shall, save as otherwise ordered by the Court, be the commencement of the winding- up of the subsidiary company ; the Court nevertheless shall have regard, in adjusting the rights and liabilities of the members of the several companies between themselves, to the constitution of suoh companies, and to the arrangements entered into between the said companies, in the same manner as the Court has regard to the rights and liabilities of different classes of contributories in the case of the wind- ing-up of a single company, or as near thereto as circum- stances admit. APPENDIX. 291 Where any subsidiary company or company alleged to be subsidiary is not in process of being wound up at the same time as the principal company to which it is subsidiary, the Court shall not direct such subsidiary company to be wound up, unless after hearing all objections (if any) that may be urged by or on behalf of such company against its being wound up, the Court is of opinion that such company is sub- sidiary to the principal company, and that the winding-up of such company in conjunction with the principal company is just and equitable. Where any subsidiary company and principal company are being wound up by different branches of the Court, the Court to which appeals from such branches lie shall make an order directing in which branch the winding-up of such companies is to be carried on, and the necessary proceedings shall be taken for carrying such order into effect. An application may be made in relation to the winding- up of any subsidiary company in conjunction with a prin- cipal company by any creditor of, or person interested in, such principal or subsidiary company; Where a company stands in the relation of a principal company to one company, and in the relation of a subsidiary company to some other company, or where there are several companies standing in the relation of subsidiary companies to one principal company, the Court may deal with any number of such companies together, or in separate groups, as it thinks most expedient, upon the principles laid down in this section. 5. Where a life assurance company is being wound up by Valuation the Court, or subject to the supervision of the Court, or "f^^^^^'" voluntarily, the value of every life annuity and life policy policies. requiring to be valued in such winding-up shall be estimated in manner provided by the first Schedule to this Act, but this section shall not apply to any company the winding-up of which has commenced before the passing of this Act, unless the Court having cognizance of the winding-up so order, which order that Court is hereby empowered to make if it think it expedient so to do, on the application of U 2 292 APPENDIX. Rules in first and second Schedules to be Rules of Court. Regulation as to nova- tions by policy- holders. Construc- tion and short title. any person interested in the winding-up of such com- pany (a). 6. The rules in the first and second Schedules to this Act shall he of the same force as if they were rules made in pur- suance of the one hundred and seventieth, one hundred and seventy-first, and one hundred and seventy-third sections of " The Companies Act, 1862," as the case may be, and may be altered in manner provided by the said sections, and rules may be made under the said sections for the purpose of carry- ing into effect the provisions of this Act with respect to the winding-up of companies. 7. Where a company, either before or after the passing of this Act, has transferred its business to or been amalgamated with another company, no policy-holder in the first-men- tioned company who shall pay to the other company the premiums accruing due in respect of his policy shall by reason of any such payment made after the passing of this Act, or by reason of any other act done after the passing of this Act, be deemed to have abandoned any claim which he would have had against the first-mentioned company on due payment of premiums to such company, or to have accepted in lieu therpof the liability of the other company, unless such abandonment and acceptance have been signified by some writing signed by him or by his agent lawfully authorised (6). 8. This Act shall be construed as one with the Life Assur- ance Companies Acts, 1870 and 1871 ; and those Acts and this Act may be cited together as " The Life Assurance Com- panies Acts, 1870 to 1872 ; " and this Act may be cited as " The Life Assurance Companies Act, 1872." First Schedule. Rule for valuing an Annuity. An annuity shall be valued according to the tables used by the company which granted such annuity at the time of granting the the same, and where such tables cannot be ascertained or adopted to (a) See ante, p. 246 et seq. (6) See ante, p. 216 et seq. APPENDIX. 293 the satisfaction of the Court, then according to the table known as the Government Annuities Experience Table, interest being reckoned at the rate of four per centum per annum. Ride for valuing a Policy, The value of a policy is to be the difference between the present value of the reversion in the sum assured on the decease of the life, includ- ing any bonus or addition thereto made before the commencement of the winding-up and the present value of the future annual premiums. In calculating such present values the rate of interest is to be assumed as being four per centum per annum, and the rate of mortality as that of the tables known as the Seventeen Offices Experience Tables. The premium to be calculated is to be such premium as according to the said rate of interest and rate of mortality is sufficient to provide for the risk incurred by the office in issuing the policy, exclusive of any addition thereto for office expenses and other charges. Second Schedule. Where an assurance company is being wound up by the Court, or subject to the supervision of the Court, the official liquidator in the case of all persons appearing by the books of the company to be en- titled to or interested in policies granted by such company, for life assurance, endowment, annuity, or other payment, is to ascertain the value of such policies, and give notice of such value to such persons, and any person to whom notice is so given shall be bound by the value so ascertained unless he gives notice of his intention to dispute such value in manner and within a time to be prescribed by a rule or order of the Court. THE LIFE ASSUEANCE COMPANIES ACTS, 1870-1872. Board of Trade Eules. The Board of Trade, in pursuance of the powers conferred* upon them under the first section of " The Life Assurance Companies Act, 1872," have made the foUovsring Eules with respect to the payment into the Court of Chancery, and repayment of the deposit required to he made hy a life assurance company, in pursuance of the provisions of the 294 APPENDIX. Life Assurance Companies Acts, 1870 and 1871, the invest- ment of the deposit in securities, the deposit of stocks or securities in lieu of money, and the payment of the interest or dividends from time to time accruing due on any such stocks or securities. 1. In these Eules the term " the Court," means the High Court of Chancery in England, and the word "company" means a company as the same is defined in the second section of the Life Assurance Companies Act, 1870. 2. Where any company is required in pursuance of " The Life Assurance Companies Acts, 1870 to 1872," to deposit the sum of twenty thousand pounds with the Accountant-General of the Court of Chancery, the said company or the subscribers of the memorandum of association 6f the said company, or any of them, as the case may be (in these Eules referred to as the promoters) may make application to the Board of Trade for a warrant, and the Board of Trade may thereupon issue their warrant to the promoters for such payment into Court, which warrant shall be a sufficient authority for the company or persons therein named to pay the money therein men- tioned into the Bank of England in the name sftid with the privity of the said Accountant-General, and for that officer to issue directions to such bank to receive the same, to be placed to his account there, ex parte the company mentioned in such warrant, according to the method (prescribed by statute or General Eules or Orders of Court or otherwise), for the time being in force respecting the payment of money into the said Court, and without fee or reward : Provided that in lieu, wholly or in part, of the payment of money, the promoters may bring into Court as a deposit, an equivalent sum of Bank annuities, or of any stocks, funds, or securities, in which cash under the control of the Court is for the time being permitted to be invested, or of Exchequer bills (the value thereof being taken at the price at which the promoters originally purchased the same, as appearing by the broker's certificate of that purchase) ; and in that case the Board of Trade shall vary their warrant accord- ingly by directing the transfer or deposit of such amount of stocks, funds, securities, or Exchequer Bills by the APPENDIX. 295 persons therein named, into the name or to the account of the said Accountant-General in trust to attend the orders of the Court ex parte the company mentioned in such warrant. 3. At any time when the ofBce of the Aocountant-G-eneral of the Court of Chancery is closed, a deposit under these Eules may nevertheless be made, in the manner and subject to the regulations provided with respect to deposits by com- panies by section 88 of the Lands Clauses Consolidation Act, 1845. 4. Where money is so paid into the Court of Chancery the Court may, on the application of the company, or the persons named in the warrant of the Board of Trade, or of the majo- rity or survivors of such persons, order that the same be in- vested in such stocks, funds, or securities, as the applicants desire, and the Court thinks fit. 6. In the subsequent provisions of these Eules, the term " the deposit fund " means the money deposited, or the stocks, funds, or securities in which the same is invested, or the Bank annuities, stocks, funds, securities, or Exchequer bills transferred or deposited as the case may be, and the term " the depositors " means the company or persons named in the warrant of the Board of Trade authorizing the deposit, or the majority or survivors of those persons, their executors, administrators, or assigns. 6. The. Court shall, on the application of the depositors, order the deposit fund to be paid, transferred, or delivered out to the applicants or as they direct, so soon as it is proved to the satisfaction of the Court that the life assurance fund of the company in respect of which the deposit is made, accu- mulated out of premiums paid to the said company, amounts to the sum of forty thousand pounds. 7. The depositors shall be entitled to receive payment of the interest or dividends from time to time accruing on or in respect of the deposit while in Court. And the Court may from time to time, on the application of the depositors, make such order as may seem fit respecting the payment of the in- terest or dividends accordingly. 8. The issuing in any case of any warrant or certificate re- lating to deposit or to the deposit fund, or any error in any 296 APPENDIX. such warrant or certificate, or in relation thereto, shall not make the Board of Trade, or the person signing the warrant or certificate on their behalf, in any manner liable for or in respect of the deposit fund or the interest or dividends accru- ing on the same, or any part thereof respectively. 9. Any application under these Eules to the Court of Chancery shall be made in a summary way by petition. "W. E. Malcolm. Board of Tkade, 29>ih August, 1872. Assign- ment of debts, and choses in action. JUDICATUEE ACT, 1873. Sect. 25, Bs. 6. Any absolute assignment, by writing under the hand of the assignor (not purporting to be by way of charge only), of any debt or other legal chose in action, of which express notice in writing shall have been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed), to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concur- rence of the assignor : Provided always, that if the debtor, trustee, or other person liable in respect of such debt or chose in action shall have had notice that such assignment is dis- puted by the assignor or any one claiming under him, or of any other opposing or conflicting claims to such debt or chose in action, he shall be entitled, if he think fit, to call upon the several persons making claim thereto to interplead concern- ing the same, or he may, if he think fit, pay the same into the High Court of Justice under and in conformity with the provisions of the Acts for the relief of trustees (a). (a) See ante, pp. 63, 106, 110. APPENDIX. 297 THE COMPANIES ACT, 1862. Sect. 38, STili-B. 6. Nothing in this Act shall invalidate any provision contained in any policy of insurance or other con- tract whereby the liability of individual members upon any such policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of such policy or contract. Sect. 44. Every limited banking company and every insur- Certain ance company, and deposit, provident, or benefit society under to'pnbUsh this Act shall, before it commences business, and also on the statement first Monday in February, and the first Monday in August in schedule!' every year during which it carries on business, make a statement in the form marked D in the first Schedule hereto, or as near thereto as circumstances will admit, and a copy of such statement shall be put up in a conspicuous place in the registered office of the company, and in every branch office or place where the business of the company is carried on, and if default is made in compliance with the provisions of this section, the company shall be liable to a penalty not ex- ceeding five pounds for every day during which such default continues, and every director and manager of the company who shall knowingly and wilfully authorize or permit such default shall incur the like penalty. Every member and every creditor of any company men- tioned in this section shall be entitled to a copy of the above- mentioned statement on payment of a sum not exceeding six- pence. Schedule I. FoKM D. FoEM OF Statement ebfeebed to in Part III. or this Act. * The capital of the company is divided into shares of each. The number of the shares is Calls to the amount of pounds per share have been made under which the sum of pounds has been received, * If the company has no capital divided into shares the portion of the statement relating to capital and shares mu^t be omitted. 298 APPENDIX. The liabilities of the company on the first day of January (or July) were : — Debts owing to sundry persons by the company £ On judgment £ On specialty £ On notes or biUs £ On simple contracts £ On estimated liabilities £ The assets of the company on that day were, — Government securities (stating them) £ Bills of exchange and promissory notes £ Cash at the bankers £ Other securities £ Com- pulsory registra- tion of certain companies. Penalty on company not regis- Sect. 209. Every insurance company completely registered under the Act passed in the eighth year of the reign of her present Majesty, chapter one hundred and ten, intituled " An Act for the Registration, Incorporation, and Eegulation of Joint Stock CompanieB," shall on or before the second day of November one thousand eight hundred and sixty- two, and every other company required by any Act hereby repealed to register under the said Joint Stock Companies Acts, or one of such Acts, and which has not so registered, shall, on or before the expiration of the thirty-first day from the commencement of this Act, register itself as a company under this Act, in manner and subject to the regulations hereinbefore contained, with this exception, that no company completely registered under the said Act of the eighth year of the reign of her present Majesty shall be required to deliver to the registrar a copy of its deed of settlement; and for the purpose of enabling such insurance companies as are mentioned in this section to register under this Act, this Act shall be deemed to come into operation immediately on the passing thereof; nevertheless the registration of such companies shall not have any effect until the time of the commencement of this Act. No fees shall be charged in respect of the registration of any company required to register by this section (a). Sect. 210. If any company required by the last section to (a) See ante, p. 165. APPENDIX. 299 register under this Act makes default in complying with the tering. provisions thereof, then from and after the day upon which -^^ s'28*'' such company is required to register under this Act, until the * day on which such company is registered under this Act (which it is empowered to do at any time), the following consequences shall ensue ; (that is to say,) 1. The company shall be incapable of suing either at law or in equity, but shall not be incapable of being made a defendant to a suit either at law or in equity : 2. No dividend shall be payable to any shareholder in such company : 3. Each director or manager of the company shall for each day during which the company so being in default carries on business incur a penalty not exceeding five pounds, and such penalty may be recovered by any person, whether a share- holder or not in the company, and be applied by him to his own use : Nevertheless, such default shall not render the company so being in default illegal, nor subject it to any penalty or disability, other than as specified in this section ; and regis- tration under this Act shall cancel any penalty or forfeiture, and put an end to any disability which any company may have incurred under any Act hereby repealed-by reason of its not having registered under the said Joint Stock Com- panies Acts, 1856, 1857, or one of them. MAEEIED WOMEN'S PROPEETY ACT. 33 & 34 Vict. c. 93. Sect. 10. A married woman may effect a policy of insurance Married upon her own life or the life of her husband for her separate ^°™^° ^ -x ^^ 1 n 1 n • •"^^ efiect use, and the same and all benefit thereof, if expressed on the policy of face of it to be so effected, shall enure accordingly, and the '°s"=^*°'^^- contract in such policy shall be as valid as if made with an unmarried woman (a). (a) See ante, p. 22, 300 APPENDIX. As to in- surance of a husband for benefit of his wife. A poKcy of insurance effected by any married man on his own life, and expressed upon the face of it to be for the benefit of his wife or of his wife and children, or any of them, shall enure and be deemed a trust for the benefit of his wife for her separate use, and of his children, or any of them, according to the interest so expressed, and shall not, so long as any object of the trust remains, be subject to the control of the husband or to his creditors, or form part of his estate. When the sum secured by the policy becomes payable, or at any time previously, a trustee thereof may be appointed by the Court of Chancery in England, or in Ireland, according as the policy of insurance was effected in England or in Ireland, or in England by the judge of the county court of the district, or in Ireland by the chairman of the civil bill court of the division of the county in which the insurance office is situated, and the receipt of such trustee shall be a good discharge to the office. If it shall be proved that the policy was effected and premiums paid by the husband with intent to defraud his creditors, they shall be entitled to receive out of the sum secured an amount equal to the premiums so paid (a). . THE STAMP ACT, 1870. 33 & 34 Vict. c. 97. Interpreta- tion of terms, &c. As TO Policies of Insurance. Sect. 117. — (1.) The term "insurance" includes assurance, and the term " policy " includes every writing whereby any contract of insurance is made, or agreed to be made, or is evidenced; and, except as hereinafter mentioned, this Act does not apply to policies of sea insurance. (2.) A policy of sea insurance made or executed out of, but being in any manner enforceable within, the United King- dom, is to be charged with duty under the Act of the thirtieth year of Her Majesty's reign, chapter twenty-three, (a) See ante, p. 77. The Married Women's Policies of Insurance Act, 1880 (43 & 44 Vict. c. 26), extends these provisions to Scotland. APPENDIX. '. 301 and may be stamped at any time within two months after it has been first received in the United Kingdom on payment of the duty only. Sect. 118. Every person who — Penalty for (1.) Eeceives, or takes credit for, any premium or con- <,„t policy, sideration for- any contract of insurance, and does not, within one month after receiving or taking credit for such premium or consideration, make out and execute a duly stamped policy of such insurance. (2.) Makes, executes, or delivers out, or pays or allows ^c^anv"^' in account, or agrees to pay or allow in account, policy not any money upon or in respect of any policy which g"^^ ^^ is not duly stamped shall forfeit the sum of twenty £20. pounds. Sect. 119.— (1.) The duties imposed by this Act upon Duty may policies of insurance may be denoted by adhesive stamps, or ■^^J adhesiye partly by adhesive and partly by impressed stamps. stamp. (2.) When the whole or any part of the duty upon a policy of insurance is denoted by an adhesive stamp, such adhesive stamp is to be cancelled by the person by whom the policy is first executed. (3.) In default of such cancellation, the person making the Penalty insurance shall forfeit the sum of twenty pounds. As TO Settlements. Sect. 124. Where any money which may become due or As to - , T r • -x i. settlement payable upon any policy ot insurance, or upon any security not ^f p^y^y ^^ being a marketable security, is settled or agreed to be settled, security. the instrument whereby such settlement is made or agreed to be made is to be charged with ad valorem duty in respect of such money. Provided as follows : (1.) Where, in the case of a policy of insurance, no pro- Proviso as vision is made for keeping up the policy, the ad valorem duty ° ^^ '"' is to be charged only on the value of the policy at the date of the instrument ; (2.) If in any such case the instrument contains a state- ment of such value, and is stamped in accordance with such statement, it is, so far as regards such policy, to be deemed 302 APPENDIX. duly stamped, unless or until it is shown that such statement is untrue, and that the instrument is in fact insufficiently stamped (a). £ s. d. 1 3 SCHEDULE. Policy op Insueanoe — (1.) Upon any life or lives, or upon any event or contingency relating to or depending upon any life or lives (except for the pay- ment of money upon the death of any person only from accident or violence or otherwise than from a natwral cause) : Where the sum insured does not exceed £10 Exceeds £10 but does not exceed £25 Exceeds £25 but does not exceed £500 : For every full sum of £50, and also for any fractional part of £50 of the amount insured Exceeds £500 but does not exceed £1,000 : For every full sum of £100, and also for any frac- tional part of £100, of the amount insured . Exceeds £1,000 : For every full sum of £1,000, and also for any frac- tional part of £1,000 of the amount insured. (2.) For any payment- agreed to be made upon the death of any person, only from accident or violence, or otherwise than from a natural cause, or as compensation for personal injury, or by way of indemnity against loss or damage of or to any property ........ 6 10 10 1 Provisions for life policies and certain post obit bonds. SUCCESSION DUTY ACT. 16 & 17 ViOT. c. 51. Sect. 17. No policy of insurance on the life of any person shall create the relation of predecessor and successor between the insurers and the assured, or between the insurers and any assignee of the assured, and no bond or contract made by any person bona fide for valuable consideration in money or money's worth, for the payment of money or money's worth after the death of any person, shall create the relation of (a) See ante, p. 93. APPENDIX. 303 predecessor and successor between the person making such hond or contract, and the person to or with whom the same shall he made ; but any disposition or devolution of the moneys payable under such policy, bond, or contract, if otherwise such as in itself to create a succession within the provisions of this Act, shall be deemed to confer a suc- cession (a). 16 & 17 Vict. c. 34, s. 54. Any person who shall have made insurance on his life Income tax or on the life of his wife, or shall have contracted for any '='=emption. deferred annuity on his own life, or on the life of his wife, in or with any insurance company which shall become regis- tered under any Act to be passed in the present session of Parliament for that purpose, and which shall comply with the requirements of such Act, and any person who shall under any Act of Parliament be liable to the payment of an annual sum, or to have an annual sum deducted from his salary or stipend, in order to secure a deferred annuity to his widow or a provision to his children after his death, shall be entitled to deduct the amount of the annual premium paid by him for such insurance or contract, or the annual sum paid by him, or deducted from his salary or stipend as afore- said, from any profits or gains in respect of which he shall be liable to be assessed under either of the Schedules (D) or (B) of this Act, or to have any assessment which may be made upon him under either of the said schedules reduced or abated by the deduction of the amount of the said annual premium from the amount of the profi.ts or gains on which such assessment has been made, or if such person shall be assessed to duties under any of the schedules contained in this Act, and shall have paid such assessment, or shall have paid or been charged with any of the said duties by deduc- tion or otherwise, such person on claim made to the Com- missioners for Special Purposes, and on production to them of the receipt for such annual payment, and on proof of the (a) See ante, p. 94. 304 APPENDIX. facts to the satisfaction of the Commissioners shall be entitled to have repaid to him such proportion of the said duties paid by such person as the amount of the said annual premium bears to the whole amount of his profits and gains on which he shall be chargeable under all or any of the schedules of this Act: Provided always, that no premium beyond one- sixth part of the whole amount of the pi-ofits and gains of such person so chargeable as aforesaid, nor shall any such deduction or abatement, entitle any such person to claim total exemption or any relief from duty on the ground of his profits and gains being thereby reduced below one hundred or one hundred and fifty pounds, as the case may be. 16 & 17 Vict. c. 91. Any person who shall have made any such insurance, or contracted for any such deferred annuity as in the said pro- vision mentioned in or with any insurance company existing on the first day of November one thousand eight hundred and forty-four, or in or with any insurance company regis- tered pursuant to the Act of the session holden in the seventh and eighth years of Her Majesty (chapter one hundred and ten) for the Eegistration, Incorporation, and Eegulation of Joint Stock Companies, shall be entitled to all the benefits and advantages which by the said provision are expressed to be given in respect of the like insurance or contract in or with any insurance company which shall become regis- tered under any Act to be passed in the present session of Parliament for that purpose (a). (a) Under these provisions any person insuring his own life or that of his wife with a company existing on NoTember 1, 1844, or registered under the Act of 1844 (7 & 8 Vict. c. 110), may deduct from the income on which income tax is chargeable any sums paid for premiums not exceeding one- sixth of his whole chargeable income. This exemption was expressly continued by 17 & 18 Vict. k. 40, 18 & 19 Vict. c. 35, which extended it to Friendly Societies, 19 & 20 Vict. c. 33, 20 & 21 Vict. c. 5, and 23 & 24 Vict. c. 14, s. 11, and has since been continued by a general clause inserted in the Annual Income Tax Act, preserving all provisions in force in the previous year so far as consistent with the Act of the year, 24 Vict. c. 20, s. 2, and 44 Vict. c. 12, s. 20. APPENDIX. 305 SHORT FORMS UNDER THE CONVEYANCING AND LAW OF PROPERTY ACT, 1881 (a). Assignment on Sale of a Policy. (iSiee ante p. 74 et seq.) This Indenture made the day of , between A. B. of of the one part, and C. D. of of the other part, WITNESSETH that in consideration of the sum of £ npon the execution hereof paid to A. B., the receipt whereof A. B. hereby acknowledges, A. B. as beneficial owner (6) assigns unto C. D. all that policy of assurance for the sum of £ effected in the name and on the life of A. B. with the at the annual premium of £ dated and numbered , and the said sum of £ and all moneys, bonuses, and additions to become payable under the said policy and the full benefit thereof (c) To hold and beceivb the same unto C. D. absolutely : And A. B. hereby co\renants with C. D. (d) that notwith- standing anything by A. B. done, omitted, or knowingly suffered the said policy is now a valid subsisting policy for the said sum of £ and for all bonuses and additions if any added or made thereto [and that he, A. B., will not do, omit, or suffer anything whereby the said policy may become void or voidable, or C. D. may be prevented from receiving or (a) The Conveyancing Act, 1881, s. 57, provides that " deeds in the form of and using the expressions in the Forms given in the 4th Schedule to this Act, or in the like form or using expressions to the like effect, shall, as regards form and expression in relation to the provisions of this Act, be sufficient," and by s. 66, solicitors and trustees adopting the Act are protected. (6) By s. 7 (a) : In a conveyance for value, other than a mortgage, the ordinary covenants for title are implied on the part of a person who conveys and is expressed'to convey as " beneficial owner." (c) S. 63 supplies the place of " all the estate " clause. (d) By s. 59 : Covenants bind the heirs of the covenantor whether nained or not. They bind his executors and administrators, and extend to executors and administrators of the covenantee at common law. ■ X 306 APPENDIX. recovering any money thereby assured, and that if he shall do, omit, or suffer any such thing he will thereupon and at all times thereafter do all such things and make all such pay- ments as may be necessary or proper for the purpose of keeping the said policy on foot or restoring the same] (a). In witness &c. MOETGAGE OP A PoLICY. (See ante p. 79 et seq.) This Indenture made the day of , between A. B., of, &c. of the one part, and C. D. of &c., of the other part WITNESSETH that in consideration of the sum of £ paid to A. B. by C. D., the receipt whereof A, B. hereby acknowledges, A. B. hereby covenants with C. D. to pay to him on the day of the sum of £ , and inte- rest thereon in the meantime at the rate of £ per cent, per annum, and also so long as any principal money remains due under this mortgage to pay to C. D. interest thereon at the same rate by equal half-yearly payments on the day of and the day of : And this Indenture also witnesseth that for the same consideration A. B. as beneficial owner (6) hereby assigns to C. D. all that policy of assurance for the sum of £ effected in the name and on the life of A. B. with the company at the annual premium of £ , and dated , and numbered , and the said sum of £ , and all bonuses and additions thereto, and all moneys to become payable under the said policy, or thereby assured, and the full benefit thereof, (a) If the policy is not on the life of the assignor these covenants will be omitted. The assignment on sale of a policy is chargeable with ad valorem duty of 6d. for every £5 of the consideration money or fraction of £5, See the schedtfle to the Stamp Act, 1870. (6) These words imply the ordinary covenants for title: Conveyancing Act, 1881, s. 7, C. APPENDIX. 307 To HOLD THE SAME to C. D. sutject to the proviso for re- demption following, viz., that if A. B. or any person claiming under him shall on the day of pay to C. D. the sum of and interest thereon at the rate aforesaid, then C. D. or the pSrsohs claiming tinder him will at the request ahd cost of A. B. or the persons claiming under him recon- irej the J)remises to A. B. ot the persons claiming under him (a). And A. B. heteby covenants with C. D. that, during the continuance of this security, he A. B. will not do, omit, or suffer anything whereby the said policy of assurance or any ne\v policy to be effected as hereinafter provided may become void oi: voidable, or whereby the said C. D. may be prevented from receiving or recovering any moneys thereby assured, and will, in case any such policy shall become void- able, forthwith at his own cost do all such things as may be tiecessary for keeping on foot or restoring the same, and tyill in case any such policy shall become void forthwith at his own cost effect or do all things necessary to enable C. D. to effect a new policy on the life of A. B. in the name of C. D. for the amount which ■rt'ould have been payable under the void policy if A. B. had died immediately before the Same became t^oid, and that eVery stich new policy and the moneys payable there tinder shall be subject to redemption and be held, and applied in like manner in all respects as the policy heteby assigned and the moneys payable thereunder ; and fdrthet, that dilring the continuance of this security A. B. will duly pay all premiums or other moneys payable for the purpose of keeping on foot Or Restoring the policy for the time being subject to this secttrity, and that within days from the day ■ivhen the Same becomes first pay- able, and will forthwith deliver the receipt for the same to C. D., and that if A. B. shall fail to pay such premiums or other moneys C. D. may advance and pay the same, and A. B. will on demand repay to C. D. all money so expended, and all costs and expenses incurred by him in keeping on (a) The trusts of the policy moneys and the mortgagee's receipt clause which ordinarily follow in this place, are supplied by s. 22 of the Conveyanc- ing Act, 1881. X 2 308 APPENDIX. foot or restoring any voidable policy or effecting any new policy or otherwise in relation to the premises, with interest thereon at the rate of £ per cent, per annum from the time of each such advance or payment, and until repayment the policy for the time being subject to this security and the moneys thereby assured shall stand charged with the amount so repayable as aforesaid, and the interest thereon. And it is hereby declared that the power to sell the mort- gaged property conferred upon mortgagees by the Convey- ancing Act, 1881, shall include a sale by way of surrender of the policy on mortgage to the office liable thereon (a). And A. B. further covenants with C. D. that notwithstanding anything by A. B. or any person through whom he claims otherwise than for value done, omitted or knowingly suffered the said policy is now a valid subsisting policy for the said sum of £ and for all bonuses and additions, if any, added or made thereto (h). In witness &c. rURTHBR ChAEGE BY SUPPLEMENTAL DeED. This Indenture made the day of between A. B. of &c., of the one part, and C. D. of &c., of the other part, and supplemental to an indenture of mortgage dated the day of , and made between the same parties, for securing the sum of £ and interest at per cent, per annum upon a policy of insurance for the sum of £ effected in the name and on the life of A. B. with the company, and dated the day of , and numbered , WITNESSETH that in consideration of the further sum of (a) A power of sale with the usual auxiliary clauses is given by ss. 19-22 of the Conveyancing Act, 1881. Lord Cranworth's Act only applied to land, and an express power of sale has hitherto been necessary in a mortgage of a policy. A power of sale would seem to include sale by way of surrender, but the clause in the text precludes all.question. (6) The forms of statutory mortgage, transfer, and reconveyance contained in the third Schedule to the Conveyancing Act only apply to mortgages of freehold and leasehold land : see s. 26. APPENDIX. 309 £ paid to A. B. by C. D., of which sum A. B. hereby acknowledges the receipt, A. B. hereby covenants with C. D. to pay to him on the day of the sum of £ , with interest thereon in the meantime at the rate of £ per cent, per annum, and also so long any prin- cipal money remains due hereon to pay to C. D. interest thereon at the same rate by equal half-yearly payments on the day of and the day of ; and further that the said policy assigned by the said indenture of mortgage, and any policy for the time being subject thereto, shall stand charged with the payment to C. D. of the sum of £ and the interest thereon hereinbefore covenanted to be paid, as well as the sum of £ and interest thereon secured by the said indenture of mortgage. In witness &c. Antenuptial Settlement of a Policy on the Husband's Life. {See ante, p. 76 et seq„ and p. 97 et seq.) This Indenture made the day of , between A. B. of &c., of the first part, C. D. of &c. of the second part, and E. F. and H. G. pf &e. of the third part, WITNESSETH that in consideration of the intended marriage between A. B., and C. D., A. B. [as beneficial owner (a), or as seitlor (6)], A. B. assigns unto E. F. and H. G. All THAT, &C. To HOLD the same to E. F. and H. G. upon trust for A. B. until the said intended marriage, and after the solemnization thereof upon trust that they or the survivor of (a) If the ordinary covenants for title are desired, A. B. may assign as " beneficial owner." (V) A conveyance by A. B., " as settlor," will imply a limited covenant for further assurance by him. Covenants for title are not unfrequently altogether dispensed with in modern settlements, and as policies are not generally intended to be sold a chain of covenants is no object, and if the policy is new and effected for the purpose of the settlement the covenants will be of little, value. 310 APPENDIX. them (a), or the executors or administrators of such survivor, or otl^er the trustees for the time being hereof, all of whom ,^re hereinafter referred to as the trustees, shall get in and receive the monpys thereby assured or p9,yable thereupder, and shall stand possessed of such monjeys or of the resj.due thereof after p,g.yme&t of all cogts and expenses of recovering and receiving the same upon trust tfl invest the sq^me in their names or upder their legg,! opntroj in g,ny of the (Investment clause) and with thp consent of C. D. during her life, and afterwards ,at their discretion, to vary such investments from time to time for any pther investment of a kind hereby 9,uthorised, and to pay the income of such moneys to C. D. during her life, and after her death tp hold the same in trust for all or any such one or more of the issue of the said intended piarriage in such manner and form in every respect as A. B. and C. D. phall by deed jointly appoint, and subject to or in default of any such appointment as the survivor shall by deed or will appoint, and subject to or in default of any such appointment upon trust for all the children or any the child of the said intended marriage who being male shall attain the age of twenty-pne, or being female shall attain that age or marry (6) : Provided always, that no child who or whose issue shall take any part of the premises under any suph appointment ^s aforesaid shall be entitled to any share in the unappointed part of ^he premises, if any, without bring- ing the part so appointed to him, or her, or hip, or her issue into hotchpot : Provided also that the trustees may, upon the reqiiest in writing of A. B. and C. D. during their joint lives, and of the survivor of them during his or her life, and afterwards at their discretion, raise any part or parts not exceeding in the whole one half of the then expectant, pre- sumptive, or vested phare pf any pMd pf the said raarriage (a) Sect. 38 of the Conveyancing Act, 188X, provides that powers and trusts given to or vested in two or mpre jojntly may be exercised by the survivor or survivors of them. (5) The trusts inserted ^re the common trusts of g, settlement^ in jts simplest form, and must l)e varied Recording \o circums^nce^. APPENDIX. 311 under the trusts hereof, and apply the same for his or her advancement or benefit (a). And it is hereby declared that if there shall be no child of the said intended marriage who being male shall^attaia twenty-one, or being female shall attain that age or marry, then subject and without prejudice to the trusts hereinbefore declared, and after the death of C. D., and such default or failure of children as aforesaid, the trustees shall hold the trust premises and the income thereof, or so much thereof as shall not have become vested or been applied under the trusts or powers hereof, in trust for A. B. absolutely. And A. B. hereby covenants with the trustees (6) that if the said intended marriage takes place he will not do, omit, or suffer anything whereby the policy hereby settled, or any new policy to be effected as hereinafter provided, may become void or voidable, or whereby the trustees may by any such policy be prevented from receiving or recovering any moneys assured, and will in case any such policy shall become voidable forthwith at his own cost do all such things as may be necessary for keeping on foot or restoring the same, and will in case any such policy shall become void forthwith at his own cost effect or do all things necessary to enable the trustees to effect a new policy on the life of A. B. with such office, and in such name or names as the trustees shall select or direct, for the amount which would have been payable under the void policy if A. B. had died immediately before the same became void, and will deliver or assign the same to the trustees, and that every such new policy and the moneys payable thereunder shall be subject to the trusts of these presents, and be held and applied in like manner in all respects as the policy hereby assigned and the moneys payable thereunder : And further, that he A. B. will duly pay all premiums or (a) Powers of raainteuanoe and accumulation are supplied by the Convey- ancing Act, 1881, s. 43, re-enacting s. 26 of 23 & 24 Vict. c. 145. (6) Sect. 60 : A covenant with two or more jointly to pay money, make a conveyance, or do any other act, implies an obligation to do the act for the benefit of the survivor or other person on whom the right to sue devolves. 312 APPENDIX. otEer moneys payable for the purpose of keeping on foot or restoring the policy for the time being, subject to the trusts hereof, and that within days from the day when the same become first payable (excluding the days of grace), and will deliver the receipt for every such payment to the trustees : Provided always, and it is hereby agreed, that the trustees may, at any time at their discretion, apply any part of the income, or if the income shall be insufficient, then any part of the capital of the trust funds hereby settled, in or towards the payment of any premiums or other sums necessary for keeping on foot or restoring the policy of assurance for the time being subject to the trusts hereof, or for effecting a new poUoy to be held upon the trusts hereof [but so never- theless that as between the trust funds hereby settled, the trust fund settled by A. B. shall be primarily liable to such payments, and that the same, if made out of the trust fund settled by C. D., shall be a charge on the trust fund settled by A. B., in exoneration of the trust fund settled by C. D. («).] And it is hereby agreed that it shall not be obligatory on the trustees so to apply any income or capital of the trust fund hereby settled, or to enforce any covenant hereinbefore contained in reference to any policy subject to the trusts hereof, and no omission or neglect in this behalf by the trustees shall be considered as a breach of trust, nor shall the trustees be responsible therefor or for the avoidance of any policy subject to the trusts hereof by any means what- soever. [And it is further agreed that the trustees may, if they shall think fit, upon the request in writing of A. B. and C. D. during their joint lives or of A. B. after the death of C. D., sell or surrender the policy for the time being subject to the trusts hereof, and shall immediately upon any such sale or surrender invest the nett proceeds thereof upon any invest- ment hereby authorized, and shall during the life of A- B. (a) If two funds are settled, and the trusts and destination of them differ insert this clause., APPENDIX. 313 accumulate the income thereof by way of compound interest by investing the same in any investment hereby authorized, and after his death shall hold and apply such moneys and the accumulations thereof upon the same trusts as are herein- before directed concerning the moneys assured by the policy so sold or surrendered] (a) : And it is further agreed that the trustees may upon such request in writing as aforesaid permit any bonus or bonuses to be declared in respect of any policy subject to the trusts hereof to be applied in reduction of the annual premium thereon : And it is hereby declared that the power of appointing new trustees hereof shall be exerciseable by A. B. and C. D. during their joint lives and by the survivor of them during his or her life : (b) And A. B. hereby covenants (c) with the trustees that not- withstanding anything by A. B. done, omitted, or knowingly suffered, the said policy is now a valid subsisting policy for the said sum of £ and all bonuses and additions, if any, added or made thereto. In witness &c. (d) If the trust funds settled are or may become insuiBcicnt to keep up the policy this power should be inserted. It may be varied if desired by omitting the trust for accumulation. The auxiliary clauses relating to the mode and conditions of a sale by trustees are supplied by s. 35 of the Conveyancing Act. (6) The Conveyancing Act, 1881, supplies a power of appointing new trustees and vesting the trust property in them (ss. 31 to 34) ; a power to give receipts (s. 36) ; a power to compound and settle claims (s. 37) ; and a power to the survivor of persons jointly intrusted to act in the powers and trusts alone (s. 38). The trustees' indemnity and reimbursement clause is supplied by 22 & 23 Vict. c. 35 (Lord St. Leonards' Aet), s. 31. (c) If it is desired to dispense with covenants for title, as is not unfrequently done in modern settlements, or if the policy is a new one effected for the purposes of the settlement, the words as " beneficial owner " in the witnessing part, which imply covenants for title, and this covenant, may be omitted. APPENDIX. 315 LIFE ASSUEANCE COMPANIES CAEEYING ON BUSINESS, AND MAKING EETUENS TO THE BOAED OF TEADE. The letter IVf after the name denotes iik&i the company is on the mutual principle ; the letter F that fire insurance is undertaken as well ; the letter I that the business is in- dustrial assurance, Where two dates of formation are given, the later one denotes the time when the company extended its operations to life insurance. Date of Special or general Act, N^me of Company. Forma- if any, incorporating or tion. authorizing tfte Company. Alliance British and Foreign (P) . 1824 5 Geo. 4, p. 137 ' 13 & 14 Vict. c. 1 Argus ..... 1833 5 & 6 Wm. 4, c. 76 Atlas (F) 1808 54 Geo. 3, c. 79 British Empire Mutual 1847 Companies Act, 1862 British Equitable , , , 1854 Do. British Legal, Limited (I) . 1863 Do. British Worlinian's, Limited . 1866 Do. Briton, Limited .... 1875 Do. Briton Medical and General . 1853 Do. Caledonian (F) . J1805) ■| 1833 J 9 & 10 Vict. c. 45 Church of England (F) 1840 4 & 5 Wm. 4, c. 92 City, Limited .... 1870 Companies Act, 1862 Cjty of Glasgow . . . 1838 24 & 25 Vict. c. 145 Clergy Mutual .... 1829 (1 Geo. 4, c. 56 )40 & 41 Vict. c. 49 Clerical, Medical and General 1824 13 & 14 Vict. c. 9 Commercial Union (V) 1861 Companies Act, 1862 Crown . , . 1825 ■ ■ ■ ■ Eagle 1807 33 Geo. 3, c. 207 Economic (M) .... 1823 3 & 4 Wm. 4, c. 66 Edinburgh, . . . . 1823 (8&9 Vict. c. 76 |21 & 22 Vict. c. 3 Emperor ..... 1853 Companies Act, 1862 English and Scottish Law . 1839 .... 316 APPENDIX. Name of Company. Date of Forma- tion. Special or general Act, if any, incorporating or authorizing the Company. Equitable (M) . Equitable of the United States Equity and Law Farmers and General (F) Free Methodist {See Methodist and General .... Friends Provident (M). General (F) Great Britain Mutual . Gresham .... Guardian (F) . Hand in Hand (M) (P) Imperial Iiife Imperial Union Limited Industrial of Great Britain, Limited Itinerant Methodist Preachers Lancashire (F) . Law Life . . Law Property Law Reversionary Interest . Law Union (F) . Legal and General Life Association of Scotland • Lion, Limited Liverpool and London and Globe (F) London and Lancashire London and Manchester Industrial Limited .... London and Provincial Law . London Annuity. London Assurance (F) London, Bast India and Colonial London, Edinburgh and Glasgow, Limited .... London Life Association (M) Marine and General Mutual . Masonic and General . Methodist and General, I Jmited (I) Metropolitan (M) Midland Counties (F) . 1762 1859 1844 1840 1832 1837 1844 1848 1821 (16961 ]1836f 1820 1866 1852 1823 1850 1854 1836 1838 1880 1836 1862 1869 1845 1720 1869 1881 1806 1852 1868 1835 1851 i3 & 4 Vict. c. 20 llO&ll Vict. c. 1 Companies Act, 1862 il3&14 Victc. 25 129 & 30 Vict. c. 225 Companies Act, 1862 Companies Act, 1863 17 & 18 Vict. c. 139 26 & 27 Vict. 0. 161 40 & 41 Vict. c. 20 Companies Act, 1862 Companies Act, 1862 16 & 17 Vict.' c. 224 Companies Act, 1862 27 & 28 Vict. c. 96 Companies Act, 1862 Do. Do. Companies Act, 1862 Do. [47 Geo. 3, sess. 1, o. 32 [17 & 18 Vict. c. 2 Companies Act, 1862 Do. 30 & 31 Vict." c. 14 Companies Act, 1802 APPENDIX. 317 Name of Company. Date of Forma- tion. Special or general Act, if any, incorporating or authorizing the Company. Mutual National Guardian, Limited National Life (M) National of Ireland (F) National Provident (M) New York . North British and Mercantile (F) Northern (P) . Norwich Union (M) Patriotic of Ireland (F) Pearl, Limited . Pelican Positive, Limited Provident . Provident Clerks (M) . Provincial . Prudential, Limited Queen (P) Refuge Friendly, Limited (I) Reliance (M) Rook Royal (P) . Royal Exchange (F) . Royal Farmers (.see Farmers and General . Scejitre, Limited. Scottish Amicable (M) Scottish Equitable (M) Scottish Imperial (P) . Scottish Life Scottish Metropolitan . Scottish Provident (M) Scottish Provincial (F) Scottish Union and National (P) 1834 1854 1830 1822 1835 1843 (1809 |1823 1836 1808 1824 1864 1797 1870 1806 1840 1852 1848 1857 1875 1840 1806 1845 1720 1840 1864 1826 1831 1865 1881 1876 1837 1825 1824 Companies Act, 1862 39 & 40 Vict! c. 86 23 & 24 Vict. c. 115 25 & 26 Vict. c. 102 33 & 34 Vict. c. 21 j28 & 29 Vict. c. 133 1 37 & 38 Vict. c. 123 53 Geo. 3, c. 215 (31 & 82 Vict. c. 148 5 Geo. 4, c. 154 Companies Act, 1862 47 Geo. 3, sess. 1, c. 33 47 Geo. 3, sess. 2, c. 88 .49 Geo. 3, c. 124 Companies Act, 1862 47 Geo. 3, sess. 1, c. 34 50 Geo. 3, c. 32 % Companies Act, 1862 (Companies Act, 1862 38 & 39 Vict. c. 77 39 & 40 Vict. c. 218 Companies Act, 1862 Do. 12 & 13 Vict. c. 70 27 & 28 Vict. c. 69 82 & 33 Vict. c. 7 Companies Act, 1862 Companies Act, 1862 12 & 13 Vict. C. 22 j 10 & 11 Vict. c. 35 [39 & 40 Vict. c. 62 Companies Act, 1862 Do. 11 & 12 Vict.' c. 106 15 & 16 Vict. c. 48 318 APPENDIX. Nailie of Compiiny. Date of Forma- tion. Special or geiieral Act, if iiny, incorporating or authorizing tK^ Company. Scottisli Widows Fund (M) , Security, Limited Sovereign . Standard , Star . Sun . Union (P) United Kent, Limited . United Kingdonl, Limited United Kingdom Tempertoce (M)) (I) , ! Universal . . ; University Wesleyan and General (M) Western Counties and London (M) Westminster and General West of England (F) . ; Whittington Yorkshire (F) . Yorkshire Provident, Limited (I) 1815 1870 1846 1825 1843 1810 1714) 1813) 1824 1866 1840 1834 1825 1847 1861 1836 1807 1855 1824 1870 24 & 25 Vict. 0. 85 Companies Act, 18fi2 23 & 24 Vict. c. 117 2 & 3 Wm. 4, c. 81 8 & 9 Vict. c. 75 22 Vict. c. 27 31 & 32 Vict. c. 165 i54 Geo. 3, c. 8 [7 Wm. 4