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Quazi AzimuddIn Quazi Ali and ors. Vs. Hercules Insurance Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectInsurance
CourtMumbai High Court
Decided On
Case NumberO.C.J. Suit No. 285 of 1947
Judge
Reported inAIR1953Bom61; (1952)54BOMLR773
ActsCode of Civil Procedure (CPC), 1908 - Order 6, Rule 6
AppellantQuazi AzimuddIn Quazi Ali and ors.
RespondentHercules Insurance Co. Ltd.
Appellant AdvocateS.T. Desai and ;M.P. Laud, Advs.
Respondent AdvocateA.C. Beynon, ;Y.B. Rege, Advs. and ;C.K. Daphtary, Solicitor General
Excerpt:
.....insured with the defendant company certain bales of cloth and yarn which were described in the policy of insurance in these terms: 'piecegoods of every description and/or yarn and/or textile fabrics. ..., the property of the insured or held by him in trust or on commission for which he is responsible. ...' the goods were destroyed by fire when these were lying in the plaintiff's godown. in a suit by the plaintiff against the defendant company, claiming the value of the goods that were burnt, the defendant contended that by the terms of the policy the company had only insured the legal liability of the assured to third parties in respect of the goods, and as the plaintiff was a bailee and it was not his case that the fire was due to his negligence, he was not liable to the true owners..........property of the insured' in such policies cover not only goods belonging to the insured but also goods in respect of which he has a lieu or a charge for services rendered or for expenses incurred. macgillivray on insurance law (edn. 3), at page 328, states the position thus:'. . . . the words 'his own' when used ib such a context cover not only goods in respect of which he is the absolute owner, but also the goods of others entrusted to him in respect of his lien or other beneficial interest therein.'then, with regard to the further words 'held by him in trust or on commission' the same author continues (p. 328):'the words 'held by him in trust or on commission, cover the goods entrusted to him. and insure them both in respect of his own personal interest to be indemnified against any.....
Judgment:

Tendolkar, J.

[1] This is a claim against an insurance company for loss arising out of fire. The suit was originally filed by one Kazi Ali who died pending the suit and his heirs and legal representatives have been brought on record subsequently as plaintiffs. Kazi Ali was carrying on business as a carting and transporting agent. It was his case that one Ebrahim Coka another person by name Sopher and a firm called Abdul Satar & Co. engaged him to transport certain bales of cloth and yarn from Bombay to Shrivardhan in Janjira State. Owing to certain circumstances, into the details of which it is unnecessary to go 181 bales out of those bales, which were originally intended for export from Janjira, could not be exported, and they had to be brought back and stored at a place called Khandpale where Kazi Ali used to reside. These goods arrived at Khand-palo in the month of May 1944. It is the plaintiffs' caso that Kazi Ali built a godowu in or about, the month of November 1945 and stored these 181 bales in the said godown. On 29-11.1945, Kazi Ali took oat a policy of fire insurance from the defendants in respect of the said 181 bales for a sum of Rs. 4,90,000 and of the building of the godown for Rs. 10,000 aggregating to a sum of five lacs of rupees for a period of one year commencing from 26-11-1945. The said goods continued to be in the said godown until 27-2-1946, when in the early hours of the morning they wore totally destroyed by fire. The plaintiffs have claimed in this suit a sum of RS. 4,36,500 which they say was the value of the goods that were burnt and part of the building that wag destroyed as sot out in particulars EX. a to the plaint.

[2] The defendants by their written statement deny that the godown was in existence on 28.11. 1945 that is, the date from which the risk under the policy commenced; they further deny that 181 bales of cloth or yarn were in the said godown if it existed on that day; they also plead that Kazi Aii failed to observe condition No. 11 of the policy with regard to producing and procuring such particulars with respect to the claim as may be reasonably required by the insurance company and urge that the supplying of such particulars was a. condition precedent to any claim under the policy; they also urge that they rejected, the said claim and in terms of condition No. 13 of the policy all benefits under the policy are forfeited unless an action or suit is commenced within three months after rejection.

[3] Quite apart from these contentions raised by the written statement, Mr. Beynon, who appeared for the defendants, raised a somewhat interesting question of law. His submission was that by the terms of the policy, to which I will presently refer, the company only insured the legal liability of the assured to third parties in respect of the goods; and as Kazi Ali was a bailee and it is not his case that the fire was due to his negligence, he was not liable to the true owners of these goods and, therefore, the defendants were not liable under the policy at all. Now, before I consider whether it is open to the defendants to raise such a contention without pleading it, it is necessary to ascertain the true scope of the policy. The policy insures (a) the building of the godown for RS. 10,000 in respect of which no question of interpretation of the terms of the policy arises; and (b) also insures for a sum of RS. 4,90,000 the goods lying in the godown which are described in these terms:

'Piecegooda of every description and/or yarn and/or textile fabrics in pressed bales and/or in cases, the property of the insured or held by him in trust or on commission for which he is responsible contained in building insured by item (a) above,'

Now, the words 'the property of the insured' in such policies cover not only goods belonging to the insured but also goods in respect of which he has a lieu or a charge for services rendered or for expenses incurred. Macgillivray on Insurance Law (Edn. 3), at page 328, states the position thus:

'. . . . The words 'his own' when used IB such a context cover not only goods in respect of which he is the absolute owner, but also the goods of others entrusted to him in respect of his lien or other beneficial interest therein.'

Then, with regard to the further words 'held by him in trust or on commission' the same author continues (p. 328):

'The words 'held by him in trust or on commission, cover the goods entrusted to him. and insure them both in respect of his own personal interest to be indemnified against any liability to the owner in the event of their loss or damages and also in respect of the owner's general proprietary interest. Such an insurance effected by a commercial trustee is one which is effected 'prima facie' on his own behalf and on his own insurable interest, and not as agent for or on behalf of the owner of the goods, bat he is entitled nevertheless, to recover the full value of them in case of loss, but only on the terms imposed by equity of holding in trust for the owner of the goods any surplus in the amount received over and above what is necessary to indemnify him in respect of his lien and liability. The policy money represents the goods and is apportion able according to the respective interests or property rights in the goods themselves.'

This passage makes it plain that the words 'held by him in trust or on commission' themselves cover both the lien of the insured as well as his liability to the true owner in respect of the same goods. On these words, which were common in policies it was held that the liability of the insurers was to the full extent of the value of the goods; but as a result of certain observations made by Erle J., in London and North Western Rly. Go. v. Glyn, (1859) 1 EL. & 652, the insurance companies adopted the practice of using a phraseology to limit their liability to the extent of the legal liability of the insured to the true owner of the goods. That was done by using words such as those which appear in the present policy, via., 'for which ho is responsible', or words to that effect viz., for which they may be liable in the event of loss or damage by fire'. The same text book at page 329 states :

'In order, so far as possible, to limit the insurer's risk on policies issued to carriers, warehousemen and the like to a personal indemnity of their assured the insurance companies, after the decision, in--'Waters v. Monarch Life Insurance Co.,' added to the description of 'goods held in trust or on commission' the words 'for which they are responsible', and so excluded from the cover the owner's proprietary interest in goods in respect of which the assured was not absolutely responsible to the owners for their safety either as a common carrier or because he had undertaken to insure the goods on the owner's behalf. A modification of this formula is to be found in the words sometimes used, viz. 'for which they may be liable in the event of loss or damage by fire' which words would seem to cover all goods ia their possession (except in the rare cases where the terms of the contract believe a person entrusted with the goods from liability for loss in any circumstances) and therefore to extend the cover to the owner's proprietary interest in any case where the assured might have been but in fact is not liable to the owner in respect of the loss or damage.'

This passage makes it clear that the only effect of the addition of the words 'for which they are responsible' or words to that effect is to exclude from the cover the owner's proprietary interest in the goods in respect of which the assured is not legally liable. But these words do not have the effect of excluding from the cover the insured's own lien or interest in the property insured which is included both in the words 'property of the in-sured' as also in the words 'held by him in trust or on commission.'

[4] Reliance was placed by Mr. Beynon on a decision reported in -- 'North British & Mercantile Insurance Co. v. Moffatt, (1871) 7 c. p. 25. In this case a policy of fire insurance was taken out on 'Merchandise, the assured a own, in trust' or 'on commission, for which they are responsible, in or on certain specified warehouses, etc.' Whilst the policy WHS in force certain merchandise on a wharf included in the policy was destroyed by fire. The assured had purchased this merchindise but had resold the same before the fire: so that at the date of the fire ho had no interest whatever in the merchandise, nor did the assured owe any responsibility to the purchasers in respect of these goods in case of fire, as property in the goods had passed to the purchasers. It was, therefore, held that the policy applied only to the goods belonging to the assured or for which they were responsible, and as at the time of the fire the good a did not belong to the assured nor was ho liable for these goods to the purchasers, the loss was not covered by the policy. I cannot read this case as an authority for the proposition that liability under a policy worded as this policy was is restricted only to the liability of the assured to third parties and does not extend to the lien of the assured himself on the goods or his interest therein. In this particular case the question of his lien or of his having any interest did not arise and that is why the only question determined was that thepolicy covered only the legal liability of the assured in respect of goods to the real owner thereof.

[5] Reliance was also placed by Mr. Beynon on another decision--Engel v. Lancashire & General Assurance Co. Ltd., (1925) 41 T.L.R. 408. In this case a furrier had taken out a policy of insurance against burglary. The policy covered not only the goods belonging to the assured but goods which were on his promises and were in his possession on trust or on commission and for which he was responsible. A burglary took place-and the furrier lost some of his own goods as well as goods which were in his custody as a bailee. He had not been guilty of any negligence as bailee and so was not liable to the owners of the bailed goods for the loss of the goods. It was held that the responsibility in such contest meant legal liability only and, therefore, the furrier could not recover on the policy as he was not liable to pay anything to the owners. The only question that was decided in this case was that responsibility meant 'legal liability' and not the general responsibility of a bailee for goods entrusted to him. In this case again the question did not arise for determination as to whether if the bailee had a lien on these goods to that extent the insurance company was liable under the policy and I am unable to read this case as holding that by the words 'for which ho is responsible' the liability of the insurance company to the extent of the lien of the insured or his interest in the goods is also excluded.

[6] On the other hand Mr. Desai for the plaintiffs has drawn my attention to a decision of the Judicial Committee of the Privy Council in -- Maurice v. Goldsbrough Mort & Co., (1939) AC 452. This was a dispute between the owners of wool and brokers in respect of wool consigned by them to the brokers. Wool had been insured against loss or damage by fire by the brokers, on 'merchandise, assured's own property or held by him on trust or on commission for which they may be liable in the event of loss or damage by fire.' The dispute between the owners and the brokers was as to the apportionment of the amount they received from the insurers. Before dealing with this dispute Lord Wright in his judgment first set out to determine what was the position between the brokers as insured and the insurance company as insurers. After stating that that must depend upon the contractual terms embodied in the policy the learned Law Lord observed at page 463 of the report as follows:

'.....In a policy such as this on merchandise, the right to recover must be based on an insurable interest in the goods themselves, whether a special property like a lien, or the general property, or some other insurable interest, such as liability in case of loss of the goods. The position of the warehousemen is well stated by Crompton J. in --'Water's Case':

'I cannot entertain the least doubt that in these policies the words 'in trust' are used without any reference to a subpoena in Chancery. The parties meant to insure those goods with which the plaintiffs were entrusted, and in every part of which they had an interest, both in respect of the lien and in respect of their responsibility to their bailors. What the surplus after satisfying their own claim might be, could only be ascertained after the loss, when the amount of their lien at that time was determined; but they were persons interested in every particle of the goods.' Wightman J. says:

'They (s.c., the bailees) had a lien on them (s.c., the goods), subject to which they were accountable to the owners who had entrusted them with the goods.' These learned Judges are upholding the right of the assured to recover the whole value from the insurers, because of their insurable interest either on the ground of lien or responsibility, the apportionment of what recovered being left to be settled between bailor and bailee, the bailees' interest being defined by their lien. That this is so in the present case is also confirmed by the terms of the policy, which insures the wool so far as it is the assured's own property, that is to the extent of their lien or special property, and as to the residue refers to the property as held on trust. In effect, in a policy of this nature the policy moneys represent the goods when the goods are destroyed by fire, and the rights in these moneys are apportionable according to the respective interests or property rights in the goods themselves.'

[7] This passage makes it clear that what is insured under a policy in these terms is both the lien or the special property of the assured as well as his liability as trustee to the true owner of these goods. The words used in the policy before me are absolutely identical to the words used in this case and I have, therefore, no hesitation in holding that on a proper construction of the words of the policy the company is liable both to the extent of the lien of the assured on these goods as well as to the whole extent of his legal liability to the true owner of these goods, the qualifying words 'for which he is responsible' having restricted their liability only to the extent to which the assured is liable to third parties.

[8] Now that being the position as I conceive it in law, is it then open to Mr. Beynon to urge that in this case Kazi Ali was not responsible to the true owners at all, and, therefore, he must of necessity fail. In so far as the policy insures the legal liability of the assured to third parties, no doubt the assured can only recover what he can prove to be his liability to third parties. But assuming that the existence of such legal liability was a condition precedent to any liability arising against the insurance company on the policy, the plaintiffs must be deemed to have pleaded that such a condition precedent was fulfilled. If the defendants wished to allege that the condition precedent had not been fulfilled, it was for them to plead that the plaintiffs had not become responsible to third parties against this policy. Order VI, Rule 6, Civil P. C. makes it quite plain that an averment of the performance of any condition precedent shall be implied in any pleading and it is for the party who wishes to contest the fact of performance to plead so distinctly and specifically. The defendants, in my opinion, have not by their written statement in the present suit pleaded that the plaintiffs have not become responsible to any person in respect of these goods. Strangely enough when the plaint sets out the words of the policy, it omits the very important words 'for which he is responsible'. This lapse is pointed out in para. 4 of the written statement and the words omitted have been set out as a material provision in the said policy. But there is no plea that the plaintiffs, had not' become responsible to third parties in respect of these goods and therefore no liability attaches under the said policy. Had there been such a plea, there would have been an issue in the case to that effect and it would have been open to the plaintiffs to meet that issue in more than one way. They could have established that Kazi Ali was a common carrier and as such liable to the true owners of the goods as an insurer. They may also have, if such were the case, proved any special agreement between Kazi Ali and the true 'owners of the goods whereby Kazi Ali had rendered himself liable to the true owners for the safety of the goods. The plaintiffs were not called upon to do so on the pleadings as they stood, and, therefore, in my opinion it is not open to the defendants now to contend that the plaintiffs must be non-suited on the plea that as the pleadings stood Kazi Ali had not averred and proved that he was responsible to third parties. Of course, in the event of my holding that the plaintiffs have a claim under the policy of insurance, the liability of the insurance company will be restricted to the extent to which it may be shown that the assured was under a legal liability to the true owners of the goods; and in the event of its being proved that he was not liable to the true owners of the goods the liability will be restricted to the lien of the assured himself on these goods for any moneys due to him in respect of the said goods.

(The rest of the judgment is not material tothe report.)

[9] Order accordingly.


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