G.K. Mitter, J.
1. This suit is based on a claim against an insurance company for loss of the plaintiff's property caused by erosion of the river Ganges at Dhulian. The defence put forward is that very soon after its acceptance the risk was cancelled under condition No. 10 of the defendant's standard policy of insurance for loss by fire and various other causes.
2. The plaintiffs describe themselves as the kartas of a joint Hindu family governed by the Mitakshara School of Hindu law carrying on business under the name and style of Chandmull Lalchand at Anupnagar Bazar, Dhulian in the District of Murshidabad. The cause of action as laid in the plaint is as follows;
(a) By two several proposals in writing both, dated 2-6-1950 the plaintiffs made proposals for insurance against loss or damage by fire, Cyclone, flood, change of course of river and/or erosion of river, land slides and subsidence to the extent of the sums of Rs. 51,000/- & 65,000/- on two several sets of houses and property belonging to the plaintiffs in Dhulian Municipality from 3-6-1950 to 3-6-1951.
(b) The said proposals were accepted by the defendant.
(c) The defendant well knew that the proposals were made on the basis and condition that the policy would not be cancelled or the risk declined during the said period of one year; a representation, promise or assurance was made by the defendant to the plaintiff that the said policy would not be cancelled or the risk declined during the abovementioned period and the plaintiffs acted upon such representation to their detriment.
(d) The defendant issued two several cover notes respectively numbered 18848 and 18850 both dated 5-6-1950 and received premia in respect of the two proposals and became bound to issue and deliver a policy or policies for the two sums of Rs. 51,000/-and Rs. 65,000/- respectively.
(e) The said two notes in so far as they purported to entitle the insurer to decline the risk were invalid.
(f) Towards the end of June 1950 the river began to erode the town of Dhulian after which by a letter dated 6-7-1950 the defendant wrongfully purported to cancel the risk and the said two cover notes under Clause 10 of the conditions of their policy,
(g) The standard policy of the defendant was not applicable to the contract between the parties and clause 10 thereof had never been agreed to and was of no effect.
(h) The buildings and properties covered by the said two cover notes and policies numbering 444T7 and 44418 were completely washed away in the middle of August 1950.
(i) In the premises the defendant was liable to indemnify and make good the loss to the plaintiff to the extent of the said two sums totalling Rs. 1,16,000/-.
3. By the written statement filed herein the insurer admitted the making of the proposals and the acceptance thereof but such proposals were alleged to be subject to the terms and conditions of the cover notes issued and to the usual terms and conditions of the defendant's fire policies, condition No. 10 whereof ran as follows:
'This insurance may be terminated at any time at the request of the Insured, in which case the Society will retain the customary short period rate for the time the Policy has been in force. This insurance may also at any time be terminated at the option of the Society, on notice to that effect being given to the Insured, in which case the Society shall be liable to repay on demand a rateable proportion of the premium for the unexpired term from the date of cancelment'.
The defence relied on is that by writing dated 6-7-1950 both the cover notes were cancelled and the risk declined by the defendant and as such the plaintiffs have no cause of action. The defendant further denies having made any representation, promise or assurance as mentioned in the plaint or the plaintiffs having acted thereon or suffered any loss or injury as a result thereof.
4. The issues settled are as follows:
1. Was there any representation or promise or assurance by the defendant to the plaintiffs that the policies would not be cancelled or the risk declined during the period of one year from 3-0-1950?
2 Where the proposals made on the condition that the said policies would not be cancelled during the period of one year from 3-6-1950?
3. Was the defendant's acceptance of the plaintiff's proposals subject, to the terms and conditions of the cover notes and the usual terms and conditions of the defendant's policies?
4. Was the plaintiff bound by Clause 10 of the 'policies?
5. Was the cancellation of the risk on 6-7-1950 proper?
6. Were the properties lost in the manner alleged in paragraphs 12 and 13 of the plaint?
7. Did the plaintiffs suffer loss to the extent of Rs. 51,000/- and Rs. 65,000/- as alleged in paragraph 17 of the plaint?
8. What relief, if any, is the plaintiff entitled to?
5. The documents which were proved at the trial are as follows. On 2-6-1950 Lalchand Jain, one of the plaintiffs, signed two proposals which are in the printed form of the defendant. They are headed 'Proposals for Fire Insurance'. According to these the period for which the insurance was required was from 3-6-1950 to 2-6-1951; additional insurance was also required for the said period for loss or damage by cyclone, flood, change of course of river and/or erosion of river, land slide and subsidence to the building or residence of which details were given. The first proposal was for one of the properties of which the value is shown at Rs. 51,000/-. The proposal form contains a number of questions which were filled up bv the assured with a declaration at the foot, reading
'We hereby declare that the foregoing statements are to the best of our knowledge and belief true and we agree that these are to be the basis of the contract and will be considered as incorporated in the policy to be issued.'
No signature of anybody appears at the place meant for the agent's signature. The second proposal was similarly worded except that the details of the property were slightly different. On 3-6-1950 two letters were sent by the defendant to the plaintiffs. They are both couched in the same words and read as follows:
'In accordance with your proposal dated 2-6-50, we hold you covered the risk from 3-6-50 to 3-6-51 as noted below. The relative cover is enclosed herewith'.
At the foot of this appears the following endorsement:
'Risk and situation. One pucca built and roofed building. Holding No. 273, 273A, 273B and 273C occupied as residence and/or shop for storage of Medicines and/or safety matches situate at Dhulian, Ward No. IV District Murshidabad inclusive of Cyclone, flood and/or loss by change of course of river, diluvion and/or erosion of river, landslide and subsidence. It is further noted that there is a thatched building or residence within 50ft. of the above premises'.
The head lines show that the document was being issued by the Fire Department of the General Assurance Society. The first cover notes bearing the date 5-6-1950 issued by the Fire Department of the General Assurance Society reads as follows:
'Messrs. Chandmull Lal Chand, P.O. Dhulian, Murshidabad being desirous to effect an insurance from loss by fire tor Rs. 51,000/- Rupees Fifty one thousand only the following property. ....including loss and damage by cyclone, flood and/or change of course of river and/or erosion of river, land-slide and/or subsidence. It is further noted that there is a thatched building or residence within 50 Ft. of the above premises, for twelve months from 3-6-1950 to 3-6-1951 the said property is hereby held insured against damage by fire subject to the terms of the applicant's proposal and to the usual conditions of the Society's policies. It is, however, expressly stipulated that this protection note cannot, under any circumstances, be applicable for a longer period than thirty days and that it is also immediately terminated before that date by delivery of the policy or, if the risk be declined by the notification of such decli-nature.
PremiumRs. 892-8-0Fire @ 28 as.do ' 382-8-0
Flood and other risks @ 12 as,'PremiumRs. 1275-0-0
6. The cover note for the other property valued by the plaintiffs at Rs. 65,000/- is similarly worded. There are two bills of the defendant both dated 5-6-1950. On 7-6-1950 the plaintiffs wrote to the defendant to say that they were sending a cheque of the same date for Rs. 2087/2 in payment of the two bills subject to the condition that the defendant would allow the plaintiffs a rebate of 15 per cent, on the amounts of the two bills for Fire risk premia for Rs. 892/8 and 325/- On the same date acknowledged receipt of Rs. 2087/2 was issued in respect of both the notes. On 1-7-1950 the plaintiffs complained to the defendant about the delay in issuing the policies to replace the cover notes Nos. 18848 and 18850 dated 5-6-1950 against fire and other risks. By two several letters issued over the signature of the acting Manager and underwriter the defendant informed the plaintiffs on 6-7-1950 that in accordance with the inspection report received both the risks were cancelled from 6-7-1950 and that the relative endorsements which were under preparation would be forwarded to the plaintiffs in due course. On 15-7-1950 the plaintiffs acknowledged receipt of these letters and took strong exception to the defendant's conduct. They stated that at the time of the issue of the cover notes the river was quiescent and they could not allow the defendant to cancel the risk when subsidence had commenced by the end of June 1950 and it had become impossible for the plaintiffs to take any precautionary measure or insure the properties elsewhere. Another letter of the same import was addressed to the defendant on 19-7-1950. The defendant acknowledged both these letters on 25-7-1950 and replied that under Clause 10 of the conditions of its standard policy the company had a right to cancel it at any time and cancellation having been made in exercise of the said right, the company was not liable thereafter and that the company would refund the proportionate amount of premium on the plaintiffs' signing a duly stamped receipt for the amounts to be refunded. Further letters passed between the parties of which no mention is necessary except that by a letter dated 25-8-1950 the plaintiffs stated that they were quite unaware of the usual conditions of the defendants policies.
7. Two printed policies of the defendant company ior Rs. 65,000/- and Rs. 51,000/- were also exhibited. They are in identical terms and one of them may be examined by way of sample. It witnes seth that Messrs. Chandmull Lall Chand Jain having paid to the General Assurance Society the sum of Rs. 325/- only for insuring against loss or damage by tire or lightening the property therein described in the sum or several hums mentioned thereinafter and it being further declared and understood that the insured having agreed to pay an additional premium of Rs. 487/8 the insurance under the policy was extended to cover loss or damage to the property insured caused by cyclone and/or flood and/or change ot course of river and/or erosion of river and/or land-slide and/or subsidence the society agreed with the insured (subject to the terms and conditions printed on the back which terms were to be taken as part of the policy) that if the property described or any part thereof should be destroyed or damaged by fire or lightening at any time between the third day of June 1950 and the third day of June 1951 both inclusive or at any time afterwards so long as the insured or their representatives in interest would duly pay to tile society and it would accept the sum required for the renewal of the policy, the society would out of its Capital, Stock and Funds pay or make good all such loss or damage to an amount not exceeding in respect of the several matters specified the sums set opposite thereto respectively and not exceeding in the whole the sum of Rs. 65,000/- only. Of the conditions printed at the back it is only necessary to refer to condition No. 10 which has already been set out above.
(After examining the evidence of the plaintiffs' and defendant's witnesses in Paras 8-12 His Lordship answered the first two issues in the negative and proceeded:)
13. The main dispute centered round the cancellation of the risk by the defendant by letter dated 6-7-1950. According to Mr Mukherji, learned counsel for the plaintiff, the condition, if it was applicable at all, governed insurance by fire only and it was not applicable to insurance of the properties against flood, erosion, change of the course of the river etc., and that in any event even if the condition was applicable the defendant could not act arbitrarily and take advantage of this condition and cancel the risk at a time when loss was imminent. According tp counsel such a cancellation would only amount to the defendant's taking advantage of its own wrong and no cancellation of the cover note could be effected on 6-7-1950 because the cover notes were in force for one month only from 3-6-1950. In any event counsel contended that it was incumbent on the defendant to disclose Ghosh's report and as according to P.K. Ghose there was nothing in the report to suggest that cancellation should be effected the defendant was not entitled to cancel the policy.
14. I cannot accept any of the above contentions of Mr. Mukherjee. The evidence shows that the proposal was for insurance against fire and other risks, that this proposal was accepted by the defendant and that the cover notes issued referred to the defendant's fire policy. There being only one policy in respect of insurance against fire used by the defendant condition No. 10 of such policy was applicable to the case of the insurance by the plaintiff. Mr. Das, learned counsel for the defendant, drew my attention to a passage on cover notes in Macgilliveray's Laws of Insurance, 3rd Edn. at pp. 399-400 which reads as follows.
'The extent of the protection afforded is not defined in the instrument itself, which is usually expressed to be on the company's usual terms, or subject to the conditions contained in company's policies. Where the conditions, are so referred to, they are binding on the assured, whether he has seen them or not, and the insurer does not have to prove that they were brought to the notice of the assured, or even that he had an opportunity of making himself acquainted with them. The assured is bound by the conditions contained in the form of the company's policy then in use and applicable to the case,'
The case referred to in the foot note is that of McQueen v. Phoenix Mutual Ins. Co. (1879) 29 UCCP 511. This report however is not available. Mr. Das also referred me to the judgment of the House of Lords in the case of Sunfire Office v. Hart, (1889) 14 AC 98 where a policy of insurance was issued against risk of fire subject to the conditions first, that it should not apply to any portion of the subject of insurance which should by reason of some act done after its date, without consent of the insurers, be exposed to increased risk of fire, or removed to a building or place other than that described in the policy; second, that the insurers might terminate by notice if
'by reason of such change, or from any other cause whatever they should desire to do so, refunding to the insured a rateable proportion of the premium for the unexpired time of the policy'.
It was held by the Privy Council that the insurers had by virtue of this condition, the option of terminating the policy at will. Delivering judgment of the Board Lord Watson observed at p. 102:
'The object of the second (the second part) of the condition referred to, with which we have to deal in the present case, is to enable the insurers to release themselves from their contract during its currency, leaving it in full vigour down to the time of notice. The words in which the power of determination is expressed, taken by themselves, are very wide and comprehensive. According to their primary and natural meaning, they import that in order to justify the exercise of the power, nothing is required except the existence of a desire, on the part of the insurers to get rid of future liability, whether such desire be prompted by causes which prevent the policy attaching, or by any other cause whatever. ...... The condition does not involve the avoidance of the policy ab initio, or forfeiture of the premium paid by the insured. There may be any circumstances calculated to beget in the mind of a fair and reasonable insurer, a strong desire to terminate the policy which it would be inconvenient to state and difficult to prove; and it must not be forgotten that the whole business of fire insurance offices consists in the issue of policies and that they have no inducement, and are not likely to curtail their business, without sufficient cause. On the other hand the insured gets all the protection which he pays for, and, when the policy is determined, can protect his own interest by effecting another insurance'.
With regard to the question whether the conduct has to be justified in a Court of law Lord Watson observed at p. 104 as follows:
'The question remains whether the clause gives the insurers the right to act upon their own judgment or whether they are bound, if so required, to allege and prove to the satisfaction of a Judge or jury, not only that a desire exists on their part, but that they have reasonable grounds for entertaining it. If the determination of the policy would be for advantage of its business, that would obviously be a reasonable ground for the office desiring to put an end to it; and a priori one would suppose that the insurers themselves must be the best if not the only capable judges of what will benefit their business. An insurance office may deem it prudent, and resolve to limit its outstanding engagements, and unless the words of the clause clearly imply the contrary it cannot be presumed that the parties meant to make such a question, of prudent administration, the subject of enquiry in a Court of Law'.
15. Such a clause, to my mind, is unexceptionable. It does not give either the insurer or the assured any special benefit or advantage over the other. It is up to the assured to cancel the policy at any time. Supposing for instance, he decides to go out of business or to sell the property I see no reason why he should be compelled to continue the insurance after he has closed his business or sold his property and can in such a case properly call upon the insurance company to refund a rateable proportion of the premium already paid. Likewise the insurance company may for many reasons including those mentioned by Lord Watson be desirous of limiting their business. They might even intend to close a part of their business and in such a case (here would be nothing unreasonable on their part to ask the assured to take refund of a portion of the premium paid and to cancel the risk. A reference to Welford and Otter-Barry's Laws of Fire Insurance shows that this is one of the usual provisions in a policy of fire insurance. The learned author comments that
'The policy may contain provisions enabling the insurers or the assured to determine it at a date earlier than fixed for its expiration. The usual provisions arc to the following effect, namely, (i) the insurers may by stipulation of the policy, reserve to themselves the right of determining it at any time upon giving notice to the assured. The policy then comes to an end upon the notice becoming effective. By the terms of this stipulation the assured becomes entitled to be repaid a rateable proportion of the premium for the unexpired portion of the period; but the policy does not remain in force until the premium is repaid, unless the stipulation makes repayment of the premium a condition precedent to the determination of the policy, (ii) The assured may, by the terms of the policy, be similarly entitled, upon giving notice of its intention to the insurers, to surrender it before the expiration of the period, for which it is in force and to receive back a rateable proportion of his premium for the unexpired portion of the period. In such a case, the policy comes to an end as soon as the surrender is complete and in the event of a subsequent loss the assured is not entitled to recover.'
The clause in this case gives the right to both the parties to terminate the insurance. The insured has only to request the Society to do so and the insurance will come to an end. On the other hand as soon as the Society gives notice to the insured that it intends to terminate the policy there is an end of the liability of the defendant. Only the question of refunding a rateable proportion of the premium for the unexpired term remains for consideration.
16. Mr. Mukherjee placed much reliance on the judgment of the House of Lords in the New Zealand Shipping Co. Ltd. v. Societe Des Ateliers ET Chantiers De France, 1919 AC 1. In this case there was a contract entered into in 1913 by which a French company agreed to construct a steamer for a shipping company to be completed by January 30, 1915, subject to extension of time if the construction was delayed by a cause beyond the control of the builders, and in case the builders should be unable in the event of France becoming engaged in a European war to deliver the steamer within eighteen months from the date fixed by the contract for completion, the contract was to become void and all money paid by the purchasers were to be repaid to the other with interest at 5 par cent. On the outbreak of the first world war, while the steamer was in the course of construction, the builders found themselves prevented by unpreventable causes from building the steamer by January 30, 1915. On the expiration of eighteen months on July 30, 1916 the question arose whether the builders were entitled to treat the contract as null and void notwithstanding that the purchasers required tie builders to complete and deliver the vessel. The Judicial Committee came to the conclusion that the contract became void and not merely voidable at the option of the purchasers and that as the avoidance of the contract had not been brought about by any wrongful act or default on the part of builders, the latter were not precluded from alleging that the contract was void. In the course of argument learned counsel contended that a party could not take advantage ot his own wrong and Lord Finlay accepted the contention but pointed out that the case in question, was not one of that type. Reference was made to the case of Rede v. Farr, (1817) 6 M and S 121 where there was a condition that the lease should become void by the failure of the lessee to pay the rent. The Board pointed out that in a case like that it was not open to the lessee to default in paying the rent and then take advantage of his own default. Mr. Mukherjee drew my attention to two judgments of the Bombay High Court, one reported in AIR 1922 Bom 44, Chunilal Dayabhai and Co. v. Ahmedabad Fine Spinning and Weaving Co., and the other in AIR 1923 Bora 75, Chotelal Lallubhai v. Chamsey Umersey and Sons, which adopted the observations made by the Board in the case just now referred to.
17. To my mind this principle has no application to the facts before me. No question of a party taking advantage of its own wrong arises in the instant case. Clause 10 of the conditions of the policy is, as I have shown not an unusual condition. It gives reciprocal rights to the assured and the insurer. The terms of the clause do not show that the cancellation has to be justified in a Court of law. It is enough for the assured to show that he wishes to terminate the policy and similarly it is enough for the Society to put an end to the policy by giving notice of such intention to the assured. The guiding motive cannot be questioned in a Court of law, nor do I think that there is any substance in Mr. Mukherjce's contention that Dangali's evidence to the effect that he cancelled the policy acting on the report of P.K. Gosh could not be justified being a capricious exercise of the power given by the condition and that as the report was not forthcoming there was no knowing as to what was the real motive which had prompted the Insurance Company to cancel the risk. In British and Benningtons Ltd. v. North Western Cachar Tea Co. Ltd., 1923 AC 48 Lord Sumner observed that if ft party repudiated a contract giving no reason at all, all reasons and all defence in the action partial or complete would be open to him. This was a case between a buyer and a seller but the proposition laid down by His Lordship seems to me to be applicable to all cases of contracts whether of purchase and sale or otherwise. The exact words, used by Lord Sumner are 'His motives certainly are immaterial, and I do not see why his reasons should be crucial'. This dictum was approved in the case of Scammell and Nephew v. Ouston, 1941 AC 251. This also was a case of a contract for sale and the question was whether there was a concluded contract. Delivering judgment Lord Wright observed (see at p. 267) as follows:
'It is true that when the appellants broke off the affair they gave reasons for doing so which they could not justify but when they were sued for breach of contract they were entitled to resist the claim on any ground that was available regardless. of reasons which they had previously given. aS Lord Sumner pointed out in 1923 AC 48, if a party repudiated a contract giving no reasons at all, all reasons and all defences in the action partial or complete would be open to him.'
At the time when the defendant purported to exercise its option under condition 10 it gave no reason. The reason which Mr. Dangali gave at the trial is not borne out inasmuch as the report is not forthcoming and P.K. Ghose's evidence hardly corroborates the testimony of Dangali. Be that as it may, condition 10 seems to be a condition in wide use and does not oblige the Insurance Company to give any reason lor exercise of the option therein or to justify the sufficiency of the reason in a Court of law. Where the option is exercised the contract comes to an end and in my view the option was rightly exercised by the defendant in this case. The fact that the plaintiff had no knowledge of the terms and conditions of the cover notes or the usual terms and conditions of the policy are wholly immaterial. When they went to the defendant company and filled up a proposal for fire insurance in one of its printed forms of proposals and accepted a cover note which referred to the conditions of the defendant's policies, they were bound not only by the terms of the cover note but also by the policies whether they had seen them or not.
18. In view of the above the answers to the remaining issues are as follows:
3. The defendant's acceptance of the plaintiff's proposal was subject to the terms and conditions of the cover notes and the usual terms and conditions of the defendant's policies which have been exhibited herein.
4. Tho plaintiff was bound by Clause 10 of the policy.
5. There was nothing wrongful in the cancellation of the risk on July 6, 1950.
6. The properties were lost. There is no doubt that the properties were lost as a result of erosion by the river and the sixth issue must be answered in the affirmative.
7. The plaintiff has not attempted to prove its loss. It is not enough to say that the sums mentioned in the policy being Rs. 51,000/- and Rs. 65,000/- the plaintiff was entitled to recover the said amounts as soon as it is proved that the properties were lost.
It is well known that a contract of insurance, specially, fire insurance, is a contract of indemnity and when loss occurs it is for the assured to prove the actual amount of his loss. The sums mentioned in the policy, as Mr. Dangali rightly said, only show the outside limit of liability of the defendant company. Reference may be made to Welford and Otter-Barry's Laws of Fire Insurance, 4th Edn. at p. 296 where the learned authors lay down the rules for calculating the value and state that the amount recoverable under the policy is to be calculated in accordance with the following rules, namely, (1) the value of the subject matter is its value at the time of the loss and the policy may contain an express provision to this effect; (2) the value of the subject matter is its value at the place of the fire; (3) the value of the subject matter is its real or intrinsic value to the assured and (4) in estimating the value of the subject matter, no allowance is to be made for the loss of prospective profit or other consequential loss. At p. 297 the learned authors observe
'The contract of fire insurance is a contract of indemnity and the assured is not adequately indemnified against the loss of this property unless, so far as money can do so, he is restored to the position which he occupied at the time of the loss.,xx xx xx. Primafacie, therefore, the basis of calculation is eitherthe market value of the property destroyed or thecost of the reinstatement.'
The policies in suit were not valued policies and,therefore unless the assured prove the actual amountof loss suffered no decree can be passed in theirfavour. The properties were, as stated by the witnesses, 40 years old. The plaintiffs have not adducedany evidence to show what was the cost incurredfor the original construction of the properties or ofthe additional constructions and therefore even if Ifind in the plaintiffs' favour on all the other issuesI would have found it extremely difficult to passany decree in their favour. In the result, theplaintiffs' suit must be dismissed with costs. Certified for two counsel.