British Traders' Insurance Co Ltd v Monson

[1964] HCA 24

HIGH COURT OF AUSTRALIA

Kitto, Taylor, Menzies, Windeyer and Owen JJ.

BRITISH TRADERS' INSURANCE CO. LTD. v. MONSON

(1964) 111 CLR 86

15 April 1964

Fire Insurance

Fire Insurance—Insurable interest—Tenant for one year with option to purchase insuring property for full value—Extent of insurable interest—Amount recoverable—Whether insurance on behalf of or for benefit of other persons with insurable interests—Fires Prevention (Metropolis) Act, 1774 (Imp.), s. 83.

Decisions

April 15.
The following written judgments were delivered:-
KITTO, TAYLOR AND OWEN JJ. This appeal arises out of an action upon a policy of insurance. By the policy the appellant company agreed in consideration of a premium that if the property described in a schedule or any part of it should be destroyed or damaged by (inter alia) fire before a stated time the company would pay to the insured named in the schedule the value of the property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace the property or any part thereof. There followed a proviso that the liability of the company should in no case exceed in respect of each item the sum expressed in the schedule to be insured thereon or in the whole the total sum insured thereby. The schedule named as the insured the respondents "for their respective rights and interests", and it described the property insured as consisting of several items of which it is necessary only to mention a dwelling and the furniture contained therein. The dwelling and the furniture were destroyed by fire before the stated time. (at p91)

2. At the trial certain questions which we have not now to consider were decided in favour of the respondents, and judgment was given in their favour for 600 pounds. That amount represented the value of the furniture only. Nothing was allowed in respect of the dwelling. This was because the trial Judge held that the respondents had effected the insurance with no intention of protecting anyone's interest but their own as owners, that therefore they could not recover anything other than an indemnity against any loss as owners, and that in fact they had suffered no such loss as they had no such interest. The facts were that the female respondent had no interest at all in the property, and the male respondent had only an interest under an agreement for a term of one year, which entitled him in the event of the dwelling being totally destroyed by fire either to determine the tenancy or to continue it at such reduced rental as should be agreed or settled by arbitration. He was not bound to insure the dwelling or to repair it in case of damage by fire. Notwithstanding that the respondents had represented themselves in the proposal as owners of the property, for reasons which it is not now material to mention the contract of insurance remained in full force and effect at all material times, and we doubt whether the learned trial judge was right in denying that the male respondent was entitled to recover the loss, if any, which he had sustained as a tenant. However, it is unnecessary to consider this matter for no claim was made either prior to or in the course of the proceedings that the male respondent had suffered any loss as tenant and no evidence was adduced to suggest that this had occurred. What is contended is that on the terms of the policy the respondents were entitled to recover the whole amount for which the dwelling was insured, even though the result be that they must account for it to the owner. (at p92)

3. On appeal to the Full Court of the Supreme Court the respondents' contention was upheld by a majority of the Judges. One line of reasoning which was sustained commenced by construing the policy as containing an unqualified promise by the company to pay the respondents in the event that happened the full amount of the sum insured ; and on this basis it was said, in answer to the appellant's insistence that a policy of fire insurance is only a contract of indemnity against loss, that according to undoubted authorities on the subject a party insured may in some circumstances recover more than the value of his insurable interest and that the most cogent of all categories of such circumstances must be that in which the parties have by express words so contracted. It is convenient to deal first with this way of putting the case for the respondents. Its fault lies, we think, not in the fact that it begins with the policy, but in the fact that it gives the policy a meaning which neither general understanding nor the law of insurance will support. It concentrates attention upon the words of obligation : "if the property insured . . . be destroyed . . . by fire . . . the Company will pay to the Insured the value of the property . . .". If those words be read in isolation from their context, no doubt the obligation is to pay the full value of the property, regardless of the quantum of loss sustained by the respondents by reason of the destruction by fire. But the allimportant fact is that they are words in a document possessing unmistakably and on its face a character which flatly contradicts the notion that the obligation of the company is to pay more than the amount of the respondents' loss. It is issued by an insurance company. It is headed "Fire Insurance Policy". All its provisions, even the very words that are relied upon for their literal meaning, are characteristic of fire insurance policies. It is far too late to doubt that by the common understanding of business men and lawyers alike the nature of such a policy controls its obligation, implying conclusively that its statement of the amount which the insurer promises to pay merely fixes the maximum amount which in any event he may have to pay, and having as its sole purpose, and therefore imposing as its only obligation, the indemnification of the insured, up to the amount of the insurance, against loss from the accepted risk. Brett L.J. in Castellain v. Preston (1883) 11 QBD 380, at p 386 said that the contract "means" that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. Lord Esher M. R. said in Dane v. Mortgage Insurance Corporation (1894) 1 QB 54 : "By the law of insurance, though the underwriter directly promises to pay on a certain event, the contract is treated as one of indemnity (1894) 1 QB, at p 61 ." There are undoubtedly cases in which the amount payable in respect of the insured's interest in the property may exceed the marketable value of that interest, but that occurs only where full indemnification to the insured would not be achieved by paying him the amount of that value : Castellain v. Preston (1883) 11 QBD 380, at p 400 . Hence, if in the present case the lease to the male respondent had contained a covenant by him to make good damage by fire, no doubt the whole amount of the insurance would have been recoverable ; but the reason would have been that the fire had cast upon him a liability of at least that amount. (at p93)

4. The case of a valued policy is special, but it throws no doubt upon the general principle. In such a case the application of the principle is affected by the agreement of the parties on value in the same way as any obligation to indemnify may be affected by an agreed pre-estimate of the value of property : Irving v. Manning (1847) 1 HLC 287, at p 307 (9 ER 766, at p 775) . The agreement in the case of a valued policy is as to the value of the subject-matter, not the amount of the loss ; and its effect upon the assessment of the amount payable to the insured is not that the process is to be directed to anything other than the indemnification of the insured, but only that the assessment of his loss must proceed on the basis of the agreed valuation of the property : Elcock v. Thomson (1949) 2 KB 755 . It may be mentioned that in the course of the argument a somewhat faint attempt was made to suggest that the policy here should be construed as a valued policy. It plainly is not ; but even if the value of the dwelling were to be taken as having been agreed at the figure appearing in respect of it in the schedule the answer to the present problem would be unaffected. (at p94)

5. To that problem no approach can be valid which fails to accept as its first step that a policy showing, as the policy here shows unmistakably, that it is intended as a policy of fire insurance must be construed as a contract for indemnification only. The celebrated judgments in Castellain v. Preston (1883) 11 QBD 380 show that that is the fixed and central point to which all else in the policy is subordinate. It could not be otherwise, for as Lord Cockburn C.J. said in charging the jury in Chapman v. Pole (1870) 22 LT 306, at p 307 , the law will not allow of gambling in the form of insurance. It was said in the Supreme Court in the present case that Castellain v. Preston (1883) 11 QBD 380 was a case of subrogation, and that until the question of subrogation arises the principle that a contract of insurance is a contract of indemnity is wrongly invoked to diminish a lawful contract to something less than is provided for by its express terms. With respect, we think this is a mistake. Castellain v. Preston (1883) 11 QBD 380 of course was not a case of subrogation in respect of an outstanding right of action and one might almost wish that some other word had been used as the label of a right which exists when it is too late for subrogation in the ordinary sense. The insured had been paid a sum of money under the policy on the footing that that was the amount of his loss. He had later received from a third party, under a contract with respect to the property, a payment which eliminated the loss. The judgments explain with care how large is the right of an insurer to be placed in the position of the insured in relation to both his rights against third parties and the fruit of those rights. The decision, following Darrell v. Tibbitts (1880) 5 QBD 560 , was that the insured was accountable to the insurer for the amount which the third party had paid him. This was because the insurer's obligation had been only to indemnify the insured against his loss, and the payment originally made to the insured had been made not because it was in fact required for indemnification but because of a mutual assumption, which had turned out to be erroneous, that it was required for indemnification. The money had to be brought to account by the insured because it diminished "the loss against which the insurance office merely undertook to indemnify them" (1883) 11 QBD, at p 397 . "The policy", as Cotton L.J. said, "is really a contract to indemnify the person insured for the loss which he has sustained . . . and from that it follows, of course, that as it is only a contract of indemnity it is only to pay that loss which the assured may have sustained . . ." (1883) 11 QBD, at p 393 . If the insured in that case had received the payment from the third party while still unpaid by the insurer, and had thereafter sued the insurer on the policy, we should be of opinion, notwithstanding the doubt suggested in MacGillivray on Insurance Law, 5th ed. (1961) par. 1798, that the fact of his having received the payment from the third party would have constituted a bar to his claim, as distinguished from affording the insurer a right by way of cross-action to have him account for the amount so received : see Morgan v. Price (1849) 4 Ex 615 (154 ER 1360) ; Bruce v. Jones (1863) 1 H &C 769 (158 ER 1094) ; Yorkshire Insurance Co. Ltd. v. Nisbet Shipping Co. Ltd. (1962) 2 QB 330 . (at p95)

6. We turn to the other line of reasoning by which the decision against the respondents was supported in the Supreme Court. It consists of two propositions. The first is that a person who has an insurable interest in property, however limited that interest may be, is entitled to insure the whole property for its full value against destruction by fire. This may be conceded ; but the second proposition we cannot concede. It is that where a person with only a limited interest does insure the whole property, he is necessarily entitled, if the property is destroyed, to recover on the policy the full value of the property up to the amount of the insurance, though he must account to the other persons interested in the property for the excess over what is required to indemnify him against his own loss. In support of this second proposition two lines of argument are employed. One is based upon s. 83 of the Act 14 Geo. III c. 78, the Fires Prevention (Metropolis) Act, 1774 (Imp.), which the Supreme Court assumed, no doubt correctly, to have been in force in Tasmania at the material time. (See now s. 90E of the Conveyancing and Law of Property Act 1884 (Tas.) inserted by s. 7 of the amending Act No. 72 of 1962.) The section authorizes an insurer of buildings against fire, upon the request of any person interested in the building or upon certain grounds of suspicion, to cause the insurance money to be laid out, as far as it will go, towards rebuilding, reinstating or repairing the building. The argument is that since a person with a limited interest may under this provision find his insurance moneys applied to the reinstatement of the building he will not be placed by the insurance in as good a position as he was in before the fire, unless those moneys are equal to the full value of the building. A passage is quoted from par. 474 of the 5th edition of MacGillivray on Insurance Law, the quotation ending with the statement that such a person "can only secure a certain indemnity to himself by insuring up to the full value of the property, and he has therefore an insurable interest up to that amount". This is true because he has an insurable interest to the extent of any indemnification he may require. But when one turns to consider what indemnification, as things turn out, he in fact does require, different answers must be given according as the laying out of the insurance moneys in reinstatement is or is not insisted upon by other persons interested or by the insurer. Indeed, MacGillivray goes on to say, immediately after the passage quoted : "If reinstatement is claimed by the company or is insisted on by some third party interested, the company will then be liable to reinstate the property up to the full amount of the insurance. On the other hand, if the company elects to pay in cash and no demand is made by any third party for reinstatement, the company may probably refuse to pay more than the value of the assured's insurable interest calculated independently of the peculiar interest given by the statute." The suggestion here made is in our opinion correct, for only by accepting it is the basic principle of insurance law fully observed. In the present case, where there is no question of reinstatement being required either by the insurer or by any third person, we find nothing in the statutory provision to assist the respondents. (at p96)

7. The other line of argument depends upon treating an intention to insure the entire property as identical with an intention to insure the property for the benefit of all persons interested in it. What is said is that if a person having only a limited interest insures the property for its full value "so as to cover all beneficial interests in it" he may recover the full value of the property, and hold the excess over the amount of his own pecuniary loss as trustee for the other persons interested. But it is necessary to define what is meant by saying "so as to cover all beneficial interests in it". No doubt in the normal case, where the person taking out the insurance knows that his own interest in the property is only partial, to say that he insures so as to cover all beneficial interests is the same as saying that he intends his insurance to be for the benefit of all who have beneficial interests in the property. But suppose an exceptional case. Suppose that the insured expects soon to acquire the full beneficial interest in the property and takes out the insurance for his own protection only, having no intention that it shall enure for anyone's benefit but his own. In a sense it is true even in such a case that he insures "so as to cover all beneficial interests in the property" ; but only in the sense that he insures so as to cover all beneficial interests for his own benefit. The present case is in fact of this kind. The evidence, even the evidence of the male respondent himself, proved beyond question that neither of the respondents had any intention of insuring for anyone's benefit but their own. It is not only that the schedule described them as being the insured "for their respective rights and interests", and said nothing as to any other rights or interests; though we ourselves should regard that as of great significance. But the fact established by the oral evidence is that when making the proposal for the insurance they expected to be the owners of the entirety by the time the policy issued, and that was the only reason why they insured for the full value. They believed they would need protection for themselves as sole owners of the building, and had no thought of providing protection for anyone but themselves. The male respondent was asked in cross-examination "When you signed the proposal you told Knight (the insurance inspector) you had bought the property". He replied, "Yes". Then he was asked, "What interest do you think you covered?" and he said, "Myself and my wife's". In answer to further questions he said he definitely did not think he had taken the insurance out for anybody else, and that he thought his wife and he would receive payment in the event of fire, but not anybody else. Later he said that he had said he was insuring his own and his wife's interest, and added that he thought he had bought the property and that he intended to insure "the full valuation of it". The trial Judge was satisfied with this evidence, for he said in his reasons for judgment that the male respondent had conceded that he intended only to insure the interest of himself and his wife. (at p97)

8. It was not suggested in the judgments below, nor is it suggested by the respondents here, that the respondents may recover upon the policy any amount in respect of the loss sustained by the lessor, on the footing that he was an undisclosed principal for whom they took out the policy as agents. They were not authorized by him to insure the property on his behalf, and since they neither intended to insure it as his agents nor professed to be doing so there could be no question of ratification. Nor was there a purported ratification. What is suggested is that the respondents may recover in respect of the lessor's loss and so as to hold the proceeds for his benefit, on the footing of a trusteeship arising from the intention which they had to insure the entire beneficial interest in the property. But once it is appreciated that this intention to cover the entire beneficial interest was not an intention to provide any benefit for the lessor, the case of a trust for him collapses. Whether the respondents would have been entitled to succeed even if they had intended the insurance to be for the benefit of the lessor as well as themselves we are not called upon to decide. The case of Green v. Russell (1959) 2 QB 226 would suggest that they would not. But clear it is that in the absence of an intention to benefit the lessor by the taking out of the policy the suggested trust for him could not arise: cf. Kauter v. Hilton (1953) 90 CLR 86, at p 100 , and therefore the principle of indemnity prevents the recovery or retention from the insurer of more than the amount of the loss caused to the male respondent in respect of his interest in the property: Castellain v. Preston (1883) 11 QBD 380, at pp 398, 399 ; Hordern v. Federal Mutual Insurance Co. of Australia Ltd. (1924) 24 SR (NSW) 267, at p 274; 41 WN 54, at p 55 ; Portavon Cinema Co. Ltd v. Price and Century Insurance Co. Ltd. (1939) 4 A11 ER 601 . (at p98)

9. Accordingly we are of opinion that the appeal should succeed. For reasons into which it is unnecessary to go the appellant concedes that the judgment given at first instance should be increased by 85 pounds 13s. 6d. in favour of the male plaintiff. The order of the Full Court should be set aside, the judgment given at the trial should be restored and varied by adding thereto judgment for the male plaintiff against the defendant for 85 pounds 13s. 6d. The order made on 2nd April 1963 so far as affected by the order of the Full Court should also be restored. (at p98)

MENZIES J. This is an appeal from a judgment of the Full Court of the Supreme Court of Tasmania varying an order of Gibson J. by entering judgment for the first-named respondent for 2,435 pounds 13s. 6d. in addition to judgment for both respondents for 600 pounds. The 2,435 pounds 13s. 6d. was made up by the addition of 2,350 pounds (the amount by which a house was insured by Monson with the appellant) and 85 pounds 13s. 6d. (other items of insurance with which by concession of the appellant we are no longer concerned), so that the question is whether Monson is entitled to recover from the appellant 2,350 pounds, being the value of a house destroyed by fire which Monson insured with the appellant for that amount. The appellant's case is that he is not because he was but a tenant with an option to purchase the land on which the house was erected and because he did not intend to insure any interest other than his own he is not entitled to recover more than his own loss. (at p98)

2. In Halsbury's Laws of England 3rd ed. vol. 22 under the title Insurance contributed by the Hon. Sir William McNair and others there are two paragraphs which it seems to me epitomize accurately the law to be applied in the determination of the question which I have stated. They are : - "643. No recovery beyond the sum insured. A fire policy always specifies the sum insured. This sum merely represents the maximum sum for which the insurers accept liability; unless the policy is a valued policy, the assured does not, in the event of a loss, become entitled to be paid it as a matter of course. What he is entitled to is a full indemnity within the limits of the policy. He cannot, therefore, recover more than the sum insured, even though the amount of the loss exceeds it, and he cannot recover even the sum insured, unless he proves a loss to that amount." (at p99)

3. "648. Recovery by person with limited interest. The assured cannot, as a rule, recover more than the value of his interest in the property insured. To entitle him to the full value of the property, he must be interested to the full amount; if he has only a limited or partial interest, he recovers the value of his interest and no more. The full value of the property is, however, recoverable where the insurance was intended to enure for the benefit of all persons interested in the property." (at p99)

4. Accepting these statements as I do, the issue is narrowed as to whether in this case, apart from the operation of the Fires Prevention (Metropolis) Act, 1774 (Imp.) and possibly of the Life Assurance Act, 1774 (Imp.) the insurance on the house which the respondents effected with the appellant "was intended to enure for the benefit of all persons interested in the property". (at p99)

5. The facts relevant to this question are that, when on or about 2nd November 1961 the firstnamed respondent signed a proposal to the appellant for fire insurance, he had agreed to buy the land upon which the buildings to be insured against fire were erected and he described himself as the freehold owner of that land. The proposal was to insure buildings upon the land, including a house, up to their full value. The house was to be insured for 2,350 pounds. On 2nd November the proponent expected that, when the policy to be issued came into operation on 6th November, he or he and his wife, who was to be a party to the policy, would be the owner of the land free from encumbrances. Before the policy was issued, however, the position had changed and, instead of going on with the contract of sale, Monson had become tenant from R. and D. F. Bullivant with an option to purchase from them, and the 200 pounds that had been paid as deposit upon the earlier agreement to purchase was to be held against the day when the option to purchase should be exercised. Monson was, therefore, when the insurance was obtained a person with a limited interest, viz. a tenant with an option to purchase, and he was under no obligation to the landlord either to insure or to make good damage done by fire. When the policy was taken out the persons interested in the property were the Bullivants as owners, the Launceston Bank for Savings as mortgagee and Monson as tenant with an option to purchase. Evidence was directed to Monson's intention when he signed the proposal upon which the policy was later issued and he made it clear that then he intended the insurance to be for his own benefit and not for the benefit of anyone else. There was no evidence of any other intention later. In these circumstances I do not think it can be inferred that the insurance that was effected was intended to enure for the benefit of the Bullivants as owners and the Bank as mortgagee as well as for the respondent himself. I have not been able to find anything upon which to rest a conclusion that the firstnamed respondent, in insuring as he did, was a trustee or agent for the other persons with interests in the property insured so that the policy moneys paid to the respondent would be held otherwise than for himself beneficially. (at p100)

6. The unfortunate thing about this case is that, when the respondent made his proposal on the basis of ownership of the land for a policy to the full value of the buildings to take effect from 6th November, arrangements were made with the Bullivants to cancel their fire policy with the same office as from that date, and this was done. Monson was not party to the arrangement between the appellant and the Bullivants and that arrangement affords no basis in law for treating Monson as insuring the Bullivants' interests as well as his own. In consequence, the Bullivants' interests were left uninsured. (at p100)

7. In the Full Court Crisp J. based his conclusion in favour of Monson on the ground that as he had an insurable interest and as the policy upon its terms was for the full value of the buildings destroyed up to the maximum specified, effect should be given to this contract in the absence of some rule of law or public policy making it unlawful for a limited owner to insure in his own interest for the full value of the premises in which he had an estate. The Chief Justice took the same view as one ground for his decision. I agree that Monson had an insurable interest and that, according to the language used, the policy does purport to insure him for the full value of the buildings covered. I also agree that the policy was not unlawful. Moreover, it is of course true that in some circumstances a person with a limited interest can, under a policy such as I have described, recover the full value of the property destroyed - e.g. if a tenant under an obligation to make good fire loss were to insure for the full value of the buildings. The point that it is necessary to emphasize, however, is that the policy does no more than provide an indemnity and that, unless a person with a limited interest takes out a policy to cover the interests of others as well as his own interest, he cannot recover more than his own loss. This is the principle which is stated in the second paragraph which I have cited from Halsbury's Laws of England and it was expressed as follows by Dixon J. (as he then was) in Goldsbrough Mort &Co. Ltd. v. Maurice (1937) 58 CLR 773 in a passage which was not affected by the opinion of the Privy Council reversing the judgment of the High Court: - "A fire insurance is a contract of indemnity, that is to say, a contract insuring against loss by fire is so understood and dealt with . . . The principle that the insurance is an indemnity and amounts to no more is satisfied by requiring that a bailee or other person having a limited interest in the goods should intend at the time of the insurance to cover the other interests making up full property in the goods . . . The possession of the bailee gives him an insurable interest, and, after satisfying whatever loss he suffers, he becomes bound to apply the surplus of the insurance moneys in accordance with the interests in the goods he so intended to protect" (1937) 58 CLR, at pp 797, 798 . Insistence upon the same limitation is to be found in the judgment of Bowen L.J. in Castellain v. Preston (1883) 11 QBD 380 when he said: - "It is well known in marine and in fire insurances that a person who has a limited interest may insure nevertheless on the total value of the subject-matter of the insurance, and he may recover the whole value, subject to these two provisions; first of all, the form of his policy must be such as to enable him to recover the total value, because the assured may so limit himself by the way in which he insures as not really to insure the whole value of the subject-matter; and secondly, he must intend to insure the whole value at the time. When the insurance is effected he cannot recover the entire value unless he has intended to insure the entire value. A person with a limited interest may insure either for himself and to cover his own interest only, or he may insure so as to cover not merely his own limited interest; but the interest of all others who are interested in the property. It is a question of fact what is his intention when he obtains the policy. But he can only hold for so much as he has intended to insure . . . But one thing he cannot do, that is, having intended only to cover himself and being a person whose interest is only limited, he cannot hold anything beyond the amount of the loss caused to his own particular interest" (1883) 11 QBD, at pp 398, 399 . The passage which follows makes it clear that when his Lordship referred to holding anything beyond the amount of his loss, he was referring to what the insured could recover from the insurer. It is this limitation that underlies the words of the policy and it is a limitation which, I consider with respect, Burbury C.J. and Crisp J. did not observe in deciding that effect should be given to the terms of the policy which did provide for the payment to Monson of 2,350 pounds in the event of the house being destroyed by fire. Burbury C.J. relied upon the Fires Prevention (Metropolis) Act, 1774 (Imp.) to support his conclusion. I do not consider, however, that the provision that a person interested in the premises destroyed may require the proceeds of the policy taken out by another to protect those premises to be expended in rebuilding advances the argument because, in determining what proceeds are to be so expended, it is first necessary to find out what loss the insured has himself suffered. In Matthey v. Curling (1922) 2 AC 180 Younger L.J. in referring to that statute said: "The statue does not enable the lessor, as a person interested, to require payment of moneys for which the assured can make no claim. But further the landlord cannot under the statute demand the money from the insurance company; the company must itself do the rebuilding" (1922) 2 AC, at p 219 . It is not possible to rely upon the dissenting judgment of James L.J. in Rayner v. Preston (1881) 18 Ch D 1 as the learned Chief Justice seems to have done and I find nothing in the judgment of Branson J. in Portavon Cinema Co. Ltd. v. Price and Century Insurance Co. Ltd. (1939) 4 A11 ER 601 to support the view that a person with a limited interest who insures a property to its full value can in the event of the destruction of the property recover in excess of his own loss unless it was intended that the policy should cover interests other than his own. On this point I express my agreement with the judgment of Gavan Duffy J. in Kennedy v. Boolarra Butter Factory Pty. Ltd. (1953) VLR 548 . Although I do not find it necessary to record my examination of all the authorities cited by Burbury C.J. and Crisp J., I do wish to say that I do not consider that the judgment of Lord Campbell C.J. in Waters v. Monarch Fire and Life Assurance Company (1856) 5 E1 &B1 870 (119 ER 705) supports the view that commended itself to those learned judges. That case was concerned with a policy on the assured's own goods in his warehouses and "goods in trust or on commission therein" and it was in relation to a policy so framed that the Chief Justice said: - "But the policies are in terms contracts to make good 'all such damage and loss as may happen by fire to the property hereinbefore mentioned'. That is a valid contract; and, as the property is wholly destroyed, the value of the whole must be made good, not merely the particular interest of the plaintiffs. They will be entitled to apply so much to cover their own interest, and will be trustees for the owners as to the rest. The authorities are clear that an assurance made without orders may be ratified by the owners of the property, and then the assurers become trustees for them." This statement, when read in the light of the words of the policy, affords no authority for the view that, when an insured intends to do no more than protect his own interest, he can recover anything beyond his own loss. (at p103)

8. The learned Chief Justice, however, based his judgment in favour of Monson upon an alternative ground. He said : - "But if I am wrong in my view that the male appellant is entitled to recover the full amount upon the basis of personal indemnity to him in accordance with the contract of insurance I think his claim is nevertheless sustainable upon the alternative basis that the appellants may be taken to have insured the building so as to cover all beneficial interests in it and that so far as the amount of the full value of the building exceeds his personal pecuniary loss he holds as a trustee for all others interested". As to this, I would repeat my earlier statement that the evidence made it clear that the insured intended to do no more than cover his own interest which at the time, it is true, was thought would be the whole interest in the buildings. I regret that I have not been able to find any basis upon which to treat Monson as other than beneficially entitled to whatever sums are payable to him under the policy which he effected. What he can recover must therefore be limited to his own loss. Taking this view, it is unnecessary to decide the debatable question whether the Life Assurance Act, 1774 (Imp.) applies to fire policies so as to require the names of persons interested therein to be inserted in the policy. (at p103)

9. Having reached the conclusion that the judgment of the Full Court ought to be set aside, it remains to consider whether the judgment of Gibson J. should be restored or whether there should be a new trial to determine what was the respondent's loss. I would have been disposed to think that there should have been a new trial for this purpose were it not the case that these proceedings have been conducted throughout on the basis that the respondent was entitled to receive the full value of the buildings destroyed or nothing. As Burbury C.J. said : - "No attempt was made at the trial to quantify the pecuniary value of the tenancy or of the option to purchase or to establish pecuniary loss by reason of disturbance of Monson's beneficial occupation. The claim was put solely on the footing that the appellant is entitled in accordance with the terms of the policy to be paid (within the limits of the sum insured) the full value of the subject matter of the insurance which has been totally destroyed". As stated previously, the appellant conceded that, if it should succeed, nevertheless 85 pounds 13s. 6d. of the sum by which the Full Court increased the order of Gibson J. should stand. To give effect to this concession I would allow the appeal and order that the judgment of Gibson J. should be varied and that there should be judgment for Monson for 85 pounds 13s. 6d. in addition to judgment for both respondents for 600 pounds. (at p104)

WINDEYER J. Because of a misunderstanding by an agent of the insurance company of the legal effect of the transaction between the Bullivants and the Monsons, the premises in question were in effect not covered by insurance. Monson insured the premises for their full value and premiums were paid on that basis. But he was really only a tenant with an option to purchase. This gave him an insurable interest. But, because an insurance contract is a contract of indemnity, the amount recoverable under the policy could not exceed the sum necessary to indemnify the Monsons against the loss actually sustained by them in consequence of the fire. An assured is not entitled to recover the amount specified in the policy unless it represents his actual loss. The amount specified fixes only the maximum liability of the insurer under the policy. I need not cite authority for these propositions. I have had the advantage of reading the judgments of the other members of the Court, and to what they have said on this aspect I cannot usefully add anything. (at p104)

2. As the evidence establishes that Monson insured only in respect of whatever interest he and his wife had in the subject property, it is impossible to accede to the argument that they should be entitled to recover the full amount insured and hold the proceeds upon trust for all those interested in the premises. Monson's mistake, if he were mistaken, as to the nature and extent of his interest in the property could not make that interest greater than in law and in fact it was. And he could not, by voluntarily agreeing to pay the proceeds of the policy to Bullivant, as it was said he had done, enlarge the amount he could recover : North British and Mercantile Insurance Co. v. Moffatt (1871) LR 7 CP 25 . (at p104)

3. The amount of the plaintiffs' loss by reason of the destruction of the buildings might not depend simply on the market value of Monson's interest as tenant with an option to purchase, although prima facie that would determine it. But no evidence was given which would enable the loss to be assessed. The insurance company repudiated all liability under the policy. The action was thus fought on the mistaken basis that, in respect of the destruction of the buildings, the plaintiffs were entitled to the whole sum insured or nothing. The insurance company repudiated liability on various grounds, including assertions of non-disclosure and misrepresentations of fact. The learned trial judge found these issues substantially in the plaintiffs' favour. He said : "In relation to the whole of the events leading up to this action I think Mr. Monson has acted in complete good faith and finds himself penalized by circumstances. The policy remains on foot, but what indemnity does it provide for the plaintiffs ?" His Honour answered the question that he thus posed for himself by deciding that the plaintiffs could recover nothing in respect of the buildings. He reached this conclusion because in their proposal for insurance they were described as owners of the freehold of the premises ; and on that basis the policy was issued. I think, however, that his Honour ought not to have held that the insured could not recover anything under the policy, for I think the loss suffered by the destruction of the limited interest which the insured had was recoverable. Had that proposition been put to his Honour and had evidence of the amount of such loss been given, then it seems probable that his Honour would have allowed the plaintiffs to have recovered that loss. For this, probably quite small, sum, it seems to me that the insurance company was liable. Nevertheless, when regard is had to the course the action has taken, to the pleadings, the evidence, the issues submitted at the trial and the questions debated before the Full Court, I think we should simply allow the appeal. I agree in the order proposed. (at p105)

Orders

Appeal allowed. Order of the Full Court of the Supreme Court of Tasmania set aside. In lieu thereof order that the judgment of 15th March 1963 entered pursuant to the order of Gibson J. be varied by adding thereto judgment for the plaintiff Lindsay John Monson for the sum of 85 pounds 13s 6d., but that otherwise the appeal to the said Full Court be dismissed with costs. Order that pursuant to the undertaking given by the appellant on the application for special leave to appeal the appellant pay the costs of the appeal including any additional costs occasioned by reason of the transfer of the hearing of the appela to Melbourne.