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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Cochran & Son v. Leckie's Trustee [1906] ScotLR 43_715 (27 June 1906) URL: http://www.bailii.org/scot/cases/ScotCS/1906/43SLR0715.html Cite as: [1906] ScotLR 43_715, [1906] SLR 43_715 |
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Page: 715↓
[Sheriff Court at Glasgow.
Insurance — Fire Insurance — Goods in Custody of Insured — Policy Covering Property Held by Insured “in Trust or on Commission, for which he is Responsible.”
A miller who was insured against fire received hay to be cut, and sent in return receipt notes or invoices with the following clause printed on them:—“All goods held in trust covered by insurance against Are.” A fire having occurred, hay belonging to a customer was destroyed, and, the miller having become insolvent, the trustee on his sequestrated estate recovered from the insurance company the estimated loss by the fire.
Held (1) that the miller had undertaken to cover by insurance the risk which his customers ran of their goods being destroyed by Are while in his possession, and (2) that whether his customers' risks were or were not covered by the policies, the insurance company having paid, the customer was entitled to a ranking on the money recovered preferable to the general creditors.
A miller who received from customers hay to be cut, was insured against Are by policies “on stock-in-trade the property of the insured, or held by him in trust or on commission for which he is responsible.”
Opinion per Lord Kyllachy that the policies might “quite well be read as constituting an insurance by the bankrupt, for himself and all others concerned, of the whole goods in his premises.”
This was an appeal from the Sheriff Court at Glasgow brought by Alexander Mitchell, O.A., Glasgow, the trustee on the sequestrated estate of Malcolm John Knox Leckie, who carried on business as a grain crusher and miller at 69 Finnieston Street, Glasgow.
Leckie's chief business consisted of crushing grain of various kinds and chopping hay belonging to customers. James Cochran & Son, grain merchants, Glasgow, were his customers, and occasionally sent hay to him for the purpose of cutting. Each invoice or receipt note received by them from Leckie bore the words “All goods held in trust covered by insurance against Are.” In form the invoices or receipt notes were similar to the following:—
Page: 716↓
“Grain Crushing and Forage Mills, 69 Finnieston Street,
Glasgow, 1905.
Messrs James Cochran & Son.
To M. J. Knox Leckie.
“All Goods held in Trust covered by
Insurance against Fire.
1905. c.
Feby. 3. G. 33 B/s Hay 29½, 10s., £0 14 9
6. , 36 , 42½, 10s., 1 1 3
£1 16 0”
[This invoice is referred to subsequently as No. 6 of pro. ] On the 11th February 1905 there was in Leckie's stores belonging to the appellants hay to the value of £19, 9s. 3d., for the purpose of being cut. This had been kept separate and distinct from the rest of the goods there. On that date a fire took place by which considerable damage by fire and water was occasioned, and the hay belonging to Cochran & Son was destroyed. Leckie was insured with the London & Lancashire Insurance Company by three policies:—(1) No 5070555, which insured on stock-in-trade the property of the insured, or held by him in trust or on commission, for which he is responsible, in his grain crushing mills, known and situate at 69 Finnieston Street—£500; (2) No. 4202639, which insured on stock-in-trade the property of the insured, or held by him in trust or on commission, for which he is responsible, in his grain crushing mills, known and situate at 69 Finnieston Street, Glasgow—£500; (3) No. 5070563, on office furniture, &c., £70, and gas engine, £30—£100. These three policies were issued in name of M. J. Knox Leckie, Finnieston Grain Mills, 69 Finnieston Street, Glasgow, grain crusher. Before a settlement was adjusted with the insurance company the appellants arrested the amount of their claim in the hands of the insurance company. Leckie having become insolvent, his estate was sequestrated on 22nd April 1905, and Alexander Mitchell, C.A., Glasgow, was appointed trustee. Under said policies the trustee recovered the sum of £363, 18s. 8d., allocated as follows (1) No. £168, 14s. 5d.; (2) No. £168, 14s. 5d.; (3) No. £26, 9s. 10d. This sum of £363, 18s. 8d. was included by the trustee in the trust estate.
On 1st May 1905 Cochran & Son lodged a claim in the sequestration for £19, 9s. 3d., as the value of their hay which had been destroyed in the store, and claimed “a preference for said sum in respect of contract of insurance and indemnity for goods held in trust.” By a deliverance on 4th September 1905 the trustee rejected this claim to a preferable ranking on the estate, but admitted it to an ordinary ranking. Cochran & Son appealed to the Sheriff against this deliverance.
On 17th April 1900 the Sheriff-Substitute ( Mitchell) pronounced the following interlocutor:—“Having heard parties' procurators, for the reasons contained in the annexed note sustains the appeal, recals the deliverance appealed against, and ordains the respondent to rank the appellants preferably on the sum of £337, 8s. 10d.received by the respondent from the insurance company pari passu with any other appellants who can establish a similar right, and to pay them the amount thereof, with bank interest thereon.…”
Note.—“The parties' procurators at the bar renounced probation, and the circumstances are clearly set forth in the condescendence and answers, the question raised being a legal one on the interpretation of the invoice for hay-cutting produced by the appellants (No. 6 of process). It is admitted that there were a series of transactions in January and February 1905 (evidenced in the account lodged with the pursuers' affidavit), and even before that, and that all Mr Leckie's accounts or invoices had the same words printed on them, viz., ‘All goods held in trust covered by insurance against fire.’
The question is whether these constituted an offer on Mr Leckie's part, accepted by the customer through the hay, &c., being sent to him for cutting, that he was to insure for his customer, so that the customer would get the insurance money if there was a fire, or were only an intimation that Mr Leckie voluntarily took on or took over the risk of fire in respect of the goods, and insured that risk to cover his own personal liability thus undertaken.
I am inclined to think that the words on the invoice and the course of dealing would be naturally understood by the customer as an agreement or contract that Mr Leckie was to do the insurance in room of, or as agent for, the customer, and that the benefit was to accrue to the customer just as if he had made the insurance himself. Obviously an insurance was desirable or necessary, and these words on the invoice seem to suggest that of two alternatives—insurance by each of many customers or by the single miller—the latter was proposed. The convenience of such a course would be obvious, and it would naturally be expected that the price paid for cutting would be fixed to cover the outlay. Trade might be or might be assumed to be more easily got if the miller took this work on for his customers. Again, the precise terms indicate the same result—the goods are held ‘in trust,’ and their fire risk is ‘covered’ surely as a trust risk, that is, on behalf of the truster.
I think this is the natural reading, and that the subtle interpretation given by the respondent would not occur to anyone, viz., that it was only an intimation that the miller took over a risk that did not lie on him, and covered himself by insurance. Notice that the customer need not insure, because insurance was done for him, is what I think the customer would read out of the printed words, and is also what I take to be their natural meaning. Nothing is said about where the risk lay apart from agreement; and anyone reading the printed words would think the whole matter of insurance was covered by them and nothing less than the whole risk—not merely an eke to the miller's personal credit in taking over an unnecessary risk.
If Mr Leckie meant one thing and the
Page: 717↓
customer read another meaning, I think Mr Leckie was to blame for so expressing himself, and that he would have to take the consequences, and so I think his trustee and creditors must take the consequences too. The case of Dalgleish v. Buchanan, 16 D. 332, cited for respondent, differs from the present case in the absence there of any contract or agreement to secure the trusted goods by insurance.” The trustee appealed to the Court of Session.
Counsel for the appellant pointed out that, strictly speaking, the respondents' claim to a preferable ranking in the sequestration was not in order, for where money was held in trust the proper procedure was by petition under section 104 of the Bankruptcy (Scotland) Act 1856 (19 and 20 Vict. cap. 79). This objection, however, they did not wish to press, but would argue as if the correct procedure had been followed.
Argued for the appellant—(1) Leckie never contracted with his customers to insure their goods so that the proceeds of the insurance policy would be directly available to them. At most he only contracted to insure his own rights and interests in his business premises, and any rights which arose from the conduct of his business. The real contract was one for cutting hay, and it was not qualified by the clause in the receipt note, which was mere advertisement — Buchanan & Company v. Macdonald, December 10, 1895, 23 R. 264, 33 S.L.R. 200. (2) Assuming that Leckie ought to have insured customers' goods, in point of fact he had not validly done so, and the Insurance Company need not have paid for his customers' losses— North British and Mercantile Insurance Company v. Moffat and Another, 1871, L.R., 7 C.P. 25. it was true the company had in error of law paid the money, but this was immaterial in a question with Cochran & Son, and the sum paid belonged to the sequestrated estate— Dalgleish v. Buchanan, January 17, 1854, 16 D. 332.
Counsel for the respondents were not called upon.
But then it is said that, even supposing the bankrupt undertook to take out on behalf of his customers a policy or policies which should cover their goods, he in point of fact did not do so, but took out a policy which covered only his own risk—that is to say, his own common law liability to his customers for damage by fire caused by his own negligence. It seems to me, I confess, that this is a construction of the policy which is at least hypercritical. I rather think the policy may quite well be read as constituting an insurance by the bankrupt for himself and all others concerned of the whole goods in his premises, whether his own goods or goods of which he was the custodier under trust or commission. But even if that construction were wrong it seems enough to say that it was the construction which the Insurance Company accepted, and on the footing of which they paid the amount in question to the trustee who is now in possession of the money. It seems to me that, in these circumstances we are not bound to inquire further. The money having been paid by the Insurance Company on the footing that it was due in respect of the insurance of the respondents' goods, the notion that the trustee can retain it for the benefit of the general body of creditors is in my opinion out of the question.
The Court dismissed the appeal and affirmed the interlocutor appealed against.
Counsel for the Appellant— T. B. Morison. Agent— F. J. Martin, W.S.
Counsel for the Respondents— W. Thomson. Agent— W. J. Haig Scott, S.S.C.