Irving v Manning

I H.L.C., 286 IRVING V. MANNING [ 1 8 4 7 ]

objects; and that even if the objects were not fully ascertained, if the purposes of thebequest were charitable, the Court could supply the omission. This is undoubtedlyt rue ; and I agree with the Vice Chancellor that the probability is that the legacy wasgiven for some purpose that would be considered to be a charitable purpose. Butit cannot, at the same time,- be denied that a municipal corporation may takeproperty in trust for the benefit of individuals, and for purposes altogether private,and it is impossible to say, with that degree of legal certainty which would justifyyour Lordships in giving effect to this bequest, that such was not the case in thepresent instance.

For these reasons, which in substance are the same, though less elaborately statedthan those upon which the Vice Chancellor rested his decision, I have come to the[286] conclusion that the legacy of 60,000 must fail. The same reasoning andthe same objections will apply to the legacy of 140,000. I submit to your Lord-ships, therefore, that the judgment of the Court below should be affirmed.

I beg leave to state, that the Lord Chancellor, who is unable to give his attendancehere to-day, entirely concurs in this opinion. He was present during the wholeof the argument.

Lord Brougham.This case, though of very large amount, 140,000 and 60,000, making 200,000 altogether, appears to me to rest upon exceedingly plainand simple grounds. I entirely agree with my noble and learned friend in the viewwhich he has taken of the bequest, both as regards the first argument on the con-struction of the bequest, and the second argument with respect to its possibleapplication. I am clearly of opinion that the right construction has been put uponit by the Court below, that it fails altogether, and that the property in questiongoes according to the destination pointed out by the decree; and, therefore I agreewith my noble and learned friend's proposition to your Lordships, that this judg-ment should be affirmed.

Under the peculiar circumstances of the case (I do not enter into details), I sub.mit to your Lordships that it is not a case in which costs should be given.

Lord Campbell.In the course of my experience, I never read a judgment morecautiously expressed, and better reasoned than that of his Honour the Vice Chan-cellor Wigram in this case. I have only to state to your Lordships, that afterhaving carefully considered the arguments on both sides, I entirely concur in thejudgment which has been proposed.

The appeal was accordingly dismissed, and the decree appealed from was affirmed,without costs.

[287] JOHN IRVING-,Plaintiff in Error;. CHARLES JOHN MANNING andJOHN L. ANDERSON,Defendants in Error [June 29 ; July 1, 8, 23, 1847].

[Mews' Dig. xii. 708; xiii. 1139, 1224. S.C. 1 C.B. 168; 2 C.B. 784; C C.B. 391.Followed in Barker v. Janson, 1868, L.R. 3 C.P. 307; and cf. Rankin v. Potter, 1873, L.R. 6 H.L. 144; Burnand v. Rodocanachi, 1880, 5 C.P.D. 426; AitcJiison v. Lohre, 1879, 4 A.C. 761.]

Policy of InsuranceTotal loss.

A vessel is totally lost, within the meaning of a policy, when it becomes, as a - ship, of no use or value to the owner, and is as much lost as if it had gone to the

bottom of the sea, or had been broken to pieces, and the whole or great partof the fragments had reached the shore as wreck.

A loss is also to be considered as total where a prudent owner, if uninsured,would not have repaired.

In a valued policy the agreed total value is conclusive.A policy of insurance is not a perfect contract of indemnity. It must be taken

with this qualification, that.the parties may agree before hand in estimatingthe value of the subject assured by way of liquidated damages.

A ship was insured in a policy, in which the value was stated at 17,500. The. 766

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IRVING V. MANNING [ 1 8 4 7 ] I H.L.C., 288

ship was injured by storms, was surveyed, and the repairs were estimatedat 10,500. When repaired, the vessel would have been of the marketablevalue of 9000. The assured abandoned and claimed as for a total loss.The jury found that, under the circumstances existing in the case, a prudentowner, uninsured, would not have repaired the vessel:

Held, by the Lords, affirming the judgment of the Court below, that the assuredcould recover as for a total loss.

This was a writ of error on a judgment of the Court of Exchequer Chamber, whichhad affirmed a judgment of the Court of Common Pleas, in an action of assumpsitbrought against John Irving, the defendant in the Court [288] below, as the re-presentative of the Alliance Marine Insurance Company. The plaintiffs below werethe managing owners of a vessel called the General Kyd, upon which a policy ofinsurance had been effected with this Company for the sum of 3000. The shipwas valued in the policy at 17,500, and was insured for a voyage " at and fromChina to Madras, while there, and back to China, not east of Hong Kong, with leaveto call at the Straits." The first count of the declaration was on this policy, andthe loss claimed was a total loss, which "was averred to have happened through theperils of the sea. There were the usual money counts. The defendant pleadedto the first count that the vessel was not wholly lost in manner and form, etc.; andto the remaining counts non assumpsit.

The cause was tried before Mr. Justice Cresswell, at Guildhall, at the sittings afterTrinity Term, 1844, when a verdict was found for the plaintiffs. The facts werestated in the form of a case for the opinion of the Court, and were afterwards turnedinto a special verdict, which stated that on the 6th June, 1843, the plaintiffs effectedwith the defendants the policy on their ship, the General Kyd, for the purpose ofbona fide covering and protecting themselves from the loss of the said ship, togetherwith its stores, seamen's wages, and other matters not constituting part of thepermanent value of the ship; that no insurance was effected by them on the freight;that the ship was of the burthen of one thousand three hundred and eighteen tons;was built originally, and at great expense, for and employed in the trade of theEast India Company, and was, on the said East India Company ceasing to' trade,sold to the plaintiffs for 11,000; that at the time of effecting the policy the shipwas, together with stores, seamen's wages, and other matters not constituting partof the permanent value of the ship, of the value to the plaintiffs of 17,500, andwas insured for that sum; that the plaintiffs were interested, as the declaration setforth, [289] and that the ship set sail on the voyage mentioned; that during therisk, and while prosecuting the voyage, the ship was damaged by perils of the sea,so as to become incompetent to proceed on the said voyage, unless repaired as aftermentioned; that the necessary expenditure to repair such damage, so as to renderthe ship sea worthy, and competent to proceed on the voyage, would have amountedto a sum of not less than 10,500, and that if such repairs had been done, and suchexpenditure had been incurred, the ship being so repaired would have been worth a sum not exceeding 9000, and which was its marketable value, as well at theperiod of effecting the said policy, as also immediately before the said damage;that a prudent owner, being uninsured, would not have repaired the vessel, and thatthe vessel was duly abandoned to the underwriters.

The question was, whether, under the circumstances set forth in the special verdict,the defendant was liable as for a total loss. The Court of Common Pleas gavejudgment for the plaintiffs (1 Com. Bench Rep. 168). The defendant brought a writ of error in the Exchequer Chamber where that judgment was affirmed (by LordChief Baron Pollock, Justices Patteson, Coleridge, and Wightman, and Barons Parke,Alderson, and Rolfe; see 2 Com. B. 784). The writ of error was then brought inthis House. The judges were summoned, and Barons Parke and Alderson, JusticesPatteson, Coleridge, Coltman, and Maule, Baron Rolfe, Justices Wightman and Cress-well, Baron Piatt, and Justices Erie and Vaughan Williams, attended their Lordships.

Sir F. Kelly, and Mr. Serjt. Channell (Mr. Lathom J. Browne was with them)for the plaintiff in error.The judgment of the Court below rests upon the au-[290]-thority of two cases; Allen v. Say rue (8 Barn, and Cres. 561'; 3 Man. and Ryl. 9), andYoung v. Turing (2 Man. and Gr. 593; 2 Scott, N. R, 752). It is submitted that the

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principle declared in both those cases, that there is, in respect of a question of partialor total loss, no distinction between an open and a valued policy, is erroneous, andthat, at all events, such a- principle cannot govern the decision in this case.

There are three classes of cases in which total loss may occur. The first iswhere the ship absolutely sinks and is in fact lost; the second, where the ship itselfmay not be in fact totally lost, but may be unable to continue the voyage, beinginjured past repair ; and the third, where the ship can be repaired, but the expenseof repair will be so considerable, that after the repairs have been effected, the vesselwill fetch less in the market than the sum expended in repairing it. This thirdclass is now known as the class of a constructive, total loss. The present case is ofthat class; and the owners insist that they may refuse to expend a sum of 10,500in repairs; may therefore convert a loss which is only partial, and capable of re-paration, into a total loss; may thereby cast on the insurers a loss of


into effect where the loss is actually total. Here the ship would be, when repaired,of the value of 9000, and it cannot be said that, that being so, the underwritersmust pay the sum of 17,500.

It cannot be contended that, because the policy is a valued policy, the sum statedin it is conclusive as against the insurer, and against him alone. The case of Hamil-ton v. Mendez (1 Sir W. Bl. 276; 2 Burr. 1197), already cited, shews that the realamount of the loss may be considered upon a valued policy. And the case of Forbes v. Aspinall (13 East, 323) is even more directly an authority for that proposition.There, upon a valued policy upon freight, the plaintiff was only allowed to recoverfor the freight on the fifty-five bales of cotton actually on board at the time of theloss. And in accordance with that doctrine is the opinion of Mr. [293] Justice Story,as quoted in an American work on Insurance (Phillips on Insurance, vol. 2, p. 273),where it is said, " In giving an opinion on this question, Mr. Justice Story says,' In what respect does the case of the ship differ from the case of the goods, as to theascertainment of the damage? Can the valuation in the policy be a more correctguide in the one case than in the other? The question in each case is necessarily thesamewhat is the present value of the property compared with its value before theinjury1? and for the same purpose; to fix the extent of the damage sustained by theaccident. One should suppose that this was the true measure of the damage in allcases in which it is attainable. The valuation on the policy cannot, in the case ofthe ship, any more than of the goods, measure the proportion of the damage, becausethe value may, in the mean time, have essentially changed. And yet it is that propor-tion which is the object of the inquiry. The law deems the ship worth repair, unlessinjured more than half its value. At what time?Surely at the time of the injury/Peele v. The Merchants Insurance Company (3 Mason, 27). The doctrine of Mr.Justice Story has been distinctly adopted by the Supreme Court of the United States;Patapasco Insurance Company v. Southgate " (5 Pet. S. C. R. 604).

In the next page of that work it is said, " On the other hand the Supreme Courtof Massachusetts has laid down the doctrine, that the rule of abandonment fordamage over half of the value, refers to the value in the policy. . . . In the first of thedecisions referred to, this Court says the value in the policy is prima facie, and,in the absence of other testimony, the true value. Winn v. The Colonial Insurance Company'3 (11 Pick., 279). But this doctrine, in laying down which Mr. JusticeStory himself took part, [294] does not in reality contradict the former, for itadmits that " other testimony " may be given to shew the true value, and if so,the value stated in the policy ceases to be conclusive between the parties. It is,therefore, submitted that the policy must, in the case of a merely constructive totalloss, be treated as an open policy, and the real amount of the loss must be ascertained.If, as the assured contend, the policy is to be treated as an open policy, when thequestion of the propriety of repairing the ship is under consideration, it must equallybe so treated when the amount payable in respect of the loss is to be determined.I t is open for all or closed for all purposes. If it is closed for all, then it is clearthat the owners had no right to abandon on account of the expence of repairing, andthen to claim for a total loss; for the ship existed in specie and might have beenrepaired, and, being repaired, would then have been a. good sea risk. The principleadopted in Hamilton v. Mendez (which case was not cited either in Allen v. Sugrue, or in Young v. Turing) is that which must govern the present case. The judgment ofthe Court below is in contradiction to the first principles of marine insurance law,and must be reversed.

The Attorney General and Sir F. Thesiger (Mr. Greenwood was with them) forthe defendants in error.

The question here is not, what is the amount to be paid? but has there, or hasthere not been a total loss? For the purposes of this case there is no distinctionbetween an open and a valued policy. If so, the assured was entitled to recover,for there can be no doubt that the loss here was a total loss. The facts shew it to beso, and it is so found in the special verdict, which declares that, under the circum-stances existing in this case, a prudent owner being uninsured would not haverepaired the vessel. It is contended that the fact of the policy being a valued policycannot affect the question of the right to recover [295] as for a total loss, when theloss is shewn to be in the nature of a total loss.

H.L.ix. 769 25



It is said that a policy of insurance is a mere contract for indemnity, and themain objection to the right of the assured rests upon that argument. It is in somerespects a contract of indemnity, but not so as to prevent the right of the assuredto recover as for a total loss upon the assessment of that total loss made in the policyitself. That this is a valued policy cannot affect the question, whether this is a case of total loss or not. It would have been a total loss upon an open policy, and thespecial verdict finds that the circumstances of the loss were such that a prudentuninsured owner would not have repaired the vessel. Upon an open policy it is there-fore clear that the plaintiff would have been entitled to recover for a total loss; whyshould he not do so upon this which is a valued policy? This is an attempt to over-turn the decision in Allen v. Sugrue (8 Barn, and Cr. 561; 3 Man. and Ry. 9), whichhas been recognized as an authority ever since it occurred. It is true that neitherin that case, nor in Young v. Turing (2 Man. and Gr. 593 ; 2 Scott, N. C. 752), whichconfirmed and adopted the former, was the case of Hamilton v. Mendez referred to.But it is impossible to doubt that that case was known to the counsel who argued,and the judges who decided 'both the latter cases, and that it was not cited simplybecause it was not deemed applicable; and it is not, for the only question there wasto what extent the goods insured had been injured. It is not denied that a policyof insurance is in some respects a contract of indemnity, but that indemnity is notto be measured by the mere amount for which the vessel would sell at the momentof the abandonment being made. If that measure of value was alone applied to it,the assured would not be indemnified. The indemnity is to be measured by what[296] was agreed to be the value of the ship when the insurance was made. Thatwas the rule which the Court applied in the case of Shaw v. Felton (2 East, 109),though there the value of the thing insured was daily becoming less during the voyage.There an insurance was effected on ship and goods, valued at a certain sum, on a voyage to Africa and the West Indies. The assured was held entitled to recover ona total loss which happened at the latest period of the voyage, although a consider-able part of the estimated value consisted of stores and provisions for the purchaseand sustenance of slaves during the voyage. The judgments of Mr. Justice Lawrenceand Mr. Justice Le Blanc are important on this point The former said (2 East,115), " As the practice of binding parties as to the amount of their interest by valuedpolicies has obtained ever since the statute of Geo. II., it would require very strongreasons to show that it is wrong. The effect of a valued policy is not to concludethe underwriter, and prevent him from showing that the assured had no interest,and that in fact it was a mere wagering policy within the statute; but in orderto avoid disputes as to the quantum of the assured's interest, the parties agree that itshall be estimated at a certain value. Here it is not pretended that the subjectmatter of the insurance was not of the value estimated in the policy. Then howdoes this differ from the case of an open policy in this respect. Would it not besufficient for the assured in an open policy to prove that at the time the shipsailed the subject matter of the insurance was of such a value? Is not that theperiod to look to, and not the state of the thing at the time of the total loss happen-ing?" And Mr. Justice Le Blanc said (2 East, 116), "The value of the propertymust be continually diminishing, and if the loss should happen at the latter end ofa long voyage, no doubt the [297] property must be considerably deteriorated bythe usual wear and tear, and yet it is never objected that the underwriter is notliable for the original value." There is no authority whatever which supports thedoctrine that the assured is not entitled to recover beyond the actual loss, as measuredby the value of the ship at the moment that loss occurs, while both these judgmentslay down an exactly opposite rule. The case of Allen v. Sugrue is opposed to sucha doctrine as that which is contended for on the other side; and there are two caseswhich occurred between the period of the decision of Allen v. Sugrue and Young v.Turing, both of which proceed on the principles recognized and adopted in thosedecisions. One of these is the case of Edington v. Jackson (tried at York in the year1832) before Mr. Baron Alderson. The notes taken in that case, by Mr. JusticeCresswell then at the bar, on an application for a new trial, give this account of thecase. The action was on a valued policy, and there Lord Tenterden said it may beprudent not to have a valued policy, but we must decide the question of total loss ornot just as we should in a case of an open policy; and the Court, composed of Justices-

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Littledale, Parke, and Patteson, expressly concurred with that opinion. The othercase was that of Heme v. Bay, before Mr. Justice Maule (tried at Liverpool, in theyear 1842), in which that learned judge expressly adopted the rule as laid downin the case of Allen v. Sugrue, and his ruling there was never afterwards questioned.Then came the case of Young v. Turing (2 Man. and Gr. 593; 2 Scott, N. C. 752),and considering the circumstances in that case, it is impossible to imagine a strongerauthority for the doctrine now contended for on the part of the defendants in error.In delivering the judgment of the Court, Lord Chief Justice Tindal said (2 Man.and Gr., 601 ; 2 So., N. C. 761), " I am not aware of any [298] case or principle inthe law of insurance which makes the estimated value in the policy a circumstanceon which the question of total or partial loss ought to turn. The agreed value inthe policy of the subject insured is intended to save the expence and doubt that mayattend the investigation of value, as affecting the quantum of compensation only*It may operate, according to events, to the advantage or detriment of either par ty ;and where no fraud exists, both are bound by it." No cases can be cited to impeachthe doctrine thus distinctly laid down, and the attempt now made is therefore a mereattempt to avoid its application to the present case. It is, in substance, contendedon the other side, that the fact of a policy being valued, ought to be taken into con-sideration in deciding the question of total or partial loss. Such a proposition cannotbe maintained, yet if not maintainable, the arguments on the other side are absolutelyinapplicable and valueless.

There are two classes of losses, total and partial, but the expression " constructivetotal loss" is not a happy one; it introduces confusion into the subject. Whetherthe loss is total by the absolute sinking of the ship to the bottom of the sea, or by thecircumstance that it has sustained such an injury, and is in such circumstances thatno prudent uninsured owner would attempt its repair, there is equally a loss of thevessel and the voyage, and an end of the risk. Both-cases must proceed on the sameprinciple. It is not pretended to be denied that if the vessel here had been actuallysunk, the owner would have been entitled to recover the full amount stated in thepolicy. Suppose it had been known that at the moment when the ship founderedin the open sea it was only worth 5000, it cannot be pretended that the underwriterwould have been entitled to say, " I will only pay you 5000." Yet he might sayso if it is true that, to all intents and in every respect, a policy of insurance is a mere contract of indemnity, and nothing more. In some respects it is a contract[299] of indemnity, but it is a contract which, in the case of a valued policy, whileit promises an indemnity, settles and declares what shall be the amount of that in-demnity. The case of Lewis v. Rucker, so much relied on by the other side, is anauthority for that proposition. In that case, Lord Mansfield says (2 Burrow'sReports, 1171), " a valued policy is not to be considered as a wager policy, or likeinterest or no interest; if it was, it would be void by the act 19 Geo. 2. The onlyeffect of the value is fixing the amount of the prime cost, j ust as if the parties admittedit at the trial. . . . It is settled that upon valued policies the merchant need onlyprove some interest to take it out of the 19 Geo. 2, because the adverse party hasadmitted the value; and if more was required, the agreed valuation would signifynothing. But if it should come out in proof that A. had insured 2000, and hadinterest on board to the value of a cable only, there never has been, and I believe therenever will be, a determination that by such an evasion the Act of Parliament may bedefeated." This last expression clearly shows what was Lord Mansfield's meaningwhen he spoke of a policy of insurance being a contract of indemnity.

A similar observation may be made with regard to what Lord Mansfield says inHamilton v. Mendez (2 Burr. 1198; 1 Sir W. Bl. 277):It is clear that a policybeing a contract of indemnity is an expression which must be understood with respectto the subject matter. There a capture and recapture had taken placethere wasnothing but a delay of the voyage; and the question was whether the assured, by themere act of his own will, had a right to turn a partial into a total loss. The pointof that judgment may be found in this expression of Lord Mansfield (2 Burr. 1212)," If the thing in truth was safe, no artificial reasoning shall be allowed to set up a [300] total loss." But in that very judgment he assumes that total loss may dependon something besides the actual destruction of the vessel, and he says (Id. 1209), " It

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does not necessarily follow that because there is a recapture, therefore the loss ceasesto be total."

The case of Aspinall v. Forbes (13 East, 323) has nothing to do with the present.There the insurance was on freight, and the ship was lost when only some of thegoods on which freight was to be earned were on board. Of course, though that wasa valued policy, the value was fixed upon the freight of a full cargo, and when onlya small part of the cargo was on board, that which had to give rise to the freight wasnot in existence. Lord Ellenborough distinctly put the judgment upon that ground.Provided the thing on which the insurance was to take effect, and on which the valuewas calculated, was in existence, the policy would attach, and, when once it hadattached, the value in the policy must be taken as conclusive. Thus: suppose therewas a valued policy on a ship, and after the policy was effected, but before the loss,a decree of the Government should issue, which produced the result of lessening thevalue of all shipping by one-half, that would not affect the right of the insured torecover the value according to which he had insured.

The argument here amounted to this, that if the expences of repairs do notexceed the value of the policy, then the loss is to be deemed only a partial loss. Butit is impossible to produce any decision, or any declared principle of law, to supportsuch a proposition. The grounds on which the assured may recover for what iscalled a constructive total loss, are those on which a prudent uninsured man wouldnot go to the expence of repairs, but would put an end to the voyage. Such havealways, hitherto, been deemed sufficient. But it is now, [301] for the first time, con-tended that that is not the test, but that a new element must be introduced into thediscussion of the questionthat the value fixed in the policy must be taken into con-sideration, and that if that value exceeds the amount required for repairs, though thatamount may itself be greater than the value of the vessel after the repairs have beenexecuted, the owner must nevertheless repair the ship and submit to the loss. Thiswould be to put him, when insured, into a worse position than if he had not beeninsured, and would convert what the plaintiff in error asserts to be a contract of in-demnity into a contract to incur loss without the hope of indemnity.

According to all the principles of marine insurance law there has been a- totalloss, and if so, then the assured are entitled to recover the value fixed in the policy.The fact that a value has been so fixed cannot affect the question, which is simply,whether the loss is a total or a partial loss?

As there can be no doubt that it is a total loss, the title of the assured is complete,and the judgment of the Court below must be affirmed.

Sir F. Kelly in reply.There is in this case a conflict of principles. The firstprinciple controverted here is that a policy of insurance is a contract of indemnity,and nothing more; the next is that which governs the Courts with respect to a valued policy. The parties here have admitted the value of the ship.y That factmust be taken as settled, and then it is said that where the ship is insured on a valued policy, and is totally lost, there can be no inquiry into the value at the timeof the loss, for the parties, as between themselves, have admitted it. But taking thatargument to be true in part, and true as applicable to cases of actual total loss, it isnot true when the case is merely one of constructive total loss. From all [302] theauthorities, the paramount principle on which a distinction is founded may bededuced. In the case of a ship positively lostsunk to the bottom of the seatherecan be no conflict of principle, the contract is one to indemnify the assured for theloss actually sustained. But if the loss is not actual, but only constructive, all thecircumstances attending it must be taken into consideration, and in that sense ofthe word the policy is an open policy. A different doctrine cannot be reconciledwith the principle that a contract to indemnify is of the very essence of a policy ofinsurance.

The ship here is valued at 17,500. As between the parties it is thereforesaid, that it must be taken as conclusive that the ship is of that value. But if so, itmust be so taken for all purposes, against the owner as well as against the under-writer. Then how stands this case? The owner comes into Court and claims fora total loss. When he has proved that the ship has been totally lost he may recoverthe value stated in the policy; but to prove that it will cost him 10,500 to repair theship, does not prove that the ship is totally lost, and till he gives that proof he cannot

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be entitled to recover. As the proof stands in the present case, the owner has merelyproved that he has sustained a loss of 9000, and yet he claims to recover 17,500.That is not indemnity, it is profit. A party cannot be permitted thus to prove a loss of a certain amount, and on that proof to recover something which far exceedsthat amount.

To pass from the principle of law to the decided cases. There can be no doubtthat all those cases are unfavourable to the claim of the owners. In Hamilton v.Mendez the Court held, that though value was not generally an open question ona valued policy, yet, that cases might arise in which it would be absolutely necessary,in order to maintain other and more important principles of law, to shew what wasthe real value.

[303] And in Lewis v. IZucker, Lord Mansfield said, that he desired it to beunderstood that in a valued policy the plaintiff could not recover more than the actualvalue when the loss occurred. And that principle is the more strongly to be en-forced in this case, because, though the ship alone was insured, the valuation wasmade on the ship, the stores, provisions, and seamen's wages. The case of Forbes v. Aspinall fully supports this argument. There the insurance was on freight, andthe damage claimed was for more cargo than was on board the ship when it was lost,and there it was held, that where the valuation is for a greater sum than is actuallylost, the indemnity cannot go beyond that loss.

It is clear that where there is a valued policy, the sum mentioned in it must betaken to be the value of the ship as respects both parties, and for all purposes what-ever, or for none, and cannot be treated as a fixed sum for one purpose, and an un-fixed and unsettled sum for another. It cannot, therefore, be treated as a settledamount for the purpose of the demand on the underwriter, but as an unsettled andunascertained amount, when the conduct of the assured in putting an end to thevoyage and converting a partial into a constructive total loss comes to be considered.Yet, unless this inconsistent mode of dealing with the policy can be supported, itis clear that the assured cannot here make out a title to claim as for a total loss.

The Lord Chancellor moved that the following question be put to the Judges: " Whether, in the judgment upon the special verdict in this case, the damages oughtto be taken on property assessed at 3000, or at 1500? "

The Judges requested time to consider the question.

[304] Mr. Justice Patteson, in the absence of Barons Parke and Alderson, statedthe answer of the judges in the following t e rms :I am desired by the judges, whoheard the whole of the argument at your Lordships' bar, to give their answer to thisquestion, and to state their opinion that the plaintiff below was entitled to recover,upon the facts found by the special verdict, the sum of 3000.

Upon the record it appears that the action was on a policy for 3000 on a shipvalued at 17,500. The other facts found by the special verdict show, that it wasfairly valued at that sum (and, indeed, it would be assumed that it was so, unlessfraud had been pleaded and proved), and then it is found that the vessel during thevoyage was so damaged as to be incompetent to proceed without repairs; that thenecessary expenditure, in order to repair and make it seaworthy, would haveamounted to 10,500, and that the ship would have been then worth 9000 only,which was its marketable value then and at the time of the policy; that a prudentowner, uninsured, would not have repaired the vessel; and that it was duly abandonedto the underwriters.

If this had not been the case of a valued policy it is clear that on the facts foundthere was a total loss; for a vessel is totally lost, within the meaning of a policy,when it becomes of no use or value as a ship to the owner, and is as much so as ifthe vessel had gone to the bottom of the sea, or had been broken to pieces, and thewhole or great part of the fragments had reached the shore as wreck; and the coursehas been in all cases in modern times to consider the loss as total where a prudentowner, uninsured, would not have repaired.

In an open policy, therefore, the assured would have been entitled to recover fora total loss, the amount to be ascertained by evidence.

What difference then arises from the circumstance that the policy is a valuedpolicy?

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[305] By the terms of it, the ship, etc., for so much as concerns the assured, by agreement between the assured and assurers, are and shall be rated and valuedat 17,500, and the question turns upon the meaning of these words.

Do they, as contended for by the plaintiff in error, amount to an agreement thatfor all purposes connected with the voyage, at least for the purpose of ascertainingwhether there is a total loss or not, the ship should be taken to be of that value, sothat when a question arises whether it would be worth while to repair, it must beassumed that the vessel would be worth that sum when repaired?

Or do they mean only, that for the purpose of ascertaining the amount of com-pensation to be paid to the assured, when the loss has happened, the value shall betaken to be the sum fixed, in order to avoid disputes as to the quantum of the assured'sinterest 1

We are all of opinion that the latter is the true meaning; and this is consistentwith the language of the policy, and,with every case that has been decided uponvalued policies.

In the case of Lewis v. Rucker (2 Burr. 1167), on a valued policy on goods, theamount to which the underwriter was held liable for a partial loss was ascertainedby computing such a proportion of the value in the policy as the difference betweenthe price for which sound goods would have sold at the port of delivery, and that forwhich the damaged goods, actually sold, bore to the price for which sound goodswould have sold. So that in estimating the extent of the loss, that is, in determiningwhether it was a loss to the extent of one half, one third, or to any other extent, thevalue in the policy was wholly disregarded, and nothing was considered but thestate of the goods as ascertained by their selling prices. If sound goods would havebrought double [306] the price of the damaged, the loss was one half, or fifty percent., whatever the value in the policy might be. But the extent and nature of theloss being ascertained by this comparison, the underwriter was held liable to pay theproportion so ascertained of the value in the policy; and this mode of treating partiallosses on goods is always adhered to. Now the question whether a loss is total orpartial, is a question of the same nature as the question, what is the extent of a partial loss? and there is the same reason in both cases for excluding the considerationof the value in the policy from the inquiry as to the extent of the loss, and for treatsing that value as binding on the question of, how much the subject so> totally orpartially lost was worth; so that the mode of determining the question, whether theloss was total or not, which has been adopted in this case, agrees, in so far as itexcludes the consideration of the value in the policy, with that in which the inquiryinto the extent of a partial loss on goods is always conducted. Such has been theconstruction put upon valued policies in the cases which are questioned in this writof error; Allen v. Sugrue (8 Barn, and Cres. 561); Young v. Turing (2 Man. and Gr.593); and Egginton v. Lawson, 1832; and Heme and Hay, 1842, cited by Sir F.Thesiger. Those cases have now been considered, for many years, as having settledthe law, and have been the basis on which contracts without number have beenformed, and they ought not on slight grounds to be departed from. The principlelaid down in these latter cases is this: that the question of loss, whether total or not,is to be determined just as if there was no policy at all; and the established mode ofputting the question, when it is alleged that there has been, what is perhaps impro-perly called, a constructive total loss of a ship, is to consider the policy altogether outof the question, and to inquire what a prudent uninsured owner [307] would havedone in the state in which the vessel was placed by the perils insur.ed against.

If he would not have repaired the vessel, it is deemed to be lost.When this test has been applied, and the nature of the loss has been thus deter-

mined, the quantum of compensation is then to be fixed. In an open policy, the compensation must be then ascertained by evidence.In a valued one, the agreed total value is conclusive; each party has conclusively

admitted that this fixed sum shall be that which the assured is entitled to receive incase of a total loss.

It is argued that this course of proceeding infringes on the generally receivedrule, that an insurance is a mere contract of indemnity, for thus the assured mayobtain more than a compensation for his loss; and it is so.

A policy of assurance is not a perfect contract of indemnity. It must be taken774


PINKUS V. RATCLIFF GAS CO. [ 1 8 4 6 - 4 7 ] I H.L.C., 308

with this qualification, that the parties may agree beforehand in estimating thevalue of the subject assured, by way of liquidated damages, as indeed they may inany other contract to indemnify.

The Lord Chancellor (July 23).My Lords, in this case of Irving v. Manning, which was before your Lordships a short time since, your Lordships called in theassistance of the learned judges. All the learned judges who were present at thehearing, were clearly of opinion that the judgment of the Court below was correct,and in that opinion all the noble and learned Lords who attended that hearing alsoconcur. I have therefore only to move your Lordships to afl&rm the judgment of theCourt below in favour of the defendant in error.

Lord Campbell.My Lords, I am extremely glad that a question which hasagitated Westminster Hall for the [308] last thirty years is at last solemnly decidedby a judgment of your Lordships. It is a question of great importance to the com-merce of this country. I entirely concur in the opinion expressed by my noble andlearned friend upon this subject.

My Lords, it appears to me that upon the just construction of this contract,the plaintiff was entitled to recover the sum which the jury has awarded him. Ifyou look at the contract, it seems to me that it was definitively determined that, forall purposes, the value of the ship would be taken at the sum of 17,500. Therewas nothing illegal in this contract; we have only to put a construction upon it,and if it be a just construction, and there is neither any rule of common law nor anystatute to prevent that construction being carried into effect, we are bound to giveeffect to it, and to pronounce in favour of the plaintiff below.

I repeat that I rejoice that this question, which has so long agitated WestminsterHall, is now for ever set at rest, and is satisfactorily decided.

Judgment affirmed, with costs.

[309] HENEY PINKUS,Appellant; THE RATCLIFF GAS-LIGHT and COKECOMPANY, GEORGE OFFOR, and others,Respondents [May 11, 12, 18,25, June 8, 15, 1846; July 21, 1847].

AgreementsSpecific performanceCompaniesLien.

The appellant having claimed to be a partner with one Paynter in gas works,which the latter had erected and was about to sell to a Company then about tobe formed, it was agreed between them, for the purpose of ending their dis-putes respecting the ownership of the gas works, that Paynter should be atliberty to sell the works at such price as he pleased, upon accounting to theappellant for the value of the works at a certain rate, and that Paynter shouldhold shares for the appellant in the company to the value of 2000 for twoyears. The Company having been formed, and having purchased the gasworks from Paynter, the appellant filed a bill against him, and obtained a decree for specific performance of their agreement. Before that decree wasmade, the Company was dissolved, and the gas works were sold to the RatcliffGas-light and Coke Company. The appellant then filed a new bill againstPaynter, the Ratcliff Company, the directors of the dissolved company, andthe assignees of Paynter, who had become bankrupt, to establish a lien uponthe gas works for what should be found due to him under the former decree,as well as to carry out the former decree against all these parties:

Held, by the House of Lords, affirming a decree of the Vice Chancellor, that thesale of the gas works by Paynter to the London Company was authorised bythe appellant's agreements; that he had no just claim against the Company,or lien on the property, and that the supplemental bill was properly dis-missed, with costs, as against all the defendants, except Paynter and hisassignees.

This was an appeal against a decree of the Vice Chancellor of England, in a suit775


Irving v Manning

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