Scottish Court of Session Decisions

On 5th August 1871 George Moir, cattle dealer, made a proposal to the Scottish Widows' Fund and Life Assurance Society for a policy of assurance on his own life for the sum of £1000. The proposal consisted of certain printed queries and answers thereto filled in by Mr Moir, and of

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a relative declaration signed by him. The answers given by Mr Moir to the said queries, which related to his habits and state of health, represented him as of sober and temperate habits, and made no mention of any previous illness except a severe cold from which he had suffered two years previously, and for which Dr Watson had attended him. In answer to further queries put to him by the pursuers' medical officer, Moir stated that he had suffered from “an eruptive complaint two years ago, attended by Dr P. H. Watson, Charlotte Square;” and the only other statement of any weakness made by him was that he was deaf, and that the deafness had existed since scarlet fever in childhood. In reliance on the said declaration and statements made by Mr Moir as aforesaid, and on the faith of their being true, the pursuers issued to him a certificate or policy on his life, dated 16th August 1871, No. 33,469, for the sum of £1000. It was provided and declared by the said policy that in case it should thereafter appear that any untrue averment was contained in the said declaration as to the age, state of health, or description of the said George Moir, the certificate or policy should be void, and all claim to any benefit out of or interest in the funds of the Society in virtue of the policy should cease and determine, and all monies that might have been paid in consequence thereof should belong to the Society. By assignation, of date 21st March 1872, Mr Moir, in consideration of a sum of £112 paid to him, assigned the said policy to the defenders.

The assured, Mr Moir, died on 28th June 1875. It was averred by the pursuers that his death was the consequence of certain complaints from which he had suffered from time to time, and which he had concealed from them in effecting his insurance, and besides, that these complaints were aggravated by loose habits and drunkenness, of which the pursuers had been kept in ignorance. They therefore brought a reduction of the policy and the assignation thereof. Their averments were generally denied by the defenders, who averred that the said George Moir, with the exception of his deafness, was in unimpaired health, and sound in all his vital organs.

The Scottish Equitable Insurance Company and the General Life and Fire Assurance Company also brought reductions of policies granted by them to Moir, on similar grounds. Their policies had also been assigned to various assignees.

The Lord Ordinary pronounced the following interlocutor in all of these cases:—“The Lord Ordinary, in respect that this cause was sent to the Procedure Roll for the purpose of hearing and determining upon the prejudicial pleas in law for the defenders, and in respect that the defenders do not now insist in these pleas as an objection to leading proof, Finds the defenders liable in the expenses thereby occasioned, modifies the same at the sum of £3, 3s., and decerns; and, on the motion of the pursuers, allows the parties a proof of their respective averments, so far as not admitted; appoints the proof to take place before the Lord Ordinary within the Parliament House, Edinburgh, upon Wednesday the 12th day of July next, at ten o'clock forenoon, and grants diligence at the instance of each of the parties for citing witnesses and havers.”

The defenders reclaimed, and asked that the case might be tried by a jury. It appeared, however, to the Court that before deciding this point it would be advisable to dispose of the following prejudicial pleas of the defender—“1. Any misstatement or omission on the part of the assured, even if made, although it might have furnished a good objection against him, cannot affect the policy in the hands of onerous assignees. 2. The pursuers having held out their policies to the public as good and valid investments for purchase or loan, are barred from objecting to the claims of onerous assignees on the ground of omission or misstatement by the assured. 5. The assured having given a reference to a medical man, from whom information might have been received, and the pursuers not having availed themselves of said reference, they cannot now object to the policy in the hands of onerous assignees. 8. The statements made by the pursuers are not relevant even against the assured, much less against onerous assignees, and the summons should be dismissed, with expenses.”

It was also suggested by the Court that the pursuers should alter their first plea; it was therefore altered and read as follows—“The truth of the statements and answers made by Mr Moir as aforesaid having been warranted by him, and these statements and answers being untrue, the said policy and the assurance bearing to be thereby effected are void, in terms of the stipulations to that effect, and the same ought to be reduced, with all that has followed thereon.”

The defenders accordingly argued in support of the 1st and 2d pleas—These pleas, no doubt, seem to controvert the maxim assignatus utitur jure cedentis; but the origin of that maxim is in the fact that assignations were originally in the form of procuratories, and in that state of matters, the assignee being procurator of the cedent, was liable of course to all exceptions competent against his author. That rule was by Statute 1621, cap. 18, declared not to hold good in regard to heritable subjects, for in such a case the records may be relied on. The course of commerce demanded a similar relaxation of the rule in the case of moveables acquired for an onerous cause, and accordingly it is laid down both by Stair and Erskine that the rule does not apply there either. With regard to personal bonds and contracts, the rule had again been relaxed by the House of Lords in the case of Redfearn. It is so distinctly recognised in the present day that an assignee is no procurator for the cedent, but has a right in his own person, that the Court should be unwilling to apply the rule, especially where the assignee is an assignee for onerous causes. Between such an assignee and a singular successor, or one who acquires the right gratuitously, Bankton and our institutional writers draw a very broad distinction. The condition here as to the voiding of the policy is truly a latent condition. The insurance companies hold out their policies to the public as a safe investment, and make no disclosure to the assignees of the relative declarations and answers. The reasons that prompted the decision in Redfearn's case will apply strongly here, viz., the inconvenience and oppression of trade, which it would cause to hold the assignee liable

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to such objections. The English decisions are not applicable, for till the passing of the Statute 30 and 31 Vict. cap. 144, no choice in action was assignable. That was an absolute rule not liable to any of the exceptions introduced with us by statute or custom.

In support of the 5th plea it was argued—An assignee is entitled to rely on the Insurance Company having taken due precautions and having made the necessary inquiries; this is part of the contract which they must fulfil. If they had known the facts they must have been liable. It is the same thing that they might have known them.

Authorities—Bankton, vol. ii. p. 191, No. 8; Pandects, rule 175; Kames' Elucidations, art. ii; Brodie's Stair, i. 10, 16, with Brodie's Note, p. 219; Stair, iii. 1, 2-3, and iv. 40, 21; More's Stair, p. 788; Erskine iii. 5, 10,; Somerville v. Redfearn, 1 Dow 5, and 6 Pat. App. 707; Bell's Com. vol. i. p. 302, note 5; Bunyan on Life Insurance, p. 36; Philips on Law of Insurance, vol. i. p. 507; Biglow on Estoppel, p. 526; York Buildings Co., M. 10,466; Walch v. Etna Life Insurance Co., American Reports, vol. vi. p. 664; Armstrong v. Turquand, 9 Irish Common Law Reports, p. 32.

The pursuers argued against the 1st and 2d pleas.—(1) This is no exception to the general rule of assignatus utitur jure auctoris. There are to that rule only three classes of exceptions—1. in heritable rights; 2. in corporeal moveables; 3. in commercial documents which are negotiable by transference. The case of Redfearn is not a condemnation but a confirmation of the rule. What was decided in that case was that a latent quality in the cedent, e.g., a trust, could not be transmitted so as to affect an onerous assignee. That all exceptions competent to the original debtor against the original creditor are competent against the assignee, was strongly set up by that case. It is not correct to say that it is because the assignee is viewed by our older institutional writers as a procurator that the rule is applied. “Assignee” means something quite different to Stair and Bankton. (2) The condition here was not latent but patent. It was the right and the duty of the assignee to see all the documents referred to in the policy, and even if he be free from objections which were latent, he cannot be free from objections which were patent on the face of the contract. Such an objection would be good even in the case of a bill. If the indorser writes on the bill “without recourse,” that is good against any holder.

Against the 5th plea it was argued—The position of the onerous assignee is the same as that of the cedent, and it would be no plea on his behalf. The statement with reference to Dr Watson is not impeached, and therefore it is quite immaterial whether the Insurance Company went to him or not.

Authorities—Stair iv. 40, 21, last two paragraphs; Erskine and Bell's Com. as above; Redfearn's case, as above; Bell's Prin. 1468; Menzies on Conveyancing, p. 264; Muir v. Calder, M. 831; Forbes v. Edinburgh Life Assurance Co., 10 Shaw 451; British Equitable Insurance Co. v. Great Western Railway, 38 L. J. 133 and 134 (Chancery); Scottish Amicable Insurance Co. v. Fuller, 16 Weekly Reports, p. 274; Dornsay v. Borrodaile, 10 Beavan 335; Bunyan on Life Insurance, p. 219; Philips on Insurance, p. 61.

At advising—