Scottish Court of Session Decisions

The Collecting Societies and Industrial Assurance Companies Act 1896 enacts—section 3—“A forfeiture shall not be incurred by any member or person insured in a collecting society or industrial assurance company by reason of any default in paying any contribution, until after ( a) notice stating the amount due by him, and informing him that in case of default of payment by him within a reasonable time, not being less than fourteen days, and at a place to be specified in the notice, his interest or benefit will be forfeited, has been served upon him by or on behalf of the society or company; and ( b) default has been made by him in paying his contributions in accordance with that notice.”

Section 4 (1) and (2) are quoted in rubric.

Section (14) (1)—“It shall be an offence under this Act if … ( b) A person attempts to transfer a member or person insured from one collecting society or industrial assurance company to another without such written consent as is by this Act required.” ( c) is quoted in rubric.

The Salvation Army Assurance Society, Limited, 79 West Regent Street, Glasgow, being an Industrial Assurance Company within the meaning of the Collecting Societies and Industrial Assurance Companies Act 1896, with consent and concurrence of James Neil Hart, writer, Glasgow, Procurator—Fiscal of Lanarkshire, brought a complaint under the Summary Jurisdiction (Scotland) Acts 1864 and 1889 and the Criminal Procedure (Scotland) Act 1887 in the Sheriff Court at Glasgow against the British Legal Life Assurance Company, Limited.

The complaint set forth “That the British Legal Life Assurance Company, Limited, being an Industrial Assurance Company within the meaning of the said Collecting Societies and Industrial Assurance Companies Act 1896, and having their principal office at Seven Blythswood Square, Glasgow, did on or about the twenty-fourth day of December nineteen hundred and six receive proposals for insurance [each for a less sum than twenty pounds] upon the lives of Peter, Mary, David, Marion, and James Findlay, residing at Somerville Buildings, Cowdenbeath, and did on or about the 27th day of December nineteen hundred and six issue policies of insurance upon the lives of the said Peter, Mary, David, Marion, and James Findlay [each for a less sum than twenty pounds] while the said persons were insured with the complainers the Salvation Army Assurance Society, Limited, under policies of insurance dated the 29th day of November nineteen hundred and four [each for a less sum than twenty pounds], the fact of the said persons being insured with the complainers as aforesaid being well known to the said British Legal Life Assurance Company, Limited, or alternatively the said British Legal Life Assurance Company, Limited, having culpably failed to ascertain the fact of said insurance with the complainers, and that the said British Legal Life Assurance Company, Limited, did fail to give notice to the complainers the said Salvation Army Assurance Society, Limited, of the said proposals for insurance made to the said British Legal Life Assurance Company, Limited, which were proposals to be transferred from the said Salvation Army Assurance Society, Limited, to the said British Legal Life Assurance Society, Limited, within the meaning of the said Collecting Societies and Industrial Insurance Societies Act 1896, and that within seven days from the date of said proposals and since, contrary to the said Collecting Societies and Industrial Assurance Companies Act 1896, sections 4 and 14, and contrary to the Friendly Societies Act 1896, sections 86, 89, 91, and 102, whereby the said British Legal Life Assurance Company, Limited, is liable to the complainers” in certain penalties specified.

The Sheriff-Substitute ( A. O. M. Mackenzie) after a proof assoilzied the respondents, holding that James Findlay and his wife and children were not, in the sense of

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the Act, transferred or sought to be transferred from the complaining society to the respondent company.

In a stated case on appeal the following facts were set forth as proved—“1. In the year 1904 James Findlay, who then lived at Portobello, effected insurances on the lives of himself, his wife, and his children Peter, Mary, and David, with the complaining society.

“2. In the summer of 1906, James Findlay moved his home to Cowdenbeath, in the County of Fife. Soon after his arrival there the respondents' agent at Cowdenbeath, Matthew Ferris, called upon him and asked whether he was insured. Findlay replied that he was insured with the complainers, and the respondents' agent thereupon left him without making any attempt to induce him to effect an insurance with the respondent company.

3. In September 1906 Findlay approached the respondents' agent Matthew Ferris with proposals for insurance on his own life and the life of his wife, and these proposals having been accepted, the proposed insurances with the respondent company were effected. The benefits secured and the premiums payable under these insurances were different from the benefits secured and premiums payable under Findlay's insurances with the complaining society.

4. From September to December 1906 Findlay paid the premiums due on his insurances with both insurance companies, but in December, having become dissatisfied with the attention he was receiving from the complainers' collectors, he resolved to leave the complainers' society, and intimated this resolution to one of their collectors. The premiums due to that society had generally been collected once a fortnight, and the last payment by Findlay was made on 10th December 1906. His intimation to the complainers' collector, just referred to, was made in the course of the following week.

5. Shortly after giving this intimation Findlay requested the respondents' agent—the said Matthew Ferris—to call upon him, and the agent having done so Findlay proposed to him that he should take over the insurances which he had with the complaining society. The respondents' agent at first declined on the ground that his company did not do transfer business, but on Findlay explaining that it was not a transfer which he was proposing, but that he was leaving the complainers, and had stopped paying them premiums, the respondents' agent proceeded to consider the application. Findlay further informed the respondents' agent that his company might have the business if they would secure him in immediate benefits of £12, 10s. on his own life and £12 on the life of his wife, at weekly premiums of 2 1 2d. and 2d. respectively. These were the same benefits as Findlay was entitled to under his insurance with the complainers' society. It was not proved that Findlay told the respondents' agent this. The respondents' agent made no inquiry either at this or any other time as to whether Findlay's insurance with the complainers' society had or had not lapsed.

6. The terms asked by Findlay being more favourable to the insured than those provided in the general tables of the respondent company, it was beyond their agent's authority to accept them on his own initiative. He accordingly reported the matter to the district superintendent of the company, who visited Cowdenbeath about this time. He informed the superintendent that Findlay had been insured with the complainers but had ceased to be a member of their society.

7. On receiving the agent's report the district superintendent of the respondents' company, accompanied by the agent, interviewed Findlay in regard to his application, and medical reports as to the good health of Findlay and his wife having been obtained, they, on 21st December 1906, took from Findlay a proposal in writing for insurance on his own life and the lives of his wife and his children Peter, Mary, and David. The benefits stipulated for were substantially identical with those secured by Findlay's insurance with the complainers' society, and the weekly premiums payable were the same.

8. Having received this proposal, the respondents' agent and superintendent forwarded it, along with the medical reports already mentioned, to the district office of the company at Edinburgh, with the recommendation that it should be accepted. The proposal bore a note that the proposed insurances on the lives of Findlay and his wife were second assurances, the reference being to the insurances effected by Findlay with the respondent company in September 1906.

9. The proposal was subsequently forwarded from the Edinburgh office, with the recommendation of the local manager, to the head office in Glasgow, and there submitted to the directors of the company, who sanctioned its acceptance, after which policies were issued on 27th December. The insurances in question were not based on the tables contained in any public prospectus issued by the respondents, but on tables issued for the private information of agents of the company.

10. Neither the Edinburgh office nor the head office were informed that Findlay had been insured with the complainers' society.

11. No notice of Findlay's application was given by respondents to the complainers.

12. At the time when the policies were issued by the respondent company, Findlay's insurances with the complainers had not lapsed. They did not lapse till February.”

The questions of law for the opinion of the Court were—“1. Upon the facts above stated to have been proved, were James Findlay and his family transferred, or sought to be transferred, from the complaining society to the respondent company, within the meaning of sec. 4 (2) of the Collecting Societies and Industrial Assurance

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Companies Act 1896? 2. Upon the facts above stated as proved, were the respondent company rightly assoilzied from the complaint?”

Argued for the complainers (appellants)—In the circumstances disclosed the respondents' company were bound to give notice to the appellants' company, and having failed to do so had committed an offence against section 14 (1) ( c), and were liable in a penalty. Under that section notice had to be given whenever a “person is sought to be transferred” from one society to another. That occurred as soon as one company took any steps to obtain the custom of a person already insured with another company whether they ultimately were successful in obtaining his custom or not. The object of this notice was to enable the original company to consider whether they would in the existing circumstances give their customer the notice which was necessary under section 3 in order to terminate their liability. “Transfer” referred to transference of business or custom or hope of custom rather than transference of the individual. A person, accordingly, might be “transferred” from company A to company B if, being a customer of company A, he became a customer of company B, even although he still remained insured in company A. The substitution of company B for company A was not necessary— Pearl Life Assurance Company, Limited v. Scottish Legal Life Assurance Society, Limited, [1901] 1 K.B. 528. Even, however, if it were necessary before there could be a “transfer” that there should be a substitution, there was a substitution here, for Findlay stopped his contributions to the complainers' society and effected, to take their place, insurances with the respondents' company on terms similar to those which had been given him by the complainers' society, and which were more favourable than those usually granted by the respondents' company. He in fact changed over from the complainers' society to the respondents' company. The fact that the head office was ignorant that Findlay was already insured with another company, and that there was nothing fraudulent in the motives of their agent, were quite immaterial, except indeed as bearing upon the amount of the penalty which the Court might think it proper to impose.

Argued for the respondents—Findlay and his wife and family were not “transferred” or “sought to be transferred” in the sense of the statute. Accordingly, no notice was necessary and no offence had been committed. The word “transfer” fell to be construed in its natural meaning, and that involved a change from company A to company B, the substitution of one for the other. Here there was nothing except an entering into an additional contract, and there was nothing in the statute to prevent a person being insured in a dozen different companies if he so desired. Section 3 was conceived solely in the interest of the insured. The statute was a penal one and fell to be strictly construed. All that the Pearl Life Assurance Company, Limited v. Scottish Legal Life Assurance Society, Limited ( cit. sup.) decided was that the mere fact that there might be policies actually co-existent in two societies at one time did not make it impossible that there might be an attempt to transfer from one to the other within the meaning of the Act. It was noticeable in the present case that there was no suggestion of any fraudulent intention.

At advising—