Scottish Court of Session Decisions

The summons in this suit, at the instance of Robert Forrester of Carbeth, and Messrs George Cowie & Sons, Airdrie, and Archibald and Richard Cowie, sole partners of the firm of Cowie & Sons, against Mrs Forrester or Robson, widow of the late Robert Robson, coalmaster, Glasgow, and the other trustees and executors of the said Robert Robson, concluded for declarator that it “ought and should be found and declared, by decree of the Lords of our Council and Session, that the pursuers, in the proportions of 4–7ths to the pursuer Robert Forrester, and 3–7ths to the other pursuers, are entitled to, and to be paid, the sum of L.3570, 9s. 4d. sterling, being the proceeds of a policy of insurance on the life of the said Robert Robson with the English and Scottish Law Life Assurance Association for the sum of L.5000, numbered 12,954, and dated 22d December 1870, after deducting therefrom the sum of L.1429, 10s. 8d., being the balance remaining due to the said Assurance Association at 27th October 1874, of an advance made by them to the firms of Forrester & Robson, coalmasters, Glasgow, and the said George Cowie & Sons, in security of which advance the said policy was assigned to said Assurance Association, and which sum of L.3570, 9s. 4d. was deposited in the joint names of the pursuers' and the defenders' agents with the British Linen Banking Company, Edinburgh, on said 27th October 1874, and the interest that may accrue thereon from 27th October 1874 till payment.”

The facts, so far as material, are set forth in the following interlocutor of the Lord Ordinary:—

“3 d February 1875.—The Lord Ordinary having heard counsel for the parties, and considered the proof, record, and conjoined processes, in the action at the instance of Robert Forrester and George Cowie & Sons, repels the defences for Robson's Trustees, and finds, decerns, and declares in terms of the conclusions of the summons; and in the relative counter action at the instance of Robson's Trustees, sustains the defences, assoilzies the defenders Robert Forrester and George Cowie & Sons from the conclusions of the action, and decerns: Finds the defenders, Robson's Trustees, liable in expenses in both actions; and remits the account thereof, when lodged, to the auditor to tax and report.”

“ Opinion.—The material facts of this case are hardly disputed on the record, and in the debate after the proof the parties were quite agreed upon them. They are as follows:—The companies of Forrester & Robson and George Cowie & Sons having occasion to borrow L.3500, applied to the Scottish Law Life Assurance Office, who agreed to lend them the money on the security of a policy of insurance for L.5000 on the life of Robert Robson, one of the partners of the former company, the money being repayable by instalments in five years. The policy was accordingly opened and assigned

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to the Association, who lent the money in December 1870. The companies were interested in the loan in the proportions of 4–7ths to Forrester & Robson, and 3–7 ths to George Cowie & Sons; and in these proportions they were liable inter se, and have paid the interest and premiums, and such of the instalments of principal as have been paid.

The policy is in its terms undistinguishable from one which Robert Robson might have opened on his life for behoof of his executry, but there is no doubt that it was in fact opened (with Robson's knowledge and assent) by the two companies to serve as a security for the loan to them, in pursuance of the arrangement with the assurance office, and that they have paid the premiums and other charges in connection with it. Robson's life was selected, because he being the youngest partner of either company his life was insurable at a lower premium.

The company of Forrester & Robson was dissolved as at 31st December 1872, on the terms specified in the agreement of 7th March 1873, between Robert Forrester (one of the pursuers) and Robert Robson, who were the only partners. These terms are stated in condescendence 7—the import of them being that Robson should retire with a certain sum of money, and that Forrester should have the company property and take their obligations. There is no doubt that Forrester was thereafter, as in a question with Robson, exclusively liable for Forrester and Robson's share of the interest, premiums, and principal connected with the loan, and that he met his liability accordingly.

Robson died (aged about 30) on 13th June 1874, leaving a settlement, under which the defenders, as his trustees, have right to his estate. By this event the policy on his life realized L.5000, and the assurance office have consigned the amount for behoof of whom it may concern, under deduction of L.1429, 10s. 8d., being the balance of principal and interest remaining due to them on the loan, in security of which it was pledged to them. The money is claimed, on the one hand, by the pursuers, in the proportion of 4–7ths to Forrester, as in right of the dissolved company of Forrester & Robson, and 3–7ths to George Cowie & Sons; and on the other, by the defenders under Robson's settlement. In a relative action at their instance, the defenders insist that the pursuers (defenders in that action) shall pay the balance due on the loan, to the effect of enabling them to draw the full amount of the policy.

The question is, to whom the policy belongs; and I am of opinion that it belongs to the pursuers in the leading action—viz., Forrester and George Cowie & Sons; and that the defenders have no right to it, or good claim under it. It was opened and kept up by the pursuers at their own expense, and for their own purpose, as a security for the loan which they obtained from the assurance association. Robson, while a partner of Forrester & Robson, had of course his share of the interest effeiring to that company, but on the dissolution of the company, when he was paid out and retired in favour of Forrester, the whole of that interest, with the corresponding liability, attached to Forrester alone. Nor do I attach importance to the circumstance that in the state made up at the time of dissolution the policy is not entered as a company asset, for at that time it had no surrender value, and was of no appreciable value in the market, but was in truth a burden necessary to be borne in connection with the loan.

A life insurance is generally a very expensive kind of security, but it has a speculative element which may possibly (however greatly the chances are against it) render it very profitable to the borrower; for ordinary calculations may be falsified by the premature death of the assured, to the effect of enabling the borrower to pay the debt thereby secured, with the proceeds of a policy on which he has paid only a single premium. If in the present case Robson had died immediately after the loan was made and the policy opened, I cannot think it doubtful that the proceeds of the policy would have been applicable in payment of the debt, to the exclusive benefit of the borrowers, and that his executors could not have maintained a claim against them on the footing that their debt was in truth paid out of the estate of the deceased, which had passed to them. Then, if the policy was theirs to the extent of the debt for which they opened and pledged it, I am unable to find a principle for holding that the amount of the debt was the limit of their right, and that anything in excess belonged to others.

“According to the actual facts, the debt when the policy became payable had been reduced to L.1429, 10s. 8d. I am clearly of opinion that to this extent the policy is available to the pursuers; and being unable to divide the interest in it, either according to the original amount of the debt, or the amount remaining unpaid when it fell due, I am constrained to find that it is entirely the property of the pursuers, and that the defenders have no right to it. It has unexpectedly, and contrary to ordinary calculations, turned out a valuable property, by reason of the premature death of Robson; but, on what I conceive to be sound and established legal principles, I must give the benefit to those who paid for it, although having considerable sympathy with the family whose interests are represented by the defenders; for undoubtedly the premature death of their husband and father Was the immediate event which brought unexpected gain to the pursuers.”

The defenders reclaimed.

Authorities cited— North Brilith Assurance Coy., 3 Macpb. 1; 14 Geo. III., c. 48; Lindsay, 13 D. 718; Countenay, 2 Giffard 337; Clark on Partnership, i. 176; Baptist Churches—M. 16, 197; Tait on Evidence, 310; Dickson, 577.

At advising—