Scottish Court of Session Decisions

William G. Brown, hotel-keeper, Uddingston, Lanarkshire, raised this action against the National Fire Insurance Corporation, Limited, concluding for payment of £1602, 18s, or otherwise that it ought and should be found that under the policy of insurance over his furniture and other effects the defenders were bound to concur in referring to arbitration the amount of damage occasioned thereto by a fire in his hotel at Baillieston in July 1884.

The pursuer averred (Cond. 2)—“On or about the 3rd day of May 1882 the defenders granted to pursuer a policy of insurance against loss by fire to the amount of £1850 over the following property, then situated in the premises occupied by pursuer in Baillieston as a hotel, &c., viz.—

1. On household goods, linen, wearing apparel, printed books, plate-glass, and earthenware, including looking-glasses, jewels, watches, and trinkets, musical instruments and printed music, pictures, prints, and drawings, no one picture, print, or drawing, in case of loss, to be valued at more than £10 in the insured's hotel, situated as above	£1000	0	0
2. On stock-in-trade therein, including a cellar in sunk flat	450	0	0
3. On upfittings and utensils, the property of the insured therein	150	0	0
4. On horses (no one of which to be valued at more than £35 in case of loss), harness, stable utensils, and fodder in stable, situated in yard at rear of hotel	125	0	0
5. On carriages in the coach-house situated in said yard	125	0	0
Amounting in all to the sum of	£1850	0	0”

He alleged that the premiums were duly paid, and that the policy was in force on 15th July 1884; that a fire occurred in the premises on that date, by which the buildings and their contents were entirely destroyed, two horses and the carriages and some harness being alone saved; that the value of the furniture, &c., was greatly in excess of the amount insured under the policy, but that the sums claimed were restricted to the amount insured. The sum sued for was thus made up:—

On household goods	£1000	0	0
On stock-in-trade	450	0	0
On upfittings and utensils	150	0	0
On harness	2	18	0
	£1602	18	0

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The pursuer averred—“(Cond. 5) In terms of the printed conditions of said policy the pursuer gave a due notice to the defenders, and delivered to them a particular account of the several articles destroyed by said fire, with the estimated value of each article, together with all the documents and vouchers in his possession or procurable, and with full explanations and particulars of the goods, &c., destroyed, and he offered further to establish by proof the value of the said goods, &c. He also furnished the defenders with a statutory declaration of the truth of the account furnished by him. With reference to defenders' statement, it is explained that the defenders have declined to accept pursuer's offer of parole proof, and that the pursuer has given to defenders all other proofs, and all vouchers and explanations as can reasonably be required by them. Reference is made to next article. The defenders' allegation that the pursuer's claim is false and fraudulent, or wilfully and fraudulently overstated, is denied, and the defenders are called upon forthwith to withdraw the same.” “(Cond. 6) Shortly after the said fire the defenders, under their powers to that effect contained in said policy, took possession of the premises, including the stables and salvage. They further, however, most unreasonably and unwarrantably stopped the business of the posting establishment carried on by pursuer, and refused to allow him to interfere with or carry on the same. Further, having obtained access to and possession of the premises as before mentioned, they most unwarrantably and unjustifiably refused to cede possession of the same to the pursuer; and, on the contrary, in spite of the warnings and protests of the pursuer, they retained possession until 5th November 1884, when they gave pursuer intimation that they did not intend longer to retain possession. The pursuer was thus wholly prevented from resuming possession of the premises, and having the same rebuilt, and the business therein resumed. The pursuers' claim for damages thereby caused is specially reserved.”

The pursuer further averred that the defenders had not paid any part of his losses; that in the course of much correspondence and of many meetings he had furnished all the information as to the value, &c., of the furniture in his power, but that all vouchers, receipts, and accounts had been destroyed in the fire. He alleged that he was ready, and had frequently offered, to refer the matters in dispute to arbitration.

The defenders averred—“(Stat. 1) By the 5th article of the conditions of the said policy it is provided that on the occurrence of any loss by fire to the property thereby insured, the insured is forthwith to give notice in writing thereof to the defenders, and within fifteen days to deliver to them a particular account of the articles so damaged or destroyed, and ‘in support thereof to give all such vouchers, proofs, and explanations, and other evidence as may be reasonably required by or on behalf of the corporation, together with (if required) a statutory declaration of the truth of the account, and in default thereof, no claim in respect of such loss or damage shall be payable or sustainable unless and until such notice, account, proofs, and explanations, or evidence respectively shall have been given and produced, and such statutory declaration (if required) shall have been made.’ The 6th article of said conditions specially provides that if the claim be in any respect fraudulent, or if any false statutory declaration be made or used in support thereof, or if the fire be occasioned by or through the procurement or connivance of the insured, all benefit under this policy is forfeited.” They also averred that the claim the pursuer sent in a few days after the fire stated his loss at £2252, 14s. 6d., including “Money, £141, 7s. 6d.,” which was not covered by the policy in question, that this was largely in excess of the sum insured, and that they, in terms of the fifth condition of the policy, called upon the pursuer to make a statutory declaration of the truth of the same, which he did on 5th August thereafter, and which statutory declaration was produced; that on receipt of the declaration they (defenders) made out a list of the pictures enumerated by the pursuer in his said claim, and required him to furnish them with the names of the artists and subjects thereof, as well as the date and place of purchase by him, but he had paid no attention to this request. “The defenders further, through their fire assessor, Mr Langley, have repeatedly required the pursuer to furnish them with any vouchers, proofs, explanations, and other evidence of the existence and value of the other articles of property for which he claims, but have been unable to obtain such from him, except to a very small extent, and for very small amounts. With regard to the amount claimed for furniture, he has informed them that he bought from the proprietor of the Commercial Hotel, Baillieston, when he took it over from its then proprietor in 1882, furniture to the value of £138, and from Mr Quinton the furniture of his house in Uddingston for £130, and that he had also at that time furniture of his own which was then insured for £200—amounting only to a sum of £468. With respect to the item ‘stock-in-trade,' while the pursuer has furnished vouchers for goods purchased by him for twelve months previous to the fire, he has not produced any for goods sold, and he has produced no vouchers or evidence of any kind with regard to the pictures for which he claims. On his policy over the buildings with the North British and Mercantile Insurance Company the pursuer accepted the Company's offer to reinstate, and has since, accordingly, received the sum of £650 as for reinstatement. (Stat. 4) The defenders believe and aver that the said claim is largely in excess of the real value of the articles destroyed, and that the said claim as made is false and fraudulent, or at least wilfully and fraudulently over-stated. In any event, the pursuer is bound to furnish the defenders with reasonable evidence of the existence and value of the articles in respect of which he claims under the policy, in terms of the conditions thereof, and as a condition-precedent to his recovering thereunder.”

The pursuer pleaded that he was entitled to decree for the sum concluded for under his policy, or otherwise that the defenders were bound to enter into a reference of terms of the policy of insurance.

The defenders pleaded—“(1) The pursuer having failed to fulfil and implement the conditions of his policy, is not entitled to recover. (2) The pursuer having made a false and fraudulent claim, and made and used a false statutory declaration

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in support thereof upon the defenders in respect of the policy founded on, has forfeited all benefit thereunder. (3) The pursuer not having sustained the loss libelled, is not entitled to recover the sum sued for, and the defenders are entitled to absolvitor, with expenses.”

The following was the clause of arbitration annexed to the policy:—“Where the corporation do not claim to avoid their liability under the policy on the ground of fraud, but a difference shall at any time arise between the corporation and the insured or any claimant under this policy, as to the amount of any loss or damage by fire, or as to the fulfilment of any of the conditions herein set forth, or as to any question, matter, or thing concerning or arising out of this insurance, every such difference, as and when the same arises, shall be referred to the arbitration and decision of two indifferent persons, one to be chosen by the party claiming and the other by the corporation, or in case of disagreement between them, then of an umpire to be chosen by the arbitrators before entering on the reference, and the costs of the reference shall be in the discretion of the arbitrators or umpire as the case may be, who shall award by whom and in what manner the same shall be paid, and the decision of the arbitrators or umpire, as the case may be, shall be final and binding on all parties, and this condition shall be deemed and taken to be an agreement to refer as aforesaid; and it is hereby expressly declared to be a condition of the making of this policy and part of the contract between the corporation and the insured that where the corporation do not claim to avoid their liability under the policy on the ground of fraud as aforesaid, the party insured or claimant shall not be entitled to commence or maintain any action on this policy till the amount due to the insured shall have been awarded as hereinbefore provided, and then only for the sum so awarded, and the obtaining of such award shall be a condition-precedent to the commencement of any action upon the policy.”

The defenders obtained leave from the Lord Ordinary to add to their statement of facts after the words “articles destroyed,” in article 4 quoted supra, “and also that it includes a considerable number of articles which were not in fact on the premises at the time of the fire;” and after the words “wilfully and fraudulently overstated,” “to the knowledge of the pursuer. They also aver that the said statutory declaration, made and used by the pursuer in support thereof, was in material respects false, in the knowledge of the pursuer.”

The Lord Ordinary adjusted the following issue and counter issues— Pursuer's Issue:—“It being admitted that the defender, by a policy dated 3d May 1882 which was in force in July 1884, insured the household goods, fittings, and utensils, stock-in-trade, horses, harness, carriages, and others situated in the hotel and relative offices in Bailliestown, occupied by the pursuer, to the extent of £1850 against loss by fire; and it being further admitted that on or about 15th July 1884 a fire took place in said hotel and offices, in consequence whereof the household goods, stock-in-trade, fittings, utensils, and harness therein, were destroyed or damaged in whole or in part—Whether the defenders are indebted to the pursuer under the said policy in the sum of £1602, 18s., or any part thereof, for loss and damage sustained by the pursuer in consequence of the said fire?”

Counter Issues:—“It being admitted that the policy founded upon in the action was granted subject to the following condition, viz., ‘If the claim be in any respect fraudulent, or if any false statutory declaration be made or used in support thereof, all benefit under this policy is forfeited’—(1) Whether the claim made by the pursuer for loss under the said policy is in any respect fraudulent? (2) Whether the statutory declaration made and used by the pursuer in support of his said claim was false within the knowledge of the pursuer?”

The pursuer reclaimed, and argued—The defence was irrelevant, being barred by the arbitration clause in the policy; it was also bad from want of specification. There being no relevant averment of fraud on record the counter issues could not be allowed.

The defenders argued—The pursuer had not given them the information required in terms of the policy with regard to the particulars of his loss; they were unable to specify what particular items in the pursuer's claim were not actually on the premises, and what were fraudulently overvalued; they were entitled on the 6th condition of the policy [above quoted] to a general issue of fraud; the counter issue proposed was similar to that proposed and approved by the Court in the case of M'Kirdy v. North British Insurance Company, Jan. 28, 1858, 20 D. 463. They also referred to the case of Campbell v. Aberdeen Fire and Life Assurance Company, June 12, 1841, 3 D. 1010.

The Court having expressed an opinion that the defenders ought to make their allegations of fraud much more specific, the defenders proposed to make the following addition to their statement of facts:—“The defenders believe and aver that the pursuer paid to Mr Quinton for the furniture purchased from him only £30 or £40; and the articles enumerated in the pursuer's claim (exclusive of pictures and photographs), which they have been able to identify as included in the said purchase, are valued in the said claim at over £100, and are thus grossly and, as the defenders believe and aver, fraudulently over-estimated. The defenders have been unable to identify in the said claim all the articles of furniture and fittings included in the purchase by the pursuer from the former proprietor of the Commercial Hotel. The articles which they have succeeded in identifying (exclusive of show-cards and pictures) are valued in the said claim at about £125, 9s., which the defenders believe to be greatly in excess of their real value. The defenders have further ascertained and believe that the said claim contains other and various items which were not in fact on the pursuer's premises at the date of the fire. So far as the defenders have been able to identify these, they amount in value, as stated in the said claim (but exclusive of pictures as before), to the sum of at least £200. The aggregate value of the pictures claimed by the pursuer is £331, 12s. 6d. The defenders have made every inquiry as to the actual value of the pursuer's pictures, and have failed to find the slightest evidence that he possessed anything like such an amount of property in pictures, or indeed that he possessed any valuable

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pictures at all. They believe and aver this portion of the claim to be grossly and fraudulently over-estimated to the extent of at least £300. The pursuer also claims for a considerable number of show-cards, of the value as estimated by him, of £8, 9s. 6d., which were gratuitously supplied to him by the respective traders for exhibition in his premises, and did not belong to him. The defenders herewith produce and refer to a copy of the said claim marked with respect to the foregoing classification, showing, as far as they are able to do so, the items before specified under the foregoing heads.”

The Court allowed the amendment to be made, adhered to the interlocutor of the Lord Ordinary, and reserved the question of expenses in the Inner House.