House of Manji Ltd v.

Liverpool Marine Insurance Co Ltd

[1964] 1 EA 693 (SCK)
[1] Insurance Liability insurance Illegality Goods Insurance against loss of or damage
to goods in transit Carriage of manufacturers goods by contractor Licence required by
contractor to carry goods for reward Vehicle unlicensed for carriage on hire Accident to
vehicle Goods lost or damaged Claim for damages Whether breach by contractor of
statutory requirement vitiates insurance.

Editors Summary
The plaintiffs were manufacturers of biscuits which they distributed for sale throughout East
Africa. In 1958 they arranged with the defendants to insure their products whilst in transit to
their customers by road, rail or air by means of a marine insurance open cover contract by
which the plaintiffs were bound to declare each and every shipment of goods to the defendants
and in respect of each of which the defendants would issue a policy. In practice the defendants
used to issue a certificate of insurance for each shipment which it was agreed had the same effect
as a policy. In May, 1961, the plaintiffs despatched a consignment of biscuits from Nairobi to
Kampala by a contractors lorry. It was common ground that the transporter had no B licence
for the vehicle as required by s. 4 of the Transport Licensing Act [K.] and in their declaration the
plaintiffs did not specify the vehicle as they should have done. The defendants duly issued a
certificate of insurance for the consignment. Before it reached its destination the lorry was
involved in an accident as a result of which a portion of the consignment was damaged, and a
number of cartons and tins of biscuits disappeared. The plaintiffs claimed damages for which the
defendants said they were not liable on the grounds that the carriage was illegal and that the
plaintiffs failure to inform the defendants that unlicensed transport would be used was nondisclosure of a material fact.

Held
(i)
the plaintiffs were well aware that unlicensed transport was being normally
employed by them and they were aware of it in the particular case with which the suit was
concerned;
(ii)
the breach of the statutory requirement contained in s. 4 of the Transport
Licensing Act [K.] went to the root of the enterprise or adventure and was not merely collateral
to it;
(iii)
the defendants were not liable to pay damages to the plaintiffs since an unlicensed
lorry was used to transport the goods;
(iv)
there was insufficient evidence to show that the employment of unlicensed
transport involved any substantial increase of the risk; accordingly the defendants had failed to
show that the failure of the plaintiffs to inform them that unlicensed transport would be used was
non-disclosure of a material fact.
Action dismissed.

The plaintiffs accordingly claim against the defendants for the damage and loss amounting in all
to Shs. 8,094/89.
The defendants resist the claim on three grounds:
(a)
illegality of the carriage;
(b)
non-disclosure of a material fact; and
(c)
breach of an implied term that the carriage should be legal.
Livio Carli and others v Salem and Mohamed Bashanfer and others
[1959] 1 EA 701 (SCA)
[1] Sale of goods Sale by description Goods not in accordance with description Goods
rejected by buyer Whether buyer entitled to reject goods.
[2] Insurance Marine insurance Insurance by buyer of goods Goods insured rejected by
buyer Goods damaged while lying at wharf Endorsement of policy to seller by buyer after
goods rejected and after loss sustained Whether buyer has any interest in policy after rejecting
goods English Marine Insurance Act, 1906, s. 5 (1), s. 6 (1) and (2), s. 7 (1) and (2) and s. 51.
Editors Summary
The plaintiffs, a Yugoslavian cement company, and their agent at Aden agreed to sell to the first
defendants 200 tons of cement described as Dalmation Portland Cement B.S.S./12/1947 of
Yugoslavian origin. Two Lions brand. The first defendants insured the shipment with the second
defendants. The cement which arrived at Aden was of Salona Towers brand which the first
defendants refused to accept as not being in accordance with the description. According to
the plaintiffs the first defendants had orally agreed to the change in brand and to a change in the
description from Two Lions brand to Standard Portland Dalmation Cement. After refusing to
take delivery the cement was damaged by rain whilst lying at the wharf and later the first
defendants assigned the insurance policy to the second plaintiffs as assignee. The insurers
claimed that as the first defendants had disclaimed any interest in the policy they themselves
could not have claimed, and in consequence, their assignment of the policy to the plaintiffs after
the loss occurred was of no effect. The plaintiffs suggested that there was an implied or
equitable assignment of the policy which arose from the nature of the transaction and that it was
valid.
Held
(i)
the first defendants had not agreed to a change of brand or in the description of
the cement and accordingly the plaintiffs had failed to tender to the first defendants cement
according to the agreed description; since this was a sale by description the first defendants were
entitled to refuse to accept delivery;
(ii)
when the first defendants rejected the goods they ceased to have any interest in
the cement, and there was nothing for them to assign; accordingly the plaintiffs had no
insurable interest in the cement at the time of the loss;

(iii)
there is no implication that by custom or otherwise in contracts of this description
the seller is deemed to be a party to the insurance policy from the outset.
Action dismissed.
(Discusses the assign ability in the police of insurance)
Also section 52 and 53 MIA 1906
at Dev Sharma trading as Seema Driving School v The Home
Insurance Company of New York
[1966] 1 EA 8 (SCK)
[1] Insurance Personal accident insurance Group policy of life and accident insurance
Interest of third party in policy Policy taken out by employer on behalf of himself and his
employees Employee injured in course of employment Action by employer claiming
compensation under policy Whether employer has insurable interest in subject matter of
assurance Whether action maintainable by employer Insurance (Life and Accident) Act,
1774, s. 1.
[2] Contract Parties Enforcement by third parties No implied trust.

Editors Summary
The plaintiff was proprietor of a driving school and entered into the defendants group policy of
life and accident insurance on behalf of himself and his three instructors. The policy provided
that in the event of the insured suffering death or disablement the company shall, subject to the
terms exceptions and conditions of the policy, pay to the insured or his legal representatives, the
compensation specified in the schedule. The first panel of the schedule in the policy set out the
name of the insured as Messrs. Seema Driving School on the lives of Messrs. . . . and there
followed the names of the four driving instructors who were not parties to the policy or the
action. During the currency of the policy one of the instructors sustained serious injuries while
on duty. The plaintiff, as the policy holder, then sued the defendant claiming compensation
specified in the policy and it was contended for the defendant that the action was not
maintainable by the plaintiff by virtue of s. 1 of the Insurance (Life and Accident) Act, 1774, as
he had no insurable interest in the subject matter of the policy.
Held
(i)
the policy on its true construction was a policy taken out by the plaintiff as
employer for the benefit of the named employees, and the plaintiff had no insurable interest in
the subject matter of the policy;
(ii)
there was no constructive or implied trust under which the plaintiff was trustee on
behalf of the employees.
Action dismissed

Tarlok Singh Nayar & another v Sterling General Insurance

Company Ltd
[1966] 1 EA 144 (SCK)
[1] Insurance Motor insurance Authorised driver driving with insureds consent
Judgment obtained by third party against authorised driver only Whether right of indemnity
enforceable by authorised driver against insurance company under an implied trust.
[2] Contract Motor insurance Parties Enforcement by stranger under an implied trust.
[3] Estoppel Estoppel by conduct Insurance company defending claims against authorised
driver Admission of a point of law not a basis for estoppel.

Editors Summary
The defendant insurer issued a comprehensive motor insurance policy to the first plaintiff (called
the insured) by which it agreed to indemnify the Insured . . . against all sums which the
Insured shall become legally liable to pay . . . and also, for a further consideration, agreed to
indemnify any Authorised Driver . . .. The insured lent the car to the second plaintiff, who was
driving it as an authorised driver under the policy, when it was involved in an accident in which a
passenger was injured. The passenger recovered damages and costs from the second plaintiff, the
insurers having taken over his defence. The insured and the second plaintiff sued the insurers
claiming a declaration that the insurers were bound to indemnify them in respect of all liability
they were or may be under to the passenger. The insurers defence was based on the absence of
any legal liability incurred by the insured and on the want of privity of the second plaintiff with
the insurers under the policy. The plaintiffs attempted to found an estoppel on the fact that the
insurers conducted the second plaintiffs defence against the claims of the injured passenger. The
insured gave evidence that he could have saved part of the premium by insuring the car for his
personal use only.

Held
(i)
the insured, having entered into the contract of insurance on his own behalf and
on behalf of the authorised driver, could sue on it either as a party or as a trustee for the
authorised driver;
Williams v. Baltic Insurance Association, [1924] 2 K.B. 282: All E.R. Rep. 368 followed.
Vandepitte v. Preferred Accident Insurance Corporation, [1933] A.C. 70 distinguished.
(ii)
the second plaintiff, being a stranger to the contract, could not himself sue on it,
although he could sue through the insured as his trustee or direct if the trustee refused, but this
point did not arise because the insured/trustee was the first plaintiff;
Kshirodebihari Datta v. Mangobinda Panda (1934), 61 Cal. 841 disapproved.
(iii)
the insurers conduct in taking over the second plaintiffs defence amounted to an
admission on a point of law and could not found an estoppel in the present action.

Declaration as prayed. Judgment for the plaintiffs as prayed

Hercules Insurance Co Limited v Trivedi & Co Limited

[1962] 1 EA 358 (CAD)
[1] Insurance Arbitration Insurance policy containing arbitration clause Application for
arbitration Denial that policy in force Whether arbitration can be ordered Rectification of
policy Indian Code of Civil Procedure, 1908, Second Schedule, para. 17 Arbitration Act,
1889, s. 4 Arbitration Act, 1950, s. 4 (1) Indian Contract Act, 1872, s. 28.
[2] Arbitration Insurance Insurance policy containing arbitration clause Application for
arbitration Denial that policy in force Whether arbitration can be ordered Rectification of
policy Indian Code of Civil Procedure, 1908, Schedule II, para. 17 Arbitration Act, 1889, s. 4
Arbitration Act, 1950, s. 4 (1) Indian Contract Act, 1872, s. 28.
Editors Summary
The respondent company having submitted to the appellant company a proposal form for
insurance against burglary to cover part of its stock-in-trade received a letter from the appellant
company on January 14, 1959, refusing to insure part of the stock only but offering a policy
covering the entire stock. The respondent company accepted this offer by letter dated February
13, 1959, whereupon the appellant company issued a burglary policy dated February 17 at 4 p.m.
standard time. However on February 16 the respondent companys premises having been burgled
and goods to the value of over Shs. 5,000/- stolen, the respondent company by letter dated
February 17 notified the appellant company which replied declining to recognise the claim on the
ground that they were not on risk at the time. Pursuant to a clause in the policy providing for
arbitration the respondent company then applied in the district court for a written arbitration
agreement between the parties to be filed in court. This application was dismissed on the ground
that the respondent company had not satisfied the court that a contract of insurance was in force
at the material time. On appeal the High Court reversed the magistrates decision and ordered
that the agreement be filed with consequential orders as to the appointment of an arbitrator and
the issue he should decide. The appellant company then appealed and submitted that since no
contract of insurance was in force at the material time, the arbitration clause could not apply. For
the respondent company it was argued that their letter of February 13 put the appellant company
on risk either as from the date of the original proposal or from the date of posting the letter of
February 13.
Held
The claim made by the respondent company was not a claim under the contractual document,
namely, the policy, but was a claim under the preliminary contract between the parties for
insurance; the real dispute between the parties was, therefore, one of rectification depending
upon the existence of the alleged preliminary contract and the arbitration clause in the policy did
not extend to a dispute as to rectification of the term of the policy. Toller v. Law Accident
Insurance Society Ltd., [1936] 2 All E.R. 952 followed.

Appeal allowed. Judgment and decree of the High Court set aside and decree of the district court
restored.

Toller v Law Accident Insurance Society Ltd

ADMINISTRATION OF JUSTICE; Arbitration: INSURANCE
COURT OF APPEAL
GREENE AND SCOTT LJJ
22, 29 JUNE 1936
Arbitration Stay of legal proceedings Insurance policy containing arbitration clause Action
on policy Denial of existence of policy Claim for arbitration Repudiation.
A motorist, on 15 August 1935, signed a proposal form for motor car insurance. The premium in
respect of the insurance was not paid, and the policy was not issued, but cover notes were issued
from time to time. On 2 October 1935, after the expiration of the last cover note, the motorist
was involved in an accident and incurred certain liabilities. The premium in respect of the
insurance was paid on 29 October 1935, and a policy dated as from that date was duly issued.
The motorist issued a writ claiming, inter alia, a declaration that a binding contract of insurance
existed between the insurance company and himself on 2 October 1935. The insurance company
applied for a stay of the action on the ground that the issue fell within the arbitration clause in the
policy:

Held
Since, if the issue were referred to arbitration, a finding by the arbitrator that there was no
contract in existence as at the date of the accident, would be a finding that the arbitration clause
never existed and that the arbitrator never had jurisdiction to deal with the matter, the issue was a
proper one to be tried in the courts. Observations on repudiation of contracts.

Re Phoenix Timber Co Ltds Application

ADMINISTRATION OF JUSTICE; Arbitration
COURT OF APPEAL
LORD EVERSHED MR, PARKER AND SELLERS LJJ
7 MARCH 1958
Arbitration Interpleader proceedings Arbitration clause in contract Exercise of courts
discretion Arbitration Act, 1950 (14 Geo 6 c 27), s 5.
The owners of a vessel on a time charter claimed a lien in respect of unpaid hire on a sum due
from the consignees for freight of a cargo of timber. The charterers refused to pay part of the hire
by reason of counterclaims arising under the time charter, which contained a clause that Any
dispute arising under this charterparty shall be referred to arbitration The consignees took
out an interpleader summons and paid the disputed sum due for freight into court. By the
Arbitration Act, 1950, s 5a, where relief by way of interpleader was granted, the court had a
discretion to direct whether the issue between the claimants should be determined in accordance
with the arbitration clause or not; by s 4(1)b the court also had a discretion to stay legal

proceedings in respect of matters within the scope of an arbitration agreement. The master
ordered that the issue as to the entitlement to the sum paid into court be tried by the High Court.
On appeal by the charterers,
________________________________________

Held
The fact that a particular dispute, within the scope of an arbitration agreement, was eminently
suited to be tried by a court of law was not a sufficient ground for refusing to give effect to the
agreement for arbitration; therefore the issue between the ship owners and the charterers should
be referred to arbitration.
Heyman v Darwins Ltd ([1942] 1 All ER 337) applied.
Per Curiam: the discretion under s 5 of the Arbitration Act, 1950, is to be exercised on the same
ground as the discretion under s 4 (see p 818, letters c and i, and p 819, letter c, post).
Appeal allowed.
In Wainwright v Bland an executor, suing on a policy effected by his testator on two
years of his life, was not required not to show any significant reason for making an insurance for
such a limited time period.

Griffith v Fleming [1909] 100 LT 765: Lord Kenyon CJ declared that it must be
presumed that every wife had interest in the life of her husbandand it is not necessary for her
to prove that she had an insurable interest only because a large sum of money would go from her
husbands estate to another, upon his death.16Farwell LJ has held that a wife may insure a
husbands life, and the husbands his wifes. 17 The English law limits insurable interest on a
sentimental basis only to the relationship of husband and wife

Halford v Khymer, is that a parent has no insurable interest in the life of his child as
mere love and affection is not sufficient to constitute insurable interest. Similarly a child does not
have an insurable interest in the life of his parent provided he is not dependent on the latter
Therefore a creditor has an insurable interest in the life of the debtor to the extent of his
interest23and where the debt has been guaranteed by a surety, then on the life of the surety
too.24 In Powell v Dewy it was held that a partner of a firm has no insurable interest in
the life of the other partner, except when the latter is indebted to him personally and only to the
extent of such indebtedness.

Collingridge v Royal Exchange Assurance Corpn. [1877] 3 QB 173

31where a property, insured by fire, was contracted to be sold and pending transfer of title, it was
destroyed by fire, it was held that the owner of the property was entitled to recover the insurance
money as he was still interested in the safety of the property

Heckman v Isaac [1862] 6 LT 383 A tenant has an insurable interest in the property
which he rents. The insurable interest of a tenant may arise either through an express clause in
the tenancy agreement, that he shall be responsible for insuring the property or otherwise, as he
stands to lose the beneficial enjoyment of the property in the event of destruction, which is
sufficient to give him an insurable interest. A tenant, who has contracted to insure a property,
continues to have an interest in it, even after his tenancy has come to an end, if his liability
continues.
Waters v Monarch Fire and Life Assurance Co. [1856] 5 E & B 870;
Also see Petrofina (UK) Ltd v Magnaload Ltd [1983] 2 Lloyds Rep 91:
whether the bailee has insured his own interest as bailee or the interest of the bailor as an owner
of the goods is a matter of interpretation. Bailees are also entitled to insure goods36 which are
entrusted to them for custody notwithstanding the fact that their liabilities to the owners or
bailors depend upon a number of circumstances, governed by statutes, contracts, common law
and customs in trade. A bailee need not show the nature of his interest to the insurer while
effecting an insurance policy, provided the policy is effected solely on his own behalf.

Stockdale v Dunlop [1840] 6 M & W 224: expectation of profit or commission, to

arise out of the sale of goods, not contracted at the time of their loss, is not an insurable interest
under the policy It is not necessary that to have an insurable interest, the person insuring must be
in possession of a vested right. It is sufficient to constitute an insurable interest, if there is
anexpectancy along with an existing present title, out of which such expectancy has arisen. But
expectation of some benefit, which might arise from subject matter in which the person insuring
is not actually interested but expects to be interested is not an insurable interest. 43 A partial as
well as a contingent interest is also insurable.
In Reed v Cole47it was held that where the owner of a ship has sold her under a contract
which requires him to pay the buyer a certain sum of money should a loss happen within a
particular period of time, the owner has an insurable interest to the extent of such a sum But
where the property, which is the subject matter of a contract of sale has completely passed to the
buyer from the seller, then the seller ceases to have any insurable interest in that property and the
buyer acquires the same: Joyce v Swann [1864] 17 CBNS 84; Also see Seagrave v Union Marine
Insurance Co [1866] LR 1 CP 305 and Sparkes v Marshall [1836] 2 Bing NC 761. Where the
subject matter insured has been mortgaged, the mortgagor has an insurable interest in that subject
matter to its full value and the mortgagee has an insurable interest on any sum due or to become
due under the contract.49 A trustee who has a legal interest in the subject matter insured may

insure in respect of that interest to the full value of the subject matter, and may recover the whole
amount on the condition that he shall hold the amount recovered, in trust for the bonafide
beneficiary.
Section 30 of the Indian Contract Act, 1872 and the Law of Contract Act of Tanzania sec 30 defines
Wager as :
Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be
won on any wager, or entrusted to any person to abide by the result of any game or other uncertain event
on which any wager is made.