to receive that money as an indemnity against my claim; therefore pay over to me that £500"; and the liquidator says: "No; that sum of money has now become the general assets of the estate, and though I received that £500 to indemnify the company against your claim, I can receive it to distribute to other creditors of the company pari passu with yourself." As I say, that seems to me to disclose a hardship. But the position in-law seems to me clearly to be that a third party in a case of this kind has no claim in law or in equity of any sort against the insurance company, or against the money paid by the insurance company, nor has he any claim against the person who injures him, the assured, to direct the assured to pay over the sum of money received under the insurance policy, to him. The amount that the assured in fact received is part of his general assets.

Now as a general rule the expediency of that, I think, cannot be disputed. It cbviously would disturb the whole practice of insurance if the claimant against the assured who caused the risk had a direct aight of recourse against the insurance company; and we know that in actual practice the assured receives the money-everybody being solvent-and does not pay over necessarily that sum of money to the third party who is injured, but, of course, pays his claim out of his own assets and uses the insurance money, so far as it goes, because it does not always completely meet his liability. Mr. Stable, in his interesting and able argument, admitted that, apart from insolvency, the third party had no sort of right in equity against the insurance company under the policy. If that is so, that really seems to me to dispose of the case, because I find it impossible to see how a special right, arising out of circumstances which ordinarily occur in cases of solvency, could come into existence merely because the assured happened to be in difficulties or financial weakness, or to become bankrupt or to have a winding-up petition made against him.

But in fact there appears to me to be authority on the matter which I should treat as binding, and that is the decision in the Law Guarantee case, [1914] 2 Ch. 617. Now I agree that the actual point determined in the Law Guarantee case was not the point which we are now considering. In the Law Guarantee case what happened was this. The Law Guarantee Society had insured the debentures of a company, which one need not refer to, and the debenture holders had had to realise those securities, and they had to make a claim against the Law Guarantee Society, and the Law Guarantee Society had become insolvent. The Law Guarantee Society had a proof made by the debenture holders in the company for some £4900, say, some £5000. They had reinsured two-elevenths of that risk with the Mortgage Insurance Society who were parties to this particular proceeding, and the question raised by the reinsurers, the Mortgage Insurance Society, was whether they had to pay over two-elevenths

of the full amount of £5000 for which the Law Guarantee Society were liable, or whether they only had to pay two-elevenths of the sum which the Law Guarantee Society should eventually pay by way of dividend, that is to say, whether they had to pay the full liability, or whether they only had to pay the actual sum paid by the Law Guarantee Society in the course of their insolvency, diminished because they were insolvent; and the Court came to the conclusion that their obligation was to pay the full amount of the liability and not merely to pay the amount which the Law Guarantee Society should in fact pay by way of dividend. But all the learned Lords Justices, in dealing with the matter, delivered themselves of opinions as to the rights of the debenture holders and the rights of the Law Guarantee Society as against the debenture holders, circumstances which no doubt were relevant for consideration, because, as the debenture holders had a right of some kind in equity to the proceeds of the reinsurance money, there is no doubt that that would have a substantial bearing on the question whether the reinsurers would have to pay the full amount. I said that every one of the Lords Justices dealt with this matter. Buckley, L.J., at p. 633 of the report, says this ::

The equitable doctrine is that the party to be indemnified can call upon the party bound to indemnify him specifically to perform his obligation, and to pay him the full amount which the creditor is entitled to receive, and that whether having received it he applies it in payment of that creditor or not is a matter with which the party giving the indemnity is not concerned. In such a case the party indemnified is entitled to receive 20s. in the pound, and, having got it, to deal with it as he thinks proper.

Then he refers to Carr v. Roberts, sup., and he says:

The case is that which is put in Carr v. Roberts, where both Mr. Justice Littledale and Mr. Justice Patteson at the conclusion of their judgments point out that it is the duty of the defendant to pay the whole amount, and it makes no difference whether it is applied in discharge of the debt, or whether the plaintiff, having recovered, it does not make a proper use of it.

Now Kennedy, L.J., goes still fuller into the matter, and at p. 639 he says this:

How the person who receives payment of a sum of money under a contract of insurance or reinsurance, or, I will add, of indemnity, deals with that sum is, in general and apart from special considerations, no concern of the party who, in fulfilment of his contract, has made the payment to him. Upon what grounds of equity or legal logic can it be argued that, because the law, on grounds of public policy, compels the creditor, the liability to whom is the event upon which

the right of a bankrupt or of an insolvent company to payment of the sum covered by the contract arises, to be content with such share of the assets of the bankrupt or the company in liquidation as a pari passu distribution between creditors will give, those assets are not to include the payment due under the contract?

That seems to me to be a direct statement by the learned Lord Justice, indeed, a statement of the law, that the third party is compelled by the law to be content with such a share of the assets as a pari passu distribution between the creditors will give. He goes on to say :

If the discharge of the liability, against which the contract of insurance or reinsurance was the protection, is not (and I think that it is not) a condition precedent to the right to claim payment of the amount of the insurance or the reinsurance, upon what ground ought it to be held that, if the person entitled to that payment becomes bankrupt, or, if a company, goes into liquidation, the trustee of the bankrupt or the liquidator of the insolvent company does not have the right to the payment of that amount in full which the bankrupt before his bankruptcy or the company before its liquidation possessed because, when he has received the amount, the law intercepts the asset in his hands, and compels him to apply it in a particular way as part of the estate divisible amongst all the creditors? Scrutton, J., dealing with the matter at the bottom of p. 616 and the top of p. 647, says:

If it be said that the society's argument enables the general creditors to make a profit, the answer appears to be that it is not the society's argument, but the operation of law which, though a creditor has a claim which the debtor has reinsured, takes the contribution of the reinsurer and divides it between the general body of creditors, because the creditor has no privity with the reinsurer, and no charge, lien, or equitable security, on his payment to the debtor,

and he repeats the same thing in other words elsewhere.

Now those propositions appear to me precisely to cover this case, and in the face of them I think it would be impossible for this Court to lay down a different rule. Even if I differed from them-and I am far from saying that I do differ from them because it seems to me to follow from the admission which was made by Mr. Stable, and quite properly made and inevitably made, that where all parties are solvent there is no right-it appears to me to follow that there is no right in the case where the assured is insolvent; and that appears to me to cover the main part of this case. Of course it is material, in dealing with a case of this kind, to consider the actual terms of the contract; and the terms of the contract are that the company will

"All sums

indemnify the assured against which the assured shall be legally liable to pay by way of compensation for: (a) Accidental bodily injury caused by any of the assured's motor vehicles described in the schedule hereto any person not being the driver of such vehicle," and "the company will in addition where any claim is contested by or with the written consent of the company pay all costs recovered by any claimant against the assured"; and it is with reference to a contract in those terms that I have made the remarks I have. They seem to me not to differ in any way from any ordinary policy of insurance.

Then Mr. Stable said there was a different position brought into existence so far as the costs were concerned, because he says that the sum here which is claimed for costs, some £200 odd, in fact created the whole asset which the liquidator has received. But that seems to me to be a fallacy, with great respect. That which created the asset was the principal existing contract of insurance. The costs are only the loss or the risk or the event upon which the policy moneys become payable, and they no more create the asset than the unfortunate fact that Mr. Chaplin was in the roadway when the taxicab ran into him, creating the other part of the asset which constituted the claim for personal injuries; and it appears to me that no special equity can arise with regard to those costs.

Then it is said that this is a case where the Court, in exercising its discretion under Sect. 142 of the Companies Act, may allow execution to issue against the company. It appears to me that that would be wrong. Execution is not, as a rule, allowed to issue unless there is some wrong-doing, some trick, or fraud, or something short of fraud, some misfeasance on the part of the company which makes it right that execution should issue in a case where it would have probably issued but for that fraud or wrong-doing. But those circumstances do not exist here; they are specially disclaimed. There is no suggestion of that kind against anybody here. The position is that the general law, however unfairly it may work in this class of case, has a general operation, and the general rule must prevail that the assets are to be divided pari passu among all the creditors; and therefore I see no reason for giving special leave to issue execution. It appears to me that exactly the same point deals with the case of ex parte James, L.R. 9 Ch. 609.

Here, for the reasons I have given in dealing with the request for leave to issue execution, there are no special circumstances which would entitle us to say that there is something dishonourable, unbecoming an officer of the Court, in keeping these assets and distributing them among the creditors. Therefore it appears to me that this case must fail.

Mr. Stable relied and naturally relied very strongly on the case of In re Richardson, [1911] 2 K.B. 705; and I am bound to say, after the discussion of In re Richardson in the Law Guarantee case and in other

cases, that that case only amounts to an authority in cases which fall within its very special facts. There is no doubt that in that case, in some very complicated proceedings, special leave had been given to the landlord and the trustee in bankruptcy of the tenant to bring an action against the bankrupt tenant and his wife, who was the cestui que trust for whom the bankrupt held the tenancy, to recover an indemnity in respect of the tenants liability on the repairing covenants, and an order had been made that any sum which was recovered was to be at the disposition of the Court of Bankruptcy, which was to decide as to whether or not the estate of the landlord was to receive it. How that action came to be framed, or what would have happened if it had in fact been fought, I do not think that anyone at this time can tell. But I think that at that time, before the action was tried, the wife paid a sum of money into Court, and the only question for the Court to determine was whether the landlord should receive it or the trustee in bankruptcy; and it was held on the facts of that case, inasmuch as the trustee in bankruptcy claimed by virtue of his rights to an indemnity as the legal trustee of the wife and as he would be making a profit out of his trust, regarding him merely in the position of trustee for the cestui que trust, the proper thing to do was to hand it over to the landlord. The special facts of the case are very unlikely to occur again, and I think the decision must be read with special reference to those facts. Therefore I think that this appeal should be dismissed.

I agree, I think, that on the whole it is an unsatisfactory result of the application of legal principles which are very good in themselves, but which I should like to be able to modify to meet the special facts of this class of case, which is, of course, a very common case. I notice, for instance, in this case, that the Commissioner of Police requires as a condition of the licence to a cab owner that he should have taken out a policy against third party risks in quite a large sum. It is quite obvious that that very reasonable and proper precaution is defeated in the very case where it is intended to be of most use, namely, where the cab owner becomes insolvent, and, indeed, as pointed out in argument, it would appear as though a person who was insured against risks and who has general creditors whom he is unable to meet, has only to go out in the street and to find the most expensive motor car or the most wealthy man he can to run him down, and he will at once be provided with assets which will enable him to give his general creditors quite a substantial dividend. But that is a result which is, perhaps, not very likely to happen, but which, in the present state of the law, cannot be avoided.

In my opinion the learned Judge below here applied quite the right principles; and therefore this appeal must be dismissed, with costs.

Lord Justice LAWRENCE: I agree entirely

with the judgments delivered by the other members of the Court, and will only add a very few remarks of my own. Of course, however much we may sympathise with the appeliant in this case, we cannot allow that sympathy to lead us astray, or to do anything other than to administer the law as it exists.

Now in this case I think that the learned Judge was plainly right. The case, when stripped of all its fringes, amounts simply to this, that the appellant here claims the benefit of a contract of insurance made between his debtor and an insurance company, to which contract he was neither party nor privy. It is not suggested that the benefit of the contract was assigned to him by his debtor, nor is it suggested that his debtor constituted himself a trustee for the benefit of this contract for the creditor. In the absence of any such assignment or trust I, speaking for myself, am at a loss to understand how the appellant can establish any claim to the money paid under that contract to his debtor or to his trustee in bankruptcy. It is attempted to be suggested that the bankruptcy or insolvency in some way gives him a charge or lien or interest in that fund. In my judgment the fact of the insolvency or bankruptcy does not operate to enlarge his right or to give him any rights to that fund which he had not got before the insolvency or the bankruptcy and, speaking for myself, I cannot understand how it could be suggested that a fund received under such a policy by a solvent creditor could, in any way, in his hands, be treated as charged to or belonging to the person to whom he became indebted for an occurrence under the policy.

Mr. Stable, in his interesting and able argument, has based his case almost exclusively upon the decision in the case of In re Richardson, sup. I confess to being very much puzzled by that case, and not for the first time on this hearing. Even with Mr. Stable's assistance I have entirely failed to understand the principles upon which it was decided, or whether it in fact laid down any principle at all. Of course, if the principle laid down or if the case in any way covered our decision in this case, we should be bound to follow it, but it seems to me that that case did not lay down any principle applicable to the facts of the case, nor did it in any way intend to call into question the general principle that a man is not entitled to obtain the benefit of or to enforce a contract to which he is not a party or privy. Whatever may have been the ratio decidendi of that case. I do not think it applies here and I think that we are not bound to follow a decision on that case, which was a decision upon facts differing widely from the facts in the present case. Therefore I think that the case of In re Richardson does not, in any way, compel us to reverse the decision of Eve, J.

That being my view, there only remains the question to be decided whether the learned Judge has rightly exercised his discretion in not allowing the execution to

proceed. The general principle on which that discretion is now exercised is that, if a company has done something in the way of vexatiously delaying or fraudulently misrepresenting facts, or otherwise done something which is wrongful as against a particular creditor, then the Court will not allow the other creditors of the company to take advantage of that wrongful act and thereby, as it were, make themselves party to the wrongful act of the company. To exercise the discretion in this case would mean that, because the appellant has a meritorious claim, with which the Court sympathises, he should therefore be allowed to proceed to enforce his judgment against the assets and thus disturb what the law has laid down to be the underlying principle of the Bankruptcy and Winding-up Acts, an equal distribution of the assets among the creditors. For these reasons I think that the learned Judge was perfectly right in the exercise of his discretion.

I need say nothing about the ultimate appeal to this Court to apply the principle of ex parte James. The case of In re Thellusson, [1919] 2 K.B. 735, which was relied on for that purpose, seems to me to stand upon an entirely different footing. Mr. Stable tried to bring it within that principle by suggesting that the costs in this case had produced the fund as much as the premiums in that case had produced the money paid by the insurance company. I think, for the reasons pointed out by my Lords, that there is an entire fallacy in that argument. I need not elaborate it, but I concur that the costs incurred in enforcing the claim against the company have not, in any way or in any sense, produced the fund within the principle of In re Thellusson or any of the other cases. What has produced the fund is the payment by the debtor of his premiums under the policy, and if the appellant here had paid those premiums he might be in a different position, or if the company had disputed its liability and the appellant had been allowed to bring an action in the name of the assured against the company and had succeeded in producing the fund in that way, I think the Court would have allowed him the costs of this litigation.

For these reasons I concur with my Lords that the appeal fails and must be dismissed, with costs.

ADMIRALTY DIVISION.

Thursday, Nov. 3, 1927.

THE "NAPIERIAN."

Before Mr. Justice HILL, sitting with Captain T. GOLDING and Captain A. S. MACKAY, Elder Brethren of Trinity House.

Collision between steamships in English Channel during fog Cross-allegations of improper speed, helm action and bad look-out.

In this case the owners of the Norwegian steamship Aagot claimed, and the owners of the steamship Napierian counterclaimed, damages in respect of a collision between the two vessels that occurred in the English Channel some miles off Dungeness on the night of July 12, 1927.

Mr.

G. P. Langton, K.C., and Mr. H. C. S. Dumas (instructed by Messrs. Thos. Cooper & Co.) appeared for the plaintiffs; Mr. C. R. Dunlop, K.C., and Mr. A. T. Bucknil (instructed by Messrs. Gregory, Rowcliffe & Co., agents for Messrs. Hill, Dickinson & Co., of Liverpool) represented the defendants.

According to the plaintiffs' case, shortly before 840 p.m. on July 12, 1927, the Aagot, a steel screw steamship of Bergen, Norway, of 3595 tons gross register, 310 ft. long, fitted with triple expansion engines of 289 h.p. nom., was in the English Channei approximately three miles to the W. of Dungeness, bound from Almeria, Spain, to Rotterdam, laden with a cargo of about 5600 tons of iron ore, and manned by a crew of 31 hands all told. The weather at the time was a thick fog, the wind about E.N.E. light, and the tide flood, setting to the E. with the force of about a knot. The Aagot was steering a course of E. N. by compass (N. 84 E. mag.) and, her engines having been reduced from half speed to slow ahead when at about 8 30 p.m. the fog became thick, she was making a speed of about three knots through the water. The whistle of the Aagot was being duly sounded for fog in accordance with the regulations. The regulation masthead and side lights (all electric) for a steamship under way, including the optional additional masthead light and a fixed stern light, were being duly exhibited on board of the Aagot and were burning brightly, and a good look-out was being kept on board of her.

In these circumstances a long blast of a steamship's whistle was heard a trifle forward of the port beam of the Aagot, and thereupon the engines of the Aagot were at once stopped. Immediately afterwards the fog signals of two other steamships were heard, one broad on the port bow and the other, which proved to be the whistle of the Napierian, twɔ to three points on the port bow. Thereupon the engines of the Aagot were kept stopped and her whistle was sounded a prolonged blast. The Napierian and the two unknown steamships each replied with a long blast of

their whistle. After an interval of about three minutes, during which time two or three further long blasts were exchanged between the Aagot and the Napierian and the two unknown steamships, the two masthead lights of the Napierian were dimly made out through the fog distant about two ship's lengths and bearing about two to three points on the port bow. The engines of the Aagot were immediately put full speed astern and her whistle was sounded three short blasts. At practically the same moment the green light of the Napierian also came into view, and it was appreciated that the Napierian was crossing the bows of the Aagot from port to starboard at considerable speed. Nothing further could then be done on board of the Aagot to avoid the collision and the Napierian, which sounded three short blasts on her whistle just before the collision, still came on and with her starboard side a little abaft amidships struck the Aagot on the stem, doing the Aagot considerable damage.

Plaintiffs alleged that those on board of the Napierian failed to keep a good lookout; that she failed to navigate at a moderate speed in fog and failed to stop her engines on first hearing the fog whistle of the Aagot and to navigate with caution until danger of collision was over; that she failed to sound her whistle in accordance with the regulations; that she improperly failed to ease, stop or reverse her engines in due time or at all; that her helm was improperly put and kept to starboard; and that those on board of her failed to comply with the provisions of Arts. 15, 16, 27, 28 and 29 of the Collision Regulations.

According to the defendants' case, shortly before 8 48 p.m. (G.M.T.) on July 12, 1927, the Napierian, a steel screw steamship of 6410 tons gross register and 400 ft. in length, manned by a crew of 45 hands, was in the English Channel about five miles to the S. of Dungeness, on a voyage from Flushing to Boston, U.S.A., laden with about 1700 tons of general cargo. The weather at the time was foggy with a very light variable wind, and the tide was flood of unknown force. The Napierian proceeding on a course of S. 64 deg. W. mag. at a speed of about six knots, with engines working at half speed ahead, and was sounding a prolonged blast on her whistle for fog at short intervals in accordance with the regulations. The Napierian was exhibiting the regulation masthead (two), side light; and fixed stern light, all of which were burning brightly, and a good look-out was being kept on board of her.

was

In these circumstances, those in charge of the Napierian heard a prolonged blast from a steamship, which proved to be the Aagot, apparently on the starboard bow, and immediately stopped their engines and sounded a prolonged blast in reply. Shortly afterwards, those in charge of the Napierian observed the masthead and green lights of the Aagot bearing about a point on the starboard bow at an estimated distance of about 300 yards, and heard

three short blasts on her whistle, and saw her red light open. The Aagot had headway and was swinging to starboard causing risk of collision, and those in charge of the Napierian immediately put their engines full speed astern and sounded three short blasts on their whistle, and then put their engines full speed ahead and the helm hard-a-port to try to throw the afterpart of the Napierian clear of the stem of the Aagot, but the Aagot, which had shut in her green light, continued to swing to starboard and the engines of the Napierian were then stopped, and shortly afterwards the stem of the Aagot struck the starboard side abaft amidships of the Napierian, doing damage.

Defendants alleged that those in charge of the Aagot failed to keep a good look-out; failed to stop on hearing the fog signal of the Napierian forward of their beam and thereafter navigate with caution; were proceeding at an excessive speed in fog; improperly and at an improper time ported their helm and/or caused or allowed the Aagot to swing to starboard; failed to ease, stop or reverse their engines in due time or at all; failed to sound their whistle for fog in accordance with the regulations; and failed to comply with Arts. 15. 16, 27, 28 and 29 of the Collision Regulations. The hearing was adjourned sine die.

KING'S BENCH DIVISION.

Wednesday, Nov. 2, 1927. CORNELIUS BULLS REDERI A/S v. BARTON THOMPSON & CO. (THE "MOUNT SHASTA.") Before Mr. Justice MACKINNON.

66

by

Practice-Action brought by foreign company-Whether a nullity--Claim defendants to strike out writ and all subsequent proceedings-Evidence that before issue of writ plaintiff company had ceased to exist and cannot sue or be sued nor can any persons sue in its name or on its behalf "-Effect of amendment of writ substituting name of assignees of rights of extinct company upon statute-barred remedyWrit, &c., struck out-No order as to costs.

In this case, which involved a claim for demurrage under a charter-party, a preliminary point was raised by defendants on a summons before his Lordship, which was adjourned to the trial of the action, as to whether the plaintiff company was in existence and therefore as to whether the action was or was not a nullity.

Sir Robert Aske (instructed by Messrs. Botterell & Roche) appeared for the plaintiffs; Mr. C. R. Dunlop, K.C., and Mr. Harold Stranger (instructed by Messrs. Trinder, Kekewich & Co.) represented the defendants.

Sir ROBERT ASKE, opening the case on behalf of the plaintiffs, said: This is an