Asaram v North American Life Insurance Company

• Jurisdiction: Guyana
• Court: High Court (Guyana)
• Judge: Bishop, C.J.
• Judgment Date: 28 July 1995
• Neutral Citation: GY 1995 HC 4
• Docket Number: No. 2233 of 1993
• Date: 28 July 1995

High Court

Bishop, C.J.

No. 2233 of 1993

Asaram

and

North American Life Insurance Co.

Appearances

Sapheir Hussain for the plaintiff.

R. Poonai for the defendant.

Contract - Privity of contract — Plaintiff common law wife of deceased person claiming proceeds as named beneficiary of policy issued to reputed husband and for which she had paid the premiums plaintiff not wife within meaning of Family and Dependants Provision Act, 1990 (Guyana) Deceased was a married man who had lived apart from his wife for more than 15 years — Whether deceased intended to create a trust with the insurance company as trustee — Finding that there was a completely constituted trust which the plaintiff could enforce and also a trust of a chose in action of which she was the only beneficiary defendant company ordered to pay plaintiff the sum which had accrued to her under the policy.

Bishop, C.J.

1 In her affidavit in support of her summons, the plaintiff swore that Harry Nauth was her reputed husband and that he died by accident on June 9, 1991. It is not clear how long they cohabited together but she bore him three children who, at the time she commenced these proceedings, were aged 17, 11 and 7. Her complaint is that on April 9, 1990, her husband entered into an Agreement of Insurance with the defendant-company and was issued POLICY No. 8083625; that she was the Named Beneficiary in the said Policy but that although she duly gave notice of her reputed husband's death and requested of the Insurers payment of the “principal sum”, $50,000.00, there has been a refusal to do so.

2 The plaintiff has placed reliance on Provision 10 of the insurance Policy. It reads as follows:

“TO WHOM INDEMNITIES ARE PAYABLE: Indemnity, if any, for loss of life is payable to the Beneficiary for such Named Insured, named in the application provided such Beneficiary survives the Named Insured by thirty (30) days, otherwise to the estate of the Named Insured. Any payment made by the company in good faith pursuant to this provision shall fully discharge the company to the extent of the payment.”

3 Given its literal meaning: R v. Judge of the City of London Court [1890] 1 Q.B. 273, 290; Magor & St. Mellons v. Newport Corporation [1951] 2 All E.R. 839, H.L., it seems quite straightforward that Provision 10 prescribes a ranking of entitlement: first, is the Named Beneficiary provided such person survives the Insured by thirty (30) days and, secondly, if he or she does not, then the insurance money goes to the estate of the deceased-Named Insured.

4 It is probable that the defendant-company would have followed that simple prescription and paid the “capital sum”, had not the lawful wife of the deceased evinced an interest in that money and the estate. She had engaged Mr. Robert Ramcharran, an attorney-at-law, to apply for grant of administration and appeared before me to announce that fact, whereupon I ordered that she be served with sealed and certified copies of documents previously filed by the plaintiff. I also gave her leave to respond within seven (7) days after she had been served. She has evinced no further interest in this matter, despite the fact I warned her of the date when to report next to the court. She also seems to have ignored the written notices sent to her. She never sought to be joined as a party.

5 There can be no doubt that the arrangements reflected in the Policy were entered into freely. What is more, I accept and believe the plaintiff, who is supported by the agent of the company, a Mr. T. Durjon, that at the time the Agreement was entered into, he advised her to have her reputed husband made the person insured on his own life, that the plaintiff could be the Named Beneficiary and, if agreed, she would pay the premiums, due on the Policy, from the profits of her business. Immediately thereafter, the Proposal Form was completed by the reputed husband consistent with that advice. It was accepted by the defendant-company and Mr. Durjon collected the premiums from the plaintiff month after month.

6 There is no challenge that the Policy subsisted from then on to the date of death of the Insured. But counsel for the defendant-company has urged that the plaintiff, although the Named Beneficiary, is not the person to enforce payment under the Policy, since she is, to all appearances, a stranger to the Contract, and is met by the formidable common law doctrine, Privity Of Contract. Here, ex facie, the principal contracting parties were the reputed husband, on the one hand, and the insurers, the defendant-company, on the other.

7 The common-law Doctrine of Privity of Contract establishes that only the parties to a Contract can sue and be sued on it; that by virtue of this doctrine, there cannot be a conferring of rights or imposing of liabilities on non-contracting parties, pragmatically described as strangers. Indeed in the highly authoritative and well-known judgment, cited by counsel for the defendant-company, Tweddle v. Atkinson [1861-1873] All E.R. Rep. 369 at p. 370 - letter I, Wightman, J. had this to say:

“No doubt there are some old decisions which appear to support the proposition that a stranger to the consideration for the Contract, who stands in the relation of child to one of the contracting parties, and for whose benefit the Contract is made, may sue upon it. The strongest case of that kind is Bourne v. Mason (1669) 86 E.R. 5, relating to the daughter of a physician. But there is no modern case of the kind and, on the contrary, it is now well established that no stranger to the consideration can take advantage of the Contract though made for his benefit …”

8 And in the very case, Crompton, J. at p. 371 at letter B was satisfied [that]:

“… it is now clear law that the consideration must move from the party entitled to sue upon the Contract.”

9 The later case, Beswick v. Beswick [1968] A.C. 58 is also to the point.

10 If Tweddle v. Atkinson is the first leading case on the Privity Doctrine, then Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge [1914-15] All E.R. Rep. 333, H.L. is the second. There, the plaintiffs sold a number of their tyres to Dew & Co., described as ‘motor accessory factors’, on the terms that Dew & Co. would not resell them below certain scheduled prices and that, in the event of a sale to trade customers, they would exact a similar undertaking. Dew & Co. sold the tyres to Selfridge, who agreed to observe the restrictions and to pay to Messrs. Dunlop the sum of £5 for each tyre sold in breach of this Agreement. Selfridge in fact supplied tyres to two of their own customers below the listed price. Dunlop therefore brought an action against Selfridge, claiming an injunction and damages. The action failed. The House of Lords held that the failure resulted from Dunlop's omission to provide consideration for Selfridges promise: that the consideration had been given by Dew & Co.

11 The judgment hints at the great inconvenience and fundamentally unjust results which the Doctrine of Privity confers on some commercial transactions. At least two of the speeches indicate that. Viscount Haldane, L.C. noted at p. 335 - letter E:

“The form of the Contract which we have to interpret leaves the appellant in this dilemma: that if they say that Messrs. Dew contracted on their behalf, they gave no consideration; and if they say they gave consideration in the shape of a permission to the respondents to buy, they must set up further stipulations, which are neither to be found in the Contract sued upon nor are germane to it, but are really inconsistent with its structure.”

12 Earlier, at letter C ( ibid), Lord Haldane had described the arrangement as a “difficulty”. And Lord Dunedin did not disguise his unhappiness about the doctrine at p. 335 - letter G:

“I confess that this case is to my mind apt to nip any budding affection which one might have had for the doctrine of consideration. For the effect of that doctrine in the present case is to make it possible for a person to snap his fingers at a bargain deliberately made, a bargain not in itself unfair, and which the person seeking to enforce it has a legitimate interest to enforce.”

13 Dunlop's case nonetheless reinforced the Privity rule, but Denning, L.J., as he then was, made a heroic attempt to dislodge it. His was a historical review containing highly persuasive elements in Smith & Another v. River Douglas Catchment Board [1949] 2 All E.R. 179 at p. 188 - letter A:

“Counsel for the board says that the plaintiffs cannot sue. He says there is no Privity of Contract between them and the board, and that it is a fundamental principle that no one can sue on a contract to which he is not a party. That argument can be met either by admitting the principle and saying that it does apply in this case, or by disputing the principle itself. I make so bold as to dispute it. The principle is not nearly so fundamental as it is sometimes supposed to be.”

14 The learned Lord Justice then gave four principal reasons in support of his proposition at letter C (ibid):

“[The principle] did not become rooted in our law until the year 1861 ( Tweddle v. Atkinson) and reached its full growth in 1915 ( Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. It has never been able entirely to supplant another principle whose roots go much deeper. I mean the principle that a man who makes a deliberate promise which is intended to be binding, that is to say, under seal or for good consideration, must keep his promise; and the court will hold him to it, not only at the suit of the party who gave the consideration, but also at the suit of one who was not a party to the Contract provided that it was made for his benefit and that he has a sufficient interest to entitle him to enforce it, subject always, of course, to any defences that may be open on the merits.”

15 Thereafter followed this historical treatment...