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[1925] All ER Rep 51, Also reported [1925] AC 619; 94 LJPC 154; 133 LT 152; 41 TLR 447; 69 Sol Jo 777; 31 Com
Cas 10

1 of 2 DOCUMENTS
Macaura v Northern Assurance Co Ltd and others
HOUSE OF LORDS
[1925] All ER Rep 51, Also reported [1925] AC 619; 94 LJPC 154; 133 LT 152; 41 TLR
447; 69 Sol Jo 777; 31 Com Cas 10
HEARING-DATES: 6, 9 MARCH, 3 April 1925
3 April 1925
CATCHWORDS:
Insurance - Insurable interest - Property of company - Interest of shareholder or creditor.
HEADNOTE:
Neither a creditor of nor shareholder in a company has any property, legal or equitable, in the property of the
company, and, therefore, neither has an insurable interest in any particular asset of the company, and this is so even
though the debt due from the company to the creditor is a very large sum and the shareholder is practically the sole
shareholder of the company.
Notes
Appeal from an order of the Court of Appeal in Northern Ireland affirming an order of the King's Bench Divisional
Court of the High Court of Justice in Northern Ireland, made on a Case Stated by an arbitrator.
The appellant, who was the owner of an estate in co Tyrone with the timber thereon, some of which was felled and
some unfelled, by an assignment of 30 December 1919, agreed to sell all the timber both felled and standing on the
estate to a company for the sum of 42,000 pounds. That sum was satisfied by the allotment to the appellant of 42,000
fully-paid shares in the company of 1 pound each, which was the total amount issued by the company, so that the
appellant was the sole owner of the shares in the company. The appellant had also financed the company, and was an
unsecured creditor for 19,000 pounds. The appellant effected insurances on the timber against fire with various
insurance companies. On 22 February 1922, the greater part of the timber was destroyed by fire, and on 12 June 1922,
the appellant instituted an action in the High Court for the recovery of moneys alleged to be due under the policies. By
an order dated 21 July 1922, all proceedings in the action were stayed and the matter in dispute was referred to
arbitration as provided by the policies. The arbitrator held that the appellant had not at any time during the currency of
the policies any insurable interest in the timber, the subject-matter of the policies, and he submitted for the decision of
the King's Bench Division (inter alia) the following questions: "Had the said Gerald J. Macaura any insurable interest in
the said timber by reason (a) of his being the beneficial owner of all the shares in the said company; or (b) by reason of
his being a creditor of the said company?" The King's Bench Divisional Court in Northern Ireland (HENRY, CJ, and
BROWN, J) answered that question in the negative, and that decision was affirmed by the Court of Appeal in Northern
Ireland (ANDREWS and MOORE, LJJ) The appellant appealed to the House of Lords.
NOTES:
Referred to: IR Comrs v Clark & Sons, Ltd, British American Tobacco Co v IR Comrs, [1941] 2 All ER 86.
As to insurable interest in fire policies see 22 HALSBURY'S LAWS (3rd Edn) 310 et seq, and for cases see 29
DIGEST 311-313.
CASES-REF-TO:

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[1925] All ER Rep 51, Also reported [1925] AC 619; 94 LJPC 154; 133 LT 152; 41 TLR 447; 69 Sol Jo 777; 31 Com
Cas 10
Cases referred to:
(1) Godsall v Boldero (1807) 9 East, 72; 103 ER 500; 29 Digest 343, 2772.
(2) Moran, Galloway & Co v Uzielli, [1905] 2 KB 555; 74 LJKB 494; 54 WR 250; 21 TLR 378; 10 Com Cas 203;
29 Digest 43, 57.
(3) Lucena v Craufurd (1806) 2 Bos & PNR 269; 127 ER 630, HL; 29 Digest 97, 555.
(4) Paterson v Harris (1861) 1 B & S 336; 30 LJQB 354; 5 LT 53; 7 Jur NS 1276; 9 WR 743; 1 March LC 124; 121
ER 740; 29 Digest 200, 1594.
(5) Wilson v Jones (1866) LR 1 Exch 193; 35 LJ Ex 94; 14 LT 65; 14 WR 499; affirmed (1867) LR 2 Exch 139; 36
LJ Ex 78; 15 LT 669; 15 WR 435; 2 March LC 452, Ex Ch; 29 Digest 116, 709.
COUNSEL:
Serjeant Sullivan, KC, and MF Healy for the appellant.; S L Brown, KC, ES Murphy, KC, and William Lowry (all
of the Irish Bar) for the respondents, were not called on to argue.
Solicitors: Herbert Z Deane & Co; Bircham & Co, for Hoey & Denning, Dublin.
Reported by EJM CHAPLIN, ESQ, Barrister-at-Law.
JUDGMENT-READ:
The House took time for consideration.
3 April. The following opinions were read.
PANEL: LORDS BUCKMASTER, ATKINSON, SUMNER, WRENBURY, PHILLIMORE
JUDGMENTBY-1: LORD BUCKMASTER:
JUDGMENT-1:
LORD BUCKMASTER:
The appellant is the owner of the Kellymoon estate in the county of Tyrone. The respondents are five insurance
companies with whom at various dates in January and February 1922, the appellant effected insurance against fire on
timber and wood goods in the open situate on the Kellymoon domain not within a hundred yards of any saw mill or any
building in which woodworking by power other than wind or water was carried on. Neither the amounts nor the exact
language of the policies are material for the purposes of the present appeal, nor is the fact that the policies were really
effected in the name of the appellant and the governor and the company of the Bank of Ireland, for the real questions
that arise for determination are (i) whether the appellant had any insurable interest in the goods the subject of the
policies, and (ii) whether the respondents were, in
the circumstances, at liberty to raise the contention that he had no such interest in the manner in which it was raised
in the course of these proceedings.
The history of the matter can be stated in a few sentences. The appellant upon whose estate the timber in question
was originally standing on 30 December 1919, assigned the whole of it to a company known as the Irish Canadian Saw
Mills, Ltd, the amount to be paid for the timber felled and unfelled being 27,000 pounds, while a further 15,000 pounds
was to be paid for the cost incurred by the appellant in felling the timber that was then down .The total price paid was,
therefore, 42,000 pounds satisfied by the allotment to the appellant or his nominees of 42,000 pounds, fully paid 1
pound shares in the company No further shares than these were ever issued .The company proceeded with the
operations of cutting the timber, and by the end of August 1921, it had all been felled and sawn up in the saw mills In
the course of these operations the appellant had become the creditor of the company for 19,000 pounds and beyond this
it is stated that the debts were trifling in amount. The timber when cut remained lying on the appellant's land, and on 22
February 1922, the greater part of its was destroyed by fire .The appellant accordingly claimed against the companies
upon the policies and, on 30 May 1922, in an answer sent on behalf of all the companies, it was stated that the
companies must decline to accept liability for the loss of any timber within a hundred yards of the saw mill. The

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[1925] All ER Rep 51, Also reported [1925] AC 619; 94 LJPC 154; 133 LT 152; 41 TLR 447; 69 Sol Jo 777; 31 Com
Cas 10
appellant and the Bank of Ireland accordingly instituted proceedings by issuing writs against each of the respondent
companies, and each of the statements of claim delivered contained the following allegation:
"3 The plaintiffs were at the date of the effecting of the said policy of insurance and at the time of the loss and
damage hereinafter mentioned interested in the said timber to the amount be insured thereon as aforesaid" .On
production of the policies all these actions must have been
dismissed since each contained a clause referring all disputes to arbitration and making the award of the arbitrator a
condition precedent to any liability on the part of the companies Instead of pleading this as a defence to the actions the
companies applied to stay the actions and refer the matters in dispute to arbitration, and on 21 July 1922, an order was
made to that effect. Upon the hearing of the arbitration several charges of fraud and dishonesty were made against the
appellant, all of which failed, and upon the point initially raised in the letter to which reference has been made the
arbitrator decided in the appellant's favour, but he held that in the circumstances the appellant had no insurable interest
in the timber, and this view has been supported in the Court of King's Bench and in the Court of Appeal
The question as to the competency of the arbitrator to determine the dispute as to the insurable interest of the
plaintiff only arises if no such insurable interest can be recognised by the law, and it is this point, therefore, that first
arises for consideration. It must, in my opinion, be admitted that at first sight the facts suggest that there really was no
person other than the plaintiff who was interested in the preservation of the timber It is true that the timber was owned
by the company, but practically the whole interest in the company was owned by the appellant. He would receive the
benefit of any profit and on him would fall the burden of any loss. But the principles on which the decision of this case
rests must be independent of the extent of the interest he held .The appellant could only insure either as a creditor or as a
shareholder in the company, and if he was not entitled in virtue of either of these rights he can acquire no better position
by reason of the fact that he held both characters. As a creditor his position appears to me quite incapable of supporting
the claim If his contention were right it would follow that any person would be at liberty to insure the furniture of his
debtor, and no such claim has ever been recognised by the courts. It is true that since Godsall v Boldero (1) where a
creditor of Mr Pitt was held entitled to effect an insurance upon his life, this interest has always been recognised, but
this depended, as was said by LORD ELLENBOROUGH, upon the means and probability
of payment which the continuance of a debtor's life affords to his creditors and the probability of loss which would
result from his death In Moran, Galloway & Co v Uzielli (2) where a creditor for ships' necessaries was held entitled to
insure the ship, the decision expressly depended upon the fact that the creditors had a right in rem against the vessel,
and the learned judge said that
"in so far as the plaintiffs' claim depends upon the fact that they were ordinary unsecured creditors of the
shipowners for an ordinary unsecured debt, I am satisfied that it must fail .The probability that if the debtor's ship
should be lost he would be less able to pay his debts does not, in my judgment, give to the creditor any interest, legal or
equitable, which is dependent upon the safe arrival of the ship"
This is, in my opinion, an accurate statement of the law, and the appellant, therefore, cannot establish his claim as
creditor.
Turning now to his position as shareholder, this must be independent of the extent of his share interest .If he were
entitled to insure because he held all the shares in the company, each shareholder would be equally entitled, if the shares
were all in separate hands. Now, no shareholder has any right to any item of property owned by the company, for he has
no legal or equitable interest therein. He is entitled to a share in the profits while the company continues to carry on
business and a share in the distribution of the surplus assets when the company is wound-up If he were at liberty to
effect an insurance against loss by fire of any item of the company's property, the extent of his insurable interest could
only be measured by determining the extent to which his share in the ultimate distribution would be diminished by the
loss of the assets - a calculation almost impossible to make. There is no means by which such an interest can be
definitely measured and no standard which can be fixed of the loss against which the contract of insurance could be
regarded as an indemnity.This difficulty was realised by counsel for the appellant, who really based his case upon the
contention that such a claim was recognised by authority and depended upon the proper application of the definition of
insurable interest given by LAWRENCE, J, in Lucena v Craufurd (3) (2 Bos & PNR at p 302). I agree with the
comment of ANDREWS, LJ, upon this case. I find equally with him a difficulty in understanding how a moral certainty
can be so defined as to render it an essential part of a definite legal proposition In the present case, though it might be
regarded as a moral certainty that the appellant would suffer loss if the timber which constituted the sole asset of the
company were destroyed by fire, this moral certainty becomes dissipated and lost if the asset be regarded as only one in

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Cas 10
an innumerable number of items in a company's assets and the shareholding interest be spread over a large number of
individual shareholders
The authorities which have the closest relation to the present are those of Paterson v Harris (4) and Wilson v Jones
(5) In the first of these cases a shareholder in a company that was established for the purpose of laying down a
submarine cable between the United Kingdom and America, effected an insurance upon his interest in the cable. The
shareholder's insurable interest in the cable does not appear to have been disputed and the real question, therefore, was
never argued In Wilson v Jones (5) where another policy was effected by a shareholder in the same company, it was
distinctly held that the policy was not upon the cable, but upon the shareholder's interest in the adventure of the cable
being successfully laid It was attempted by the underwriters to limit the insurance to an interest in the cable itself, which
would have lessened the risk, but it was held that this was not the true construction of the policy It was not argued that,
if it were, the shareholder had no interest to insure, but both MARTIN, B, in the Court of Exchequer and WILLES, J, in
the Exchequer Chamber, stated that the plaintiff had no direct interest in the cable as a shareholder in the company, and,
so far as I can see, this consideration it was that assisted the court in determining
that the insurance was upon the adventure in which the shareholder had an interest and not upon the cable in which
he had none. There are no other cases that even approximately approach the present case, and, properly regarded, I think
Wilson v Jones (5) is against, and not in favour, of the appellant's contention Upon the merits of this dispute, therefore,
the appellant must fail. Neither a simple creditor of nor a shareholder in a company has any insurable interest in a
particular asset which the company holds
Nor can the appellant's claim to insure be supported on the ground that he was a bailee of the timber, for in fact he
owed no duty whatever to the company in respect of the safe custody of the goods; he had merely permitted their
remaining upon his land. [HIS LORDSHIP dealt with further contentions of the appellant which do not call for report,
and concluded:] For these reasons I am of opinion that this appeal must fail, and should be dismissed with costs
JUDGMENTBY-2: LORD SUMNER:
JUDGMENT-2:
LORD SUMNER:
This appeal relates to an insurance on goods against loss by fire It is clear that the appellant had no insurable
interest in the timber described. It was not his It belonged to the Irish Canadian Sawmill Co, Ltd, of Skibbereen, co
Cork. He had no lien or security over it, and, though it lay on his land by his permission, he had no responsibility to its
owner for its safety, nor was it there under any contract that enabled him to hold it for his debt. He owned almost all the
shares in the company, and the company owed him a good deal of money, but, neither as creditor nor as shareholder,
could he insure the company's assets.The debt was not exposed to fire nor were the shares, and the fact that he was
virtually the company's only creditor, while the timber was its only asset, seems to me to make no difference. He stood
in no "legal or equitable relation to" the timber at all .He had no "concern in" the subject insured. His relation was to the
company, not to its goods, and after the fire he was directly prejudiced by the paucity of the company's assets, not by the
fire. No authority has been produced for the proposition that the appellant had any insurable interest in the timber in any
capacity, and the books are full of decisions and dicta that he had none Paterson v Harris (4) and Wilson v Jones (5) are
very special cases, and neither is in point here. In the former there was no plea traversing the allegation that the plaintiff
had an insurable interest. The court, construing the policy as one really expressed to be on the cable, dealt with the case
as one in which interest was admitted therein, but its decision of the case after this admission of interest is not a decision
that a shareholder as such has an insurable interest in a company's assets themselves In the latter, where the policy
described the subject-matter of the insurance in a very obscure manner, it was held that the shareholder insured had an
interest that he could insure in the profits of the adventure so described, but it was expressly stated that he had no such
interest in his shares in the company. [HIS LORDSHIP dealt with the further contentions already mentioned and said
that, in his opinion, the appeal should be dismissed.
JUDGMENTBY-3: LORD WRENBURY:
JUDGMENT-3:
LORD WRENBURY:

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[1925] All ER Rep 51, Also reported [1925] AC 619; 94 LJPC 154; 133 LT 152; 41 TLR 447; 69 Sol Jo 777; 31 Com
Cas 10
This appeal may be disposed of by saying that the corporator, even if he holds all the shares, is not the corporation,
and that neither he nor any creditor of the company has any property, legal or equitable, in the assets of the corporation.
Further, I have read and concur in the judgment delivered by my noble and learned friend LORD SUMNER.I think the
appeal should be dismissed.
[LORD ATKINSON and LORD PHILLIMORE concurred.]
DISPOSITION:
Appeal dismissed.