(1970) 16 WIR 447

Rajkumar v First Federation Life Insurance Co Ltd

HIGH COURT OF TRINIDAD AND TOBAGO

REES J


22 JUNE 1970



Insurance - Life insurance - Plaintiff and policy[#8209]holder married according to Hindu religious rites - Marriage not registered under Hindu Marriage Ordinance - Policy holder refers in proposal to person paying premium as "husband" - Plaintiff named as beneficiary - Plaintiff paid all premiums - Whether plaintiff can claim as beneficiary - Plaintiff paid all premiums - Whether plaintiff can claim as beneficiary - Claim allowed - Hindu Marriage Ordinance, No 5 [T], Cap 29.

The plaintiff and Dolly Rajkumar, the insured, were married according to Hindu religious rites; but the marriage was never registered under the provisions of the Hindu Marriage Ordinance and the parties were therefore not legally recognised as man and wife according to the law of Trinidad and Tobago. Early in 1966 a policy of insurance was issued by the defendant in favor of Dolly Rajkumar who had stated in her proposal that the premiums would be paid by her husband and named the plaintiff as her beneficiary. The plaintiff paid the premiums, Rajkumar died in November 1966, and in course of time the plaintiff claimed payment of $2,000 being the proceeds of the policy. The defendant contended that the plaintiff was merely a third party named in the contract of insurance and was not entitled to sue on the contract.

Held: that the contract of insurance impliedly created a trust in favour of the plaintiff and he was therefore entitled to the proceeds of $2,000.

Judgment for plaintiff with costs.

Cases referred to

Tweddle v Atkinson (1861), All ER Rep 369, 1 B & S 393, 30 LJQB 265, 4 LT 468, 25 JP 517, 8 JurNS 332, 9 WR 781, 121 ER 762

Bourne v Mason (1669), 1 Vent 6, 2 Keb 454, 457, 527, 86 ER 5

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, 84 LJKB 1680, 113 LT 386, 31 TLR 399, 59 Sol Jo 439, HL

Smith v River Douglas Catchment Board [1949] 2 All ER 179, 113 JP 388, 65 TLR 628, 93 Sol Jo 525, 47 LGR 627, 12 MLR 498, sub nom Smith & Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500, CA

Drive Yourself Hire Co (London) Ltd v Strutt [1953] 2 All ER 1475, [1954] 1 QB 250, [1953] 3 WLR 111, 97 Sol Jo 874, 217 LT 42, 104 LJ 164, CA, 70 LQR 467

Beswick v Beswick [1967] 2 All ER 1197, [1968] AC 58, [1967] 3 WLR 932, 111 Sol Jo 540, HL, 83 LQR 465, 30 MLR 687

Gandy v Gandy (1885), 30 ChD 57, 54 LJCh 1154, 53 LT 306, 1 TLR 520, 33 WR 803, CA

Cleaver v Mutual Reserve Fund Life Assocn [1892] All ER Rep 335, [1892] 1 QB 147, 61 LJQB 128, 66 LT 220, 56 JP 180, 40 WR 230, 8 TLR 139, 36 Sol Jo 106, CA

(1970) 16 WIR 447 at 448

Re Engelbach's Estate, Tibbetts v Engelbach [1924] 2 Ch 348, [1923] All ER Rep 93, 93 LJCh 616, 130 LT 401, 68 Sol Jo 208

Re Clay's Policy of Assurance, Clay v Earnshaw [1937] 2 All ER 548

Re Sinclair's Life Policy [1938] 3 All ER 124, [1938] Ch 799, 107 LJCh 405, 159 LT 189, 54 TLR 918, 82 Sol Jo 545

Re Foster, Hudson v Foster [1938] 3 All ER 357, 54 TLR 993, 82 Sol Jo 584

Re Webb, Barclays Bank Ltd v Webb [1941] 1 All ER 321, [1941] Ch 225, 110 LJCh 89, 164 LT 307, 57 TLR 355, 85 Sol Jo 129

Re Schebsman, Ex parte Official Receiver, Trustee v Cargo Superintendents (London) Ltd & Schebsman [1943] 2 All ER 768, [1944] Ch 83, 113 LJCh 33, 170 LT 9, 60 TLR 128, 88 Sol Jo 17, CA

Action

Action by the plaintiff to recover the sum of $2,000 being the proceeds of a policy of insurance in which he was named as beneficiary.

Editorial Note: This judgment emphasises the functional usefulness of law as an instrument of social justice. Perhaps the time is ripe for Law Reform Commissioners in the English[#8209]speaking Caribbean to consider legislation which would effectively revive the former common law that if a promise in a simple contract were made expressly for the benefit of a third person and intended to be enforceable by him, then he could enforce the contract although he was not a party to it.

Dr A Wills (instructed by S Capildeo) for the plaintiff

D A R Patrick (instructed by J A Procope & Co) for the defendant

REES J. The plaintiff's claim is for the sum of $2,000 as beneficiary under a policy of insurance upon the life of Dolly Rajkumar effected by her with the defendant and made by them in consideration of the payments made as therein mentioned.

The facts are these: Several years ago, the plaintiff and Dolly Rajkumar went through a ceremony of marriage which the plaintiff described in his evidence as a marriage "under bamboo". By this I understand him to mean a marriage solemnised by a marriage officer in accordance with the rites of the Hindu religion. The marriage was not registered and consequently is invalid for noncompliance with the requirements of the Hindu Marriage ordinance. Nevertheless, the parties lived together as husband and wife for several years. On 7 March 1966, Dolly Rajkumar applied to the defendant for a policy of insurance and on the proposal form made her mark which was witnessed by Basdeo Balroop. She supplied the particulars requested in the form and some of the questions are relevant to the matter in hand. At 1A the question is "Is right to change the beneficiary reserved?" The answer is ("Yes"). Question 5 is "Who will pay premiums?" and the answer is "Husband". She gave the name of the beneficiary as Poplar Rajkumar, the plaintiff in this action.

On 4 April 1966, the policy was issued by the defendant and so far as material the terms of that policy are as follows. The recital reads:

'In consideration of the payment in advance of the weekly premium specified in the Schedule on p 4, on or before each and every Monday during the continuance of this policy, the Company will, immediately upon receipt of due proof of death of the Insured while this policy is in force and effect, pay the amount of Insurance shown in the Schedule to the Beneficiary if living, otherwise to the estate of the Insured unless payment be made under the 'Fecility of Payment clause.'

Then there follow fourteen conditions of which I need mention only conditions 3, 4, 12, and 13.

(1970) 16 WIR 447 at 449

Condition 3 provides:

'ENTIRE CONTRACT-This policy constitutes the entire agreement between the parties hereto. All printed or written words on the following pages of this policy are a part of this contract as fully as if recited over the signatures hereto. All statements made by the Insured or on his behalf shall, in the absence of fraud, be deemed representations and not warranties. No agent shall have the power or authority to waive, change or alter any of the terms or conditions of this policy, nor shall it be changed in any manner except by endorsement signed by the President or Secretary.'

Condition 4 provides:

'PREMIUMS-Premiums are due and payable on or before each Monday, beginning with the Date of Issue, until premiums for 20 full years in all have been paid, or until the prior death of the Insured. Premium payments shall be made to an authorised representative of the Company on or before the date when due. If for any reason a representative of the Company does not call for a premium when due, this will not excuse non[#8209]payment thereof, and in such case, the Insured shall be required to pay the premium at an office of the Company. If any premium is not paid when due, it shall be in default, and if it is not paid by the end of the grace period, the policy shall lapse and cease to be in force except as otherwise provided in this policy.'

Condition 12 provides:

'BENEFICIARY-By written notice to the Company, the Insured may from time to time name a new Beneficiary, subject to evidence of insurable interest satisfactory to the Company, such change to be effective when endorsed on this policy by the Company.'

Condition 13 provides:

'FACILITY OF PAYMENT-In order to save for the policyholder the expense of administration or guardianship, it is hereby expressly agreed that if the beneficiary herein named or hereafter appointed, shall die before the Insured, or shall at the death of the Insured be a minor or insane, or otherwise legally incapacitated to receive and disburse the proceeds of this policy, or if the said beneficiary shall fail, within 60 days from notice to the Company of death of the Insured, to make application for the proceeds of this policy, the Company may make payment provided for in this policy to the husband or wife, or any relative by blood or connection by marriage of the Insured or to any person appearing to said Company to be equitably entitled to the same by reason of having incurred expense on behalf of the Insured, or for his or her burial; and the production of a receipt signed by either of said persons, or other proof of such payment or grant of such privilege to either of them, shall be conclusive proof that all claims under this policy have been satisfied.'

On 23 November 1966, Dolly Rajkumar, to whom I shall hereinafter refer as the deceased, died. The plaintiff notified the defendant of her death and on 4 February 1967, a claim by letter together with the policy and a copy of the death certificate was forwarded to the defendant. Representations were later made by the plaintiff's solicitor on his behalf but the defendant failed to pay the amount of insurance due to the beneficiary. On 4 May 1968, the writ in this action was issued claiming the sum of $2,000 as beneficiary under the policy. In its defence, the defendant alleged that the policy is void and of no effect because the defendant was induced to issue the said policy by reason of the deceased's fraudulent concealment from it of a material fact, a line of defence which was abandoned during the hearing.

(1970) 16 WIR 447 at 450

Counsel for the defendant contended, however, that only parties to a contract should be allowed to sue on it and the plaintiff who is merely a third party named in the contract, as somebody to whom payment is to be made, is not entitled thereunder. That this is so is beyond question. For over two hundred years before the year 1861 it was settled law that if a promise in a simple contract were made expressly for the benefit of a third person intended to be enforceable by him, then he could enforce the contract at common law, although he was not a party to it. But the decision in Tweddle v Atkinson ((1861), All ER Rep 369, 1 B & S 393, 30 LJQB 265, 4 LT 468, 25 JP 517, 8 JurNS 332, 9 WR 781, 121 ER 762) put an end to this and crystallised the principle that no stranger to a contract can sue upon it even though it was made for his benefit In that case, LORD WIGHTMAN said:

'Some of the old decisions appear to support the proposition that a stranger to the consideration of a contract may maintain an action upon it, if he stands in such a near relationship to the party from whom the consideration proceeds, that he may be considered a party to the consideration. The strongest of these cases is that cited in Bourne v Mason ((1669), 1 Vent 6, 2 Keb 454, 457, 527, 86 ER 5), in which it was held that the daughter of a physician might maintain assumpsit upon a promise to her father to give her a sum of money if he performed a certain cure. But there is no modern case in which the proposition has been supported. On the contrary it is now established that no stranger to the consideration can take advantage of a contract although made for his benefit.'

The rule that only a party to a contract can sue on it was well and firmly established by the House of Lords in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd ([1915] AC 847, 84 LJKB 1680, 113 LT 386, 31 TLR 399, 59 Sol Jo 439, HL) LORD HALDANE in his speech said ([1915] AC at p 853):

'My Lords, in the law of England, certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam.'

Although this principle was accepted as the most fundamental in the law of contract and Tweddle v Atkinson ((1861), All ER Rep 369, 1 B & S 393, 30 LJQB 265, 4 LT 468, 25 JP 517, 8 JurNS 332, 9 WR 781, 121 ER 762) had the blessing of the House of Lords as to the rule that only a party to a contract can sue upon it, LORD DENNING'S view in Smith v River Douglas Catchment Board ([1949] 2 All ER 179, 113 JP 388, 65 TLR 628, 93 Sol Jo 525, 47 LGR 627, 12 MLR 498, sub nom Smith & Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500, CA) and again in Drive Yourself Hire Co (London) Ltd v Strutt ([1953] 2 All ER 1475, [1954] 1 QB 250, [1953] 3 WLR 111, 97 Sol Jo 874, 217 LT 42, 104 LJ 164, CA, 70 LQR 467) was to the effect that the rule laid down in Tweddle v Atkinson ((1861), All ER Rep 369, 1 B & S 393, 30 LJQB 265, 4 LT 468, 25 JP 517, 8 JurNS 332, 9 WR 781, 121 ER 762) is by no means fundamental and must give way when it comes into conflict with another principle which is that the common law will hold a contractor bound not only to a contractee, but also to a third party for whose benefit the contract was made and who has sufficient interest to entitle him to enforce it. This view of LORD DENNING'S was a departure from the law as it had been understood for the previous century, and was disapproved by the House of Lords in Beswick v Beswick ([1967] 2 All ER 1197, [1968] AC 58, [1967] 3 WLR 932, 111 Sol Jo 540, HL, 83 LQR 465, 30 MLR 687). In the light of these authorities, I think it is now beyond question that so far as the common law is concerned, it is only a party to a contract who can sue upon it.

The rule undoubtedly causes great hardship and is not in harmony with many transactions in commercial life of the present day. However, although it may be a clog to commercial progress, we have to deal with the law as it is. Counsel for the defendant contended that in the particular circumstances of the present case the plaintiff ought to be considered as having a beneficial right as cestui que trust under the contract. If his contention is a valid one, then it falls within one of the exceptions to the rule that a contract can only be enforced by a party to it. Counsel referred me to Gandy v Gandy ((1885), 30 ChD 57, 54 LJCh 1154, 53 LT 306, 1 TLR 520, 33 WR 803, CA), the head note of which reads:

(1970) 16 WIR 447 at 451

'to entitle a third person, not named as a party to a contract, to sue either of the contracting parties, that third party must possess an actual beneficial right which places him in the position of cestui que trust under the contract.'

It follows that in the present case the question must turn on whether a trust of the policy monies was created for the plaintiff in the contract.

Whether a trust has been created or not so as to allow a beneficiary not a party to the contract to sue, is sometimes not free from difficulty. This is so, no doubt, because different minds may arrive at differing conclusions on the question as to whether the circumstances sufficiently show an intention to create a trust. Be that as it may, it must be borne in mind that equity leans against implying a trust for the benefit of a person not a person not a party to the contract unless there is a clear intention to create one. I referred myself to Cleaver v Mutual Reserve Fund Life Assocn ([1892] All ER Rep 335, [1892] 1 QB 147, 61 LJQB 128, 66 LT 220, 56 JP 180, 40 WR 230, 8 TLR 139, 36 Sol Jo 106, CA); Re Engelbach's Estate, Tibbetts v Engelbach ([1924] 2 Ch 348, [1923] All ER Rep 93, 93 LJCh 616, 130 LT 401, 68 Sol Jo 208); Re Clay's Policy of Assurance, Clay v Earnshaw ([1937] 2 All ER 548); Re Sinclair's Life Policy ([1938] 3 All ER 124, [1938] Ch 799, 107 LJCh 405, 159 LT 189, 54 TLR 918, 82 Sol Jo 545); and Re Foster, Hudson v Foster ([1938] 3 All ER 357, 54 TLR 993, 82 Sol Jo 584); all cases in which the court held that no trust of policy monies was, on the true construction of the relevant policy, created. On the other hand, in Re Webb, Barclays Bank Ltd v Webb ([1941] 1 All ER 321, [1941] Ch 225, 110 LJCh 89, 164 LT 307, 57 TLR 355, 85 Sol Jo 129), in which those cases were reviewed, a father had taken out a policy on the lives of his two children. After a thorough examination of the policy, FARWELL J, came to the conclusion that the agreement showed such a clear and exclusive intention to benefit the children, that he must be taken to have converted himself into a trustee for them, and so the policy must be held on trust for them. I was referred to Re Schebsman, Ex parte Official Receiver, Trustee v Cargo Superintendents (London) Ltd, & Schebsman ([1943] 2 All ER 768, [1944] Ch 83, 113 LJCh 33, 170 LT 9, 60 TLR 128, 88 Sol Jo 17, CA), which was a motion by the deceased debtor's trustee in bankruptcy for a declaration that certain sums payable to third parties under a contract entered into by the bankrupt formed part of the bankrupt's estate. The matter which was debated in that case discussed the question of the rights arising when the parties are given benefits by a contract to which they are not parties. It was held that a contract between A and B that A shall pay certain sums to C does not make B a trustee for C, and it is a question of the contract itself whether the payment to C is the only method of performance which is open to A or whether the contract is that payment shall be made either to C or as B directs. In the latter case B would be in a position to intercept the money and on B's bankruptcy, his trustee in bankruptcy, who would then stand in his shoes, would have a right to intercept the money and secure it for the benefit of the creditors. But it was not decided that C could sue on a promise made by A to B for C's benefit. What it decided was that if A chose to pay C, B's trustee in bankruptcy could do nothing about it.

Applying the principles which I gather from these authorities to the present case, it would seem that the mere fact that the deceased took out a policy which is expressed for the benefit of the plaintiff does not constitute a trust for the plaintiff; further, the mere fact that the policy provides that the policy monies are to be payable to the plaintiff does not create a trust in favour of the plaintiff. It is a question of construction of the relevant contract read in the light of all the circumstances which were known to the parties and this is to my mind the heart of the problem.

The contract in the present case is contained in the proposal form and the policy itself. It provides that the premiums were to be paid by the plaintiff and if the premiums were paid and the policy kept alive, then the sum assured would be paid to the beneficiary if living immediately upon receipt of due proof of death of the insured, that is the deceased. The contract gave to the deceased powers during the life of the policy to agree to waive, change, or alter it. She could name a new beneficiary by agreement with the defendant. If the plaintiff surrendered the policy, any money so acquired would have been

(1970) 16 WIR 447 at 452

monies belonging to the plaintiff and not the deceased because the plaintiff was the person who was paying the premiums according to the agreement between the deceased and the defendant. She had disclosed in the proposal form that the plaintiff would pay the premiums and this was agreed to by the defendant. The payment of premiums is a fundamental condition of any insurance agreement.

But what is perhaps the most significant feature of the contract is that on the death of the insured (deceased) if the policy is still subsisting, and in full force and effect the defendant is obligated to pay the amount of insurance to the beneficiary if he is alive. That is the event upon which the defendant promised to pay the plaintiff the policy monies and on 23 November 1966, the event occurred. Whatever interest the deceased may have had under the policy before 23 November 1966, that interest ceased and came to an end because the plaintiff who was named as beneficiary was alive. Whatever may have been the position before, it was now a matter between the defendant and the plaintiff. If on 23 November 1966, the deceased ceased to have any beneficial interest in the policy, then it is not difficult to imply a trust for the person for whose benefit the policy is expressed to have been taken out. Indeed, it appeared to me that the only method of performance which is open to the defendant is by payment of the policy monies to the plaintiff. The personal representatives who are standing in the shoes of the deceased are in no position to intercept the money on or after the death of the deceased, as they have no right to the policy monies.

It has not been argued, and rightly so, that in the circumstances of the present matter, the defendant's obligation is to be regarded as a nullity. If the personal representatives of the deceased cannot recover, who can? As I see it, the beneficiary, that is, the plaintiff in this action.

In my opinion, on the true construction of the contract, there is sufficient for me to hold that a trust of the policy monies was created. The action is therefore maintainable and there must be judgment for the plaintiff for the sum of $2,000 with costs to be taxed. Stay of execution for six weeks.

Judgment for plaintiff