Question

Discuss the basic principles that the following cases establish: (i) Macaura v Northern Assurance Co. Ltd [1925] AC 619

(ii) Luguterah v Northern Engineering Co. Ltd [1972] 1 GLR 153

Answer 1

The owner of a timber estate sold all the timber to a company which was owned almost solely by him. He was the company’s largest creditor. He insured the timber against fire, but in his own name. After the timber was destroyed by fire the insurance company refused the claim.

The House of Lords held that in order to have an insurable interest in property a person must have a legal or equitable interest in that property. The claim failed as “the corporator even if he holds all the shares is not the corporation… neither he nor any creditor of the c

In Luguterah v Northern Engineering [1978] GLR 477 the court made a distinction between an act which is ultra vires by the company and an act which is ultra vires the directors. It held that members cannot ratify an act by the company which is ultra vires.

In this instance, a credit transaction involving the Bank and McDan, the credit transaction cannot be said to be ultra vires the company because the objects of a bank include lending money to its customers.

ompany has any property legal or equitable in the assets of the corporation