Ziel Nominees Pty Ltd v VACC Insurance Co Ltd [1975] HCA 40; (1994) 180 CLR 173 (8 October 1975)

HIGH COURT OF AUSTRALIA

ZIEL NOMINEES PTY LIMITED AND ANOTHER v V.A.C.C. INSURANCE CO. LIMITED AND ANOTHER [1975] HCA 40; (1994) 180 CLR 173
Insurance

HIGH COURT OF AUSTRALIA
BARWICK CJ(1), STEPHEN(2) AND JACOBS(3) JJ

Insurance - Fire insurance - Insured premises damaged by fire after execution of contract of sale - Contract settled - Assignment to purchaser of vendor's interest in policy - Liability of insurer to indemnify purchaser.

HEARING

1975, MELBOURNE, October 8
8:10:1975

DECISION

BARWICK CJ We have had an opportunity of considering the matter. The appellants in this appeal by a contract in writing dated 1 December 1972, purchased for a cash price, an encumbered property in Fitzroy, from the personal respondent who was joined as a defendant in the action, and as a respondent in this appeal for conformity as a necessary party whom I shall call hereafter the vendor. The contract was enforceable. The property had been insured by the vendor against loss by fire by a policy dated 5 May 1970, but renewed from time to time with the corporate respondent whom I shall hereafter refer to as the insurance company, with an upward limit of liability of $60,000.

2. On 21 January 1973, the improvements on the land which was the subject of the contract of sale were very substantially damaged by fire and to an extent which could have involved the insurance company in a liability of $60,000 being the upward limit of the policy. On 8 February 1973, the vendor lodged with the insurance company a declaration of loss, claiming the full amount of the policy on the footing that the damage by fire exceeded that amount.

3. On 20 February 1973, the vendor signed an authority addressed to the insurance company to pay to the purchaser's solicitors and I quote: "All the moneys to which I would be entitled under the insurance policy . .. being the insurance proceeds of the property at 237 Smith Street, which was destroyed by fire." The vendor further informed the insurance company that upon that payment being made he, the vendor, released the insurance company from any claims he may have had. He further undertook, presumably to the appellants, to take all steps necessary with due despatch in the processing of the claim lodged by him with the insurance company. Apparently, though signed on 20 February this document was handed over on settlement of the contract of sale the following day. Thus, as an authority and as an assignment, as I have assumed it to be, it was effective upon the settlement on 21 February. As l have said, on that day, 21 February, the contract of sale was settled according to its terms.

4. On that day also the vendor, by indorsement on the policy of insurance, transferred all his right and interest in the policy to the appellants. Also on the same day the solicitors for the appellants sent to the insurance company a photocopy of the authority signed by the vendor on 20 February, and also a photocopy of the transfer of the policy by indorsement upon it.

5. They indicated that their clients intended to continue with the policy, premiums thereunder having been adjusted between vendor and purchaser. They then asked for payment to them of the amount claimed by the vendor. Upon the refusal of the insurance company to pay the claimed sum of $60,000, the appellants sued the insurance company joining the vendor as a defendant.

6. The Supreme Court of Victoria (Harris J) gave judgment for the defendants, holding in substance that to any claim the personal respondent might have made against the insurance company, it would have a complete defence in the fact that, the policy of fire insurance being a contract of indemnity, the insured had not suffered any loss by the fire which had damaged the building on the land.

7. In my opinion, the conclusion reached by the Supreme Court was correct. It may be assumed, for the purpose of disposing of this appeal, without deciding anything in those respects, that the benefit of the claim of the vendor under the policy of insurance, was assigned, no matter whether legally or equitably, to the purchaser on settlement of the contract of sale and that notice of the assignment was given to the insurance company on 21 February.

8. It is settled law that upon the signature of an enforceable contract of sale of land the purchaser is bound to complete, irrespective of the destruction of the improvements on the land in the meantime and the purchaser has, upon that signature, an equitable estate in the land commensurate with the estate which the vendor has agreed by the contract to transfer or convey. The purchaser accordingly has an insurable interest which he can immediately protect by cover note or policy of insurance.

9. On the other hand, the vendor having an enforceable contract of sale is entitled to the price, notwithstanding the destruction of the improvements on the land (1). Thus a vendor who receives the price

(1) See generally in this connexion, Williamson, Vendor and Purchaser, 3rd ed. (1922), pp. 483485.

which he has agreed to accept for the land suffers no loss by the destruction of the improvements on the land meanwhile. The absence of any loss by reason of that destruction is clearly demonstrated by the vendor's receipt of the agreed price.

10. It follows in my opinion that at the time the document of 20 February became effective i.e. on settlement of the contract of sale, the vendor was not and could not at that time have become entitled to any moneys under the policy: and this for the simple and direct reason that he had not and could not suffer any loss by reason of the destruction or damage of the improvements on the land which he had sold. In other words he had nothing to assign.

11. If he had sued the insurance company for the amount of $60,000, the fact that he had been paid his agreed price would provide the insurance company with a complete defence. This conclusion in my opinion disposes of this appeal. I do not think the result depends in any respect or to any extent upon questions relating to equitable assignments. I would dismiss the appeal.

STEPHEN J I agree.

JACOBS J I agree.

2. Appeal dismissed with costs.