4 Section 83 of the Fires Prevention (Metropolis) Act 1774 (Imp)

49 THE LONG TITLE TO THE FIRES PREVENTION (METROPOLIS) ACT 1774 (IMP) describes the Act as:

An Act . . . for the more effectually preventing Mischiefs by Fire within the Cities of London and Westminster the Liberties thereof, and other the Parishes Precincts and Places within the Weekly Bills of Mortality,³ the Parishes of St Mary–le–bon, Paddington, St Pancras and St Luke at Chelsea, in the county of Middlesex.

Despite what would appear to be the clear intention demonstrated by these words the section has been held to apply generally in England and Wales and in former colonies including New Zealand: Cleland v South British Insurance Co (1890) 9 NZLR 177; Searl v South British Insurance Co Ltd [1916] NZLR 137; Auckland City Corporation v Mercantile and General Insurance Co Ltd [1930] NZLR 809. It was carefully preserved by the Imperial Laws Application Act 1988 s 3(1) and the first schedule. It reads as follows:

83 Money insured on houses burnt; how to be applied

In order to deter and hinder ill-minded persons from wilfully setting their house or houses or other buildings on fire with a view of gaining to themselves the insurance money, whereby the lives and fortunes of many families may be lost or endangered: . . . It shall and may be lawful to and for the respective governors or directors of the several insurance offices for insuring houses or other buildings against loss by fire, and they are hereby authorised and required, upon the request of any person or persons interested in or entitled unto any house or houses or other buildings which may hereafter be burnt down, demolished or damaged by fire, or upon any grounds of suspicion that the owner or owners, occupier or occupiers, or other person or persons who shall have insured such house or houses or other buildings have been guilty of fraud, or of wilfully setting their house or houses or other buildings on fire, to cause the insurance money to be laid out and expended, as far as the same will go, towards rebuilding, reinstating or repairing such house or houses or other buildings so burnt down, demolished or damaged by fire, unless the party or parties claiming such insurance money shall, within 60 days next after his, her or their claim is adjusted, give a sufficient security to the governors or directors of the insurance office where such house or houses or other buildings are insured, that the same insurance money shall be laid out and expended as aforesaid, or unless the said insurance money shall be in that time settled and disposed of to and amongst all the contending parties, to the satisfaction and approbation of such governors or directors of such insurance office respectively.

The purpose of the section

50 It is evident that the section is intended to deter the wilful burning down of buildings by persons with a partial interest in claiming the insurance money. The section endeavours to achieve this deterrent purpose by:

entitling interested parties to require that insurance money be applied in reinstatement rather than paid out in cash; and
authorising insurers if they suspect fraud to elect to reinstate rather than paying out in cash.

51 The second of these points is of little practical significance because:

a right to the insurer to elect to reinstate can be and commonly is included in the insurance contract; and
if the insured has only a limited interest an insurer is unlikely to elect to reinstate as the cost of reinstatement is likely to exceed the indemnity the insured is entitled to in respect of that limited interest: British Traders Insurance Company Ltd v Manson (1964) 111 CLR 86, 96.

52 On the first point, persons held entitled to compel reinstatement include owners, mortgagors and mortgagees, tenants for life and remaindermen and lessors and lessees (see 25 Halsbury’s Laws of England, 1994, para 639). The purpose of the provision is to protect the indemnifiers from fraud by removing the incentive for persons with limited interests in premises to burn them down to get the insurance proceeds. The purpose is not to alter the rights between the insured and other persons. Although it is not certain, a mortgagor, for example, would presumably not be permitted to invoke s 83 and override such provisions as those implied by cl 6 of the fourth schedule to the Property Law Act 1952 and in the meaning given to the expression “will insure” by cl 4 of the fifth schedule to the Chattels Transfer Act 1924.⁴ But a stranger to the mortgage contract such as a lessee or subsequent encumbrancer has, by virtue of s 83, a clear right to compel reinstatement. It is difficult to see how the sole reason for the existence of the section, namely to discourage fraud by owners of limited interests, is promoted by the existence of such a power.

The application of the section

53 The section is limited in its application. It does not apply to insurance

against risks other than fire, or
with Lloyd’s underwriters,⁵ or
of contents.

Abolition in Australia

54 There has been no corresponding provision in New South Wales since 1879, a position which the Australian Capital Territory inherited and has not changed. The absence of such a provision has led to no discernible mischief. (Other Australian states have retained either the original s 83 or a re-enactment in contemporary language.) The Australian Law Reform Commission concluded that the section should be repealed and not replaced and this recommendation was adopted in the Insurance Contracts Act 1984 (Aust) s 3(1) (see Insurance Contracts, 1982, ALRC 20, paras 128–129).

RECOMMENDATION

55 In our view this section is anachronistic and unnecessary and so should be removed from the New Zealand statute book.⁶ None of those who commented on our draft report indicated a serious contrary view (see pages 59–81 for our complete draft Insurance Law Reform Amendment Act and commentary).⁷

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.nzlii.org/nz/other/nzlc/report/R46/R46-4.html