Corporate Case Brief – Macaura v. Northern Assurance Company

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FACTS:

The appellant, Mr. Macaura, formerly owned a timber estate in Northern Ireland, who consequently sold the timber to a Canadian Milling Concern, agreeing to accept payment in the shares of the company. The appellant received 42,000 fully paid up £1 shares, making him the whole owner. He was also an unsecured creditor for £19,000. The appellant took out an insurance policy on the timber in his own name, and shortly afterwards damage was caused by the fire. The appellant sought to recover from such an insurance policy, but Northern Assurance Co. refused to pay up as timber was owned by the company, and the fact that company is a separate legal entity.

ISSUE:

Is the insurance company liable to pay for the damage caused by fire to Mr. Macaura?

HELD:

The House of Lords held that insurers were not liable on the contract, as Mr. Macaura had no insurable interest in the timber, as his relation was to the company, and not to its goods. Unusually, in this case, request to lift the corporate veil was made by the corporation’s owner himself, as he contended that he held the maximum percentage of shares. However the court held that the corporator, even if he holds all the shares, is not the corporation, and neither he nor any creditor of the company has any property legal or equitable in the assets of the corporation.

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