Fuji Finance Inc v Aetna Life Insurance Co Ltd

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Fuji Finance Inc v Aetna LifeInsurance Co Ltd

Chancery Division

07 July 1994

Case Analysis

Where Reported

[1995] Ch. 122;[1994] 3 W.L.R. 1280; [1994] 4All E.R. 1025; [1995] L.R.L.R. 490;[1994] C.L.C.

723;[1995] Pens. L.R. 21; (1995) 92(2) L.S.G.35; Times, July 21, 1994Independent, September15, 1994

Case Digest

Subject: Insurance

Keywords: Insurance contracts; Life insurance

Summary: Contract; Life insurance; capitalinvestment bond; benefits payable on surrender ordeath of assured; whether contract a policy of lifeinsurance

Abstract: The court ruled on preliminary issuesrelating to the nature of an insurance contract,namely whether: 1) a policy constituted aninsurance policy and if so whether it was a policyof life insurance pursuant to theLife Assurance Act1774 s.1,and 2) if the policy was neither an

insurance policy nor a life policy it was enforceableas a contract under theInsurance Companies Act1982 s.16.

Held: Where an insurance contract provided forthe amount insured to be payable on demand bythe insured, not just following his death, and thoseamounts were the same, the contract did not
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conform with the requirements of s.1 of the 1774Act and was therefore not a life policy. In theinstant case FF's contract with ALI was more in theway of an investment policy as FF did not havesufficient insurable interest in the life of the

insured, or at least only in the actual insured valuenot the profits which accrued on the policy. Thefact that the policy did not fall within s.1 did not,however, automatically render the contract voidfor lack of insurable interest. The Vice Chancellorrejected ALI's argument that the contract wasunenforceable because FF was bound by s.16(1) ofthe 1982 Act to limit its business to insurance, andas the contract in question was not one ofinsurance it contravened the law, on the groundsthat Parliament could not have intended allcontracts entered into in good faith in breach ofs.16 to be struck down.

Judge: Sir Donald Nicholls, V.C.

Counsel: For FF: Nicholas Underhill Q.C. andRobert Powell-Jones. For ALI: Nigel Davis Q.C. andLindsey Stewart

Solicitor: For FF: Peter Sewell & Co. For ALI:

Hartwig (Croydon)


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Fuji Finance Inc. v Aetna LifeInsurance Co. Ltd. and Another

Image 1 in PDF format. Available for Offline Print

Chancery Division

7 July 1994

[1993 Ch. F. No. 7891]

[1995] Ch. 122

Sir Donald Nicholls V.-C.

1994 June 27, 28, 29; July 7

InsuranceLife insuranceValiditySame sum payable on death of assuredas on surrender of policyWhether payable "on the life of any person"Whether policy contract of life assuranceWhether policy voidLifeAssurance Act 1774 (14 Geo. 3, c. 48), s .

InsuranceContractIllegalityStatutory prohibitionInsurance companycarrying on business otherwise than in connection with insurance businessIssue of investment policyWhether policy unenforceableInsuranceCompanies Act 1982 (c. 50), s. 16

The plaintiff company took out a policy described as a policy of life assurancewith an insurance company whose business was shortly thereafter takenover by the defendants, the life insured being that of T., who was concernedin the management of the plaintiff. Under the policy a sum calculated by

reference to the price of units currently allocated to the policy was payableon the death of the life assured or on its earlier surrender. The policyprovided that on a surrender within the first five years the amount payablewas to be reduced by a discontinuance charge. The plaintiff paid a singlepremium of 50,000, which was applied to secure units in a variety ofinternal funds administered by the insurance company. The policyholder hadthe option to switch units allocated to his policy between the funds. Bytaking advantage of the defendants' procedure for fixing the price of the
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units the plaintiff was able to increase the surrender value of the policy from50,000 to over 1m. in six years. The defendants then altered theprocedure for switching units so that the plaintiff was unable to continue tomake profits as before. The plaintiff claimed that by altering the terms of theswitching procedures the defendants had committed a repudiatory breach of

contract and surrendered the policy. The defendants paid the plaintiffthe *123surrender proceeds, which amounted to 1,110,758. The plaintiffbrought an action for damages for breach of contract. Trial was ordered ofthe preliminary issues whether the policy was a policy of life insurancewithinsection 1 of the Life Assurance Act 17741so as to be void because theplaintiff had no insurable interest in the life of T., or, if not, whether it wasunenforceable undersection 16 of the Insurance Companies Act 1982.2

On the trial of the preliminary issues:-

Held:

(1) that to qualify as a policy of insurance on the life of a person a sum ofmoney or other benefit had to be payable on an event uncertain as to itstiming or as to its happening at all and dependent on the contingencies ofhuman life; that, since the same sum was payable on surrender of the policyas on the death of T., the policy was not a contract of insurance on the lifeof T.; that only where the object of a contract as a whole was to insure couldit be categorised as a contract of insurance, and the insignificant element ofinsurance introduced into the policy by the operation of the discontinuancecharge on voluntary surrender within the first five years was insufficient to

convert a contract of an essentially different nature into one of insurance;and that, accordingly, the policy was not rendered void by section 1 of theLife Assurance Act 1774 (post, pp. 130F-G, 131C-G, 133C-E, 134B).

Prudential Insurance Co. v. Inland Revenue Commissioners [1904] 2 K.B.658considered.

(2) That, since the policy was not a contract of insurance, it had been issuedby the insurance company in contravention of section 16 of the InsuranceCompanies Act 1982; but that a policy issued in good faith, albeit in breachof the section, was not thereby rendered unlawful and unenforceable (post,pp. 134F, 136A, G, 137A).

Phoenix General Insurance Co. of Greece S.A. v. Halvanon Insurance Co.Ltd. [1988] Q.B. 216, C.A. considered.

The following cases are referred to in the judgment:
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Flood v. Irish Provident Assurance Co. Ltd. (Note) [1912] 2 Ch. 597 Gould v.Curtis[1913] 3 K.B. 84, C.A..

Joseph v. Law Integrity Insurance Co. Ltd. [1912] 2 Ch. 581, C.A.. National Standard Life Assurance Corporation, In re [1918] 1 Ch. 427 Phoenix General Insurance Co. of Greece S.A. v. Halvanon Insurance Co. Ltd.

[1988] Q.B. 216; [1987] 2 W.L.R. 512;[1986] 1 All E.R. 908;[1987] 2 AllE.R. 152, Hobhouse J. and C.A. .

Prudential Insurance Co. v. Inland Revenue Commissioners [1904] 2 K.B.658

The following additional cases were cited in argument:

Medical Defence Union Ltd. v. Department of Trade [1980] Ch. 82; [1979] 2W.L.R. 686; [1979] 2 All E.R. 421

Paterson v. Powell (1832) 9 Bing. 320 Smith v. Anderson (1880) 15 Ch.D. 247,C.A. .

PRELIMINARY ISSUES

On or about 28 October 1986 Tyndall Assurance Ltd. ("Tyndall"), aninsurance company, issued a policy described as a policy of life assurance tothe plaintiff, Fuji Finance Inc., in consideration of a single premiumof *12450,000 paid by the plaintiff. On or about 27 April 1987 the firstdefendant, Aetna Life Assurance Co. Ltd., took over the undertakings andliabilities of Tyndall pursuant tosections 49 and 50 of the InsuranceCompanies Act 1982. By a petition made pursuant to those sections on 16December 1993 certain liabilities of the first defendant including its liabilities

to the plaintiff in respect of the policy of 28 October 1986 became theliabilities of the second defendant, Windsor Life Assurance Co. Ltd. By astatement of claim dated 11 April 1994 and re-amended pursuant to theleave of Master Barratt on 25 March 1994 the plaintiff sought against thedefendants damages for breach of contract in relation to the policy of lifeassurance of 28 October 1986.

By their re-amended defence the defendants denied that the policy was apolicy of life assurance and averred that it was unenforceable because itcontravenedsection 16 of the Insurance Companies Act 1982.

On 25 March 1994 Master Barratt further ordered trial of the preliminaryissues (1) whether the policy in the amended statement of claim issued onor about 28 October 1986 was or was not a policy of insurance; (2) if thepolicy was a policy of insurance, whether the policy was a policy of lifeinsurance within the meaning ofsection 1 of the Life Assurance Act 1774;and (3) if the policy was not (a) a policy of insurance or (b) a policy of life
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6/21

insurance within the meaning of the Act of 1774 whether it wasunenforceable under section 16 of the Insurance Companies Act 1982.

The facts are stated in the judgment.

Nicholas Underhill Q.C.and Robert Powell-Jonesfor the plaintiff. It is theessence of a contract of insurance that the payment of benefit is dependenton the happening of an "event." In the case of life assurance that event iseither the death of the life assured ("whole life" assurance) or his survival toa specified age ("endowment" assurance): seePrudential Insurance Co. v.Inland Revenue Commissioners [1904] 2 K.B. 658;Gould v. Curtis [1913] 3K.B. 84;Joseph v. Law Integrity Insurance Co. Ltd. [1912] 2 Ch.581andMedical Defence Union Ltd. v. Department of Trade [1980] Ch. 82.That position is not in principle altered by a right to recover premiums orsome other specified sum by way of surrender prior to the specified event.

Subject to the discontinuance charge, the rights of the insured were notaffected in any way by the event supposedly insured against, i.e. the deathof the life assured. That was because there was no death benefit under thecontract (the multiplier being 1), and accordingly no "mortality cost:" indeedthe right to vary so as to include a death benefit subsequently had beenexcluded. The death of the life assured was merely the terminus of a periodduring which the plaintiff could cash in the fund (in whole or in part) at anytime; and the distinction between rights on surrender and rights on deathwas wholly empty. Therefore there was simply an investment contractdressed up as a life assurance contract. The discontinuance charge is purely

ancillary and cannot by itself change an investment contract into a contractof insurance.

There is no evidence that Tyndall "carried on" activities of a kind prohibitedby section 16(1) of the Insurance Companies Act 1982. Even if *125it did,the effect of a breach of section 16 was not to render the contractunenforceable. The concept of "carrying on" an activity requires an elementof repetition and continuity: seeSmith v. Anderson (1880) 15 Ch.D. 247 ,277-278.The evidence showed only that on a single occasion Tyndallentered into a contract which was not a contract of insurance. Even if therehad been a breach of section 16 that would not render the contractunenforceable: the assured relies on the principles set out inPhoenixGeneral Assurance Co. of Greece S.A. v. Halvanon Insurance Co. Ltd. [1988]Q.B. 216.

Nigel Davis Q.C.and Lindsey Stewartfor the defendants. A satisfactorydefinition of a "contract of insurance" may not be capable of being evolved:seeMedical Defence Union Ltd. v. Department of Trade [1980] Ch. 82, 95.
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7/21

There are, however, three requirements (seePrudential Insurance Co. v.Inland Revenue Commissioners [1904] 2 K.B. 658, 663): (1) the contractmust provide that a sum of money, or a monetary equivalent, will be paid onthe happening of a specified event; (2) there must be uncertainty as to thehappening of such event; (3) there must be an insurable interest in the

insured which ordinarily connotes that the event is prima facie adverse tothe interests of the assured. [Reference was also made toGould v. Curtis[1913] 3 K.B. 84; Halsbury's Laws of England, 4th ed., vol. 25 (1994Reissue), pp. 10-11, para. 2; Chitty on Contracts, 26th ed. (1989) vol. 2,pp. 917-918, para. 4204 andMedical Defence Union Ltd. v. Department ofTrade [1980] Ch. 82, 98 et seq.] Strictly, perhaps the third "requirement" isa precondition to claiming on what otherwise, under the first tworequirements, would be a valid contract of insurance: see the Life AssuranceAct 1774 andPaterson v. Powell (1832) 9 Bing. 320. Given these criteria,the policy was plainly a contract of insurance. It only failed to bea validcontract of insurance because of the lack of an insurable interest onthe part of the plaintiff in the life insured.

At the heart of the plaintiff's case is the allegation that the policy was only a"policy of investment" and not a policy of insurance. But it is a non sequiturto suggest that because a policy may be styled an investment it cannot bean insurance contract. On the contrary, the mere fact that an insurancepolicy may, in practice, be an investment of itself in no way shows that itis notan insurance policy. Life insurances can be styled investments:indeed, they are so designated in theFinancial Services Act 1986 (seesection 1(1) and Schedule 1, Part I, paragraph 10)and life insurance policies

may be subject to the Rules of the Securities and Investments Board: seeSchedule 10, paragraph 5(3) . [Reference was also made to Birds, ModernInsurance Law, 3rd ed. (1933), p. 7.]

The plaintiff places reliance on the fact that the death benefit factor wasstated to be 1.00 in the schedule to the policy and the view that the amountpayable on the death of the life assured would have been the same as if thepolicy had been surrendered. But that does not of itself displace the fact thatthe policy (apart from there not being an insurable interest) fulfilled therelevant requirements of insurance. There is no requirement, in principle oron authority, that the value of the benefit payable under the policy must, ascompared to surrender, be greater on death. There is no reason in principlewhy there should be; nor do any of the authorities even suggest that it isrelevant: seePrudential Insurance Co. v. Inland Revenue Commissioners[1904] 2 K.B. 658;Joseph v. Law Integrity Insurance Co. Ltd. [1912] 2 Ch.581and Flood v. Irish Provident Assurance Co. Ltd. (Note) [1912] 2 Ch. 597. In any event, the argument overlooks the fact that, in the case ofsurrender within the first five years, the benefit wouldbe lower than the
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benefit payable on death. Thus, the policy was not simply an investmentpolicy but also a policy of insurance within the ambit of the Life AssuranceAct 1774: seeJoseph v. Law Integrity Insurance Co. Ltd. [1912] 2 Ch. 581,594; Prudential Insurance Co. Ltd. v. Inland Revenue Commissioners; Gouldv. Curtis andIn re National Standard Life Assurance Corporation [1918] 1

Ch. 427.

If the policy was not a contract of insurance it was issued in contravention ofsection 16 of the Insurance Companies Act 1982 and was therefore illegaland unenforceable: seePhoenix General Insurance Co. of Greece S.A. v.Halvanon Insurance Co. Ltd. [1988] Q.B. 216.

Underhill Q.C.replied.

Cur. adv. vult.

7 July. SIR DONALD NICHOLLS V.-C.

handed down the following judgment. In recent years many life insurancecompanies have devised increasingly sophisticated forms of policies designedto make them attractive as investments. Potential investors are wooed withthe advantages of these policies: they are tax efficient, they offer protectionagainst inflation and, unlike the traditional forms of life policies, money canbe withdrawn instantly and regularly so as to give the policyholder a sourceof income.

This case concerns one such policy. The case has a most unusualbackground. In short, the policy in question enabled the policyholder toswitch the units allocated to his policy between several funds. For a reason Iwill explain, the policyholder was able to make switches in circumstanceswhere he always gained and never lost; indeed, every investor's dream. Sothe policy increased phenomenally in value. The policy appreciated in valueat an annual average rate of 90 per cent. compound, which equals a tenfoldincrease every four years. The policy was taken out in October 1986, and asingle premium of 50,000 was paid. In less than six years, by June 1992,the policy had soared in value to over 1m.

The insurance company then changed its switching procedures. Thepolicyholder claimed this was a repudiatory breach of contract andsurrendered the policy. The surrender proceeds amounted to 1,110,758,and these were paid. The policyholder was not satisfied. He launched thisaction for damages. The amount of damages being claimed is at large. Theinsurance company says that, if the policy had continued to appreciate atthe same rate for the expected lifetime of the life assured, the damages
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could amount to 252 thousand trillion. This is equivalent to the grossnational product of the United Kingdom for 460,000 years. In fact, thedamages could not exceed the value of the relevant funds of the company.Even so, the sums involved must be very substantial.

The insurance company denies it has committed any breach of contract. Oneof its defences is that the policy is null and void under *127section 1 of theLife Assurance Act 1774. A preliminary issue has been directed on thispoint, and on a further point concerning the effect of contraventionofsection 16 of the Insurance Companies Act 1982.

The policy

Before I turn to the Act of 1774 I must put a little more flesh on the bones.Mr. Gary Robert Tait is a sophisticated investor. In 1986 he looked closely atsome policies, called Investment Account, being marketed by TyndallAssurance Ltd. Under these policies sums were payable on the death of thelife assured or the earlier surrender of the policy. Either way, the sumspayable were calculated by reference to the value of the units then allocatedto the policy. The value of the units was the measure, although the amountpayable was not necessarily equal to that value. Depending on thecircumstances and requirements of a particular policyholder, the amountpayable on death might be more than the current value of the policy units.The sum payable on death might, for instance, be 1.5 times the value of thepolicy units.

In short, the way these policies worked was this. The value of the policy waslinked to the price of units of internal funds of Tyndall, these internal fundsbeing identified subdivisions of Tyndall's long term business fund. The namesof the funds indicate their content. I mention some of them: U.K. equityfund, property fund, fixed interest fund and index-linked fund. The prices ofunits in the funds were based upon the value of the assets constituting thefunds. In some cases, such as the North American Equity and Far Easternfunds, the assets were themselves units in a corresponding unit trust, ormore than one unit trust, managed by an associated company of Tyndall.The assets in the internal funds were not the property of the policyholder.Units in the funds were notionally allocated to the policy as a means ofcalculating the value of the policy.

A feature of the policies was a "switch" option. This option entitled thepolicyholder to direct Tyndall to convert units of an internal fund allocated tothe policy to units of another fund. Suffice to say, switching instructionsgiven by 2.30 p.m. on, say, Tuesday were carried out at prices published inWednesday's Financial Times. Tyndall fixed those prices at 10 a.m. on
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Tuesday. They were based on the prevailing stock market prices, in the caseof the U.K. equities and fixed interest stocks. So an investor who was well-informed about the movement of prices on the stock exchange could do hisown calculations. By this means he could know, after 10 a.m. and before2.30 p.m. on Tuesday, the approximate price Tyndall would have fixed at 10

a.m. on Tuesday as the value of the units in some of the funds. He couldcalculate this for himself, even though the prices struck by Tyndall would notbe published until the following day. So, when he gave a switchinginstruction at 2 p.m. on Tuesday, he was in effect switching at known prices.By this means he could make profits and avoid losses.

Mr. Tait is the prime mover behind a Panamanian company, Fuji Finance Ltd.In October 1986 Fuji took out a policy with Tyndall, called a CapitalInvestment Bond. Before doing so, Mr. Tait checked with Tyndall that he hadcorrectly understood the switch option procedure. Fuji paid a single premiumof 50,000. The life assured was Mr. Tait. He *128then operated the switchoption procedure to great effect, as already mentioned. In March 1987Tyndall's long term business was transferred to Aetna Life Insurance Co. Ltd.

Fuji's policy was not a particularly large one at the outset. But, as the valueof the policy grew and the number of switches increased, adverse effectswere felt by other policyholders. Some complained about the poorinvestment performance of the funds. In 1990 Aetna undertook a review ofits procedures. In April 1991 the procedures were revised. Mr. Tait was toldthat in future, in order to improve the equitable treatment of allpolicyholders, Aetna was changing the time at which prices for units in the

internal funds would be struck from 10 a.m. to 4 p.m. So, in future, aninstruction given by Mr. Tait at 2 p.m. on Tuesday would not be carried outby reference to values already determined. This led to Fuji's claim that Aetnahad committed a repudiatory breach of contract. In turn, this was followedby Fuji surrendering the policy and commencing this action. On 31December 1993 Aetna's long term business was transferred to Windsor LifeAssurance Co. Ltd.

The Life Assurance Act 1774

The Life Assurance Act 1774 renders null and void life insurances, andcertain other insurances, in which the insured does not have an insurableinterest. This Act, perhaps surprisingly, is the statute which still governs thisaspect of life insurance. The mischief at which the Act was aimed, as recitedin the Act, was that by experience it had been found that making insuranceson lives or other events in which the assured had no interest "hathintroduced a mischievous kind of gaming." Section 1 provides:


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"no insurance

shall be made by any person . . . on the lifeor lives of any personorpersons, or on any other event or events whatsoever, wherein the person . .. on whose account such policy . . . shall be made, shall have no interest, or

by way of gaming or wagering; and . . . every assurance made contrary tothe true intent and meaning hereof shall be null and void to all intents andpurposes whatsoever." (Emphasis added.)

In the present case Fuji, the policyholder, accepts that it had no insurableinterest in Mr. Tait's life, at any rate to a greater amount than the 1.1m.paid to Fuji when the policy was surrendered. The area of dispute iswhether, having regard to its terms and conditions, Fuji's policy is an"insurance on the life" of Mr. Tait for the purposes of section 1. Theinsurance company, now Windsor, claims that the policy is within the section

and is void accordingly. Fuji asserts the contrary.

"Insurance on the life of any person"

Surprisingly, there seems to be no authority in which the meaning of the keyphrase in section 1 "insurance . . . on the life . . . of any person" has beendirectly considered. However, there are several cases in which similar ormore widely drawn expressions under other statutes have been addressed.Foremost among these isPrudential Insurance Co. v. Inland RevenueCommissioners [1904] 2 K.B. 658. The question concerned the stamp dutypayable on a policy under which a specified sum was payable *129on the

life assured attaining 65 years of age, or a lesser sum on his earlier death.Channell J. held this was stampable as a policy of life insurance within themeaning ofsection 98 of the Stamp Act 1891 (54 & 55 Vict. c. 39). Underthat Act a policy of life insurance is defined as "a policy of insurance uponany life or lives or upon any event or contingency relating to or dependingupon any life or lives . . ." That case is well known for Channell J.'sexposition of what is meant by "insurance." In short, and subject to onepoint I need not mention, he described insurance, at p. 663, as a contractwhereby a sum of money or some other benefit is payable upon thehappening of an event which involves a degree of uncertainty, either as to

the happening of the event or as to the date on which the event will occur.In that case the policy, considered as a whole, satisfied those criteria.Further, the endowment aspect, even if considered separately, fell within thestatutory definition of a policy of life insurance, because money was therebymade payable on a contingency relating to life, the contingency being theinsured living to age 65.


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Next, chronologically, was the decision of the Irish Court of Appeal in 1910in Flood v. Irish Provident Assurance Co. Ltd. (Note) [1912] 2 Ch. 597 . Theimportance of this case, for present purposes, is that it brought out that acontract may be a contract of insurance even though the insurer tradeswithout any risk. The sums payable under the policy, and the amounts

payable on the uncertain event, may be so arranged that in purely financialterms the insurer cannot lose. In that case the question was whether anumber of policies were outside the objects of the company as "policies ofassurance upon or in any way relating to human life." The company issuedpolicies for fixed sums payable at the end of a certain number of years if thelife assured were still living, in return for the periodical payment ofpremiums, with a provision that in the event of earlier death a percentage ofthe premiums would be repaid. Holmes L.J. observed, at p. 601, that theinsured would have done better to lodge the amount paid as premiums inthe Post Office Savings Bank from which he or his personal representativescould withdraw the full amount at any time with interest. Despite this, thecourt held that these were policies of assurance. Further, and plainly, thepolicies fell within the description of policies of assurance "upon or in anyway relating to human life." Accordingly the policies were ultra vires thecompany.

Two years later a similar point came before the English Court of Appeal,inJoseph v. Law Integrity Insurance Co. Ltd. [1912] 2 Ch. 581. Thequestion was whether certain policies fell outside the company's objects,which excluded life insurance within the meaning of the Life AssuranceCompanies Act 1870 (33 & 34 Vict. c. 61). In return for periodic payments,

sums were payable at stated intervals if the insured were still alive. If hedied before a payment date, the premiums paid since the last payment datewere returned. In the court below the policies were held not to be policies oflife insurance; they did not insure against risk, the premiums were fixedirrespective of the average duration of life and irrespective of the age orhealth of the insured, and the contract was properly described as a means ofenabling thrifty persons to accumulate a sum of money by small savings:see 107 L.T. 538 , 540. The Court of Appeal reversed this decision. Althoughthe Act of 1870 did not expressly *130define life insurance, that expressionwas to be understood as including insurance whereby a sum of money ispayable on the happening of a contingency depending on the duration ofhuman life. The policies in that case satisfied that test. Accordingly theywere ultra vires.

The same approach was adopted by the Court of Appeal inGould v. Curtis[1913] 3 K.B. 84. An insurance policy provided for payment of 200 on thedeath of the life assured within a stated period of years, and 100 if he werealive at the end of the period. The question was whether this was an


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insurance by the taxpayer "on his life" within the meaning of section 54 ofthe Income Tax Act 1853 (16 & 17 Vict. c. 34) . The court held that it was.All three members of the court observed that "on his life" imports the notionof payment being dependent on the contingency of human life. The phraseincludes the case where payment is contingent on survival as well as the

case where payment is contingent on death: see Sir Herbert Cozens-HardyM.R., at p. 92, Buckley L.J. at pp. 94-95, and Kennedy L.J., at p. 97.

I return to section 1 of the Act of 1774: "no insurance shall be made . . . onthe life of any person . . ." To be within the scope of this prohibitory section,the contract must be, first, an insurance which, secondly, is on the life of aperson. InPrudential Insurance Co. v. Inland Revenue Commissioners [1904]2 K.B. 658, Channell J. enunciated the essence of an insurance for thispurpose: a contract under which a sum of money becomes payable on anevent which is uncertain as to its timing or as to its happening at all. Thesecond element ("on the life") requires that the uncertain event is onegeared to the uncertainties of life. This reading of section 1 accords with thenow well-established understanding of what is meant by life insurance.

I appreciate that, as I have already observed, the decided cases wereconcerned with the application of particular statutory or other definitionsconcerned with life insurance. However, none of those cases turned onsubtle nuances of language. Shining through the cases is a judicial appraisalof the essence of life insurance. Moreover, if one were to seek to comparelanguage,Joseph v. Law Integrity Insurance Co. Ltd. [1912] 2 Ch.581would be indistinguishable. There the company's objects incorporated a

reference to the business of life assurance within the meaning of the LifeAssurance Companies Act 1870 . That Act applied to companies which issued"policies of assurance upon human life." I can see no reason for interpretingthe similar expression in the Act of 1774 differently from the way the Courtof Appeal interpreted that expression in the Act of 1870. Accordingly, in myview, to be within section 1 a sum of money (or other benefit) must bepayable on an event uncertain, either as to its timing or as to its happeningat all, and that event must be dependent on the contingencies of human life.

The application of section 1 to this policy: the death benefit

I now turn to apply section 1, as so understood, to Fuji's policy. The two keyprovisions are conditions 5 and 7. Condition 5 reads:

"Benefit on death. On the death of the life assured, the company shall paythe value of the units on the next valuation day following *131receipt bythe company of written notification of death, multiplied by the death benefitfactor . . ."
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Fuji Finance Inc v Aetna Life Insurance Co Ltd