The issue was whether Macaura had an insurable interest at the time of the loss.
Macaura's case is depending upon the fact that Company whether private or public is distinct from his owner if he took the policy from insurance company at the name of company then he could claim for damages. Only Macaura’s company, as owner of the timber, which had the requisite insurable interest in it.
However, the House of Lords held that the company was a different legal person from the shareholders, and thus Mr Salomon, as a shareholder and creditor, was totally separate in law from the company A Salomon & Co Ltd.
Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder.
The liquidator and the other creditors objected to this, claiming that it was unfair for the person who formed and ran the company to get paid first.
The company carried the business of felling and milling timber. Macaura had earlier insured the timber against loss of by fire in his own name. He subsequently sold the plantation to a company of which he was the only shareholder, through the purchase money remained owing to him.
He had not transferred the insurance policy to the company. After the sale, Macaura continued to insure the plantation in his own name. When Macaura attempted to claim on the policy, the company refused to pay.
In this case, Mr Salomon was the major shareholder, a director, an employee and a creditor of the company he created.
It is quite common in Ireland for one person to have such a variety of roles and still be a different legal entity from the company. Lee formed his crop spraying business into a limited company in which he was director, shareholder and employee. Lee was self-employed and thus not covered by the legislation. Lee and the company he had formed were separate entities, and it was possible for Mr. The following case is similar to Salomon and Lee, but the principle of separate personality worked to the disadvantage of the plaintiff.He sold his business to the newly formed company, A Salomon & Co Ltd, and took his payment by shares and a debenture or debt of £10,000.Mr Salomon owned 20,000 £1 shares, and his wife and five children owned one share each.In a sole proprietorship or partnership, the owners personally liable.For all intents and purposes, all acts taken by these two company types are taken by the owners themselves.When he was killed in a flying accident, his widow sought social welfare compensation from the State, arguing that Mr. The defendant company was involved in legal proceedings but did not have enough money for legal representation.