Indemnity covenant recovery upheld despite unenforceable decrees and voluntary-payment objection

An indemnity claim was not defeated merely because the decrees relied on had already become unenforceable; limitation for enforcement of the decrees did not keep the underlying liability alive, but that did not by itself bar recovery under the indemnity covenant. The payment made to clear the encumbrance created by the mortgagor's transaction was treated as loss within the scope of the covenant, and the voluntary-payment objection failed on the facts assumed. The appellants were therefore entitled to recover the amount paid, with interest, under the indemnity covenant, and the prior decision was set aside.

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Issues: (i) Whether the claim under the indemnity deed was barred by limitation when the decretal liability was paid after the decrees had become unenforceable. (ii) Whether the amount paid to satisfy the assigned decrees could be recovered under the covenant of indemnity notwithstanding the objection that the payment was voluntary.

Issue (i): Whether the claim under the indemnity deed was barred by limitation when the decretal liability was paid after the decrees had become unenforceable.

Analysis: The claim was examined in the light of the limitation governing enforcement of the decrees and the right to sue on indemnity. The decrees of 26 August 1905 had become unenforceable before the payment was made, and the payment was therefore not made in discharge of a legally enforceable decretal remedy. The right under indemnity depended on the point when the appellants were damnified, but the earlier decretal proceedings did not keep the underlying liability alive for limitation purposes.

Conclusion: The claim based solely on enforcement of the decrees was barred, but that did not by itself defeat the indemnity claim.

Issue (ii): Whether the amount paid to satisfy the assigned decrees could be recovered under the covenant of indemnity notwithstanding the objection that the payment was voluntary.

Analysis: The indemnity was wide enough to cover losses arising from the mortgagor's acts in creating and maintaining the encumbrance over the property. The Board treated the payment made to clear that encumbrance as expenditure incurred to remove the burden created by the original mortgage transaction. Although the case had been fought on the footing of the decrees and evidence on some factual matters was lacking, the Court assumed ordinary business conduct and held that the payment was referable to the encumbrance and the covenant to indemnify. The voluntary-payment objection did not defeat recovery on the facts assumed by the Court.

Conclusion: The appellants were entitled to recover the amount paid, with interest, under the indemnity covenant.

Final Conclusion: The appeal succeeded, the High Court's decision was set aside, and the decree in favour of the appellants was restored, with each side bearing its own costs in the circumstances.

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