Before: Master Ellison
 
 

B E T W E E N

JUDGMENT
 
DATED: 3 March 1998

Master Ellison :

This judgment deals with an issue pertaining to a mortgage protection policy taken out by the late Denis Hunter ("the deceased"), who died on 26 July 1992, several months after the completion of the purchase by him and by the plaintiff as joint tenants of a dwelling house known as 2 Waringsfield, Moira, County Down ("the premises") for £49,000 subject to a mortgage from the then Ulster Bank Executor and Trustee Services Company (the successor in title of which is Ulster Bank Limited) to secure an advance of £30,000.

The defendant is the widow of the deceased, the residuary legatee under the terms of his will and the personal representative of his estate, letters of administration (will annexed) having issued to her on 21 June 1995, the executors having renounced probate. The plaintiff is the former business partner of the deceased and a beneficiary under his will and has brought this action by originating summons seeking, inter alia, an administration order and accounts and inquiries. As part of the accounts and inquiries directed by me on 18 November 1996 and the proceedings under an order made on 8 October 1997 for administration of the estate, an issue has arisen as to whether a mortgage protection policy taken out by the deceased for an initial sum assured of £35,000, but reducing as set out in a scheduled table of sums insured under the policy and payable on the death of the deceased before 2 April 2002, was deposited with and is held by the Ulster Bank Limited by way of an equitable mortgage in its favour -- and, if so, whether the plaintiff, who as the survivor of the joint tenants has continued to make payments of the monthly instalments due to the bank on foot of the mortgage of the premises and thus reduced the amount secured by the mortgage of Site 2 Waringsfield by the sum of £14,276.39 (as at 2 February 1998) from her own resources subsequent to the date of the deceased's death, has any claim on the policy or its proceeds.

I quote the following letter dated 3 February 1988 from Ulster Bank Limited to the plaintiff's solicitors:-

Dear Sirs

Borrowers: Miss Currie

Property: SITE 2 Waringsfield, Lurgan Road,

Moira, Co Armagh --

Further to our letter of 2 February 1998 we write to advise the following:

Balance as at date of death 26.7.1992 --£29,621.80

Balance of mortgage as at 12.2.1998 -- £15,345.41.

We confirm that our client Mrs E Currie has therefore reduced the mortgage by the sum of £14,276.39 from her own resources. Mr Hunter's life insurance was provided by General Accident Policy No 247320 LU. This was a Mortgage Protection Policy (deceasing term assurance) originally for £35,000 commenced on 8 April 1992.

The Claim Form was received from General Accident on 5 August 1992. Ulster Bank Limited held the policy by Equitable Deposit and therefore General Accident will not release the policy proceeds until the form is signed by both the Bank and the Executors of the estate.

We have asked General Accident to return the policy and we have noted to forward it to you immediately it is received.

Yours faithfully

Elizabeth McCann

Mortgage Office"

At the hearing on 12 February 1998 when Mr Coyle of counsel appeared for the plaintiff and Mr Philip J Smith solicitor appeared for the defendant, a number of other documents were produced and, in addition to the affidavit evidence filed by the plaintiff (with whom that bank appears to have a commonality of interest in the determination of the issues addressed in this judgment), the oral evidence of Mr Laird of the Ulster Bank, who was called as a witness of the plaintiff, was received. A counterpart lease dated 9 April 1992 established that the deceased and the plaintiff held the premises as joint tenants under a registered leasehold title subject to a registered charge in favour of the then Ulster Bank Executor and Trustee Services Company.

The offer of advance includes the following general condition:

"6. Mortgage protection assurance

6.1 This form of insurance is required for non-endowment linked mortgages. The policy will be held by the Executor and Trustee Services Company.

6.2 Unless a special condition states otherwise, mortgage protection assurance will be arranged by the company.

6.3 If required by a special condition, assurance must be arranged by the applicant(s) and the acting solicitor must be supplied with the original policy or evidence of acceptance of proposal for assurance to lodge with the company when requesting the advance cheque."

A declaration dated 6 November 1991 and signed by both mortgage applicants on the back of the application form for the advance includes the following, which I regard as placing beyond doubt the relevant intentions of the parties to the mortgage transaction:

"I/We declare and fully understand that: ...

8. The security for the advance will be a first legal mortgage of the property shown in Part D together with: ...

(c) In the case of a repayment mortgage deposit of a mortgage protection policy or alternative policy acceptable to the lender to provide sufficient death cover for the amount and term of the advance."

The mortgage of the premises is and was a capital repayment mortgage. The fact that the mortgage protection policy was deposited with the plaintiff gives rise to a rebuttable presumption of a mortgage of that policy in favour of the lender with whom the document was deposited: see Wylie's Irish Land Law, 3 Ed 1997, at paragraph 12.44 and the cases referred to in the relevant footnote. It is abundantly clear from the terms of general condition 6 and the above paragraph 8 of the declaration endorsed on the mortgage application and the failure of the defendant to adduce evidence which rebuts the presumption I have mentioned that the mortgage protection policy formed part of the collateral security for the advance and was deposited with the bank by way of an equitable mortgage over the policy itself and its proceeds.

That being so and as the deceased was named as the sole policyholder and the person to whom the sum assured is payable, had the deceased also been a sole owner of the premises it would seem that any surplus proceeds of the policy after discharge of the amount due to the bank and also secured by the land mortgage would have been due and payable to his estate.

In the instant case, however, the plaintiff was a co-owner and mortgagor of the premises and has reduced the amount due on foot of the original advance by over £14,000 paid after the date of death of the deceased and, given that the deceased died only a matter of months after the inception of the policy on foot of which £35,000 and (presumably) interest thereon would therefore be payable, it appears to me that the plaintiff is entitled to an equitable mortgage on the policy for the moneys which she has so expended after the deceased's death by way of subrogation to the rights of the Ulster Bank. To view the matter otherwise would be to permit the estate of the deceased to be unjustly enriched at the expense of the plaintiff and I respectfully refer to the very recent case of Banque Financiere De la Cite v. Parc (Battersea Limited) and Others [1998] 1 All ER 737, in which the House of Lords held that subrogation as a restitutionary remedy did not depend upon the common or unilateral intentions of the parties, but would be available where a defendant would be enriched at a plaintiff's expense, where such enrichment would be unjust and where there were no policy reasons for denying the remedy. I am not aware of any reasons for denying the remedy in the instant case and respectfully refer in this respect to the passage headed "The limits of subrogation" in The Law of Restitution by Goff & Jones, 4th Edition (1993) at page 594 et seq. The plaintiff should not be prejudiced by the payments which she has had to make by reason of the inordinate and exceptional delay on the part of the defendant personal representative in addressing the realisation of the policy as part of the obligation upon her to get in the assets of the estate and which has led to the making of a full administration order in this action.

I shall hear submissions as to the appropriate form of order including costs consequent on these findings.