Economic Life Assurance Society v Usborne

• Jurisdiction: Ireland
• Judge: H. L.
• Judgment Date: 14 November 1901
• Court: House of Lords (Ireland)
• Date: 14 November 1901

[HOUSE OF LORDS.] ECONOMIC LIFE ASSURANCE SOCIETY APPELLANTS; AND USBORNE AND OTHERS RESPONDENTS. 1901 Nov. 14. EARL OF HALSBURY L.C., LORD SHAND, LORD DAVEY, and LORD BRAMPTON.

Covenant - Judgment - Merger - Mortgage - Rate of Interest - Ancillary and Independent Covenants.

A mortgage deed contained a proviso for redemption if the mortgagors should pay the principal with interest after the rate thereinafter covenanted. The mortgagors covenanted to repay the principal on a day named with interest at 5 per cent., and if the principal was not then paid, to pay interest at that rate half-yearly on so much of the principal as should remain unpaid. The mortgagors having made default, the mortgagees recovered judgment against them for principal and interest upon the covenant.

An action having been brought by another mortgage for an account of all moneys due to incumbrancers:—

Held, that though the personal remedy on a covenant to pay a debt merges in a judgment and a judgment carries only 4 per cent. interest, yet upon the true construction of this mortgage deed the mortgagees were entitled to retain their security until they were paid the principal sum and interest at 5 per cent.

The decisions of the Master of the Rolls and the Court of Appeal in Ireland, Usborne v. Limerick Market Trustees, [1900] 1 I. R. 85, reversed on this point.

BY a statutory mortgage in 1853 the Limerick Market Trustees assigned the undertaking, rents, tolls, &c., to the National Bank of Ireland until the loan of 10,000l., with interest at 4½ per cent., should be satisfied, the principal to be repaid in eighteen months. A similar mortgage was made in 1854 to secure 10,000l. with interest at 5 per cent., the principal to be repaid in twelve months. In 1858 these mortgages were transferred by deed to the appellants, who advanced 20,000l. By a separate deed of the same date the Limerick Market Trustees assigned the undertaking, rents, tolls, &c., to the appellants, subject to a proviso for redemption if the market trustees should pay the appellants “the sum of 20,000l. with interest for the same after the rate at the times and in manner hereinafter covenanted.” And the trustees covenanted with the appellants to pay the sum of 20,000l. on May 17 next with interest at 5 per cent., and if the principal was not then paid to pay interest at that rate half-yearly upon so much of the principal as should remain unpaid after May 17.

In 1897 the appellants brought an action in the Queen's Bench Division in Ireland against the Limerick Market Trustees upon the covenant in the mortgage of 1858 to repay the 20,000l. on May 17, 1859, with interest at 5 per cent., and signed judgment for the balance then due.

In 1898 Usborne on behalf of himself and other mortgagees brought an action in the Chancery Division, Ireland, against the Limerick Market Trustees and the appellants, claiming the appointment of a receiver, an account, and payment out of the rents, tolls, &c., to the respective mortgagees according to their priorities. By an order of the Master of the Rolls in this action it was (inter alia) declared that the appellants were entitled to interest at the rate of 4 per cent. from the date of their judgment on the sum of 19,069l. This declaration was affirmed by the Court of Appeal (Lord Ashbourne L.C., FitzGibbon and Holmes L.JJ.) as to the rate of interest.^F1 Against this decision the appellants brought the present appeal. They also appealed against the decision of the Master of the Rolls and the Court of Appeal upon a question of priorities between the respective mortgagees. That question turned entirely on the construction of the Limerick Market Acts and has no bearing upon the subject of the present report.

Haldane, K.C., and Jellett, K.C. (Irish Bar), (Lyttelton Chubb with them), for the appellants, contended that though the covenant to pay a debt merged in a judgment the appellants were entitled to retain their security until the principal with interest at 5 per cent. was paid, and discussed the cases referred to in Lord Davey's judgment.

Ronan, K.C., and Morphy (both of the Irish Bar), for Usborne and other respondents, contended that, after the judgment upon the covenant, the covenant was merged in the judgment, and the rate of interest could only be 4 per cent.: see 1 & 2 Vict. c. 110, s. 17.

O'Connor, K.C., and C. F. Doyle (both of the Irish Bar), for other respondents.

Haldane, K.C., in reply.

EARL OF HALSBURY L.C. My Lords, this case has occupied a considerable time, but I confess that I have not been able to entertain any doubt as to its true solution.

With respect to the point about the rate of interest, it appears to me that there is a confusion of thought which, with the utmost respect to the very able and learned counsel who have argued this question, has pervaded the whole of the argument. Where you are endeavouring to sue by any form which the law recognises for the realization of the security, or to free it from all claims, whether it be in the form of the redemption of a mortgage, or whatever the form be, all the rights arising from the instrument in question are to be observed; and it is idle to say, because the right as to one specific sum of money has been changed in its nature — changed from a right to sue upon the covenant into a judgment bearing interest at 4 per cent. — that therefore you have got rid of the...