Kevans v Joyce

• Jurisdiction: Ireland
• Judgment Date: 25 June 1895
• Date: 25 June 1895
• Court: Court of Appeal (Ireland)

Kevans

and

Joyce.

Monroe, J.

Appeal.

CASES

DETERMINED BY

THE CHANCERY AND PROBATE DIVISIONS

OF

THE HIGH COURT OF JUSTICE IN IRELAND,

AND BY

THE COURT OF BANKRUPTCY IN IRELAND,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1896.

Unconscionable bargain — Reversionary interest — Estate falling into possession — Purchase of equity of redemption by mortgagee — Confirmation of prior dealings — English bankruptcy — Title of trustee — Redemption suit — Offer to redeem — Amendment — Costs.

A, who was a young man of improvident habits, and entitled in reversion, expectant on the death of his father, to an estate for life in certain lands, and in a mortgage for £3000 and a sum of £20 railway stock, applied to the defendant, who was a professional money-lender at high rates of interest, for an advance of £140 on the security of his reversionary property, and by deed, dated the 18th June, 1889, mortgaged it to the defendant to secure £140 principal and £5 stated to be agreed upon as the costs of making searches and preparing, stamping, and registering the deed, with interest at £60 per cent. He also gave a promissory note at six months for £140 2s. The mortgage was framed to secure future advances, including interest, with monthly rests, commission, and other charges, and included a power of sale exercisable without notice. On the occasion of this transaction the defendant advised A to have an independent solicitor to act for him, but A declined to do so, and signed a document to that effect. A having been subsequently informed by the defendant that the mortgage had been stamped to cover an advance of £400, borrowed a further sum of £260 from the defendant, and gave a promissory note for the amount, payable in three years. A policy of insurance for £800 was effected on A's life, and was assigned to the defendant. In October, 1889, A borrowed a further sum of £140, and on the 17th October, 1889, he executed to the defendant a further mortgage of his said reversionary property to secure the repayment of this amount at £60 per cent. interest, with a proviso that the amount should not be paid off for three years without the defendant's consent. Another policy of insurance was effected on his life for £400, and assigned to the defendant. The premiums on the policies were charged on the mortgaged property.

On the 17th July, 1890, a writ was issued by A in the Chancery Division to set aside the two deeds of mortgage and the promissory notes upon payment of the principal amount advanced and £5 per cent. interest. A statement of claim was delivered on the 5th March, 1891, but no further steps were taken in this action. In January, 1891, A's father died, and A, who had borrowed a large sum of money, after the defendant's advances, from London money-lenders, and was desirous of leaving the country, had an interview with the defendant with the view of disposing of his equity of redemption in the mortgaged property. The defendant agreed to give him £250 as an advance on the mortgages and £120 as the consideration for the purchase. On the 31st March, 1891, A signed an agreement, whereby, in consideration of an advance of £250 repayable on the 13th July, 1892, he confirmed the deeds of mortgage of the 18th June, and 17th October, 1889, and undertook to change his solicitor, to discontinue the Chancery action, and to appoint the defendant mortgagee in possession. On the 3rd April, 1891, A executed a deed conveying the equity of redemption to the defendant in consideration of £120. A then appointed a new solicitor in the Chancery action, who, by his instructions, entered a rule to change, and discontinued the action. A received the money from the defendant and went abroad. He was adjudicated bankrupt by his English creditors on the 19th April, 1892, and the plaintiff was appointed trustee.

The defendant having presented a petition for sale of the lands in the Land Judge's Court on foot of another incumbrance, the plaintiff, on the loth February, 1893, brought an action to set the mortgages of 18th June and 17th October, 1889, the agreements of 31st March, and the conveyance of the 3rd April, 1891. The statement of claim, as delivered, did not contain any offer to redeem.

At the trial of the action, upon oral evidence, Monroe, J., arrived at the following conclusions of fact:—

I. As regards the mortgages and assignments of the policies—(a) that the several transactions were entered into at the instance of A, and not by the inducement of the defendant; (b) that A understood the nature and material parts of the contracts, except the provision as to monthly rests; (c) that A was not advised by any independent solicitor, but that this was his own fault; (d) that A was not suffering from any pecuniary pressure beyond that he was reckless and improvident, and ready to accept money on any terms to supply him with the means of dissipation; (e) that the property comprised in the mortgages of the 18th June, 1889, and the 17th October, 1889, with the policies of insurance, gave ample security for the money advanced.

II. As regards the sale of the equity of redemption—that at the time of the conveyance of April, 1891, A had no idea of the charges on his property, or what the equity of redemption was worth, and that he was at that time deplorably at a loss for money.

Upon these conclusions of fact Monroe, J., held:—

1. That the mortgages of the 18th June, 1889, and 17th October, 1889, were hard and unconscionable bargains, and should only stand as securities for the amounts advanced, and interest at 5 per cent.

2. That, as regards the transaction of April, 1891, and the agreements immediately preceding it, A and the defendant were not on an equal footing, and that it therefore lay on the defendant to show that the bargain was fair and reasonable, and that the property was not sold at an undervalue; and the Court being of opinion that the purchase-money was grossly under the value of the property sold, held that the conveyance of the 3rd April, 1891, should also stand as a security only for the amounts advanced and interest at 5 per cent., and that there was no valid confirmation of the mortgages of 1889.

3. That it was not competent for the defendant to question, in the present action, the validity of the English bankruptcy proceedings, and the consequent title of the plaintiff as trustee to sue, even on the grounds of champerty and maintenance by the creditors who obtained the adjudication.

The decision of Monroe, J., on these points was affirmed by the Court of Appeal.

Observations upon a mortgagee purchasing the equity of redemption from a mortgagor at an undervalue.

Monroe, J., gave the plaintiff leave at the hearing to amend the statement of claim by inserting an offer to redeem, though resisted by the defendant.

Monroe, J., directed each party to abide their own costs of the action. His Lordship's decision in this respect was not altered by the Court of Appeal.

Trial of Action.

The plaintiff sued as trustee in bankruptcy of Henry Walter Smith, under an adjudication of the English Bankruptcy Court.

The statement of claim sought to have it declared that certain indentures of mortgage, dated respectively 18th June, 1889, and 17th October, 1889, and certain assignments of policies of insurance on the life of the said Henry Walter Smith, together with two agreements, each dated the 31st March, 1891, and a deed of conveyance, dated the 3rd April, 1891, should stand as securities only for the moneys advanced by the defendant to the said Henry Walter Smith, with interest at 5 per cent. The statement of claim did not offer to redeem the defendant on these terms, the plaintiff's advisers considering that, as there would be sufficient funds to the credit of the estate of the said Henry Walter Smith, which had been sold in the Land Judge's Court, to satisfy the defendant's claim on this basis, such an offer was unnecessary; and it was admitted at the bar that the statement of claim had been deliberately prepared in this way.

At the hearing, which occupied several days, numerous witnesses were examined, including Henry Walter Smith, the plaintiff Mr. Kevans, the defendant, and persons in his employment; and a vast quantity of correspondence was put in evidence.

The material facts, as well as the arguments of counsel, are fully reviewed in the judgment of Mr. Justice Monroe, and the following short summary of the learned Judge's notes of the evidence will afford a sufficient prefatory outline of the circumstances under which the suit was instituted.

Henry Walter Smith, whose estate was the subject of a petition for sale in the Land Judge's Court, was formerly a sergeant in the 14th Hussars, and, at the time of the transactions impeached, was about twenty-eight years of age.

Under an indenture of settlement, dated the 15th April, 1857, he was entitled to an estate for life in remainder, expectant upon the determination of the life estate of his father Richard Jeremiah Smith, in the town and lands of Drumsawny, otherwise Summerhill, in the county of Meath, held under two indentures of fee-farm grant, dated respectively the 25th March, 1862, at the respective yearly rents of £75 5s. 1d., which yielded a profit rent of about £400 a-year; and in a sum of £2000, secured by a mortgage, dated the 16th February, 1855; and also to a life interest, expectant on the death of his father, in a sum of £1000, secured by a mortgage, dated the 30th August, 1855; and in a sum of £200 Great Southern and Western Railway stock, with divers remainders over. The inheritance of the lands was subject to a contingent jointure of £200 a-year for his mother, then aged about fifty-nine years, which afterwards became payable, and the same and the said sums of £2000, £1000, and £200, were subject to a mortgage to secure £1000 with interest thereon; and Henry Walter Smith's life estate in the lands and ultimate remainder in fee-farm were subject to a mortgage for £150, and...