Murphy v Aib

• Jurisdiction: Ireland
• Judge: Mr. Justice Francis D. Murphy
• Judgment Date: 04 February 1994
• Neutral Citation: 1994 WJSC-HC 1472
• Docket Number: No. 7848P/1984
• Court: High Court
• Date: 04 February 1994

1994 WJSC-HC 1472

THE HIGH COURT

No. 7848P/1984

MURPHY v. AIB

BETWEEN

HUBERT MURPHY

PLAINTIFF

AND

ALLIED IRISH BANKS LIMITED

DEFENDANTS

Citations:

CONVEYANCING ACT 1881 S21(3)

BANNER V BERRIDGE (1881) 18 CH D 254

CHARLES V JONES 35 CH D 544

EDGE V JARVIS 1958 1 WLR 815

SHEPERD V MOULS 1845 4 HARE 500

LAW V ROBERTS 1964 IR 306

STATUTE OF LIMITATIONS 1957 S43

STATUTE OF LIMITATIONS 1957 S44

TRUSTEE ACT 1888 S8

COLLINGS V WADE 1896 1 IR 340

HOW V EARL OF WINTERTON 1896 2 CH 640

STATUTE OF LIMITATIONS 1957 CH 3

Synopsis:

BANKER

Loan

Security - Sale - Proceeds - Balance - Trustee of balance - Interest on balance - Rate of interest at court rate or at rate appropriate to that payable on deposit account where deposit repayable on demand - Limitation of actions - Mortgagor's claim to interest on balance - Interest payable during six years before action brought - (1984/7848 P - Murphy J. - 4/2/94) 1994 2 ILRM 220

|Murphy v. Allied Irish Banks Ltd.|

INTEREST

Trustee

Liability - Mortgagee - Security - Sale - Proceeds - Balance due to estate of deceased mortgagor - Interest on balance - Rate of interest at court rate or at rate appropriate to that payable on deposit account where deposit repayable on demand - Limitation of actions - Interest payable during six years before action brought - (1984/7848 P - Murphy J. - 4/2/94) - [1994] 2 ILRM 220

|Murphy v. Allied Irish Banks Ltd.|

LIMITATION OF ACTIONS

Trustee

Bank - Mortgagee - Security - Sale - Proceeds - Balance due to estate of deceased mortgagor - Interest on balance - Rate of interest at court rate or at rate appropriate to that payable on deposit account where deposit repayable on demand - Interest payable during six years before action brought - (1984/7848 P - Murphy J. - 4/2/94) - [1994] 2 ILRM 220

|Murphy v. Allied Irish Banks Ltd.|

REAL PROPERTY

Incumbrance

Mortgage - Mortgagee - Security - Sale - Proceeds - Balance payable to mortgagor - Interest on balance - Rate of interest at court rate or at rate appropriate to that payable on deposit account where deposit repayable on demand - Limitation of actions - Interest payable during six years before action brought - (1984/7848 P - Murphy J. - 4/2/94) - [1994] 2 ILRM 220

|Murphy v. Allied Irish Banks Ltd.|

TRUSTS

Trustee

Interest - Payment - Bank - Mortgagee - Security - Sale - Proceeds - Balance due to estate of deceased mortgagor - Interest on balance - Rate of interest at court rate or at rate appropriate to that payable on deposit account where deposit repayable on demand - Limitation of actions - Interest payable during six years before action brought - Conveyancing Act, 1881, s. 21 - Statute of Limitations, 1957, ss. 43, 44 - (1984/7848 P - Murphy J. - 4/2/94) - [1994] 2 ILRM 220

|Murphy v. Allied Irish Banks Ltd.|

Mr. Justice Francis D. Murphy

1 The Plenary Summons herein was issued on the 15th day of October 1984. The wrongdoing alleged to have been committed by the Defendants occurred or commenced some 20 years earlier. The Plaintiff contends that the Defendant Bank realised certain assets, the property of his late mother, which were held by the Bank by way of security and that the Bank having discharged the debt due to them failed in their duty as trustees to invest the surplus for the benefit of those entitled thereto.

2 The matter arose in this way. Margaret J. Murphy owned the lands comprised in Folio 876L in the County of the City of Dublin upon which had been erected the premises known as 84 Mobhi Road, Glasnevin, in the County of Dublin. By an instrument of charge dated the 13th day of February 1957, Mrs. Murphy charged the said premises in favour of the Defendant Bank (then the Munster and Leinster Bank Limited). Mrs. Murphy died on the 26th of December 1962. She left her surviving eight children, including the above named Plaintiff Hubert Murphy and his eldest brother Patrick Murphy. Letters of Administration were not extracted by the Plaintiff herein until the 18th of February 1987 and it appears therefrom that the gross value of all of the estate of the deceased was £3,100 and that the net value thereof amounted to £2,742.

3 On the 4th of November 1965 the Bank sold the property for £4,081. The Bank contends that the costs of realisation and the amount due on foot of the security totalled £2,103 and that the balance of £1,980 was discharged by crediting the same to an account in the Bank in the name of the deceased.

4 Whilst the Plaintiff admitted that the security had been properly realised he disputed the amount claimed by the Bank to be due on foot of the security and more particularly he contended that the Bank held the balance - whatever it was - as Trustee and that as such they were bound to invest it, or at any rate to "apply it fruitfully" for the benefit of the estate of their customer.

5 The issue as to the amount due on foot of the security turned essentially on whether the Bank was entitled to discharge out of the proceeds of sale certain sums due to it by a company known as Royal Candy Limited.

6 The only basis on which the Bank could have discharged the indebtedness of Royal Candy Limited would be that the deceased had guaranteed the liabilities of that company. The Bank were not in a position to produce any such guarantee but that is not altogether surprising seeing that the transaction is now nearly 30 years old. What is known about Royal Candy Limited is that it had been a business in which the husband of the deceased had been engaged prior to his death in 1949. Mrs. Murphy subsequently took over the business and when her eldest son Patrick left school at the age of 18 he joined her in that business. Some time later the partnership business was incorporated and both Mrs. Murphy and Patrick Murphy held shares therein. It does appear from a letter dated the 3rd April 1968 from the Munster and Leinster Bank Limited to Patrick T. Murphy, that the Bank held a joint letter of guarantee from Patrick Murphy and his wife in respect of the liabilities of Royal Candy Limited. If the Bank had insisted on obtaining a guarantee from Mr. Patrick Murphy who was a young man and a junior "partner" in the enterprise (and indeed from his wife who had no interest in the business at all), surely it is at least highly probable that the Bank also obtained a guarantee from his mother who was more closely associated with the business and that for a considerably longer period than any member of her family. In the circumstances I am satisfied on the balance of probabilities that the Bank was entitled to discharge the debts due to it by Royal Candy Limited out of the proceeds of sale of the house owned by the deceased and charged in favour of the Bank. No serious challenge was made in respect of the other deductions made by the Bank out of the proceeds of sale, nor was their right to sell the property disputed.

7 The remaining issue between the parties is whether the Bank is liable to pay interest (or profits) to the Plaintiff on the balance of £1,980 remaining in their hands after the discharge in November 1965 of the debts and expenses aforesaid.

8 The Plaintiff contends that the Bank were and are express Trustees of the balance aforesaid. In fact it is not disputed that this is so (see the Conveyancing Act 1881 Section 21 (3) andBanner .v. Berridge 1881 18 Ch. D. 254 at 260/70) what the Defendants contended was that by paying the surplus into an account in the name of the deceased they had discharged their obligation as trustees. Whilst I appreciate that the Bank were placed in a somewhat difficult position, I do not accept that they were entitled to discharge the obligations imposed upon them in that manner. Placing the balance in an account in the name of the deceased did not constitute payment: it was simply a procedure by which payment could be made conveniently when sought by the personal representative of the deceased.

9 Understandably the Plaintiff relies strongly on the decision inCharles .v. Jones 35 Ch. D. 544. In that case a mortgagee sold under his power of sale and retained the surplus proceeds of sale. In those circumstances Kay, J. stated, and answered, the material question in the following terms at page 549:-

"Then the question remains as to his liability to pay interest upon the balance of purchase money in his hands. I have never heard it doubted that where a mortgagee sells, and has a balance in his hands, he is a Trustee of that balance for the persons beneficially interested. He takes his mortgage as a security for his debt, but, as soon as he has paid himself what is due, he has no right to...