Smyth, Owner; Toms, Petitioner

• Jurisdiction: Ireland
• Judge: Ross, J.
• Judgment Date: 15 May 1918
• Court: Chancery Division (Ireland)
• Date: 15 May 1918

Smyth

Owner

and

Toms

Petitioner

Ross, J.

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1918.

Marshalling — Successive charges on different estates — Deficiency of funds — Rights against third parties — Apportionment.

The owner of two estates, A and B, and his predecessors in title created incumbrances affecting them:—the first on A and B; the second on A; and the third on A and B. The third incumbrancer had notice of the prior charges,

A was sold, but the proceeds were not sufficient to pay more than the first incumbrance and part of the second. B having been subsequently sold,”

Held, that the owners of the second incumbrance were not entitled to marshall, but only to have an apportionment of the first incumbrance between A and B, and to have a recoupment on this basis.

Archer's Estate, [1914] 1 I. R. 285, not followed.

Motion on Notice.

Wilhelmina Smyth and Jane Smyth, daughters of John Smyth, deceased, the father of the owner herein, who were annuitants under his will, applied for an order that the balance of the redemption prices of their annuities and the arrears of interest thereon should be paid to them out of the money in Court to the credit of the matter, and that the funds should he marshalled so as to meet said balance and interest.

John Smyth, who died in 1872, was possessed of three denominations of lands or interests in lands which may be described as follows:—(a) The five townlands; (b) the lands of Rathcoursey; (c) certain rents.

Affecting the above estates were the following incumbrances:—

1. An old charge for £2000, Created in 1788, affecting (a), and (c).

2. An old charge for £1000, created in 1825, affecting (a), (b), and (c).

3. A charge for £500, created in 1858, affecting (a), and (b).

4. A charge for £1000, created in 1859, affecting (b) only.

5. John Smyth the elder, the then owner, by his will made in 1853, devised (a) and (b) to trustees, subject to the charges affecting the same, on trust to pay certain annuities to his daughters (including the applicants), and subject thereto to his son, J. J. Smyth, the present owner. John Smyth the elder died in 1872.

6. In 1886 the owner created a mortgage in favour of Eliza Wakeham affecting (a), (b), and (c).

7. Mortgage created by the owner in 1887 in favour of the Munster and Leinster Bank for £1200, affecting (a), (b), and (c).

When (a) and (b) were sold the incumbrances, Nos. 1–4 (inclusive) were paid off. The redemption of the annuities (No. 5) was ordered, and the redemption prices fixed, but the proceeds of (a) and (b), after discharging the prior incumbrances, were not sufficient to pay the redemption prices in full, and a considerable amount remained still due to the several annuitants.

The rents (c) having been subsequently sold, and the proceeds thereof having come to credit, the annuitants asked for a declaration that they were entitled to marshal, and to throw incumbrances 1 and 2 on to the proceeds of (c), and thus leave sufficient of (a) and (b) to meet their own claims in full, and that the proceeds of (c) should now be resorted to for that purpose. The Bank contended that the annuitants were only entitled to the benefit to be derived from pro rata contribution.

McCarthy Mahony, for the applicants:—

The charges for £2000 and £1000 were incumbrances on (a), (b), and (c), and as they have been entirely paid off out of (a) and (b), the annuitants are entitled to marshall; Archer's Estate (1) is a direct authority on the question.

There are two classes of case—1, cases of marshalling proper, which is an equitable principle arising from the position of the parties; and 2, cases in which an owner of incumbered property conveys away part of it—there the right of the assignee to be indemnified depends on contract. The fundamental authorities on these subjects are: Aldrich v. Cooper (2); Averall v. Wade (3); Barnes v. Racster (4).

The question in the present case is whether the annuitants are precluded from marshalling by reason of the mortgages by the owner to Eliza Wakeham and the bank (Nos. 6 and 7). The rule, as often stated, that the doctrine of marshalling will not be applied to the prejudice of third parties is far too general, and is not justified by the authorities. The foundation of it is to be found in Aldrich v. Cooper (2), in which Lord Eldon uses the words, “if no third persons are concerned,” dealing with the principle of marshalling in its simplest application, where there were no third parties. In Averall v. Wade (3), Sugden C., referring to the judgment in that case, says (p. 259) that Lord Eldon avoids dealing with the rights of third parties intervening; and again (p. 263), that in Ex parte Kendall (5), Lord Eldon was guarded in his observations, and always kept in mind that the rights of third parties could not be affected. In Averall v. Wade (3) it was the claimants third in point of time who sought to marshall against those second in time; and it was held that they were not entitled to do so. Here the second incumbrancers claim to marshall against the third—a very different matter. The other question decided in Averall v. Wade (3) comes under the second class of case; so far as it has any bearing on the present, the decision is in the annuitants' favour.

Again, in Barnes v. Racster (1), Hartwright, the second incumbrancer on Foxhall, claimed to marshall as against Williams, the fourth incumbrancer, whose charge was on Foxhall and No. 32. But in that case, at the time of Hartwright's mortgage, Barnes (the first incumbrancer) also had a mortgage on Foxhall alone, so that when Hartwright took his security he obtained no right direct or indirect against No. 32. It was only the accident that subsequently Barnes' second mortgage included No. 32 that would have given Hartwright any claim at all against that property. The Vice-Chancellor, referring to the contentions of Hartwright and Williams, says (p.408): “This is the question to be decided, and I think that it may be decided without necessarily involving either of two other points to which the argument has extended itself, I mean, first, the question, What would have been the rights of Hartwright and Williams had Barnes's security upon No. 32 preceded and not been...