Judgments - AIB Group (UK) Plc (Formerly Allied Irish Banks Plc and AIB Finance Limited) v. Martin and Another

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    37. Mr Davidson QC, counsel for Mr Gold, protests that this passage, while it plainly rejects the distributive construction contended for, does not explain why it does so.

    38. Mr Davidson accepts that the construction contended for by the bank, and accepted by the Court of Appeal, is a legitimate construction but argues that the distributive construction, too, is legitimate and that the court, in choosing which of two legitimate constructions to adopt, should choose that which is more appropriate having regard to the factual matrix. The factual matrix, he says, supplies no reason why Mr Gold should have been expected to undertake personal liability for Mr Martin's debts and that the distributive construction is, therefore, to be preferred.

    39. I am afraid that I do not find Mr Davidson's submissions in the least compelling or clause 2 in the least ambiguous. The clause starts with a joint covenant by Mr Gold and Mr Martin. It is not three separate covenants, one by them jointly and one by each of them individually. It is a single joint covenant. Their liability under this joint covenant is declared to be joint and several. This deals with the effect of their joint covenant. It does not turn a single covenant into three covenants.

    40. But the critical issue is not whether Mr Gold and Mr Martin, as well as jointly covenanting to pay, have severally covenanted to pay. The critical issue is what have they covenanted to pay? Under sub-clause (1) they have covenanted to pay "all sums of money ... advanced to the mortgagor by the bank ... " The mortgagor means the two of them and/or each of them. So they have covenanted to pay all sums of money advanced by the bank to the two of them and/or to each of them. I do not understand how any process of construction can avoid the conclusion that they have covenanted to pay the sums advanced by the bank to Mr Martin alone as well as the sums advanced by the bank to them jointly.

    41. The point is the same under sub-clause (2). Mr Gold and Mr Martin have covenanted to pay or discharge "all other indebtedness and/or liabilities whatsoever of the mortgagor to the bank ... " ie "... of the two of them and/or each of them ... " So they have covenanted to pay or discharge the indebtedness of Mr Martin to the bank as well as their joint indebtedness to the bank.

    42. The distributive construction, which treats the single joint covenant as three separate covenants, makes no sense of sub-clause (3). Mr Gold and Mr Martin covenant to pay "all costs and expenses incurred by the bank ... in relation to this legal mortgage ... ". This would cover the costs of proceedings taken by the bank to enforce payment of the indebtedness of Mr Martin alone as well as the cost of proceedings to enforce payment of any joint indebtedness. There is no reference in sub-clause (3) to 'the mortgagor' and no distributive construction can exclude Mr Gold's liability to pay all costs and expenses caught by the sub-clause, whether incurred in connection with the recovery of indebtedness for which Mr Martin is primarily liable or of any joint indebtedness. A construction that excludes Mr Gold from liability in respect of advances to Mr Martin alone but leaves him liable to pay the bank's costs of proceedings to recover those advances does not produce a result that could sensibly, or reasonably, have been intended.

    43. In my opinion, there are no real difficulties of construction arising out of the reference to 'the mortgagor' in clause 2. As was succinctly put by Mr Cousins, following for the bank, clause 2 constitutes a covenant by Mr Gold and Mr Martin to pay their joint debts to the bank, to pay Mr Martin's debts to the bank and to pay Mr Gold's debts to the bank.

    44. This simple construction may leave Mr Gold under obligations that he had not foreseen and had not intended at the time he signed the joint mortgage. But he has already succeeded in an action for negligence against the firm of solicitors who acted for him and, as I understand it, this appeal is being funded by their insurers.

    45. In my opinion the Court of Appeal came to the correct conclusion for the correct reasons. I would dismiss the appeal.


My Lords,

    46. I have had the privilege of reading in draft the speeches of both my noble and learned friends, Lord Millett and Lord Scott of Foscote. Despite Lord Millett's reservations I have come to the view that the relevant provisions should be construed as Lord Scott proposes.

    47. There is, of course, no doubt about the value of the canon of interpretation which Lord Millett invokes. It occurs in a number of slightly different forms, all of them still - happily - in concise and precise Latin. Like any other rule of interpretation, it is there to help to ascertain the objective meaning of the document in question. Like all such rules, it must be used with discrimination. In this case I am by no means satisfied that applying it in the manner suggested would truly bring out the intended effect of clause 2(1).

    48. As Lord Scott points out, the covenant in clause 2(1) is a single covenant by the mortgagor which, by reason of the definition of "the mortgagor" in clause 1, is "joint and several". Prima facie - and without reading any further - the use of these words indicates that Mr Martin and Mr Gold are jointly and severally liable for any obligations to be specified in clause 2(1). In other words, each of them is liable to pay the whole or any part of the sums specified, as opposed to being liable simply to pay a pro rata (half) share of those sums.

    49. It is necessary, however, to go further into clause 2(1) to discover for what sums Mr Martin and Mr Gold are to be liable. As Lord Millett explains, if parsed out, clause 2(1) provides:

    "Mr Martin and Mr Gold and each of them hereby jointly and severally covenant with … the bank … that they and each of them will on demand pay or discharge to the bank … all sums of money … advanced to Mr Martin and Mr Gold or either of them by the bank…"

It is common ground that this provision can indeed be construed as imposing an obligation on Mr Gold, jointly with Mr Martin but also severally, to pay not only all sums of money advanced by the bank to Mr Martin and Mr Gold but also all sums advanced by the bank to either of them as an individual. In other words, Mr Gold is to be jointly and severally liable inter alia to pay the sums advanced by the bank to Mr Martin. Both Jacobs J and the Court of Appeal interpreted the provision in this way. The suggestion is, however, that it would be preferable to interpret it reddendo singula singulis so that liability for the separate debts of the individuals making up "the mortgagor" would be attributed only to the individual who incurred the debt in question. The result is then that there is in effect a joint and several liability on Mr Martin and Mr Gold to pay the joint debts and a several liability on each of them to pay his separate debts. On that footing Mr Gold is liable to pay his own separate debts to the bank but not Mr Martin's.

    50. I accept, of course, that the rule of construction, reddendo singula singulis, could be applied to a document containing obligations on the part of two debtors. So, for instance, a mortgage deed in which A and B covenanted to pay "their debts" might be interpreted, reddendo singula singulis, as meaning that each of them undertook to pay his own debts. I am not persuaded, however, that in the present case the single covenant, for joint and several liability, should in effect be divided up so as to withdraw the separate debts of the individuals from the joint and several liability and then to subject them to a, separate, several liability of the relevant individual. I do not question the intellectual respectability of the proposed way of reaching that result; I simply do not believe that the result reflects the intention of the parties to this particular agreement.

    51. In part, at least, I have difficulty in accepting the second defendant's construction because Mr Davidson acknowledged on his behalf that provisions making one of two debtors liable for the debts of the other are frequently found in documents used by banks and lending institutions. This can be seen from a number of specimens which the bank produced. For instance, in the case of the Royal Bank of Scotland, condition 12.2 - also dealing with interpretation - provides that, where two or more persons are included in the expression "mortgagor", each of them is to be "primarily liable by way of indemnity for the liabilities to the bank of the other or others of them". Counsel accepted that explicit provisions of this kind are indeed intended to make one debtor liable for the debts of the other and that they are valid. Against that background I do not find the result produced by the straightforward interpretation of the wording of clause 2(1) surprising.

    52. In the circumstances the second defendant's argument had really to rest on the form of the provisions in this case. In effect, counsel argued that definition clauses should not be interpreted so as to produce what are, in effect, important substantive effects on the obligations of the debtors concerned. As is apparent, however, from the Royal Bank and other examples shown to the House, interpretation clauses of this kind are by no means unusual. In the absence of reported cases to the contrary, it must be assumed that they are given effect.

    53. More positively, I note that in Wright v Tennent Caledonian Breweries Ltd 1991 SLT 823 - to which the House was not referred - the First Division of the Court of Session had to deal with a deed of variation of a loan agreement where "the borrower" was defined in a somewhat similar manner to "the mortgagor" in this case. In particular, in the case of two or more individuals, the obligations and conditions affecting the borrower were to be binding on the individuals "jointly and severally". Despite this, one of the debtors submitted that her liability under the loan agreement was only pro rata, because it would have required clear provisions in the deed of variation to incorporate the joint and several liability into the loan agreement. The court rejected that argument. In his opinion, with which Lord Allanbridge and Lord Sutherland concurred, Lord President Hope said, at p 827 A - B:

    "In my opinion the statement in clause 1.03 of the deed of variation that the obligations and conditions affecting the borrower shall be binding on two or more persons jointly and severally goes beyond a mere definition of the expression 'the borrower'. It is concerned not with the question who is to be taken to be the borrower - that is to say, with the person or persons to whom that expression extends - but with the measure of the obligations undertaken by those persons in that capacity."

He went on to say that the whole structure of the loan agreement as varied "including the use of the expression 'the borrower' in the singular at the outset to describe the two persons who are to receive the loan" confirmed his view that the debtors' liability under the agreement was joint and several (as opposed to pro rata).

    54. In much the same way, the definition of "the mortgagor" in the agreement in this case was not concerned simply with the question of who was to be taken to be the mortgagor: it dealt with the measure of the obligations which Mr Martin and Mr Gold undertook. It must be treated accordingly. There may be various reasons why the draftsman of the bank's standard form agreement chose to draft it in this particular way. I need not go as far as the First Division and draw a positive inference from the use of the singular "the mortgagor". It is sufficient that I find nothing in the chosen form of drafting which would, of itself, justify the House in adopting the second defendant's preferred interpretation of clause 2(1).


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