On 4^th November 1996 Mr Anthony James Murphy (Mr Murphy) and his then wife, Mrs Lisa Murphy, the second defendant and the appellant, effected a policy of life insurance with Royal Life Insurance Limited (Royal Insurance). Mr and Mrs Murphy were named as the policyholders and as the lives insured. The policy was a temporary fixed term policy to run for 25 years; it provided for the benefit to be paid either on the death of the first of the lives insured or on the acceptance by the Royal of a claim for terminal illness by one of the lives insured; there was no endowment element. There was no evidence as to the circumstances in which or the purposes for which the policy was effected

In July 2000 Mr and Mrs Murphy were divorced but payment of the premium continued under the policy.

By August 2000 Mr Murphy had commenced living with the first defendant and second respondent to this appeal, Nicola Holland; they continued to live together until Mr Murphy died on 10 June 2001. On 16 June 2001 the claimant and first respondent was born to Nicola Holland; no provision was made for her by Mr Murphy. On 17 December 2002 she began these proceedings against Nicola Holland (who was granted probate so that the claimant could bring proceedings under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act) and against Mrs Murphy, the child of the marriage and Mr Murphy’s brother and sister who were named as executors in the last will and testament of Mr Murphy but who had refused to take up grant of probate.

The sole asset in respect of which the claim under the 1975 Act was made was the insurance policy with Royal Insurance.

The claimant claimed that she was a child of Mr Murphy within the meaning of s.1(1) (c) of the 1975 Act and applied under s.2 of the 1975 Act for the court to make in its discretion reasonable financial provision for the claimant.

It was asserted on behalf of the claimant that provision could be made from the proceeds of the policy because it fell within s.9(1) of the 1975 Act. That section provides as follows:

By reason of the provisions of s.9(4) and s.25(1) of the 1975 Act, it was common ground that there could be a joint tenancy of the life policy.

On 30 January 2003 an order was made for trial of the following preliminary issue on agreed facts which I have summarised in the preceding paragraphs.

The Judge in a careful judgment given on 10 April 2003 held that immediately before the death of Mr Murphy the benefit of the policy was jointly held and that the benefit of severance was built into it and therefore the joint interest could be severed by notice of severance. The policy therefore fell within the ambit of s.9 of the 1975 Act. He reached that conclusion on the basis that it was right to apply the presumption that where there was co-ownership, the co-owners were presumed to hold the property jointly unless there was an intention that they held it separately. As in his view, there were two co-owners of the benefits under the policy, there was a presumption that they were joint tenants, unless the contrary was proved. He held the contrary was not proved:

By framing the issue in the terms set out at paragraph 8, the wrong question was asked of the judge. The terms of the preliminary issue asserted that the policy was a joint policy; from that assertion the Judge proceeded to consider the issue on the basis that there was co-ownership of the benefits under the policy. However, the issue framed in those terms begged the essential question as to whether the rights under the policy were, as a matter of construction, joint rights. It was accepted before this Court that the issue should have been framed:.

Thus the sole issue was whether, as a matter of construction of the life policy, the right to the death benefit under the policy was a jointly held right in which the interests could be severed by a notice of severance or whether Mr Murphy and Mrs Murphy held separate rights to the death benefit. If the right was joint, then notice of severance could have been given by either of the policy holders; once given the right to the death benefit under the policy would be a right to which both would have been beneficially entitled and thus the death benefit have been payable to the estate of Mr Murphy as well as to Mrs Murphy.

It was contended on behalf of Mrs Murphy that there were no joint rights to the death benefit; it was intended that the sum payable on death be paid out to the spouse that survived. Upon the death of the first of them, the other had the sole right to the sum payable on that death. Mr Murphy’s right to the sum payable on death as a policy holder under the policy was a right only to receive that sum on the death of Mrs Murphy if that occurred before his death; Mrs Murphy was similarly solely entitled to the sum on his death, if that occurred before hers. The simple contention was that as the policy was not an endowment policy and had no surrender value, it cannot have been intended that the rights were joint rights as there was no point in benefiting the estate of the deceased as well as the survivor; the intention must have been that the survivor was to enjoy the sum payable on death and nothing was to be paid to the estate of the deceased spouse. The right to the death benefit was always intended to belong to the survivor. It was, however, accepted that the terminal illness benefit was held jointly.

The claimant contended that it cannot have been intended that the rights to the terminal illness benefit and the right to the death benefit be treated differently. As it was accepted that the terminal illness benefit was held jointly, it followed from that and from the terms of the policy that both benefits were held jointly.

As the issue is solely one of construction, it is necessary to refer to the terms of the policy in some detail. It was a standard form policy known as a “Lifewise policy” with standard conditions and a schedule containing the information specific to the policy.

The material parts of the definition clause of the policy provided as follows:

The acceptance by the Company of a claim for Terminal Illness of the Life Assured during the Term but excluding the 12 months preceding the Termination Date.

In the Policy Schedule the Policyholders were identified as Mr Murphy and Mrs Murphy and the Life Assured were Mr Murphy and Mrs Murphy. The Policy Schedule described the insurance as “Temporary Fixed Term” and the Benefit was “£100,000 without profits”. It was also stated that the policy had no surrender value.

The material terms of the policy were

The death of the Life Assured during the term; or

The acceptance by the Company of a claim for Terminal Illness of the Life Assured during the term but excluding the 12 months preceding the Termination Date.

Consideration

Proof that the person making the claim has legal title to the Policy; and

It was also provided by clause 8 that the policy had no surrender value.

It is not uncommon in the insurance market for insurers to use policy forms that are not specifically tailored to individual circumstances; they use the nearest standard form available and adapt it. A common example is a composite policy; in such a policy two or three persons are named as assured even though the interests being protected under the policy are different. In such a case, the policy will not be a joint policy, but a composite policy where the separate interests of each are protected in the same policy. In property insurance, for example, it is not uncommon for two persons to be named as the insured in respect of property when their interests are different. A good example of such a policy was a fire policy considered by this Court in General Accident Fire and Life Assurance Corporation –v- Midland Bank [1940] 2 KB 388; there were three insured named in the policy - a company occupying the insured premises, the freeholders of the premises and the bank who had a floating charge over the property of the occupiers. A question arose as to the nature of their interests. Sir Wilfred Greene M.R. put the issue very clearly:

Although the nature of the insurance in General Accident and the circumstances are very different, in essence, it was Mr Hamilton’s contention on behalf of Mrs Murphy that the policy issued to Mr and Mrs Murphy was in effect a composite policy; although they had a joint interest in the terminal illness benefit, there were two separate contingent rights to the death benefit.

In my view, although there was no evidence, as I have stated, in relation to the circumstances surrounding the policy, the plain inference to be drawn was that the death benefit was intended by the parties to be payable to the survivor of either Mr or Mrs Murphy; it was to be for the exclusive benefit of the survivor to enable the survivor to deal with the financial consequences of the death of one of them. That would be the ordinary inference to be drawn when a life insurance is effected for a fixed sum without profits, without a surrender value and without an endowment element; it was not a so called “savings product”, but pure life insurance. There is nothing to displace that ordinary inference. Nor is there anything to suggest that in this case it was ever intended that the estate of the deceased was intended to benefit; there would have been no point. It was not an endowment policy where it would ordinarily be intended that the benefit payable on maturity would be available for them jointly.

In the ordinary course of events, it would not be necessary to analyse whether in order to give effect to that intention the entitlement to the benefit payable on death was an obligation owed jointly or one owed to them severally; that is because, on the death of the one, even if the benefit was one owed to them jointly, it would by survivorship pass to the other in the absence of the service of a notice of severance. However, it is necessary to make that analysis for the purposes of the 1975 Act.

I have already expressed my view that the obvious intention of the parties was that the death benefit be paid to the survivor. Therefore the ordinary inference would be that each had a separate interest; Mrs Murphy would have the sole right to the sum if Mr Murphy died first and Mr Murphy would have that right if she died first. They cannot have intended the right to that benefit was to be defeasible by a notice of severance; it was to be a right to which each was entitled.

It is my understanding that notices of severance are occasionally served in respect of life assurance contracts where there is a joint entitlement to the sum payable on an endowment; I cannot conceive that the parties to this fairly simple standard contract contemplated anything other than the death benefit always being payable to the survivor. On that basis, the right to the benefit must have been one owed to each severally.

Next the question arises as to whether it was likely that the parties would have intended to include within a policy a terminal illness benefit that was owed to them jointly and a death benefit that was not. It might at first sight be thought surprising that that would be the case, but on consideration, I do not think so. The benefit payable on terminal illness would be needed by both of the policyholders to defray the cost of that illness; in contradistinction, the benefit on death would only be required by the survivor. On analysis therefore, the purpose of the benefits was different and different treatment within a composite policy accorded with the obvious intention attributed to the parties in respect of the different nature of the benefits.

Third, the language of the policy is entirely consistent with that intention and supports it. It is first necessary to observe that no real assistance is, in my view, given by many of the clauses; they are consistent with either of the alternative contentions; for example, clause 2.5 or clause 2.6; these simply make clear that the benefit is only payable once; they do not assist further. The obligation to pay the premium was a joint obligation, but again that is consistent with either interpretation.

However, a clear distinction is drawn between the entitlement to claim on death and the entitlement to claim on terminal illness; this is made clear in the definition of “The Qualifying Event” and in clause 7, the claim payment procedure. Under clause 7.4, the benefit payable on the occurrence of a qualifying event is payable to the policyholder; the policyholder is defined as the person(s) named in the schedule – Mr Murphy and Mrs Murphy – “or his executors, administrators or assignees”. The inclusion of the words “or his executors, administrators or assignees” suggests through the use of the word “or” that it is intended that the benefit be paid to the policyholder (if only one survived) (or to both the policyholders if both were alive as would probably be the case in respect of the terminal illness benefit) or if not to the executors, administrators or assignees. The “or” is disjunctive and the provision is intended to deal, in the case of the death benefit, with the position of both policyholders being dead. The position would, of course, have been beyond argument, if the policy had provided for payment to the survivor, but natural inference from the language is that it was intended that the death benefit be payable to the surviving policyholder alone and not to the surviving policyholder and the executors of the deceased policyholder as well.

I should record that we were referred to Griffiths v Fleming [1909] 1 KB 805, In re S [1996] 1 WLR 235, Powell v Osborne [1993] 1 FLR 1001 and In re McKerrell [1912] 2Ch 648, in each of which a policy of life insurance was considered, but none was of any direct assistance. This is hardly surprising as the issue before us was one of the construction of the terms of the particular policy.

In the result therefore, I would answer the question in the preliminary issue, as reformulated, “No, Mr Murphy was not entitled immediately prior to his death to a joint tenancy of the benefit payable if his death occurred first.”

The Inheritance (Provision for Family and Dependants) Act 1975 empowers the court to make orders for financial provision for (amongst others) the child of a person dying domiciled in England and Wales. In determining whether its powers under that Act should be exercised in the particular case, the court is required to have regard to the size and nature of the net estate of the deceased – section 3(1)(e). Indeed, it is the net estate of the deceased that is the primary source from which financial provision can be made – section 2(1)(a) to (e) of the Act. Sections 8 and 9 of the Act (“Property available for financial provision”) require (section 8) or enable (section 9) property which would not otherwise fall within the deceased’s estate to be treated as part of the net estate. Section 9 is in point:

In the present case the claimant seeks an order under the 1975 Act that provision be made for her out of the estate of her putative father, Mr Anthony Murphy. Mr Murphy died on 10 June 2001. Immediately before his death he was entitled, with his former wife, Mrs Lisa Murphy, as “the Policyholder” under a term assurance policy issued on 4 November 1996 by Royal Life Insurance Limited. Following his death the sum assured under that policy (described therein as “the Benefit”) was paid to Mrs Lisa Murphy. That gave rise to the question whether any part of that sum could, by the exercise of the power conferred on the court by section 9 of the 1975 Act, be treated as part of the net estate of Mr Murphy; or, to put the point another way, whether any part of the monies paid to Mrs Lisa Murphy were monies out of which the court could order financial provision to be made for the claimant. On 17 February 2003 it was ordered that there be tried as a separate, or preliminary issue:

His Honour Judge Moseley QC, sitting as a judge of the High Court in Cardiff, determined that issue in favour of the claimant; that is to say, he answered the question posed in the affirmative. In my view he was right to do so. In the circumstances that the other members of this Court take a different view, it would not be appropriate for me to set out my reasoning at any length; but, in fairness to the claimant who will, as a result of the order which this Court will make, be denied provision out of her putative father’s estate – there being no other assets out of which provision could be ordered under the Act – it is right that I should explain why I reach the conclusion that I do.

It is common ground that, immediately before his death on 10 June 2001, Mr Murphy and his former wife were the persons together named as policyholder under the policy; that their contractual rights as policyholder were such as would aptly be described as a chose (or choses) in action; and that a chose in action is a form of property in which a joint tenancy may subsist. If there were doubt as to the last of those propositions, that doubt is laid to rest by section 9(4) of the 1975 Act. The first question, as I have said, is whether the rights conferred on Mr Murphy and Mrs Lisa Murphy by the policy, during their joint lives, were joint rights or several rights. I emphasise the words during their joint lives because it is important to keep in mind that the point of time by reference to which the question whether the relevant property was held jointly is immediately before the death of the first to die of the two persons described as the policyholder.

It is important, also, to keep in mind that the policy document is in a standard form which includes, at clause 2.2 of the policy conditions, the following:

If and to the extent that the rights conferred on the policyholder by the policy, during their joint lives, were joint rights, there is, conceptually at least, a second question: were those joint rights held, as between Mr Murphy and his former wife, as beneficial joint tenants or as beneficial tenants in common? That question would turn on their intentions at the time when they took out the policy and paid the premiums. But that is not a question to which, in the circumstances of the present case, it is necessary to give an answer. Neither party contends for a beneficial tenancy in common. It would not be in Mrs Lisa Murphy’s interest to do so. If, during their joint lives (or immediately before the death of Mr Murphy) the parties were entitled to rights conferred by the policy jointly as beneficial tenants in common, then Mr Murphy’s beneficial share would fall into his estate under the general law: there would be no need to invoke the powers of the court under section 9 of the 1975 Act. Nor would it assist Mrs Lisa Murphy to contend for a beneficial joint tenancy. The powers under section 9 of the Act enable the court, in effect, to treat property held jointly as beneficial joint tenants as if the first to die had given notice of severance immediately before his death. The issue in this case is whether the rights under the policy were joint rights or several rights; not whether the rights under the policy (if joint rights) were held by the persons named as the policyholder (as between themselves) as beneficial joint tenants or as beneficial tenants in common.

I return, therefore, to the first question: whether the rights conferred on the policy holder by the policy, during their joint lives, were joint rights or several rights. To answer that question it is necessary to analyse the terms of the policy. The obligation which it imposes upon the issuing company is expressed in clause 3 of the Policy Conditions:

The obligation in clause 3 of the Policy Conditions must be read with the general conditions set out in clause 2. Clause 2.1 is in the following terms:

It is important to keep in mind that the person or persons named in the policy as the Life Assured may or may not be same as the person or persons named as the Policyholder. It is necessary only that the Policyholder have an insurable interest in the life (or health) of the Life Assured. And it is trite law that one person may have an insurable interest not only in his own life, but also in the life of another – Lea v Hinton (1854) 5 De Gex, MacNaghten & Gordon 823, 43 ER 1090, Branford v Saunders (1877) 25 WR 650. In particular, a wife has long been presumed to have an insurable interest in the life of her husband – Reed v Royal Exchange Assurance Co (1795) Peake (Add Cas) 70, 170 ER 198 – and the presumption was extended in Griffiths v Fleming [1909] 1 KB 805, 816, 821, to give a husband an insurable interest in the life of his wife.

As this Court recognised in Griffiths v Fleming [1909] 1 KB 805, 815, it is not uncommon for one partner to insure the life of another; or for two partners to insure the life of a third In such a case it could not be argued that the rights under a policy effected by A and B, as policyholder, on the life of their partner C in terms identical to those in the present policy were not rights which A and B held jointly. It is pertinent, therefore, to ask whether there is any reason in principle why the position should be different if two partners – say, A and B – effect insurance on the life of one of them – say, A – under a policy the terms of which are identical to the present policy. Is such a policy to be treated as policy effected by A on his own life for the benefit of B; or as a policy effected by B on A’s life for his own benefit; or (as appears on the face of the policy) as a policy effected by A and B jointly on A’s life for their joint benefit (whether as joints tenants or as tenants in common) – it being possible, of course, that either might survive the other.

Whatever the answer to that question if the policy did not provide for payment of benefit on the company’s acceptance of a terminal illness claim, it is impossible to ignore that fact when construing a policy in the terms which we have to consider on this appeal. It is necessary to have regard to the possibility that, under the terms of a policy which does provide for the payment of benefit on the company’s acceptance of a terminal illness claim, benefit may become payable during A’s life. That fact, as it seems to me, points strongly against construing such a policy as a policy effected by A on his own life for the benefit of B. If benefit becomes payable during A’s life, the policy monies must, under the terms of the policy, be paid to A, or to A and B jointly if B is then living. That follows from the terms of the policy; in particular, from the terms in which “the Policyholder” is defined. But there is nothing in the policy document to suggest that, in such a case, the policy monies are to be paid to A, or to A and B jointly, as trustee for B. Nor is there any reason to construe such a policy as a policy effected by B on A’s life for his own benefit. If it were the parties’ intention that benefit payable during A’s life should be paid for the sole benefit of B (whether or not B was then living) for what purpose would A be named as a policyholder. In my view there is no reason why a policy which provides for the payment of benefit on acceptance of a terminal illness claim and which, on its face, purports to be effected by A and B jointly on A’s life should not be treated as a policy the rights under which belong to A and B jointly. That, of course, provides no answer to the question whether, as between A and B, the joint rights are held on a beneficial joint tenancy or as beneficial tenants in common. It is on the answer to that latter question, rather than on the terms of the policy, that the further question - whether the survivor takes the whole by survivorship – will turn.

So far, I have considered the position where there is only one person named as the Life Assured. I turn, now, to consider whether the policy should be given a different effect where more than one person is named as the Life Assured. Clause 2.5 of the policy conditions provide for such a case:

The reason why it is important, in the present context, to identify the persons to whom (and for whose benefit) the policy monies are payable if, during the joint lives of A and B, a terminal illness claim is accepted by the company, is that the relevant enquiry, under section 9 of the 1975 Act, is “which of A and B was entitled to the rights under the policy immediately before the death of the first to die?” – that is to say, which of them is entitled to the rights under the policy during their joint lives. It is, to my mind, impossible to construe the policy in such a way that the answer to that enquiry depends on the nature of the Qualifying Event which gives rise to the benefit becoming payable. I appreciate, of course, that there will be circumstances in which the separate interests of those named together as the policy holder are protected in the same composite policy – as Lord Justice Thomas has pointed out – but I am not persuaded that this is such a case. It cannot be said that only the survivor has an interest in the life of the first to die.

The point may be illustrated by an example. Suppose that A and B have submitted a claim based on the terminal illness of A and that the company, after proper inquiry by its chief medical officer, is about to accept that claim. When the claim is accepted, the policy monies will be paid to A and B jointly, for the reasons which I have sought to explain. But suppose that, immediately before the claim is accepted, either A or B dies. The policy monies will be payable by reason of the death; it will be the death, rather than the acceptance of the terminal illness claim that will be the relevant Qualifying Event. And the policy monies will be paid by the company to the survivor, because (after the death of the first to die) it will be the survivor who will have become, by survivorship, “the Policyholder”, from whom alone the company can obtain a good receipt. But that will provide no answer to the question “which of A and B was entitled to the rights under the policy immediately before the first to die?”.

I find it impossible to hold that the answer to the question “which of A and B is entitled to the rights under the policy immediately before the first to die?” is “whichever of A and B is not the first to die”. As I have sought to explain, in a case where the policy provides for the payment of benefit during the joint lives of A and B, I take the view that the only answer that can be given to that question is that, during their joint lives, the rights under the policy are joint rights; and that remains the position at the time immediately before the first death.

It may well be that, if Mr and Mrs Murphy had been asked, at the time when they took out the policy in 1996, who should have the benefit of the policy monies on the death of the first to die, each would have answered, without hesitation, that of course the policy monies would go to the survivor. But that answer is as consistent with the rights under the policy being joint rights as it is with the rights under the policy being several rights. The answer is consistent with the rights under the policy being joint rights held, as between husband and wife, as beneficial joint tenants: the survivor taking the beneficial, as well as the contractual, interest in the policy monies by survivorship. The more pertinent question, in 1996, would have been: “who should have the benefit of the policy monies if, after the marriage has broken down, one of you dies or becomes terminally ill?”. It must be doubtful whether husband and wife addressed their minds to that question. If they had, one likely answer would, perhaps, have been: “the question will not arise; if the marriage breaks down, we will not continue to pay the premiums under the policy”. The curious feature of this case is that the premiums were paid, and the policy maintained, after the marriage had broken down; notwithstanding that this was not an endowment policy and there was no surrender value. That is why there was an issue before the judge which required an answer. As I have said, the answer is to be found in the terms of the policy; not in speculation as to what Mr Murphy and his former wife might or might not have thought in 1996.

I would have dismissed this appeal.

By this policy, husband and wife obtained a degree of financial protection for a fixed term of 25 years, by way of the payment by the insurers of a fixed sum upon the happening of one of four possible events during the term, the death of one or other of them or the suffering by one or other of them of a terminal illness as defined in the policy. Only on the first of those four possible events was the sum payable. There was to be no surrender value and there was no endowment element.

While accepting that this standard form policy is designed to meet a number of different requirements and eventualities, Mr Walters, for the respondent, stresses that it is accepted that there was a joint interest in the potential terminal illness payment. That being so, he submits, the interest in the potential death benefit was jointly held. On the wording of the policy, no distinction should be drawn between qualifying events so as to create rights which differ according to which of the qualifying events occurs. The policy does not expressly provide, in the definition clause or elsewhere, that, upon a death, it is only the survivor (or his “executors, administrators or assignees”) who has an interest.

I entirely agree with the reasoning of Thomas LJ. In my judgment, the plain inference to be drawn is that the death benefit was intended by the parties to be payable to the survivor. Where there are two proposers, the policy is plainly devised for those in a close relationship. As between husband and wife, the purpose of a policy providing for the payment of a lump sum upon the first death is readily understandable. A fund is made available to assist one spouse to deal with the consequences for that spouse of the death of the other and I have no doubt that the policy was devised by the insurers with that in mind. Those entering into the contract, both the proposers and the insurers selling it to them, would be likely to have been astonished at the suggestion that the estate of the deceased had an interest in the sum payable under the policy. The subjective intent of the proposers is not of course decisive but, in construing the contract objectively, the Court is entitled, and should, give weight to the likely purpose of the policy and the intention of the parties.

I see no difficulty in distinguishing between the consequences of different qualifying events and no barrier to a policy such as this providing for different interests arising in different circumstances. The policy distinguishes, in Clause 2.1, between the potential qualifying events and in Clause 7 between the procedure to be followed upon the happening of the one and that to be followed upon the happening of the other. The qualifying events, a terminal illness and a death, create different problems for those party to the policy. A joint interest may be appropriate to the needs which arise on the first; it is not appropriate to the second. To carry the joint interest arising upon terminal illness into the different circumstances of a death, would, in my view, be to defeat the intentions of the parties.

The case turns upon the construction of the policy and I see nothing in the wording of this policy document which suggests an intention to create or build up a fund for the benefit of the estate of one of the parties. The reference to personal representatives in the definition clause was sensible provision for the possibility of two deaths having occurred when the sum falls to be paid. It does not create an interest in a party upon whose death this sum is payable.

For those reasons, and the reasons given by Thomas LJ, I would allow the appeal and answer the question in the preliminary issue in the way formulated by Thomas LJ.