Hyett v Stanley & Ors

SIR MARTIN NOURSE: This appeal is primarily concerned with a dispute as to the beneficial ownership of a property in which an unmarried couple, Robert William Freeman and the claimant, Lynette Dawn Hyett, lived together from the end of 1988. On 10th November 1999 Mr Freeman died at the age of 46 following a hunting accident. In an action against the executors of his will and his two sons, Bobby and Timothy, now aged 22 and 19 respectively, Miss Hyett claims a half share of the beneficial interest in the property. On 24th January 2003, in a judgment reserved after a four-day hearing at Birmingham in December 2002, Her Honour Judge Kirkham, sitting as a judge of the Chancery Division, rejected that claim and held that the entire beneficial interest formed part of Mr Freeman’s estate. In a secondary dispute Miss Hyett claims payment of £91,337, being the major part of the proceeds of a policy with Royal Sun Alliance (“the RSA policy”) which matured on Mr Freeman’s death. That claim was also rejected by the judge. With the leave of this court, Miss Hyett has appealed against the judge’s decision on both questions. Mr Freeman’s two sons have taken no part in the proceedings, either here or below.

The judge gave a very careful judgment, from which the following abbreviated adaptation of the facts is largely taken, much of it in her own words. Mr Freeman and his wife, Louise Dorothy Georgina Freeman, were married in October 1979. In 1984 Mr Freeman purchased a piece of land of an area of about 46.41 acres at Hill Furze, Bishampton, near Pershore in Worcestershire. It was conveyed into his sole name. The cost was £59,800, of which £39,000 was advanced on a mortgage by Lloyds Bank and the balance was provided by Mr and Mrs Freeman out of their own resources. By November 1988 outbuildings and a house had been erected on the land. The property became known as Whitsun Brook Farm. I will refer to it as “the farm”.

In August 1988 Mr and Mrs Freeman separated and she and the two boys went to live with Mr Mark Turpit. She took with her a motor car and £7,000. On 29th June 1990, on Mr Freeman’s petition, the marriage was dissolved by decree absolute. Meanwhile, in 1986, Mr Freeman had begun a relationship with Miss Hyett. From August 1988 they lived together as husband and wife, moving into the farm in December 1988 and living there until Mr Freeman’s death. Miss Hyett remains in occupation of the farm.

Mrs Freeman, who married Mr Turpit in 1992, gave evidence at the trial. (On her divorce from Mr Turpit she reverted to the name of Freeman.) The judge accepted her evidence without hesitation, describing her as a most truthful witness. Mrs Freeman told the judge that, although the farm was not in their joint names, she considered that, to all intents and purposes, it was jointly owned by her and Mr Freeman. She said that when she left Mr Freeman in 1988 it was understood between them that the farm would remain in his sole name and would be held for the benefit of their two sons, to whom it would pass on Mr Freeman’s death. By a consent order made in the divorce proceedings on 19th October, 1990 Mrs Freeman made no claim for financial provision for herself. The judge accepted that her only motive in not making a claim was to preserve the position of her two sons. The judge also accepted her evidence that, when she asked Mr Freeman whether he intended that Miss Hyett should benefit from his estate, he assured her that that would not happen.

On 20th July 1989 Mr Freeman made his last will, in which he gave the whole of his net estate to such of his children as should attain the age of 25. Two days earlier, on 18th July, he had effected a policy (“the Alba policy”) on his life, which was written in trust for Miss Hyett. It guaranteed a death benefit of £300,000 for the first ten years and a reducing amount thereafter. The amount produced on Mr Freeman’s death was £292,000. The judge found that Mr Freeman effected the Alba policy at Miss Hyett’s suggestion and expressly because, on his death, she would not benefit from his estate. Miss Hyett accompanied Mr Freeman to the solicitors when he executed his will. It was common ground that she knew that he intended to make a will leaving everything to his sons before she made the suggestion that he should effect the Alba policy.

From late 1988 Mr Freeman and Miss Hyett lived together at the farm in a relationship which proved to be stable and lasted until Mr Freeman’s death. The judge found that Mr Freeman considered himself to be married to Miss Hyett in all but formalities, and that he had expressed his wish to marry her once his sons had reached adulthood. She also found that from 1988 until Mr Freeman’s death he and Miss Hyett pooled their resources. Before their relationship began Mr Freeman had kept a bank account for the farm, which he continued to maintain in his sole name. All Miss Hyett’s earnings from her various jobs and the businesses she carried on at the farm were paid into this account. Payment for some transactions was made in cash. All these funds, whether in the farm account or in hand, were used by Mr Freeman and Miss Hyett as necessary for living and business expenses. The premiums on the Alba policy and on the other policies hereafter referred to were paid by standing orders on the farm account.

For reasons which will appear, it is necessary, in dealing with the arrangements between Mr Freeman and Miss Hyett, to start with the period between 1988 and 1992. Between April 1988 and October 1989 Miss Hyett was employed by a firm of financial advisers at an annual salary of £4,000 rising to £8,000. In October 1989 she ceased working for that firm and devoted herself to working at the farm. That included work on the farm itself, for example assisting with calves, and running various businesses connected with horses, including livery, tuition and other riding services and buying and selling horses. The livery business was started in 1990. In that year its earnings were £2,700, rising to £11,340 in 1991 and falling to £9,750 in 1992. Between January 1990 and August 1992 Miss Hyett worked for the Clerical Medical and General Life Assurance Society as a life inspector at an annual salary of £16,000. During 1990 she helped Mr Freeman with the building of a stable block and tack room for 21 horses. She then helped with the building of a hunter trial course which she had designed. In about February 1992 she started to travel to Poland to buy horses for resale in this country.

As the basis for her claim to half the beneficial interest in the farm Miss Hyett seeks to establish a constructive trust under the principles of Gissing v Gissing [1971] AC 886. In Lloyds Bank plc v Rosset [1991] 1 AC 107, 132, Lord Bridge of Harwich considered the test to be applied to determine the circumstances in which the sole legal proprietor of a dwelling house can properly be held to have become a constructive trustee of a share in the beneficial interest in the house for the benefit of the partner with whom he or she has cohabited in the house as their shared home. He said:

“The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against a partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do.”

Lord Bridge then referred to the leading cases of Pettitt v Pettitt [1970] AC 777 and Gissing v Gissing, which, as he said, both demonstrate situations in the second category of case. He continued, at p133:

“Outstanding examples on the other hand of cases giving rise to situations in the first category are Eves v Eves [1975] 1 WLR 1338 and Grant v Edwards [1986] Ch 638. In both these cases, where the parties who had cohabited were unmarried, the female partner had been clearly led by the male partner to believe, when they set up home together, that the property would belong to them jointly. In Eves v Eves the male partner had told the female partner that the only reason why the property was to be acquired in his name alone was because she was under 21 and that, but for her age, he would have had the house put into their joint names. He admitted in evidence that this was simply an ‘excuse’. Similarly in Grant v Edwards the female partner was told by the male partner that the only reason for not acquiring the property in joint names was because she was involved in divorce proceedings and that, if the property were acquired jointly, this might operate to her prejudice in those proceedings. As Nourse LJ put it at p. 649:

‘Just as in Eves v Eves, these facts appear to me to raise a clear inference that there was an understanding between the plaintiff and defendant, or a common intention, that the plaintiff was to have some sort of proprietary interest in the house; otherwise no excuse for not putting her name on to the title would have been needed.’

The subsequent conduct of the female partner in each of these cases, which the court rightly held sufficient to give rise to a constructive trust or proprietary estoppel supporting her claim to an interest in the property, fell far short of such conduct as would by itself have supported the claim in the absence of an express representation by the male partner that she was to have such an interest. It is significant to note that the share to which the female partners in Eves v Eves and Grant v Edwards were held entitled were one quarter and one half respectively. In no sense could these shares have been proportionate to what the judge in the instant case described as a ‘qualifying contribution’ in terms of the indirect contributions to the acquisition or enhancement of the value of the houses made by the female partners.”

Before 1992 Miss Hyett’s claim, if any, to a beneficial interest in the farm would have fallen within Lord Bridge’s second category. It is unnecessary to decide whether such a claim would have succeeded and I do not propose to do so. In 1992 there occurred events which have led to the claim being advanced as one falling within the first category. It is on that basis that it must be considered.

In her witness statement Miss Hyett said that in January 1990 she discovered that Mr Freeman’s borrowings from Lloyds Bank amounted to £186,000. By the beginning of March 1992 they had been reduced to about £138,000. Miss Hyett said that by that time she had finally convinced Mr Freeman that he should restructure his borrowings in order to reduce the interest payments and also to reduce the amount of capital borrowed. The judge said that by early 1992 the financial pressures on the couple had become acute. An approach was made to Barclays Bank, which, as the judge found, was only prepared to lend the amount needed to pay off Lloyds Bank on the security of a mortgage on the farm if Miss Hyett became a joint borrower with Mr Freeman. That was because Mr Freeman’s income on its own was regarded as insufficient. At that time Miss Hyett had an annual salary of £16,000 from the Clerical Medical.

Accordingly, on 6th March 1992, Mr Freeman and Miss Hyett executed a legal charge in favour of Barclays Bank, by which, first, they gave a joint and several covenant that they would on demand pay or discharge all monies and liabilities which should for the time being be due owing or incurred by them or either of them to the bank and, secondly, Mr Freeman charged the farm by way of legal mortgage with payment or discharge of all such moneys and liabilities. At the same time a joint life first death policy was effected with Barclays Bank, which duly advanced the sum of £138,313 on the security of the legal charge and the policy, that sum being applied in paying off Mr Freeman’s borrowings from Lloyds Bank.

In para 28.3 of her witness statement Miss Hyett said this of the transaction with Barclays Bank:

“I understood that if I were to become jointly liable for the borrowing, I needed to have some security. I also understood that the normal way of doing this would be for me to be the joint owner of the security offered (the Property). Rob explained that he had always owned his property in his sole name and that I would have to trust him. He said: ‘You know that I always stand by my word. You don’t need your name on the deeds to prove it. Anyway, with your name on the mortgage, you have a right to the property; you can prove it. I won’t let you down. If you do not do this we are going to lose our home’. We both viewed my agreement to become a joint borrower as confirmation of our commitment to each other.”

The cross-examination of Miss Hyett on that passage will be considered in due course.

Having referred to this crucial part of Miss Hyett’s evidence, the judge said (para 51):

“On balance, and notwithstanding that I am unable to accept some of the claimant’s evidence on other matters, I conclude that the claimant did ask Mr Freeman, in the context of the Barclays loan in 1992, whether she could be included on the property deeds. The claimant appears to have a shrewd appreciation of financial matters. It is consistent with that that she should have raised this. I accept that Mr Freeman refused, and said to her that, with her name ‘on the mortgage’, she would have a right to the property. However, it is not clear what Mr Freeman meant by this. The claimant accepted in giving evidence that her concern, in 1992, was not with regard to what might happen on Mr Freeman’s death but what would happen if she and Mr Freeman fell out. If their relationship failed, she would be in a position where, but for his assurance, she might have no right to the property. In contrast, the position on Mr Freeman’s death was that she would take free of all mortgage and business debts and be left with the proceeds of the Alba policy, which was likely to be greater than the value of the property at any material time, including the date of death.”

The judge’s essential finding of primary fact was that Mr Freeman said to Miss Hyett that, with her name on the mortgage, she would have a “right” to the farm. However, since it was not clear to the judge what Mr Freeman meant by that assurance, it became necessary for her to make inferences as to his meaning.

Before those inferences are considered it is necessary to refer to certain of the subsequent events. In the spring of 1993 the financial pressures again intensified. Barclays Bank threatened to withdraw their facilities. Miss Hyett and Mr Freeman agreed to a restructuring of the debt, which rose to £191,000 in September 1993. By May 1995 it had been reduced to £135,000. Mr Freeman and Miss Hyett discussed restructuring their borrowings, this time with Midland Bank, which raised the question of Miss Hyett being shown on the title deeds. In order to obtain the loan, a value of £330,000 had been declared for the farm, but the stamp duty of £3,300 payable on a conveyance of the legal estate into joint names, together with the legal fees involved, made that course impracticable. Midland Bank was nevertheless willing to lend money on the basis that Miss Hyett would be jointly liable for the loan. The judge said that there was no evidence that, at that time, Mr Freeman made any promise or gave any assurance to Miss Hyett’s position so far as the farm was concerned. Neither side has suggested that that is a point of importance in the case.

On 22nd May, 1995 Mr Freeman and Miss Hyett entered into two house mortgage loan agreements with Midland Bank, one for £28,000 and the other for £89,000. These were capital repayment mortgages which provided for repayment of principal and interest by monthly instalments. In each case the security was described as a first charge on the farm, together with the mortgage of a mortgage protection policy with a company approved by the bank for the term of, and at least the amount of, the loan. In a box above the signatures of Mr Freeman and Miss Hyett headed “Customer’s Acceptance” appeared the following:

“I/We accept the loan on the terms set out above and overleaf and agree to repay it as provided above. I/We also irrevocably agree that the proceeds of any life insurance policy covering this loan may, on my/our death, and before any probate is granted, or upon the maturity of the policy, be paid direct to Midland Bank plc.”

As the judge said, on the remortgage to Midland Bank Miss Hyett undertook a liability directly to the bank for the full amount of the loans. The mortgage protection policy offered to and accepted by the bank was the RSA policy, which had been issued on 1st May 1994 in substitution for the Barclays Bank life policy, Miss Hyett having rebroked the risk in January 1994.

In considering the inferences made by the judge it is necessary to read from her judgment at some length. She said (para 61):

“I conclude that the inference to be drawn from the 1992 discussions is that Mr Freeman considered that, as long as he and the claimant maintained their relationship, she had the right to remain in the property and to earn her living from it. However, the claimant has not persuaded me that, in expressing that view in 1992, Mr Freeman considered that the position on his death, which they had agreed in 1989, would be changed. Mr Freeman’s intention in effecting the Alba policy had been to protect the claimant on his death because she would not benefit from his estate ... . There is no evidence that in 1992 or 1995, at the time of the loans, or indeed at any other time, Mr Freeman expressed any different view from that which he held in 1989 as to the consequence of his death, namely that his estate was to pass to his sons and that the claimant would be compensated by the Alba policy... In 1992 Mr Freeman gave the claimant a promise or assurance that she had a right to the property in the event that they fell out while he was alive. Her concern was not with what would happen if he died but what would happen if they fell out while he was still alive. If that happened, the claimant would be left with both the mortgage debt and the need to claim against Mr Freeman for a share in the farm.” (Emphasis added).

Having referred to Grant v Edwards, the judge continued (para 63):

“I conclude that there was no common intention in 1989 that the claimant should have a beneficial interest. In 1992, Mr Freeman acknowledged that she had a beneficial interest in the property, while he was alive. The claimant has not proved a common intention that such beneficial interest supersede the agreement reached in 1989 as to what should happen on Mr Freeman’s death. The claimant has not proved that there was a common intention that she have a beneficial interest which would survive his death. There is no evidence of any agreement reached by Mr Freeman and the claimant at any time that she have a beneficial interest in the property on his death.” (Emphasis added).

In considering the question of detriment (para 66) the judge concluded that Miss Hyett did undertake a real risk in becoming jointly liable for a substantial sum. She said that, if it had been necessary, she would have concluded that Miss Hyett had established that she did act to her detriment by undertaking liability on the mortgage. That finding was clearly correct, and it has not been questioned in this court. In the language of the authorities, Miss Hyett could not reasonably have been expected to incur liability under the mortgages unless she was to have an interest in the farm.

In para 68 the judge turned to proprietary estoppel. She held that Miss Hyett had failed to establish the representation or assurance necessary to establish an entitlement by reason of proprietary estoppel because:

“The assurances given in 1992 related to the position which would obtain if the couple’s relationship broke down not as to what would happen on Mr Freeman’s death.”

That sentence has been relied on by Mr Quirke, for the executors, as being equally material to the judge’s inferences in relation to constructive trust.

Mr Cousins, QC, for Miss Hyett, has submitted that this case falls squarely within Lord Bridge’s first category. He has relied mainly on Grant v Edwards, comparing Mr Edwards’s statement to Miss Grant that her name was not going onto the title because it would cause some prejudice in the matrimonial proceedings between her and her husband with Mr Freeman’s statement to Miss Hyett that she did not need her name on the deeds because, with her name on the mortgage, she would have a right to the farm. Mr Cousins submits that, just as in Grant v Edwards, Mr Freeman’s statement raises a clear inference that there was an understanding between him and Miss Hyett, or a common intention, that she was to have a beneficial interest in the farm. He adds that, when Mr Freeman told Miss Hyett that she would have a “right” to the farm, he could only reasonably have intended to mean, and have been understood by Miss Hyett to mean, that she was to have an immediate and absolute beneficial interest in it. Mr Cousins submits that there was no, or no sufficient, evidence on which the judge could find that Miss Hyett was only to have a beneficial interest in the event that she and Mr Freeman fell out while he was alive and, further, that she was to have no interest on his death.

Before Miss Hyett’s cross-examination is considered it is helpful to ponder the precise nature of the interest for which the executors contend, as found by the judge. I think Mr Quirke accepts that if Miss Hyett was to have any form of “right” to the farm, she would have been entitled, if sued on her personal covenant during the joint lives, to have resort to it in order to satisfy her liability. On that footing she must have been intended to have an immediate interest in it. What Mr Quirke seems to be arguing for, in the language of conveyancers, is an immediate interest subject to defeasance in the event of Mr Freeman’s death. It must be said that an intention to create such an interest is a very curious one to impute to persons in the position of Mr Freeman and Miss Hyett.

In his cross-examination Mr Quirke took Miss Hyett through para 28.3 of her witness statement, part of which I have read. He has relied in particular on the following exchanges:

Mr Quirke has submitted that Miss Hyett’s cross-examination as a whole and those answers in particular show that Mr Freeman intended, and that she understood, that she was only to have a beneficial interest in the farm if she and Mr Freeman fell out, or if he became ill, and, moreover, that she was to have no interest in it on Mr Freeman’s death. I cannot accept that submission. I cannot read Miss Hyett’s answers to the questions that were put to her as demonstrating an understanding that she was to have no interest in the property in the event of Mr Freeman’s death. The judge said (para 51) that Miss Hyett accepted that her concern, in 1992, was not with regard to what might happen on Mr Freeman’s death but what would happen if she and Mr Freeman fell out. That may well have been her primary concern, but her evidence simply does not establish that she had no concern with regard to what might happen on Mr Freeman’s death. Moreover, once it is established that Miss Hyett was intended to have an immediate interest in the farm it is incumbent on the executors to establish that it was not an absolute interest. I am unable to see how it can be said that that was established during Miss Hyett’s cross-examination.

Mr Quirke relies on the well known decision of the House of Lords in Watt v Thomas [1947] AC 484 for the proposition that an appellate court should not differ from a trial judge on a question of fact unless it is satisfied that his decision cannot be explained by any advantage he enjoyed by reason of having seen and heard the witnesses. This is not that kind of case. The judge’s findings of primary fact are not in dispute. It is unnecessary for us to resolve any conflict in the oral evidence. The question is whether the judge drew inferences which could properly be drawn from the evidence of Miss Hyett. Making every allowance for the fact that we have not seen or heard Miss Hyett in the witness box, I remain of the opinion that her evidence did not justify the inferences drawn by the judge.

In the circumstances, essentially for the reasons advanced by Mr Cousins as I have stated them, I conclude that on the execution of the legal charge in favour of Barclays Bank on 6th March 1992 Miss Hyett became entitled to an immediate and absolute beneficial interest in the farm by way of a constructive trust.

As an alternative to his submissions on that question, Mr Quirke, relying on the decisions of this court in Yaxley v Gotts [2000] Ch 162 and Jennings v Rice [2002] EWCA Civ 159 [2003] 1 FCR 501, has submitted that this case ought properly to be treated as one of proprietary estoppel. His object in this is to take advantage of the discretionary nature of the relief available to the court in such a case. He submits that, since Miss Hyett became entitled to the proceeds of the Alba policy (£292,000) on Mr Freeman’s death, it would be unconscionable for her to take a beneficial interest in the farm (which was worth about £280,000 on Mr Freeman's death) as well. I reject those submissions. Although it has been suggested more than once, in particular by Sir Nicolas Browne-Wilkinson VC in Grant v Edwards [1986] Ch, at pp. 656G and 657H, that the principles underlying the law of proprietary estoppel might provide useful guidance both in regard to the conduct necessary to constitute an acting upon the common intention by the claimant and in regard to the quantification of his or her beneficial interest in the property, the two doctrines have not been assimilated, and in my view we in this court must continue to regard cases such as the present as being governed by the principles of Gissing v Gissing; see Stokes v Anderson [1991] 1 FLR 391, 399. I would in any event hold, in all the circumstances of the case, that it would not be unconscionable for Miss Hyett to take an interest in the farm while retaining the proceeds of the Alba policy.

Finally under Gissing v Gissing, it is necessary to determine the extent of Miss Hyett’s beneficial interest in the farm, which prima facie will be that which she and Mr Freeman intended; see [1991] AC, at p 908G; see also Grant v Edwards [1986] Ch., at p 657G. The judge found (para 49) that it was likely that there was very little, if any, equity in the farm in 1992. Mr Cousins relies on that finding and also on Mrs Freeman’s evidence at the trial that in 1990 or thereabouts Mr Freeman had told her that the farm was “mortgaged to the hilt” or words to that effect. Mr Cousins submits that if, in 1992, there was very little, if any, equity in the farm, it can only have been the common intention of Mr Freeman and Miss Hyett that they were each to have a half share of the beneficial interest.

One of the difficulties we have had to face is that there was no evidence before the judge as to the value of the farm in 1992. Mr Quirke relies on Miss Hyett’s evidence that in January 1990 she discovered that Mr Freeman’s borrowings from Lloyds Bank amounted to £186,000. He says that it is reasonable to assume that the bank would not have allowed Mr Freeman’s borrowings to exceed the value of the farm, so that in 1990 its value should be assumed to have been in excess of £186,000. On the footing that the borrowings had been reduced to about £138,000 by the beginning of March 1992, Mr Quirke submits that the judge’s finding that there was very little, if any, equity in the farm at that time cannot be supported. From that he argues that before 6th March 1992 Mr Freeman must have had a beneficial interest of substantial value which entitled him to claim a correspondingly larger share as against Miss Hyett.

The evidence is not in my view sufficiently clear to allow us to go behind the judge’s finding. In any event, I do not think that the value of Mr Freeman’s beneficial interest before 6th March 1992 is of decisive significance. The shares of the parties are to be determined by their common intention which, if not expressed, must be inferred from all the circumstances. Here, although there are other circumstances which might be relied on, there is one feature of the case which stands out from the others. Bearing in mind that Mr Freeman and Miss Hyett rendered themselves jointly and severally liable to Barclays Bank by entering into the legal charge dated 6th March 1992, the very transaction by which Miss Hyett acquired her beneficial interest, I conclude that they can only reasonably have intended that they should each take a half share.

I can well understand that, in the circumstances described in paras 5 and 6 above, Mrs Freeman and her two sons will not regard this as a fair result. Regrettably, things were very different in March 1992 from what they had been in July 1989. Mr Freeman’s financial difficulties made it necessary, in order that he should be able to retain the farm, to enlist the cooperation of Miss Hyett and for her to be put at equal risk with himself in regard to his liabilities to the bank. The price he had to pay for that was the surrender of his power to dispose of half the beneficial interest in the farm

I turn to Miss Hyett’s secondary claim in relation to the RSA policy. Although this can be dealt with far more briefly than her primary claim, some further recital of the facts is necessary.

As I have said, the RSA policy was issued on 1st May 1994. In the schedule to the policy it was classified as a “Mortgage Protection Assurance Joint Life (Without Profits)”. In the body of the policy it was provided that the insurers would pay the sum assured in accordance with the schedule to the Assured or the successors in title of the Assured. In the schedule the Assured were stated to be Mr Freeman and Miss Hyett “as joint tenants”. Also in the schedule, it was provided that in the event of the termination of the joint lifetime of the Assured before 1st May 2017 the sum assured would be determined from the table there set out according to the year of assurance in which such termination occurred. In the event of a death during the first year the sum assured was £125,000; it reduced yearly thereafter.

On Mr Freeman’s death the proceeds of the RSA policy, amounting to £114,211, were paid to Miss Hyett. Also on Mr Freeman’s death there matured a policy on his life with the Norwich Union Life Insurance Society. That policy had been effected in his own name and for his own benefit. The proceeds from it were £23,037, of which £8,350 was applied by the executors in repayment of the overdraft on the farm account and £14,687 in reduction of the amount owing on Midland Bank’s mortgage on the farm (£106,024). That left £91,337 as the sum required to repay the whole of the Midland Bank mortgage. It was paid by Miss Hyett out of the £114,211 she received from the RSA policy, the balance of £22,874 being retained by her.

Miss Hyett claims that not only is she entitled to retain that balance but also to repayment by the executors of the £91,337. The judge rejected that claim, holding that Miss Hyett was liable to account to the executors for such part of the proceeds of the RSA policy as was required to discharge the Midland Bank mortgage; in other words, not only was she not entitled to the return of the £91,337, she was bound to reimburse the executors for the £14,687 that they had expended out of the proceeds of the Norwich Union Policy. The judge made an order to that effect.

The judge said (para 72):

“The claimant’s evidence is that the RSA policy was taken out not to cover the mortgage but to secure all the debts of her and Mr Freeman. I reject that evidence. It is clear from the face of the policy that this was a mortgage protection assurance policy. The term of the policy matched that of the Barclays loan and the sum assured decreased over the period to match the decrease in the expected indebtedness to Barclays. The policy was sent to Barclays as part of its security for the loan, and subsequently to Midland Bank in 1995. It is clear on the evidence that the purpose of the policy was to discharge the mortgage on the death of either Mr Freeman or the claimant. The documents show that the claimant and Mr Freeman expressly agreed that. That was the arrangement they agreed with the mortgagees: see, for example, the Midland Bank customer acceptance form which the claimant signed.”

Mr Cousins has struggled valiantly to convince us that the judge’s decision of this question was wrong and ought to be reversed. Shortly stated, his submission is that, since the RSA policy provided for the sum assured to be paid to Mr Freeman and Miss Hyett as joint tenants, she, as the survivor, is beneficially entitled to its proceeds. In my judgment that submission can only be valid in regard to the ultimate balance of £8,187 (£114,211 less the £106,024 required to pay off the mortgage). The executors do not suggest that Miss Hyett is not entitled to retain the £8,187. They claim that in regard to the £106,024 the judge’s decision as expressed in para 72 of her judgment was correct and ought to be affirmed.

I agree with the executors. If there were any doubt about the matter, it would be resolved in their favour by the decision of this court in Smith v Clerical Medical and General Life Assurance Society [1993] 1 FLR 47, to which the judge referred and to which the present case is, by reason of her findings as to the express agreement between Mr Freeman and Miss Hyett, a fortiori.

I would allow Miss Hyett’s appeal so far as it relates to her beneficial interest in the farm and would make a declaration accordingly. I would dismiss her appeal so far as it relates to the proceeds of the RSA policy.

LORD JUSTICE KEENE: I agree.

LORD JUSTICE PETER GIBSON: I also agree.