AIB Group (UK) Plc (Formerly Allied Irish Banks plc and AIB Finance v Martin and another

A mortgage covenant expressed to be joint and several may make each mortgagor liable for money advanced to any one of them. Where an interpretation clause defines the collective expression for the mortgagors as referring to all or any of them, that clause determines both their identity and the measure of their obligations.

The canon reddendo singula singulis may distribute plural words among their respective subjects where that reflects the document's objective meaning. It cannot be used to divide a single joint and several covenant into separate obligations where the wording makes each covenantor liable for all specified debts, including another covenantor's individual debts.

Two business partners jointly mortgaged jointly owned properties to secure lending by a banking group. The bank's standard form defined “the mortgagor” as both partners and provided that the expression referred to all or any one of them, whose obligations were joint and several. Its payment covenant covered advances and other liabilities of “the mortgagor”.

After enforcement of the security left a shortfall, the bank sought to hold Mr Gold liable for advances made to Mr Martin alone. Jacob J rejected Mr Gold's plea of non est factum. The Court of Appeal subsequently rejected his argument that the covenant should be construed distributively, so that each partner was liable only for the joint debts and his own individual debts.

The issue before the House was whether the joint mortgage made Mr Gold liable for Mr Martin's separate indebtedness.

1. Disposition. The House unanimously dismissed the appeal. Lord Scott of Foscote gave the principal reasoning adopted by Lord Irvine of Lairg LC, Lord Hutton and Lord Rodger of Earlsferry. Lord Millett preferred a distributive construction but did not dissent from the House's unanimous conclusion.

2. The payment covenant. Per Lord Scott, the mortgage contained one joint covenant, not three separate covenants. The interpretation clause made the liability under that covenant joint and several. Because “the mortgagor” meant both mortgagors and each of them, the covenant covered advances to them jointly and advances to either individually. Mr Gold was therefore liable for Mr Martin's separate debts as well as their joint debts.

3. Clause 2(3), concerning the bank's costs and expenses, reinforced that construction. It contained no reference to “the mortgagor” capable of distributive treatment. A construction which excluded liability for another mortgagor's advances while retaining liability for the costs of recovering them would not produce a sensible or reasonable result.

4. The distributive canon. Per Lord Rodger, with whose reasoning Lord Hutton agreed, reddendo singula singulis is a valuable interpretative canon but must be used with discrimination to ascertain objective meaning. It could apply to an undertaking by two debtors to pay “their debts”. It did not justify dividing this single joint and several covenant so that each individual became liable only for his own separate debts. The definition clause governed the measure of the obligations, not merely the identity of the mortgagors.

5. Extrinsic intention. Lord Hutton observed that the parties' intention under a deed is generally ascertained from its words. Subject to limited exceptions, extrinsic evidence of their actual intention is inadmissible. That rule promotes legal certainty even where its application may defeat actual intention. On the facts, however, the adopted construction accorded with the understanding of the solicitor on whom Mr Gold relied.

6. Lord Millett's reservation. Lord Millett considered the distributive construction legitimate and more natural. In his view, an interpretation clause should ordinarily serve its drafting purpose and should enlarge substantive obligations only in plain and unambiguous terms. He nevertheless accepted the contrary unanimous view and agreed that the appeal should be dismissed.

1. House of Lords: The appeal was dismissed unanimously. The Court of Appeal's construction of the mortgage was upheld.

2. Court of Appeal: The court rejected the distributive construction and held that the joint and several covenant made each mortgagor liable for the other's separate indebtedness.

3. High Court: Jacob J rejected Mr Gold's plea of non est factum. The effect of the payment covenant had then been accepted.