AIB Group (UK) Plc v. Martin and Another

The House of Lords considered the construction of a standard-form mortgage clause (clause 2) and an interpretation clause which defined "the mortgagor" as two named persons and stated that where more than one person was included the expression should be construed as referring to "all and/or any one" of them and that obligations would be joint and several. The court held that clause 2, properly construed, created a single joint covenant which, by reason of the definition, was joint and several and extended to sums advanced to either mortgagor individually as well as to sums advanced to them jointly. The proposed "distributive" construction (reddendo singula singulis) which would have limited each person's several liability to his own separate debts was rejected. The court also noted the trial judge's rejection of a non est factum defence but the principal decision turned on contractual construction of the mortgage deed.

Background and parties.

The bank (AIB Group) lent to two mortgagors, Mr Martin and Mr Gold, in a combination of joint and individual advances. The borrowers executed a standard-form joint mortgage and contemporaneous individual mortgages. The bank sold secured properties leaving a shortfall and sought to enforce clause 2 of the joint mortgage against Mr Gold for sums advanced to Mr Martin alone. Mr Gold appealed, with leave, from the Court of Appeal.

Nature of the application and relief sought.

• The appellant sought a declaration or ruling that clause 2 did not make him liable for sums advanced to Mr Martin alone and contended for a distributive construction limiting each mortgagor's several liability to his own separate debts. The appellant had earlier raised a non est factum defence at trial which was rejected by Jacob J.

Issues framed by the court.

• Whether clause 2(1) of the joint mortgage, read with the interpretation clause, imposed liability on each mortgagor for advances made to the other;
• whether the interpretation clause could legitimately be applied distributively (reddendo singula singulis) so as to confine each mortgagor's several liability to his own debts; and
• the relevance of the factual matrix and the limits on extrinsic evidence in construing a standard form mortgage deed.

Court's reasoning and subsidiary findings.

The majority treated clause 2 as a single covenant by "the mortgagor" which, because the definition rendered the expression applicable to both jointly and severally, must be read as creating joint and several obligations that extended to sums advanced to either of the named mortgagors. The House concluded that the distributive application would require treating the single covenant as three separate covenants, which did not accord with the natural and ordinary operation of the clause and produced anomalies (for example, in relation to clause 2(3) dealing with costs). The court emphasised the limited role of factual background and extrinsic evidence in construing a standard-form interpretation clause; certainty of meaning in deeds was prioritised. Lord Millett analysed and explained the distributive construction as intellectually respectable and showed how it could avoid introducing suretyship, but ultimately accepted the majority view. The trial judge's rejection of non est factum was noted and the House observed that the appellant had remedies elsewhere (for example against solicitors) but these did not affect construction of the mortgage deed.

Appeal dismissed. The House upheld the Court of Appeal's construction of clause 2: the joint mortgage covenant, read with the interpretation clause, imposed joint and several liability which extended to sums advanced to either mortgagor individually as well as to sums advanced to them jointly. The alternative "distributive" construction was rejected as inapt to the single covenant and inconsistent with other operative provisions (notably the costs clause) and with the purpose and drafting of the standard-form deed.