In the event that you have visited this site following a search for the Court of Appeal case Rooney v Cardona & others, in which Gerard Rooney was the Applicant, we have produced the text of the Law Report by kind permission of The Times, London (4th March 1999) – The Times.
Personal representatives were the trustees
Rooney v Cardona and others
Before Lord Justice Swinton Thomas, Lord Justice Mantell and Lord Justice Robert Walker [Judgment February 9]
On the agreed facts between the parties that a policy of life insurance effected by a husband and wife, which contained no express declaration of trust nor any reference to the Married Women's Property Act 1882, was subject to the provisions of section 11 of that Act, a judge erred in rejecting a submission that when the section referred to the personal representatives of the life assured it did so as a means of identifying the trustee or trustees who were to be legally entitled to the policy not as a direction that they were to hold the policy as personal representatives.
The court of appeal so held in allowing an appeal by Mr Gerard Rooney, the trustee in bankruptcy of Robert Daniel Cardona, from an order of Judge Cook in St Albans County Court on August 6, 1998, varying an order of district judge Hewetson-Brown on four preliminary issues in an action against the first defendant, Mr Cardona's son, and Black Horse Insurance Company and others.
Mr John McLinden for the trustee in bankruptcy; Mr Philip Marshall for Black Horse Insurance Co; the first defendant did not appear and was not represented.
LORD JUSTICE ROBERT WALKER said that in 1992 Mr and Mrs Cardona effected a policy with the second defendant on their own lives for ten years, with a death benefit of £60,000 payable on the death of either prior to that date.
Mr and Mrs Cardona were the grantees and the appropriate benefit was payable "to the grantee(s) or the person(s) otherwise entitled" subject to proof of entitlement.
On October 24, 1995 Mr Cardona was adjudicated bankrupt on the petition of the Inland Revenue. On November 22, 1995 notice of his bankruptcy was published in the London Gazette. On January 30, 1996 Mr Rooney was appointed his trustee in bankruptcy. On June 8, 1996 Mrs Cardona made a will leaving her entire estate to her son, the first defendant.
She appointed Mr Cardona and a Mr Cave as her executors. She died on July 23, 1996. Her will was proved by Mr Cardona on September 6, 1996, power to be reserved to the other executor.
There was no evidence that Mr Cave had formally renounced probate or taken part in the administration of the estate.
Within a short time of his wife's death Mr Cardona contacted Black Horse Insurance and subsequently obtained the death benefit, having claimed that he was legally entitled to the policy and that it had not been assigned mortgaged, settled, charged or otherwise dealt with.
The four preliminary issues were:
1. If Mr Cardona was the sole beneficiary of the policy, was the receipt of Mr Cardona, as his wife's legal personal representative, a valid discharge for the proceeds of the policy against the trustee in bankruptcy pursuant to section 11 of the 1882 Act assuming the only possible notice was the Gazette notice of November 22, 1995?
2. Would the answer to the previous question be different if Black Horse had actual notice as pleaded?
3. Did the proceeds of the policy devolve on Mr Cardona as after-acquired property for the purposes of section 307 of the Insolvency Act 1986?
4. Would the answer to questions 1 and 2 be different if Black Horse had no notice of the capacity in which Mr Cardona gave the receipt?
Both sides agreed, and were plainly right in agreeing that the judge gave the correct answer "no" to question 3.
But the other three questions were based on an agreed but questionable premise: that the policy was effected under section 11 of the 1882 Act and was subject to the special provisions as the trusteeship contained in that section.
It had been held that a policy that was a life or endowment policy could fall within section 11, at any rate if the life assured died before the maturity date: see In re loakimidis Policy Trusts ( Ch 403). It had also been held or opined by the majority of the court of appeal in Griffiths v Fleming ( 1 KB 805, 817-819) that a policy on the joint lives of a husband and wife could be regarded as two policies, each effected by one or other of the married couples on his or her own life and each falling within section 11 of the 1882 Act.
In that case Lord Justice Farewell and Lord Justice Kennedy took the view, (at p818) that the joint lives policy with which they are concerned, or rather the component of it effected by the wife, was "expressed to be for the benefit of her husband" within the meaning of section 11.
His Lordship found that view puzzling on the wording of the policy recorded in the report. In In re S dec'd ( 1WLR 235) Mr Justice Ratee also seemed to be rather puzzled by Griffiths v Fleming although he followed it and applied it to a joint life and 25 year endowment policy.
Had the issue been live his Lordship would have taken the view that the court was not bound to apply the views expressed to two members of the court in Griffiths v Fleming in relation to a policy which they regarded as a mistaken amalgamation of two separate contracts.
The policy with which the court was concerned made no reference to section 11 of the 1882 Act. It was not expressed to be effected for the benefit of Mr Cardona or Mrs Cardona. In the absence of any evidence as to separate proposal forms his Lordship would have been disposed to think that it was not within section 11 of the 1882 Act.
But the parties must be held to their agreed starting point that the policy must be treated as if it had been a life policy effected by Mrs Cardona for the benefit of her husband. The effect of the assumptions on which the preliminary issues were agreed was that Mrs Cardona's personal representatives became trustees of the policy on her death.
The judge recorded but rejected Mr McLinden's submission that when section 11 referred to the personal representatives of the life assured it did so as a means of identifying the trustee or trustees who were to be legally entitled to the policy.
In his Lordship's judgment, he was wrong to do so. The whole purpose of the provisions at the end of section 11 was to identify trustees who were to hold the policy moneys on the appropriate trust, with a statutory direction that those moneys "shall not, so long as any object of the trust remains unperformed, form part of the estate of the insured or be subject to his or her debts".
Those words could hardly be clearer and excluded the possibility that Mr Cardona could act on his own trusteeship, if Mr Cave was indeed his co-trustee.
However his Lordship also considered the position on the hypothesis that Mr Cave did disclaim his trusteeship and that Mr Cardona became sole trustee of the policy.
On that hypothesis, Mr Cardona would have been sole legal owner and sole and absolute beneficial owner, but for his bankruptcy.
In those circumstances references to the office of trustee or Mr Cardona being entitled to give a receipt in a fiduciary capacity became totally unreal.
A man could not hold property in trust for himself because in such a situation the legal and beneficial interests were merged and it would be artificial to treat them as separate. From the moment of his wife's death and with Mr Cave's assumed disclaimer of his trusteeship relating back to that moment no other person had any beneficial interest to the policy. It was a policy that was vested in the trustee in bankruptcy in statutory trusts for Mr Cardona's creditors, and only the trustee in bankruptcy could give a good receipt for it.
That was so whether or not Black Horse had actual notice of Mr Cardona's bankruptcy, although if Black Horse did have notice of the bankruptcy it had to some extent brought the loss upon itself.
Lord Justice Mantell and Lord Justice Swanton Thomas agreed.
Solicitors: Pictons, St Albans; Kingsford Stacey Blackwell.
© The Times, London, 1999