The High Court has dismissed claims by the personal representative of Matthew Cahill’s estate over a life policy assigned to Ulster Bank, finding that the bank was entitled to apply its proceeds against debt owed by a company covered by guarantees signed by Mr Cahill.
The judgment, delivered by Mr Justice Tony O’Connor on 3 November 2016, concerned a policy that assured IR£55,000 on Mr Cahill’s death. He assigned it to the bank by way of mortgage in 1988. Although the policy named him as its owner, the company paid the annual premiums from 1988 to 2012.
Mr Cahill had signed continuing guarantees for the company in 1985 and 1991, each with a stated limit. His personal representative, James J.M. Meagher, sought declarations that the estate was entitled to the policy proceeds and that the guarantees had been terminated. He also sought an injunction for return of the policy.
Mr Cahill died on 21 March 2012. The bank’s 2011 facility letter to the company did not list the guarantees or policy assignment as security. The bank’s later 2012 facility letter did list them. The estate gave notice to terminate the guarantees in December 2012 and April 2013. In May 2013, the bank demanded €266,645 from the estate, and the life assurer later issued a cheque for €218,188.99 to the bank.
The estate argued that the bank had not made a demand within the one-month notice periods and that the company had not yet defaulted when the demand was sent. The bank submitted that the guarantees preserved liability for amounts “recoverable” when each notice period expired. It also argued that the company’s payment of premiums entitled it to the policy proceeds, a submission the court said it did not need to decide.
The judge distinguished the guarantees from those considered in an earlier case. Their wording provided that termination would not affect liability for amounts recoverable at the end of the notice period. The judge held that termination crystallised the bank’s entitlement to demand payment for the company’s obligations at that point; the demand could follow after the notice period. The court also found that Mr Cahill’s death was an event of default under the bank’s general terms and that the company remained indebted in an amount exceeding the guarantees’ combined limit and the policy payment.
The court dismissed the claims for declarations, an injunction and damages. It did not decide the bank’s alternative submission that the company was independently entitled to the policy proceeds.