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CHAPTER 4

THE LABYRINTH

4.10.7Benefits : Your Loan WILL BE Repaid
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(a)

An Endowment Mortgage Contract is a Standard Form Contract.

There is the clear impression given (see Section 4.8), from the First National HOME MORTGAGES explanatory pamphlet, from the pre-contract representations by First National when explaining the Endowment Mortgage Contract and giving advice, and from the Mortgage Quotations of First National / Irish Life, that, with both the Repayment Mortgage and the Endowment Mortgage, the Loan WILL BE Repaid at the end of the Mortgage Term.

In effect, this clear impression constitutes an implicit assurance that the loan will be repaid at the end of the Mortgage Term
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While the assurance that the Mortgage Loan will be repaid at the end of the Mortgage term is most definitely implicit, this assurance, in the case of the pre-contract oral representations by First National and in the case of the written representations in the First National / Irish Life Mortgage Quotations, could be reasonably interpreted as an ‘express undertaking’ it could be interpreted as a warranty.


Consider the clear statement in the Mortgage Quotation (see Case 1 of Appendix 1/2):

Projected Surplus After Loan Repaid £12,770


The use of the expression After Loan Repaid gives express assurance that Loan Repayment has occurred it is a past event.


If First National / Irish Life did not wish to give such an express assurance, then they could have stated the matter thus:

Projected Surplus £12,770


The express assurance, that with the Endowment Mortgage the Loan will be Repaid at the end of the Mortgage Term, is further fortified within the Mortgage Quotation 'Notes', as, while both the Projected Surplus and the Early Repayment Term are clearly indicated as being CONDITIONAL on the assumed growth rate being achieved, NO CONDITIONAL LINK is shown to be associated with the Repayment of the Mortgage Loan itself.

Such an express assurance should, therefore, take priority over the printed terms in the policy Provisions, Privileges and Conditions  it should be given contractual effect.


(See Section 2.2.4: Other Limitations at Common Law to the Operation of Exemption Clauses, (a) Express Undertakings.)


(b)


Both the representations of First National, within their HOME MORTGAGES explanatory pamphlet and when giving advice prior to contract, and the representations of First National / Irish Life in their Mortgage Quotations, give the false impression that the Premium Payments towards the Endowment Mortgage would result in the Repayment of the Mortgage Loan over the loan period. Their representations in this regard, therefore, constitute Misrepresentation.


(See Section 2.3.1: The Conditions Necessary for the Existence of Misrepresentation, and Section 2.3.5: Statutory Misrepresentation. See also Section 2.8.1: The Right to Revoke the Contract, and Section 2.8.4: The Measure of Damages as a result of a successful Action based on the Statute Law liability under Misrepresentation.)


(c)


A fact of the utmost importance to the borrower is the Certainty that the Mortgage Loan will be repaid over the loan period.

Information regarding any Risk associated with this fact is absolutely critical to the borrower and would have a major effect on his decision as to choice of Mortgage type.


First National, when explaining the Repayment and Endowment Mortgage Contracts, and when giving advice as to the best choice of Mortgage type, owed a duty to my wife and I (by reason of their fiduciary position) to make full disclosure of all material facts known to them which might be considered likely to affect the decision of my wife and I to enter into the Endowment Mortgage Contract. Irish Life also, by reason of the special relationship duty of care transferred through their tied agent, owed a similar duty to disclose to my wife and I. First National and Irish Life, both, failed to honour this duty.


They failed to inform us of the following RISK BURDENS known by them to be intrinsic to their Endowment Mortgage Contract:

(i)

With the Endowment Mortgage Contract the Repayment of the Mortgage Loan itself is CONDITIONAL on an assumed growth rate being achieved (this assumed growth rate was 7% p.a. net in the case of the 15 Year Endowment Mortgage actually chosen by my wife and I).

(ii)

IF the assumed growth rate necessary to effect the Repayment of the Loan is not achieved, THEN it will be necessary to increase the premium payments to Irish Life.

(See Section 2.3.4: The Duty to Disclose and Silence as a Misrepresentation, (a) Where a Fiduciary Relationship or a Special Relationship exists. See also Section 2.8.1: The Right to Revoke the Contract, and Section 2.8.3: The Measure of Damages as a result of a successful Action based on the Common Law liability under Negligent Misrepresentation.)


(d)


The most burdensome Risk sought to be covered by the Borrower when taking out a Mortgage is the risk associated with the Repayment of the Loan.

Consider, therefore, the application of the rationale behind the duty to disclose falling on the insured (in this case my wife and I), as described by Lord Mansfield in 1766:

The Life Assurance Company trusts in the representations of the insured (as stated in the Proposal Form) and proceeds upon confidence that the insured does not keep back any circumstances in his knowledge, to mislead the Life Assurance Company into the belief that the circumstance does not exist, and to induce the Life Assurance Company to estimate the Risk, as if it did not exist. By keeping back such a circumstance the Life Assurance Company is deceived and the policy is, therefore, void; because the Risk run is really different from the Risk understood and intended to be run, at the time of agreement.

But the Duty to Disclose material facts is a mutual one, imposing reciprocal duties on the Life Assurance Company.

The Irish Life Assurance Company are therefore burdened with a duty to disclose all facts known to them, which are material either to the nature of the risk sought to be covered or to the recoverability of a claim under the policy, which a prudent insured would take into account in deciding whether or not to place the risk (for which he seeks cover) with Irish Life.



Irish Life failed to fulfil that duty.


Irish Life failed to disclose the following facts, known to them to be critical to the risk associated with the Repayment of the Loan, and, which my wife and I (or any borrower) would most certainly have taken into account in deciding whether to choose a Repayment Mortgage or an Endowment Mortgage:

(i)

They failed to disclose the possible undesirable consequence of the Endowment Mortgage Contract, whereby Repayment of the Mortgage Loan will not be accomplished unless an assumed growth rate (7% p.a. net in the case of the Endowment Mortgage taken out by my wife and I) is achieved. Their actions were in fact such as to induce the borrower not to take any account of the risk associated with such a grave consequence.

(ii)

They failed to disclose the fact that IF the assumed growth rate necessary to effect Repayment of the Mortgage Loan is not achieved, THEN it will be necessary to increase the premium payments into the Endowment Policy.

(See Section 2.3.4: The Duty to Disclose and Silence as a Misrepresentation, (c) Contracts of Insurance.)

Note! The duty of disclosure pertaining to a contract Uberimmae Fidei (i.e. of the Utmost Good Faith) is an express duty of Law; its burdens cannot be denied by the Life Assurance Company just because the Endowment / Life Assurance Contract has been sold by an ‘independent financial adviser’ who does not act with their contractual authority of agency.


(e)


By their non-disclosure of the Risk factors associated with the Benefits pertaining to the Endowment Mortgage Contract, First National and Irish Life were able to effect concealment of the undesirable circumstances that could befall the borrower who opted for an Endowment Mortgage. These suppressed material facts put a wholly different complexion on the Benefits they have represented, and show what only is disclosed to be dishonest, because it is not the whole truth.


But, by withholding these material facts they also subtly induce an even greater deception of the borrower; they mask the attractions of the Repayment Mortgage.


By their non-disclosure of these Risks associated with the Benefits pertaining to the Endowment Mortgage, First National and Irish Life ensure that the greatest Quality of the Repayment Mortgage, the ABSENCE OF RISK, does not come to the knowledge of the consumer.

They ensure that this absence of the Burden of Risk with the Repayment Mortgage is denied true WEIGHT on the Decision Scales when the borrower is choosing between an Endowment Mortgage and a Repayment Mortgage.



They further ensure that the borrower is misled.

Their non-disclosure is therefore imbued with the stigma, mala fides.

There is dishonest intent.

They have tampered with the weights.

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This tampering with the weights can also be seen in the SUMMARY OF BENEFITS tabulated comparison between an Endowment Mortgage and a Repayment Mortgage, as represented in the First National HOME MORTGAGES explanatory pamphlet (see Appendix 1/1).

In the light of what we have thus far exposed, this Weighting of the Decision Scales to favour the Endowment Mortgage clearly evidences a dishonest intent from inception.


(See Section 2.3.2: Fraudulent Misrepresentation. See also Section 2.8.1: The Right to Revoke the Contract, and Section 2.8.2: The Measure of Damages as a result of a successful Action based on the Common Law liability under Fraudulent Misrepresentation.)

 

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