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CHAPTER 10

THE GRAVY TRAIN

10.3.3Conscious Knowledge that a False Impression is being imparted to the Borrower
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By maintaining silence in the matter of a year-by-year value comparison between the Endowment Mortgage Fund Value and the Repayment Mortgage Cumulative Principal Repaid (for equivalent net cash outflows), while representing the End Value (end of Policy Term value) of the Endowment Mortgage compared to the Repayment Mortgage, Irish Life further ensured concealment of both the Defects associated with DEPENDENCE on Bonus pertaining to the Endowment Mortgage and the Attributes of the Repayment Mortgage.

(They also further ensured concealment of the fact that they ‘creamed off ’ the entirety of the first year’s premiums and 4% of each subsequent year’s premiums. See Section 4.10.6 Investment: Active Concealment of Dishonest Intention.)


The false impression was given that the comparison between the Endowment Mortgage and the Repayment Mortgage was on an equivalent basis.
My wife and I were induced to believe that the progression in value of the Endowment Mortgage Fund and the Repayment Mortgage Cumulative Principal Repaid was uniform in both cases. While this is true in the case of the Repayment Mortgage, it is false in the case of the Endowment Mortgage (see Section 10.2).


Irish Life had conscious knowledge that a false impression would be imparted by their Mortgage Quotation Comparison representation and that the Attributes of the Repayment Mortgage would be effectively concealed.

They had conscious knowledge that the advice of their agent would be based on, and supportive of, this false impression.

There was a clear intent by Irish Life to deceive.


Such conduct by Irish Life constitutes Fraudulent Misrepresentation.


(See Section 2.3.2: Fraudulent Misrepresentation and Section 2.3.4: The Duty to Disclose and Silence as a Misrepresentation, (b): Where the Silence Distorts a Positive Representation, and (a): Where a Fiduciary Relationship or a Special Relationship exists. See also Section 2.8: DAMAGES FOR MISREPRESENTATION.)




IF
the addition of Annual Bonus and/or Terminal Bonus is incorporated by the Life Assurance Company into their representations of the projected Value at Maturity of their Endowment Mortgage / Life Assurance Policies, and the false impression is given (either directly by the Life Assurance Company or by their agent) that the progression to such End Value is uniform over the Policy Term, THEN fraudulent misrepresentation is likely to have been effected.


Again, notwithstanding the issues of the intent to deceive or the absence of honest belief, unless the Life Assurance Company can show, objectively, that these matters were brought to the attention of the borrower / investor AND explained, and that the contract itself was ADVANTAGEOUS to the borrower / investor, negligent misrepresentation will have been effected.


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In U.K. Mortgage Quotations complying with the Conduct of Business Rules (or with the similar successor Rules), and in more recent Mortgage Quotation presentations in Ireland that complied with the Irish Insurance Federation’s Code of Practice (or with the subsequent Regulatory Authority Codes), the Endowment Fund Value at the end of various years throughout the Endowment Mortgage Term is represented. This partly conveys the information to the borrower that the progression in value of the Endowment Mortgage Fund is not uniform over the Mortgage Term.


BUT the corresponding Cumulative Principal Repaid for an Equivalent Net Outlay in the case of the Repayment Mortgage is still not disclosed.


Such partial disclosure ensures that the Attributes of the Repayment Mortgage are still denied true Weight on the borrower’s Decision Scales.


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While, by such conduct, it cannot be as forcefully construed that a conscious knowledge exists that a false impression is being given, it is difficult to see how a contention of honest belief that the whole truth is being represented can be sustained.

The Life Assurance Company, Tied Agent, Agent or Independent Financial Adviser, as the case may be, have special knowledge and skill, and know that the borrower / investor is relying on them, to apply that special knowledge and skill with respect to the appropriateness of the transaction being recommended, and to present the whole truth, including the whole truth about the comparative product, the Repayment Mortgage.


In such circumstances, their conduct (i.e. their silence on the Attributes of the Repayment Mortgage) may still be construed as an active concealment.


Notwithstanding this active concealment argument, the standard of such conduct (i.e. the partial disclosure) most certainly falls short of that required by a duty of care; such conduct would most certainly constitute Negligent Misrepresentation by omission.

 

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