England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY

		Claim Nos. 1BC90002, 1BC90003, PR190103 Manchester Civil Justice Centre 1 Bridge Street West Manchester M60 9DJ
		26th September 2012

JUDGE HODGE QC:

1. This is my extemporary judgment on the trial of a preliminary issue which has arisen in the course of three separate claims which have been brought under the Inheritance (Provision for Family and Dependants) Act 1975 in relation to the estate of the late Jocelyn Justiniani Walia, deceased, claim numbers 1BC90002, 1BC90003 and PR190103.
2. The resolution of this preliminary issue raises a knotty problem which was not addressed in either of the two relevant Court of Appeal authorities. The problem may be expressed thus: where the proceeds of a fixed term joint life policy are paid over as the result of the death of the first of the joint lives insured, but in circumstances where it is to be assumed that the payment of the sum insured might have been brought forward on the footing that the deceased had been suffering from a terminal illness, was the deceased, immediately before her death, entitled to a joint tenancy of the lump sum life cover for the purposes of section 9 of the 1975 Act? The resolution of this problem is made more difficult as a result of the majority decision of the Court of Appeal in the case of Murphy v Holland [2003] EWCA Civ 1862.
3. This extemporary judgment is divided into six sections as follows:
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1. The Background

2. The Legislation and Authorities

3. The Policy Documentation

4. The Parties' Submissions

5. Discussion and Resolution

6. Disposal.

1. The Background

4. The deceased was born on 28^th October 1972. On 18^th July 2003 she had married the defendant in all three sets of proceedings, Mr Navpreet Singh Walia. He is now 39 years of age. Before their marriage, the deceased and the defendant had taken out a fixed-term life cover benefit insurance policy with Direct Line Life Insurance Company Limited. The policy was taken out on 21^st May 2002. The proposal form had been issued on 4^th April 2002 and had been signed by the deceased and the defendant on 8^th April 2002. The proposal form is to be found at B1 through to B4. The insurance schedule is at B5. The policy terms and conditions are at B6 through to B14 and key features of the life cover are described in a document at B15 through to B19. Those are the relevant policy documents. It should be stressed that, contrary to a suggestion made in paragraph 9 of the first witness statement of the defendant made for the purposes of these proceedings and dated 26^th October 2011, the life cover was not taken out at the time of the purchase of what became the matrimonial home, 23 Prenton Gardens, Thornton-Cleveleys, in the county of Lancaster, which took place about a year later. The parties had been married on 18^th July 2003, some 14 months after the life cover was taken out. There was one child of the marriage. Emma-Kaur Walia was born on 8^th November 2004 and she is now 7 years of age.
5. The deceased and the defendant appear to have separated when the deceased went to live in the Philippines. She formed an attachment there to a Mr Felipe Bulawan Lim, and a son was born to that relationship on 20^th July 2009. The son's name is Philip Ronald Justiniani Lim and he is now 3 years of age. Unfortunately, the deceased contracted cancer in a fatal form. According to the evidence of Mr Felipe Lim, as set out in his witness statement of 1^st August 2012, the diagnosis of cancer was only made at about the end of February 2011. Tragically, the deceased did not long survive that diagnosis. She died on 15^th March 2011, aged only 38. According to the evidence, she had been in the process of making a will but, unfortunately, that process had not borne fruit by the time of her death. The deceased, therefore, died intestate; and, given the size of her estate, her effective sole statutory next of kin is the defendant, Mr Navpreet Singh Walia, although, as I say, the parties had, by the time of the deceased's death, become estranged, and Mr Walia had instituted divorce proceedings, apparently on the grounds of his wife's adultery. Nevertheless, they were still married and therefore he was, effectively, her sole statutory next of kin and certainly the only adult person entitled to a grant of administration to her estate. Accordingly, on 1^st April 2011, a grant of administration was issued to Mr Walia out of the Winchester District Probate Registry. Within the six months following that grant no less than three separate claims under the 1975 Act were issued. In chronological order, they were as follows:

1. Claim number 1BC90002. That was a claim by the deceased's son, Philip, now aged 3, which was issued in the Blackpool District Registry of the Chancery Division (or at least purported to be issued there, since Blackpool is not in fact a Chancery District Registry). The Part 8 claim form was issued on 21^st September 2011. Philip is of course a minor and therefore, the proceedings were brought on his behalf by a litigation friend, Mrs Emma Woodhouse, who is the grandmother of Philip and the mother of the deceased.

2. The second set of proceedings in point of time was issued in the Preston District Registry of the Chancery Division on 27^th September 2011, under claim number PR190103, by the father of Philip, Felipe Bulawan Lim, the deceased's former partner. He claims as a dependant of the deceased.

3. Third in order of time was a claim brought on behalf of the deceased's daughter by her marriage to the defendant, Emma-Kaur Walia. That claim was issued on 28^th September 2011, again purportedly in the Blackpool District Registry of the Chancery Division. In those proceedings the litigation friend of Emma-Kaur Walia is the defendant's sister, Baljit Malhotra.

6. There was a matrimonial, or former matrimonial, home, 23 Prenton Gardens. That had been purchased in the joint names of the deceased and the defendant on a joint tenancy; and it therefore passed by survivorship to the defendant. It has been valued for probate purposes at a sum in the order of £150,000; but it is subject to a mortgage which reduces the value of that property to below £30,000. It is fair to say that the estate is of negative value and, for that reason, the defendant has issued proceedings under the Insolvent Administration of Estates legislation. That claim, which is proceeding under case number 185 of 2012, has been transferred to the Manchester District Registry of the Chancery Division of the High Court but has been stayed until further order of the court.
7. As far as the three Inheritance Act claims are concerned, by an order of District Judge Rouine, sitting at Blackpool District Registry on 5^th March 2012, all three claims were transferred to the Manchester District Registry of the Chancery Division and were directed to be case managed together. On 23^rd May 2012 those claims all came before District Judge Richmond, together with the petition by the defendant for an insolvency administration order relating to the deceased's estate. District Judge Richmond ordered the trial of a preliminary issue, which is the matter now before me. As formulated by paragraph 2 of District Judge Richmond's order, the preliminary issue was to determine whether the sum paid by Direct Line to the defendant upon the deceased's death, pursuant to the policy of life assurance, falls to be treated for the purposes of the 1975 Act as part of the deceased's estate. A later order made by District Judge Khan, after recording an acknowledgment by the claimant that, if the preliminary issue were decided in the claimant's favour, the claimant would nevertheless still be obliged to prove (on the balance of probabilities) that the deceased was suffering from a terminal illness within the meaning of the policy, further provided that, for the purposes only of determining that preliminary issue, it was to be assumed by the court that the deceased had died from a terminal illness within the meaning and definition of the policy.
8. At the trial of this preliminary issue, Mr Simon Charles (of counsel) appears for the claimant, Philip Lim, instructed by Roland Robinsons and Fentons LLP. Mr Jonathan Dale (also of counsel) appears for the defendant under the Bar Direct Public Access Scheme. There is no representation on behalf of either Emma-Kaur Walia or Felipe Bulawan Lim. They have both agreed to be bound by the outcome of this hearing, as indeed was envisaged by the earlier case management orders of the district judge.
9. Both counsel have agreed before me that the preliminary issue should be re-formulated in the following terms: was the deceased, immediately before her death, beneficially entitled to a joint tenancy of the right under the policy to benefit from her death before the death of Mr Walia and/or was the deceased, immediately before her death, entitled to a joint tenancy of the right under the policy to benefit from her - I interpose the word "assumed" - terminal illness? In fact, the preliminary issue is narrower than that. Mr Charles, for the claimant, expressly concedes, as indeed he was bound to do as a result of the Court of Appeal's decision in Murphy v Holland, that the deceased was not beneficially entitled immediately prior to her death, to a joint tenancy of the right under the insurance policy to benefit from her own death before the death of the defendant. The issue between the parties is, therefore, whether the deceased, immediately before her death, was entitled to a joint tenancy of the right under the policy to benefit from her assumed terminal illness.
10. There are a number of witness statements before the court. For the claimant there was the supporting witness statement of the claimant Philip's, litigation friend, Mrs Emma Woodhouse, dated 19^th September 2011. The defendant had, before the order for the trial of the preliminary issue, made three witness statements. Two of them were made in his capacity as sole administrator of the estate. One was dated 26^th October 2011 and the other dated 7^th February 2012. In his capacity as beneficiary of the estate, the defendant had made a witness statement dated 17^th February 2012. It is only, I think, paragraph 15 of that witness statement which is of any real relevance to the preliminary issue. For the purposes of the preliminary issue itself, the defendant had made two witness statements, dated 30^th July and 3^rd August 2012. In addition, the defendant has recently produced certain additional documents which have been added to the end of section B of the main trial bundle. There is a witness statement from Felipe Bulawan Lim, dated 1^st August 2012. No witness evidence has been filed or served on behalf of either Philip Lim or Emma-Kaur Walia for the purposes of the preliminary issue. I have heard no oral evidence. This trial of a preliminary issue has proceeded on the basis exclusively of oral submissions, supplemented by the helpful written skeleton arguments of Mr Charles and Mr Dale, both dated 24^th September 2012.

2. The Legislation and Authorities

11. For the purposes of this preliminary issue it is unnecessary for me to do more than refer to section 9 of the 1975 Act. That section relates to property held on a joint tenancy. Section 9(1) provides that:

"Where a deceased person was immediately before his death beneficially entitled to a joint tenancy of any property, then, if, before the end of the period of six months from the date on which representation with respect to the estate of the deceased was first taken out, an application is made for an order under section 2 of the Act, the court for the purposes of facilitating the making of financial provision for the applicant under this Act may order that the deceased's severable share of that property, at the value thereof immediately before his death, shall, to such extent as appears to the court to be just in all the circumstances of the case, be treated for the purposes of this Act as part of the net estate of the deceased."

By section 9(2):

"In determining the extent to which any severable share is to be treated as part of the net estate of the deceased by virtue of an order under subsection (1) above, the court shall have regard to any capital transfer tax payable in respect of that severable share."

By section 9(4):

"For the avoidance of doubt it is declared that for the purposes of this section there may be a joint tenancy of a chose in action."

It should be noted that:

1. The relevant time for assessing whether the deceased was entitled to a joint tenancy of any property was immediately before his or her death; and

2. Section 9(4) explicitly states that there may be a joint tenancy of a chose in action.

12. For present purposes, section 9 has been the subject of consideration by the Court of Appeal in two cases. The first is the case of Powell v Osbourne [1993] 1 FCR 797. In Powell the deceased had separated from his wife and had begun to cohabit with another lady, the defendant, Miss Osbourne. The deceased and Miss Osbourne had purchased a property in Tottenham as joint tenants, with the assistance of a mortgage. The purchase price had been £91,000 and the mortgage was £85,000. The mortgage had been supported by an endowment policy, which would pay out after 15 years, or upon the earlier death of either party. The payment upon an earlier death was guaranteed to be at least £85,000. As at the date of death, there was no sale or surrender value attaching to the policy. The deceased died, and Mrs Powell brought proceedings under the Act. Aside from any interest which the deceased had in the payment made under the policy and/or in the Tottenham property, his estate was valueless. Mrs Powell, the wife, argued that immediately before his death, the deceased could have severed the joint tenancy in respect of the property, which would have meant that he was entitled to a half-share of the property, but with the benefit of the half-share of the benefit of the policy monies. The Court of Appeal accepted that argument, and held that it could not be correct to regard, as the recorder in the court below had done, the policy as having only a negligible value, as to do that would be to evaluate it immediately before the deceased's death, but without any reference to his imminent death.
13. In the course of his judgment, at page 802, Lord Justice Dillon referred to section 9(4) of the 1975 Act and observed that a policy of assurance, and the right to the policy monies thereunder, is, of course, a chose in action. He then went on to say, at page 803:

"The object" - I interpose to say of section 9 - "is to bring in what could have been severed immediately before the date of death. If the deceased had in fact severed the beneficial joint tenancy immediately before his death, he would have thereupon become entitled to a half-share in the property subject to the mortgage but with the benefit of the half-share in the policy monies and, accordingly, on his death, his net estate would have been left with a clear half-share of the property, half the policy monies having gone to discharge his half-share of the mortgage.

I find it slightly startling therefore, and anomalous, that the effect of section 9 should be said to be that, if the court is merely ordering that the deceased's share of the joint property at the value thereof immediately before his death is to be treated as part of his net estate, the result is that the half-share of the policy monies is to be treated as of no value at all or at best merely a token value. One is looking at the moment immediately before the deceased's death, which is the last moment for severing the beneficial joint tenancy, and to give effect to that it is necessary, to my mind, to keep in mind that the deceased is indeed about to die the very next moment or very soon, almost immediately, thereafter. Therefore it cannot be right to value immediately before his death without regard to his assumed imminent death. On the actual facts, he died in hospital (where he had been admitted not long before) and the cause of death was cerebral haemorrhage and hypertension. That again seems to indicate that immediately before his death his actual prospects of surviving would have been virtually negligible.

Taking that into account, I conclude that the order should reflect that, though the property is subject to the mortgage, the half-share of the policy monies is also to form part of the net estate."

14. The only other member of the Court of Appeal was Lord Justice Simon Brown. At pages 803-804, he delivered a short, concurring judgment. He recorded that the deceased was immediately before his death beneficially entitled to a joint tenancy of a property which included an endowment policy. The crucial issue raised in the proceedings was therefore this: what was the value of the deceased's severable share of that policy immediately before his death? Given that immediately before death the fact of imminent death was by definition inevitable, that issue could in turn be restated thus: in determining the value of a severable share immediately before death, does the court have regard to, or does it ignore, the imminence of death? If it has regard to it, then to all intents and purposes the value of a life policy is the same as at death. If, however, the court is to ignore the deceased's imminent death and logically therefore ignore even his generally adverse medical condition, then the value is very considerably less.
15. Although Lord Justice Simon Brown had at first thought that in directing the court to value the share immediately before death, Parliament was requiring the court to ignore utterly both the fact and imminence of death, he had come to think differently:

"I have concluded that the reason, and indeed the sole reason, why the value is to be determined immediately before death is because that is the last moment at which severance is possible and it is the severable share that is to be valued. No such consideration arises under section 8 and that is why by section 8(2) the value is to be taken there as at the date of death. The result is that when the value of the property in question depends upon death, and that will only be the case when, as here, the property is a life policy, the value immediately before death will be effectively the same as the value upon death. So be it. That seems to me both fair and to accord with the literal language of section 9."

16. The other relevant authority is the case to which I have already made reference, that of Murphy v Holland [2003] EWCA Civ 1862. In that case, the deceased and his estranged wife had effected a policy of life assurance. The policy was for a fixed term of 25 years, and it provided for the benefit to be paid out upon the death of the first of the lives assured, or upon the acceptance by the insurer that a terminal illness had inflicted itself upon the lives of one of the assured. Prior to his death, the deceased had formed a new relationship with Miss Holland; and six days after his death, she had given birth to the claimant, who was therefore the daughter of the deceased and Miss Holland.
17. The claimant brought a claim under the 1975 Act, and sought to rely upon section 9 to bring what was alleged to be the deceased's severable share of the monies paid out to the deceased's estranged wife, pursuant to the terms of the policy, within the scope of the deceased's net estate for the purposes of an award under the 1975 Act. By a majority of two to one (Lord Justices Thomas and Pill, with Lord Justice Chadwick dissenting) the Court of Appeal held that the claimant was not able to rely upon section 9 to augment the size of the distributable estate. Lord Justice Thomas gave the leading judgment; and within it he observed that the preliminary issue before the trial judge had incorrectly been framed as whether the joint life policy was joint property within the meaning of section 9 of the 1975 Act. Lord Justice Thomas stated that in the Court of Appeal both the parties and the court had agreed that the issue should have been re-formulated as follows: was the deceased, immediately before his death, beneficially entitled to a joint tenancy of the right under the policy to benefit from his death before that of his estranged wife? Mr Charles has re-framed the preliminary issue in the present case as so reformulated. Lord Justice Thomas explained that the sole issue was whether, as a matter of construction of the life policy, the right to the death benefit under the policy was a jointly held right in which the interests could be severed by notice of severance, or whether Mr and Mrs Murphy held separate rights to the death benefit. If the right was joint, then notice of severance could have been given by either of the policy holders; once given, the right to the death benefit under the policy would have been a right to which both would have been beneficially entitled and thus the death benefit would have been payable to the estate of Mr Murphy, as well as to Mrs Murphy.
18. Later in his judgment, Lord Justice Thomas, having analysed the terms of the policy, and the evidence in the case, concluded that there was nothing to suggest other than that when the policy had been effected, the parties had intended that the money payable upon the death of the first of the policy owners was to be payable to the survivor of them only. At paragraph 21 of his judgment, Lord Justice Thomas said, in a passage upon which Mr Charles places particular reliance, as follows:

"Next the question arises as to whether it was likely that the parties would have intended to include within a policy a terminal illness benefit that was owed to them jointly and a death benefit that was not. It might at first sight be thought surprising that that would be the case, but on consideration, I do not think so. The benefit payable on terminal illness would be needed by both of the policy holders to defray the cost of that illness; in contradistinction, the benefit on death would only be required by the survivor. On analysis, therefore, the purpose of the benefits was different and different treatment within a composite policy accorded with the obvious intention attributed to the parties in respect of the different nature of the benefits."

19. Those observations fall to be considered in the light of the fact that, earlier in his judgment, at the end of paragraph 12, Lord Justice Thomas had recorded that it had been accepted by both parties to the appeal that the terminal illness benefit had been held jointly. What was being contended by the claimant was that it could not have been intended that the rights to the terminal illness benefit and the right to the death benefit should be treated differently. As it had been accepted that the terminal illness benefit was held jointly, it was said by the claimant (and respondent to the appeal) that it followed from that, and from the terms of the policy, that both benefits were held jointly. That was, however, a submission that was rejected by Lord Justice Thomas. Lord Justice Pill agreed with that view.
20. In a concurring judgment, Lord Justice Pill made a similar distinction between a payment made pursuant to a terminal illness claim and a death claim when, in paragraph 46, he said that he saw no difficulty in distinguishing between the consequence of different qualifying events and no barrier to a policy, such as the instant one, providing for different interests arising in different circumstances. He said that the policy distinguished between the different potential qualifying events, and between the procedure to be followed upon the happening of one and that to be followed upon the happening of the other. The qualifying events, a terminal illness and a death, were said to create different problems for those party to the policy. A joint interest might be appropriate to the needs which arose on terminal illness, whereas it was not appropriate to the second, arising on death. To carry the joint interest arising upon terminal illness into the different circumstances of a death would, in the view of Lord Justice Pill, be to defeat the intentions of the parties.
21. In a powerful judgment, at paragraphs 26 through to 42, Lord Justice Chadwick dissented from the majority decision in Murphy. He relied upon the fact that under the terms of the policy, a successful claim based upon a terminal illness would result in a payment being made to the two policy holders jointly. Building upon that, Lord Justice Chadwick concluded, in particular at paragraphs 29 and 37 of his judgment, that if one of the policy holders, pursuant to becoming affected by a terminal illness, acquired the right to make a claim under the policy, then that was the position immediately before his or her subsequent death from the terminal illness. In that scenario, Lord Justice Chadwick concluded that immediately prior to the death, the terminally ill policy holder had a chose in action under the policy, the proceeds of which belonged to him or her and to the other policy holder.
22. At paragraph 39 he sought to illustrate the point by an example:

"Suppose that A and B have submitted a claim based on the terminal illness of A and that the company, after proper inquiry by its chief medical officer, is about to accept that claim. When the claim is accepted, the policy monies will be paid to A and B jointly, for the reasons which I have sought to explain. But suppose that, immediately before the claim is accepted, either A or B dies. The policy monies will be payable by reason of the death; it will be the death, rather than the acceptance of the terminal illness claim that will be the relevant Qualifying Event. And the policy monies will be paid by the company to the survivor, because (after the death of the first to die) it will be the survivor who will have become, by survivorship, "the Policyholder", from whom alone the company can obtain a good receipt. But that will provide no answer to the question "which of A and B was entitled to the rights under the policy immediately before the first to die?"."

23. At paragraph 40, Lord Justice Chadwick found it impossible to hold that the answer to the question "which of A and B is entitled to the rights under the policy immediately before the first to die?" was "whichever of A and B is not the first to die". He said that in a case where the policy provided for the payment of benefit during the joint lives of A and B, he took the view that the only answer that could be given to that question was that, during their joint lives, the rights under the policy were joint rights; and that remained the position at the time immediately before the first death. Speaking for myself, I have considerable sympathy for the views expressed by Lord Justice Chadwick, which were, in their turn, consistent with the view taken by the judge at first instance (His Honour Judge Hywel Moseley QC); but the views of the equity judges were in the minority, and it is the views of the common lawyers, represented by Lord Justices Pill and Thomas, that in the event have prevailed. That, then, is the relevant legislation; and those are the only two relevant authorities.

3. The Policy Documentation

24. The proposal form set out the identities of the two lives: the deceased as the first life and the defendant as the second life. The cover chosen was said to be a fixed term life cover, joint lives, first death. The insurance schedule, issued on 21^st May 2002, described the policy owners as the deceased and the defendant. The first life was the deceased and the second life, the defendant. The policy was said to be a fixed term life cover benefit, with the lives insured being the deceased and the defendant. Cover commenced on 16^th May 2002 and was to last for 25 years, to 15^th May 2037. The sum insured was £113,000. The notes to the policy included a warning that the policy had no cash-in value at any time. The policy terms and conditions described fixed term life cover and made it clear that it had no cash-in value, nor was there any return at the end of the period of insurance. It is that feature which distinguishes the present case from the earlier case of Powell v Osbourne.
25. Terminal illness benefit for joint lives, first death policies made it clear that the payment would be brought forward on proof to the company's satisfaction that one of the lives insured was suffering from a terminal illness. No benefit was to be payable on any subsequent occurrence. No death benefit was to be payable if a claim had been paid. In the case of the first death under a joint lives optional benefit, the insurer was to pay the sum assured on the first death to occur of either of the two lives insured named in the insurance schedule. When addressing claims, the policy made it clear that a maximum of one claim under each policy was to be paid. The policy owners, or their legal representative, were to be required to confirm the details of any claim by completing a claim form. The company might request such information, including evidence of death, evidence of terminal illness, evidence of age, and all documents establishing ownership of the policy proceeds, as the insurance company deemed necessary. No benefit was to be paid where, as a result of the company not receiving the information requested, the company was unable to establish satisfactory evidence of death, terminal illness, age of life insured, or ownership of claim proceeds.
26. There was special provision for terminal illness claims. Terminal illness claims should be notified to the company within three months of the occurrence of the insured event, and at least 18 months before the policy was to expire. When making a claim for terminal illness benefit, the policy owners must provide the insurer with certificates from one or more medical practitioners, one of which must be the life insured's hospital consultant, confirming the terminal illness. The definition made it clear that references to the customer, "you or your", were to the person who took out the policy. The customer need not necessarily be the same person as the life insured, but would need to have financial dependency on the life insured at the time of taking out the policy and any subsequent increases in cover. Terminal illness was defined as an advancing or rapidly progressing medical condition that could not be cured, and from which the life insured would not survive for more than 12 months from the date the company was notified of the condition.
27. The key features of the life cover described its aims as follows:

1. To pay a fixed cash sum (the sum insured) if the person on whom the life cover had been taken out (the life insured) died within a period of time determined at the outset, defined as 'the policy term'.

2. To pay the sum insured earlier if the life insured developed a terminal illness.

28. Those are the material terms of the policy documentation. At pages 24 and following of section B of the trial bundle, there is a series of letters written by Direct Line Life Insurance Company Limited to Mr Walia, the defendant, responding to various questions and queries which he had raised. Those letters begin on 26^th July 2011 and extend up to the most recent letter, added to the bundle recently, dated 4^th September 2012. Those letters make it clear that in fact no claim was ever made under the policy on the footing of a terminal illness. The £113,000 that was paid over in May 2012 to the defendant, in his capacity as the surviving policy owner, was paid on the footing that the first of the policy owners, the deceased, had died. That is made clear in the letter of 4^th September 2012.
29. In that letter Direct Line Life Insurance Company Limited confirmed the following:

"We can confirm that the above mentioned policy had a terminal illness benefit for joint lives, first death policies, which this policy was. The payment could be brought forward 'on proof to the company's satisfaction that one of the lives insured is suffering from a terminal illness. No death benefit will be payable if a claim has been paid'. The letter stated 'previously no such claim for terminal illness was ever made'; therefore a claim was only made and settled upon the death of Mrs Walia. To admit a claim, 'on proof to the company's satisfaction that the life insured is suffering from a terminal illness', our procedure would be to contact the treating consultant of the life insured for information on the condition and life expectancy. Terminal illness is defined by our terms and conditions as 'an advancing or rapidly progressing medical condition that cannot be cured and from which the life insured will not survive for more than 12 months from the date the company is notified of the condition'. We must satisfy this definition before any claim would be admitted. As the above mentioned policy was a joint policy, if a claim had been made on terminal illness, a form of authority would have been issued for both policy holders to sign and agree a bank account into which funds would be paid should the claim be valid. We would not accept the signature of only one policy holder. The claim for terminal illness can only be made whilst the life insured is alive."

4. The Parties' Submissions

30. Mr Charles, for the claimant, submits that the authorities provide support for the following propositions:

1. That the right to pursue a claim under an insurance policy is a chose in action which falls within section 9(4) of the Act: see the judgment of Lord Justice Dillon in Powell at page 802, and the judgments in Murphy at paragraphs 7 and 21 by Lord Justice Thomas, paragraph 29 per Lord Justice Chadwick, and paragraph 46 by Lord Justice Pill.

2. That a claim based upon the terminal illness of one of the lives assured under a term joint life first death policy results in a payment to the policy holders jointly: see the judgments in Murphy at paragraph 7 by Lord Justice Thomas, paragraph 37 per Lord Justice Chadwick, and paragraph 44 by Lord Justice Pill.

3. That the relevant time to consider whether the deceased was entitled to a joint tenancy of any property is immediately before his or her death: see section 9(1) of the 1975 Act.

31. Mr Charles goes on to submit that, in contrast to Murphy, in the present case the deceased was suffering from a terminal illness prior to her death. Hence it logically follows that:

1. From the moment she became inflicted with a terminal illness, or perhaps from when she was first diagnosed with one, the deceased was entitled to pursue a claim under the policy for payment of the insured sum of £113,000 which, upon payment, would be owned by the policy holders, that is to say, the deceased and the defendant, jointly.

2. The right to pursue a claim for the payment was a chose in action and thus clearly fell within section 9 of the Act, given the wording of section 9(4).

3. As a result, immediately before her death the deceased was, to quote section 9 of the Act, "beneficially entitled to a joint tenancy of property", the property being the chose in action consisting of the right to claim payment under the policy.

4. The logical consequence of the above was, once again to quote section 9 of the Act, "that the deceased's severable share of that property, at the value thereof immediately before her death, should, to such extent as appeared to the court to be just in all the circumstances of the case, be treated for the purposes of the Act as part of the net estate of the deceased."

32. To look at the matter from a different angle, in Murphy the deceased was said to have had no right to claim any money under the policy immediately before his death as he was neither terminally ill nor dead. Hence, he was not entitled to a joint tenancy of any right of action or right to bring a claim. In the present case, however, it is said that, immediately before her death, the deceased did have a chose in action for the purposes of section 9(4), being the right to rely upon her terminal illness to claim the insured sum. Mr Charles recognises that, given that in Murphy the claimant's claim was unsuccessful, the court may be anxious that, if it were to decide this case in favour of the claimants, it would be making a decision contrary to previous authority.
33. However, he submits that the court need have no such anxieties in the light of the following:

1. Each of the propositions upon which the claimant's case is built is supported by clear and unambiguous authority.

2. The majority in Murphy draw a clear distinction between cases, such as Murphy itself, where the event which triggers a right to payment is death, and cases, such as the present, where the triggering event is terminal illness. Indeed, both of the judges in the majority in Murphy clearly stated that payments made upon a terminal illness claim were to be regarded as belonging to the policy holders jointly.

3. When the above was taken into account, it is said that it becomes clear that the facts of the present case are easily, and readily, distinguishable from those in Murphy. Mr Charles submits that the court should guard against any attempt made by the defendant to assert that the facts of the two cases are analogous.

4. In addition to the distinction drawn between the outcome following different trigger events, Lord Justice Chadwick, in his dissenting judgment, specifically considered the facts of the present case within the example which he set out at paragraph 39 of his judgment; and he concluded that the only answer which could be given was that, during their joint lives, the rights under the joint policy were joint rights; and that remained the position at the time immediately before the death of the first policy owner.

34. For all of those reasons, Mr Charles submits that when a court applies the clear and unambiguous legal propositions which he has set out to the facts of this case, it is readily apparent that the preliminary issue should be decided in favour of the claimant. In the course of his oral submissions, Mr Charles submitted that the defendant's answer to his submissions relied upon two propositions. The first was that a claim under the policy could only crystallise when it was accepted by the insurer upon receipt of a claim, and the insurer satisfied itself, on the evidence, that there was a terminal illness. In answer to that, Mr Charles submitted that the right arose when, at the very latest, the deceased was diagnosed with a terminal illness. Although there were procedural hurdles to be overcome, that did not undermine the deceased's existing cause of action. The second line of defence which Mr Charles identified was that, during their joint lives, any claim under the policy had to be brought by the policy owners jointly. Therefore, so the defendant submitted, there was nothing to sever, and so nothing falling within the scope of section 9. In relation to that submission, Mr Charles's answer was that, on the true construction of the policy documentation, one of the joint policy owners could notify a claim. He submitted that he was entitled to rely upon the terminal illness part of the policy, and not upon the entitlement that would arise on the deceased's later death. Mr Charles submitted that the crucial distinction between the instant case and that of Murphy was that, in that case, there had been no indication that the deceased, prior to his actual death, was suffering from any terminal illness.
35. For the defendant, Mr Dale submitted, for identical reasons as those given by the majority of the Court of Appeal in Murphy, that the deceased was not entitled, immediately prior to her death, to a joint tenancy of the benefit payable if her death were to occur before that of the defendant. Thus, he submitted that section 9 did not apply to the benefit which was in fact paid to the defendant in this case. He submitted that the fact that there might have been grounds for making a claim under the policy for an advance payment under the terminal illness benefit provision, in all likelihood only a matter of two to three weeks prior to the death, which claim was not in fact made, ought not to affect the position. Mr Dale did, however, anticipate that the claimant would be submitting that the case was distinguishable from Murphy v Holland on the assumed basis that the deceased had been suffering from a qualifying terminal illness, within the meaning and definition of the policy, prior to her death. He anticipated that it would be argued that a joint tenancy of the terminal illness benefit had arisen prior to the deceased's death for the purposes of section 9 of the Act. However, Mr Dale submitted that, even if, on the assumed basis, the deceased were suffering from a terminal illness, as defined in the policy, before her death, this should not mean that section 9(1) of the Act was engaged. The chose in action in question - the rights of the deceased and the defendant in the insurance contract - were to be derived from the terms and conditions of the policy itself. It was clear that in the event of the diagnosis of a terminal illness of one of the two lives insured, the claim would, in order to have any prospect of being accepted by the insurer, have to be made by both of the persons who together constituted the policy owner. That was said to have been made clear by the claim's terms, and the definition of "you" in the terms and conditions of the policy. The same point was emphasised, or reinforced, by the Direct Line letter of 4^th September, which made it clear that as the policy was a joint one, if a claim had been made on terminal illness, a form of authority would have been issued for both policy owners to sign and agree a bank account into which funds would be paid should the claim be valid. The insurer would not have accepted the signature of one policy holder alone.
36. Mr Dale submitted that the fact of the matter was that the deceased, even assuming that she was suffering from a terminal illness before her death, had no severable share in the terminal illness benefit which, in any event, would only have crystallised upon acceptance of a claim by Direct Line. The concept of a severable share appeared from the language of section 9(1) of the Act to be a pre-requisite to an order being made under that section. Unlike, for instance, in respect of a joint tenancy of a real property in possession, where one joint tenant could unilaterally readily sever the joint tenancy by service of a written notice on the other, in the present case the deceased had enjoyed no such right under the terms of the insurance policy. The deceased could only have made a claim on the policy jointly with the defendant. Mr Dale submitted that it would be absurd if the effect of section 9(1) of the Act were that an order of the court could, after the fact of death, effect a severance of a joint tenancy which the deceased could not have achieved in life under the terms of the policy. Indeed, authority was said to point to the contrary.
37. Mr Dale placed reliance upon the statement in Powell v Osbourne, at page 803, by Lord Justice Dillon, when considering the object of section 9(1) of the Act, where he said that the object was to bring in what could have been severed immediately before the date of death. Quite simply, Mr Dale said, the right to make a claim for the terminal illness benefit under the terms of the policy was non-severable immediately before the deceased's death, and that, he said, precluded the operation of section 9(1) in the present case.
38. In his oral submissions, Mr Dale emphasised that we know that, as a matter of fact, the payment under the policy was made under the death benefit provisions and not the terminal illness provisions. He made the point that in Murphy itself there had been no argument on the effect of the terminal illness benefit provisions because, as was apparent from the judgments, it had been accepted that the terminal illness benefit should be held jointly: see in particular the judgment of Lord Justice Thomas at the end of paragraph 12 and the judgment of Lord Justice Pill at paragraph 44. Mr Dale submitted that there were two related, and overlapping, obstacles in the way of the claimant's case. First, that the benefit under the policy was payable only on the contingency of a qualifying event; and, secondly, that the right under the policy was not severable before the death of one of the policy owners. In the present case, he submitted that the right was one only to a contingent benefit.
39. He submitted that the court should be concerned with what was capable of being done by the deceased immediately before her death. That was said to involve a consideration of the terms of the life policy. He submitted that under the terms of the policy documentation, the deceased could not have made a unilateral claim for terminal illness benefit under the policy. That was reinforced by the terms of the insurer's letter of 4^th September 2012. In summary, and for the reasons set out in his written skeleton argument at paragraph 33, section 9 was simply not engaged, even on the assumed facts of the instant case.
40. In reply, Mr Charles made four points. First, he submitted that every case decided under section 9 involved an element of artificiality. Secondly, he emphasised that the court was, for present purposes, proceeding on an assumed basis. He acknowledged that the claimant would still need to satisfy the court that the deceased had had a terminal illness. That question of fact was left over for the future. Mr Charles emphasised that in Powell the Court of Appeal had said that it would be wrong for the court to disregard the imminent death of the first of the policy owners to die in deciding what, if any, value to assign to the life policy. Here, Mr Charles submitted, the facts were even stronger. Immediately before her death, the deceased was known to have contracted a terminal illness. The contingency upon which the terminal illness benefit became payable had therefore already been satisfied.
41. Thirdly, Mr Charles submitted that the deceased did not need to have served a notice of severance in respect of the joint tenancy before section 9 could be invoked. In response, the court put to Mr Charles the proposition that the insurer was still entitled not to pay up for terminal illness unless and until it had received a claim form, signed by both policy holders. Mr Charles did not accept the relevance of that point. He submitted that the insurer was required to pay half of the policy proceeds to the deceased once she had effected a severance of her joint benefit under the policy. He submitted that the right to bring a claim was not contingent upon both policy owners joining together to make a terminal illness benefit claim.
42. Fourthly, and finally, he submitted that under section 9 the sole question for the court was whether the beneficiary was entitled to a joint tenancy of any property. The question was not in terms whether the joint owner was capable of effecting a severance of the chose in action. Those were the submissions in the case.

5. Discussion and Resolution

43. I have to confess that I have not found this to be an easy matter. The difficulty seems to me to stem from the distinction, approved by the majority of the Court of Appeal in Murphy v Holland, between a claim under a composite life policy for, on the one hand, the contingency of terminal illness and, on the other, the contingency of death. As I explained at the outset, in the present case, although it is to be assumed that payment of the sum insured might have been brought forward on the footing that the deceased had been suffering from a terminal illness, in fact what happened in the present case was that no terminal illness claim was ever advanced, and the sum payable under the policy was in fact paid as a result of the death of the first of the policy owners to pass away. That is not a situation that was considered by the majority of the Court of Appeal in Murphy v Holland. Even in his dissenting judgment, the example given by Lord Justice Chadwick, at paragraph 39, actually postulated a claim having been made for terminal illness benefit, even though such claim had not been resolved by the time of the death of the first of the policy owners; but in any event, Lord Justice Chadwick's observations were to be found within a dissenting judgment. As I have already indicated, I have considerable sympathy for the view of the minority in Murphy v Holland but I must allow myself to be guided by the majority decision.
44. At one stage, my mind was exercised by the consideration that the benefit actually paid was a benefit paid by reason of the deceased's death and, because the terms of the policy documentation make it clear that only one form of benefit would be paid under the terms of the policy, that might provide a complete answer to the claimant's case. No terminal illness benefit could be paid because death benefit had in fact been paid; but, it seems to me that that would ignore the provision within section 9(1) that one is directed to look to the position immediately before the death, and to the value immediately before that time.
45. As I say, I have found this a difficult question which has been extremely well argued before me by both counsel. It is one of those decisions that could go either way. I find it very difficult to accept the distinction drawn by the majority in Murphy v Holland between the treatment of a sum paid on a claim made for terminal illness and one payable on death, but that distinction does have to be drawn. However, as I say, one is looking not at the position after the death, when we know that the claim that was made was one on death, but one is looking at the value of a chose in action immediately before the deceased's death. The question I have to consider is whether, immediately before her death, the deceased was beneficially entitled to a joint tenancy of the right under the policy to benefit from her assumed terminal illness. It seems to me that, immediately before her death, the deceased was so entitled. She had an accrued claim with the defendant for a terminal illness benefit, on the assumed facts of the case. The fact that she could only pursue that claim jointly with the defendant does not seem to me to affect the nature and quality of the claim which she there had, jointly with the defendant.
46. In Powell v Osbourne, at pages 803 to 804, Lord Justice Simon Brown identified the crucial issue raised by the proceedings as this: what was the value of the deceased's severable share of that policy immediately before the deceased's death. He reformulated that issue in these terms: in determining the value of that severable share immediately before death, was the court to have regard to, or was it to ignore, the imminence of death? The answer that he gave was that the court should not ignore the imminence of death.
47. By parity of reasoning, it seems to me that the court should not ignore the fact that, immediately before her death, the deceased, together with her joint policy owner, the defendant, had a crystallised right, subject to proof, to have her death benefit brought forward because of her diagnosed terminal illness, which I am required to assume for the purposes of this preliminary issue.

6. Disposal

48. For that reason, and notwithstanding the powerful points made by Mr Dale for the defendant, it seems to me that the second limb of the reformulated preliminary issue should be answered in favour of the claimant, rather than the defendant. I, therefore hold, for the reasons that I have given, that immediately before her death, the deceased was indeed entitled to a joint tenancy of the right under the life policy to benefit from her assumed terminal illness.
[Judgment ends]