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(1901) JELR 91588 (HL)

House of Lords  •  17 Dec 1901  •  United Kingdom




It is to my mind a very remarkable corroboration of the criticism which I am now making that in that case, upon which doubt appears to have been thrown, namely, that of Santley v. Wilde(1), my noble and learned friend Lord Lindley's judgment is in these terms - and I do not know that there has been a more authoritative exposition of the rule which arises now than what my noble and learned friend there laid down: "The principle is this: a mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt, or the discharge of some other obligation for which it is given. This is the idea of a mortgage; and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is the law. Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or fetter on the equity of redemption, and is therefore void.

It follows from this that 'once a mortgage always a mortgage,' but I do not understand that this principle involves the further proposition that the amount or nature of the further debt or obligation, the payment or performance of which is to be secured, is a clog or fetter within the rule."

My Lords, I cite that case because it appears to me that that lays down the rule; and the differences which are supposed to prevail from time to time appear to me to be only differences of fact or of the modes in which the various Courts have regarded the fact, as to whether a case came within that rule or not. But I do not believe that there is any portion of that which my noble and learned friend laid down in the case which I have cited that has been the subject of doubt or difficulty in any Court whatever.

My Lords, I find that the same question has arisen and has been very learnedly discussed in the Irish Courts lately, in the case of Browne v. Ryan(2), and certainly that case is extremely relevant to the question which your Lordships are now discussing, because in truth it arose upon what practically are the facts of this case, and the learned judges in the Court of Appeal

have arrived at the same conclusion as that at which I invite your Lordships to arrive. FitzGibbon L.J. in his judgment (and also Holmes L.J.), in referring to the case which I have just cited, appears to consider that that case is inconsistent with the rule which they themselves lay down. I confess I am unable to find any inconsistency. It may be that my noble and learned friend Lord Lindley took a different view of the facts in the case to which he was then referring from that which they would have taken, but that is not a difference in the law; and in this case it appears to me, as in the case which was argued in the Court of Appeal in Ireland, it is almost impossible, if the rule laid down by Lord Lindley there is the rule upon which the Courts must act, to deny that there is here a fetter or clog, or whatever figurative word may be used, to prevent that which, according to the known state of the law, is to be enforced, namely, that the person who has pledged his estate for the payment of a debt shall, upon redemption, be entitled to have that estate back again unfettered and unclogged by anything that shall prevent his exercising the right which the law insists upon his being permitted to have.

Under these circumstances, my Lords, it is and must be in each case a question of the particular thing which is advanced as a clog or a fetter, and in some cases it may seem to come very near the line. Whatever rule is laid down one can reduce it to something like an absurdity by taking an extreme case. But, my Lords, taking this case, it appears to me that undoubtedly this was a mortgage, and that the equity of redemption is clogged and fettered here by the continuance of an obligation which would render this house less available in the hands of its owner during the whole period and beyond the whole period of the term, apart from the realization of the security. Under those circumstances, as a matter of the merest and simplest reasoning, I am wholly unable to come to any other conclusion than that there is a clog and fetter here which the law will not permit.

That seems to me, my Lords, to be the whole of this case, and, apart from the attempt to determine the sources from which this rule of law or equity was arrived at, it seems to me that this case is capable of being disposed of very summarily in that way. I care not what the sources of the rule were - I care not what difference of fact there may have been in other cases - what I say is, here is a case strictly within the rule, and looking at the facts of this case and applying to it one's ordinary knowledge of what would be the effect upon the property which was made the pledge, and which has to be restored free and unfettered to its owner, I cannot entertain a doubt that this did, and did intentionally, place a clog and fetter upon the right of redemption which it is the policy of the law as announced by the Courts of Equity to insist shall not be taken away by anything in the nature of a mortgage.

Under these circumstances, I move your Lordships that this appeal be dismissed with costs.

LORD MACNAGHTEN. My Lords, I am of opinion that the judgment of Cozens-Hardy J., affirmed by the Court of Appeal, is perfectly right.

Redemption is of the very nature and essence of a mortgage, as mortgages are regarded in equity. It is inherent in the thing itself. And it is, I think, as firmly settled now as it ever was in former times that equity will not permit any device or contrivance designed or calculated to prevent or impede redemption. It follows as a necessary consequence that, when the money secured by a mortgage of land is paid off, the land itself and the owner of the land in the use and enjoyment of it must be as free and unfettered to all intents and purposes as if the land had never been made the subject of the security.

In the present case it is hardly necessary to appeal to this principle. The mortgage deed under consideration expressly and in terms provides that on repayment of the money advanced the mortgagees are to reconvey the mortgaged premises to the mortgagor, or as he shall direct. That, of course, means that the land is to be reconveyed freed and discharged from all burthen and liability in respect of or arising out of the contract under which the advance was made.

Mr. Haldane, in his reply, felt the difficulty of his position so much that he was driven to contend that the subject of the security was a "tied" public-house, and that, therefore, the mortgagor could only get back his property subject to a preexisting "tie" in favour of the brewers. But to this, as was pointed out in the Court of Appeal, there are two answers. In the first place, the argument has no foundation in fact. Nothing can be plainer than this, that it was the object and intention of all parties that the property should be set free from the old "tie" attached to it in the hands of its former owner, and that it should be mortgaged to the appellants as a free public-house. In the next place, if the tie is invalid after redemption now, the old tie could not have subsisted after the former mortgage was paid off.

Since the argument, my attention has been called to the case of Browne v. Ryan(1), recently decided by the Court of Appeal in Ireland. There a farmer mortgaged his holding to secure 200 l. and interest; and, as part of the mortgage transaction, it was stipulated that the mortgagor should sell his holding within twelve months, employ the mortgagee as the auctioneer at a certain commission, and pay him the like commission if the conduct of the sale was given to any one else. The Court of Appeal held, and, in my judgment, rightly held, that the stipulation had no effect after redemption. The judgments of the learned judges in the Court of Appeal seem to me, if I may venture to say so, to contain a very clear exposition of the law. They had occasion to consider the judgment of the English Court of Appeal in Santley v. Wilde(2),and they expressed their disapproval of the conclusion at which the English Court arrived. My Lords, speaking for myself, with all deference to my noble and learned friend opposite, Lord Lindley, I cannot help sharing that view. I do not in the least dissent from the propositions laid down by my noble and learned friend, taking them separately. But the transaction in that case seems to me to have been nothing more than an ordinary mortgage to secure an advance of money, with a superadded obligation offending against the settled principles of equity, in that it rendered redemption impossible. It seems to me to be contrary to principle that a

mortgagee should stipulate with his mortgagor that after full payment of principal, interest, and costs, he should continue to receive, for a definite or an indefinite period, a share of the rents and profits of the mortgaged property as the result of an obligation arising from the contract made when the mortgage was crested. Nor can I agree with the President of the Probate Division, who appears to have thought that Santley v. Wilde(1) was covered by the decision in Biggs v. Hoddinott(2),a decision to which, as it seems to me, no objection can be taken.

If there is an expression in Cozens-Hardy J.'s judgment to which I do not cordially assent, it is one in the last paragraph but one of his judgment, where the learned judge seems to refer to this tie as "an equity attached to the property," or as an "equitable burden." I rather doubt whether such an obligation can be made to run with the land or can be imposed on the owner in respect of the property except as between lessor and lessee, or, in the case of a mortgage, during the continuance of the security.

I concur in thinking that the judgment should be affirmed.

LORD SHAND. My Lords, I am of the same opinion. For the reasons stated by Cozens-Hardy J., by the Court of Appeal, and by your Lordships, I am of opinion that the judgment appealed from should be dismissed.

LORD DAVEY. My Lords, there are three doctrines of the Courts of Equity in this country which have been referred to in the course of the argument in this case. The first doctrine to which I refer is expressed in the maxim, "Once a mortgage always a mortgage." The second is that the mortgagee shall not reserve to himself any collateral advantage outside the mortgage contract; and the third is that a provision or stipulation which will have the effect of clogging or fettering the equity of redemption is void.

My Lords, the first maxim presents no difficulty: it is only another way of saying that a mortgage cannot be made

irredeemable, and that a provision to that effect is void. In the case of the Salt v. Marquis of Northampton(1) the question was whether a certain life policy, the premiums on which were charged against the mortgagor, was comprised in the mortgage security. That question having been decided in the affirmative, it was declared to be redeemable, notwithstanding an express provision to the contrary contained in the deed.

My Lords, the second doctrine to which I refer, namely, that the mortgagee shall not reserve to himself any collateral advantage outside the mortgage contract, was established long ago when the usury laws were in force. The Court of Equity went beyond the usury laws, and set its face against every transaction which tended to usury. It therefore declared void every stipulation by a mortgagee for a collateral advantage which made his total remuneration for the loan indirectly exceed the legal interest. I think it will be found that every case under this head of equity was decided either on this ground, or on the ground that the bargain was oppressive and unconscionable. The abolition of the usury laws has made an alteration in the view the Court should take on this subject, and I agree that a collateral advantage may now be stipulated for by a mortgagee, provided that no unfair advantage be taken by the mortgagee which would render it void or voidable, according to the general principles of equity, and provided that it does not offend against the third doctrine. On these grounds I think the case of Biggs v. Hoddinott(2) in the Court of Appeal was rightly decided.

The third doctrine to which I have referred is really a corollary from the first, and might be expressed in this form: Once a mortgage always a mortgage and nothing but a mortgage. The meaning of that is that the mortgagee shall not make any stipulation which will prevent a mortgagor, who has paid principal, interest, and costs, from getting back his mortgaged property in the condition in which he parted with it. I do not dissent from the opinion expressed by my noble and learned friend opposite (Lord Lindley), when Master of

the Rolls, in the case of Santley v. Wilde.(1) He says: "A clog or fetter is something which is inconsistent with the idea of security; a clog or fetter is in the nature of a repugnant condition." But I ask, "security" for what? I think it must be security for the principal, interest, and costs, and, I will add, for any advantages in the nature of increased interest or remuneration for the loan which the mortgagee has validly stipulated for during the continuance of the mortgage. There are two elements in the conception of a mortgage: first, security for the money advanced; and, secondly, remuneration for the use of the money. When the mortgage is paid off the security is at an end, and, as the mortgagee is no longer kept out of his money, the remuneration to him for the use of his money is also at an end. I confess I should have decided the case of Santley v. Wilde(1) differently from the way in which it was dealt with in the Court of Appeal. After the payment of principal and interest, and everything which had become payable up to the date of redemption, the property in that case remained charged with the payment to the mortgagee of one-third share of the profits, and the stipulation to that effect should, I think, have been held to be a clog or fetter on the right to redeem. The principle is this - that a mortgage must not be converted into something else; and when once you come to the conclusion that a stipulation for the benefit of the mortgagee is part of the mortgage transaction, it is but part of his security, and necessarily comes to an end on the payment off of the loan. In my opinion, every yearly or other recurring payment stipulated for by the mortgagee should be held to be in the nature of interest, and no more payable after the principal is paid off than interest would be. I apprehend a man could not stipulate for the continuance of payment of interest after the principal is paid, and I do not think he can stipulate for any other recurring payment such as a share of profits. Any stipulation to that effect would, in my opinion, be void as a clog or fetter on the equity of redemption.

By the Conveyancing Act a mortgagee may now be required

to transfer his mortgage on payment of what is due to him, and he must then transfer all his security, including every advantage which he derives from the mortgage transaction, and all his deeds and documents constituting his title as mortgagee. And on redemption he must do the like to the mortgagor, and any stipulation which varies the effect and incidents of redemption on payment off of what is due on the loan is a clog within the meaning of the rule.

Now, applying what I have said to the present case, the decision becomes easy. In the first place, I do not think that the respondent's covenant to deal exclusively with the brewers continued after the payment off of the loan and the redemption; and, secondly, if it did, it was an attempt to charge it on the property, and that constituted a clog or fetter which, according to well-established principles, was void.

My Lords, I only desire to add that, with my noble and learned friend by my side (Lord Macnaghten), I cannot assent altogether to the assumption made by Cozens-Hardy J. that the covenant constituted or might constitute a good charge upon the property by virtue of the operation of the doctrine in Tulk v. Moxhay.(1) I should hesitate some time before I assented to that proposition; but it is perfectly immaterial for the decision in the present case, because, as I have already said, I think that the covenant did not continue after the redemption, and that the mere attempt to make it a charge on the property would render it void.

My Lords, upon these grounds I agree with the motion proposed by my noble and learned friend.

LORD BRAMPTON. My Lords, I am so satisfied in my own mind with the judgment pronounced by Cozens-Hardy J. and by the Court of Appeal, and the judgment already proposed to this House by my noble and learned friends, that I think I should be wasting your Lordships' time if I were to add anything to them beyond expressing my concurrence.

LORD ROBERTSON . My Lords, I concur.

LORD LINDLEY .My Lords, I agree in thinking that the covenant contained in this mortgage, and by which the mortgagees have attempted to convert the house mortgaged from a free public-house into a tied public-house even after redemption, is invalid. I see no answer to the objection taken to it that upon payment off of the mortgage money the mortgagor cannot get back what he mortgaged, namely, a free public-house. The attempt to strengthen the tie by stipulating for liquidated damages and charging them on the property certainly does not mend matters, but makes them worse.

The case before us is not like the case of a mortgage of wasting property, e.g., a lease which, owing to its nature, cannot be given back on redemption in the state in which it was mortgaged. Here the mortgage contains a covenant the object of which is to disentitle the mortgagor on redemption from having back the property unfettered by that covenant. This is inconsistent with the settled law of mortgage.

I regard the mortgage deed in this case as another unsuccessful attempt to lay a new burden on land not warranted by law or by the doctrine laid down by Tulk v. Moxhay(1), which has often lately been relied upon as going much further than it does.

The conclusion thus arrived at is not inconsistent with Santley v. Wilde(2), on which the appellants so strongly rely. Some of your Lordships think that case went too far. I do not think so myself; but I will not trouble your Lordships with its details, which were complicated. The principle on which the Court of Appeal decided the case was, I still think, sound. Whether it was properly applied in that case is now of no importance. I believe the true principle applicable to these cases to be that expounded by the Court of Appeal in Biggs v. Hoddinott(3) and Santley v. Wilde.(2) That principle is perfectly consistent with a real pledge and with the maxim "Once a mortgage always a mortgage"; but it will not render valid the covenant which your Lordships have to consider in the present case.

I agree that this appeal ought to be dismissed with costs.

As regards the recent case of Browne v. Ryan(1) in Ireland, I am not satisfied that the Court of Appeal did not go too far in holding that the plaintiff's action for damages could not be sustained.

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