Noakes & Co Ltd v Rice
A collateral advantage in a mortgage that continues after the mortgage has been redeemed is a clog on the equity of redemption and is void.
Facts
Mr Rice mortgaged the lease of a public house to Noakes, a brewery. As part of the mortgage, he covenanted that, for the whole term of the lease, which had about 26 years to run, he would buy beer only from the brewery, so the pub would be tied to the brewery even after the loan was repaid. Mr Rice later wanted to repay the loan and be free of the tie.
Legal principle
The House of Lords held that Mr Rice was entitled to redeem the mortgage free of the tie. Lord Davey said that a mortgage must not be made irredeemable, and that a provision or stipulation which will have the effect of preventing the mortgagor from getting back his property, free of the mortgage, when the debt is paid, is a clog or fetter on the equity of redemption and is void. A tie that continued after redemption would mean that he got back a tied house, rather than a free house, so it was unenforceable after the mortgage was redeemed.
Related cases on mortgages
- Barclays Bank plc v O'Brien [1994] 1 AC 180
- Biggs v Hoddinott [1898] 2 Ch 307
- Cheltenham & Gloucester Building Society v Norgan [1996] 1 WLR 343
- CIBC Mortgages plc v Pitt [1994] 1 AC 200
- Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166
- Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949
- Fairclough v Swan Brewery Co Ltd [1912] AC 565
- Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317
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