"ONCE A MORTGAGE ALWAYS A MORTGAGE"

This is the principle that was developed in the law of mortgagor to enable the mortgagor to exercise the equitable right of redemption after the time of payment of the loan have been expired.

The equitable right to redeem; Equity allowed the mortgagor an equitable right to redeem on any date after the date fixed for redemption. Equity took the view that the property mortgaged was merely a security for the money lent and that it was unjust that the mortgagor should lose his  property because he was late in repaying his loan  Equity compelled the mortgagee to reconvey the property to the mortgagor on payment of the principal with interest and cost even if the legal date of redemption had passed

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4 MEANING OF THE CONCEPT.

A: Even where the legal right to redeem is lost the mortgagor still have equitable right of redemption, any provision in the mortgage deed which intends to make mortgage irredeemable is void by virture of section 121 (1) a, b, c of LAND ACT.

SALT V. MARQUIS OF NORTHAMPTON (1892)

In this case the question was whether a certain life policy, the premiums on which were charged against the mortgagor, was comprised in the mortgage security. The question having been decided in the affirmative, it was declared to be redeemable, notwithstanding an express provision to the contrary contained in the deed. he continued explaining the meaning of the second doctrine when he said that the doctrine was developed a long time ago in the court of equity which went beyond the usury laws, and set its face against every transaction which tended to usury. It therefore declared void every stipulation by a mortgage for a collateral advantage which made his total remuneration for the loan to indirectly exceed the legal interest.

Lord Lindley MR "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 What this means is that, once a mortgage has been executed any separate and independent transaction giving an option to purchase may be valid provided it does not defacto form part of the mortgage."

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B: The test of what is the mortgage depends on the substance and not the form.Where the parties have defaulted in the creation of mortgage they will end up creating the informal mortgage .

SAMUEL V. JARRAH TIMBER [1904] AC 223

The defendant mortgaged the debenture stock to the plaintiff as security, the mortgage provided inter alia that plaintiff shall have the option to purchase the whole or part of the debenture stock at 40% of price within 12 months . when the plaintiff wanted to exercise his right the corporation claimed to be able to redeem it. When the matter came to court the defendant asked for the declaration that the clause was void as it was the clog to the equity of redemption.

HELD.

the House of lord held that the defendant was entitled to redeem it on the basis of the principle that once a mortgage always a mortgage. and the clause was of the effect that the defendant could not redeem the land contrary to the law.

Lord Lindley : “the doctrine…means that no contract between a mortgagor and a mortgagee made at the time of the mortgage and as part of the mortgage transaction, or, in other words, as one of the terms of the loan, can be valid if it prevents the mortgagor from getting back his property on paying off what is due on his security. Any bargain which has that effect is invalid, and is inconsistent with the transaction being a mortgage.

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C:There should be no clog or fetter or any obstacle in the exercise of the right of redemption . section 122(1) (b) of The Land Act

STANLEY V. WIDLE (1899) AC 474

A lease for 10 years of a theatre was mortgaged for a loan of 5 years The mortgagee was given an additional right to a third of the profits from the under-lease for the full 10 years After paying off the principal and interest of the loan, the mortgagor sought to redeem the mortgage but the mortgagee decline to reassign the lease back to him The mortgagor brought an action for redemption.

HELD

The court found for the mortgagee. The mortgage could still be paid off in five years. Consequently, this provision was not a clog on the equity of redemption. There was no suggestion of fraud. The theatre business was unpredictable and if it failed the borrower would probably lose the money advanced. Therefore, asking for a share of profits was reasonable. A mortgagee was free to obtain any collateral advantage for himself beyond the repayment of the debt and interest provided it was not unconscionable or oppressive. There was no automatic presumption that a collateral advantage was obtained under pressure. Each case had to be decided according to its own circumstances.

Lord Lindley MR‘"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.’In this case, a right to a share of profits of the underlease is not a clog"

D:there should not be any collateral benefit that provides additional advantage to the mortgagee with the purpose of making the right of redemption difficult to be exercised by the mortgagor.

NOAKES V. RICE [1902] AC 24

In this case Owner of a 26 year lease of a pub mortgaged it to a brewery, covenanting that he would buy liquor only from the brewery for the whole term of the lease (a beer tie agreement), even after the loan is paid off.

HELD

The House of Lord held that collateral advantages are invalid where they represent a clog on the right of redemption and, having paid off the debt, Plaintiff was entitled to have the security interest returned to them and were

not bound by the term requiring exclusive purchasing from the defendant.

. Lord Macnaghten: Redemption is inherent to a mortgage, and therefore, once the debt has been repaid the land “as free and unfettered to all intents and purposes as if the land had never been made the subject of the security”also 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.

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