Campbell v Holyland (1877) 1 ChD 166

Key point

  • Equity of redemption is available even after a foreclosure order and sale of the property by the mortgagee to a third party

Facts

  • Foreclosure absolute was ordered against B’s mortgaged property
  • The property was then sold to a third party
  • The administrator of B’s estate sought to redeem the property nonetheless

Held (Court of Appeal)

  • A mortgage could be redeemed even against a third party purchaser of the mortgaged property

Sir Jessel MR

  • Though a mortgage contract is in form an absolute conveyance when the condition is broken, in equity it is always security (prior to the LPA 1925, mortgages involved the actual conveyance of title or lease in property from the borrower to the lender)
  • A mortgagee was entitled to call on the mortgagor to redeem within a certain time, under penalty of losing the right to redemption
  • There would be interim orders for payment followed by a final order called foreclosure absolute that the mortgagor should not be allowed to redeem at all
  • But later it was later decided that notwithstanding the form of the order the mortgagor was still allowed to redeem
  • The mortgagor has the right to redeem even against a third party purchaser if the third party had notice

Commentary

  • The strict control of the power of foreclosure is the reason why is it rare used today