Fairclough v Swan Brewery [1912] AC 565

Key point

  • Under a mortgage, a restriction on the right of redemption that renders the equity of redemption a mere pretence is void

Facts

  • F held a 17 year lease of a hotel, of which S was the landlord
  • S lent F money on the security of the his lease
  • The contractual date of redemption was fixed for 6 weeks before the lease was due to expire
  • As the equitable right to redeem does not arise until the contractual date has passed, the mortgage was effectively irredeemable for the duration of the lease
  • Dispute arose when F sought to redeem the mortgage over the lease ahead of the date of redemption

Held (Privy Council)

  • F was entitled to redeem the mortgage; the provision preventing redemption until 6 weeks before lease expiry was void

Lord MacNaghten

  • ‘equity will not permit any device or contrivance being part of the mortgage transaction or contemporaneous with it to prevent or impede redemption’
  • ‘Is there any difference between forbidding redemption and permitting it, if the permission be a mere pretence? Here the provision for redemption is nugatory. ‘
  • At the time when the lease is about to expire, redemption can be of no advantage to the mortgagor
  • ‘For all practical purposes the mortgage is irredeemable’