Knightsbridge Estates Trust v Byrne [1939] Ch 441

Key point

  • A test of unreasonableness for restrictions on the right to redemption was rejected

Fact

  • Mortgage between 2 large companies
  • The legal date of redemption was set 40 years in the future
  • It was argued by the mortgagor that a postponement of the contractual right of redemption is only permissible for a ‘reasonable’ time is not well-founded

Held (Court of Appeal)

  • The term stipulating the date of redemption was valid

Sir Wilfred Greene MR

  • A commercial agreement between two important corporations experienced in such matters and has none of the features of an oppressive bargain: p. 455
  • The agreement is made between competent parties acting under expert advice and knowing their own business best
  • A test of reasonableness would involve an unjustified interference with the freedom of business men to enter into agreements best suited for their interests
  • Equity may give relief against contractual terms that are oppressive and unconscionable and not merely unreasonable
  • In deciding whether a particular transaction falls within this category, the length of time for which the contractual right to redeem is postponed may well be an important consideration
  • In the present case no relief is given as equity does not reform mortgage transactions merely because they are unreasonable