Kreglinger v New Patagonia Meat [1914] AC 25

Key point

  • The right of pre-emption over mortgaged property was held to be valid since it was in substance not part of the mortgage

Facts

  • Under the terms of a mortgage, the mortgagor promised that he would sell his sheepskins to no one but the lender (right of pre-emption) for 5 years regardless of when the loan was repaid

Held (House of Lords)

  • The right of pre-emption was valid as a contractual right independent of the mortgage

Viscount Haldane LC

  • The right of pre-emption, although contained in the same document as constituted the security, is in substance independent of it
  • Bradley v Carritt cannot be taken as authoritatively laying down that if after redemption the property is not in the same condition as a result of a bargain made at the time of the mortgage the bargain is invalid
  • To render the obligation invalid the obligation must based on its substance to be part of the terms of the mortgage and to have really cut down a true right of redemption
  • He approves Lord Lindley’s dissenting judgment in Bradley v Carritt 

Commentary

  • Warnborough follows the approach in Kreglinger
  • The right of pre-emption was recognised as a contractual right, independent of the mortgage, which means that it is not secured by the mortgage