United Kingdom House of Lords Decisions

The House took time for consideration.

May 11.

LORD MACNAGHTEN

.My Lords, this appeal raises in a slightly different form and with some difference of circumstance the question which this House had to consider in the recent case of Noakes v. Rice.⁽¹⁾ Your Lordships, I think, have nothing to do now but to determine whether the distinction between the present case and the case of Noakes v. Rice⁽¹⁾, as finally decided, is or is not a solid and substantial difference leading to a different result. Other points, no doubt, were discussed at the bar, but the only effect of the discussion
(1)     [1902] A C 24.


was to incumber and embarrass the argument on the one point which was really arguable. In my view, all these other points were and are immaterial, and I pass them by altogether.

The distinction between Noakes v. Rice⁽¹⁾ and the case under review is brought out very clearly in the judgment of the Court of Appeal, which was delivered by Stirling L.J. It is, I need not say, a most careful judgment, to which little or nothing could be added by the learned counsel for the respondent. But if I am not mistaken, it shews some trace of the difficulties created by recent decisions and dicta in the Court of Appeal. And certainly it is only fair to bear in mind that at the time when it was delivered the case of Noakes v. Rice⁽¹⁾ had not gone beyond the Court of Appeal, while the principles re-established or definitely asserted by this House in Noakes v. Rice⁽¹⁾had been shaken and obscured by the decision of the Court of Appeal in Santley v. Wilde.⁽²⁾ I am aware that my noble and learned friend Lord Lindley, from whom I should never differ without the greatest hesitation and misgiving, still holds that Santley v. Wilde⁽²⁾ was rightly decided. My noble and learned friend will, I am sure, pardon me for saying that I am unable to concur in that view. I think the method of the judgment questionable, and the effect subversive of a settled doctrine of equity. Santley v. Wilde⁽²⁾ was the case of a mortgage to secure an advance of money. The loan was the occasion of the mortgage. The end and purpose of the mortgage was to secure the loan; and but for one stipulation in the mortgage deed the transaction would have been a matter of every-day occurrence. The mortgagee stipulated, of course, for repayment of principal, and for payment of interest properly so called; and by way of further remuneration for the accommodation afforded he stipulated for a share of the profits to be derived from the use of the mortgaged property, which happened to be a theatre held under lease for a term of years. Now that the usury laws have been repealed there cannot, I think, be any objection to such a stipulation, provided it comes to an end when the mortgagee is paid principal, interest, and costs. But in Santley v. Wilde⁽²⁾

(1)     [1902] A C 24.
(2)     [1899] 2 Ch 474.


the stipulation was that the mortgagee should receive his share of profits after the mortgage was paid off, during the continuance of the mortgagor's interest in the property, for the whole term of the lease. That stipulation was, as it seems to me, unquestionably part of the mortgage transaction. Well, the mortgagee calls in the loan. The mortgagor tenders principal, interest, share of profits up to date, and costs, and demands a reassignment. This demand is refused; and then he brings an action for redemption. Reversing Byrne J., the Court of Appeal held that the mortgagor was not entitled to redeem. The way by which the Court arrived at that conclusion was this: "A mortgage," said the Master of the Rolls, "is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given." I cannot help thinking that the double aspect which this definition apparently presents may have had something to do with the result. For the Court of Appeal proceeded to split up the mortgage transaction into two parts - a security for payment of the debt, and a security for the discharge of an additional obligation. They say in effect: "The mortgagor may pay off the debt if he likes, but that will not discharge the mortgage. The mortgage will remain as a security for the performance of the obligation relating to the share of profits. As long as that obligation lasts the mortgage stands." The result, therefore, was, to use the words of Cozens-Hardy J., that "the proviso for redemption was nugatory," because it only came into operation when there was "nothing on which it could operate." That seems to me to be a very far-reaching decision. It reduces the rule that a mortgage cannot be made irredeemable to a dead letter. You have only to tack on some stipulation, such as men of business might well agree to if there were no mortgage, and the thing is done. In Noakes v. Rice⁽¹⁾ the mortgagee suffered, it would seem, merely because his legal advisers had the misfortune to know a little law, and had not learned the secret of Santley v. Wilde.⁽²⁾ They thought they could make the covenant on which they meant

(1)     [1902] A C 24.
(2)     [1899] 2 Ch 474.


to rely run with the land. If they had not puzzled over a matter which is often one of some difficulty, if they had only inserted a covenant to the effect that the mortgagor and his assigns should get their beer from the mortgagee, and from no one else, so long as the lease lasted, and if the proviso for redemption had been so expressed as to cover that obligation, the mortgage, according to Santley v. Wilde⁽¹⁾, would have been irredeemable, and the covenant open to no objection.

Now, what was the Court of Appeal to do when it was confronted by the decision in Santley v. Wilde⁽¹⁾, and at the same time warned by what was said in Biggs v. Hoddinott⁽²⁾that judges were not to go one step beyond what had been actually decided? I must say I think the Court took the only course open to it.

In the first place, it is observed in the judgment of the Court of Appeal that it has never been laid down that it is essential for the validity of what are called, not very happily, I think, collateral stipulations, that they should cease to operate on redemption. That is perfectly true. But it may he said with equal truth that, putting aside the case of Santley v. Wilde⁽¹⁾, there is no case to be found in the books from the earliest times to the present day in which a mortgagee after redemption ever attempted to keep on foot the benefit of any collateral stipulation which was part and parcel of the mortgage transaction. And that surely is far more significant. You could hardly expect to find in any judicial utterance a note of warning against an experiment which before Santley v. Wilde⁽¹⁾ no one ever thought of trying. Then it is to be observed that it was the view of Cozens-Hardy J. and the Court of Appeal in Noakes v. Rice⁽³⁾ that the covenant in question in that case imposed an actual burden on the land which was the subject of the mortgage. "The covenant," said Collins L.J., "imposes a tie upon the house, not a personal restriction upon the mortgagor." Giving great weight to this circumstance, and intending, no doubt, to keep strictly within the line of decided cases, the learned judges of

(1)     [1899] 2 Ch 474.
(2)     [1898] 2 Ch 307.
(3)     [1902] A C 24.


the Court of Appeal came to the conclusion that a direct fetter on the equity of redemption, such as that which was supposed to exist in Noakes v. Rice⁽¹⁾, was not permissible, but that a fetter, or restriction operating indirectly, though it might have the same effect, was not open to objection, and, indeed, was sanctioned by principles said to have been laid down in Biggs v. Hoddinott.⁽²⁾

The real question is whether this distinction can be supported. It is necessary, I think, to examine closely the reasoning on which the conclusion of the learned judges of the Court of Appeal was based. At the outset they were met by a passage in a former judgment of Rigby L.J.: "'The property,' said Rigby L.J. in Noakes v. Rice⁽³⁾, 'which comes back to the mortgagor must not be worse than it was when it was mortgaged, and the mortgagee must not, either expressly or by implication, reserve to himself any hold upon the property after the time for redemption has arrived and the right of redemption has been put in force.'" That, my Lords, was very much what was said in this House when the case was before your Lordships; and it is quite right so far as it goes. To that expression of opinion exception was taken. The words "by implication" are explained away by saying, "It is an expression which we consider to have been used by Rigby L.J. with reference to a class of cases in which the obligation takes the form of a penal sum or liquidated damages by way of penalty on the doing of a particular thing." My Lords, I am not quite sure that I understand the force or application of that observation. Then the judgment goes on to observe: "It is said, however, that the shares, after redemption, are fettered, inasmuch as the stipulations into which the mortgagor had entered will prevent him from dealing so freely with his property as he otherwise would." And then follow these important words: "It is quite possible that an indirect effect of this nature may flow from these stipulations, but the same result would have followed if the stipulations had been entered into on the occasion of an advance being made by the plaintiff to the

(1)     [1902] A C 24.
(2)     [1898] 2 Ch 307.
(3)     [1900] 2 Ch 445, at p. 457.


defendant W. M. Bradley on his personal security; and in that case the stipulation would, as it seems to us, be perfectly valid." My Lords, there again I have some difficulty in following the reasoning of the Court of Appeal. I should not have supposed that any one would contend that the peculiar doctrines of equity applicable to mortgage transactions apply in all cases, whether there is a mortgage or not, and I rather doubt whether the circumstance that a stipulation is valid when it is not part of a mortgage transaction is an argument for its validity when it is.

The judgment concludes by repeating what was said at the outset: "There is no decision that such indirect effect of the stipulations brings them within the doctrine of equity under consideration, and so to hold would," it adds, "reduce the operation of the decision in Biggs v. Hoddinott⁽¹⁾ within very narrow limits. For these reasons we think that the equity of redemption ought not in the present case to be held clogged."

My Lords, I have stated, in the words of their judgment, the reasons which induced the learned judges of the Court of Appeal to decide against the present appellants. I doubt whether those reasons can be regarded as altogether satisfactory. As to the last reason, I must say, speaking for myself, that I am not sure that it would be a great misfortune if the operation of every decision were to be confined to the matter decided and the principles on which the decision rests. Harm, I think, is sometimes done by general expressions, even in praise of a principle which everybody admires in the abstract, when they are not necessary for the purpose in hand. Though true in themselves, they are apt to be misunderstood owing to the connection in which they are found. One learned judge thought Santley v. Wilde⁽²⁾ was covered by Biggs v. Hoddinott⁽¹⁾,though the actual decision in Biggs v. Hoddinott⁽¹⁾does not, I think, touch the point raised in Santley v. Wilde.⁽²⁾ Biggs v. Hoddinott⁽¹⁾ was a plain case. It purported to decide two things. In the first place, it purported to decide that a mortgage may be made irredeemable for a reasonable period. Well, everybody knows that when money was placed

(1)     [1898] 2 Ch 307.
(2)     [1899] 2 Ch 474.


out on mortgage as an investment nothing was more common than to make the mortgage irredeemable for a certain limited time. It was an old and well-established practice, and a very reasonable practice too. I do not understand that in the case of Teevan v. Smith⁽¹⁾ Sir George Jessel M.R. treated the point as open to any possible doubt. He referred to it, I think, as a practice well understood and perfectly valid. The other matter which Biggs v. Hoddinott⁽²⁾ purported to decide was that a stipulation for additional remuneration during the continuance of the mortgage was valid. That, again, was a matter which was hardly open to question after the repeal of the usury laws. As my noble and learned friend Lord Davey pointed out in Noakes v. Rice⁽³⁾, the additional remuneration is only interest in another form. Such a stipulation does not prevent the mortgagor getting back his property or impede or obstruct redemption.

My Lords, it seems to me to be playing with words to say that on redemption these shares came back to Mr. Bradley no worse than they were when he mortgaged them. If I part with property owing to a temporary necessity and the property is returned to me afterwards, do I get it back just as it was when it comes enveloped in an atmosphere of danger which was not present when I parted with it? Is it none the worse? Is its usefulness to me unimpaired if it now requires delicate handling and cautious treatment to prevent its becoming a source of mischief to its owner? Mr. Bradley could not have safely sold or mortgaged any of these shares when he got them back. True, their value to a purchaser or a mortgagee would be just the same. But what would have been Mr. Bradley's position? We were told, and it seems to stand to reason, that the only market for shares of this description is to be found among tea brokers. Tea brokers want to get hold of shares in a tea company in order to have the sale of the company's teas. That means or points to the displacement of the acting broker. A change of brokers in Mr. Bradley's company would, if the respondent be right, necessarily expose

(1)     (1882) 20 Ch D 724, 729.
(2)     [1898] 2 Ch 307.
(3)     [1902] A C 24.


Mr. Bradley to a heavy liability. The Court of Appeal says that is not enough: the mortgagee has not retained any direct hold upon the shares, though he may have indirectly brought about the same result. My Lords, I do not think it is necessary that there should be any hold upon the property, direct or indirect. I think, as I ventured to say in Noakes v. Rice⁽¹⁾, that equity will not permit any device or contrivance designed or calculated to prevent or impede redemption. And I think your Lordships gave sanction to that proposition when you approved the decision in the Irish case of Browne v. Ryan.⁽²⁾ Can you impose on the equity of redemption a fetter operating indirectly, when you cannot, as it is admitted, impose a fetter which operates directly? My Lords, I should have thought that that question answered itself - yon cannot do indirectly that which you must not do directly.

The result, therefore, in my opinion, is that the judgment of the Court of Appeal cannot be maintained, and the action must fail so far as regards Mr. W. M. Bradley. It fails too, I think, as regards Mr. James Bradley. His liability, in my opinion, was only secondary to his brother's liability. When Mr. Carritt, by his own act in calling in the loan, put an end to the liability of Mr. W. M. Bradley, the liability of Mr. James Bradley fell with it.

Nor the reasons I have given I move your Lordships that the appeal be allowed and the action dismissed, and that the respondent do pay the costs both here and below.

LORD SHAND .My Lords, in this case I have had the advantage of reading and carefully considering the judgment of in noble and learned friend Lord Lindley, and I agree with him in thinking that the judgments of Bigham J. and of the Court of Appeal should be affirmed and the appeal dismissed. It is unnecessary for me to recapitulate the facts of the case, which have been fully stated by his Lordship, and, as I am in complete agreement with him in the grounds of judgment, I shall make only a few observations in addition.

In the case of James Bradley there is merely a reference

(1)     [1902] A C 24.
(2)     [1901] 2 I. R. 653.


to the loan which the plaintiff, Mr. Carritt, had given to his brother, and in consideration of this he agrees, as a shareholder in the Sephinjuri Bheel Tea Company and in every other capacity, that Mr. Carritt, or any firm of brokers of which he shall for the time being be a partner, "shall always hereafter have the sale of all the company's teas as broker, and in case of any of the company's teas being sold otherwise than through you or your firm, I personally engage and agree to pay you the amount of the commission which you or your firm would have earned if the teas had been sold through you or your firm." This obligation is unconditional and simple. In respect of a loan given an obligation is granted, and not a word is added which can suggest the argument as to fettering or clogging the security afforded by the temporary transfer of shares in the case of his brother, William McKenzie Bradley, in the action against him.

Then as regards William. After an acknowledgment of money lent, an obligation for repayment with interest, a note, and a transfer of shares in the Sephinjuri Bheel Tea Company as security, subject, of course, to a right of redemption on the repayment of the loan and interest, the agreement proceeds: "4. I further agree as a shareholder of the Sephinjuri Bheel Tea Company, Limited, and in every other capacity, to use my best endeavours to secure that you, or any firm of brokers of which you for the time being shall be a partner (as you shall elect), shall always have the sale of all the company's teas as broker," with this addition: "And in the event of any of the company's teas being sold otherwise than through you or your firm, I personally engage and agree to pay to you or your firm the amount of the commission which you or your firm would have earned if the teas had been sold through you or your firm."

My Lords, I confess I think it was unfortunate for the law that the rule, now called a principle, "once a mortgage always a mortgage," with all its consequences, was ever carried further than was necessary for the purpose of relieving borrowers from forfeiture of their property on non-payment of the sum lent on a fixed day. I strongly agree with the expressions of opinion of Lord Bramwell in the case of Salt v. Marquess of Northampton⁽¹⁾ in 1892, of Lord Lindley, Chitty L.J., and the present Master of the Rolls in the case of Biggs v. Hoddinott⁽²⁾, that in agreements and obligations which cannot be represented to be unconscionable, or to have been procured by fraud or undue influence, and which are expressed in clear language quite understood by the parties who have entered into them, effect should be given to the terms used having regard to the true nature of their bargain. The origin of the rule is, however, to be traced, I believe, not to its natural and reasonable meaning in itself, but to the provisions of the usury laws which existed when it was introduced.

"Once a mortgage always a mortgage," however, had, and I think still has down to the present date, application only where the power of redemption by repayment of the loan is itself fettered or clogged by conditions which prevent full redemption even where such repayment is made or offered. And I agree with Lord Lindley in holding that this is not a case of that class, and that where, as here, redemption can be fully obtained by repayment of the loan and interest, a separate obligation for a different or collateral advantage to the lender is valid and enforceable.

It was argued that by art. 4 of the agreement Mr. William Bradley became bound to remain for all time a shareholder of the Sephinjuri Bheel Tea Company, and that this obligation was a fetter on his right to redeem his shares and to dispose of them, which by agreement affected the shares as his property even after the redemption of the loan. I am clearly of opinion there was no such obligation undertaken either expressly or by implication. If he continued to be a shareholder, no doubt he undertook to use his influence in that character to continue Mr. Carritt as broker, but he was quite free to sell his shares, as he was also free to redeem them on repayment of the loan. The true force of the agreement was contained in the entirely separate obligation that if the company's teas should be sold otherwise than through Mr. Carritt's firm he nevertheless personally bound himself to pay the

(1)     [1892] A C 1.
(2)     [1898] 2 Ch 307.


broker's commission to Mr. Carritt or his firm. It may be assumed that if he had not agreed to grant that obligation he would not have obtained the loan.

By the agreement there was no restraint, fetter, or impediment on the power to redeem the mortgage. On payment of principal and interest Mr. William Bradley was entitled to have the mortgage entirely discharged or redeemed, and to recover the subject of the mortgage exactly as he had previously possessed it. The case is entirely distinguished from such a case as that of Noakes v. Rice⁽¹⁾ or similar cases, where, even after repayment of the principal and interest of the loan, the subject of the security still remained fettered by the condition that it was by the agreement to be a tied house. So, in all the cases which have occurred in which the rule "once a mortgage always a mortgage" has been enforced, the subject of the mortgage, notwithstanding the redemption by repayment of principal and interest, remained in some way fettered. Here the merely personal obligation to continue to pay commission on the withdrawal of the business of selling the teas in no way affects the subject of the security. The obligation was entirely separable and separate from anything relating to the subject of the security, which was Mr. Bradley's shares in the company, and there is no reason for holding that the obligation is in any way invalid. It appears to me, on my construction of the agreement, that if the appellants are to succeed in their present argument, the rule of law said to be founded on equity must henceforth be not merely "once a mortgage always a mortgage," but "once a mortgage and a separate personal agreement or obligation by the mortgagor, always a mortgage only, and no such binding agreement or obligation"; and that it may be contended hereafter that the rule in this form may be enforced even where the security and the subject of the security can be completely redeemed by the simple repayment of principal and interest. I confess I think such a proposition is unreasonable and unwarranted, first, because it operates so as to prevent the owner of a property from using its value to the full extent in obtaining a loan on it,

(1)     [1902] A C 24.


and, secondly, because it enables him to disregard a clear obligation undertaken for onerous causes. If the right of redemption of the mortgage is quite unfettered, the authorities cited do not, I think, apply, and that is the case here.

In the case of Noakes v. Rice⁽¹⁾ I simply concurred in the judgment given. The Lord Chancellor had entirely expressed my view of the law, which I strongly hold, in his judgment to the effect that Lord Lindley had "given a most authoritative exposition of the true effect of the rule in the case of Santley v. Wilde."⁽²⁾ Lord Lindley had there said, in words which the Lord Chancellor quoted and in which I entirely agree "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." The Lord Chancellor carefully added: "It is and must be in each case a question of the particular thing which is advanced as a clog or fetter, and in some cases it may seem to come very near the line. Whatever rule is laid down one can reduce it to something like an absurdity by taking an extreme case."

The only case to which I think it necessary to refer is that of Browne v. Ryan⁽³⁾, one of that very class which, as the Lord Chancellor says, "may be said to come very near the line." In that case the mortgagee "sought damages for the breach of a contract depriving the mortgagor of his property even after its redemption by him," thus leaving a fetter on the subject of the security, as Lord Lindley observes in his judgment in this case; and so it may be taken simply as an illustration of the rule "once a mortgage always a mortgage," and is in this view clearly to be distinguished from the present case; for in this case there is no fetter of any kind on the power of redemption.

(1)     [1902] A C 24.
(2)     [1899] 2 Ch 474.
(3)     [1901] 2 I. R. 653.


LORD DAVEY .My Lords, in advising this House in the case of Noakes v. Rice⁽¹⁾ I endeavoured to express my views as to the meaning and effect of the equitable rules affecting the redemption of mortgage securities. I see no reason to dissent from anything which I then said, and I need not repeat it. I might, however, have added that the expression "clogging" or "fettering" the equity of redemption is not the happiest mode of expressing the object to which the third rule referred to by me is directed. The principle, as it appears to me, is that on payment of the principal, interest, and costs, together with any bonus or anything in the nature of a bonus which has been properly stipulated for, and has become payable, the mortgage contract comes to an end, and the mortgagor is entitled to get his property back, unaltered in character, condition, and incidents, and is henceforth relieved from the burden imposed upon him by the contract. If this be the true principle, as I think it is, the decision of the present case presents no difficulty. There can be no doubt that the obligation assumed by the first appellant in clause 4 of the agreement of May 16, 1892, is part of the mortgage contract, and the corresponding advantage to the respondent was derived therefrom exclusively. The form of the agreement shews this. It begins with the words "In consideration of two thousand two hundred and fifty pounds this day advanced by you to me." Then follow six numbered paragraphs containing the terms agreed to, including the fourth clause, which commences with the words "I further agree," and so forth. If, therefore, any breach of the agreement in the fourth clause had taken place during the currency of the mortgage, or any moneys had become exigible under it, I make no doubt that the appellant William McKenzie Bradley would have been liable. But the mortgage has now been paid off, and everything which became due during the currency of it has been paid. The breach which is complained of has taken place since redemption, and I am really at a loss to understand how, consistently with the equitable doctrine, a mortgagee can insist on retaining the benefit of a covenant in the mortgage

(1)     [1902] A C 24.


contract materially affecting the enjoyment of the mortgaged property after all principal, interest, and costs, and everything which has become payable before redemption, has been paid.

My Lords, I agree with my noble and learned friend Lord Macnaghten in thinking that the case of Santley v. Wilde⁽¹⁾was wrongly decided. I thought so when Noakes v. Rice⁽²⁾was under consideration by this House, and a further examination of the report of the case has confirmed me in my opinion. Two of the learned judges who decided that case in the Court of Appeal thought that it was covered by the case of Biggs v. Hoddinott.⁽³⁾ I cannot agree. It is, to my mind, plainly distinguishable. All that I understand to have been decided in Biggs v. Hoddinott⁽³⁾ is, first, that a stipulation for the continuance of a loan for five years was valid, and, secondly, that a covenant to take beer from the mortgagee limited to the continuance of the security did not clog the equity of redemption, and was enforceable by injunction. My noble and learned friend Lord Lindley, however, based his decision in Santley v. Wilde⁽¹⁾ on a broader ground, but he seems to me to have divided the transaction into two parts, namely, a loan of 2000 l. and a sale of two-thirds of the profits of the theatre. That seems to me a fallacious and wrong way of looking at the transaction. There was only one transaction which was a mortgage transaction, and the only consideration for the grant of two-thirds of the profits was the loan of the money. It appears to me that the claim to retain the security as a security for the share of profits was in fact imposing a fetter on the redemption on payment of principal, interest, and costs. And I understand this to be the view taken by my noble and learned friend Lord Macnaghten.

It is, in my opinion, idle to say that the mortgagor in this case has got his property back unfettered or that he has the unrestricted enjoyment of it, if the agreements contained in the fourth clause of the contract of May 16, 1892, are held to constitute a continuing obligation. It is said that the performance of these agreements is not secured on the shares.

(1)     [1899] 2 Ch 474.
(2)     [1902] A C 24.
(3)     [1898] 2 Ch 307.


But, my Lords, that is not necessary. The agreements which were held objectionable, both in Browne v. Ryan⁽¹⁾ and in Noakes v. Rice⁽²⁾, did not constitute charges on the mortgaged premises, but they fettered the mortgagor, in the one case, in the free disposition and, in the other, in the free enjoyment of his property. In the present case the agreement is that the appellant W. M. Bradley will, "as a shareholder," use his best endeavours to secure the sale of the company's teas to the respondent or his firm, and in the event of the teas being sold through another broker will pay to the respondent the amount of the commission which he or his firm might have earned. In other words, he agrees to use the voting power attached to his shares in a particular way for the respondent's benefit. Now, what is a share? It is but a bundle of rights, of which the right of voting at meetings of the company is not the least valuable. My Lords, can it be said that the mortgagee does not retain a hold upon the shares which form the mortgaged property, or that the mortgagor has full redemption of it, when the latter is not free to exercise an important right in such manner as he may think most conducive to his own interests? He may think it advantageous to the company to employ another broker, or that the change would produce a better return on his shares, but if he gives effect to his opinion he incurs what is in effect a heavy penalty. Again, the appellant could not part with or otherwise deal with his shares without losing the influence in the company's counsels which might enable him to secure the performance of the first part of the agreement, or running a serious risk of liability under the second part.

My Lords, I can see no difference in principle between this case and the case of Browne v. Ryan⁽¹⁾, which has already been approved in this House. The respondent can no more claim to be continuously employed as broker for the sale of the teas of the appellant's company, or to be compensated for loss of his commission if not so employed, than the land agent in Browne v. Ryan⁽¹⁾ could claim to be employed in the sale of the farmer's estate, or to be compensated for the loss of his

(1)     [1901] 2 I. R. 653.
(2)     [1902] A C 24.


commission. I am, therefore, of opinion that, even if the fourth clause of the contract bears the construction which has been put upon it by the Courts below, the agreements contained in it are such as cannot, in the circumstances, be enforced by the Courts of this country.

But, my Lords, I doubt whether we ought to put that construction on the clause in question. Primâ facie a clause in a mortgage contract is limited to the duration of the mortgage relation between the contracting parties. In this clause we have the words "always hereafter"; but I observe that in two other clauses (the third and the fifth) a similar phrase, "at any time hereafter," is used and is limited by the context to the duration of the mortgage. I am disposed to say that the words "always hereafter," having regard to the nature and purport of the agreement, in like manner mean at any time hereafter during the currency of the loan. But in the view which I take of the case it is not necessary for me to express a decided opinion on this question.

With regard to the appellant, James Bradley's, agreement, I think it was part of the same transaction and ancillary to the principal agreement, and by way of further security to the respondent and increased remuneration to him for the use of his money. And I am of opinion that it must be construed in the same way, and stand or fall with the principal agreement.

I am, therefore, of opinion that the decision of the Court of Appeal should be reversed, and instead thereof the action should be dismissed with costs, and the respondent should pay the costs in the Court of Appeal and in this House.

LORD ROBERTSON .My Lords, in considering this case I have found myself greatly aided by first forming a clear conception of what is the respondent's theory of Mr. William Bradley's rights and duties as a shareholder of this company. Before this loan and agreement Mr. William Bradley was entitled, like every one else, to use his position as a shareholder solely for his own benefit. In particular, he could vote for such tea brokers as he thought would bring in good profits, and therefore good dividends on his 1541 shares. Now, according to the respondent, he is not entitled to do this. On the contrary, he is bound to vote in the important matter of choosing a tea broker, not in the interests of himself, the shareholder, but in the interests of the respondent, the candidate for the tea brokership. It is true he has the option (somewhat derisory, as I cannot but think) of voting freely an paying two tea brokers; for, if the respondent is not appointed, then Mr. William Bradley has got to make good to the respondent the commission lost by that gentleman's non-employment, as well as to contribute to pay the broker who is appointed. This, according to the respondent, is to be the tenure of his shares by Mr. William Bradley for all time, or at least so long as the respondent or his firm carry on business.

Now, if it be asked, Why is Mr. William Bradley thus limited in his enjoyment of his shares, and made bound to use them for the respondent's benefit? the answer must be, because, once upon a time, the respondent lent Mr. Bradley money, long since repaid, and gave him his shares in security, long since retransferred. This is not merely historically the fact, but the mortgage itself sets out that this limitation of Mr. Bradley's right to deal with those shares as his own is agreed to in consideration of the advance.

Accordingly, on this question of fact, it seems to me perfectly plain that, if the respondent is right in his law, one result of the agreement was that, in consideration of the advance, Mr. William Bradley had the respondent permanently quartered upon him, and that as regards that part of his estate, namely, the 1541 shares, Mr. Bradley was bound to use it, in one important relation, no longer for his own interest, but for the respondent's, and his own, only so far as his own did not conflict with the respondent's.

Now, when I turn to the law of the case, I speak with much more diffidence, for the system of jurisprudence in which I was trained does not in the matter of mortgages impose any restraint on free contracts. But I have made it my duty to study and understand the law now in question; I do not hold myself entitled to question or detract from it, and I am unable to resist the conclusion that the appellants are entitled to prevail. I entirely agree in the judgment of Lord Davey.

LORD LINDLEY .My Lords, Mr. Carritt (the respondent in this case) brought an action against several persons, including the two appellants, for the recovery of damages for breaches by them of certain agreements entered into by them with him. The agreements sued upon were contained in three letters, namely, (1.) a letter dated August 14, 1889, signed by William Bradley on behalf of himself and all the other defendants; (2.) a letter dated May 16, 1892, signed by William Bradley alone; (3.) a letter of the same date signed by James Bradley alone. The plaintiff discontinued his action against the defendants other than the two Bradleys, and the action against them was tried before Bigham J. and a special jury. The plaintiff obtained a verdict and judgment for 750 l. against the two Bradleys for their breaches of their agreements of May 16, 1892. From this verdict and judgment they appealed to the Court of Appeal, and asked that the verdict and judgment against them might be set aside, and that judgment might be entered for them with costs, or that a new trial might be directed. This appeal was dismissed with costs. The two Bradleys now appeal to your Lordships, and ask that judgment may be entered for them.

No question now arises as to the first agreement of 1889, and, except as part of the history of the two letters of May 16, 1892, the letter of 1889 is of no importance. The two Bradleys put in a joint amended defence, and alleged that if the letters of May 16, 1892, were to be construed as the plaintiff contended, then those letters did not express the real agreement between the parties, and ought to be rectified; and in the Court below evidence was gone into to establish this defence. The attempt to do so failed, and it was not seriously renewed either in the Court of Appeal or before your Lordships, and it is unnecessary to refer further to this controversy.

The questions raised by this appeal are:-

1. The true construction of the two letters of May 16, 1892.

2. Their validity, having regard to equitable doctrines relating to mortgage transactions.

3. The form of the judgment as entered against the two appellants.

The two letters in question are set out in the record, and I will not detain your Lordships by reading them at length. The first of them, namely, that signed by William Bradley, is the most important, and the only one which need be considered in discussing the meaning and validity of both. In order to understand this letter the position of the writer and of Mr. Carritt, to whom it was written, should be known. The tea company mentioned in the letter had been formed in 1889 by the Bradleys, and Mr. Carritt had assisted them in the issue of debentures on the formation of the company. Mr. Carritt was a member of a firm of tea brokers, carrying on business under the name of Lloyd, Matheson & Carritt. In 1889 that firm had been appointed the tea brokers of the tea company, and the firm had been its tea brokers ever since. There had been some controversy, however, about the permanency of their appointment, and different views on this subject had been expressed. The two Bradleys were large shareholders in this tea company, and were also directors of it.

William Bradley wanted to borrow 2250 l. , and Mr. Carritt lent it him on the terms mentioned in the letter. It is quite immaterial to consider the sources from which Mr. Carritt obtained the money. As between him and William Bradley, Mr. Carritt was the lender, and the advance of the money is not disputed.

The letter states that in consideration of the advance Bradley agrees to repay it with interest at 7 per cent., and as security he hands over (1.) his promissory note for that amount and interest; (2.) a transfer of 1541 fully paid-up shares in the tea company, and a certificate for those shares in Bradley's name. Then comes a power of sale in case of default of payment (clause 3), and this is followed lower down by a special power to sell forty-one of the shares even before any default is made (clause 5). So far there is nothing more than a loan, a promise to pay, a promissory note, and an agreement for a mortgage of a certain number of shares with the powers of sale mentioned. There is another clause (6.) by which Bradley agrees to execute any further documents which Mr. Carritt shall require for perfecting or giving effect to the security intended to be thereby made.

In addition, however, to this mortgage transaction there is another clause (4.), which runs thus: "I further agree, as a shareholder in the Sephinjuri Bheel Tea Company, and in every other capacity, to use my best endeavours to secure that you or any firm of brokers of which you for the time being shall be a partner (as you shall elect) shall always hereafter have the sale of all the company's teas as broker. And in the event of any of the company's teas then being sold otherwise than through you or your firm, I personally engage and agree to pay to you or your firm the amount of the commission which you or your firm would have earned if the teas had been sold through you or your firm. This engagement on my part is in addition to and without prejudice to any previous engagements to you, and in particular to the contract of August 14, 1889, by which I agreed, on behalf of the proprietors, to give you the sale of all the company's teas."

The plaintiff's action, so far as Mr. William Bradley is concerned, is for a breach of this agreement. The loan was called in and was paid off, and the shares which had been transferred and registered in the name of Mr. Carritt, or his nominee, were duly retransferred to and registered in the name of William Bradley. But in August, 1899, the company changed their tea brokers and ceased to employ Mr. Carritt or his firm; and this action was then brought.

The first question which arises is the true construction of this clause 4. The defendants contend that when the loan was paid off this clause ceased to be operative; that it was part of the security for the loan, and that the words "always hereafter" ought to be construed as the words "at any time hereafter," in clauses 3 and 5 giving the powers of sale, must be construed. This contention appears to me quite untenable. It is obvious that the powers of sale are conferred in order to enable the mortgagee to get back his money, and for no other purpose, and the words "at any time hereafter" in those powers have no sensible meaning, and no legal operation after the loan is repaid. This reasoning is wholly inapplicable to clause 4.

Again, to say that clause 4 is part of the security appears to me quite incorrect. It is true that the loan of the money is the consideration for the whole agreement, including clause 4; but the security for the loan is the promise to repay it, the promissory note, and the shares with the powers to sell them. Clause 4 is in no sense part of the security for the money, but it is an additional advantage stipulated for by the mortgagee.

Clause 4 means what it says. It gives Mr. Carritt the option of himself, or any firm of tea brokers of which he is a member, becoming an applicant for the appointment of tea brokers to the company, and binds Mr. William Bradley to use his best endeavours to secure that appointment, and if any other broker should be employed by the company to sell the company's teas, then Bradley undertakes to pay to Carritt, or his firm as the case may be, the commission lost by their non-employment. The only limit to the duration of this agreement is that set by the possibility of carrying it out. It would necessarily cease if Mr. Carritt gave up the business of tea broker, or if the company gave up selling tea; but I can discover no other event on which it would come to an end. I can discover no legitimate ground for implying that it was to last only for a reasonable time, nor can I find any measure for such a period. To use Bigham J.'s language, the words "always hereafter" in this clause mean, "So long as I am in a position to sell the teas, and the teas are there for me to sell."

It is hardly necessary to add that Mr. James Bradley's letter bears the same meaning. This letter is to the same effect as clause 4; but Mr. James Bradley did not make himself liable for the loan, although the loan was the consideration for the promise he made.

I pass now to the second question, namely, the validity of the contracts sued upon, and it will be convenient to take Mr. James Bradley's letter first. If he had been sued separately for a breach of his contract, I cannot conceive what defence he would have had to the action. Legal defence is out of the question, and, there being no fraud, undue influence, oppression, or extortion, I can discover no ground whatever for the interference of a Court of Equity with the legal rights of the plaintiff. Mr. James Bradley contracted as a principal; he was not a mortgagor; he was not a surety, or in any way responsible for the mortgage debt; he had no interest in the shares mortgaged; he would not be a necessary or proper party to any suit in equity by or against William Bradley for the redemption or foreclosure of his mortgage. I cannot see that Mr. James Bradley's position is altered by the fact that he has been made a co-defendant with Mr. William Bradley in the present action, or by the fact that the two defendants have joined in defending it. This procedure was, I suppose, adopted to save expense; but it cannot, in my judgment, affect the merits of the case in any way whatever. As regards Mr. James Bradley, I am unable to discover any defence or semblance of defence to the plaintiff's action.

Mr. William Bradley's position is no doubt different, for he was a mortgagor, and he is sued upon an agreement imposing upon him an obligation beyond that of repaying the money lent with interest and costs, and which agreement was entered into in consideration of the loan for which he mortgaged his shares.

My Lords, before considering the validity or invalidity of this additional agreement, it is essential to bear in mind that Mr. Bradley raised no defence to the action on the ground of fraud, undue influence, extortion, or oppression. No issue was raised or left to the jury on which a verdict could have been given for the defendant on any of these grounds. The only defence set up was a mistake, and this failed. The legal point that the agreement was invalid on equitable doctrines applicable to the admitted or established facts is of course still open for argument. But no other defence can, I apprehend, be now properly listened to. I allude more particularly to such a possible ground of defence as oppression or unfairness in the bargain. Bigham J. and the Court of Appeal both alluded to this suggested defence, and said that in their opinion the agreement was not oppressive or unreasonable, and I agree with them.

If the agreement contained in clause 4 is to be held invalid, it must be upon some equitable principle applicable to the terms of the bargain itself and to the facts not now in controversy. The equitable grounds relied on are, as I understand them, two in number, namely, (1.) that clause 4 is a clog on the redemption, and infringes the well-settled equitable principle, once a mortgage always a mortgage; (2.) that it is part of the mortgage transaction, and must, as a matter of law, cease with it, in conformity with the rule, once a mortgage always a mortgage, and nothing but a mortgage.

As to the first ground, clause 4 gives the mortgagee of the shares no right or interest in them legal or equitable. So long as he holds them as mortgagee he has the ordinary rights of a mortgagee, with the rights of selling them conferred by the other clauses of the agreement; but when he is paid off his principal, interests, and costs he is bound to retransfer the shares to the mortgagor, and clause 4 contains nothing whatever which entitles or purports to entitle the mortgagee to retain the shares, or to control the use of them when returned to the mortgagor. Clause 4 in no way fetters the right to redeem, nor obstructs the mortgagor in the practical exercise of that right, or of the use or enjoyment of his shares when he gets them back. He can then do what he likes with them, free from all control by the mortgagee. How it can be said that clause 4 clogs the equity of redemption or infringes the rule, once a mortgage always a mortgage, passes my comprehension. It is admitted that after redemption the mortgagor can sell the shares; but it is said that so long as he holds them he is bound to use whatever influence they give him in favour of the mortgagee, so as to enable him to retain his position of broker to the tea company. This observation, so far as it is true, applies to whatever shares Mr. William Bradley might happen to hold when it became necessary to use his influence in Mr. Carritt's favour. But clause 4 gives Mr. Carritt no legal or equitable right to have shares, still less any particular shares held by Mr. Bradley, used in any particular way. By the first part of clause 4 Mr. Bradley has bound himself to use his best endeavours to secure the tea brokerage for Mr. Carritt: this might or might not involve voting for him. The votes conferred by the shares might be too few to be of any use, and other endeavours than voting in respect of them might be more likely to prevail. But to say that the equitable principle under discussion is infringed, and that clause 4 is invalid simply because it might be necessary for Mr. Bradley to use the influence which the mortgaged shares, if retained, would confer in order to perform his engagement to Mr. Carritt, seems to me to stretch the doctrine under consideration to an extent not warranted by principle or authority.

The second part of clause 4 binds Mr. Bradley to pay commission if Mr. Carritt loses the tea brokerage to the company, even although Mr. Bradley may have used his best endeavours to prevent such loss. The second part of clause 4 increases the inducement to make such endeavours, but that is its only bearing on the present controversy; and it is plain from the summing-up of Bigham J. that the action was for a breach of this part of clause 4, and that the damages were assessed for this breach. The second part of the clause does not depend upon the first part, and comes into operation whether the first has been broken or whether it has been duly performed.

But then reliance is placed upon authority, and especially on Salt v. Marquess of Northampton⁽¹⁾, Noakes v. Rice⁽²⁾, Browne v. Ryan⁽³⁾, and the disapproval by some of your Lordships of Santley v. Wilde.⁽⁴⁾ I will, therefore, shortly refer to these cases. Salt v. Marquess of Northampton⁽¹⁾turned entirely on whether the policy then in question was mortgaged and for what. As soon as that was settled, there was no difficulty in applying the doctrine once a mortgage always a mortgage. That case does not appear to me to assist your Lordships to decide the present controversy one way or the other. In Noakes v. Rice⁽²⁾, if the decision had been the other way and the contract had been upheld, the

(1)     [1892] A C 1.
(2)     [1902] A C 24.
(3)     [1901] 2 I. R. 653.
(4)     [1899] 2 Ch 474.


public-house, which was free when mortgaged, would have been tied to the mortgagee when redeemed. In Browne v. Ryan⁽¹⁾ the mortgagee, who was an auctioneer, had stipulated for the right to sell the mortgaged property within twelve months after redemption, and whether the mortgagor desired to sell or not. In Noakes v. Rice⁽²⁾ this House approved that decision, although I expressed my doubts about its correctness. It goes further than any other case that I know of. I have searched in vain for any similar case in which the Court of Chancery restrained a common law action. But treating Browne v. Ryan⁽¹⁾ as having been properly decided, the difference between that case and this is apparent, for the mortgagee there sought damages for the breach of a contract depriving the mortgagor of his property, even after its redemption by him. In Santley v. Wilde⁽³⁾ the Court of Appeal held that upon the true construction of the contract the property mortgaged, which was a theatre held for a short term of years, was made a security (1.) for money borrowed and interest, and (2.) for the performance of an agreement entitling the mortgagee to a share of profits earned by the mortgagor during the lease, even although the loan might have been repaid with interest.

The Court of Appeal, over which I then presided, considered that the security for both of these was valid. In Noakes v. Rice⁽²⁾ two of your Lordships thought this decision wrong, and so did the Court of Appeal in Ireland in Browne v. Ryan.⁽¹⁾The error in the decision in Santley v. Wilde⁽³⁾, in the view of those who think it wrong, was that the property mortgaged was burdened with more than the loan made upon it, and that redemption was impossible. That is not so in the case now before your Lordships, as I have endeavoured to shew. Santley v. Wilde⁽³⁾ was a difficult case, and it may have been wrongly decided, although I do not think it was. Be this as it may, I do not understand that the legal principles laid down in it have been condemned by this House as unsound. I say this after carefully considering the observations made on that case by the noble and learned Lords who decided Noakes v. Rice.⁽²⁾

(1)     [1901] 2 I. R. 653.
(2)     [1902] A C 24.
(3)     [1899] 2 Ch 474.


It remains to consider the second ground, namely, that clause 4 is part of the mortgage transaction and must cease with it, or, in other words, that it infringes the last part of the rule, once a mortgage always a mortgage, and nothing but a mortgage.

My Lords, when the usury laws were in force and every device for evading them had to be defeated, the above language was convenient and as free from objection as most concise statements are; for every stipulation in a mortgage in favour of a mortgagee and conferring pecuniary benefits on him in addition to repayment of his principal moneys and lawful interests and costs was open to the objection that it was a cloak for usury. But now that the usury laws are abolished such language is much too wide. Biggs v. Hoddinott⁽¹⁾,which was approved by this House in Noakes v. Rice⁽²⁾,shews it to be so.

Laying aside the usury laws and all rules to prevent their evasion, and laying also aside all considerations of fraud, undue influence, oppression, and illegality on other grounds, I am not aware of any authority which invalidates a contract between a mortgagor and a mortgagee unless it affects or purports to affect the property mortgaged, or the right to redeem it. Any contract which does that has always been held invalid in equity, and must now be treated as invalid by all Courts. The restoration of the mortgaged property to the mortgagor on performance of the obligation to secure which it was mortgaged is the grand object which Courts of Equity have always steadily kept in view and insisted on, all agreements to the contrary notwithstanding. The wasting away of leasehold or other property does not affect the principle, but only modifies its application. I hope that nothing which ever has fallen from me, or which may fall from me now, will cast any doubt on this matter. But beyond that I am not prepared to go. I cannot bring myself to believe that it is part of the law of this country that mortgagors and mortgagees cannot make what bargains they like with each other so long as such bargains are not inconsistent with the right of the mortgagor to redeem the

(1)     [1898] 2 Ch 307.
(2)     [1902] A C 24.


property mortgaged by discharging the debt or obligation to secure which the mortgage was effected. I have given my reasons already for holding that this principle is not infringed in this case.

Upon the merits, therefore, my opinion is that Bigham J. and the Court of Appeal were right in giving judgment for the plaintiff.

There remains, thirdly, the point of form. The judgment as drawn up is against the two defendants jointly; but they were sued on different contracts, and in strictness the judgment should have been drawn up accordingly, i.e., there should have been two judgments for the same sum, one against each defendant, but so worded as to prevent the plaintiff from being paid his damages twice over; for it is plain that the jury did not intend to give the plaintiff two sums of 750 l. The form of the judgment was not alluded to before Bigham J. nor before the Court of Appeal. If your Lordships had agreed with me it would not have been necessary to disturb the form of the order, for although technically irregular it does no injustice to any of the parties. Neither is it necessary to notice the irregularity, as the judgment is to be reversed as to both defendants. But if your Lordships had allowed the appeal as to William Bradley's mortgage, but had affirmed the judgment as to James Bradley, I submit to your Lordships that the proper course would have been to reverse the judgment so far as it affects William Bradley, and leave it standing as a separate judgment as against James Bradley.

In my opinion, however, the appeal should simply be dismissed with costs.

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