Santley v Wilde [1899]
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Santley v Wilde [1899] 2 Ch 474 is a significant decision by the English Court of Appeal concerning the legal principles underlying mortgages, particularly the concept of the equity of redemption. The central issue was whether a specific provision in a mortgage agreement could be considered a clog or a fetter on the equity of redemption. The court ultimately held that the provision in question, which granted the mortgagee a share of the profits from a theatre company, did not violate the equity of redemption and was, therefore, valid.
The facts of the case reveal that the mortgagor, a woman who held a ten-year lease on a property, sought to borrow £2,000 to finance the operation of a theatre. The mortgagee agreed to lend her the money, with the condition that she would repay it over five years with interest. Additionally, the mortgagee was to receive one-third of the theatre's profits from the date of the mortgage until the end of the lease, extending beyond the period during which the mortgage would have been repaid. This provision was central to the dispute.
Sir Nathaniel Lindley MR, the Master of the Rolls, delivered the leading judgment in the Court of Appeal. He described the fundamental nature of a mortgage under English law as a conveyance or assignment of property to secure the payment of a debt or the fulfilment of an obligation. Lindley stated that the security provided by a mortgage is inherently redeemable upon repayment or fulfilment of the debt, and any clause that seeks to prevent redemption would be considered a clog or fetter on the equity of redemption, rendering it void. However, he held that the profit-sharing provision in this case did not constitute such a clog. Given the limited security of a mortgage over a short-term lease, Lindley considered the arrangement a reasonable bargain that did not unduly restrict the mortgagor's right to redeem.
The decision in Santley v Wilde has been cited with approval in numerous subsequent cases, including by the House of Lords in Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1913] UKHL 1, where the principles articulated by Lindley MR were upheld. It has also been referenced in other legal texts and cases, such as Brighton and Hove City Council v Audus [2009] EWHC 340 (Ch), as a foundational description of the nature of mortgages. However, the decision has not been without criticism. It was strongly criticised by Lord Macnaghten and Lord Davey in Noakes v Rice [1902] AC 24, and Lord Macnaghten reiterated his criticism in Bradley v Carritt [1903] UKHL 1, where Lindley himself acknowledged the complexities of Santley v Wilde and admitted the possibility that the case may have been wrongly decided. Further criticism came in the case of British South Africa Company v De Beers Consolidated Mines Ltd [1912] AC 52.
Despite the critiques, Santley v Wilde remains an important case in English mortgage law, particularly for its articulation of the equity of redemption and the principle that any attempt to create a non-redeemable mortgage would be void. The case illustrates the situations where courts must strike a balance between upholding contractual freedom and protecting the fundamental rights of mortgagors within the context of English law.
The facts of the case reveal that the mortgagor, a woman who held a ten-year lease on a property, sought to borrow £2,000 to finance the operation of a theatre. The mortgagee agreed to lend her the money, with the condition that she would repay it over five years with interest. Additionally, the mortgagee was to receive one-third of the theatre's profits from the date of the mortgage until the end of the lease, extending beyond the period during which the mortgage would have been repaid. This provision was central to the dispute.
Sir Nathaniel Lindley MR, the Master of the Rolls, delivered the leading judgment in the Court of Appeal. He described the fundamental nature of a mortgage under English law as a conveyance or assignment of property to secure the payment of a debt or the fulfilment of an obligation. Lindley stated that the security provided by a mortgage is inherently redeemable upon repayment or fulfilment of the debt, and any clause that seeks to prevent redemption would be considered a clog or fetter on the equity of redemption, rendering it void. However, he held that the profit-sharing provision in this case did not constitute such a clog. Given the limited security of a mortgage over a short-term lease, Lindley considered the arrangement a reasonable bargain that did not unduly restrict the mortgagor's right to redeem.
The decision in Santley v Wilde has been cited with approval in numerous subsequent cases, including by the House of Lords in Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1913] UKHL 1, where the principles articulated by Lindley MR were upheld. It has also been referenced in other legal texts and cases, such as Brighton and Hove City Council v Audus [2009] EWHC 340 (Ch), as a foundational description of the nature of mortgages. However, the decision has not been without criticism. It was strongly criticised by Lord Macnaghten and Lord Davey in Noakes v Rice [1902] AC 24, and Lord Macnaghten reiterated his criticism in Bradley v Carritt [1903] UKHL 1, where Lindley himself acknowledged the complexities of Santley v Wilde and admitted the possibility that the case may have been wrongly decided. Further criticism came in the case of British South Africa Company v De Beers Consolidated Mines Ltd [1912] AC 52.
Despite the critiques, Santley v Wilde remains an important case in English mortgage law, particularly for its articulation of the equity of redemption and the principle that any attempt to create a non-redeemable mortgage would be void. The case illustrates the situations where courts must strike a balance between upholding contractual freedom and protecting the fundamental rights of mortgagors within the context of English law.
