Jones v Morgan [2001] EWCA Civ 995

• The mortgagor had borrowed money from the mortgagee in return for a charge on his property. In a later agreement (which on the facts was really a variation of the mortgage agreement), the mortgagee was to acquire the right to purchase some of the mortgaged land.

• CA held that this was invalid under Lord Parker’s 2nd ground (in Kreglinger), i.e. it clogged the equity of redemption.

Chadwick LJ

• Principles discerned from earlier cases:

  1. First, that a mortgagee cannot as a term of the mortgage enter into a contract to purchase, or to obtain an option to purchase, any part or interest in the mortgaged premises.

  2. Secondly, that the foundation of this rule is that such terms are repugnant to the mortgage transaction of which they form a part.

  3. Thirdly, that the reasoning is that such terms cannot stand with the contractual proviso for redemption or with the equitable right to redeem.

  4. Finally, that it is essential to consider in all cases whether the transaction is in substance a mortgage. 

Pill LJ

• Dissented on the facts, not the law. 

Phillips MR

• Agreed with Chadwick LJ’s conclusion but added:

The doctrine of a clog on the equity of redemption is, so it seems to me, an appendix to our law which no longer serves any useful purpose and would be better excised.

RELATED CASES

• Kreglinger v New Patagonia Meat Company