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Warnborough v Garmite

[2003] EWCA Civ 1544

Case summary last updated at 09/01/2020 18:08 by the Oxbridge Notes in-house law team.

Judgement for the case Warnborough v Garmite

D mortgaged his property to P, granting him options to purchase the mortgaged property. The CA felt bound by the precedent so that the “unruly dog” of the collateral advantage rule was still alive. However CA allowed the options to stand, since when there is a sale of the property (for a price which is left to be outstanding on mortgage) by the grantee of the option, then “… there must be a very strong likelihood that, on an examination of all the circumstance, the court will conclude … that the substance of the transaction is one of sale and purchase and not one of mortgage”.(Per Jonathan Parker LJ). 
The validity of some collateral advantages may also be affected by the doctrine of restraint of trade: see Esso v Harper’s Garage [1968] AC 269: Two mortgages were in issue, one with a solus agreement for exclusively buying petrol from the mortgagee for 5 years, and the other for 21 years. The first tie was upheld by HL but not the second. This was not on the basis of clogs on redemption, but on the basis on restraint of trade (common law, not equity). This approach commended itself to Diplock LJ in CA, who said that this common law doctrine was surer than th equitable doctrine of clogs to redemption. HL determined unfair restraint of trade on the circumstances of the individual case, which Lord Hodson preferred to consider in terms of its effect on the public rather than the contracting individuals, given the widespread economic effect of the subject matter (petrol). 

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