Fairclough v Swan Brewery [1912] AC 565

Court: Privy Council

Basic Facts:

• Parties: F (Mortgagor), S (Mortgagee), V (Original Lessor).

• Context: F was the registered proprietor of a lease from V for a hotel. F mortgaged the lease to S, receiving £500 to be repaid in 209 monthly installments of £2 8s each. The mortgage included a term preventing F from redeeming the lease except by installments and only with S’s consent. As a result, the lease could not be redeemed until shortly before its expiration.

Issue for the Court: When will a term in a mortgage be considered as clogging or fettering the right of redemption?

Held: The court ruled that any provision that clogs or fetters the mortgagor's equity of redemption is void.

Lord Macnaghten

• Principle: Equity will not allow the right of redemption to be hindered by any term in the mortgage or by subsequent agreements that effectively prevent or impede redemption.

• Application: The term in this mortgage made redemption impractical, as F would receive no benefit from redeeming the lease when it was almost expired. Hence, the mortgage was deemed void as it obstructed F's right to redeem.