Samuel v Jarrah Timber [1904] AC 323

Court: House of Lords

Basic Facts: the claimant, borrowed money secured by debenture stock, with an option for the lender to purchase the stock within twelve months at a set price. Before the loan's repayment notice was given, the lender sought to exercise the option to buy the stock.

Issue for the Court: When can a mortgage be redeemed, and can a mortgagee also have the option to purchase the mortgaged property?

Held: The court held that options to purchase granted to mortgagees are void if they impede the equity of redemption.

Earl of Halsbury LC:

• Redemption of a mortgage should restore the property to the mortgagor free of any conditions or stipulations from the mortgage transaction.

• A mortgagee cannot include a purchase option in the mortgage agreement as it conflicts with the right to redeem the mortgage.

Lord Lindley:

• Any agreement in a mortgage that prevents the mortgagor from redeeming the property upon full repayment is invalid.

• The principle of "Once a mortgage, always a mortgage" means that mortgage agreements cannot contain terms that deny the mortgagor’s right to redeem.