Santley v Wilde (1899) 2 Ch 474

Facts

• The case involved a dispute over a mortgage agreement between Santley (the mortgagor) and Wilde (the mortgagee).
• Santley had mortgaged a property to Wilde as security for a loan.
• The mortgage deed included a clause enabling Wilde to retain possession of the property and continue to receive rents and profits even after the loan was repaid.
• Santley sought to redeem the property, arguing that the clause was invalid since it effectively nullified his right to redeem.
• The court examined the terms of the mortgage and the intentions of both parties.

Issues

1. Whether a contractual provision allowing the mortgagee to retain possession of the mortgaged property and rents after repayment constitutes a restriction or elimination of the essential right to redeem.
2. Whether such a clause is unenforceable as a "clog on the equity of redemption."
3. Whether equity should override contractual provisions that seek to undermine the mortgagor's right to redeem.

Decision

• The court held that the clause permitting Wilde to retain possession indefinitely, even after loan repayment, was inconsistent with Santley's right to redeem.
• The offending clause was declared void as it constituted a clog on the equity of redemption.
• The court permitted Santley to redeem the property upon repayment of the loan.
• The decision reaffirmed that equity would not enforce any terms undermining the mortgagor’s right to redeem.

Legal Principles

• The essential right to redeem is an equitable principle preventing a mortgage from being made irredeemable by contractual stipulation.
• Any provision in a mortgage agreement that restricts or eliminates the mortgagor's right to redeem is void as a clog on the equity of redemption.
• Equity intervenes to ensure fairness in mortgage transactions, preserving the mortgagor's continuing interest regardless of potentially oppressive contractual terms.
• The judiciary will scrutinize mortgage terms to prevent exploitation of borrowers and maintain the protection against public policy violations.

Conclusion

Santley v Wilde (1899) 2 Ch 474 confirmed the essential right to redemption in mortgage law, holding that any provision restricting or nullifying a mortgagor's right to redeem is void, thereby safeguarding equitable protection for borrowers against oppressive mortgage terms.