Noakes & Co Ltd v Rice (1902)

Transfer of Property · Redemption & Clog

Facts.

The owner of a leasehold public house mortgaged it to a brewery. The mortgage contained a covenant tying the house to the brewery’s beer — the mortgagor and his successors would buy beer only from that brewery for the rest of the lease, even after the mortgage debt had been repaid. On redeeming, the mortgagor sought to be free of the tie.

Issue.

Could a collateral advantage (the beer tie) be made to continue after redemption of the mortgage?

Held.

The House of Lords held it could not. A mortgage cannot be made irredeemable; on redemption the mortgagor is entitled to get back his property unencumbered, exactly as he gave it. A collateral advantage that survives redemption is a void clog on the equity of redemption — “once a mortgage, always a mortgage.”

Why it matters.

It is the classic authority on the clog doctrine — the mortgagor’s right to redeem cannot be fettered by a term that outlasts the mortgage — the heart of Unit III’s most-examined topic.

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