Maxwell v Tipping

• Jurisdiction: Ireland
• Judgment Date: 31 July 1903
• Docket Number: (1902. No. 1008.)
• Date: 11 July 1903
• Court: Chancery Division (Ireland)

Maxwell

and

Tipping.

M. R.

(1902. No. 1008.)

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND.

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1903.

Mortgage — Collateral agreement — Once a mortgage always a mortgage — Equity of redemption — “Clog” on redemption — Independent agreement — Provision for increase of interest on mortgage debt — Collection of rents by mortgagee — Agency fees.

M., being previously indebted to T. in the sum of £1500 secured by mortgages on land, with interest at 5 per cent., in 1878, in consideration of a further advance of £300, gave his bond (on which judgment was subsequently entered, and which was registered as a judgment mortgage against the lands already mortgaged), and executed a collateral agreement by which he appointed T. his agent over the mortgaged lands, and empowered him to charge agency fees, and agreed to pay six per cent. interest on the whole £1800 due by him to T., being 1 per cent. additional on the £1500 secured by the mortgages. This additional 1 per cent. rate of interest was not by the agreement charged on the lands:—

Held, that the agreement of 1878, being a new contract for a fresh consideration, had not the effect of imposing a fetter on the equity of redemption by reason of increasing the rate of interest payable, or by reason of making the mortgagee the agent of the mortgagor to receive the rents, and empowering him to charge agency fees.

Trial of Action.

Prior to 1878 the plaintiff was indebted to Nathaniel Tipping in the sum of £1500, secured with interest at five per cent. by three indentures of mortgage of the lands of Tattykeel, county Tyrone, dated respectively 1st June, 1872, 16th June, 1875, and 26th October, 1876. (The first mortgage was security for £300 charged on the inheritance. The other two indentures were mortgages of plaintiff's life interest in the lands, and also of two policies of assurance and a reversionary interest in bank stock as security for £1200.)

On the occasion of a further advance of £300 by Nathaniel Tipping to the plaintiff, the plaintiff by bond dated the 4th October, 1878, became bound in the penal sum of £600, to pay Nathaniel Tipping the sum of £300, with interest at five per cent., and judgment was subsequently entered, and it was registered as a judgment mortgage of the plaintiff's interest in the lands of Tattykeel on the 31st October, 1878.

On the occasion of the advance of the £300, and the execution of the bond, a collateral agreement of the same date was entered into between the parties. The operative part of the agreement of the 4th October, 1878, was in these terms:—

First, the said Nathaniel Tipping shall collect and receive the rents of Tattykeel on the usual gale days, until the whole sum of £1800 be paid off.

Second, the said Nathaniel Tipping shall, out of said rents, pay all head-rent, tithe rentcharge, rates, taxes, and cesses, payable by the said George Maxwell in respect of said lands, and shall also pay the premium on the policies of assurance aforementioned as the same shall accrue due, and shall deduct and retain thereout the yearly sum of £90 sterling, that is to say, interest at the rate of £5 per cent. per annum on the said sum of £1800 debt charged on said lands, and shall finally retain and appropriate the remainder of the rents of said lands as receiver's fees, and in payment for all trouble and expenses he may incur as agent and receiver of said lands.

Third, the said George Maxwell shall make up the interest to be paid to the said Nathaniel Tipping to 6 per cent. per annum; the said Nathaniel Tipping receiving the yearly sum of £18 sterling, in twelve instalments of £1 10s. each, which he shall pay on the first of each month.

This agreement was proposed to Nathaniel Tipping by the plaintiff, being accompanied by a statement in plaintiff's own handwriting, made out by him at the date of the agreement. The terms of this statement or calculation are set out in the judgment of the Master of the Rolls.

After the date of the agreement Nathaniel Tipping received the rents and profits of the lands of Tattykeel, as receiver and agent of the plaintiff, and in management of the lands.

On 5th March, 1896, Nathaniel Tipping died intestate, and on 1st May following letters of administration of his estate were granted to his son, the defendant.

By his statement of claim in the action, delivered 12th of January, 1903, the plaintiff asked for a declaration that interest at the rate of 5 per cent. per annum, and no more, was payable in respect of the sum of £1800 (or so much thereof as was then due), secured by the indentures of mortgage of 1872, 1875, and 1876, the bond dated 4th October, 1878, and the judgment mortgage registered 31st October, 1878. It also asked for a declaration that the defendant, as being and representing the mortgagee in possession, was not entitled to receive or charge agency or receiver's fees, or other remuneration whatsoever, in respect of the collection and receipt of the rents of the lands of Tattykeel and the management of the mortgaged premises.

The plaintiff in the seventh paragraph of his statement of claim alleged undue influence and oppression or fraud on the part of Nathaniel Tipping in inducing him to execute the agreement of the 4th October, 1878, but this charge was negatived, and was abandoned by plaintiff's counsel at the trial.

Matthew J. Bourke, K.C. (with him Colthurst), for the plaintiff:—

The agreement of October 4th, 1878, is a clog on the equity of redemption, first, because the interest on the mortgages on the lands of Tallykeel is raised from 5 per cent. to 6 per cent.; secondly, because the agreement purports to empower the plaintiff to collect the rents of premises, and to charge commission on such collection, whereby the redemption is more burdensome on the plaintiff than it otherwise would be.

The additional 1 per cent. interest chargeable by the agreement is a clog on the equity of redemption. Even if the mortgaged lands are not charged with the additional interest, the receipt of 6 per cent. interest out of the rents of the lands was illegal, and the difference must be refunded. Browne v. Ryan (1) decides that when a mortgage is paid off, the land must be as free in the hands of the owner as if it had never been mortgaged at all, and any stipulation contained in the mortgage deed or collateral thereto inconsistent with this right cannot be enforced. That decision governs this case. Noakes v. Rice (2) approves of Browne v. Ryan (1). The principle is that a person who has mortgaged his property for a debt shall upon redemption have it back unfettered by any obligation except that for which the security was given.

The rule is that stated by the Master of the Rolls in Jennings v. Ward (3) in this way:—“A man shall not have interest for his money and a collateral advantage besides for the loan of it, or clog the redemption with any by-agreement.”

In Chappie v. Mahon (4) there was a stipulation as to payment for commission beyond interest in case the mortgage was paid off. The commission contracted for was not charged on the mortgaged lands, but the agreement was held illegal and void as contrary to the nature of a mortgage security and a clog on the equity of redemption. See also Edwards' Estate (5).

As to agency fees; they are not allowable. A mortgagee in

possession cannot charge for commission or allowance for his trouble beyond his actual expenses, and any stipulation or contract therefor is invalid: M'Kinley's Estate (1); Kavanagh v. Workingman's Benefit Building Society (2); Chambers v. Goldwin (3); Comyns v. Comyns (4). In Parkinson v. Hanbury (5), the point of the decision was this, viz. that Hanbury and Company were not held liable, because they had gone into possession under a contract with a third party (a prior mortgagee). On this ground they escaped liability.

Henry, K.C., and Donaldson (with them O'Connor, K.C.), for the representative of Nathaniel Tipping, the original mortgagee:—

There was no fraud or undue influence in the transaction. Maxwell perfectly understood what he was doing, and the contract was fair and reasonable. The question then is, whether the Court is bound, as matter of law, to disallow that which the parties have contracted for. Apart from any question as to the policy of the law in these transactions, people should be bound by the contract they have entered into. The older authorities do show that a mortgagee cannot stipulate to be a receiver over the mortgaged property, or for any additional profit over and above principal, interest, and costs. The foundation of these decisions is based on the existence of...