Williams v Morgan [1906] 1 Ch 804

No right to foreclosure for breach of condition to pay interest on mortgage

Facts

The defendant was a borrower under a mortgage and the lender was the plaintiff’s predecessor. The mortgage deed provided that the principal mortgage sum would be repaid on 1st January 1914. The mortgage deed also provided that interest was payable biannually. In 1906, the plaintiff issued a summons for foreclosure.

Issue

The plaintiff argued that the condition for biannual repayment of interest had been broken and it could therefore foreclose even though the principal was not yet payable. The defendant argued that there was no room for foreclosure until the legal right to redeem had come to an end.

Held

The Court noted that the proviso that the defendant shall not pay off the principal until 1st January 1914, was unconditional. Furthermore, the proviso that the principal will not be called up if the interest is regularly paid on a biannual basis was absolutely clear in its terms. The Court could not import a covenant to pay the principal at an earlier date if interest was in default. If a condition in the mortgage deed is broken in whole or in part then the defendant mortgagee’s estate is absolute in law and foreclosure lies regardless of whether the time for paying the principal has arisen. However, in this case, having considered the tenor of the document, the Court did not consider that any condition in the deed was broken. It was not possible to import the covenant to pay biannually into the proviso for redemption so that the defendant’s estate was absolute in law. There could therefore be no foreclosure before the agreed date of 1st January 1914.

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