security 5+6 Flashcards
lta mtg def obli
mtg can secure obligations beyond the repayment of money
e.g. perfomance or contractual duties
freedom of contract vs equity
FOC- supports enforceable collateral advantages
equity - once debt is payed, mor is free from conditions tied to the mtg
kreiglinger approach
- is it unconsionable
- is it a penal clause
- is it repugnant
- is it unconsionable
kreiglinger approach
- equity set aside uncon contracts
- handled under the CCCFA
- is it a penal clause
kreiglinger approach
- punishment for failure 2 meet terms is inconsistent with equitable right of redemption
- if additional cost after default, could be penal and contradict equitable or contractual ROR
- is it repugnant
kreiglinger approach
- contradicts both equitable and contractual ROR
- clause w/ unfair advantage beyond the contractual term
clogs
clog is something that interferes, restricts, defeats MOR equitable ROR
kreiglinger case facts
- wool broker, sheep skin as by product of meat works
- ## wool brokers give loan to meat works and agree that wool brokers have ROFR on the sheep skins
kreiglinger case what is the Coll adv
- ROFR to sheep skins
kreiglinger case held
- valid after the mtg
- col adv was seperate to the mtg, two seperate doc
- rained valid for the term
- transaction was commercial, ROFR was primary, mtg secondary
NOT A CLOG ON EROR
REEVE v Lisle
primary transaction was option to enter partnership and the mtg was secondary, was there only to protect the transaction if it fails
Noakes v rice issue
- requirement to buy liquor from the brewery (coll adv) could continue after mtg was repaid
Noakes v rice HOL decision
- the Coll adv was valid until mtg was paid
- ## was making a free public house a tied public house and this is not the same property
collateral adv can …
be valid until mtg relayed but after the term if they are informed they are seen as penal and a clog on the EROR
Bradley v Carrit facts
- tea broker lender so could take security over shares in tea company and ensure broker was main supplier of tea
-mee to be compensate if mor failed
Bradley v Carrit HOL decision
- Coll adv could not continue after the loan was repayed
-deemed clog on EROR bc it continued beyond repayment - it imposed on going restrictions on how shares could be used
Bradley v Carrit and noakes v rice
no control over the shares and not being a free public house are the same
limits on the collateral approach case
Lewis v frank love
jones v Morgan
Lewis v frank love facts
- mee feel into default
- transfer of existing mtg was made
- new mee required mor to grant option to purchase property
Lewis v frank love held
court ruled that the option was a clog on the EROR and rejected it was part of contract
- opt to purchase tied to mtg are clog unless part or primary transaction
jones v Morgan facts
- mor sold land to reduce debt
- mee agreed to release the part of security but required that half of the remaining land in trust for them
jones v Morgan held
court held that it was a clog
- bc the terms varied the EROR
as it required payment of the debt PLUS half remaining property, unfair restriction
MEE remedies against MOR in default
- sue
- enter into poss
- sell mtg prop
- appt receivers
MEE remedies against MOR in default
1. sue
sue for breach of personal covenant ( promise to repay)
- no need for personal promise sometimes
