Jones v Morgan, [2001] EWCA Civ 995
Citation:Jones v Morgan, [2001] EWCA Civ 995
Rule of thumb:What happens if you think that you have been sold a contract for a ‘mortgage’ but when you look at the terms closely you do not actually own the property? This is a void contract & the bank owes the person damages for this.
Judgment:
The facts were that there was a contract for a so-called mortgage where the person with the mortgage did not actually own all of the property at the end of it. The bank argued that the person with the mortgage benefited as they achieved a payment for the house which was still well below the rate of renting the property. The Court held that where there is a title for the contract which is wholly false, then the contract is unconscionable and it is void, ‘The principles which I derive from those passages, so far as material to the present appeal, may be summarised as follows: (i) there is a rule that a mortgagee cannot as a term of the mortgage enter into a contract to purchase, or stipulate for an option to purchase, any part of or interest in the mortgaged property; (ii) the foundation of the rule is that a contract to purchase, or an option to purchase, any part of or interest in the mortgaged property, is repugnant to or inconsistent with the transaction of mortgage of which it forms part, and so must be rejected; (iii) the reason why the contract or option to purchase is repugnant to or inconsistent with the mortgage transaction is that it cannot stand with the contractual proviso for redemption or with the equitable right to redeem – the proviso for redemption (and, where the contractual date for redemption is past, the equitable right to redeem) requires the mortgagee to reconvey the mortgaged property to the mortgagor in the state in which it had been conveyed to him at the time of the mortgage; and (iv) it is essential, in any case to which the rule is said to apply, to consider whether or not the transaction is, in substance, a transaction of mortgage’, Chadwick LJ at 55.
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.