• In the case of White v City of London Brewery Co [1889] 42 Ch D 337, the Court of Appeal held that ordinarily, a mortgagee in possession of a mortgaged property is accountable to the mortgagor for any excess profits and rent, save in cases such as the present case, whereby the profits were from the brewery’s business, and were not carried on upon the mortgaged premises.

Facts of the case:

  • D, the mortgagees in possession who were brewers, let a premises with a restriction that the tenant should take his supply of beer entirely from them.
  • The mortgage was a leasehold public-house to secure £700, and such further sums as might become due from the C to D for money advanced, goods sold or otherwise.
  • Large amounts of money was made from the supply of beer to the tenant, and C, the mortgagors, claimed that they were entitled to the profits.

Issues in the case:

  • The issue in this case was whether C was indeed entitled to the profits of the tenants.

Court of Appeal held:

  • The proviso limiting the amount recoverable did not apply to interest, or to outgoings incident to the possession of the premises which the mortgagor was bound to reimburse the mortgagees, and that as the sum due for moneys lent and goods supplied did not exceed the limit, the mortgagees were entitled to retain out of the proceeds of sale the balance due to them.

Cotton LJ

  • [245] “The great contention was that the mortgagor was entitled to the profits made by the mortgagees as brewers in supplying the mortgaged property, which was a public-house, with their own beer. Now, first, is that question open on this decree?”
  •  [246] “The business there referred to is not the brewery business, but the business of the public-house, and this inquiry is directed to such profits (if any) as were made by the Defendant company in the business carried on in the public-house during the period they were in possession by their manager or servant, and in no way gave the Plaintiff any opportunity of raising this question, nor entitled him to make the defendants account for any profits they made as brewers, not in carrying on the business of the public-house, but in carrying on their own business.”
  • [247] “Whether, if it were raised, it would have any chance of success is very doubtful. I do not doubt that if the mortgagee be a brewer, and let the house with a covenant to take all the beer from himself, and it can be shown that he could have got a larger amount if the house had been free from that covenant, the mortgagor either under the wilful default clause or otherwise, must have some relief in respect of the difference between the two rents. And some relief has been given him in the present case, but I think the claim for a share of the profits made by the brewers in supplying beer is entirely outside this order.”

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