• In the case of Knightsbridge Estates Trust v Byrne [1939] Ch 441, it was held that the legal date of redemption set 40 years in the future is not unreasonable.

Facts of Knightsbridge Estates Trust v Byrne [1939] Ch 441

  • This case related to a mortgage between companies
  • The C company had granted a mortgage to the D’s insurance company
  • The mortgage deed provided for repayment in 80 instalments at a set rate of interest, of which the legal date of redemption was 40 years
  • At first instance, it was held that this log period constituted a clog on the equity of redemption; the Ds appealed

Issues in Knightsbridge Estates Trust v Byrne [1939] Ch 441

  • Should there be a test of unreasonableness on the date to the right of redemption?
  • Was 40 years a reasonable time?

Held by the Court of Appeal

Appeal allowed – there was a valid date of redemption present; the test was rejected.

Sir Wilfrid Greene M.R

Even if the law of equity steps in, it would not be right for there to be a test of reasonableness where (as in the present) it is an agreement between competent companies who have received expert advice and presumed to know their own businesses well.

  • Such would result in “an unjustified interference with the freedom of business men to enter into agreements best suited to their interests and would impose upon them a test of “reasonableness” laid down by the Courts without reference to the business realities of the case.” [454]

“The resulting agreement was a commercial agreement between two important corporations experienced in such matters, and has none of the features of an oppressive bargain where the borrower is at the mercy of an unscrupulous lender.” [455]

Unapplicable in the present case,

  • “equity may give relief against contractual terms in a mortgage transaction if they are oppressive or unconscionable, and in deciding whether or not a particular transaction falls within this category the length of time for which the contractual right to redeem is postponed may well be an important consideration.” [457]

Equity cannot reform mortgage transactions on the basis that they are unreasonable, it concerns where the agreement has not been observed and oppressive/unconscionable terms have been enforced. [457]