White v City of London Brewery Co (1889) 42 Ch D 237
Facts
A brewery held a mortgage over a public house and entered into possession. It arranged for the premises to be operated under a restriction requiring beer to be purchased from the brewery. The brewery therefore received income connected with the pub and also made profits through its separate business supplying beer. In the mortgage accounting proceedings, the mortgagor sought to recover those supply profits. The dispute required the court to distinguish receipts and profits of the mortgaged public-house business from the brewery’s independent trading profits, and to consider the scope of the accounting order already made.
Legal Issue
Did the accounting order entitle the mortgagor to the brewery’s separate beer-supply profits, and how did a tied letting affect the mortgagee’s responsibility for rent?
Held
The Court of Appeal rejected the attempt to bring the brewery’s separate supply profits within the existing accounting order. Cotton LJ explained that the relevant inquiry concerned the business carried on at the public house, rather than the mortgagee’s own brewing business. That procedural distinction was central. He also recognised a different possible complaint: if imposing the beer tie reduced the rent reasonably obtainable for the premises, the mortgagor could be entitled to relief for that difference. The court therefore did not grant mortgagees a general exemption from accounting. It distinguished the appropriate rental account from an attempt to capture a separate trading profit outside the order.
⭐ Legal Principle
A mortgagee in possession must account on the proper basis for the mortgaged property, but an account does not automatically extend to profits of a separate business. A tied letting which depresses obtainable rent can raise a distinct claim concerning the rental account.
Significance
White is useful for identifying the correct loss and accounting measure when a mortgagee pursues its own commercial advantage. The difference between reduced rent and the supplier’s trading profit is substantive, while the scope of the existing order also mattered procedurally. Students should avoid stating that all collateral profits belong to the mortgagor, or that none can ever be relevant. The particular activity, the mortgagee’s duty and the remedy actually claimed must be examined.
Common exam questions about this case
Why did the mortgagor not simply receive the beer-supply profits?
The accounting order concerned the public-house business conducted on the mortgaged premises, not the brewery’s separate trade. That limited what could be claimed in those proceedings. The judgment should therefore not be reduced to a broad rule awarding every business profit made by a mortgagee while it holds possession.
Why might a reduced rent still matter?
If the beer tie caused the mortgagee to obtain less rent than an untied letting would reasonably have produced, that shortfall concerned the proper management and account of the mortgaged property. It was a different complaint from demanding the brewery’s entire profit on beer supplied to the tenant.
Does the case excuse a mortgagee from accounting for the property?
No. It distinguishes the scope and measure of the account. The mortgagee’s obligations concerning receipts, management and rent remain relevant. A student should identify whether the claim concerns income from the mortgaged asset, an avoidable rental shortfall or profits of a genuinely separate business, rather than treating all three as identical.