Cityland and Property (Holdings Ltd) v Dabrah [1968] Ch 166
Mortgages and collateral advantages.
Facts
The plaintiffs, Cityland, sold a house to a former tenant for £3,500. The tenant paid £600 in cash and took out a mortgage from the plaintiffs for the remaining £2,900 over six years. There was no provision for the payment of interest. Instead the mortgage contained a premium of £1,653 that represented 19% interest per year, or 57% of the whole loan. The mortgage contained a term that in the event of a default the entire £4,553 was payable.
Issues
The defendant sought equitable relief against the premium charged on the grounds that it was an unreasonable collateral advantage. The plaintiffs argued that Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25 meant there were no public policy grounds to oppose the existence of a collateral advantage. This was a commercial transaction and the defendant was not poor or ignorant.
Decision/Outcome
The court held that it would grant relief against a collateral advantage if was unconscionable, paying particular attention to the size of the advantage. This meant the advantage could not be unfair or unreasonable. Reasonableness and fairness would depend on the circumstances. The agreement imposed an extremely high premium rate rather than interest, amounting to 57% of the loan. The plaintiffs could not justify charging such a high amount in lieu of interest. Also, in case of default the entire amount became due. This was unconscionable. Consequently, the court used its inherent jurisdiction to rewrite the agreement, and the borrower was allowed to repay the loan together with 7% interest, which was reasonable.
Updated 21 March 2026
This article accurately summarises the facts, issues, and outcome of Cityland and Property (Holdings) Ltd v Dabrah [1968] Ch 166 and the equitable principles concerning collateral advantages in mortgage law as established by that case. The case remains good law for the proposition that equity will intervene against a collateral advantage that is unconscionable, and the discussion of Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25 is correctly represented.
Readers should be aware of two material contextual developments. First, the Consumer Credit Act 1974 and, more recently, the consumer credit regulatory framework administered by the Financial Conduct Authority (including the FCA’s Consumer Duty under the Financial Services and Markets Act 2023) now provide extensive statutory and regulatory protections in consumer lending contexts that did not exist at the time of this decision. In many modern consumer mortgage situations, challenges to unfair or extortionate terms would more naturally proceed under this statutory framework rather than relying solely on the equitable jurisdiction illustrated in Dabrah. Second, the Unfair Terms in Consumer Contracts Regulations 1999 (now consolidated into the Consumer Rights Act 2015) may also be relevant where a borrower is a consumer. The equitable principles in Dabrah remain significant, particularly in non-consumer or commercial mortgage contexts, but students should understand that the purely equitable route now sits alongside a substantial body of statute.
