Fairclough v Swan Brewery Co Ltd [1912] AC 565
Equity of redemption means that mortgage cannot be made irredeemable
Facts
The appellant bought a hotel from a vendor who held the hotel under a lease which was due to expire in June 1925. The property was mortgaged to the respondent lender. The respondent was a brewery company and the mortgage deed contained a covenant which required the appellant to purchase beer and ale exclusively from the respondent. The respondent refused to allow the appellant to pay off the mortgage early in 1910.
Issues
On Appeal from the Supreme Court of Western Australia, the question for the Privy Council was whether the mortgage deed, which precluded early redemption of the mortgage and precluded the appellant from purchasing beer from any other person during the term of the mortgage, was void as being a clog on the equity of redemption and in terms of being an unreasonable restraint on trade.
Decision/Outcome
The Privy Council observed the firmly established rule that equity will not permit any term in a mortgage to prevent or impede redemption of the mortgage. Counsel on behalf of the respondents had admitted that a mortgage cannot be made irredeemable. In the circumstances, the provision for redemption was nugatory and the mortgage irredeemable. Therefore, the Privy Council restored the judgment of the First Instance judge and held that the appellant was entitled to redeem the mortgage and the provisions in the mortgage deed which prevented the appellant from redeeming were void as being an unreasonable clog on the appellant’s equity of redemption. After the redemption had been refused by the respondent there was no breach of the mortgage deed by the appellant.
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Updated 19 March 2026
This case summary accurately describes the facts, issues, and outcome of Fairclough v Swan Brewery Co Ltd [1912] AC 565. The core equitable principle that a mortgage cannot be made irredeemable, and that clogs on the equity of redemption are void, remains part of English and Welsh law. However, readers should be aware of two material developments.
First, the doctrine of clogs on the equity of redemption has been significantly reconsidered in more recent case law. In Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25, the House of Lords confirmed that collateral advantages in mortgages are not automatically void and will be assessed on their own terms. More significantly, in Jones v Morgan [2001] EWCA Civ 995, the Court of Appeal expressed considerable doubt about the continued utility and coherence of the clog doctrine, with Chadwick LJ describing it as an appendix to the law which serves no useful purpose and should be excised. The doctrine has not been formally abolished, but its scope is now understood to be narrower and more uncertain than older authorities such as Fairclough might suggest.
Second, the law on restraint of trade and solus agreements has developed considerably since 1912, and students should not treat this case as an authoritative statement on restraint of trade principles in modern law.
The case remains a foundational authority for the basic principle that a mortgage must be redeemable, but should be read alongside later case law when considering the broader doctrine of clogs on the equity of redemption.
