Cityland and Property (Holdings Ltd) v Dabrah

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Last modified: 12/10/18 Author: In-house law team

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Cityland and Property (Holdings Ltd) v Dabrah [1968] Ch 166

Mortgages and collateral advantages.


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.


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.


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.

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