## Samuel v Jarrah Timber and Wood Paving Corp Ltd [1904] AC 323

This case is a key precedent in English law regarding mortgages and the concept of “equity of
redemption.” Here’s a breakdown of the case:

**Facts:**

* Samuel (borrower) borrowed money from Jarrah Timber and Wood Paving Corp Ltd (lender)
using his debenture stock (company loan) as security.
* The loan agreement included an option for the lender to purchase the debenture stock within 12
months at a significant discount (40% of its value).

**Issue:**

 Did the option to purchase render the transaction unfair and prevent Samuel from
redeeming his debenture stock (paying back the loan and regaining ownership)?

**Holding:**

* The House of Lords ruled in favor of Samuel.

* The court upheld the principle of “once a mortgage, always a mortgage.” This means that a
mortgage inherently allows the borrower to redeem the mortgaged property upon repayment of
the loan.
* The court considered the option to purchase as an unfair “clog” on Samuel’s equity of
redemption, meaning it hindered his ability to get his debenture stock back by making the
repurchase price unreasonably low.

**Significance:**

* This case reaffirmed the importance of protecting borrowers’ rights in mortgage agreements.
* It established that lenders cannot include clauses that effectively prevent redemption through
seemingly separate options to purchase.
* The principle applies not only to land mortgages but also to other forms of secured loans, like
debenture stock in this case.

**Additional Points:**

* The court acknowledged the potential for modifying the “once a mortgage” rule in specific
situations with fair negotiations between parties on equal footing. However, in this case, such
conditions weren’t met.
* The case highlights the court’s role in ensuring fairness and preventing lenders from exploiting
borrowers’ financial vulnerability.

Would you like to know more about the specific judges’ opinions or the historical context of the
case?