Clogging the Equity of Redemption: An Outmoded Concept?

Abstract

In his article, "The Modern Application of the Rule Against Clogs on the Equity of Redemption" published in 1997, Peter Devonshire very comprehensively examined what could be considered the remnants of the doctrine of clogs upon the equity of redemption, particularly relating to the thorny issue of a mortgagee taking an option to purchase as part of the conditions of loan. Since this article, there have been additional decisions where the conduct of the mortgagee may have earlier been characterised as a clog on the equity of redemption, such as the charging of excessive interest rates, but has now been characterised as constituting unconscionable conduct. In the past several years, the law relating to unconscionability has developed further, stronger consumer credit legislation in relation to domestic financing has been enacted and the Trade Practices Act 1974 has been strengthened by the enactment of s 51AC dealing specifically with unconscionable conduct in business dealings. This article takes account of more recent cases, and argues that in the modern legislative environment and with significant developments in the law relating to unconscionability, that the doctrine relating to clogs on the equity of redemption may have outlived its usefulness in 21st century commerce.