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Coram: Macnaghten, Davey, Robertson, Lindley LL
Shares in a tea company had been mortgaged to secure a loan from a broker on terms that the mortgagor would seek to ensure that the mortgagee should thereafter have sale of the company’s teas. The mortgage contained a covenant that, if the company sold its teas otherwise than through the mortgagee, the mortgagor would pay to the mortgagee an amount equivalent to the commission that he would have earned from the company as broker. It was complained that the agreement was a clog on the mortgagor’s equity of redemption.
Held: (Lord Lindley dissenting): The agreement did not fail, falling within the principle in Noakes v Rice.