CLAUSE 2.—(Validity of provision in mortgage for repayment of loan by instalments.) (Hansard, 30 June 1932)

§ The CHAIRMAN
I think that this Amendment is not in order as it amounts to a direct negative of the Clause.

§ Mr. LEWIS
I shall be glad if at this stage we can have some further explanation of the need for the provision in this Bill which takes away from the farmer the right which is enjoyed by all other persons who borrow money on mortgage. There is among agriculturists a good deal of uncertainty as to why this special provision should be made in their case. As hon. Members know, it is the universal rule that a person who mortgages his property cannot be prevented from redeeming it for an unreasonable time if he is willing and able to do so. I believe I am right in saying that it is a working rule in the courts that a period of from seven to 10 years may be held to be. for this purpose, an unreasonable period. A man who borrows money on terms making it repayable over a great number of years may come in time to regret that the period fixed was so long. He may acquire funds from some unexpected source, for example, under a will, or there may be some great change, such as we have witnessed, in the value of money, which may mean that if he could redeem his property he could borrow again on much more favourable terms. It is for these reasons that the courts have always refused to allow a man so to bind himself that he cannot redeem his property, if able and willing to do so, until after an unreasonable time has elapsed. By this Clause this privilege is to be expressly taken away from farmers borrowing money from the corporation which was created under the original Act, and I think we are entitled to some explanation as to why that is regarded as necessary.
It might be urged that if no such provision were made the whole contract might 2053 be invalidated, and that the corporation would be unable to recover from year to year the sums agreed to be paid by way of return of capital and interest. If that be the only reason I would submit that some countervailing provision should have been put in the Bill, so that the borrower, though deprived of the protection afforded to other similar borrowers by the courts of equity, would get the compensation of a special Clause which would enable him, on giving a certain number of years' notice, and being willing to pay the proper amount, to redeem his property. On the face of it, and from the very short explanation we had on Second Reading, I cannot gather what further reason there may be for this provision and I think we should be told why it is necessary to take away from farmers borrowing from this corporation this right which has been granted by the Courts to all other persons.

§ Sir JOHN RUTHERFORD
Before the Solicitor-General replies, may I make a further point with regard to this Clause, as one who has advised clients in regard to these mortgages and who is himself also a mortgagor under the original Act? Where I had the original form of mortgage put before me, I saw that it contained a proviso, which is, in substance, this suggested Clause, saying that the mortgage could not be paid off, except with the permission of the Board, before the stated time. I have advised clients that that provision in the mortgage was invalid. It may be that farmers have taken up these loans disregarding what it states in the mortgage, just as one disregards the ordinary provision for redemption in a mortgage, not taking it literally but more as an expression of intention and there might be an injustice if this Clause were to apply to mortgages already in existence. Would it not be more equitable to limit it in its application to mortgages which are made in future? That is a point upon which I should like the Solicitor-General to reply.

§ The SOLICITOR-GENERAL (Sir Boyd Merriman)
The point which was made by the hon. Member for Colchester (Mr. Lewis) really goes to the whole root of this Bill. When the Act of 1928 was passed this House sanctioned the setting up of a company for the purposes, as the Act itself showed, of making long-term advances for the benefit of the agricul- 2054 tural community. It was of the essence of the scheme that it should be a long-term scheme, and, as the Act itself shows, it was with a view to securing that the loans by such a company should be made on terms most favourable to borrowers; and I suppose nobody will dispute that the farming community have, in fact, derived great benefits from it. But the finance of the scheme was based, as the Act itself said, upon this being a long-term scheme, and not changeable at the will of the mortgagor—because he has come into a legacy, as the hon. Member for Colchester suggested—into a short-term scheme should it happen to suit him and be disadvantageous to the company.
I am afraid that I cannot accept the suggestion of the hon. Member for Edge-hill (Sir J. Rutherford) that people have been under any genuine misapprehension as to the nature of the scheme in the meantime. The whole idea was to set up machinery for long-term credits, which would only be changeable by the mutual consent of both parties, and not at the will of only one. That was what it was thought the Act of 1928 had achieved; but although there has never been any decision on the point—I am not able to find any actual, reported case—I understand that doubts have been expressed as to whether, if the matter were challenged, the ordinary rule, which was stated quite accurately by the hon. Member for Colchester, might not apply. It is to remove those doubts, and to restore what was the plain intention of the Act, that it has been necessary to bring forward this Bill. I cannot accept the suggestion that there is any hardship in making it retrospective. Therefore, I hope the House will reject the suggestion that there should be any amendment of the Clause.