AGRICULTURAL CREDITS (MORT- GAGES) BILL. [H.L.] (Hansard, 25 May 1932)

§ THE LORD CHANCELLOR (VISCOUNT SANKEY)

My Lords, I beg to move that this Bill be now read a second time. I think it is an entirely uncontroversial measure. Its object is to supplement the provisions of the Agricultural Credits Act, 1928. The matter is a rather technical legal one, but capable of very brief explanation. The object of the 1928 Act is stated in the Preamble to be as follows: An Act to secure, by means of the formation of a company and the assistance thereof out of public funds, the making of loans for agricultural purposes on favourable terms, and to facilitate the borrowing of money on the security of farming stock and other agricultural assets, and for purposes connected therewith. Your Lordships consented to the passing of the Act, which is a great help to agriculture in this country.

The manner in which the object of the Act was to be secured was this. It was to enable long-term credits to be granted, and it states in Section 1 that: With a view to the incorporation of a company having for its principal objects— (a) the making of loans on mortgages of agricultural land. certain public assistance should be given to the company, and it is provided by Section 2 (3) (c) that the memorandum of the company shall make provision for 440 regulating the loans to be made by the company on mortgage, so that a loan shall in no case exceed two-thirds of the estimated value of the mortgaged property at the time of the loan, and that the loans shall be repayable by equal yearly or half-yearly instalments of capital and interest spread over a period not exceeding sixty years.

That being the Act, the company was duly formed, but there is a small legal difficulty in its way. Your Lordships are perfectly aware that a mortgagor is always entitled to redeem his property, and though redemption may be postponed for a number of years, there is a rule in equity which makes inoperative any covenant or agreement or arrangement whereby, in effect, a mortgagor is restrained for an unreasonable time from redeeming the property mortgaged. You will readily recognise that it would be unreasonable that he should not be able to redeem for a hundred years, and it has become a sort of working rule in the Courts now that anything more than seven or ten years may be an unreasonable time. The object of the present Bill is to make it clear that this rule of equity is not to apply to mortgages made under Section I (1) (a) of Part I of the principal Act, and that notwithstanding the rule such mortgages may not be redeemed, apart from agreement, before expiry of the period over which the repayment instalments are spread.

That being the object of the Bill, your Lordships will permit me now to go rapidly through the clauses. Clause 1 of the Bill simply validates any orders which have been made by the Courts under the principal Act. Clause 2 is the important clause of the Bill, and says that notwithstanding any rule of equity to the contrary a provision in a mortgage requiring the loan secured thereby to be repaid by such instalments of capital and interest as are specified in paragraph (c) of subsection (3) of Section 2 of the principal Act, shall not be treated as being invalid by reason only that the mortgage is thereby rendered irredeemable for the period during which the instalments are payable. The whole object is to enable these mortgages to last rather longer than the ordinary time provided for in equity.

There is only one other clause to which I need call your Lordships' attention, and 441 that is Clause 3, which makes provision as to mortgages where land is held in trust. That is rather a technical matter with which I need not trouble your Lordships at any length. It chiefly refers to mortgages authorised to be made by tenants for life, and the effect of the clause is as follows: Subsection (1) empowers persons who hold land in a fiduciary capacity (that is, who have the powers of a tenant for life under the Settled Land Act, 1925) to borrow from the corporation or company on mortgage, on the terms of repaying by instalments without the right to redeem the mortgage in any other way. Some provision has to be made as to the incidence of the instalments as between capital and income, because the question of that incidence will necessarily arise in the great majority of cases of mortgages by fiduciary owners on the special terms, and it would be possible to provide that such part of the instalments as represents interest should be borne by income and such part as represents repayments of principal by capital.

The reasons for adopting the principle of imposing the whole liability on income are these:(a)in a case where the trust property consists solely of the land mortgaged, or in any other case where there are no liquid assets subject to the same trusts, it would as a practical matter be difficult or impossible to pay any part of the instalments out of capital;(b)the general principle of equity is that income must keep down all periodical payments extending over a considerable period; and (c)in the case which is in purpose and effect, though not in legal form, closely analogous to these instalments, of instalments of charges under the Land Improvement Act, 1864, that Act imposes by Section 66 the whole liability on income. Since that time there have been numerous decisions, and we have a body of law that is certain and which will be of great assistance if any dispute should arise.

The only other subsection is subsection (3) which deals with two matters, of which I need only refer to one—namely, the redemption out of capital of a mortgage normally repayable by instalments, which under subsection (2) must be borne by income. It is always open to the corporation to consent to a loan 442 being paid off by way of anticipation of the instalments, but where the improvements are of a kind authorised by the Settled Land Act, 1925, the position is precisely analogous to that of a charge made under the Land Improvement Act, and such a charge as that may be redeemed out of capital. It would not be reasonable that an owner should be able to redeem one liability out of capital but not the other. The whole object of the subsection, therefore, is to enable a mortgage normally repayable by instalments out of income to be redeemed out of capital, in circumstances similar to those in which an improvement rent-charge could be redeemed out of capital. It is a technical matter, but it only enables the bank or company in question to carry out the terms which have been stipulated. The last clause, Clause 4, deals with the title only. I beg to move that the Bill be now read a second time.