Between: Esso Petroleum Co Ltd - Appellant
And: Harper's Garage (Stourport) Ltd - Respondent

Judges: Lord Reid
Lord Morris of Borth-y-Gest
Lord Hodson
Lord Pearce

Lord Wilberforce

Subject References:
MORTGAGE
Equity of redemption
Restraint of trade
Mortgage tied with sales agreement with oil company for sale of petrol
Mortgage irredeemable for 21 years with sales tie
Whether doctrine of restraint of trade applicable to covenants in mortgage
Whether mortgage unreasonable and invalid
Whether mortgage oppressive and redeemable
RESTRAINT OF TRADE
Sale of goods
Restriction on brand of goods
Tied garages
Sales agreements with oil companies for sale of petrol
Agreements for four years and five months and 21 years respectively
Mortgage of garage irredeemable for 21 years with sales tie
Whether agreements in unlawful restraint of trade
whether Reasonable
Whether categories closed
Restrictions falling within doctrine
Whether applicable to covenants in mortgage

Judgment by:
Lord Wilberforce

My Lords, the main features in the solus agreements entered into by the respondent company with Esso are that the respondent agreed to purchase from Esso the whole of its requirements of motor fuel for resale at the relevant service stations, accepted a resale price maintenance clause, agreed to operate the relevant service stations in accordance with the Esso dealer co-operation plan, which included a provision that the service station should be kept open at all reasonable hours for the sale of Esso petrol and oil, and, lastly, agreed that, before completing any sale or transfer of the relevant service station, the respondent would notify Esso and procure the intended successor to assume the respondent's obligations under the agreement.

In the case of the Mustow Green Garage, the agreement, dated June 27, 1963, was expressed to operate for four years and five months from July 1, 1963, this being the residue of a longer period which was taken over by the respondent from a previous operator of the station.

In the case of the Corner Garage at Stourport-on-Severn the agreement, dated July 5, 1962, was expressed to operate for 21 years from July 1, 1962. In addition to this solus agreement, the respondent entered into a mortgage of this station, dated October 6, 1962, by which the station was charged to Esso to secure a sum not exceeding £7,000 with interest. The principal sum was repayable - and only repayable - by instalments over 21 years from November 6, 1962. There were certain special provisions in the mortgage deed which I need not specify at the present stage.

The first main issue is whether these agreements are to be regarded as agreements in restraint of trade so as to be exposed to the tests of reasonableness stated in the Nordenfelt case. ^[F88] It is the appellant's contention that they are not, mainly on the ground that they relate to the use of the respondent's land, and that covenants, or contracts, which so relate are by their nature incapable of being regarded as in restraint of trade. This contention has made it necessary to consider how a covenant or contract in restraint of trade is to be defined or identified.

The doctrine of restraint of trade (a convenient, if imprecise, expression which I continue to use) is one which has throughout the history of its subject-matter been expressed with considerable generality, if not ambiguity. The best-known general formulations, those of Lord Macnaghten in Nordenfelt ^[F89] and of Lord Parker of Waddington in Adelaide, ^[F90] adapted and used by Diplock L.J. in the Court of Appeal in the Petrofina case, ^[F91] speak generally of all restraints of trade without any attempt at a definition. Often we find the words "restraint of trade" in a single passage used indifferently to denote, on the one hand, in a broad popular sense, any contract which limits the free exercise of trade or business, and, on the other hand, as a term of art covering those contracts which are to be regarded as offending a rule of public policy. Often, in reported cases, we find that instead of segregating two questions, (i) whether the contract is in restraint of trade, (ii) whether, if so, it is "reasonable," the courts have fused the two by asking whether the contract is in "undue restraint of trade" or by a compound finding that it is not satisfied that this contract is really in restraint of trade at all but, if it is, it is reasonable. A well-known text-book describes contracts in restraint of trade as those which "unreasonably restrict" the rights of a person to carry on his trade or profession. There is no need to regret these tendencies: indeed, to do so, when consideration of this subject has passed through such notable minds from Lord Macclesfield onwards, would indicate a failure to understand its nature. The common law has often (if sometimes unconsciously) thrived on ambiguity and it would be mistaken, even if it were possible, to try to crystallise the rules of this, or any, aspect of public policy into neat propositions. The doctrine of restraint of trade is one to be applied to factual situations with a broad and flexible rule of reason.

The use of this expression justifies re-statement of its classic exposition by White C.J. in Standard Oil Co. of New Jersey v. United States. ^[F92] Speaking of the statutory words "every contract in restraint of trade "(Sherman Act, 1890), admittedly taken from the common law, almost contemporaneous with Lord Macnaghten's formula and just as wide, he said: ^[F93]

"... as the acts which may come under the classes stated in the first section and the restraint of trade to which that section applies are not specifically enumerated or defined it is obvious that judgment must in every case be called into play in order to determine whether a particular act is embraced within the statutory classes, and whether if the act is within such classes its nature or effect causes it to be a restraint of trade within the intendment of the Act ..."

And he goes on to say that to hold to the contrary would involve either holding that the statute would be destructive of all right to contract or agree or combine in any respect whatsoever, or that, the "light of reason" being excluded, enforcement of the statute was impossible because of its uncertainty. The right course was to leave it to be determined by the light of reason whether any particular act or contract was within the contemplation of the statute. One still finds much enlightenment in these words.

This does not mean that the question whether a given agreement is in restraint of trade, in either sense of these words, is nothing more than a question of fact to be individually decided in each case. It is not to be supposed, or encouraged, that a bare allegation that a contract limits a trader's freedom of action exposes a party suing on it to the burden of justification. There will always be certain general categories of contracts as to which it can be said, with some degree of certainty, that the "doctrine" does or does not apply to them. Positively, there are likely to be certain sensitive areas as to which the law will require in every case the test of reasonableness to be passed: such an area has long been and still is that of contracts between employer and employee as regards the period after the employment has ceased. Negatively, and it is this that concerns us here, there will be types of contract as to which the law should be prepared to say with some confidence that they do not enter into the field of restraint of trade at all.

How, then, can such contracts be defined or at least identified? No exhaustive test can be stated - probably no precise non-ex-haustive test. But the development of the law does seem to show that judges have been able to dispense from the necessity of justification under a public policy test of reasonableness such contracts or provisions of contracts as, under contemporary conditions, may be found to have passed into the accepted and normal currency of commercial or contractual or conveyancing relations. That such contracts have done so may be taken to show with at least strong prima force that, moulded under the pressures of negotiation, competition and public opinion, they have assumed a form which satisfies the test of public policy as understood by the courts at the time, or, regarding the matter from the point of view of the trade, that the trade in question has assumed such a form that for its health or expansion it requires a degree of regulation. Absolute exemption for restriction or regulation is never obtained: circumstances, social or economic, may have altered, since they obtained acceptance, in such a way as to call for a fresh examination: there may be some exorbitance or special feature in the individual contract which takes it out of the accepted category: but the court must be persuaded of this before it calls upon the relevant party to justify a contract of this kind.

Some such limitation upon the meaning in legal practice of "restraints of trade" must surely have been present to the minds of Lord Macnaghten and Lord Parker. They cannot have meant to say that any contract which in whatever way restricts a man's liberty to trade was (either historically under the common law, or at the time of which they were speaking) prima facie unenforceable and must be shown to be reasonable. They must have been well aware that areas existed, and always had existed, in which limitations of this liberty were not only defensible, but were not seriously open to the charge of restraining trade. Their language, they would surely have said, must be interpreted in relation to commercial practice and common sense.

Any attempt to trace historically the development of the common law attitude towards "restraints" of different kinds would be out of place here, and generalisations as to it are hazardous. But a few examples of comparatively modern origin show how some such rule of action, however imperfectly I have expressed it in words, has been operated. In some cases the process can be seen whereby a type of contract, initially regarded with suspicion, has later come to be accepted as not, or no longer, calling for justification.

First, there are the brewery cases. Contractual clauses tying a leased public-house to the lessor's beers have been known, and commonly current, at least since the early 19th century (for an early case see Hartley v. Pehall. ^[F94] In the form which they then assumed (commonly providing that if the tying covenant was broken there should be an increased rent recoverable by distress) we find them encountering some judicial criticism (Cooper v. Twibill, ^[F95] per Lord Ellenborough C.J.). But by 1850 they had become current; the attrition of negotiation and competition may be taken to have worn them down to an acceptable shape and in Catt v. Tourle ^[F96] the Court of Appeal in Chancery not only accepted that such covenants were outside the doctrine of restraint of trade, but was prepared to extend the exclusion to the case where the servient house was sold instead of leased. I quote Selwyn L.J.'s words: ^[F97]

"... with respect to this particular covenant, it seems to me that the court cannot but take judicial notice of its being extremely common. Every court of justice has had occasion to consider these brewers' covenants, and must be taken to be cognisant of the distinction between what are called free public-houses and brewers' public-houses which are subject to this very covenant. We should be introducing very great uncertainty into a very large and important trade if we were now to suggest any doubt as to the validity of a covenant so extremely common; as this is."

And Giffard L.J. added ^[F98] "it does not go beyond the ordinary brewer's covenant." Neither of the Lords Justices, it will be seen, puts his decision upon the ground (simple and decisive if he had thought it appropriate) either that the covenant related to the use to be made of land, or that it was imposed on a disposition of land. That it was too late to subject such tying covenants to the test appropriate in restraint of trade was stated in 1889 by Bristowe V.-C. of the County Palatine of Lancaster (Clegg v. Hands, ^[F99] and the issue was not even debated in the Court of Appeal.

The working of the same principle can be seen even earlier in relation to covenants restricting trade in leases generally. In the normal exploitation of property, covenants are entered into, by lessee or lessor, not to trade at all or not to carry on particular trades. In 1614 (Rogers v. Parrey ^[F100] the issue, whether a covenant in a lease for 21 years not to exercise a particular trade was in restraint of trade, was still susceptible of debate, but Coke C.J. and the judges of the King's Bench upheld its validity. By 1689 this seems to have become accepted doctrine, for in Thompson v. Harvey ^[F101] Holt C.J. was able to say: "It is usual to restrain a lessee from such a trade in the house let," giving as the reason "for I can choose whether I will let the house, or not." (Compare in relation to chattels, United Shoe Machinery Co. of Canada v. Brunet. ^[F102]

The same has come to be true of dispositions of the freehold: for over 100 years it has been part of the normal technique of conveyancing to impose and to accept covenants restricting the use of land, including the use for trades or for trade generally, whether of that conveyed or of that retained. A modern example of this is Newton Abbott Co-operative Society Ltd. v. Williamson & Treadgold Ltd. ^[F103]

One may express the exemption of these transactions from the doctrine of restraint of trade in terms of saying that they merely take land out of commerce and do not fetter the liberty to trade of individuals; but I think one can only truly explain them by saying that they have become part of the accepted machinery of a type of transaction which is generally found acceptable and necessary, so that instead of being regarded as restrictive they are accepted as part of the structure of a trading society. If in any individual case one finds a deviation from accepted standards, some greater restriction of an individual's right to "trade," or some artificial use of an accepted legal technique, it is right that this should be examined in the light of public policy. An example of this process in a lease (a lessor's covenant as to trading) may be found in Hinde v. Gray, ^[F104] and, in a conveyance, in the Scottish case of Aberdeen Varieties Ltd. v. James F. Donald (Aberdeen Cinemas) Ltd. ^[F105]

Then there is the well-known type of case where a man sells his business and its goodwill and accepts a limitation on his right to compete. Here too we can see the period of scrutiny in the 17th century. That, on the sale of the goodwill of a business, a promise might validly be given not to carry on the relevant trade was established, after debate, in Broad v. Jollyfe ^[F106] - the covenant held void - reversed in the King's Bench, sub nom. Jollie v. Broad, ^[F107] where Dodderidge J. said that it was the usual course of men in their old age to turn over their trade to another, general recognition was given to this type of covenant by Lord Macclesfield in Mitchel v. Reynolds. ^[F108] So the rule has become accepted that, in the interest of trade itself, restrictions may be imposed on the vendor of goodwill provided that they are fairly and properly ancillary to the sale: if they exceed this limit the "doctrine" may be applied (see Leather Cloth Co. v. Lorsont, ^[F109] where James V.-C. excepted "natural" covenants from the "doctrine").

The line of thought that restrictions may in some contexts be imposed, and upheld, where they have become part of the accepted pattern or structure of a trade, as encouraging or strengthening trade, rather than as limiting trade, is I think behind the courts' acceptance of exclusivity contracts and contracts of sole agency. So, in Servais Bouchard v. Prince's Hall Restaurant Ltd., ^[F110] the contract was for exclusive purchase of burgundy for the defendant's restaurant for an indefinite period. The judgments of the Lords Justices are based on different grounds and it was held, in any event, that the covenant was reasonable; but the judgment of Henn Collins M.R. is instructive. He thought that the case did not come within the principle by which restraints of trade were held to be invalid as being contrary to public policy. Contracts of the same class as that now in question, viz., contracts by which persons bound themselves for good consideration to supply their customers with goods obtained from a particular merchant exclusively, were for the benefit of the community. There was need for contracts of this kind and the court must have regard to the fact that contracts for sole agency were matters of every-day occurrence. (See too W. T. Lamb & Sons v. Goring Brick Co. Ltd., ^[F111] where the agreement was not challenged, and British Oxygen Co. Ltd. v. Liquid Air Ltd. ^[F112] In the Adelaide case ^[F113] an agreement for exclusive purchase of a more comprehensively restrictive character was held to be in restraint of trade.)

Lastly (though this is still an uncertain field) certain contracts of employment, with restrictions appropriate to their character, against undertaking other work during their currency may be acceptable. (Compare Warner Pictures Incorporated v. Nelson; ^[F114] Gaumont-British Picture Corporation Ltd. v. Alexander. ^[F115] But here too it is found that if the restriction is purely limitative or sterilising, it may be subject to examination (see Gaumont-British Picture Corporation Ltd. v. Alexander, ^[F116] per Porter J. and compare the facts in Young v. Timmins: ^[F117] the decision was mainly based on inadequacy of consideration).

These illustrations are sufficient to show that the courts are not lacking in tools which enable them to select from the whole range of those contracts, which in one way or another limit freedom in trading, segments of current and recognisably normal contracts which are not currently liable to be subjected to the necessity of justification by reasonableness. Such contracts may even be listed, provisionally, in categories (see Gare, The Law Relating to Covenants in Restraint of Trade (1935); Cheshire & Fifoot, Law of Contract, 6th ed. (1964), pp. 324, 329 et seq.) but the classification must remain fluid and the categories can never be closed.

I turn now to the agreements. In my opinion, on balance, they enter into the category of agreements in restraint of trade which require justification. They directly bear upon, and in some measure restrain, the exercise of the respondent's trade, so the question is whether they are to be treated as falling within some category excluded from the "doctrine" of restraint of trade. The broad test, or rather approach, which I have suggested, is capable of answering this. This is not a mere transaction in property, nor a mere transaction between owners of property: it is essentially a trade agreement between traders. It is not a mere agreement for exclusive purchase of a commodity, though it contains this element: if it were nothing more, there would be a strong case for treating it as a normal commercial agreement of an accepted type. But there are other restrictive elements. There is the tie for a fixed period with no provision for determination by notice, a combination which McEllistrim's case ^[F118] shows should be considered together, and there is the fetter on the terms on which the station may be sold. Admittedly Harpers could liberate themselves by finding a successor willing to take their place: admittedly, too, being a limited company, they could trade in several places simultaneously, so that even if they remained tied to these sites, and obliged to continue trading there, they could in theory set up business elsewhere. But just as in McEllistrim's case ^[F119] the reality of the covenantor's restraint was considered more relevant than his theoretical liberty to depart, so here, in my opinion, addition of all the ingredients takes the case into the category of those which require justification. Finally the agreement is not of a character which, by the pressure of negotiation and competition, has passed into acceptance or into a balance of interest between the parties or between the parties and their customers; the solus system is both too recent and too variable for this to be said.

The test, suggested by the appellants, seems, by comparison, artificial and unreal. The covenant, they say, is not in restraint of trade because it relates to the use of the respondent's land. Not only does it require an effort of mind to regard the covenant in this way, but the comment is obvious that an opposite result would be produced by so slight an adjustment as by relating the covenant to an area of land instead of to a specific property.

The view which I would take of the agreements moreover agrees, as that suggested by the appellants does not, with those reported cases which have been cited as bearing most directly upon the present.

In McEllistrim's case ^[F120] this House decided that the obligation imposed on a farmer to sell all his milk to the respondent society, a co-operative, was in restraint of trade and unreasonable on the ground that he was thereby prevented from trading both in a wide area in Western Ireland and (effectively) elsewhere and that he had no means open to him to withdraw from the agreement. I find it impossible to extract from the case, even by an argument ex silentio, any inference that had the respondent's obligations been limited to specified land of his, the restrictions would have been exempted from the doctrine. I should be much more inclined to read into it a willingness to accept normal co-operative selling schemes and a rejection of the relevant rule because it was an unusual and excessive fetter on the farmer's personal liberty. English Hop Growers Ltd. v. Dering ^[F121] was another instance of co-operative selling. It is one of those cases to which I have referred in which the decision was a compound one - that the agreement was not in unreasonable restraint of trade. It being apparent that the agreement was both of a normal type (according to Romer J., similar agreements were entered into by 95 per cent. of the hop growers) and inter partes reasonable, it is natural enough that the members of the Court of Appeal based their judgments in different degrees on both these factors. Again one may add that the case lends no support to the appellants' suggestion that the decision was based on the personal character of the agreement or that it would have been any different, or differently expressed, had the agreement related more specifically to the respondents' land. Then there is Servais Bouchard v. Prince's Hall Restaurant Ltd.: ^[F122] I have already referred to this case; I need add here only that the decision, upholding the agreement, is not related in any way to the fact that the contract concerned the use to be made of land.

Lastly there is Foley v. Classique Coaches Ltd., ^[F123] where on a sale of land the purchaser agreed to take all the petrol he needed for his coaching business from the vendor. Scrutton L.J., ^[F124] with whom the other Lords Justices agreed, described the contract as an ordinary one to purchase petrol from a particular person and held there was no "undue restraint of trade," a compound finding, but the ordinary commercial character of the agreement was clearly a strand in it. The fact that the agreement related (as it plainly did) to the use of the defendant's land played no part in the decision.

On this view of the agreements it becomes necessary to subject them to the test of reasonableness. As regards the two solus agreements, having had the benefit of reading the opinions which precede mine, I am content to say that I am in concurrence with them in the view that the Mustow Green agreement does, and that the Corner Garage agreement does not (on account of its long duration), satisfy the test of reasonableness in the interests of the parties. I would only add two observations. The first relates to the ground, I think the main ground, on which the Court of Appeal held that even the 4 years and 5 months for which the Mustow Green agreement was to last was too long. They were faced with the difficulty (which faces us) that there was very little evidence at the trial, and because of the course the trial took, no finding by the judge, of facts which would support a tie for any particular period. So the Court of Appeal, which had to decide the question of reasonableness for the first time, devised a special and more concrete test of their own. They asked themselves the question, how long it would take Esso to find an alternative site if the respondent's site were liberated from the tie, and Lord Denning M.R. arrived at a period of 3 years certain and thereafter subject to 2 years' notice. Diplock L.J., while not committing himself to any firm period, thought that evidence might have justified a period of 2 years or so, or an indefinite period subject to 2 years' notice. I do not feel able to accept this-way of dealing with the matter. The parties have contracted in relation to a particular site and no other: who can say what features of it they considered relevant or significant? How can one judge what site, or whether any site, would be an "alternative" or to what lengths Esso ought to go to find one? What degree of continuity at one place is Esso entitled to expect, or, conversely, how often may Esso be expected to move its outlets without losing goodwill or profits?

None of these questions can, in my opinion, be answered with certainty and the question to be answered is a different question. For what the court is endeavouring to ascertain is whether it is unreasonable for Esso in relation to Esso's interest in selling petrol on this location, to bind Harper's to it in the way that Harper's is bound for the period of the tie; or whether, in the public interest of preserving liberty of action to Harper's Ltd., they ought not to be held in the fetters which they have accepted. There appears to me to be enough in the evidence to show that, on Esso's side, to secure a tie for this period was a legitimate commercial objective; and that as regards Harper's, no public policy objection existed against holding them so long bound. On this point it is I think legitimate to draw support from a number of decisions in various jurisdictions where restrictions of various kinds, over comparable periods, have been upheld (see British America Oil Co. v. Hey ^[F125] (5 years); Peters American Delicacy Co. Ltd. v. Patricia's Chocolates & Candies Proprietary Ltd. ^[F126] (3 years); Ampol Petroleum Ltd. v. Mutton ^[F127] (3 years); Shell Co. of S.A. Ltd. v. Gerran's Garage Ltd. ^[F128] (5 years); Great Eastern Oil Co. Ltd. v. Chafe ^[F129] (3 years)). I should add that I must not be taken either as suggesting that the periods mentioned are maximum periods, or as expressing any opinion as to the validity of ties for periods intermediate between five years and 21 years such as, for example, existed in the Petrofina case ^[F130] (12 years).

The second observation I would make is this: the case has been fought exclusively on the first limb of the Nordenfelt ^[F131] test of reasonableness (in reference to the interest of the parties) the respondent explicitly disclaiming any reliance on the second limb (in reference to the interests of the public). The first limb itself rests on considerations of public policy: it must do so in order to justify releasing the parties from obligations they have voluntarily accepted. But in relation to many agreements containing restrictions, there may well be wider issues affecting the interests of the public than those which relate merely to the interests of the parties; these may have been the subject of inquiry as in this case under statutory powers (Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948) or the subject of a finding by another court (Restrictive Trade Practices Act, 1956) or may be investigated by the court itself. In the present case no separate considerations in this wider field have emerged which are inconsistent with the validity of the Mustow Green solus agreement - on the contrary such as have appeared tend to support it, but I venture to think it important that the vitality of the second limb, or as I would prefer to put it of the wider aspects of a single public policy rule, should continue to be recognised.

Finally it is necessary to deal separately with the mortgage on the respondent's Corner Garage, which the appellant contends falls in a separate category, not subject to the "doctrine" of restraint of trade at all. The submission is that, under accepted principles of equity, there is nothing to prevent a mortgage being made irredeemable for a period provided (and this is the only suggested limitation) that the terms of it are not harsh or unconscionable: for this the appellant invokes the well-known judgment of Lord Greene M.R. in Knightsbridge Estates Trust Ltd. v. Byrne. ^[F132] Indeed the appellant's position is even stronger, it is claimed, because the mortgage ranks as a debenture ^[F133] and so may legitimately be made completely irredeemable (Companies Act, 1948, ss. 89, 455 (1): s.v. debenture). The steps in this argument are coherent once its foundation is made good - that mortgages as such and restrictions in them fall totally outside the "doctrine" of restraint of trade. But is this foundation sound? I consider first the relevant authorities.

The best known of these is Biggs v. Hoddinott, ^[F134] a brewery mortgage case. The decision is conveniently summarised by Lord Davey thus: first that a stipulation for the continuance of a loan for five years was valid, and secondly, that a covenant to take beer from the mortgagee limited to the continuance of the security did not clog the equity of redemption (see Bradley v. Carritt. ^[F135]

The issue as to restraint of trade was not raised. In Morgan v. Jeffreys, ^[F136] another brewery case, where the contractual right of redemption had passed, a provision against redemption before the expiry of 28 years, coupled with a tie, was held to exceed all reasonable limit, but again no question of restraint of trade was raised. Biggs v. Hoddinott ^[F137] was recently followed by Russell J. in Hill v. Regent Oil Co. Ltd. ^[F138] where there was a mortgage, coupled with a tie, for 20 years and it was held that this was not oppressive or unconscionable. The case again was decided purely on the classical principles of equity applicable to mortgages and the judgment makes no reference to restraint of trade. A similar decsion was given in Ontario in Clark v. Supertest Petroleum Corpn. ^[F139]

These authorities then establish, and to that extent I have no desire to question them, that as part of a transaction of mortgage, it is permissible, so far as the rules of equity are concerned, both to postpone the date of repayment and, at any rate during the period of the loan, to tie the mortgagor to purchase exclusively the products of the mortgagee. Such an arrangement would fall fairly within the principle I have earlier suggested, as coming within a recognised and accepted category of transactions, in precisely the same manner as a lease. But just as provisions contained in a lease, affecting the lessees' (or lessors') liberty of trade, which pass beyond what is normally found in and ancillary to this type of transaction and enter upon the field of regulation of the parties' trading activities, may fall to be tested as possible restraints of trade, so, in my opinion, may those in a mortgage.

The mere designation of a transaction as a mortgage, however true, does not ipso facto protect the entire contents of the arrangements from examination, however fettering of trade these arrangements may be. If their purpose and nature is found not to be ancillary to the lending of money upon security, as, for example, to make the lending more profitable or safer, but some quite independent purpose, they may and should be independently scrutinised. This scrutiny is called for in the present case: for it is clear, upon consideration of the mortgage both taken by itself and in its relation to the solus agreement which shorty preceded it, that so far from the tie being ancillary to a predominant transaction of lending money, the mortgage, as was the solus agreement, was entered into as part of a plan, designed by Esso, to tie the Corner Garage to its products for as long as possible. As Harman L.J. put it, ^[F140] after a detailed examination of the terms of the mortgage which I forbear from repeating, "the mortgage was intended to bolster up the solus agreement." It follows, in my opinion, that it must be judged by the test of reasonableness. If this is so, I think there can be little doubt, once a conclusion adverse to the restrictions is reached as to the solus agreement affecting the Corner Garage, that the same must follow as regards the mortgage. I should add that the appellant added to his main argument on this point a subsidiary contention that the stipulations in the mortgage should be regarded in the same legal light as if they had been contained in a lease. For this he referred to section 85 of the Law of Property Act, 1925, and Regent Oil Co. Ltd. v. J. A. Gregory (Hatch End) Ltd.141 I cannot accept this esoteric argument. For if it be the case that inclusion of the relevant restrictions in a mortgage does not save them from examination, they surely cannot be saved because, for conveyancing purposes, the mortgage also bears the character of a lease.

The relationship between the covenant and a lease of the garage site is too technical and notional to bring the case within the recognised exemption which, within limits which I have earlier stated, applies to actual leases of an accepted character.

In my opinion, the appeal should be allowed as regards the Mustow Green Garage and the judgment and order of Mocatta J. so far restored. As regards the Corner Garage it should be dismissed.

Appeal allowed in part.

Solicitors: Piesse & Sons; Field, Roscoe & Co., for F. Glover, Stourport-on-Severn.