AIB Group (UK) Plc v Turner & Ors

Further to Paragraph 104 of my Judgment handed down on 18 December 2015, additional submissions have been made for the Bank and Maxine Turner. Mr Cousins QC’s main additional submission for the Bank was dated 19 January 2016 (for which I extended time). Mr Price’s main submission for Maxine Turner was dated 23 December 2015. The submissions were made without sight of each other’s submissions, and Mr Cousins QC and Mr Price have made short further submissions on 21 January 2016 and 22 January 2016 respectively.

Mr Cousins QC’s submissions enclose a draft Order. I refer to its paragraphs.

Paragraph 1 dismisses the counterclaim of Maxine Turner and gives judgment for the Bank on it. That is not controversial and I make that order.

Paragraph 2 dismisses the Bank’s strike-out application. That follows from my judgment and again is not controversial. I make that order. It has a costs consequence (see below).

Paragraph 3 seeks an order for possession of the Cottage against Maxine Turner. Mr Price makes the point that a claim by the Bank against her for possession is not before me. Whilst I tried her counterclaim dated 8 December 2014, Maxine Turner had been added as a Defendant on 20 October 2014 to the Bank’s claim for possession. Given the dismissal of the counterclaim, Maxine Turner has no defence to the claim for possession. I consider that the Bank is entitled to a possession order against her. The issue between the parties seems to relate to the time for giving possession. Mr Cousins QC suggests 42 days (six weeks from the date of the order approved by me). Mr Price seeks three months. Given the passage of time, I will direct that Maxine Turner gives possession within eight weeks of the Order.

Paragraph 4 provides for the removal of a registration of an interest made against the title to Ewall Lawn which includes the Cottage. I see no proper answer to that order and I make it.

Paragraph 5 deals with costs between the Bank and Maxine Turner. Mr Cousins QC’s draft suggests that she should be ordered to pay 90% of the Bank’s costs, on the standard basis. That acknowledges the Bank’s failure on the strike-out application and that in effect 5% of the costs of each of the Bank and Maxine Turner relate to that issue. Mr Price suggests that the percentage should be either 50% or 45%. He raises in addition to the failed strike-out application, the Bank’s failure to prove as a matter of fact that Maxine Turner signed the 2005 Deed of Consent which the Bank required as a condition of granting its relevant mortgage dated 11 October 2005. I was not satisfied that she did so. In context, I was not persuaded by the late change of view by the Bank that she may have signed the Deed of Consent, borne of written and oral evidence it was able to adduce at trial of Mr Kesterton, the solicitor who acted for the Bank and the Turners in connection with the mortgage and Mrs Bettison, his secretary. I understand Mr Price’s relevant submission to be that if I simply award the Bank its trial costs they should be reduced to 50% to reflect the costs of the factual issue relating to the Deed of Consent, but that if I take the costs of the trial and strike-out application together there should be a further reduction to 45% (in effect a set-off of 2.5% of costs of each of the Bank and Maxine Turner relating to the application). I suspect Mr Price might on reflection have contended for a reduction to 40%.

The general rule is that the unsuccessful party pays the costs of the successful party (CPR 44.2(2)(a)), but the Court may make a different order (CPR 44.2(2)(b)). The Court may have regard to its success on part of a case, even if the party has not been wholly successful (CPR 44.2(4)(b)), and the reasonableness of pursuit of a particular allegation or issue (CPR r.2(5)(b)). Further, the Court can order a payment of a proportion of another party’s costs (CPR 44.2(6)(a)), or costs relating only to a distinct part of the proceedings (CPR 44.2(6)(f)). Before the Court considers making an order under Paragraph (6)(f) it will consider whether it is practicable to make an order under, for example, Paragraph (6)(a) (CPR 44.2(7)).

There appears common ground on the submissions that were I to deduct some of the Bank’s costs to be assessed on the standard basis, I should follow the proportion or percentage route. The Bank has been the successful party, but in relation to the strike-out application Maxine Turner was the successful party. It appears to me sensible to reduce the Bank’s costs by 10% to reflect the failed strike-out application. In relation to the failure of the Bank to establish that Maxine Turner signed the Deed of Consent, I accept that the contentious oral evidence called on behalf of the Bank did not persuade me that the Deed of Consent was signed. However, in my judgment the clear majority of the costs incurred in relation to the counterclaim related to the issues referred to at Paragraph 6(a) to (c) of my Judgment. The main controversial evidence was that of Maxine Turner. She did not establish evidentially a trust or estoppel relating to the Cottage. Moreover, she did not persuade me that she was in actual occupation of the Cottage at the relevant time (the deed of consent point was merely a precursor to consideration of the actual occupation issue). Further considerable time in relation to those issues involved consideration of points of law. I am persuaded to reduce the costs payable to the Bank from 90% to 80% to reflect the time taken on the Deed of Consent issue.

Paragraph 6 seeks an order that the Bank should be entitled to add its costs to its security in accordance with the terms of its mortgage dated 11 October 2005.

It should be recalled that the costs in issue relate largely to the costs of defending Maxine Turner’s counterclaim. The Court of Appeal in Barker-Tweedale v. Dunbar Bank plc (No.2) [1990] 2 All ER 588 noted an exception to the “general rule” that mortgagees can reimburse themselves under the general law out of the mortgaged property for all costs, charges and expenses reasonably and properly incurred in enforcing or preserving their security. The exception is where a third party impugns the title to a mortgage or the enforcement or exercise of some right or power accruing to the mortgagee thereunder, the mortgagee’s costs of the proceedings, even though they be reasonably and properly incurred, are not allowable (see per Nourse LJ at 591, A-C). That exception is noted at CPR 44.5(1). Without “more”, it might be arguable that the Bank’s costs of defending Maxine Turner’s counterclaim could not be added to the security.

The “more” is that mortgagees have tended to include as a term of their mortgage the power to add relevant costs to the security. In Gomba Holdings (UK) Ltd v. Minories Finance Ltd (No.2) [1993] Ch 171 Scott LJ at 185A-E before citing from the judgment of Nourse LJ in the Dunbar Bank case observed:

“First, it is not all costs, charges and expenses properly incurred which a mortgagee can, without express contractual justification, add to the security”.

It appears to have been accepted in the Dunbar Bank case (see 590F-H) that the relevant clause in the Dunbar Bank charges only enabled costs, charges and expenses recoverable by the mortgagee out of the mortgaged property to be those recoverable under the general law. The relevant clause referred to costs, charges and expenses properly incurred and all other money properly paid in respect of the said costs, charges and expenses. The relevant issue, as I understand in the Gomba Holdings case, was whether the mortgagee could challenge costs by way of account which had not been reasonably incurred or were unreasonable in amount. As a matter of construction of the relevant terms in that case, the Court of Appeal considered that such costs were not recoverable from the security.

The Court of Appeal in Gomba Holdings set out principles which emerged from its review of the law in the manner cited at CPR 44.5.1:

“(i)

An order for the payment of costs of proceedings by one party to another party is always a discretionary order: s.51 of the Senior Courts Act 1981.

(ii)

Where there is a contractual right to the costs, the discretion should ordinarily be exercised, so as to reflect that contractual right.

(ii)

The power of the court to disallow mortgagees costs ought to be added to the mortgage security is a power that does not derive from s.51 but from the power of the courts of equity to fix the terms on which redemption will be allowed.

(iv)

A decision by a court to refuse costs in whole or in part to a mortgagee litigant may be a decision in the exercise of the s.51 discretion; or a decision in the exercise of the power to fix the terms on which redemption will be allowed, or a decision as to the extent of a mortgagee’s contractual right to add their costs to the security or a combination of two or more of those things. The pleadings in the case and the submissions made to the judge may indicate which of the decisions has been made.

(v)

A mortgagee is not to be deprived of a contractual or equitable right to add costs to the security, merely by reason of an order for payment of costs made without reference to the mortgagee’s contractual or equitable rights, and without any adjudication as to whether or not the mortgagee should be deprived of those costs.”

The Bank’s term in the relevant mortgage provided that ‘Secured Obligations’ included ‘all costs and expense incurred by the Bank … in relation to this legal mortgage … (such costs, charges and expenses shall … include all amounts which the Bank may require from time to time to compensate it for its internal and management costs and expenses incurred in connection with the enforcement of their Legal Mortgage…’ (clause 1 (b)). The Turners covenanted with the bank to pay the ‘Secured Obligations’ (clause 2(1).

The costs of seeking possession against Maxine Turner and meeting her counterclaims of better title can in my judgment be said to have been incurred in relation to the mortgage and I do not consider that the express reference to enforcement in relation to internal costs in the ‘Secured Obligations’ can be read as excluding legal enforcement costs from such Obligations. It appears to me therefore that the Bank is entitled to add its costs to its security in accordance with the terms of the mortgage dated 11 October 2005 and I make the paragraph 6 order. It would be for Mrs Turner (or rather the Turners) to seek an account as to whether costs were not reasonably incurred or were unreasonable in amount. On the material before me, I do not consider that as between the Bank as mortgagee and the Turners as mortgagors the costs of the strike-out application or indeed seeking to establish the execution of the Deed of Consent by Maxine Turner were unreasonably incurred (the Turners had of course agreed to procure such execution). I do not have the material to consider the amount of the costs.