AIB Group (UK) Plc v Turner & Ors

Costs remain discretionary, even where one party succeeds overall. The court may reflect success on distinct issues by ordering payment of a proportion of the successful party’s costs.

A mortgagee’s general equitable entitlement to recover enforcement costs from mortgaged property is subject to the exception that costs of proceedings in which a third party impugns the mortgagee’s title or enforcement rights are not recoverable under the general law. An express contractual term may nevertheless confer a right to add such costs to the security. The court must construe the mortgage and may permit an account to determine whether costs were reasonably incurred or reasonable in amount.

This was a further judgment following the court’s substantive judgment handed down on 18 December 2015. The court had dismissed Miss Maxine Turner’s counterclaim, dismissed the Bank’s strike-out application, and considered the Bank’s claim for possession of the Cottage.

The further issues concerned the appropriate possession period, removal of a registration against the title, the proportion of the Bank’s costs payable by Miss Turner, and whether the Bank could add those costs to its mortgage security. The central questions were how the costs discretion should reflect partial success and whether the mortgage terms covered costs incurred in defending the counterclaim and seeking possession.

1. Orders. Miss Turner’s counterclaim was dismissed and judgment was given for the Bank. The Bank’s strike-out application was dismissed. Miss Turner was ordered to give possession of the Cottage within eight weeks, and the registration of an interest against the title to Ewall Lawn was ordered to be removed.
2. Costs. The general rule under CPR 44.2(2)(a) is that the unsuccessful party pays the successful party’s costs, but the court may make a different order under CPR 44.2(2)(b). The court may take account of success on part of a case, the reasonableness of pursuing a particular issue, and the practicability of ordering a proportion of costs or costs relating to a distinct part of the proceedings. The appropriate order was to reduce the Bank’s recoverable costs to 80%, reflecting its failed strike-out application and the unresolved issue whether Miss Turner had signed the deed of consent.
3. Mortgage security. Barker-Tweedale v Dunbar Bank plc (No.2) [1990] 2 All ER 588 established the relevant exception to the general entitlement of a mortgagee to recover reasonably and properly incurred costs from the mortgaged property. Where a third party impugns the mortgagee’s title or the enforcement of a mortgage right, the costs are not recoverable under the general law.
4. Gomba Holdings (UK) Ltd v Minories Finance Ltd (No.2) [1993] Ch 171 confirmed that the court’s costs discretion, its equitable jurisdiction concerning redemption, and the construction of the mortgage may each be relevant. An express contractual right to costs should ordinarily be reflected. The Bank’s mortgage defined secured obligations broadly enough to include legal enforcement costs. The Bank was therefore entitled to add its costs to the security, subject to an account concerning whether they were reasonably incurred or reasonable in amount.