Kirsty Amanda Mary Louise Cadogan v Kevin Andrew Cadogan & Ors

Costs incurred by a subordinate charge-holder in obtaining an order for sale do not become costs and expenses of sale ranking ahead of a prior mortgage. They may be added to the subordinate charge, but remain payable according to its existing priority. The same applies generally to costs of obtaining possession, clearance, repairs, management and insurance, although properly due service charges and ground rent must be paid to complete a sale.

A non-party directly and adversely affected by an order may apply to vary it under CPR 40.9 or under a sufficiently broad permission to apply. Parties seeking to modify a standard order in a way that may prejudice a senior charge-holder should give notice and draw the modification to the judge’s attention.

The claimant had obtained an order for sale concerning properties owned by the first defendant and secured various costs orders against them by charging orders. The order for sale concerning the Property modified the standard form in PD73A by treating the claimant’s costs of the claim as costs and expenses of sale, apparently ranking them ahead of the Bank of Scotland’s first legal charge.

The bank had not been a party to the order-for-sale proceedings and had not been given notice of the modification. After the Property fell into negative equity, the bank applied to vary the order. The claimant also sought declarations that insurance, possession, locksmith, clearance and related costs ranked as sale expenses.

1. Variation application. The bank had standing as a non-party directly affected by the order under CPR 40.9. In addition, the order itself gave any interested person broad permission to apply for variation or directions. The finality principles associated with CPR 3.1(7) and Tibbles v SIG plc [2012] 1 WLR 259 were not the appropriate framework for this non-party application.
2. Delay was a factor within the assessment of all the circumstances, including prejudice and the overriding objective, but was not an independent ground for refusing the application. The bank’s delay was not material or culpable in the circumstances. It had not known of the adverse modification until August 2022, and the dispute did not require immediate determination while no sale was imminent.
3. The modification was inconsistent with mortgage priorities. Costs of obtaining the order for sale were not costs and expenses of effecting the sale. They formed part of the claimant’s debt against the first defendant and could be added to her subordinate charge, but could not be paid ahead of the bank’s mortgage. The order was therefore varied to remove the words treating the costs of the claim as sale expenses. The bank was not liable for those costs.
4. The claimant’s bailiff and locksmith costs, clearance and repair costs, and insurance premiums were costs associated with obtaining possession, preserving or managing the Property. They were not recoverable in priority as costs and expenses of sale, although they might be recoverable against the first defendant in the same priority as the claimant’s charge. Properly due service charges and ground rent had to be paid to enable completion, but no declaration was necessary.
5. Parties seeking an order for sale which departs from the standard form in a manner capable of affecting a senior charge-holder should give that charge-holder notice of the proposed modification and draw it expressly to the judge’s attention.

The bank’s Application succeeded. The Sale Costs Application was refused.