Mortgagee — Costs incurred in successfully resisting action — Action brought by beneficiary — Whether costs can be added to security — Whether beneficiary a “stranger” to the mortgagee — Cross-appeal by mortgagee dismissed
In Parker-Tweedale v Dunbar Bank plc and others (No 1) (1989) 140 NLJ 169, the Court of Appeal dismissed an appeal brought by the plaintiff against a decision of Peter Gibson J (January 26 1989) dismissing his claim that the defendant mortgagee was in breach of its duties in the exercise of the power of sale. The mortgagee cross-appealed against a declaration that it was not entitled to add its costs of those proceedings to its security.
By clause 21 of the mortgage deed the mortgagee was entitled to add “all costs charges and expenses properly incurred…” to the charge on the property concerned. The mortgagee contended that the costs it had incurred in defending the claim brought by the plaintiff, the husband of one of the defendants, and a beneficiary of the proceeds of sale, should be added to the security charged on the land. The plaintiff’s wife, who was also entitled to an interest in the equity of the land on sale, submitted that any exception to a general rule denying the mortgagee the right to add its costs was wrong; that the decision in Parker v Watkins (1859) Johns 133 was wrong or should be distinguished.
Held The cross-appeal was dismissed.
The general rule is that a mortgagee is entitled to add to his security: (1) his costs reasonably and properly incurred of proceedings between himself and the mortgagor or his surety and (2) his costs reasonably and properly incurred of proceedings between himself and a third party where what is impugned is the title to the estate because he is acting for the benefit of the equity of redemption. But (3) a mortgagee was not entitled to add costs incurred where a third party impugns the mortgagee’s title. That was the position in the present case and however illogical this exception might be where a beneficiary challenges the mortgagee’s behaviour and conduct, Parker v Watkins applied and could not be distinguished.
The mortgagee was not entitled to rely on RSC Ord 62, r 6(2), in support of its claim for costs, as that order is concerned with the costs of proceedings which are awarded in the proceedings themselves. The order cannot, without specific words, have been intended to apply where the matter comes up de novo on the taking of an account.
Timothy Lloyd QC and Stephen Acton (instructed by Clintons) appeared for the cross-appellant, Dunbar Bank plc; and Maurice Kay QC and Steven Whitaker (instructed by Baldocks, of Guildford) appeared for Mrs Parker-Tweedale.
