Adding costs to the security
Unfair contract term?
Article: Costs in mortgage possession proceedings: An unfair contract term? by Justin Bates, barrister of Arden Chambers - An interesting article on the scope to challenge as an unfair contract term the contractual right for lenders to add litigation costs to the security, and suggests ways of tackling district judges. As a matter of law it might be observed that a challenge under the Unfair Terms in Consumer Contracts Regulations 1999 is somewhat uphill, and the prospect of district judges (a) having time to entertain an argument, and (b) finding against well-established principles (Gomba Holdings (UK) Ltd v Minories Finance Ltd  Ch 171 - costs can be added to the security even without a term to that effect; and CPR PD 48) somewhat unrealistic. The author suggests that if the courts are not willing to take an interventionist approach, mortgagors should consider possible remedies under the 1999 Regulations.( Journal of Housing Law 31)
Contract term required
Helden v Strathmore Ltd
 EWCA Civ 542
On the question of costs in this case, the judge had been wrong to assume that all mortgagees are entitled to indemnity costs. While it is perfectly true that the majority of mortgages contractually provide that the mortgagee should be entitled to recover its costs of enforcing the mortgage on an indemnity basis, here the charge did not contain a provision entitling the mortgagee to recover its costs. The judge should have proceeded on the basis that he had the normal discretion enjoyed by the court to be judicially exercised by reference to the facts of the case. Lord Neuberger MR at paras 57 to 59:
"It is perfectly true that the majority, probably the great majority, of mortgages contractually provide that the mortgagee should be entitled to recover its costs of enforcing the mortgage on an indemnity basis, and that, in the absence of a good reason to the contrary, the court will give effect to that provision when exercising its discretionary power in relation to costs.Costs were awarded on the standard basis.
However, in this case, the 2006 Charge did not contain a provision entitling Strathmore to recover the costs of enforcing its rights, on an indemnity basis or at all. In those circumstances, with due respect to the Judge, who gave an excellent judgment on the substantive issues, he went wrong in dealing with costs effectively on the assumption that the 2006 Charge did so provide. Where an agreement contains no provision stating how the costs of proceedings will be dealt with, then it seems to me that it would be wrong in principle for the court to proceed on the basis that there is such a provision, simply because the majority of agreements of the type in question do contain such a provision. If anything, one would presume that the parties intentionally departed from the norm.
It seems to me that the Judge should have proceeded on the basis that he had the normal discretion enjoyed by the court when it comes to costs, namely a discretion to be judicially exercised by reference to the facts of the case, with no special presumption as there would often be if there had been a specific term dealing with costs agreed between the parties."
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