The Co-Operative Bank Plc v Phillips: ChD 21 Aug 2014

The bank had brought possession proceedings against the defendant under two legal charges securing personal guarantees. The proceedings had been abandoned, but the court now was asked whether costs for the defendant should be on the standard or indemnity basis. The defendant argued that the proceedings had been brought for a collateral purpose and were and abuse of process. The bank also argued that the costs should be added to the sum secured. The defendant had entered into an individual voluntary arrangement, saying also that the properties should be excluded since the prior charges themselves left him with negative equity.
Held: The bringing of the possession proceedings for the purpose of putting pressure on Mr Phillips was for the purpose of obtaining repayment of the sums secured by the charges and was therefore a permissible purpose.
As to the costs, the court applied the Gomba Holdings case. Though the proceedings were not an abuse of process, that did not mean that they were reasonable for this purpose. The defendant had shown that the bank had acted unreasonably in bringing th two sets of proceedings, and the bank should not be allowed to add the costs incurred to the mortgage debt, and was liable to him for his costs incurred, and nor was the bank entitled to set off such liability against the mortgage debt.

Morgan J
[2014] EWHC 2862 (Ch)
Civil Procedure Rules 38.5(3) 38.6(1)
England and Wales
CitedDownsview Nominees Ltd and Another v First City Corporation Ltd and Another PC 19-Nov-1992
(New Zealand) The holder of a second debenture appointed receivers to the assets. The first debenture holder then also appointed receivers not to obtain repayment of its debt, but to disrupt the work of the first appointed receivers and in order to . .
CitedQuennell v Maltby CA 15-Nov-1978
A house was mortgaged to a bank. The house was then let to tenants at an annual rate of andpound;1,000. The tenants were protected as against the mortgagor by the Rent Acts. The tenancy was not binding on the bank. The mortgagor’s wife took a . .
CitedRopaigealach v Barclays Bank plc CA 6-Jan-1999
The applicant’s property was charged to the defendant. At the time it was not occupied. The mortgage fell into arrears, and after serving notice at the property, the bank took posssession and sold the property at auction. The claimants said the bank . .
CitedCukurova Finance International Ltd and Another v Alfa Telecom Turkey Ltd PC 30-Jan-2013
(British Virgin Islands) The claimant sought to recover shareholdings given in charge.
Held: There was an event of default, which entitled ATT to accelerate the loan and to appropriate – or forfeit – the charged shares, but that relief against . .
CitedMeretz Investments Nv and Another v ACP Ltd and others ChD 30-Jan-2006
The applicant challenged the exercise of a power of sale under a mortgage, saying that the mortgagee’s purposes included purposes not those under the mortgage. The parties had been involved in an attempted development of a penthouse.
Held: The . .
CitedAlbany Home Loans Ltd v Massey CA 1997
It is generally not appropriate to order possession against one of two mortgagors where the order would be of no benefit to the mortgagee, particularly where the joint mortgagors were husband and wife. An ordinary order for possession might be . .
CitedGoldsmith v Sperrings Ltd CA 1977
Claims for Collateral Purpose treated as abuse
The plaintiff commenced proceedings for damages for libel and an injunction against the publishers, the editors and the main distributors of Private Eye. In addition, he issued writs against a large number of other wholesale and retail distributors . .
AppliedGomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) CA 1993
A clause entitling a mortgagee to recover legal costs from the mortgagor did not extend to costs that were unreasonably incurred or which were unreasonable in amount. Whether costs were unreasonably incurred or were unreasonable in amount was to be . .
CitedBerkshire Capital Funding Limited v Street and Barker, Nationwide Building Society CA 14-Apr-1999
The court can make an order for possession in favour of the second mortgagee, subject to the rights of a prior mortgagee. Where the first mortgagee grants a tenancy of the mortgaged property, the second mortgagee will be bound by that tenancy and . .

Lists of cited by and citing cases may be incomplete.

Costs, Banking, Insolvency

Updated: 15 January 2022; Ref: scu.536007