Generally, a charge or mortgage will contractually provide that the costs of enforcing it will be paid by the chargor or mortgagor on an indemnity basis. If it does not, the court has held that such wording should not be implied into the charge or mortgage.

In Helden v Strathmore Ltd, Helden entered into a charge with the defendant, secured by way of legal mortgage. A dispute arose as to the enforceability of the loan. The court found it to be enforceable and awarded the defendant its costs of the proceedings on an indemnity basis. The court held that there was a line of case law confirming that a mortgagee is generally contractually entitled to recover all costs in enforcing and preserving its security on an indemnity basis. It ruled that there was no reason why the costs order in this case should not reflect the usual contractual position. The claimant appealed.

The Court of Appeal, reversed the judgment on costs as there was no contractual provision in relation to the recovery of costs in this particular charge. The court held that it would be wrong in principle to proceed on the basis that there was such a provision, simply because the majority of charges do contain such a provision. It could be said that the absence of the costs provision suggested that the parties intended to depart from the normal practice. The court should exercise its discretion on costs in the normal way by reference to the facts of the particular case. The Court of Appeal ordered the claimant to pay 60 per cent of the defendant's costs on the standard basis.

Things to consider

Contracts should be checked to ensure that the costs of enforcement can be fully recovered. It is clear from this judgment that the courts will not simply imply such a provision into a mortgage just because it is standard in the industry. Contractual entitlement to recover costs in small claims can also be useful when pursuing claims in the small claims courts where costs will not otherwise be recoverable.