Costs—recovery of costs under contractual clauses

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Costs—recovery of costs under contractual clauses
  • Court’s discretion
  • Amount of the costs payable under a contract (CPR 44.5)
  • Summary assessment of costs under a contractual indemnity
  • Interpreting indemnity costs clauses
  • Recovery of expenses
  • Costs of an appeal
  • Test applied by the court to determine whether costs are recoverable
  • Leases—examples of contractual indemnity cost clauses and the court’s interpretation
  • Example 1—all costs and expenses
  • More...

Costs—recovery of costs under contractual clauses

Court’s discretion

The general position in relation to the court dealing with the issue of costs is that the costs follow the event, ie the loser will be liable for the winner's costs. However, the court has a discretion when it comes to making costs orders and it may depart from this general rule and there are numerous types of costs orders that can be made. The costs order will also set out the basis on which the costs are to be assessed, ie standard basis or indemnity basis. For guidance on the general principles covering these issues, see Practice Notes: Cost orders—the general rule and the court's discretion, Costs assessment—general principles and Indemnity costs orders—principles.

The courts’ discretion when dealing with costs may be impacted where a contract between the parties contains a contractual indemnity as to the payment of costs in the event that a dispute arises between the parties. Such a contractual indemnity causes a tension as to which costs rules apply and as a consequence the costs claimed under contractual indemnity clauses are frequently challenged in the courts.

The approach of the courts in such cases was clearly set out by the Court of Appeal in Gomba Holdings v Minories Finance (1992) where it was held that the court's discretion, as to the costs to be ordered, will

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