Costs—recovery of costs under contractual clauses
Costs—recovery of costs under contractual clauses

The following Dispute Resolution guidance 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
  • Examples of contractual indemnity cost clauses and the court’s interpretation
  • How do you recover costs under a contractual indemnity clause for costs?
  • Drafting indemnities giving rise to costs liabilities

Court’s discretion

The court has a discretion what costs to order and on what basis, see Practice Note: Costs assessment—general principles.

Within this discretion, the court has the power to award costs on an indemnity basis, see Practice Note: Indemnity costs orders.

Note that the general rule as to costs is that costs follow the event, ie the loser will be liable for the winner's costs. This should be borne in mind when considering costs liability generally (see Practice Note: Cost orders—the general rule and the court's discretion).

When exercising its discretion to award costs under CPR 44.2, a court should generally reflect any contractual rights (Rabilizirov v A2 Dominion London Ltd).

A contract may contain a contractual indemnity as to the payment of costs in the event that a dispute arises between the parties. This causes a tension as to which rules apply and costs claimed under contractual indemnity clauses have been challenged in a number of cases.

The Court of Appeal in Gomba Holdings v Minories Finance held that the court's discretion will normally be exercised to correspond with the contractual entitlement agreed by the parties. In other words, courts can and will give effect to indemnities when making orders as to costs including ordering costs to be assessed on an indemnity basis. The principle as set out by the Court