Leases & the costs of proceedings investigated by James Davies
A costs provision in a lease can go against provisions of the Civil Procedure Rules relating to fixed costs regimes and even the principle of costs following the event.
The recent case of Forcelux Ltd v Binnie (LTL 21/10/09) provides an illustration of the general principle as set out in Church Commissioners v Ibrahim [1997] 1 EGLR 13 and its application to the costs of an unsuccessful appeal.
The starting point
In considering the general principle and when it does and does not apply it is sometimes possible to overlook what should always be the starting point in any case: what the relevant covenant in the lease actually says.
A well drafted costs covenant will provide that the tenant will indemnify the lessor on the full indemnity basis for all legal costs caused by the tenant’s breach of any covenant under the lease. Less well drafted clauses may provide that the tenant will pay the lessor’s costs “which may be incurred in or in contemplation of any steps or proceedings proceedings under s 146
