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Home Chaplair Limited v Kumari [2015] EWCA Civ 798 – A Welcome Decision for Landlords

Chaplair Limited v Kumari [2015] EWCA Civ 798 – A Welcome Decision for Landlords

When it comes to reclaiming the costs of pursuing unpaid service charges and rents, the often outdated British legal structure has historically disallowed landlords and their agents or representatives from claiming associated costs. This is because the small claims track, to which the majority of such cases are typically allocated, generally prevents cost recovery under CPR 27.14, except in certain circumstances such as court fees, reasonably incurred travel expenses of party or witness, unreasonable behaviour etc. Where a lease has a costs recovery clause, this was typically addressed under the fixed costs regime for possession claims under Part 45.

It has largely been left at the Judge’s discretion to decide whether or not to allow costs under part 27, and claims have generally failed to survive. Chaplair Limited v Kumari [2015] EWCA Civ 798 is a landmark ruling as it explicitly states that a landlord’s claim for costs in pursuing arrears is acceptable within section 27.

It was ruled that Part 27 does not prevent costs recovery, provided that the costs the landlord seeks are contractual costs under the lease. Whilst the court retains a discretion as to whether to award contractual costs, it is important that this is considered in conjunction with the contractual right to costs. CPR 27.14, which limits small claims costs must be read subject to CPR 44.5 which deals with contractual costs (see the decision in Gomba Holdings – which ruled that an order for costs is always discretionary but, where there is a contractual right to costs, the discretion should usually be exercised to reflect the contractual right), and is not excluded by CPR 27.2 (see Patten LJ at para 44). The contractual costs are recoverable subject to the court’s equitable power to disallow unreasonable expenses (para 45).

The case provides valuable clarification in the important area of a whether a landlord’s contractual right to costs can be successfully upheld in the court. The Court of Appeal confirmed that where a tenant agrees to indemnify its landlord for costs, the landlord can recover more than the minimal Small Claims Court limit.

What this ruling highlights for landlords is that when negotiating the terms of a lease, they would be highly recommended to insist on the costs indemnity. Tenants, on the other hand, may wish to consider whether the terms of the indemnity put them under a greater liability than they would otherwise have in the courts if they are ruled an unsuccessful party in litigation.

 

References:

Chaplair Limited v Kumari [2015] EWCA Civ 798
Gamba Holdings (UK) Ltd v Minories Finance Ltd (No.2) [1993] Ch 171.

 

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