A (Costly) Sting in the Tail: Criterion v McKinsey (Part.2)

18.02.2021

As previously published on this website, on 11 February 2021, HHJ Matthews (sitting as a Judge of the High Court) handed down his judgment on the claim in Criterion v McKinsey [2021] EWHC 216 (Ch). Since the Claimant was successful party, there was no dispute that it was entitled to the costs of the action. But, on what basis?

The Claimant landlord argued that it was entitled to indemnity costs as a matter of contract under the terms of the Defendant tenant’s leases. The leases contained fairly standard covenants to pay costs and expenses incurred by the landlord in recovering arrears of rent and service charges. The covenants were worded slightly differently. One referenced “all expenses … properly incurred by the Landlord,” another “all costs, charges and expenses which the Landlord may … incur” and the third “all expenses (including proper solicitors’ costs and suveyors’ fees) properly incurred …”

Relying on the decision of the Court of Appeal in Macleish v Littlestone [2016] 1 WLR 3289 and a decision of Moulder J in Alafco Irish Aircraft Leasing Sixteen Ltd v Hong Kong Airlines Ltd [2019] EWHC 3668 (Comm), HHJ Matthews held that the above formulations gave rise to an entitlement to indemnity costs. In arriving at his conclusion, HHJ Matthews held that an old case of Primerigde Ltd v Jean Muir Ltd [1992] EGLR 273 was wrongly decided.

The decision of HHJ Matthews is reported at [2021] EWHC 314 (Ch).

The case is an important reminder for landlords and tenants to pay close attention to the wording of a costs provision in a lease. Unless the provision restricts costs to what is proportionate, it is likely that the provision will give rise to an entitlement to costs to be assessed on an indemnity basis.

Nicholas Trompeter and Alice Hawker (instructed by Gurpreet Sanghera of Simkins LLP) acted for the successful Claimant.

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