Littlestone and Others v Macleish [2016] EWCA Civ 127

This case concerned a dilapidations claim for £75,000 by Macleish, as landlord, against his former partners  in solicitors’ firm Macleish Littlestone Cowan, as tenants. This followed the termination of a lease of their office premises in Snaresbrook, London.

The judge awarded Macleish damages of £48,000 together with interest and agreed service charges, with a small deduction for an agreed insurance premium rebate. She also ordered the defendants to pay Macleish’s costs of the proceedings, but on the “standard” basis. On the standard basis, costs need to be proportionate.

Macleish appealed this point on grounds that the judge should have awarded costs on an indemnity basis.  Macleish argued he had a contractual entitlement to an indemnity for costs under the lease.

Under the lease the tenant was obliged to pay “all costs and expenses…which may be incurred” in a dilapidations claim. Although the costs recovery clause did not expressly refer to an indemnity, the Court held that it corresponded more closely with assessment on an indemnity basis than on the standard basis, and determined that Macleish’s costs were to be assessed on the indemnity basis.

Key points

  • The key difference between the standard and indemnity basis is that on the standard basis costs need to be proportionate, but don’t on the indemnity basis.
  • It is common in commercial property for the lease to determine cost liability for pursuing breaches of covenant rather than the default court rules, so tenants beware.
  • When drafting costs recovery clauses, it should be noted that the obligation to pay “all” costs and expenses here was pertinent.  It persuaded the Court that the costs should reflect the indemnity basis.