KfW v Singal (Costs)

Where a party has a contractual entitlement to costs, the court retains its ordinary discretion under Civil Procedure Rules 1998, but will normally exercise it consistently with the contractual right unless there is a particular reason to do otherwise. Under CPR Part 44.5, contractual costs are presumed to have been reasonably incurred and reasonable in amount, subject to rebuttal. A contractual entitlement to all costs may justify assessment on the indemnity basis. The successful party may therefore recover its contractual costs where the costs were reasonably incurred and reasonable in amount.

The claimants applied for summary judgment on claims under three guarantee and indemnity agreements. The judge had given judgment for the claimants and was required to determine costs. The defendant did not appear or make representations. The claimants relied both on the general rule that costs follow the event and on contractual provisions entitling them to recover costs incurred in enforcing the relevant finance documents and guarantees.

The central issues were whether the contractual entitlement should govern the exercise of the court’s discretion and whether the claimed costs should be awarded on a summary basis.

1. Costs followed the event. The claimants were the successful parties. Although the defendant did not actively defend the claims, his conduct required the claimants to incur substantial expense in establishing their entitlement to judgment.
2. Contractual entitlement. The court’s ordinary discretion over costs was not displaced by the contractual right. However, the discretion would normally be exercised in accordance with that right unless there was a particular reason to depart from it.
3. Presumption under CPR Part 44.5. Where costs were payable under a contract, the costs were presumed to have been reasonably incurred and reasonable in amount, subject to rebuttal. There was no reason to depart from that presumption.
4. Consistently with Bank of Baroda v Panessar [1987] 1 Ch 335 at 355E–F, a contractual entitlement to all costs was treated as equivalent to an entitlement to assessment on the indemnity basis.
5. The claimed costs were in any event reasonably incurred and reasonable in amount, having regard to the sums at stake, the detailed work required on quantum, service at multiple addresses including in India, and the need to consider German, Indian and English law.
6. The claimants were awarded all costs of the application, amounting to £200,691.33, and all other costs of the action, amounting to £166,983.97. The costs were ordered to be payable to the second claimant.