Contractual Costs

Contractual costs are a problem for any party seeking to assert their legal rights.  An obvious example relates to mortgage re-possession costs.  Put simply the other side (usually a landlord or a mortgage company, but increasingly in other types of contract) include a clause whereby they are entitled to recover their costs from you irrespective of any rules of Court otherwise.

Because the clauses are not normally negotiated individually they are covered by the Unfair Terms in Consumer Contracts Regulations 1999.  However in the case of Robert Shaw v Nine Regions Limited [2009] EWHC 3553 (QB) the High Court decided that such a term was highly reasonable and created no significant imbalance between the parties.  Despite the importance of this decision it does not appear on the British and Irish Legal Information Institute website.

The case was not as simple as it sounds.  Mr Shaw had fought the case on principle and refused reasonable offers to compromise.  At the hearing in the High Court he was acting in person so the High Court Judge only had the benefit of the barrister for Nine Regions Limited to assist him on the law.  The case does not appear to have been tested on appeal to the Court of Appeal either.  This is presumably because no party has had a significant enough costs Order made against them under a contractual clause to justify the expense of taking an appeal to the Court of Appeal.

The clauses are normally only one way.  This means they dis-apply the cost rules as they would apply to the entitlement of the party who drafted the contract to recover costs to the potential detriment of the consumer.  The most important rule to be learned from this case is that any contract should be read before it is signed and you know what you are potentially letting yourself in for.

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