Lownds v Home Office (Practice Note)

On a standard-basis assessment, proportionality requires a two-stage approach. The court should first take a global view of the costs against the relevant factors. If the total is not disproportionate, reasonably incurred items of reasonable amount will normally be allowed. If it appears disproportionate, recovery is confined to reasonable costs of work that was necessary for proportionate conduct of the litigation.

Necessity is a higher threshold than reasonableness, but must be applied sensibly and without hindsight. A party's reasonable assessment of the sum recoverable governs proportionality; a claimant is not entitled to recover costs generated by an exaggerated claim. These principles give effect to the proportionality objective in the Civil Procedure Rules.

The Home Office appealed from a Leeds County Court decision dismissing its appeal against a detailed assessment of the respondent prisoner's costs in a settled clinical-negligence action. The claim settled for £3,000 plus costs, while the assessed costs exceeded £16,000.

The Home Office did not challenge the reasonableness of individual items. It contended that the total was disproportionate and that the costs judge should have made a global reduction under the Civil Procedure Rules. Most of the work had, however, been undertaken before the Rules came into force on 26 April 1999. The central issue was how proportionality and reasonableness operate on a standard-basis assessment, including where the amount recovered is materially less than the amount claimed.

1. Appeal dismissed. The transitional provision in the Practice Direction to Part 51 created a general presumption that costs incurred before 26 April 1999 should not be disallowed if they would have been allowed under the former taxation regime. Since most of the costs fell in that period, the Court would not disturb the assessment upheld by the county court.

2. The Court nevertheless gave guidance for post-CPR assessments. Proportionality is mandatory on the standard basis. A costs judge should first form a preliminary global view of whether the total costs are disproportionate, having regard to the factors in Part 44.5(3) of the Civil Procedure Rules.

3. If the total is not disproportionate, the ordinary inquiry is whether each item was reasonably incurred and reasonable in amount. If the total appears disproportionate, the judge must additionally decide whether the work represented by each item was necessary for proportionate conduct of the litigation. Only a reasonable amount of necessary work is recoverable. The process must not impose double jeopardy by deducting an item and then making a further global deduction for the same excess.

4. Necessity requires a sensible standard. It is higher than reasonableness, but must allow for legitimate professional judgments and avoid hindsight. The conduct of the opposing party may make work necessary that would otherwise not have been necessary.

5. Where recovery is substantially below the pleaded claim, a claimant's costs are judged against the sum it was reasonable to believe might be recovered when the claim was made. A defendant may normally assess proportionality by reference to the value reasonably represented by the claimant's claim. The Court endorsed the planning approach referred to in Jefferson v National Freight Carriers Ltd [2001] 2 Costs LR 313 and regarded the itemised assessment approach in Flowers Inc v Phonenames Ltd [2001] EWCA Civ 721 as consistent with this guidance.

• Court of Appeal: Appeal dismissed in [2002] EWCA Civ 365. The Court upheld the assessment because of the transitional provisions, while issuing prospective guidance on proportionality.

• Leeds County Court: His Honour Judge Lightfoot dismissed the Home Office's appeal from the detailed assessment by District Judge Bellamy.

• Detailed assessment: District Judge Bellamy assessed the claimant's costs following settlement of the clinical-negligence action.