Lownds v Home Office (Practice Note)

On a standard-basis assessment of costs, proportionality requires a two-stage approach. The court first considers whether the costs claimed as a whole appear disproportionate, having regard to all relevant circumstances. If they do not, individual items normally require only reasonable incurrence and reasonable amounts. If they do, recovery is confined to work necessary for litigation conducted proportionately, at reasonable amounts. Necessity must be assessed sensibly, allowing for reasonable professional judgments and the other party’s conduct. Necessary costs should not suffer a further global reduction merely because their total appears disproportionate.

Proportionality depends on reasonable expectations of recovery, rather than simply the amount ultimately recovered. This prospective guidance did not displace transitional protection for earlier expenditure and was not to be applied retrospectively to cases in which costs had already been assessed.

Lownds, a prisoner, brought clinical negligence claims against the Home Office concerning delayed diagnosis and treatment of gallstones and inadequate dental advice and treatment. The action settled for £3,000 and costs subject to detailed assessment. District Judge Bellamy assessed the costs at £16,784.53, including VAT, against a bill totalling £19,405.38.

The Home Office challenged the total as disproportionate but did not contest the reasonableness of individual items. Judge Lightfoot dismissed its appeal at Leeds County Court. Permission for a second appeal was granted because the case raised important questions about proportionality by reference to the amounts claimed and recovered.

Most expenditure preceded the commencement of the Civil Procedure Rules. The Court of Appeal therefore had to consider the transitional protection for that expenditure alongside the relationship between proportionality and reasonableness, and whether assessment required a global approach, an item-by-item approach, or both. Senior Costs Judge Hurst assisted the court as an assessor.

The appeal was dismissed. Lord Woolf CJ delivered the judgment of the court.

1. The whole assessment was governed by the Civil Procedure Rules, subject to paragraph 18 of the Practice Direction to Part 51. Costs for work undertaken before 26 April 1999 were presumptively protected where they would have been allowed under the former taxation regime. Most expenditure fell within that protection. The court therefore declined to interfere with the assessed amount. Its guidance was also not to be applied retrospectively to cases in which costs had already been assessed.
2. The court gave prospective guidance on standard-basis assessment, expressly recognising that it did not affect the appeal’s result. Proportionality required both a global assessment and examination of individual items. An initial assessment of the total, having particular regard to the circumstances identified in Part 44.5(3), determined the appropriate approach to the detailed assessment.
3. If the total was not disproportionate, individual items normally needed to have been reasonably incurred and reasonable in amount. If the total appeared disproportionate, the court had to be satisfied that each item represented work necessary for litigation conducted proportionately and that its amount was reasonable. Reasonable amounts for necessary work should normally be allowed. A further global deduction should not deprive the receiving party of those amounts.
4. Necessity imposed a higher threshold than reasonableness, but required a sensible standard. The court had to allow for different reasonable professional judgments and avoid an excessively demanding assessment with hindsight. Uncooperative conduct by the paying party could make additional expenditure necessary. Expenses reasonably incurred but unnecessary might remain recoverable from the client, while being irrecoverable from the opposing party.
5. Costs were not governed by a fixed percentage of the claim’s value. Modest claims could require costs equalling or exceeding the amount in dispute. Where recovery was substantially below the amount claimed, the claimant’s costs were assessed against what it was reasonable to expect to recover when making the claim. The defendant’s costs were assessed against a reasonable expectation of the claimant’s potential recovery, normally taking the claim at face value.
6. The court repeated the planning approach approved in Jefferson v National Freight Carriers Ltd [2001] 2 Costs LR 313. It endorsed the approach in Flowers Inc v Phonenames Ltd [2001] EWCA Civ 721 of revisiting individual items following a global check. Costs judges could use their general experience, but summary assessment should not introduce judicial tariffs derived from a single comparison case.

• Court of Appeal: In [2002] EWCA Civ 365 , dismissed the Home Office’s second appeal and left the assessed costs undisturbed. Permission had been granted by May LJ because the appeal raised important points of principle.
• Leeds County Court: On 10 July 2001, Judge Lightfoot dismissed the Home Office’s appeal against the detailed assessment, concluding that the district judge’s decision fell within the permissible exercise of discretion.
• Leeds County Court: On 26 January 2001, District Judge Bellamy assessed the claimant’s costs at £16,784.53, including VAT, following settlement of the underlying claims.