O'Beirne v Hudson

A consent order awarding costs on the standard basis prevents a costs judge from substituting the fixed-cost regime applicable to the small claims track. The judge must nevertheless consider all the circumstances under the Civil Procedure Rules 1998, including that the claim would probably have been allocated to that track.

That circumstance is highly material to proportionality and to whether legal representation was reasonably or necessarily incurred. The assessment must scrutinise the individual items rather than impose the small-claims figures as an automatic cap. The central question is whether it is reasonable for the paying party to pay more than would have been recoverable had the claim been allocated appropriately.

The claimant obtained a pre-allocation settlement of damages and hire charges following a road traffic accident. A consent order required the defendant to pay the claimant's reasonable costs and disbursements on the standard basis, subject to detailed assessment.

The district judge held that the order precluded assessment under the small-claims costs regime and assessed costs at £3,987.29. His Honour Judge Stewart QC reversed that ruling, holding that the costs judge retained a discretion to assess by reference to the small claims track. The claimant appealed.

The central issue was how the probable allocation of the claim to the small claims track should affect a detailed assessment under an order awarding costs on the standard basis.

1. Appeal dismissed unanimously. The district judge's assessment could not stand because she had failed to apply the required approach. His Honour Judge Stewart QC was therefore right to reverse her decision, although the Court of Appeal differed from his formulation of the costs judge's powers.

2. Per Waller LJ, with whom Hooper and Etherton LJJ agreed, the consent order required assessment on the standard basis. Its reference to “reasonable” costs added nothing. The costs judge could neither vary that order nor direct that only the fixed costs available on the small claims track would be awarded.

3. The standard-basis order did not make the claim's probable track allocation irrelevant. Under rule 44.5(1) of the Civil Procedure Rules 1998, the costs judge was entitled to consider all the circumstances. The fact that the claim would almost certainly have entered the small claims track was highly material, as was the limited recovery which that track would have permitted.

4. The assessment therefore required anxious scrutiny of whether each item was reasonably or necessarily incurred and reasonable in amount. In particular, the costs judge had to consider whether lawyers were necessary and whether it was reasonable to require the paying party to bear their costs. The principles of necessity and proportionality stated in Lownds v The Home Office [2002] 1 WLR 2450 applied.

5. The costs judge was not bound to allow only the sums fixed by the small-claims regime. There was a material distinction between imposing that regime at the outset and assessing each item on the standard basis while considering what proportionate litigation should have cost. The operative question was whether it was reasonable for the paying party to pay more than would have been recoverable in a claim which should have entered the small claims track.

6. Hooper LJ emphasised that the district judge was correct that the consent order prevented her from fixing costs solely by reference to the small-claims regime. Her error was failing to apply the item-by-item proportionality test. Etherton LJ agreed with both judgments.

1. Court of Appeal (Civil Division): The claimant's appeal was dismissed unanimously. The court upheld the reversal of the district judge's assessment, but clarified that standard-basis assessment could not be replaced by the fixed small-claims regime.

2. Liverpool County Court, His Honour Judge Stewart QC: The defendant's appeal was allowed. The judge reversed the district judge's ruling and held that the costs judge retained a discretion to assess costs by reference to the small claims track.

3. Liverpool County Court, District Judge Harrison: The district judge held that the consent order precluded restriction to small-claims costs and assessed the claimant's costs at £3,987.29.