O'Beirne v Hudson

Factual and Procedural Background

On 3rd September 2006, the Appellant was the driver of a stationary car at a roundabout when it was hit from behind by a car driven by the Respondent. The Appellant’s vehicle repair costs were paid before legal proceedings were issued. The Appellant then issued proceedings claiming general damages exceeding £1,000. Before the case was allocated to any track, the parties reached a settlement comprising £400 general damages, £719.06 hire charges, and payment of costs. This settlement was recorded in a consent order which provided that the Defendant was to pay the Claimant's reasonable costs and disbursements on the standard basis, subject to detailed assessment if not agreed.

The Respondent disputed the Appellant’s costs bill, arguing that had the case proceeded to allocation, it would have been allocated to the small claims track, and therefore, costs should be assessed on the small claims track basis, which allows only fixed costs and excludes lawyer fees. The Costs Judge (District Judge Harrison) initially ruled in favour of the Appellant, holding that the consent order precluded applying the small claims track costs regime. The Respondent appealed, and His Honour Judge Stewart QC reversed the Costs Judge’s decision, holding that the court retained discretion at assessment to consider whether costs should be assessed by reference to the small claims track. The Appellant then appealed to the current court.

Legal Issues Presented

1. Whether, in a case settled before allocation but with a consent order providing for costs on the standard basis, the Costs Judge is entitled to consider that the case would have been allocated to the small claims track and thus limit costs assessment accordingly.
2. Whether the wording of the consent order precludes the court from assessing costs by reference to the small claims track regime.
3. The extent of the Costs Judge’s discretion in assessing costs when a case settled before allocation might have been allocated to the small claims track.

Arguments of the Parties

Appellant's Arguments

• The consent order’s terms, specifically the use of "reasonable" and "standard basis," preclude applying the fixed costs regime of the small claims track.
• The parties, aware that lawyers were involved, must have contemplated recovery of reasonable lawyer costs, which are not allowed under the small claims track.
• The decision in Voice & Script International Ltd v Alghafar concerned trial judges’ orders and is not applicable to the detailed assessment stage under the consent order.

Respondent's Arguments

• Relying on Voice & Script International Ltd v Alghafar, the Respondent argued that costs should be limited to the fixed costs prescribed by the small claims track regime.
• The court has discretion to assess costs by reference to the small claims track, even if the consent order provides for standard basis assessment.
• It would be unreasonable for the paying party to pay more than would have been payable had the case been allocated to the small claims track.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the wording of the consent order, which provided for costs on the standard basis with detailed assessment if not agreed. It concluded that this wording does not preclude the court from considering, at the assessment stage, whether costs should be assessed by reference to the small claims track regime. However, the court emphasised that the Costs Judge cannot rewrite or vary the costs order itself.

The court explained that the Costs Judge must exercise discretion in assessing costs, taking into account all relevant circumstances under CPR 44.5(1), including the fact that the case would likely have been allocated to the small claims track. This involves scrutinising whether it was necessary to incur certain costs, such as lawyer fees, and whether it is reasonable for the paying party to bear them given the likely allocation.

The court referenced Lord Woolf’s guidance in Lownds v The Home Office, highlighting the two-stage approach to costs assessment: (1) a global assessment of proportionality and (2) an item-by-item consideration of necessity and reasonableness. The court stressed that disproportionate costs or unnecessary items should be disallowed or reduced.

While the District Judge initially held that the consent order fettered her discretion and excluded the small claims track costs regime, the court disagreed with this interpretation, holding that the consent order’s language is open and allows the court discretion to consider the small claims track principles in assessment.

However, the court also noted a difference in approach between the judges: whether the Costs Judge may fix costs solely by reference to the small claims track without considering each item individually. The court favoured an approach that considers the reasonableness of each cost item in context rather than an automatic small claims track assessment.

Holding and Implications

The court DISMISSED the appeal, upholding the decision of His Honour Judge Stewart QC to reverse the Costs Judge’s ruling.

The effect of this decision is that a Costs Judge assessing costs under a consent order providing for standard basis assessment is not precluded from taking into account that the case would have been allocated to the small claims track. The Costs Judge must exercise discretion to determine whether costs were reasonably and necessarily incurred, considering the proportionality and the likely track allocation. However, the Costs Judge cannot rewrite the terms of the consent order to impose a fixed small claims track costs regime. This decision clarifies the proper scope of the Costs Judge’s discretion in such circumstances but does not establish a new precedent beyond the existing principles of proportionality and reasonableness in costs assessment.