Hindsight and legal costs
Traditionally, the law has avoided applying hindsight when assessing the reasonableness of legal costs that have been incurred.
However, when dealing with the issue of proportionality, hindsight has had a tendency to creep in. If a matter settles for, say, £100,000, the issue of proportionality at detailed assessment has tended to be viewed in light of the damages actually recovered. Many would argue, correctly, that this was the wrong approach. This is because of the Court of Appeal’s comments in Lownds v Home Office  EWCA Civ 365:
“the proportionality of the costs incurred by the claimant should be determined having regard to the sum that it was reasonable for him to believe that he might recover at the time he made his claim”
Since that decision in 2002, I am unaware of any detailed examination by the courts of what this actually means. This is odd because although a cursory consideration of the words used suggests this is no more than a restating on the traditional approach of not applying hindsight, even a moments proper thought reveals this passage to be so ambiguously worded as to be virtually meaningless.
Taking matters in turn, proportionality is to be judged by what it was reasonable for “him” to believe might be recovered. To whom does “him” refer? The claimant? Most claimants will have no knowledge of what a claim is actually worth or what they may recover, other than what they are told by their legal advisers. This is therefore presumably meant to mean what the claimant reasonably believes based on what his solicitor reasonably informed him the claim to be worth. But what of a case where the solicitor forms one view as to quantum but obtains an advice from counsel which gives a different figure? And what if counsel gives one advice but leading counsel is then instructed who gives another figure? Which of the various figures is to be used?
Secondly, what on earth does “might” mean in the phrase “might recover”? If I buy a lottery ticket, I might win the jackpot. Is it not reasonable to believe this “might” be the outcome even if it is spectacularly unlikely? Depending on what medical evidence subsequently emerges, and how well a claimant recovers from the initial injuries, the same claim “might” settle for anything from £100,000 to £5,000. Which end of that spectrum should be used when considering “might”? Is “might” to be interpreted as “possibly might”, “probably will”, “on balance will” or something else?
To top off one of the most carelessly worded sentences to appear in a modern judgment, what does “at the time he made his claim” mean? Is this at the time a letter of claim is sent, when there may be no medical evidence available and no real basis for forming a view on quantum? Is the claim “made” when proceedings are issued, when there may be medical evidence but it may be incomplete? The reality, of course, is that the value of a claim is potentially in a state of constant flux. Medical evidence will change, new evidence will emerge, an injured party’s condition may unexpectedly improve or deteriorate. It would be wholly unrealistic to fix the notional value of what a claim “might” be worth at some arbitrary point in time and for this to dictate the issue of proportionality regardless of future developments. In reality, if hindsight is not to be used, a judge on detailed assessment would have to undertake multiple retrospectives assessments of what it was or was not reasonable to believe the likely value of the claim was at any given point in time and then apply different figures at multiple different stages when considering what work was proportionate at that point. Perhaps it is unsurprising that most assessments under the old test simply focused on the level of damages actually recovered.