Does hindsight now apply to assessment of legal costs?
I previously commended on the fact the law has traditionally avoided applying hindsight when assessing the reasonableness of legal costs that have been incurred.
This approach was confirmed when applying the old proportionality test 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”
I also commented on the problems this creates when trying to apply this in practice.
However, has this basic principle survived recent reforms?
CPR 44.3(5)(a) certainly provides that “costs incurred are proportionate if they bear a reasonable relationship to the sums in issue in the proceedings”, although that simply begs the question as to what sums really were in issue.
I would suggest that the traditional “rule” against applying hindsight may no longer apply.
Certainly, in the area of personal injury claims, the majority of matters are now subject to one form or another of fixed fees. Generally, the greater the level of damages recovered, the higher the award of fixed costs to a successful claimant. This is intended, on a swings-and-roundabouts basis, to reflect the fact that the higher the level of damages recovered the more complex the matter was likely to have been and the more work that would have been reasonably necessary.
However, the crucial point to recognise is that claimants’ costs are calculated by reference to the damages actually recovered, not the amount claimed or the amount it may have been reasonable to expect to recover.
If costs in the majority of cases are therefore now expressly subject to hindsight, by reference to the damages recovered, on what logical basis should those cases that fall outside fixed costs be subject to a fundamentally different test? Lord Justice Jackson is now embarking of a massive further extension of fixed fees. Again, initial suggestions are that these will based (at least in broad bands) on greater damages recovery meaning greater costs recovery).
It would be very odd to have two different general principles (absolute hindsight v no hindsight) operating at the same time in civil claims.
It would be nice to think the Court of Appeal will expressly address this issue when they consider proportionality in BNM v MGN Limited, but I won’t hold my breath.