Serious issues within the Bill of Costs

Serious issues within the Bill of Costs: Costs reduced from £260k to £nil at Detailed Assessment

The matter of Kapoor (Deceased) v Johal was recently heard by Costs Judge James in the Senior Courts Costs Office. A number of serious issues were established with the bill which resulted in the Court assessing the costs at £nil (the total claimed being £258,583.78). The Paying Party was also awarded its costs of the detailed assessment on the indemnity basis, which were assessed as drawn at £10,314.00.

Background

The main action concerned a convoluted dispute (originally issued in 2010) between neighbours relating to works undertaken that the Paying Party was unhappy with. The Paying Party issued an injunction application and a claim for damages, both of which were unsuccessful, with costs payable to the Receiving Party by order dated 6 January 2022. There were also a number of costs orders stemming from other actions issued by the Paying Party. It is worth noting that some of these orders had been summarily assessed.

The Notice of Commencement was served on 6 October 2023 and the Points of Dispute were served on 17 November 2023. The Points of Dispute outlined a number of serious errors and points for concern within the Bill of Costs. However, at detailed assessment, upon further review of the files it became clear that there were a number of more concerning issues at hand.

The Points of Dispute

The key issues raised within the Points of Dispute and supplemental Points of Dispute (served on 17 March 2024) can be summarised as follows:

1. The Bill of Costs had not been split from 1.4.13 to account for the differing tests of proportionality, in line with PD 47, para 5.8(7)
2. The Bill claimed costs relating to 4 separate matters however only costs orders relating to 2 of these matters had been referred to in the N252. As such, there were no live costs proceedings for these 2 other matters
3. The Bill claimed costs which were subject to an appeal however had subsequently been overturned. This claim for costs was correct at the time of service of the original Points of Dispute but had been overturned by March 2024 and the Receiving Party made no attempt to amend the bill before seeking Detailed Assessment in June 2024.
4. There were serious discrepancies against previous N260s prepared in respect of the same costs. This included differing time, differing hourly rates and costs that were said to be “fixed” now appearing at a higher sum.
5. The application of statute invoices was queried and copies of the same were requested for inspection

The Detailed Assessment of the matter took place over two days on 14 and 15 October 2024.

Misconduct under CPR 44.11 and Findings

Costs Judge James considered the courts power with regards to misconduct under CPR 44.11 and referred to the leading case of Gempride Limited v Bamrah and Others [2018] EWCA 1367. It was noted that the relationship between misconduct and wasted costs is “plainly similar” however it differs in that misconduct is penal rather than compensatory in nature. As the CPR does not contain definitions of “unreasonable” or “improper” the Court must refer to the guidance provided in Ridehalgh v Horsefield [1994] Ch 205 relating to wasted costs and that mistake, negligence or error of judgment would be insufficient.

Costs Judge James considered the proportionality test and concluded that, as this differs from the new test, it is necessary to ensure the later test is applied. The Judge suggested that, whilst the Receiving Party would have to pay the costs of unravelling this issue, this in isolation may not amount to misconduct. The same applied to the inclusion of costs for which no N252 had been served and also to the inclusion of the summarily assessed costs. These issues taken together, would however likely warrant a sanction for misconduct. It was notable that the Receiving Party had had plenty of notice to redraw the bill before seeking assessment on 28 June 2024 and failed to do so.

She considered whether an adjournment to redraw the bill, along with potential witness statements to address these issues and decided that the expense would be disproportionate and a waste of the Court’s resources. Additionally, the Receiving Party was on notice of the issues set out from the first set of Point of Dispute and failed to take any steps to rectify these issues.

Statute Invoices

The Judge noted that, despite the Paying Party having requested sight of the invoices raised, these had not been provided within the papers to the Court. Whilst the Paying Party was not entitled to see these, the Judge wished to review the same. The Receiving Party therefore provided these on the second day of the assessment. Whilst the invoices were not described as “interim statute bills”, she concluded that these were statute invoices by nature; they covered a specific time period, referred to the client’s right to assessment and provided a breakdown of the work done. Therefore the costs claimed should be limited in line with the invoices billed to the client. It is worth noting that the Claimant did not dispute that these amounted to statute invoices in any event.

Discrepancies and Further Concerns

On review of the first tranche of invoices alone, it was noted that £35,670 had been claimed against the £12,682.50 billed to the client for relatively the same period. She noted that this was a serious breach of the indemnity principle and, in her view, were not merely mistakes.

This led to a more thorough review of the papers following the hearing. It was noted that various invoices had been raised which did not charge VAT to the client however VAT had been claimed throughout the bill. On various occasions time had been claimed for a Grade A fee earner for preparing for and attending hearings, which a clerk had in fact charged a fixed fee of only £150. Whilst it was entirely reasonable to send a clerk to sit behind Counsel, it was unreasonable and improper to claim a Grade A attendance when no such attendance took place.

There were a number of incidents where time significantly in excess of the amounts within the breakdown to the client had been claimed. Tasks had also been rebranded as other tasks, such as photocopying claimed as preparing instructions to counsel. There was clear evidence of doctoring undertaken to file notes with time amended in addition to evidence that file notes that had been prepared much later and also evidence that some items had been completely fabricated. Costs Judge James concluded that these were not contemporaneous notes. On occasion, the bill claimed up to 49 times the amount that was billed to the client. The time was often excessive, even with the actual billed time in mind. This practice had been replicated on the previous firms’ files.

Based on the Judge’s calculations the Bill was around 3 times that actually charged to the client. It was noted to the worst example of tampered files that the Judge had ever encountered. The fee earner could not shift the responsibility for the certificate onto the costs draftsman, nor could the previous firms. Had a standard basis assessment took place, the time would likely have been allowed at less than 50% with a total costs recovery of £40-45k taking into account the stat invoices. The compelling evidence of misconduct meant that the bill was assessed at nil under CPR 44.11.

Commentary

We are all very familiar with the comments of Lord Justice Henry in Bailey v IBC Vehicles Limited  [1998] EWCA Civ 566 and the principles of misconduct surrounding Gempride. This case simply reinforces those principles.

The Receiving Party in this matter not only claimed costs far in excess of what was charged to the client but also significantly tampered with the file to support this claim. This is clearly unacceptable conduct, particularly given the sheer number of examples provided within the 41 page judgement. The conducting solicitor at RH Solicitors has in fact reported to the SRA and the costs draftsman involved only escaped regulatory action on the basis that he is unqualified and therefore not regulated. This is clearly a warning to all practitioners that this sort of conduct will not be tolerated and will result in dire consequences. An entirely appropriate sanction in my view, anything less would undermine any faith in the costs assessment process.