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It has long been established that the miscertification of a bill of costs is a serious issue, in view of the presumption of trust that is afforded by the signature itself (Bailey v IBC Vehicles (1998)). In the recent case of Jagjit Bamrah v Gempride Limited (2014) LTL 24/3/2014 this issue was considered in detail in the context of CPR 44.11 and it is demonstrated that in certain circumstances, such conduct can have a significant impact on the amount of costs that are ultimately recoverable as a result.
The matter came before Master Leonard to assess the costs incurred in a claim for personal injury arising out of a tripping accident sustained by the Claimant at the Defendant’s premises. Liability was admitted and damages in the sum of £50,000 were ultimately agreed by way of a Part 36 offer.
The claim had initially been dealt with by the Claimant herself; effectively trading as a sole practitioner within a Limited Company (Firm 1), between June 2008 and July 2012, before being taken over by a second firm (Firm 2). The bill of costs was accordingly divided into two parts and totalled £201,086.76 globally. Part 1 of the bill incorporated an hourly rate of £280 and a success fee of 100% pursuant to a Conditional Fee Agreement between the Claimant and Firm 1, whilst in part 2 an hourly rate of £217 was claimed and a success fee of 20% applied. Each firm had prepared and certified their respective parts of the bill.
Detailed assessment proceedings were commenced in July 2013 and in the Points of Dispute, the Defendant offered an hourly rate of £241, which was subsequently accepted by the Claimant. The Defendant also enquired as to availability of other methods of funding, to which the Claimant replied that ‘BTE legal expenses cover was not available’. Firm 2 also responded in a similar fashion. This was accepted by the Defendant and it was confirmed that the point would not be pursued.
The Claimant’s CFA was subsequently disclosed (the issue of its previous non-disclosure having also been raised by the Defendant) and enclosed with it was a copy a ‘funding options checklist’. A review of the CFA revealed that the hourly rate provided for was in fact £232. Furthermore, the ‘funding options checklist’ provided that Before the Event Insurance had been available, albeit not on terms that were acceptable to the Claimant. Consequently, an application was made by the Defendant to resile from the concessions previously made and for the entirety of the Claimant’s costs to be disallowed, pursuant to CPR 44.11 (formerly CPR 44.14). The Defendant also sought costs of assessment.
CPR 44.11 provides that the Court may disallow all or part of a party’s costs where that party (or their legal representative) either fails to comply with a rule or practice direction, or where the conduct of a party was unreasonable or improper. The Court may also order the party at fault to pay the costs incurred by the other side as a result.
It was the Defendant’s submission that all of the Claimant’s costs should be disallowed in view of her conduct (specifically in claiming an hourly rate in excess of that provided for in the CFA and in falsely stating that BTE insurance was not available), which amounted to improper conduct for the purposes of CPR 44.11. This was also extended to Firm 2, who, the Defendant submitted, should have made further enquiries before stating that no alternate funding was available.
The Claimant, however, argued that no part of the costs should be disallowed under CPR 44.11. It was the Claimant’s case that when the bill was prepared, she took the view, in her role as conducting solicitor, that the work merited an enhanced rate and she had applied to review the provisions of the CFA retrospectively to charge an hourly rate of £280.
In relation to the alternative funding point, the Claimant submitted that her reply was not inaccurate; funding had not, in reality, been available because the BTE insurer refused to fund the claim unless panel solicitors were instructed. The BTE insurer also did not consider the Claimant to be sufficiently impartial. It was, however, later accepted that the Claimant should not be entitled to recover any additional liability and the 100% success fee and ATE premium were conceded in relation to part 1 of the bill.
Firm 2, however, maintained that they had been ‘entitled to rely on the fact that the Claimant, as an experienced personal injury solicitor, would have already looked into whether she had any Before the Event legal expenses insurance and would have used it if it would have provided her with the appropriate cover’.
The Defendant also submitted that the Claimant was effectively a Litigant in Person, or in the alternative a sole practitioner who could not enter into a contract with herself and accordingly the CFA would be unenforceable between the parties. This was initially refuted by the Claimant, who sought to rely on the existence of a valid contract in law (the CFA), though later seemed to abandon the argument and sought to rely on the principle that where a solicitor is represented by their own practice, costs are recoverable by reference to an hourly rate appropriate to the practice of the solicitor in question, to indemnify against the expense incurred (London Scottish Benefit Society v Chorley Crawford and Chester (1884) and Malkinson v Trim (2002)).
Firstly, Master Leonard acknowledged that the Claimant had referred to the principles set out in London Scottish Benefit Society v Chorley Crawford and Malkinson v Trim in response to the Defendant’s attempt to categorise her as a Litigant in Person; however, as she had sought to claim costs and a success fee pursuant to a CFA with Firm 1 it was found that the claimed hourly rate was based on the premise of the contractual agreement. It followed that, as there was no provision within the agreement permitting a retrospective revision of the hourly rates, the Claimant had in effect certified a bill of costs which claimed an hourly rate substantially in excess of that which she was contractually bound to pay.
In relation to the alternative funding enquiry, the Claimant’s response was held to be untrue. “It is not open to the Claimant to record for her own purposes, as she did, that BTE funding was available to her but to tell the paying party, as she did, that it was not. Nor can she say that because it was not available to her on terms acceptable to her, it was not available at all”. The Claimant was also held to be responsible for the factual accuracy of the statement despite the replies having been prepared by a Costs Draftsman on her behalf.
In view of the findings, Master Leonard went on to consider whether the Claimant’s conduct, in miscertifying the bill and providing a false response to the Points of Dispute, would fall within CPR 44.11(1)(b) as ‘unreasonable’ and ‘improper’. This is further defined in PD 44 paragraph 11.2 to include “steps which are calculated to prevent or inhibit the Court from furthering the overriding objective”.
By reference to a number of cases such as Lahey v Pirelli Tyres Ltd (2007) and Ridehalgh v Horsefield (2010), Master Leonard concluded that the words ‘unreasonable’ and improper’ should be construed narrowly to denote a significant breach or violation of a duty to the Court imposed by the code of professional conduct, in a similar fashion to the making of a Wasted Costs Order. The word ‘unreasonable’ was also held to describe conduct which is designed to harass the other side rather than advance the resolution of the case.
In considering whether the miscertification of the bill constituted the requisite breach of duty, Master Leonard also referred to the definitive case of Bailey v IBC Vehicles (1998), in which it was held that the miscertification of a bill should be treated as a most serious disciplinary offence. In view of this, it was held that in falsely certifying an hourly rate some £48 in excess of the terms of the CFA (£96 with the success fee) the Claimant was in breach of her duty to the Court.
Furthermore, the Claimant’s untrue response with regards to the availability of alternative funding, which had resulted in the concessions being secured from the Defendant, was also found to be unreasonable and improper within the meaning of CPR 44.11(1)(b).
In applying CPR 44.11, Master Leonard concluded that whilst it would be ‘unduly harsh’ to completely disallow all of the Claimant’s costs, the penalty needed to reflect the serious nature of the conduct complained of, and the Claimant’s concession of the additional liabilities was not considered to be sufficient. It was therefore decided that the Claimant, by her actions, had in effect forfeited any right to rely upon the binding contract with Firm 1 (though the existence of such a binding contract, Master Leonard considered, was open to doubt in the circumstances) and should accordingly be treated as a Litigant in Person. As a result, all costs within part 1 of the bill that exceeded the fixed hourly rate recoverable by a Litigant in Person were disallowed.
As regards part 2 of the bill, Master Leonard found the assumption made by Firm 2, that no BTE funding had been available, to be an honest mistake and concluded that it would be unfair to categorise the same as unreasonable or improper. No penalty was therefore imposed in relation to part 2.
The Defendant was also awarded the costs incurred as a result of the Claimant’s actions.
It is clear from the decision that the miscertification of a bill of costs remains a serious offence and this, coupled with the misleading information contained in the replies, has the potential to result in significant reductions to the base profit costs recoverable (in accordance with CPR 46.5 a Litigant in Person can recover either their actual financial loss, which must be evidenced, or a fixed hourly rate of £18/hour, subject to a ceiling of two-thirds of the costs that would be incurred by a legal representative), not to mention the loss of the 100% success fee and the ATE premium, in addition to the requirement to pay the Defendant’s costs.
What is also apparent from the decision, however, is the scope of judicial discretion that exists when making a decision as to the appropriate penalty to impose. Clearly, the case turned heavily on its unusual facts; the Claimant being a sole practitioner within Firm 1 and effectively running her own case. It seems evident that the general uneasiness and doubt surrounding this arrangement (contractual or otherwise) heavily influenced Master Leonard’s decision to categorise the Claimant as a Litigant in Person. What remains unclear is how this could be applied to the ‘ordinary’ case involving the lay Claimant and his or her legal representative. Nonetheless, Master Leonard made it clear that the conduct exhibited in this case satisfied the narrow interpretation of ‘unreasonable’ or ‘improper’ and should therefore be avoided at all costs.
Points to Note
1. A party will be responsible for the content and factual accuracy of their replies, regardless of whether they drafted the replies personally;
2. It is not open to a party to state that Before the Event funding is unavailable simply because the terms are unacceptable to that party;
3. The miscertification of a bill of costs containing misleading information and the provision of untrue information as regards the availability of alternative funding amounts to a breach of the party’s duty to the Court, which in turn qualifies as ‘unreasonable’ and ‘improper’ for the purposes of CPR 44.11(1)(b);
4. Whilst complete disallowance of the costs of the Claimant was considered too harsh in the circumstances, the Court demonstrated its wide discretion to disallow part of the costs, and this can result in a significant reduction in the costs that are ultimately recoverable.