Costs News

13 September 2018
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Supreme Court refuses application to appeal by law firm over 'dishonest' costs claims

The Supreme Court has refused permission for a third appeal by a claimant law firm against a ruling that it submitted 'dishonest' costs claims.

It announced this week that it had refused permission “because the application does not raise an arguable point of law of general public importance which ought to be considered at this time bearing in mind that the case has already been the subject of judicial decision and reviewed on appeal”.

The Court of Appeal ruling in GSD Law Ltd v Wardman and Ors [2017] EWCA Civ 2144 arose from 14 successful personal injury claims, for which GSD Law was on the record in nine and acted as agents for Sovereign Solicitors in the other five.

The paying parties’ insurer, Allianz, responded to the detailed assessment proceedings with allegations of systematic fraud and misconduct, which it said included claims for hourly rates in excess of the retainer rates, claims for senior lawyers’ rates claimed for the work of junior fee-earners and claims for work that had simply not been done.

According to Allianz, GSD initially sought £225,000 in costs. The formal bills for costs that followed totalled just under £160,000, but were later reduced to £128,000.

Two of the claims were chosen as sample cases, GSD Law was joined as a party to the proceedings, and District Judge Neaves in Leeds County Court – the regional costs judge – heard the case over three days.

Sovereign discontinued the detailed assessment proceedings in relation to its cases at the start of the hearing.

DJ Neaves held all allegations against GSD proved and that the extent of its misconduct was at the most serious end of the scale. This included submitting a forged conditional fee agreement to the court.

He concluded: “The conduct of the receiving party’s solicitor is sufficiently egregious as to make the only appropriate sanction the disallowance of all costs on the sample files. The receiving party will also pay the costs of the assessment proceedings including the preliminary issues.”

GSD Law’s first appeal was rejected by His Honour Judge Gosnell and then by the Court of Appeal. Both rejected GSD Law’s argument that the district judge was wrong to consider the allegations against the firm under CPR 44.11 – which deals with the court’s powers in relation to misconduct – because it was a summary jurisdiction.

Lord Justice Newey said: “It seems to me that it was right to entertain the application under CPR 44.11. The paying parties were contending that costs ‘which [were] being assessed’ should be disallowed because of ‘unreasonable or improper’ conduct in connection with the assessment of costs; the allegations could be addressed in the context of pending assessment proceedings; certain of the allegations (in particular, those relating to the bills of costs) would fall to be addressed anyway in those proceedings; there is no suggestion that legal professional privilege presented any difficulty; and the complaints made by the paying parties did not call for any inquiry into the merits of the substantive claims…

“Having regard both to seriousness of the allegations and to the sums potentially at stake, I do not think it was disproportionate to have a three-day hearing.

“I cannot see, moreover, how ordinary civil proceedings for fraudulent misrepresentation could have provided a satisfactory alternative to an application pursuant to CPR 44.11.”

A second ground, that the procedure adopted by the district judge was unfair, was also rejected. Lord Justice Newey agreed with HHJ Gosnell that GSD and Ms Madhas “had more than adequate notice of the allegations against them and were given a full opportunity to respond to them”.



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