Could your Without Prejudice Schedule of Costs land you in trouble?
Are you preparing Without Prejudice Schedules of Costs before preparing a formal Bill? You need to read GSD Law Ltd V Craig Wardman Of St Gobain Building Distribution & Ors (2017) where a Receiving Party’s costs for 14 Claimants were dismissed due to a law firm’s misconduct. Victoria Stewart, Costs Lawyer at PIC reports.
In the case of GSD Law Ltd v Craig Wardman Of St Gobain Building Distribution & Ors  EWCA Civ 2144, the Court of Appeal upheld a previous decision that GSD Law’s costs should be disallowed on the basis that there had been misconduct on their part and that they should pay the costs of the assessment proceedings on the indemnity basis as per CPR 44.11 (headed “Court’s powers in relation to misconduct”).
GSD Law are a law firm with 14 successful cases. Following the conclusion of their 14 cases, they prepared without prejudice schedules of their costs in connection with the cases which they sent to the paying party. The paying party did not agree the costs and so GSD Law prepared a formal Bills of Costs, with lower figures, and Detailed Assessment proceedings were commenced. The paying party responded with Points of Dispute. The paying party made allegations that there had been an attempt at significant overcharging and that the Claimants should not recover costs at all.
The particulars of this allegation was that there had been a systematic attempt by GSD Law to claim more in without prejudice schedules than was properly claimable (such as claiming hourly rates that were higher and not consistent with the retainer, using a blanket rate for all grades of fee earner and therefore disguising what grade of fee earner had carried out the work, claiming for work that had not been done, claiming additional liabilities that were not payable at all or differed than the amounts claimed and for claiming a drafting fee that did not exist), and had the attempt succeeded, then GSD Law would have been personally enriched. All of which gave rise to some very serious allegations requiring to be answered by GSD Law.
The matter proceeded to assessment with two cases being selected. GSD Law were joined as a party and the fee earners gave evidence at the assessment.
Bundles were prepared by the Claimant which included numerous copies/versions of the CFA and during the hearing the handwriting was scrutinised for the date of the CFA. The Claimant admitted one of the CFAs was a forgery and the court claimed it was inconceivable that a solicitor, facing such serious allegations, would delegate to others the task of ensuring that the correct documents were before the courts.
Also, the Claimant had made a complaint to the Costs Lawyer Standards Board about the Defendants’ Costs Lawyer. The complaint was a blatant attempt to discredit the Costs Lawyer for the purposes of getting the upper hand in this litigation. GSD Law confirmed under cross-examination that the allegations contained within it were false and that she knew that they were false. This, also, was serious misconduct within the meaning of CPR rule 44.11(1)(b).
GSD Law stated its acceptance that there had been unreasonable conduct in the sample files but that this was a case of carelessness as to administrative duties through ‘inadvertence’ and that as a result the court should allow the costs subject to assessment. It was District Judge Neaves’ decision that the costs claimed be disallowed in full in light of GSD Law’s conduct. GSD Law were ordered to pay the costs of the assessment on an indemnity basis.
GSD Law applied for permission to appeal. The grounds of appeal that remained before the Court of Appeal and brought by GSD Law were as follows:
- Should District Judge Neaves have declined to entertain the allegations against GSD because CPR 44.11 is a summary jurisdiction, akin to that regarding wasted costs?
- Was the procedure that was adopted unfair?
GSD Law failed on both issues, with the court commenting:
‘It is a fundamental principle of fairness that a charge of dishonesty should be unambiguously formulated and adequately particularised’.
‘…Bailey v IBC Vehicles Ltd… there is a strong public interest in ensuring that solicitors do not certify costs figures dishonestly… there would be unfortunate consequences if paying parties “lost confidence in the bona fides of solicitors signing these certificates”.
This case demonstrates the necessity for accurate, honest and consistent billing from day one, with a close eye on the Indemnity Principle.
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