Kapoor goes Kaput!

Having exercised its powers under CPR 44.11 (misconduct in relation to costs assessment), the Court assessed the Bill of Costs at nil.

“I have found the Bill to be riddled with claims that (regrettably) I find dishonest, and unreasonable and improper”.

The Receiving Party was also ordered to pay the Paying Party’s costs of assessment in full and on the indemnity basis.

Read on to find out what went wrong in Kapoor v Johal [2024] EWHC 2853 (SCCO) and how you can avoid making the same mistakes.

The Case:
Case type: Neighbour/boundary dispute (4 matters with 4 claim numbers and 3 firms of Solicitors, the latest being RH Solicitors Ltd)
Claimant: Paying Party (PP)
Defendants: Receiving Party (RP)
Bill of Costs: £258,583.78 including VAT
N252: 06.10.23 – the Bill referenced 2 claim numbers
Points of Dispute: 17.11.23 (11 months prior to Hearing) PP raised a number of points, of grave consequence if upheld, including (paraphrased):

1.      No split at 01.04.13 for proportionality.

2.      Costs from the ‘2 missing claim numbers’ had been included in the Bill and the Bill did not split out the work relating to the 4 different claim numbers (therefore no detailed assessment process had been started in relation to the costs for those 2 missing claim numbers).

3.      Costs related to one of the claims being struck out and a failed appeal had been included in the Bill.  Confusingly, there had been no attempt to separate these costs from the other litigation costs and the costs order was overturned on Appeal after the Detailed Assessment proceedings had been commenced. There was therefore no way to properly determine what costs would now no longer be recoverable.

4.      A number of concerns regarding the Bill, including:

a)      By reference to earlier N260s for various Hearings, the Bill claims substantially higher amounts and times

b)     Costs Summarily Assessed during the proceedings have been claimed again in the Bill

c)      Costs which were previously stated to be ‘fixed’ at a figure, appear in the Bill at a higher figure

d)     Discrepancies in relation to amount of costs recorded in Statement of Costs for Hearing on 08.02.22 compared to costs now in the Bill

e)     Statement of Costs for 08.02.22 referenced costs at £150p/h that were claimed at £220 and £250p/h in the Bill

f)       Document times in the Statement of Costs for 08.02.22 did not match the same times in the Bill, with the latter being substantially higher

PP was not privy to the interim statute invoices sent to RP during litigation when preparing the PODs.

Supplemental PODs: 27.03.24 – the struck out claim and subsequent Appeal was highlighted here and PP pointed out that the RP had failed to make any attempt to redraw the Bill to reflect this turn of events.
Replies: Whilst RP is not obliged to file and serve Replies to PODs, to ignore points 1, 2 and 3 when they clearly warranted attention (and a redrawn Bill) was unreasonable.
N258: 28.06.24
Door of Court: The RP provided a 2.5 page ‘Response to the Points of Dispute’.  The document said nothing material about the matters addressed.
Hearing before Costs Judge James: The suggestion at the Hearing that the matter (listed for 2 days) should be adjourned to allow for ‘mistakes’ to be corrected, would have been bad enough if it covered only Points 1-3, which do appear to be genuine mistakes (but should have been put right before the N258 was filed).  RP had plenty of notice that these Points were in issue and did nothing.  Even more serious are the issues set out at Point 4.
Findings of Misconduct:

 

Summarily Assessed Costs – Bill includes some work that should have been omitted (pointed out in PODs) and also the costs did not match the Statement of Costs / invoices.

No Order as to Costs / Silent as to Costs – Bill includes some work that should have been omitted (pointed out in PODs) and also the costs did not match the Statement of Costs / invoices.

Interim Invoices – PP requested sight of the interim invoices in the PODs.  On day 1 of the hearing the Judge requested sight of the interim invoices.  They were still at the Costs Draftsman’s office.  The Judge was not happy that the invoices had been separated from the file of papers that had been filed.  The partial set of invoices were reviewed on day 2 with a witness statement that did not explain why they had been separated and their contents were of grave concern and indicated serious misconduct on a number of issues.

Status of the Invoices – The Judge found that the invoices were interim statute bills covering a specific time period and included a breakdown of the time spent/work done during that period and included Notice of the right to a detailed assessment and the Solicitors Act 1974.  No submissions were made by the RP to suggest they were interim ‘on account’ invoices.  Of note, a Grade A fee earner had been claimed for time spent at many hearings that were attended by a clerk and charged to RP as a fixed fee in those invoices.

Other Issues with Items in the Interim Statute Bills vs the Bill – There were scores, if not hundreds of non-contemporaneous serif attendance notes across the file of all three firms of Solicitors; the notes all look the same as to font, font size and layout and they do not look like the other (contemporaneous) attendance notes on the files of papers.  The Judge found that they were added at a much later date.  That is a matter of the gravest seriousness.  “This is the worst example of tampering with a file of papers that I have ever encountered”.

Bill of Costs v Statement of Costs dated February 2022 – do not match up after cross referencing the costs claimed by each Solicitor.

Exaggerated Bill total – Bill claims many times more than RP has ever been invoiced for the services of all three firms instructed by RP since 2010.

Outcome:

 

True costs invoiced to RP were less than one third of the amount claimed in the Bill, and it was likely that those costs would have been reduced on the Standard Basis by as much as 50% if not more.

In any event, given the aforementioned issues above, the Bill was assessed at nil.

The PP was awarded their costs of assessment on the indemnity basis.

After the Hearing: In addition, after the Hearing the Judge found a further, potentially extremely serious issue around VAT – some invoices and in the Statement of Costs, VAT had been excluded for non VAT-registered practitioners, yet VAT had been claimed on those costs in the Bill.

This point was included in the Judgment for the attention of the SRA and, if appropriate HMRC (this issue was not aired in Court and RP had no opportunity to answer the point) – this was not factored into the decision to assess the Bill at nil, nor to award PP’s costs on the indemnity basis.

The Judge indicated that they would be reporting the sole practitioner at RH Solicitors Ltd to the SRA and if their Costs Draftsman at Nathan Associates were a Costs Lawyer, then they would have been reported to the ACL.  In any event, their conduct warrants investigation.

 

Conclusion:

PIC cannot stress the importance of:

  • The Indemnity Principle – the RP cannot receive more than they are liable to pay their own legal representatives.
  • Accurate Interim Statute Bills and sticking to those sums when a final Bill is prepared for a PP.
  • Preparing contemporaneous file notes / time recording when work is done.
  • The signature to the Bill of Costs – you are signing to assert that the Bill is both accurate and complete and that the costs do not exceed the costs which the RP is/are liable to pay your firm. As such, following Bailey v IBC Vehicles Ltd, the actions of the Solicitor in this case were a serious disciplinary issue.
  • The ultimate responsibility for signing and approving the accuracy of the Bill of Costs is yours. Per Gempride Limited v Bamrah you cannot shift responsibility to the Bill Drafter.
  • Instructing a reputable Costs Drafting Firm (for those not sending instructions in-house) with regulated employees who will be familiar with and know the importance of legal costs Rules when preparing their Bills, Budgets, Advices, etc.

A copy of the judgment is available here Kapoor v Johal.PDF

Victoria Stewart, Costs Lawyer

28.11.2024

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