The Court of Appeal has rejected a Leeds law firm’s challenge to a ruling that it submitted a series of dishonest costs claims.
The appeal 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 found GSD’s principal, Kirna Madhas, to be “a wholly unreliable witness” and that her evidence was “not only evasive and inconsistent, but dishonest”.
He held all the allegations made against GSD proved and that the extent of the conduct and dishonesty of GSD 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.”
Ms Madhas also admitted to making false allegations to the Costs Lawyer Standards Board about the conduct of Allianz’s costs lawyer, Jon Williams of Williams Associates Costs Lawyers.
GSD Law’s first appeal was rejected by His Honour Judge Gosnell and then last Friday 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 is 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”.
The assessment proceedings in the remaining cases continue.
Tony Newman, head of motor claims at Allianz, said: “These types of behaviours taint the entire legal profession, and have to be rooted out and addressed by the toughest possible means.
“Ultimately, this is an act of greed and fraud against a motor insurance customer – it is not a victimless crime. Claimant law firms need to understand that Allianz will take them to task if they take this route.”
Mr Williams added: “Allianz has been entirely vindicated for taking a robust stance when presented with such thoroughly dishonest claims for costs by this firm of solicitors.
“The negotiation and assessment of costs is as much a legal process as the underlying substantive claim and there is no place in the legal, or indeed any, profession for such fraudulent practices.”
GSD’s solicitor, Luke Patel, a partner at Leeds firm Blacks, said: “Whilst the decision of the Court of Appeal is respected, it is with regret that the appeal judges did not take the opportunity to give any clear guidance to assist costs judges and parties on how and in which jurisdiction serious allegations of dishonesty in the context of cost claims should be dealt with.
“District Judge Neaves correctly recognised that very important issue and the necessary guidance required when allowing the appeal.
“He stated: ‘There is a dearth of authority to guide the court in the manner as to which CPR 46.11 procedures should be conducted when serious allegations of dishonesty are made against a receiving party. There is a need for guidance from an appellate court and it is therefore in the public interest for permission to be granted.’
“This case raised important matters of principle relating to the costs regime and to the administration of justice as recognised by the lower court.
“Unfortunately, the appeal judges did not take that opportunity and did not give that clear guidance. They were not prepared to look beyond the issues in this case.
“In the current political costs climate and the might of the resourceful paying parties, it is only a question of time before the same issues will soon come before the appellate courts.”