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||Neutral Citation Number:  EWCA Civ 2144
||Case No: A2/2015/2438
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COUNTY COURT AT LEEDS
His Honour Judge Gosnell
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE HAMBLEN
LORD JUSTICE NEWEY
|| GSD LAW LIMITED
||- and -
||CRAIG WARDMAN OF ST GOBAIN BUILDING DISTRIBUTION
Mr David Berkley QC (instructed by Blacks Solicitors LLP) for the Appellant
Mr Matthew Smith (instructed by Williams Associates) for the Respondents
Hearing date: 29 November 2017
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
Lord Justice Newey:
- By an order made on 15 December 2014, District Judge Neaves, sitting in the County Court at Leeds, made an order under which the claimants' costs in two cases, Moriarty v Frodsham Sign & Display Ltd ("the Moriarty case") and Ismail v Fibrelite Composites Ltd ("the Ismail case"), were disallowed on the basis that there had been misconduct on the part of the appellant, GSD Law Limited ("GSD"), who had acted for the claimants. District Judge Neaves further ordered GSD to pay the costs of the assessment proceedings relating to these cases on the indemnity basis.
- An appeal was heard by His Honour Judge Gosnell, sitting in the County Court at Leeds, but was dismissed. GSD now appeals to this Court with permission from McFarlane LJ. The case raises issues relating to CPR 44.11.
- The appeal arises out of 14 personal injury claims in which the claimants succeeded and so became entitled to costs. GSD was on the record for the claimants in nine of these cases and acted as agents for Sovereign Solicitors as regards the other five. GSD undertook the work on the basis of conditional fee arrangements.
- GSD prepared informal schedules of their costs in connection with the 14 cases which they sent to the paying parties. The paying parties having declined to agree the costs, GSD prepared formal bills of costs and detailed assessment proceedings were commenced. The paying parties responded with points of dispute.
- Mr Jon Williams, a costs lawyer, was instructed on the 14 cases by the paying parties' insurer, Allianz. As a result of concerns that he had about the costs claimed, a document headed "Particulars of Allegations" was served on behalf of the paying parties by way of supplement to the points of dispute on 12 November 2012. This stated in terms that it contained allegations of fraud and misconduct against GSD and put GSD on notice that the paying parties intended to argue that it had:
"caused the receiving parties [i.e. the claimants in the substantive proceedings] to be guilty of (gross) misconduct within the meaning of CPR rule 44.14 [now, CPR 44.11] and … as such they should both be denied their costs and they should pay the costs of the assessment".
The document proceeded to suggest that there had been "a systematic attempt by GSD to claim more in without prejudice schedules than is properly claimable", from which, had the attempt succeeded, GSD would have been personally enriched. Receiving parties (through GSD) were said to have "claimed hourly rates which were higher than those that were properly and honestly claimable", to have "attempted to mislead the paying parties as to the status of the persons who carried out the work", to have "claimed profit costs for work that was not done", to have "claimed additional liabilities which were either not payable at all or which were less than the amounts claimed" and to have "claimed a 'drafting fee' that did not exist".
- Specific allegations were then set out in relation to various matters. As regards, for example, the Ismail case, the following was said:
i) Under the heading "Rates":
"A rate of £203 ph was claimed in the Schedule whereas the work was actually carried out by two fee earners, one of whom was not entitled to claim that rate";
ii) Under the heading "Time":
"The documentary and attendance time in the Schedule dated 05/09/11 was grossly overstated (20.0 hours as against 6.0 hours in the Bill of Costs); in addition, the number of routine letters was overstated (96 as against 69), as was the number of routine telephone calls (46 as against 30)"; and
iii) Under the heading "Notes":
"The total claimed in the Schedule was £11,185.56 whereas the total claimed in the Bill of Costs was only £6,242.83."
- On 16 November 2012, there was a hearing before District Judge Bedford, then the Regional Costs Judge. He gave directions for all the relevant detailed assessments to be case-managed together, for the parties to choose two sample cases that were "indicative of the issues raised in the other cases", for there to be a hearing to determine certain preliminary issues (including "the relevant jurisdictions that are open to the Court on the facts of this case, and in particular, whether the Court is able to reduce or limit the sums claimed on the grounds of misconduct or fraud, and if so, under which powers the Court may do so") and for cases other than the sample cases to be stayed.
- District Judge Bedford's order also provided for GSD to have permission to join itself as a co-defendant at any time for the purposes of dealing with costs. GSD availed itself of this opportunity in September 2013, formally becoming a defendant to the proceedings. Mr David Berkley QC, who appeared for GSD before us (as he also did before Judge Gosnell), confirmed to us that, although the claimants in the proceedings were nominally the receiving parties, the commercial interest in the costs issues always rested with GSD.
- A "Reply to Allegations" was served on 21 December 2012. By this point, the parties had selected Hussain, Khan & Mohammed v Powwow Water Company Ltd & Allianz Insurance plc ("the Powwow case") and the Moriarty case as the sample cases. The document therefore provided a "GSD response in specificity in the Sample cases" as well as denying the allegations against GSD in more general terms.
- The evidence filed by GSD included two witness statements from Ms Kirna Madhas, the sole principal of GSD, dated respectively 11 March 2013 and 21 October 2013. In the second of these statements, Ms Madhas commented both on the two sample cases (Powwow and Moriarty) and on other cases in respect of which the paying parties had made allegations. One of these was the Ismail case.
- The preliminary issues came on for trial before District Judge Neaves, who had by then become the Regional Costs Judge, on 7 May 2014. At the start of the hearing, Sovereign Solicitors applied for, and were granted, permission to discontinue the detailed assessment proceedings in respect of the five cases in which they had acted. Since these included the Powwow case, that was replaced as one of the two samples by the Ismail case. GSD and the paying parties had known that Sovereign Solicitors would be applying to discontinue and so had agreed in advance of the hearing that Moriarty and Ismail should be taken as the sample cases.
- A number of witnesses gave oral evidence over 7 and 8 May 2014. Amongst them were Mr Williams and Ms Madhas, who was cross-examined at some length but whose testimony had not been completed by the close of the second day. At that stage, Dr Mark Friston, by whom the paying parties were then being represented, said that he had put the majority of his points in general terms but would be happy to deal with each item individually. In the discussion that followed, District Judge Neaves said:
"I am just throwing this open as a suggestion but it would deal with the matter if in between now and that adjourned hearing, Mr Friston, you were to effectively draft something akin to an indictment? That is perhaps not entirely the appropriate word but I do think we need that level of specificity because I am clearly going to be invited to make specific findings on all of these cases and I need to be very clear as to what those findings are. The witness needs to be equally clear as to what exactly is being put to her in each of those cases."
- There was also reference at this stage to the files relating to the Moriarty and Ismail cases. In this connection, District Judge Neaves said:
"So far as further directions are concerned, in relation to the files that were handed up yesterday, I take it that Ms Madhas will need to retain those so that she can consider them obviously prior to the adjourned hearing but I am conscious of the fact that they need to be filed with the Court so that I can also consider them in good time before the adjourned hearing."
- An order was accordingly made that provided for the Moriarty and Ismail files to be lodged with the Court not less than 14 days before the next hearing, for the paying parties to serve a document "setting out the allegations of fraud and misconduct made against [GSD]" and for GSD to serve a response.
- On 19 June 2014, the paying parties served a document headed "'Indictment-Style' List of Allegations of Fraud and Misconduct". This sought to add one new allegation, in these terms:
"On 17 January 2014 GSD, instructed their agents, Blacks LLP, to make a complaint to the Costs Lawyer Standards Board about the Defendants' costs lawyer (Mr Williams); that complaint was made in the context of the whole of this litigation, including the test cases. That complaint was a blatant attempt to discredit Mr Williams for the purposes of getting the upper hand in this litigation. GSD's principal has confirmed under cross-examination that the allegations contained within it were false and that she knew that they were false. This was (gross and serious) misconduct within the meaning of CPR rule 44.11(1)(b)."
The document also, in paragraphs 19-23, summarised the allegations made in respect of the Moriarty and Ismail cases, but, as Mr Berkley accepted before both Judge Gosnell and us, it added little of substance to what had been alleged in the 2012 "Particulars of Allegations".
- GSD served a "Reply to Allegations" on 18 July 2014. This document included this:
"The 'hourly rate' point is answered by reference to the retainers. These are attached hereto."
Amongst the documents comprising the attachment was what appeared to be a signed conditional fee agreement ("CFA") for the Ismail case referring to an hourly charging rate of £203. The handwritten date that the document bears cannot fully be made out, but it begins with the number "6".
- The hearing before District Judge Neaves resumed on 8 September 2014. Dr Friston was by then taking a sabbatical for health reasons and so Mr Matthew Smith appeared for the paying parties (as he also did before Judge Gosnell and us). The oral evidence was completed and directions were given for each side to make closing submissions in writing, which they did. It is perhaps noteworthy that, in his submissions, Mr Craig Ralph, who then represented GSD, accepted that there had been "unreasonable conduct in the two sample files". His position was that "GSD/Ms Madhas' is a case of 'carelessness' as to her administrative duties through inadvertence" and that, in those circumstances, the Court should allow the costs in the sample files subject to assessment.
- District Judge Neaves handed down a written judgment at a hearing on 15 December 2014. He said of Ms Madhas that she was "a wholly unreliable witness" and that her evidence was "not only evasive and inconsistent, but dishonest" (see paragraph 78 of the judgment). He held all the allegations made against GSD to have been proved (including two relating to the bills of costs rather than the schedules that preceded them) and agreed with Mr Smith that the extent of the conduct and dishonesty of GSD was at the most serious end of the scale. He concluded (in paragraph 83):
"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."
He said that he would hear further submissions as to how to deal with the remaining cohort of cases.
- One of the allegations made in respect of the Ismail case merits specific mention. As expressed in the "Indictment-Style" list of allegations, this was that:
"In the Schedule, GSD claimed an hourly rate of £203 per hour, this being a false representation of what was reasonably claimable. This was for one or both of the following reasons: (i) it was a rate that exceeded the rate set out in Mr Ismail's fee agreement, and (ii) it was a rate that was grossly excessive given the fact that much of the work was carried out by a junior fee earner."
- The £203 rate was, of course, consistent with the Ismail CFA attached to the "Reply to Allegations" (which District Judge Neaves termed "CFA 1") (see paragraph 16 above). At the hearing on 8 September 2014, Ms Madhas was asked to produce the original of this document, in response to which she produced two sheets of paper which, unlike CFA 1, contained no handwritten date and gave an hourly rate of £180 and so (as District Judge Neaves noted) could not be the original of CFA 1. Nor could a third document found in a trial bundle that also purported to be the CFA for Mr Ismail and which the District Judge called "CFA 3". As to this, the District Judge recorded that, in contrast to CFA 1, CFA 3 referred to an hourly rate of £180 and observed that "[t]he '6' of the handwritten date on CFA 3 does not appear to match the '6' that can be made out on CFA 1" (see paragraph 32 of the judgment). The District Judge went on (in paragraph 34):
"Upon further questioning by Mr Smith [Ms Madhas] accepted that CFA 1 was a forgery. She was unable to explain how that forged document came to be appended to the reply, although earlier during the hearing she had suggested that her administrative team had copied and sent over documents. To the extent that that is tendered as an explanation, I do not accept it. It is inconceivable that a solicitor, facing such serious allegations, would delegate to others the task of ensuring that the correct documents were before the courts."
- GSD applied for permission to appeal, and District Judge Neaves granted it, taking the view that there was a "dearth of authority to guide the court in the manner as to which CPR 44.11 procedures should be conducted when serious allegations of dishonesty are made against a receiving party". The ensuing appeal came before Judge Gosnell, himself a former Regional Costs Judge, on 9 June 2015 and he delivered a written judgment on 8 July. He concluded that the appeal should be dismissed.
- Five grounds of appeal were advanced before Judge Gosnell. Those relevant to the appeal to this Court were essentially, first, that District Judge Neaves had "purported to use the CPR 44.11 powers in a manner which was entirely inconsistent with their purpose to be an ancillary jurisdiction intended to be summary in nature and which does not require the consideration of detailed allegations of alleged dishonest conduct" and, secondly, that the procedure that the District Judge had adopted was unfair. As for the latter point, Judge Gosnell considered that "the proceedings overall were fair", taking the view 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" (see paragraph 28 of the judgment). With regard to the former issue, the Judge concluded (in paragraph 23):
"The alleged misconduct in this case goes to the very heart of the detailed assessment process and examination of some of the issues would be called for on a detailed assessment in any event. The Court has an important role in maintaining professional standards and ensuring that parties behave fairly and honestly towards each other in the litigation process. In my judgment the Judge below was right to investigate this conduct under the summary procedure envisaged by CPR 44.11 and certainly cannot be said to be out with the wide discretion open to him when deciding how to deal with this issue."
- Earlier in his judgment, Judge Gosnell had noted that certificates such as paragraph 5.21 of PD 47 requires "appeared on both the costs schedule and Bill of costs of [GSD] and the indemnity principle had in both documents been breached as found by the Judge below and conceded by counsel on behalf of [GSD]" (paragraph 20 of the judgment). He went on (in paragraph 21):
"In my view it was incumbent on the Judge to investigate factually whether these numerous alleged breaches of the indemnity principle and the consequent signing of misleading certificates were part of a habitual or systemic scheme to obtain unreasonable amounts of costs or were mere coincidences caused by genuine errors. The signing of a certificate on the bill of costs certifying its accuracy is very important. If paying parties lost confidence in the bona fides of solicitors signing these certificates the consequences for civil litigation as a whole would be significant. Paying parties would be reluctant to negotiate informal settlement of costs and would insist on a Bill being served and they would then insist on seeing the document which evidences the retainer to ensure the indemnity principle had not been breached. This was the very evil which Bailey v IBC Vehicles was intended to address. The allegations made in this case were serious and went to the heart of the detailed assessment process. Many of the documents which had to be examined would have been examined as part of the detailed assessment process anyway (in particular the documents evidencing the retainer). In my view it would have been an abdication of the court's duty not to investigate these allegations."
- In Bailey v IBC Vehicles Ltd  3 All ER 570, to which Judge Gosnell referred in this passage, Henry LJ said (at 575-576):
"RSC Ord 62, r 29(7)(c)(iii) requires the solicitor who brings proceedings for taxation to sign the bill of costs. In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. The bill specifies the hourly rates applied, and the care and attention uplift claimed. If an agreement between the receiving solicitor and his client (here the trade union) restricted (say) the hourly rate payable by the client, that hourly rate is the most that can be claimed or recovered on taxation (see General of Berne Insurance Co v Jardine Reinsurance Management Ltd  2 All ER 301). The signature of the bill of costs under the rules is effectively the certificate by an officer of the court that the receiving party's solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement.
The court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended….
… And the other side of a presumption of trust afforded to the signature of an officer of the court must be that breach of that trust should be treated as a most serious disciplinary offence."
- The following issues arise on the present appeal:
i) 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? ["The Summary Jurisdiction Issue"]
ii) Was the procedure that was adopted unfair? ["The Unfair Procedure Issue"]
- I shall take these in turn.
The Summary Jurisdiction Issue
- CPR 44.11, pursuant to which District Judge Neaves made his order, is headed "Court's powers in relation to misconduct" and provides as follows:
"(1) The court may make an order under this rule where—
(a) a party or that party's legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or
(b) it appears to the court that the conduct of a party or that party's legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.
(2) Where paragraph (1) applies, the court may—
(a) disallow all or part of the costs which are being assessed; or
(b) order the party at fault or that party's legal representative to pay costs which that party or legal representative has caused any other party to incur…."
- It will be seen that this power extends to both a party and his legal representative. Among other things, conduct on the part of a legal representative can result both in the disallowance of costs that are being assessed and in the representative being ordered to pay costs incurred by another party.
- The Court also has power to make a "wasted costs" order against a legal representative under section 51(6) of the Senior Courts Act 1981 and CPR 46.8. Section 51(6) of the Senior Courts Act explains that the Court "may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court". The expression "wasted costs" is defined in section 51(7) to mean:
"any costs incurred by a party—
(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or
(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay."
CPR 46.8 states:
"(1) This rule applies where the court is considering whether to make an order under section 51(6) of the Senior Courts Act 1981 (court's power to disallow or (as the case may be) order a legal representative to meet, 'wasted costs').
(2) The court will give the legal representative a reasonable opportunity to make written submissions or, if the legal representative prefers, to attend a hearing before it makes such an order…."
- The circumstances in which the wasted costs jurisdiction should be exercised were considered by the Court of Appeal in Ridehalgh v Horsefield  Ch 205. In the course of delivering the judgment of the Court, Sir Thomas Bingham MR said this (at 238-239):
"The procedure to be followed in determining applications for wasted costs must be laid down by courts so as to meet the requirements of the individual case before them. The overriding requirements are that any procedure must be fair and that it must be as simple and summary as fairness permits. Fairness requires that any respondent lawyer should be very clearly told what he is said to have done wrong and what is claimed. But the requirement of simplicity and summariness means that elaborate pleadings should in general be avoided. No formal process of discovery will be appropriate. We cannot imagine circumstances in which the applicant should be permitted to interrogate the respondent lawyer, or vice versa. Hearings should be measured in hours, and not in days or weeks. Judges must not reject a weapon which Parliament has intended to be used for the protection of those injured by the unjustifiable conduct of the other side's lawyers, but they must be astute to control what threatens to become a new and costly form of satellite litigation."
- Ridehalgh v Horsefield was approved by the House of Lords in Medcalf v Mardell  UKHL 27,  1 AC 120. Lord Bingham, however, noted (at paragraph 13) that it appeared that "the clear warnings given in that case have not proved sufficient to deter parties from incurring large and disproportionate sums of costs in pursuing protracted claims for wasted costs, many of which have proved unsuccessful". Later in his speech, he said (at paragraph 24):
"In Ridehalgh v Horsefield  Ch 205, 238-239, the Court of Appeal considered that wasted costs hearings should be measured in hours and urged the courts to be astute to control what threatened to become a new and costly form of satellite litigation. In Harley v McDonald  2 AC 678, reviewing the exercise by the New Zealand courts of the inherent jurisdiction to order barristers and solicitors to pay costs unnecessarily incurred, the Judicial Committee of the Privy Council observed, at p 703, para 50:
'As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with a view to the making of a costs order should be confined strictly to questions which are apt for summary disposal by the court. Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples. The factual basis for the exercise of the jurisdiction in such circumstances is likely to be found in facts which are within judicial knowledge because the relevant events took place in court or are facts that can easily be verified. Wasting the time of the court or an abuse of its processes which results in excessive or unnecessary cost to litigants can thus be dealt with summarily on agreed facts or after a brief inquiry if the facts are not all agreed.'
Save in the clearest case, applications against the lawyers acting for an opposing party are unlikely to be apt for summary determination, since any hearing to investigate the conduct of a complex action is itself likely to be expensive and time-consuming. The desirability of compensating litigating parties who have been put to unnecessary expense by the unjustified conduct of their opponents' lawyers is, without doubt, an important public interest, but it is, as the Court of Appeal pointed out in Ridehalgh v Horsefield, at p 226, only one of the public interests which have to be considered."
- There was reference in both Ridehalgh v Horsefield and Medcalf v Mardell to the significance of legal professional privilege in the context of a wasted costs application. In Ridehalgh v Horsefield, Sir Thomas Bingham MR said (at 237):
"The respondent lawyers are in a different position. The privilege is not theirs to waive. In the usual case where a waiver would not benefit their client they will be slow to advise the client to waive his privilege, and they may well feel bound to advise that the client should take independent advice before doing so. The client may be unwilling to do that, and may be unwilling to waive if he does. So the respondent lawyers may find themselves at a grave disadvantage in defending their conduct of proceedings, unable to reveal what advice and warnings they gave, what instructions they received. In some cases this potential source of injustice may be mitigated by reference to the taxing master, where different rules apply, but only in a small minority of cases can this procedure be appropriate. Judges who are invited to make or contemplate making a wasted costs order must make full allowance for the inability of respondent lawyers to tell the whole story. Where there is room for doubt, the respondent lawyers are entitled to the benefit of it. It is again only when, with all allowances made, a lawyer's conduct of proceedings is quite plainly unjustifiable that it can be appropriate to make a wasted costs order."
In Medcalf v Mardell, Lord Bingham said (at paragraph 23):
"Where a wasted costs order is sought against a practitioner precluded by legal professional privilege from giving his full answer to the application, the court should not make an order unless, proceeding with extreme care, it is (a) satisfied that there is nothing the practitioner could say, if unconstrained, to resist the order and (b) that it is in all the circumstances fair to make the order."
- In Lahey v Pirelli Tyres Ltd  EWCA Civ 91,  1 WLR 998, the Court of Appeal drew an analogy between what has become CPR 44.11 and the wasted costs jurisdiction when considering the meaning of the word "unreasonable" in what is now CPR 44.11(1)(b). Dyson LJ, delivering the judgment of the Court, said (at paragraph 30):
"The powers given to the court by rule 44.14 [now, CPR 44.11] include powers that are similar to those available to a judge making a wasted costs order, since where rule 44.14(1) [now, CPR 44.11(1)] applies, the court may order the party at fault or his legal representative, as substituted, to pay costs which he has caused any other party to incur. It is unlikely that the draftsman intended that a legal representative could be ordered to pay costs under rule 44.14 in circumstances where a wasted costs order could not be made under section 51(6) of the 1981 Act, as substituted, in respect of costs incurred as a result of 'any improper, unreasonable or negligent act or omission on the part of [the] legal representative': section 51(7). The word 'unreasonable' in section 51(7) of the 1981 Act has been construed quite narrowly. In our view, it should be given a similarly narrow meaning in rule 44.14(1)(b)."
- Mr Berkley submitted that principles relating to wasted costs applications should also have been applied in the present context. It can be seen from Ridehalgh v Horsefield and Medcalf v Mardell, he said, that the wasted costs jurisdiction should be invoked only where summary determination will be possible. In the light of the guidance to be found in those authorities, District Judge Neaves ought not, so it was argued, to have entertained the paying parties' allegations, which were by their nature unsuited to summary determination and required the Court to depart in more than one respect from that guidance (for example, by having a hearing measured in days rather than hours and extended oral evidence from Ms Madhas). The proper way for the paying parties to have advanced a complaint founded on allegedly dishonest costs claims would, Mr Berkley suggested, have been by way of an ordinary civil action, in particular by bringing a claim for fraudulent misrepresentation.
- In contrast, Mr Smith supported Judge Gosnell's comment that it would have been an abdication of the Court's duty not to investigate the allegations against GSD. There was, he maintained, no question of the litigation being derailed: it was rather a matter of getting to the bottom of claims that GSD had chosen to put forward and was pursuing. Mr Smith recognised that the hearing before District Judge Neaves had not been "measured in hours" (as contemplated in Ridehalgh v Horsefield), but said that the process had to be sufficiently probing to allow the Court to decide whether it was appropriate to exercise the powers conferred on it by CPR 44.11. As for the suggestion that the paying parties' complaints should have been pursued, if at all, in ordinary civil proceedings, Mr Smith both objected that such a claim would itself represent satellite litigation and disputed its viability.
- One answer to Mr Berkley's argument might be that it should have been raised much earlier. The point was not taken either at the hearing before District Judge Neaves or, as I understand it, in the context of the order made by District Judge Bedford on 16 November 2012 (which laid down the procedure for what followed) or the various further orders that were made in 2013. Further, there was no attempt to appeal any of these orders. There is also a persuasive argument that, the hearing before District Judge Neaves having in fact taken place, it could not be right to ignore the product of the exercise even if (because it could not be undertaken on a summary basis) it had not originally been appropriate to embark on it.
- In my view, however, it was appropriate to embark on it. As was pointed out by Mr Smith, the wording of CPR 44.11 suggests that it might be possible to invoke the provision in situations far removed from that with which District Judge Neaves was concerned. On the face of it, the rule could, for example, be relied on in support of an application for a party's legal representative to pay costs which the representative had caused another party to incur (pursuant to CPR 44.11(2)(b)) on the strength of unreasonable or improper conduct on the part of the representative "before or during the proceedings" and in a context unrelated to the assessment of costs (within CPR 44.11(1)(b)). An application of that kind would be indistinguishable from (or at least resemble closely) one under the wasted costs jurisdiction and the guidance given in Ridehalgh v Horsefield and Medcalf v Mardell would seem to be just as applicable as it would be to a conventional wasted costs application.
- However, where (as in the present case) it is suggested that costs "which are being assessed" should be disallowed (under CPR 44.11(2)(a)) because of "unreasonable or improper" conduct in connection with the assessment of costs, it appears to me that the guidance found in Ridehalgh v Horsefield and Medcalf v Mardell is much less relevant. Doubtless, the Court should still have in mind the overriding objective and, specifically, proportionality, but there will not be the same risk of satellite litigation. It may well be possible and appropriate to deal with the application in the course of pending assessment proceedings and conduct put forward as justifying the disallowance of costs may also be relevant to how costs should be assessed if not disallowed. In contrast, a wasted costs application is essentially free-standing and is often made when the litigation is otherwise over. On top of that, it will be typically, I suspect, be easier to determine whether there has been "unreasonable or improper" conduct in relation to the assessment of costs than whether, say, a lawyer was justified in pleading fraud. Certainly, an application that is based on matters related to costs and addressed during assessment proceedings is less likely than a wasted costs application to be affected by the impact of legal professional privilege (since a costs judge can potentially see privileged material – see e.g. Phipson on Evidence, 18th ed., at paragraph 26-13).
- In the case before us, as I have already indicated, 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. It is also relevant that, as can be seen from what was said in Bailey v IBC Vehicles Ltd (for which, see paragraph 24 above), there is a strong public interest in ensuring that solicitors do not certify costs figures dishonestly: as Judge Gosnell noted, there would be unfortunate consequences if paying parties "lost confidence in the bona fides of solicitors signing these certificates". 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. In the first place, such a claim could itself fairly have been described as "satellite litigation". Secondly, the power to disallow costs which it has been thought appropriate to confer on the Court by CPR 44.11 would not have been available, with the result, presumably, that loss could have been established only if and to the extent that the paying parties could have shown that costs were assessed at too high a figure as a result of deceit on the part of GSD; it would not appear to have been open to them to contend that costs should have been disallowed in their entirety. Thirdly, it is by no means clear to me that it would have been proper for the paying parties to seek to impugn the figures held to be due in the assessment proceedings: that might be thought to have involved an illegitimate attack on a previous Court determination (compare e.g. Phipson on Evidence, 18th ed., at paragraph 43-23, and Tibbs v Islington BC  EWCA Civ 1682, at paragraphs 8, 15, 17-19, 21 and 22).
- In short, I cannot accept this ground of appeal.
The Unfair Procedure Issue
- It is GSD's case that, even supposing that it was legitimate to entertain the paying parties' allegations (which, as I have said, I think it was), the procedure that was adopted was unfair. In this connection, Mr Berkley referred us to Salha v General Medical Council  UKPC 80, 80 BMLR 169, a case involving disciplinary proceedings against two doctors, where Lord Hoffmann said (at 14):
"It is a fundamental principle of fairness that a charge of dishonesty should be unambiguously formulated and adequately particularised."
- Judge Gosnell considered that "the proceedings overall were fair", taking the view 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" (paragraph 28 of the judgment). He also noted that "[n]o documents were relied on which did not emanate from [GSD]", that GSD "was permitted to rely on and serve witness statements from five witnesses" and that GSD "saw the [paying parties'] witness evidence before the start of the hearing" (paragraph 27).
- Mr Berkley disputed Judge Gosnell's conclusions. He stressed in particular the fact that, by the time the "Indictment-Style" list of allegations was produced, much of the oral evidence had already been given and Ms Madhas herself had been cross-examined at length (albeit that her evidence had not been completed). The fact that District Judge Neaves felt that such a document was needed shows, Mr Berkley argued, that the paying parties' allegations had not previously been spelt out adequately. More than that, Mr Berkley said, the "bombshell" was dropped on Ms Madhas during the resumed hearing on 8 September 2014 that she was being accused of forgery. Mr Berkley complained, too, that GSD was not joined to the proceedings until 10 months after the paying parties' "Particulars of Allegations" were served.
- For my part, however, I agree with Judge Gosnell that the procedure was fair. Among other things:
i) District Judge Bedford's order of 16 November 2012 allowed GSD to join itself as a party whenever it wished. In the event, it elected to do so in September 2013, but it was evidently in the driving seat on the costs issues well before this. As mentioned in paragraph 8 above, the commercial interest always rested with GSD;
ii) The "Particulars of Allegations" served in November 2012 gave GSD and Ms Madhas sufficient notice of the case they had to meet at the hearing on 7 and 8 May 2014 and, in particular, the allegations of dishonesty. I am not entirely sure why District Judge Neaves proposed the "Indictment-Style" list of allegations (possibly, as Mr Smith suggested, to effect a "clearing of the decks"), but it in fact added little of substance to the "Particulars of Allegations"; and
iii) The "bombshell" arose from GSD choosing to attach to its "Reply to Allegations" of 18 July 2014 a document that proved to be a forgery. The paying parties cannot be criticised for their failure to refer to this in their "Particulars of Allegations" or "Indictment-Style" list of allegations since these pre-dated the "Reply to Allegations" and the forged document had not yet featured in the case. It is also significant that GSD did not suggest at the hearing on 8 September 2014 that it needed an adjournment to deal with the document.
- In my view, therefore, this ground of appeal fails.
- I would dismiss the appeal.
Lord Justice Hamblen:
- I agree.
Lord Justice Longmore:
- I also agree.
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