Cock-up, not conspiracy: preparing budgets and bills

There are times in your personal life where you contemplate, for example, the installation of a new outside tap and as you prepare to drill the first hole in the wall, you turn to your partner and say, ‘How hard can it be?’

And so it is with the preparation of bills of costs. Even after 26 years I still never cease to be amazed at the firms who will entrust the preparation of a bill of costs to the new trainee/paralegal/secretary/office cat (delete as appropriate).

Dark art

Costs have long been thought of as a dark art and in recent times, with the introduction of phased bills and the new electronic bill coming into effect from 1 October 2017, it is more important than ever that budgets and bills are prepared by a costs lawyer.

If you require convincing of this, then look no further than Master Whalan’s decision in Jago v Whitbread Group Plc (SCCO, 2016). The recently circulated judgment is one of six cases so far in 2017 which actually looks at conduct in costs proceedings.

In this case, the claimant brought a successful personal injury claim against her employer, and on 4 March 2015 agreed damages net of CRU in the sum of £41,035.37. It was further agreed that the defendant would pay the claimant’s costs to be assessed, if not agreed. It was at this point that the claimant’s solicitors delegated the task of settling a schedule of costs to the trainee legal executive. This was the first ‘how hard can it be?’ moment.

On 12 March 2015, a schedule claiming £101,677.21 was served. The schedule included an uplift or success fee of 20 per cent (£13,918.93) plus disbursements of £537. The claim for producing the two-page document was for two and a half hours of time. ‘What can possibly go wrong?’ I hear you ask. The statement was then duly signed by a partner.

CFA query

Upon receipt, the defendant requested a copy of the claimant’s conditional fee agreement. The reply stated that there was no CFA. Not unreasonably, the defendant queried the request of a 20 per cent success fee.

On 19 November 2015, the claimant served a bill with a notice of commencement, again with the usual certificates signed by a partner. The total claimed was £91,474.41, less than the original schedule but including an increased success fee of 25 per cent. Time for preparing the bill (by a non-costs lawyer) had increased to three and a half hours.

Points of dispute were served but the claimant, instead of acceding to the defendant’s request to amend the bill, prepared a completely new bill. This time the total claimed reduced to £56,719 and the success fee had been removed altogether. Certificates were again provided and signed and a further three and a half hours claimed for a non-costs lawyer. Upon having the procedural error of proffering a new bill instead of an amended bill pointed out by the defendant, the claimant served version number four, this time seeking £55,393.19.

Unreasonable conduct

The defendant made an application for payment of costs on the grounds of the claimant’s unreasonable conduct (CPR 44.11(1) and (2)).

Before Master Whalan, counsel for the defendant applied the definitions of ‘unreasonable’ and ‘improper’ as defined by Sir Thomas Bingham in Ridehalgh v Horsefield (1994) 3 All ER.

At paragraph 22 of Jago, Master Whalan states: ‘Improper and unreasonable are defined carefully so that, whilst dishonesty need not be shown, a mere mistake is not enough. However, as the court has outlined, carelessness or indeed negligence can qualify if it is classified as “gross” or “significant”.’

The claimant accepted that the solicitors had not ‘covered themselves in glory’ and stated that it was a small high-street firm who simply could not afford a costs lawyer’s fees. However, as the master pointed out, costs had still been claimed for drafting the schedule and bills, which are ordinarily recoverable. At paragraph 24 of the judgment, the master described it as a ‘case of cock-up and not conspiracy’.

The master had sympathy for the legal executive but the fundamental issue here was the certification of each bill by the partner. The master found (paragraph 33) that the claimant’s solicitors were ‘guilty of conduct that can be described as both improper and unreasonable’.

The master proceeded to order a reduction of 50 per cent of reasonable costs. He then made further reductions to specific items in the bill and disallowed in their entirety the time for preparing and checking the bill.

Costs are a minefield and have increased in their complexity in the past few years. As for the tap, my wife called a plumber who arrived in the nick of time to stop me drilling straight through to the cold water pipe. Turned out he was having a spot of bother with a solicitor who he thought had overcharged him. He was going to try to sort it himself, but thought he would ask a professional.

Paul Bracewell is a council member of the Association of Costs Lawyers and a costs lawyer and accredited civil and commercial mediator with Bracewell Costs

@CostsLawyers

www.associationofcostslawyers.co.uk