A Warning on Funding Enquiries and Hourly Rates – Get them right or suffer the Costs Consequences
This was a case for personal injury resulting from a tripping accident occurring in 2008. The matter was conducted by 2 parties, firstly by Falcon Legal Service ltd, through whom the Claimant trades as a sole practitioner, and secondly by David Sinton & Co. Both conducting parties entered into Conditional Fee Agreements. The matter settled for £50,000.00 damages and a Bill of Costs divided into two parts for the respective firms was submitted totalling £201,086.76. The pertinent issues related primarily to the costs claimed by Falcon Legal.
The Defendant filed Points of Dispute in relation to the Bill, amongst other things the Defendant raised the following disputes:
1. That Falcon Legal had not disclosed their CFA nor had they provided any appropriate statement in support of the same. As a result the Defendant requested that the success fee be disallowed or in the alternative:
• If the court had received a copy of the CFA the Court should disallow any claim for hourly rates in excess of those within the agreement.
• If the CFA had not been filed to the court disallow any claim under the CFA.
2. That confirmation be provided as to what other methods of financing costs were available to the Claimant.
3. That notwithstanding the above, the Hourly rates claimed by Falcon Legal were unreasonably high. The Defendant offered £241 per hour against £280 claimed.
Replies were submitted as follows:
1. That the required information had already been disclosed.
2. That ‘BTE Legal Expenses cover was not available…’
3. The offer on hourly rates was accepted.
Supplementary Points of Dispute and Points of Reply were also exchanged regarding the Claimant’s appropriateness to self-conduct the case, however for the purposes of this article, they bought nothing further to the issues in question.
As it happened, Falcon Legal had not provided the CFA documentation requested as the Replies stated (David Sinton & Co had done so for their CFA), however after an Application for relief from sanctions, the parties agreed that the Defendant would take no further point on funding if Falcon Legal disclosed their CFA.
Following this agreement, Falcon legal disclosed the CFA and supporting documents, however the disclosure bought to the Defendant’s attention inaccuracies within the Bill of Costs and Replies. Significantly the CFA identified 1) that BTE was available to the Claimant and 2) an hourly charge rate of £232 per hour applied.
As a result of this additional information the Defendant submitted an Application to resile from concessions made with reliance on the accuracy of the Bill of Costs and the Points of Reply. The Defendant requested that the entirety of the Claimant’s costs be disallowed under CRP 44.11.
The matter was heard in the Senior Courts Costs Office before Master Leonard.
Whether or not the Claimant’s costs should be disallowed was dependent upon whether it could be established that the Claimant’s conduct was, as per CPR 44.11 ‘unreasonable or improper’.
Definitions of the terms were provided with reference to Ridehalgh v Horsefield  CH 205 as follows:
Unreasonable – ‘conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case… The acid test is whether the conduct permits of reasonable explanation’
Improper – ‘conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalties… (or) conduct which would be regarded as improper according to the professional opinion…’
Further illustration was provided with reference to Myers v Elman  A.C.282 in which it was established that:
‘The court’s jurisdiction to make a wasted costs order against a solicitor is founded on breach of the duty owed by the solicitor to the court to perform his duty as an officer of the court in promoting within his own sphere the cause of justice.’
Master Leonard determined that Part 1 of the Bill was certainly misleading but was it ‘unreasonable or improper’. Master Leonard referred to the landmark case of Baily v IBC vehicles [1998[ 3 All ER 570 which established that:
‘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.’
On this basis Master Leonard held that by signing a Bill of costs containing hourly rates to which there was no contractual entitlement, the Claimant was in breach of her duty to the court. Further Master Leonard explained that the Claimant’s untrue response regarding the existence of BTE insurance was a further breach of the Claimant’s duty.
For these reasons Master Leonard accepted the Defendant’s argument that the Claimant had acted improperly and unreasonably and for that reason disallowed all of the Claimant’s profit costs for Part 1 of the Bill, being the part for which the breaches were relevant.
To many Solicitors, the result in the index case will not come as a shock. It has long been established that the accuracy of a Bill of Costs is of paramount importance and that weight placed on the signature to the Bill (and by association the signature to the Points of Reply) is of equal importance. In light of the Judiciary’s recent no-nonsense approach to sanctions it will come as little surprise that serving a misleading Bill has been dealt with sternly.
The case does however illustrate that even experienced fee earners can allow bad habits to infiltrate their handling of a case to the point where the bad habits become breaches of duty, with expensive and significant consequences.
While not revolutionary, the case should encourage all Solicitors to revisit their retainers and ensure that they are appropriate for the given case. Solicitors should also ensure that appropriate enquiries are made as to the availability of alternative funding and that the same is dealt with appropriately. Specific note should be taken of the difference between no BTE insurance being available and no BTE insurance being available on terms which the Claimant is prepared to agree. Even if there are reasons the indemnity offered by the insurance has not been invoked, the insurance must be properly accounted for when appropriate. For example in Points of Reply.
The situation is not all warnings, doom and gloom. Although the index case reiterates the Court’s eagerness to strictly apply sanctions where appropriate, it also shows that the court will take a common sense approach to ensure that the sanctions do not punish those who have not caused them. Despite David Sinton & Co having also identified that no alternate funding was available within their Points of Reply, they were found not to have intentionally misled the court and were therefore able to pursue recovery of their own profit costs. The responsibility for making the funding enquiries was placed on the Claimant (being an experienced solicitor) and as such the consequences flowing from the failure to appropriately consider the results of said enquiries were placed solely at Falcon Law’s door. Keep in mind when taking cases over from other firms however, that if the First Claimant had not effectively been representing themselves the Court may well have determined that David Sinton & Co had also been misleading by stating that no alternate funding was available.
One thing is for certain, if you are outsourcing your costs make sure you are checking Bills accuracy thoroughly and ensure that you are instructing a costs firm with the knowledge and experience necessary for the successful conduct of your cases.