DeNovo Law

linkedin

Details

A clash of billing cultures, but senior costs judge finds no misconduct in presentation of ‘impressionistic’ breakdown of foreign legal advisor’s costs (Quantum Care Ltd v Modi)

Background

In the course of a detailed assessment the claimant (paying party) alleged misconduct on the part of the defendant and sought an order that, as a result, the claim for costs (which, as served, stood at in excess of £.5M) should be assessed at nil.  The allegation related to the inclusion of a claim for slightly in excess of £100,000 in the bill of costs, for assistance rendered by the defendant’s adviser (Mr Hora) – an Indian qualified lawyer and advocate and long-standing legal advisor to the defendant and his family.  Mr Hora had represented the defendant - an Indian national and UK resident - in the underlying dispute initially and until such time as it became necessary to instruct solicitors within the jurisdiction.

The defendant failed to serve Mr Hora’s fee notes or invoices with the bill of costs. In response to a Part 18 request the defendant provided a ‘memo of legal fees’ in support of the claim, and which showed that Mr Hora’s charges related to his input on disclosure, trial preparation, closing submissions and his attendance at trial.  The parties subsequently agreed directions inter alia for a detailed breakdown and justificatory explanation of Mr Hora’s fees and his involvement.  Service of the breakdown was followed by supplementary points of dispute in which the claimant alleged misconduct on the basis that the account contained fictitious time entries (for example, time was claimed for working on closing submissions after closing submissions had taken place, and for attending trial on a Saturday).  In replies to points of dispute, the defendant conceded Mr Hora’s fees in full, and also explained that the breakdown had not been prepared on the basis of contemporaneous time records, because Indian lawyers do not record time in that way, rather clients are billed agreed amounts or on the basis of an approximation of time spent.  Confirmation was given that the account had been prepared by Mr Hora with assistance from his staff and was a best effort based on emails and diary entries. 

The claimant insisted on cross-examination of Mr Hora.  The costs judge found him to be credible and honest, and noted his explanation of the way in which the breakdown had been prepared (long after the event, and involving the marriage – largely by his assistants - of best estimates with various available indicators of his activity).  Various discrepancies (some of which related to differences between time zones) were addressed and cleared up, whilst Mr Hora accepted that some mistakes had been made.  The judge found that there was no evidence that Mr Hora had explained to the defendant or his solicitors that the breakdown had been prepared in the way that it had, or that could not be taken at face value and assumed to be accurate in the sense that is normally demanded in detail assessment in the UK. Mr Hora explained that he was unaware that a rigorous account was required or that the illustrative account that he had provided would be subject to a detailed examination.

The law

The court may make an order under CPR 44.11, disallowing all or part of the costs to be assessed, on finding ‘unreasonable or improper’ conduct by a party or that party’s legal representative prior to or in the course of the proceedings or detailed assessment proceedings. 

In reaching his decision the costs judge had regard to guidance given in Gempride Ltd v Bamrah [2018] EWCA Civ 1367, where (at para 26) Hickinbottom LJ clarified that:

i) A solicitor as a legal representative owes a duty to the court, and remains responsible for the conduct of anyone to whom he subcontracts work that he (the solicitor) is retained to do. That is particularly so where the subcontractor is not a legal representative and so does not himself owe an independent duty to the court.

ii) Whilst "unreasonable" and "improper" conduct are not self-contained concepts, "unreasonable" is essentially conduct which permits of no reasonable explanation, whilst "improper" has the hallmark of conduct which the consensus of professional opinion would regard as improper.

iii) Mistake or error of judgment or negligence, without more, will be insufficient to amount to "unreasonable or improper" conduct.

iv) Although the conduct of the relevant legal representative must amount to a breach of duty owed by the representative to the court to perform his duty to the court, the conduct does not have be in breach of any formal professional rule nor dishonest.

v) Where an application under CPR rule 44.11 is made, the burden of proof lies on the applicant in the sense that the court cannot make an order unless it is satisfied that the conduct was "unreasonable or improper".

vi) Even where the threshold criteria are satisfied, the court still has a discretion as to whether to make an order.

vii) If the court determines to make an order, any order made (or "sanction") must be proportionate to the misconduct as found, in all the circumstances.

The decision

The application failed.  The judge found that any misconduct on the part of Mr Hora, could not implicate the defendant’s solicitors, because they had not retained him or subcontracted work to him.   Although Mr Hora had been retained directly by the defendant, the latter was also untainted by any misconduct as, the judge found, ‘[a] party would not normally be responsible for their professional advisers.’ [by common agreement Mr Hora was not considered to be a ‘legal representative’ within the meaning of CPR 2.3] 

Additional points to note

The judge expressed the view that as Mr Hora had apparently been acting as an intermediary between his client and his client’s solicitors (a not uncommon practice for wealthy parties) it was always unlikely that a significant proportion of his fees could be recovered on assessment. However, the presentation of such an optimistic claim for costs would not of itself amount to misconduct. Nor was the presentation of Mr Hora’s particular claim improper or unreasonable – the judge found that whilst there ought to have been a proper explanation of the way in which the breakdown was prepared there was nothing to suggest that either the defendant or the solicitors were aware of the impressionistic nature of the account.

Although the judge hypothesised that it is unlikely that a UK solicitor, aware of the requirements of this jurisdiction, would ever produce a breakdown prepared in the same way;   he also suggested that if that were to occur it would probably amount to misconduct.

Takeaway

The case underscores the need for UK solicitors to insist that intermediaries or advisory experts should keep detailed and contemporaneous time records. Particular care should be taken to distinguish between time spent as intermediary (acting qua client, or as go between) and time spent on substantive case preparation.

Link to judgment:  Quantum Care Ltd & Anor v Modi [2024] EWHC 402 (SCCO) (26 February 2024) (bailii.org)

Details

A clash of billing cultures, but senior costs judge finds no misconduct in presentation of ‘impressionistic’ breakdown of foreign legal advisor’s costs (Quantum Care Ltd v Modi)

Background

In the course of a detailed assessment the claimant (paying party) alleged misconduct on the part of the defendant and sought an order that, as a result, the claim for costs (which, as served, stood at in excess of £.5M) should be assessed at nil.  The allegation related to the inclusion of a claim for slightly in excess of £100,000 in the bill of costs, for assistance rendered by the defendant’s adviser (Mr Hora) – an Indian qualified lawyer and advocate and long-standing legal advisor to the defendant and his family.  Mr Hora had represented the defendant - an Indian national and UK resident - in the underlying dispute initially and until such time as it became necessary to instruct solicitors within the jurisdiction.

The defendant failed to serve Mr Hora’s fee notes or invoices with the bill of costs. In response to a Part 18 request the defendant provided a ‘memo of legal fees’ in support of the claim, and which showed that Mr Hora’s charges related to his input on disclosure, trial preparation, closing submissions and his attendance at trial.  The parties subsequently agreed directions inter alia for a detailed breakdown and justificatory explanation of Mr Hora’s fees and his involvement.  Service of the breakdown was followed by supplementary points of dispute in which the claimant alleged misconduct on the basis that the account contained fictitious time entries (for example, time was claimed for working on closing submissions after closing submissions had taken place, and for attending trial on a Saturday).  In replies to points of dispute, the defendant conceded Mr Hora’s fees in full, and also explained that the breakdown had not been prepared on the basis of contemporaneous time records, because Indian lawyers do not record time in that way, rather clients are billed agreed amounts or on the basis of an approximation of time spent.  Confirmation was given that the account had been prepared by Mr Hora with assistance from his staff and was a best effort based on emails and diary entries. 

The claimant insisted on cross-examination of Mr Hora.  The costs judge found him to be credible and honest, and noted his explanation of the way in which the breakdown had been prepared (long after the event, and involving the marriage – largely by his assistants - of best estimates with various available indicators of his activity).  Various discrepancies (some of which related to differences between time zones) were addressed and cleared up, whilst Mr Hora accepted that some mistakes had been made.  The judge found that there was no evidence that Mr Hora had explained to the defendant or his solicitors that the breakdown had been prepared in the way that it had, or that could not be taken at face value and assumed to be accurate in the sense that is normally demanded in detail assessment in the UK. Mr Hora explained that he was unaware that a rigorous account was required or that the illustrative account that he had provided would be subject to a detailed examination.

The law

The court may make an order under CPR 44.11, disallowing all or part of the costs to be assessed, on finding ‘unreasonable or improper’ conduct by a party or that party’s legal representative prior to or in the course of the proceedings or detailed assessment proceedings. 

In reaching his decision the costs judge had regard to guidance given in Gempride Ltd v Bamrah [2018] EWCA Civ 1367, where (at para 26) Hickinbottom LJ clarified that:

i) A solicitor as a legal representative owes a duty to the court, and remains responsible for the conduct of anyone to whom he subcontracts work that he (the solicitor) is retained to do. That is particularly so where the subcontractor is not a legal representative and so does not himself owe an independent duty to the court.

ii) Whilst "unreasonable" and "improper" conduct are not self-contained concepts, "unreasonable" is essentially conduct which permits of no reasonable explanation, whilst "improper" has the hallmark of conduct which the consensus of professional opinion would regard as improper.

iii) Mistake or error of judgment or negligence, without more, will be insufficient to amount to "unreasonable or improper" conduct.

iv) Although the conduct of the relevant legal representative must amount to a breach of duty owed by the representative to the court to perform his duty to the court, the conduct does not have be in breach of any formal professional rule nor dishonest.

v) Where an application under CPR rule 44.11 is made, the burden of proof lies on the applicant in the sense that the court cannot make an order unless it is satisfied that the conduct was "unreasonable or improper".

vi) Even where the threshold criteria are satisfied, the court still has a discretion as to whether to make an order.

vii) If the court determines to make an order, any order made (or "sanction") must be proportionate to the misconduct as found, in all the circumstances.

The decision

The application failed.  The judge found that any misconduct on the part of Mr Hora, could not implicate the defendant’s solicitors, because they had not retained him or subcontracted work to him.   Although Mr Hora had been retained directly by the defendant, the latter was also untainted by any misconduct as, the judge found, ‘[a] party would not normally be responsible for their professional advisers.’ [by common agreement Mr Hora was not considered to be a ‘legal representative’ within the meaning of CPR 2.3] 

Additional points to note

The judge expressed the view that as Mr Hora had apparently been acting as an intermediary between his client and his client’s solicitors (a not uncommon practice for wealthy parties) it was always unlikely that a significant proportion of his fees could be recovered on assessment. However, the presentation of such an optimistic claim for costs would not of itself amount to misconduct. Nor was the presentation of Mr Hora’s particular claim improper or unreasonable – the judge found that whilst there ought to have been a proper explanation of the way in which the breakdown was prepared there was nothing to suggest that either the defendant or the solicitors were aware of the impressionistic nature of the account.

Although the judge hypothesised that it is unlikely that a UK solicitor, aware of the requirements of this jurisdiction, would ever produce a breakdown prepared in the same way;   he also suggested that if that were to occur it would probably amount to misconduct.

Takeaway

The case underscores the need for UK solicitors to insist that intermediaries or advisory experts should keep detailed and contemporaneous time records. Particular care should be taken to distinguish between time spent as intermediary (acting qua client, or as go between) and time spent on substantive case preparation.

Link to judgment:  Quantum Care Ltd & Anor v Modi [2024] EWHC 402 (SCCO) (26 February 2024) (bailii.org)