Alpha Rocks Solicitors v Alade [2015]
In Alpha Rocks Solicitors v Alade [2015] EWCA Civ 685 (09 July 2015) the Court of Appeal found the High Court was wrong to strike out a claim over unpaid fees brought by the Claimant firm of solicitors because of alleged exaggeration and inaccurate sums, without hearing any witnesses.
In an earlier hearing Mr Kevin Prosser QC sitting as a Deputy Judge in the Chancery Division heard an application for two of the bills, presented by the Claimant Solicitors to its Defendant Clients, be struck out under CPR Part 3.4(2)(b) in respect of two matters referred to as the “Catherine claim” and the “Rufus claim” with the fees of each referred to by those names.
The bills were £131,514.56 for the Rufus matter and £43,732.50 for the Catherine matter. The Judge struck out the two claims made by the Claimant for the whole of the bills leaving in place two other claims for smaller amounts. He acknowledged this was a harsh step but considered the abuses of court process to be serious, making a fair trial impossible.
The Judge rejected the application was an abuse of process. He considered allegations of “recent creation of documents” which he rejected in respect of certain aspects of the Rufus matter but, accepted in relation to a letter of the 16th January 2012 enclosing a six page bill, in respect of the Catherine costs. He believed they were created by the Claimant Solicitor afterwards.
He further found the Rufus bill, not the Catherine bill, a “deliberate exaggeration of the fees” and the Catherine bill was generated knowing it was incorrect. The Judge found the inaccuracies in the work done, the fee earning charges and Counsel’s fees from the evidence of the Claimant’s costs consultant.
Judge Prosser concluded:
- “74. In my opinion, [the solicitors] are guilty of abuse of process in bringing the Rufus claim in reliance on deliberately exaggerated fees, and in bringing the Catherine claim in reliance on fabricated documents and on a bill of costs which was drawn up knowing it to be inaccurate.
- 75. In these circumstances I have power to strike out those claims. In considering whether or not to do so, I bear in mind that it is a draconian step because it would extinguish substantive rights. However, the abuses which I have identified both involve a serious misuse of the court’s procedure. Moreover they render further proceedings thoroughly unsatisfactory and create a serious risk that a fair trial of the claims would be impossible. In addition, it would be unfair on [the client] to subject him to the time and cost involved in a detailed assessment of the claims. In these circumstances I have no hesitation in refusing to allow [the solicitors] to take further part in the proceedings so far as those claims are concerned, and I shall strike them out accordingly”.
He ordered the Catherine and Rufus claims to be struck out and the Claimant Solicitors should pay 75% of the Defendant’s costs on indemnity basis, with £20,000 on account before assessment.
The Claimant appealed:
- That the application to strike out was itself an abuse of process.
- That the judge ought not to have conducted a mini-trial.
- As to the Rufus bill, the judge was wrong to find that the solicitors had not prepared the trial bundles for which they charged, and the order was disproportionate.
- The Catherine bill should not have been struck out when the judge could not conclude that it was exaggerated, and when he had misunderstood “paid counsel” as meaning counsel had been paid rather than “not pro bono counsel”.
- The solicitors appealed the costs and other orders made by the judge on a number of grounds.
In the Court of Appeal Lord Justice Vos observed there were remedies available to the Court where a party in a litigation matter believes the other party has exaggerated its claim whether fraudulently or by some other means. He believed
- “the court should exercise caution in the early stages of a case in striking out the entirety of a claim on the grounds that a part has been improperly or even fraudulently exaggerated”.
Lord Vos considered the Judge had forgot his own repeated warnings to himself about not conducting a mini-trial and the draconian nature of what he was contemplating doing and instead went on to conduct an inappropriate mini fraud trial without hearing any witnesses. He made his findings on very serious matters without witnesses being cross-examined.
He continued there had been a conflict in evidence between the parties and Lord Vos considered that the Judge could not decide upon this without oral evidence and “striking out was too blunt an instrument to deal with the heavily conflicting evidential accounts of the parties”.
He did not believe that the Judge should have decided the issues of fraud without there being cross-examination and disclosure. He therefore allowed the appeal.
He noted that if the Claimants had behaved in a fraudulent manner and made false claims then penalties would be imposed together with the possibility of contempt of court and prosecution but
- “The burden of this judgment, however, is that such a case needs, where there is starkly conflicting witness evidence, to be evaluated after disclosure and the hearing of oral evidence and not by a process of forensic deduction from apparently unsatisfactory documentation”.
He considered that the Claimant Solicitors should re-examine their bills, taking into account the matters raised and consider reducing them. If they refused then all the issues raised, including exaggerated and fraudulent claims, would have to be looked at again and tried after disclosure and the hearing of oral evidence. Further the matter should go back to a Chancery Judge for directions, the hearing be fixed after the Claimant Solicitors had re-examined their bills whereupon, the Judge would decide whether a detailed assessment by the costs judge should happen as a result of this judgment.