A Leeds firm found by a district judge to have inflated the costs of personal injury work has failed to overturn that ruling in the appeal court.

In GSD Law Ltd v Wardman & Ors, GSD Law Limited appealed a decision from Leeds County Court where costs were disallowed based on misconduct on its part.

Following a hearing last month in the Court of Appeal based on two sample cases, Lord Justice Newey (pictured) said the court was right to entertain the application to disallow costs, and he rejected the contention that the procedure adopted was unfair.

In the original ruling from 2014, District Judge Neaves had described evidence from the firm’s sole principal Kirna Madhas as ‘not only evasive and inconsistent, but dishonest’ and upheld a number of allegations.

Only two sample cases out of nine where GSD was on the record were dealt with at trial and at the appeal and the findings only relate to those two sample cases, with the balance cases stayed and reserved to DJ Neaves. Those balance cases are still pending.

Allianz, the paying parties’ insurer, alleged at trial a systematic attempt by GSD to claim more in without prejudice than was properly claimable, recovering fees for inflated hourly rates and attempting to mislead the defendant as to the status of people carrying out the work. The insurer alleged that senior lawyers’ rates were claimed for the work of junior fee-earners and claims were made for work that had not been done.

According to Allianz, GSD has claimed £225,000 in legal costs, but the formal bills for costs that followed totalled just under £160,000 and were further later reduced to £128,000.

In his written judgment, Neaves had said the conduct of the receiving party’s solicitor was ‘sufficiently egregious’ so as to make the only appropriate sanction the disallowance of all costs on the sample files.

The firm appealed, arguing the procedure adopted in the county court was unfair and that DJ Neaves should have declined to entertain the allegations because the court did not have authority to make such a ruling.

Lawyers for GSD argued that the proper procedure was for Allianz to advance a complaint, founded on allegedly dishonest costs claims, would have been by way of an ordinary civil action.

Allianz said it would have been an ‘abdication’ of the court’s duty not to investigate the allegations against GSD, and any further claims would have represented satellite litigation and been disputed.

Allianz head of motor claims Tony Newman said the types of behaviour alleged in court ‘taint the entire legal profession, and have to be rooted out and addressed by the toughest possible means’.

In a statement issued on behalf of GSD, the firm said: 'Whilst the decision of the Court of Appeal is respected, it is with regret that the appeal lords did not take the opportunity to give any clear guidance to assist costs judges and parties on how and in which jurisdiction serious allegations of dishonesty in the context of cost claims should be dealt with. 

'This case raised important matters of principle relating to the costs regime and to the administration of justice as recognised by the lower court. Unfortunately the appeal judges did not take that opportunity and did not give that clear guidance. They were not prepared to look beyond the issues in this case. 

'In the current political costs climate and the might of the resourceful paying parties, it is only a question of time before the same issues will soon come before the appellate courts.’