The criminal division of the Court of Appeal has taken the unusual step of announcing its intention to refer a City law firm to the Solicitors Regulation Authority.
The move came after the court ordered businessman Hitendra Patel and criminal law specialists Neumans to repay interim costs of £500,000 to the Lord Chancellor at a hearing last month.
Lord Justice Simon, sitting with Mr Justice Hickinbottom, said the court also intended to refer the matter to the Director of Public Prosecutions to consider whether it should be “the subject of a prosecution”.
Neumans, a two-partner firm with 26 solicitors and an office in Manchester as well as London, denies any wrongdoing.
The Court of Appeal allowed an appeal by Mr Patel in 2009 against two convictions for marketing a medicinal product without holding a European Community or UK marketing authorisation.
Lord Justice Simon said that, following Mr Patel’s successful appeal and a defence costs order (DCO) in his favour, Neumans submitted a bill of costs to the Court of Appeal in 2011 for £2.9m plus VAT.
An interim payment of £500,000 on account was made out of central funds to Neumans.
“In the course of the subsequent assessment it became apparent that Neumans’s bill of costs was based on an agreement to increase the level of fees charged by Neumans,” Simon LJ recorded.
The costs claimed by Mr Patel were based on an “initial retainer”, setting out rates between £150 and £250 per hour for Crown Court work, followed by an “oral agreement” capping the solicitors’ fees at £275,000, followed by a “further oral agreement” in March 2009 varying this to allow Neumans to charge hourly rates of £350 per hour for a junior solicitor and £500 for a senior solicitor.
The judge said: “The court was concerned that the March 2009 agreement and what happened in relation to the preparation of the invoice and bill of costs might have been a sham which had been designed to obtain out of central funds a sum far larger than otherwise be due in the event the appeal succeeded.
“The fact that all this only emerged in August 2011, when the determining officer first learned of the arrangements was also a matter of concern.”
Simon LJ said the Court of Appeal responded by asking the Registrar of Criminal Appeals to carry out an investigation, which he did between 2012 and 2015, the delay caused by various factors.
He said the registrar’s report concluded that “very large sums had been claimed on a false basis” and that 2,783 hours out of a claimed 3,047 hours were “not properly recoverable”.
The report also found that there had been a deliberate decision not to disclose eight invoices totalling £275,000 which had been paid in respect of work up to 16 November 2007.
Simon LJ continued: “Since these payments were consistent with the capping agreement, the registrar concluded that the creation and tendering of 10 June 2011 invoice in the sum of £2,916,166 excluding VAT without disclosing these invoices was dishonest and designed to procure payment out of central funds of more than Mr Patel was entitled to.”
The Lord Chancellor used this and other documents to allege that Neumans’ invoices and bill of costs “significantly overstated” Mr Patel’s fees, that there was a “deliberate failure” to mention and disclose copies of eight invoices, and that the claim on central funds “was not an honest claim”.
The Court of Appeal said both Mr Patel and Neumans accepted that the DCO should be revoked and it ordered them to repay the £500,000 on a joint and several basis by 23 January 2017, and Mr Patel to pay costs of £15,000 for the latest hearing.
Simon LJ said: “If the true facts had been known, we are clear that the court would not have made the original DCO. Additionally on the basis of largely unchallenged facts, as they have now belatedly emerged set out in the Lord Chancellor’s case and evidence, we are quite satisfied the DCO should be revoked.”
Nabeel Sheikh, senior partner of Neumans, told Legal Futures: “We have no comment to make save to say Neumans LLP denies any wrongdoing.”
A spokesman for the Solicitors Regulation Authority said: “We take all complaints seriously, and will look at all relevant evidence provided to us before deciding on an appropriate course of action when a report is made.”