Judicial ruling reveals regulatory gap in costs law

In a stark ruling, Costs Judge Jennifer James reduced a legal bill from nearly £260,000 to zero, citing widespread misconduct in the bill's preparation by an unregulated costs draftsman. This case, Kapoor v Johal, drew attention to a significant regulatory gap in legal costs work, where unregulated practitioners, unlike regulated Costs Lawyers, are not subject to oversight or consumer protections.

Judge James pointed out several serious issues, including inflated charges and retroactively created attendance notes, describing these actions as “deliberate” rather than “mistakes.” She referred the solicitor involved for investigation by the Solicitors Regulation Authority (SRA) but noted that no regulatory body had jurisdiction over the costs draftsman, as the Costs Lawyer Standards Board (CLSB) oversees only regulated Costs Lawyers.

This lack of recourse has been a growing concern for the ACL, which advocates for greater regulation of legal costs practitioners. ACL vice-chair David Bailey-Vella said, “Costs Judge James’s ruling highlights a significant shortcoming of the current regulatory regime. Costs law is a specialist area, and it demands practitioners with rigorous training and oversight. It is difficult to understand why solicitors would risk their clients’ costs recovery by relying on unregulated advisers.”

The ACL has called on the Legal Services Board to collaborate with the CLSB to prevent unregulated practitioners from potentially undermining the integrity of costs litigation. This concern echoes those raised in Professor Stephen Mayson’s 2020 independent review, which warned of the risks posed by unqualified costs practitioners operating under insufficient supervision.

The ACL argues that stronger regulations are necessary to protect consumers and ensure accountability in legal costs work, especially as the field grows increasingly complex and specialised.