Hourly rates - where are we now

What seemed an eternal wait for the Guideline Hourly Rates (“GHR”) of 2010 to be updated, was finally resolved with the “new” GHR which came into effect in October 2021.

However, the 2021 GHR are in my view far from satisfactory. This is why?

1.      The 2021 rates were already out-of-date when introduced, since the Civil Justice Council in their final report conceded that “The rates the working group has recommended are based on 2019-2020 data of what has been awarded or agreed…”

2.      The rates still adhere to the same geographic locations as all previous GHR, despite the exercise in updating the rates taking place during the pandemic, when working practices changed and have largely remained changed for good, with most firms still having a significant percentage of its fee earners working remotely, with real-estate frequently being downsized. Location has now become irrelevant in my view. Surveys of magic circle and top firms suggest that remote and virtual working is now here to stay. PWC Law Firms Survey 2022 reports: “property costs are down with approximately one third of Top 100 firms reducing their office footprint in the year…When firms were asked on average how much of their time employees have spent in the office over the past three months, the most prevalent response across the Top 100 was 41%-60% (equivalent to 2-3 days a week), followed by 21%-40% (equivalent to 1-2 days a week). These two categories accounted for over 92% of all responses, indicating the dramatic impact the pandemic has had on office presence.”

3.      In view of 2 above, the rates should be based on types of litigation (personal injury, clinical negligence, commercial etc…) perhaps banded by value of complexity.

Are the 2021 GHR retrospective? Yes, they have to be for the reason stated in 1 above.

The recommendation at paragraph 9 of the Civil Justice Council’s final report states:

“If the proposed GHRs are introduced they should be applicable to all summary assessments from the date of their introduction.”

At paragraph 10.6 one SCCO Master rightly pointed out that if they are not retrospective, there would be a practical problem of numerous rates being claimed for all fee-earners, over a number of years. This would lead to complicated N260s and bills alike, naturally leading to an increase in judicial time in performing a summary assessment, which would result in only a marginal gain.

In TRX V SOUTHAMPTON FC (2022) EWHC B7 Master Brown, armed with the proposed new Guideline Rates before they came into effect, applied the 2021 Guideline Rates to work undertaken as far back as 2017. He stated: “I do think some enhancement is appropriate even on the proposed rates that are set out in the new GHR, CJC consultation documents. I think some uplift is appropriate having regard to the nature of the case. I do not think that there is any warrant for straightforward inflationary increases from the 2010 Guideline rates, not least given the more recent proposals…There are all kinds of matters which determine, it seems to me, the reasonableness of the rate, not least of which is the availability of other firms who might have provided a competent and reasonable service.”

Master Brown concluded:

“I think the rates claimed are too high. I consider that the appropriate rate for a grade A is £330 an hour, and this is for work during the period 1 2017/18/19; for a grade B fee earner, £250 per hour, for the grade C, £210, and the grade D, £135.”

In R v BARTS NHS TRUST (2022) EWHC B3 (Costs), Master Rowley said “Where the work is as recent as 2019, it seems to me there is really no argument that the correct starting point is the 2021 guideline figures”...., adding “ Given the vital nature of these proceedings, it seems to me that the hourly rates claimed are in fact entirely reasonable and that there is little need to go through the seven pillars of Wisdom (ignoring the budgeting aspect) in CPR 44.4(3) in any detail. In particular, it is hard to imagine any case involving more importance to the client or, given the need for urgent action, one which would score more heavily on the circumstances in which the work was done.” He allowed the rates claimed, which exceeded the 2021 Guidelines.

Although paragraph 28 of the 2021 Guidance to the summary Assessment of Costs states that the figures “may also be a helpful starting point on detailed assessment”, in SAMSUNG-v-LG (2022) EWCA Civ 466 Males LJ was sympathetic to the arguments raised on behalf of LG, that the hourly rates in competition litigation are alway high and held that there was no justification in exceeding the guideline rates in the absence of “a clear and compelling justification”. However, this decision was on the facts of this particular case and despite being a decision of the Court of Appeal, most cost assessment hearings will treat the guidelines as starting point, depending on the applicable factors under CPR 44.4(3) as Master Rowley did in R-v-Barts above.

And to assist in the approach to exceeding the GHR, we must remember the pre-CPR approach to hourly rates has long since been endorsed in Higgs-v-Camden & Islington Health Authority  [2003] EWHC 15 QB

Where Fulford J, sitting with assessors, considered the Costs Judge’s approach in adopting the pre-CPR approach to hourly rates, taking a notional expense rate based on the guideline rates being calculated on a 50% mark-up for care and conduct, going on to allow a 100% mark-up in this complex birth trauma cerebral palsy case, which based on an A Factor of £150 per hour, produced a composite hourly rate of £300 per hour. Of course Pre-CPR authorities support a mark-up of as much as 150%!

And how to measure the percentage uplift for care and conduct? In litigation it is CPR 44.4(3) and the “Pillars of Wisdom” which are reflected equally (with some additions and minus costs budgeting) in The Solicitors' (Non-Contentious Business) Remuneration Order 1994.

Summary

The fact remains that hourly rates are approached differently at different levels of the court, yet I hazard to suggest that despite the engrained reliance in the GHR in both justifying and disputing costs, there is no doubt in my mind that assessing courts, especially the SCCO weigh up the Pillars of Wisdom against the background of the case, whereas Higher Courts perhaps adopt more of a “going rate for the job” approach.

Whatever is the right approach, the net result is often similar. Litigants and indeed non-contentious lawyers looking at retainer rates should assess and value the job, remember to value themselves, remain mindful of the factors in the “Pillars” and treat the GHR as an out-of-date yardstick, not a straight jacket!

Richard Allen is a Costs Lawyer and Senior Pricing Consultant at Burcher Jennings and Virtual Pricing Director.