In allowing an increase of 35% to the current Summary Assessment Guideline Hourly Rates (‘GHR’) used by the courts when assessing costs, HHJ Hodge QC in Cohen v Fine & Ors has thrown further pressure on the GHR to be increased. The last time they were published was back in 2010, with a failed attempt to revise them taking place in 2014. There is now a working group of the Civil Justice Council being led by Mr Justice Stewart working on data submitted by the profession of rates being allowed on assessments. The working group is due to fully report sometime next year, with an interim report possibly being released before Christmas.
In this article, Adam Burrell and Peter Causton (a member of the hourly rate working group) consider the current decisions grabbing the headlines calling for revised GHR and look ahead to what the outcome of the GHR review might be in 2021.
The judicial plea for revised GHR
Cohen –v- Fine & Ors is yet a further example calling for increased GHR, endorsing the comments made last year by Mrs Justice O’Farrell in the widely reported decision of Ophen v Invesco Fund. The point was made in Cohen that cases in the Business and Property Courts, both in the North West and the RCJ, regularly feature claims for hourly rates significantly higher than current GHR. In HHJ Hodge’s view, the GHR should be the subject of an increase that takes account of inflation and after applying the Bank of England Inflation Calculator, an increase of 35% would be justified as a starting point. However, in many cases in the Business and Property Courts a further increase would be justified.
Turning back to 2019, it is worth remembering those comments by Mrs Justice O’Farrell in Ophen, where it was suggested “…It is unsatisfactory that the guidelines are based on rates fixed in 2010 and reviewed in 2014, as they are not helpful in determining reasonable rates in 2019. The guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines would be very welcome.”
More recently Master Whalan, in PLK & Ors, ruled that whilst GHR were applied as standard in Court of Protection matters, they could not be applied fairly as an index of reasonable remuneration if they were not subject to periodic review. In light of this, whilst having no power to formally review or amend the GHR, he appeared to direct Costs Officers conducting Court of Protection assessments to exercise broad, pragmatic flexibility and if the rate claimed fell within 120% of the GHR then they should be regarded as being reasonable.
The purpose of the GHR
Contrast this call for revised GHR with the comments of Master Rowley in Shulman v Bogalyubov. In allowing a rate of £750ph for a Grade A lawyer, when dealing with such an international commercial dispute worth in the region of US$600 million, the very existence of GHRs was dismissed as largely irrelevant, stating that they were a “broad approximation and it is really the roughest of rough guides as to what might be allowed…the potential range of litigation in the City can be seen in this case and it explains why the Guideline Rates are barely even a starting point in a case such as this.”
GHR were introduced to assist Judges in summary assessment but there was never any intention that they should be routinely applied in detailed assessments. Away from the litigation at the far end of the complexity scale in heavy international commercial work, appreciating also that the types of cases seen in the business and property lists or cases involving the Court of Protection vary enormously, are the hourly rate cases often involving claims for personal injury that are neither routine or significantly complex. These are the cases routinely defended by large public sector organisations or large liability insurers and are defended at more often than not at rates lower than the current GHR. These are the cases that are brought by lawyers acting for claimants at rates more often than not in excess of the current GHR. Just as in 2014 when the GHR were last reviewed, the market rate on what firms can profitably do the same work for is polarised depending on which side is being represented. The relevance of inflation can only be fairly applied once the true impact of competitive market forces is taken into account.
On behalf of defendant firms, the point is often made that they are leaner and more efficient and therefore their processes are tuned into the fact that they undergo competitive tendering and rigorous value bench-marking. The claimants’ representatives will bemoan the fact that they don’t have the economy of scale or cash-flow reliability that comes with bulk work.
Why undertake a review now?
The impact of COVID-19 has changed the working landscape permanently. Current GHR are based on geography but in the future the location of lawyers will be less relevant. Having waited 10 years for any revised GHR, it seems that the timing right now is entirely inappropriate. The forced imposition of agile working will have long lasting impacts on firms’ overheads and real estate footprints. Taking into account that the two key cost bases for any professional service firm is on its people and premises, the switch to home-working provides an opportunity to reduce the spend on premises which should mean a lower costs base from which a profit can be returned. Indeed, the Senior Costs Judge speaking recently at the Association of Cost Lawyers Conference stated that “We’re conscious of the fact that working practices have changed in the last year… and, in due course, somebody will have to carry out a rather more fundamental review of how the legal profession is working….”
The impact of fixed costs reforms and costs management should also be factored into the timing. The overwhelming likelihood of the fixed costs regime being extended to most civil litigation on the fast track together with costs management controlling most costs (without reference to hourly rates) on the multi-track, raises the question of the relevance of hourly rates when the existing regimes either fix or manage costs to a proportionate and reasonable level.
What’s the basis of the review this time?
The 2014 review was based upon an ‘Expense of Time’ approach and ultimately the Master of Rolls declined the recommendations on the basis that there was simply insufficient evidence to implement the changes. The committee heard oral evidence from all interested parties, which meant looking at what solicitors’ overheads were and what profit they were making. This was a controversial exercise as it was not the function of the Court to control solicitors’ profit margins. The 2020 review is adopting a different approach and is seeking evidence of actual hourly rates agreed between parties and in particular awarded on assessment for a three month period between 1st September and 27th November 2020.
It is estimated that less than 1% of cost disputes proceed to a detailed assessment hearing in which a determination is made on hourly rates. This is an extremely small sample of data to be then used as the basis to recommend any potential changes to the GHR. Further, matters that proceed to detailed assessment are not necessarily representative of the types of litigation that practitioners deal with on a day to day basis and are more likely to be those cases where a rate significantly in excess of the GHR is claimed; there is a clear risk that the data captured will be skewed as based on untypical cases.
What to expect in 2021
The current working group is now considering the evidence of assessed and agreed hourly rates submitted and it is anticipated will publish an interim report shortly, possibly before Christmas. The working group consists of members of the judiciary and stakeholder representatives including Peter Causton as a representative of defendant’s solicitors. Peter was on the 2014 review committee representing defendant’s solicitors on behalf of the Law Society. Once the full report is finalised, it will be submitted for consideration by the Master of the Rolls. It seems therefore that to ensure the interests of stakeholders are fully articulated during the formulation of the full report that it will be down to the relevant representative and industry bodies to ensure all of the arguments are submitted.
It seems we will soon find out what hourly rate a lawyer can recover in 2021 to the limited extent reflected in the GHR. The danger for paying parties is that any review will result in an increase, costing them more money just as they try and cope with the very crisis that the review data will not take into account.
Adam Burrell heads up the Costs Product in the Claims Solutions Group at DACB and is a member of the Costs Sector Focus Team at the Forum of Insurance Lawyers.
Peter Causton is a consultant to the Claims Solutions Group at DACB and sits as a Deputy District Judge on the Northern Circuit as well as being the Law Society Civil Litigation Council Member and barrister at Whitestone Chambers. Peter is also a member of the Judicial Liaison Committee, which is currently considering ways of encouraging the use of mediation at an early stage in litigation. He also runs the mediation pilot in Manchester and has set up a national mediation provider, ProMediate.
Please get in touch with Adam Burrell if you have any concerns with the review and the impact that a recommended increase might have on you.
