Hourly Rates - The Present and Future. Andrew Lyons

Transcription

1 Hourly Rates - The Present and Future Andrew Lyons

2 Solicitors hourly rates, their applicability, use and (especially of late) their future, are never far from the collective mind of the judiciary. The Jackson reforms did not settle the issue, instead only extending fixed costs in most fast-track personal injury claims. In December, Lord Neuberger heavily criticised hourly rates, contending that the centrality in assessing costs this way was malign and encouraged inefficiency. Worse, he expressed concern that the maintenance of hourly rates encouraged procrastination while rewarding the less skilful. It seems, therefore, that among the judiciary, opinion is leaning towards extending fixed costs, at least for fast-track cases. However, hourly rates will remain in the medium term, as evidenced by the guideline hourly rates (GHR) review being undertaken by Mr Justice David Foskett and his Costs Committee. Their recommendations are likely to have extremely significant ramifications for the future profitability of litigation firms. Foskett J will report to the Master of the Rolls by the end of May 2014 (although this date may well be put back), tackling three issues in particular: The extent to which the current GHR (unchanged since 2010) continue to be reasonable for the work of different level fee earners in different parts of the country; What is to be regarded as a fair profit margin after expenses (including salaries); The effect that the Jackson reforms are likely to have on how GHR are calculated. The Cost Committee were disappointed with the lack of responses to the consultation and stated they might consider further submissions by interested parties but that deadline has now closed. 2/7

3 The Costs Committee also considered the following further issues: Whether GHR should apply to detailed assessments; Whether Grade D and potentially Grade C fee earners should have a banding within the category to recognise fee earners who have considerable litigation experience. Unsurprisingly, commercial solicitors are categorically against GHR fixing hourly rates in detailed assessments, while if such an approach is adopted then personal injury solicitors might see their recoverable hourly rates increase since it may be linked in part to commercial rates; however more likely is that personal injury hourly rates will be in a separate category to commercial rates. While paying homage to the oft-used argument that current GHR should have no practical use in anything other than summary assessments, Foskett J accepts that the guideline rates are based on outof-date information. So do guideline rates have any relevance whatsoever when it comes to detailed assessment? Often the paying party will ask the court to give heed to the guideline rates at a detailed assessment, while the receiving party will ask it to disregard the guideline rates. Who is right? Cook on Costs has stated: The guide was not intended to be used in detailed assessment where it was assumed that the judge would have more experience of appropriate hourly rates and the parties would have the opportunity of providing more evidence to support their positions if the rates were challenged The figures were originally produced by collating figures largely provided by district judges and local law societies So to regard these rates as a substitute for solicitors calculating their own rates and justifying them on assessment is really to put the cart before the horse. Any advocate at a detailed assessment who is seeking to persuade a judge that they should have no regard to the GHR would do well to come armed with this passage. 3/7

4 Until recently, the paying party had very limited ammunition with which to counter this stance. However, the comments of Judge Jeremy Richardson QC, sitting with two assessors in the recent case of G v Kingston upon Hull City Council (2013) 1, now at least enable the paying party to point to an authority that states the guideline rates have some applicability. His Honour Judge Richardson said: We disagree that the guidelines have no relevance whatsoever on detailed assessments. Having carefully considered the authorities we take the view that it is entirely appropriate for the guidelines to be referred to during a detailed assessment and/or for them to be used as a starting point. This view was echoed in Intergraph (UK) Ltd v Wolfson Microelectronics Plc 2 where Richard Snowden Q.C. sitting as a High Court judge had regard to GHR when stating that the case was not complex enough to allow a significant departure from the GHR. At best, guideline rates are likely to have only marginal relevance when it comes to assessing hourly rates in a detailed assessment. When assessing an hourly rate it was made clear by Mr Justice Eady in Cox v MGN Ltd (2006) EWHC 1235 that the court is required to take into account all of the circumstances including, in particular, the factors listed at CPR Part 44.5(3), which are sometimes referred to as the seven pillars of wisdom. It is necessary to have regard to the solicitor s particular skill, effort, specialised knowledge and responsibility. The relevant law is now CPR Part 44.4 (3) and the eight pillars of wisdom. 1 unreported but available on Lawtel 2 (2012) EWHC /7

5 Leaving that aside, justifying that a case is particularly complex, or a fee earner has a particular specialised knowledge is effective argument for a receiving party to support a higher-than-guideline hourly rate. But it isn t the only way. For instance, one factor is the place where and the circumstances in which work was done ; it can be further effective argument for the receiving party to justify that the solicitors who conducted the work are in an area that attracts high business overheads such as high rents, and evidence this. My experience of arguing about the applicability of hourly rates at detailed assessment tells me that there is little uniformity of approach by the judiciary. For instance, very recently a judge in Lincoln County Court gave some regard to the guideline rates, while a Cambridge County Court judge was unprepared to take them into account at all. What about hourly rates in CCMCs? When CCMCs were new, judges tended to review hourly rates sought and tended to pay significant regard to the GHR. Recently however there has been a noticeable change in judges attitudes to interfering with the hourly rates claimed in CCMCs. Judges now tend to refuse to costs budget the hourly rate sought, often stating this is a matter for detailed assessment and not the CCMC. Judges are now advised apparently have been advised in training to take this approach with an eye to making sure CCMCs are conducted in an hour. In these circumstances, and without a definitive guide as to what an appropriate hourly rate is in a detailed assessment, how is it possible to know what a receiving party is likely to recover when it comes to the assessment? There are no simple answers unfortunately, but simply relying on the guideline rates is a mistake that many solicitors unwittingly make, in both fast-track and multi-track cases. However, if not set by taking the guideline rate, a perennial worry for firms is that if the rate sought is too high, then the assessing judge will not only substantially reduce it, but possibly also decide that the costs 5/7

6 sought are disproportionate. Conversely, there may be concern that if the hourly rate sought is too low, they may be underselling themselves. The solution is to seek advice at the outset from a specialist who has far more experience as to what hourly rate to set in consideration of the recovery on assessment (this early timing is necessary so that the indemnity principle is not breached when setting out the hourly rates, in either the retainer or the client care letter). I would be happy to informally discuss with solicitors as to what they should set their hourly rate at. Precisely how much weight GHR will carry in a detailed assessment going forward is still very much open to question. GHR may or may not have a far more significant role to play in detailed assessments, depending on Foskett s committee s recommendations and how they are implemented if, indeed, they are. I intend to write a further update to this article discussing the Costs Committee s recommendations when they are shortly published. Andrew Lyons May /7

7 Andrew Lyons Andrew Lyons was called to the Bar in He specialises in costs law and is experienced in settling points of dispute, replies to points of dispute and advises solicitors as to appropriate Part 47 offers. He regularly appears at detailed assessment hearings on behalf of both the paying and receiving party. He is also experienced in preliminary costs arguments such as conditional fee enforceability and predictable costs. Disclaimer: The information and any commentary on the law contained in this article is provided free of charge for information purposes only. The opinions expressed are those of the writer(s) and do not necessarily represent the view of Ropewalk Chambers as a whole. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by the writer(s) or by Ropewalk Chambers. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are expressly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comment contained within this article. 7/7