Costs News

11 February 2021
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“Conventional approach” is to increase guideline rates by 25%, says High Court judge

The High Court has described increasing the guideline hourly rates (GHR) by 25% to bring them up to date as “the conventional approach”.

But questions have been raised about whether this is actually the case, not least because the Civil Justice Council working group report on the GHR did not mention it.

The ruling of His Honour Judge Mark Pelling QC, sitting as a High Court judge, was handed down last October but has only just been published.

Since then, the working group published its interim recommendations, currently out for consultation, that the GHR should be increased by between 7% and 35%, depending on the grade and location.

The case concerned the costs of repairing a yacht under an insurance policy. The claimant was awarded €244,000 (£214,000) and sought costs of £213,000. As the claim was run through the shorter trial scheme, the judge had to assess the costs summarily.

Neither the solicitors nor the rates they claimed were specified in the ruling, but the defendants complained that the rates exceeded the GHR.

HHJ Pelling described this as “to an extent an artificial submission” in that the claimant’s solicitors were previously at a City law firm and had set up their practice just outside the EC postcode – in N1.

He went on to describe the GHR as “significantly out of date”, although the defendants said it was wrong simply to look at inflation, because solicitors’ rates have suffered commercial pressure, particularly in respect of work carried out for big institutional clients such as insurers.

The judge said: “That is a difficult submission for me to act on without real evidence upon which to arrive at a judgment. The conventional approach in relation to guideline rates is to uplift them by about 25% in order to reflect the effects of inflation on the figures previously arrived at.”

In any event, he went on, “it has always been the case that specialist solicitors in specialist areas of activity should recover an uplifted fee to reflect that specialism”.

That was the situation here, HHJ Pelling said, meaning the rates were “appropriate in all the circumstances”.

He explained: “The difference between where in fact they now practise and where they previously practised is an artificial distinction which has only very limited impact on the fees which can properly be charged, although I recognise that there will be a marginal difference driven by things like rent and rates, but all of that said, this is specialist work by specialist solicitors and I am satisfied that it is appropriate that they should charge such a rate.

“I note that, in any event, the rate charged by the solicitor acting for the defendant at £290 an hour as an associate is not unadjacent to the rates which have been charged in this case.”

However, the judge’s comments about the uplift have been questioned. Indeed, in December, another High Court judge recommended a 35% increase to take account of inflation while the review was taking place.

Writing on his well-known blog, Costs Lawyer Simon Gibbs of Gibbs Wyatt Stone predicted that receiving parties would seek to rely on it.

“If this is the conventional approach, when did it develop? Presumably not in 2011. Did it only develop in 2020 and, if so, what was it before?

“What does ‘conventional approach’ mean? Was the judge taking judicial notice that this is what judges up and down the country, whether county court, High Court, Senior Courts Costs Office, Admiralty Court, etc, all routinely apply?”

If so, he went on, the Civil Justice Council report “could have been significantly shorter” – but in fact it did not indicate that such an approach was common.

Mr Gibbs continued: “As it was, this case was proceeding in the Business and Property Court. Perhaps the comment was intended to simply reflect the judge’s experience of what was typically allowed in that court.

“However, this then raises the question as to what extent should GHRs be departed from to reflect complexity. If, in 2020, the Business and Property Court sticks fairly rigidly to GHRs but just adds an element for inflation, then this decision may be rather less favourable to receiving parties then in initially appears, at least so far as more complex litigation is concerned.”

The ruling was also “entirely unclear” about “the interplay, if any, between the need to reflect inflation since 2010 and the need to reflect specialism”.

  • The ACL is looking for Costs Lawyers to join the working party that will prepare its response to the working party report. Also, while strongly encouraging all members to prepare their own individual responses, the ACL appreciates that not everyone will have the time and so you can send your views to the ACL to incorporate into its response. Email enquiries@costslawyer.co.uk for more details on both opportunities.

Mr E Jones appeared on behalf of the claimant. Mr J Watthey appeared on behalf of the defendants.

Comments

Anonymous   15/02/2021 at 15:20

I would have thought that unilaterally revising the GHRs upwards was somewhat unconventional. But this is typical of judges favouring the receiving party. GHRs really ought to be revised substantially downwards especially when in relation to asking the other side to pay.

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