Costs News

17 September 2020
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Leading defendant firm expresses concern over approach of GHR review

A leading defendant law firm has expressed concern that the data being requested for the review of guideline hourly rates (GHR) and the process that is being used “will lead to GHR being introduced that are fundamentally flawed”.

As we reported last week, High Court judge Sir Stephen Stewart has been appointed to head the working group building the evidence base for the review and has issued a call for evidence on assessments carried out in the last 18 months and those being carried out over the next two months.

Howard Dean, director of costs at Keoghs, argued that, because of the prevalence of conditional fee agreements (CFAs), “the hourly rates claimed upon assessment are not representative of the hourly rates that a claimant would actually pay his solicitor for the services provided. The claimant is never going to pay those high hourly rates and has no interest in reducing them”.

How much the costs judge allowed on assessment was the “only one restraining force on hourly rates”, he said. “The vast majority of personal injury claims are funded under CFAs for this very reason. It follows that determining new GHR on the basis of a data set of distorted hourly rates is fundamentally flawed.”

Mr Dean went on that the courts’ knowledge of local hourly rates came from those that were claimed and allowed upon assessment. “Keoghs handle over 100,000 claims a year and less than 1% proceed to a hearing where costs are assessed with hourly rates being determined by the court.

“In the vast majority of that 1% of cases, the hourly rates are the pre-eminent issue because those claimed significantly exceed the hourly rates claimed in the 99% of cases that settle without a hearing.

“It follows that the average hourly rates that the court assesses in the 1% of cases is not representative of the average hourly rates that are claimed… Determining new GHR on hourly rates that are allowed in that 1% of cases is statistically unsound and fundamentally flawed.”

Mr Dean highlighted how technology and new business practices have reduced overheads, while the increase in specialisation also provided economies of scale and concentration of expertise. He pointed to research published by the Legal Services Board and Competition and Markets Authority earlier this month that showed significant regional variations in legal fees for various standard consumer law services.

“Using a dataset of historic hourly rates will only serve to ‘bake’ into any new GHR the pre-Covid overheads, along with regional imbalances, that are currently reducing as a result of digitalisation. In our view, basing GHR on this dataset will not satisfy the objective of reviewing the basis of GHR and will result in new rates which are distorted, fundamentally flawed and out of date.”

Mr Dean called for fixed recoverable hourly rates instead as an exception to the indemnity principle. “In effect, can we now ‘decouple’ the hourly rate a party is contracted to pay and the rate the court will allow between the parties?” he asked.

Among the benefits, he said, would be reduction in the number of assessment hearings and court time spent on hourly rates, “certainty and transparency as to the hourly rates that can be recovered”, an increase in agreed budgets, and competition between solicitors on the contractual hourly rates a client is liable to pay.

The ACL is urging Costs Lawyers to provide evidence to the GHR working group. For copies of the two forms to be submitted electronically, email the ACL office (enquiries@costslawyer.co.uk).

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