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17 January 2020
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Guideline hourly rates: time for a review

The guideline hourly rates (GHR) are coming up to an unwelcome 10-year anniversary – the last time they were updated.

This is not good news for solicitors. And the judiciary is finally taking note. In the recent case of Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC), Mrs Justice O'Farrell urged a review of the GHR, saying the current levels are “not helpful” when deciding what reasonable rates should be in 2019.

She was ruling on costs after granting the defendant's application for the claim to be stayed pending compliance by the parties with the agreed dispute resolution procedure in favour of the defendant. The parties agreed that the claimant should pay the defendant's costs on summary assessment, and the claimant accepted that no issue of proportionality arose.

The claimant’s costs were £45,418 and the defendant’s £52,152. The claimant submitted that the defendant’s solicitors’ hourly rates were unreasonably high, particularly when compared against the Senior Courts Costs Office (SCCO) guideline rates. O'Farrell J said: “The hourly rates of the defendant's solicitors are much higher than the SCCO guideline rates. 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.”

O’Farrell J found that, although the value of the case was not particularly high for the Technology and Construction Court, “the technical nature of the dispute justifies the engagement of solicitors with the appropriate skill and expertise to ensure proper and efficient conduct of the litigation”.

She continued: “Solicitors providing such skill and expertise are entitled to charge the market hourly rate for their area of practice. The hourly rates charged cannot be considered in isolation when assessing the reasonableness of the costs incurred; it is but one factor that forms part of the skill, time and effort allocated to the application.

“It may be reasonable for a party to pay higher hourly rates to secure the necessary level of legal expertise, if that ensures appropriate direction in a case, including settlement strategy, with the effect of avoiding wasted costs and providing overall value.”

Though the hourly rate of the grade A fee-earner was high, “very limited time” was charged, O’Farrell J said the overall cost was reasonable, as it was with the grade D fee-earner. However, the grade B and grade C fee-earners spent excessive time on the documents and she reduced the fees claimed by £5,000.

There is plenty of support among costs lawyers for the judge’s position. A survey in November of our members found that 60% considered a review of the GHR to be urgent, agreeing that they are doing more harm than good. A further 26% said it would be “helpful”.

Interestingly, speaking at an ACL conference in Manchester the same month, SCCO judge Jennifer James said the ruling of O’Farrell J has “created a mood and perhaps an impetus for change that might not have been there before”.

Master James said the GHR were discussed at a recent meeting of the SCCO’s costs practitioners’ group meeting. There was “more of a move towards getting something done”, she said.

The master also suggested that paying parties actually did themselves a disservice by arguing for the GHR in cases where they were “clearly inappropriate”, such as those involving brain-damaged babies. In doing so, they lost “a golden opportunity” to give the judge “something helpful and to make me start thinking they’re at least trying”.

But if there is to be a review, the profession has to do better than it did the last time there was one. After a year-long study by the Civil Justice Council’s costs committee and talks with the Law Society and government, the then Master of the Rolls Lord Dyson concluded in July 2015 that there was insufficient evidence on which to base new rates.

He said: “There is no funding available from any source for undertaking the sort of in-depth survey which the Civil Justice Council’s costs committee and its expert advisers consider is required to produce an adequate evidence base. There is also considerable doubt that even if such funds were forthcoming there would be sufficient numbers of firms willing to participate and provide the level of detailed data required to enable the committee (and in turn myself) to produce accurate and reasonable GHRs.”

Though Lord Dyson considered that the GHRs were becoming “less and less relevant” for several reason – such as the use of proportionality as a driving principle in assessing costs, and the greater use of costs budgeting – he acknowledged that they were still widely used in summary and detailed assessments, as well as budgeting, and as a measure for smaller law firms to base their charges on and to demonstrate to clients a national benchmark.

Little has changed since then. The GHRs need updating, but the current Master of the Rolls will likely be just as unwilling to do so without evidence. If the profession wants this, it will have to play ball and deliver the data needed to make the case. Solicitors will literally pay the price if they don’t.

This article by Francis Kendall, Vice-Chair of the Association of Costs Lawyers appeared on the THOMSON REUTERS DISPUTE RESOLUTION BLOG on 17 January 2020

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