A High Court judge has urged a review of the guideline hourly rates, saying the current levels are “not helpful” when deciding what reasonable rates should be in 2019.
Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC) concerns claims and counterclaims arising out of the development and implementation of a digital online platform for buying and selling investment funds.
Mrs Justice O’Farrell 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.”
She 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, and 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: “Although the defendant was the applicant and, as such, will have had the additional burden of preparing the application and the bundle, that does not justify the defendant expending nearly twice as many hours as the claimant.”
As a result, she reduced the total solicitor fees from £27,842 to £22,035 and produced a total net of VAT of £37,695.
“If the defendant is unable to recover any part of the VAT as input tax, the total VAT would be £7,488, giving a total sum of £45,183. That total is increased to £46,000 to reflect the claimant’s failure to accept the defendant’s offer that would have avoided the contested hearing.”
Matthew Parker (instructed by Bryan Cave Leighton Paisner) for the claimant, and Fionn Pilbrow QC (instructed by Herbert Smith Freehills) for the defendant.