Make 2023 the year hourly rates are recovered in full

Much has been said about the Guideline Hourly Rates (GHR) following Samsung Electronics Co. Ltd v LG Display Co. Ltd [2022] EWCA Civ 466 and Athena Capital Fund v Secretariat of State for the Holy See [2022] EWCA Civ 1061. Paying parties rely on them and Judges at summary assessment feel bound to follow them, despite the potential damage they could do to the profession’s reputation in London given how the GHR compare to the market.  However, there are positives and lessons to learn from these decisions.

How did we get here?

The GHR were finally increased in October 2021 following the Civil Justice Council’s consultation earlier that year.  This followed widespread concern that the GHR, last updated in 2010, were woefully outdated and significantly lower than the then current hourly rates for many solicitors. Some may argue that the updated GHR remain well below the market, which could have been negated by a proper evidence-based exercise, which was easily achievable for those with the IT knowhow given the existence of thousands of costs budgets, statements of costs and bills of costs.

Samsung and Athena

These well-known decisions followed straightforward appeals in the Court of Appeal, involving a summary assessment of costs and a payment on account of costs.

The successful respondents’ costs in Samsung were summarily assessed. Cleary Gottlieb Steen & Hamilton LLP acted for the respondent and the Appellant’s counsel, instructed by Covington & Burling LLP, submitted that the hourly rates were higher than the GHR for London 1, some more than double.

Males LJ noted that “the guide [to summary assessment] recognises that in substantial and complex litigation an hourly rate in excess of the guidelines may be appropriate giving as examples “the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element”. However, it is important to have in mind that the guideline rates for London 1 already assume that the litigation in question qualifies as "very heavy commercial work”, deciding that rates in excess of the GHR need be accompanied by a clear and compelling justification.

It is a pity that the respondents’ attempt to justify its rates was to merely acknowledge that the rates were higher than the GHR and “that is almost always the case in competition litigation”.  With respect, this was never going to be enough.  However, Males LJ only seems to focus on the appeal itself, regarding the appropriate forum for the trial, which was not particularly document heavy and with amount claimed modest by commercial litigation standards.

Athena was a successful appeal of a decision to impose a case management stay of the proceedings.  The hearing was listed for two days but the appeal itself concluded in one day.  Both parties’ costs were broadly similar, although the solicitors’ costs were different.  Despite the paying party (represented by Hill Dickinson) not objecting to the hourly rates, Males LJ specifically noted Samsung (his decision) and that no justification for rates well in excess of the GHR had been advanced.

Further examples where the GHR were applied include Eurohone UK Mortgages 2007-1 PLC v Deutsche Bank AG, London Branch [2022] EWHC 2408 (Ch) - involving an application to strike out/reverse summary judgment where the evidence and submissions were essentially the same as a connected application, successfully heard earlier in July 2022 (in theory, no clear and compelling justification arose) and Patley Wood Farm LLP & Ors v Kicks and Nimmo [2022] EWHC 3118 (Ch), where the losing party submitted that the successful party be limited to the local GHR, despite their own solicitors charging rates exceeding the GHR.   No justification for exceeding the GHR was put forward.

Ask your costs lawyer

What constitutes a clear and compelling justification will depend on the facts.  However, it is clear that failing to put forward any justification condemns the litigant to a shortfall on what is charged and recovered on hourly rates alone.  The need for justification is vital and firms need to ensure counsel is briefed to make submissions.  It may be why more favourable decisions have started to materialise from the SCCO, where specialist costs judges, counsel and lawyers argue the points.

Also, these decisions do not seem to consider the substantive litigation.  Litigants are not going to instruct a different, cheaper firm for interim applications given they are obviously connected to litigation itself.  Clearly the judiciary are not suggesting this but it is arguable whether overemphasis on the interim application itself could give rise to any grounds of appeal.  Some of the decisions being made have resulted in huge reductions to costs which may make an appeal worth the candle.

A consequence of costs management and summary assessment is the ability to see what your opponents are charging.  This insight assures us that our hourly rates are highly competitive for the experience, specialism and standing our lawyers at Kingsley Napley LLP are renowned for.

FURTHER INFORMATION

For further information on the issues raised in this blog, please contact a member of the Dispute Resolution team. 

ABOUT THE AUTHOR

Dale Gibbons is a Legal Director in our Costs & Litigation Management team. He advises on litigation funding and acts in costs management and costs assessment proceedings. Dale is also a qualified legal project practitioner.