The Tail Wagging the Dog - Hourly Rates Review 2021

4 October 2021

The Master of the Rolls, Sir Geoffrey Vos, has approved the new guideline hourly rates (GHR) proposed by the CJC and the Stewart committee which came into effect on 1st October 2021.

These new rates are a result of the final report of the Civil Justice Council released at the end of July 2021 and the forerunning consultation that took place between 8 January and 31 March 2021.

This article looks at the methodology behind the final report recommendations, the perceived writing on the wall before its publication and the potential for further reviews.

In case you missed them, here are the approved rates (the High Court was actually already using them pre 1st October 2021 see ECU Group plc v Deutsche Bank [2021] EWHC 2083 (Ch), [25]);

  Grade A Grade B Grade C Grade D
London 162 £512 (25.2%) £348 (17.6%) £270 (19.5%) £186 (34.8%)
London 263 £373 (17.8%) £289 (19.5%) £244 (25%) £139 (10.4%)
London 364 £282 (13.7%) £232 (15.8%) £185 (11.9%) £129 (7%)
National 1 £261 (20.2%) £21865 (13.5%) £178 (10.7%) £126 (6.8%)
National 2 £255 (26.78%) £218 (23.2%) £177 (21.3%) £126 (13.5%)

Episode I - the data gathering exercise 

In February 2020, Sir Terence Etherton MR tasked the Stewart committee (“the committee”) to “conduct an evidence-based review of the basis and amount of the guideline hourly rates (GHR) and to make recommendations accordingly to the Deputy Head of Civil Justice and to the Civil Justice Council during the Trinity term 2021”.

This was on the back of some growing concerns from the judiciary, as well as practitioners, that the GHR were so out of date they had become unhelpful. Mrs Justice O’Farrell said in Ohpen Operations UK Limited v Invesco Fund Managers Limited [2019] EWHC 2504 (TCC);

“As to the first point, 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.”

The committee sought the following data from the profession as part of their review;

  1. Hourly rates allowed at detailed assessment between April 2019 – August 2020;
  2. Hourly rates allowed at detailed assessment between August 2020 – November 2020.

A narrow window on any viewing. In terms of the judiciary, the committee sent questionnaires seeking information on rates allowed in differing types of court such as the Business & Property Court.

It is argued, by some dissenting voices to the methodology, that this data set would be a circular approach given that this is assessment only data, based upon the out of touch 2010 GHR and not what the market is actually charging their consumers.

Interestingly, one of the members of the committee speaking at an event during the data gathering exercise suggested that there had been a lack of data provided at that point from the profession which would lead to rates not being accepted by the Master of the Rolls nor the profession more generally or perhaps 2010 GHR rates ‘plus a bit’. This was hardly surprising given the narrow window of assessment data sought from the profession. It looked like a larceny of fair opportunity to present, good, thought out data that was based upon market rates. This view point is quashed within the final report. The idea that the pathway trodden by the Foskett committee in 2014 could be repeated but with a successful outcome was given short shrift.

 

Episode II – the interim report and the consultation response

We live in an age of misinformation and ‘fake news’ so it is very important to understand that these recommendations are not built on review of the full market (detailed assessment and summary assessment advocates take note). In 2014, the Foskett committee attempted to look at “what it costs lawyers to run their practices”. To put it bluntly, they failed to achieve this due to what the then Master of Rolls, Lord Dyson, described as a lack of evidence provided by the profession.

In the interim report, the Stewart committee stated;

1.16. The history of GHRs between 2010 and the present is one where it has become apparent that the holy grail of rigorous, fully evidence-based precision, sought but not achieved by the Foskett committee, is simply not possible.

There is certainly some strength to this argument given that the landscape of the geography of law firms (virtual offices etc) and the types of legal services provided by different types of legal structures is unrecognisable from 2010.

That said, perhaps that in order for those assessing costs to be given a solid foundation with which to undertake the task of assessing costs and for the GHR to be fair for both consumer and lawyer, a wider net needed to be cast on the data collection process. Even if only to act as a barometer over the Stewart assessment only data.

Since the advent of Costs Management at CPR 3 Section II in 2013, firms have been preparing hundreds of costs budgets that carry un-assessed hourly rates that are being charged to and paid by clients in a variety of cases.

The data of how firms charge their clients and the costs of access to justice in the marketplace is held within these budgets. In so far as the concern for cherry-picking budgets might exist for any data collection exercise, perhaps it is not in the interests of the profession to do be so belligerent because inflated GHR will act as a barrier to entry to the market and would not serve anyone. It is likely that those firms that work on insurance panels with artificially low rates well below the actual market rate will bring down the average in any event (just like the assessment only data has). This needs to be factored in and would negate any cherry picking if that did occur.

A broad range of case disciplines can be adopted for testing London 1 & 2 such as those used by Jackson LJ in Review of Civil Litigation Costs: Supplemental Report 2017;

A. Clinical negligence
B. Personal injury
C. Business disputes
D. Chancery and property
E. Technology and Construction Court (“TCC”)
F. Defamation
G. Other

In order to assess the size of this task, Jackson LJ received 97 budgets for category A when making recommendations in the review above. It is suggested a similar number would be sufficient and easily obtained from the profession.

Putting this data into a spread sheet and creating averages would not be too time consuming. So why not?

 

Episode III - the final report

At footnote 45 of the final report it says – “Some respondents suggested using information from costs budgets. However the court, when cost budgeting, does not approve hourly rates. Therefore the working group rejects this suggestion.”

This is correct, the court at costs management does not fix the hourly rates for the case. But it certainly takes them into account when setting an amount for each phase of the litigation. To ignore this data could be regarded as a dereliction of duty. See The Capital Markets Company [“Capco”] & Ors v Andrew Tarver & Ors [2017] EWHC 2885, among others.

The idea that this information would be disregarded is of huge concern given it is the consumer that will be left with the shortfall between their actual fees and the recovery from their opponent. The Stewart data does not protect the consumer from high rates, it exposes them.

 

There will be another review of the GHR in the next few years, so perhaps the committee will consider the data being charged to the consumer that time around.  If it chooses not to do so, consumers will continue to be exposed.

ABOUT THE AUTHORS

Michael Tyler is a Partner in our Costs & Litigation Management team. He has conducted costs proceedings at first instance and on appeal in the High Court and Supreme Court Privy Council. Michael is also a qualified legal project practitioner.

Dale Gibbons is Legal Counsel 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.

 

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