Dose of realism needed on hourly rates

While the outcome of the review of guideline hourly rates (GHR) could be considered to be largely unsatisfactory, for thousands of costs lawyers and legal executives, it marked a significant moment.

Behind Lord Dyson’s headline decision that the evidence base was too weak to change the rates, was the master of the rolls’ agreement that qualified and regulated costs lawyers should be counted as grade B or C fee-earners depending on the complexity of the work, and chartered legal executives with eight years’ post-qualification experience as grade A. This is due recognition of the expertise these two groups of legal professionals bring to the litigation process.

While most of the other findings of the Civil Justice Council’s costs committee – which overall would have seen rates go down – now fall away, there is one section that is important: the relationship between the GHR and detailed assessment and costs budgeting.

As Lord Dyson noted, the original intention of the GHR was to provide the judiciary and others with a simplified scheme of rates to be used in undertaking summary assessment. But, unsurprisingly, they have leaked into detailed assessments, and the CJC committee reported receiving conflicting submissions on whether this was appropriate.

 Some argued strongly for the GHR to have no role in detailed assessments, saying a ‘one-size-fits-all’ approach was not suited to them. On the other side, it was said that using the GHR as at least the starting point in detailed assessments met the need for certainty and predictability for clients.

 The CJC committee was ‘generally of the view that, while summary and detailed assessments are distinct processes, it is unrealistic for them to be completely disaggregated’ – it was also mindful that in the evidence it received on the expense of time, the committee did not try to distinguish between the two.

It continued: ‘The GHR are themselves guidelines and a benchmark for summary assessments. As such, they may provide a helpful starting point in the detailed assessment process, but no more than that. The court’s discretion and exercise of judgment in the application of the eight pillars of wisdom will be of significance in both forms of assessment, more obviously so in detailed assessments.’

In relation to budgeting, the committee said that ‘while the GHR had no formal role in costs budgeting, it would not be unreasonable for parties and clients to have some regard to them as a reference point for estimating expected costs to be incurred in a’. At the same time, judges have made it clear – not least in the judicial roundtable hosted by the Association of Costs Lawyers earlier this year – that they are not particularly interested in a detailed analysis of hourly rates during the budgeting process.

The CJC report said: ‘As a result, the committee felt that this was an issue that would be better addressed in guidance notes accompanying the GHR, rather than an attempt being made to draw up suggested rates for detailed assessments or for offering prescriptive guidance on what the relationship between the GHR and detailed assessment ought to be.

 ‘The committee was concerned not to make recommendations that could be seen to fetter judicial discretion in the proper exercise of a detailed assessment or the costs budgeting process.’

This all led to a formal decision not to recommend separate rates for detailed assessments, but the committee advocated ‘greater flexibility in detailed assessments than would ordinarily be shown in summary assessments’. Lord Dyson explicitly accepted this.

This is good news and has been broadly welcomed by practitioners. While the GHR will no doubt remain the bedrock of detailed assessments, Lord Dyson’s decision clearly opens the door to arguments that different rates are appropriate in specific cases – this possibility should also be reflected in retainers, I would suggest.

So while we wait for the outcome of Lord Dyson’s ‘urgent discussions’ with the Law Society and government on how to obtain solid evidence on which to base the GHRs, costs lawyers and advocates in detailed assessments have been given the green light to make their own case for what is a reasonable rate. And courts have retained their discretion to allow different rates having considered all the facts of the case. 

I would sound a note of caution, however. Unless the arguments about hourly rates are speedily resolved, with realism applied by both paying and receiving parties, we could end up with fixed recoverable costs being extended to all but the most high value and/or complex of cases – a proposition which has already been mentioned, with approval, by Lord Neuberger among others.

Sue Nash is chair of the Association of Costs Lawyers