Guideline hourly rates: an assessment

I was on the last attempt to revise guideline hourly rates (GHRs), the Foskett Inquiry, and the problem it faced was lack of data. This latest attempt, which reported on Friday, sought to override that problem by an entirely different approach. But it still faced data problems and, as it has explained, itself has taken in some aspects a broad brush approach.

Foskett J’s committee sought to establish a true foundation to guideline hourly rates through assessment of the cost of time. This is an old exercise that was used from time to time in assessments of costs. In order to establish the correct hourly rate parties might submit to the assessment court an expense of time statement. This would then be used as the foundation for the hourly rate allowed by the court.

Foskett and the experts sought to apply this exercise more generally, although they had to do so within the constricts of competition law which had previously stopped a similar exercise. The problem however was that the data collected was not sufficient to establish rates of general application.

The committee made recommendations, but because of the lack of data the then master of the rolls decided not take up the recommendations. The exercise was almost completely wasted. It was thought then that GHRs would wither on the vine and courts would start using their own rates.

The CJC decided that was not good enough, did not provide a sound basis and meant that there would be no uniformity or record of what was likely to be allowed.

A new effort

This new committee has taken a different approach of assessing what courts are actually awarding in hourly rates. The game plan was that this information would be much easier to gather since it was relatively simple and could in part come from the courts themselves. It also came from a viewpoint that the old geographical split of hourly rates needed a shake up with lawyers from London and the other cities seeking to raise comparative rates as the cost of rent and salaries grew exponentially.

Then came the pandemic and one factor referred to by the committee is the potential for costs to reduce as a result - but the vast increase in salaries and the call for return to the office seem to put paid to that. The final report does not add a great deal to the interim report to which stakeholders had responded; indeed it has not changed any of the rates from the interim report.

The committee itself faced data challenges. For instance, a lack of data in London 2. Whilst there is a united voice that the GHRs need updating the questions for the master of the rolls are

• Is there sufficient data on which to conclude to apply these rates or is the broad brush approach sufficient
• Is the exercise circular, effectively anecdotal and self-serving?
• Is it a fair exercise for consumers?

Increases in the rates – playing catchup

The increases in rates look dramatic but the published rates haven’t increased since 2010. Some in the profession regarded the increases as fairly modest. Both sides of the litigation divide may seek to ensure that the rates are as close as possible to the contractual rate but minimising the difference is all important to claimants who are less likely to be able to afford costs above those recovered. Well-resourced defendants are much better able to afford that difference. It is an important exercise to update the rates but whether the committee have done enough to persuade the master of the rolls remains to be seen. If not, GHRs will wither and disappear as a useful tool.

Geographical boundaries

The question of geographical boundaries is naturally of vital importance to those on the boundaries. The difficulty in drawing those boundaries is establishing the correct criteria. Rather like the Foskett inquiry the factor that should drive the determination is areas that face similar costs but this committee has rejected that on the basis that that data is imply unavailable and has taken a very broad brush approach. Will that be sufficient for the MR remains to be seen.

Implementation

As with the Foskett report, the master of the rolls has to think about the balance between consumer interest and the availability of data. I am sure the MR will consider this in some depth because there will always be the threat of JR if the exercise is not seen as fair and balanced.

David Greene is senior partner of Edwin Coe and a former president of the Law Society