Guideline hourly rates – impact and mitigation

The Civil Justice Council’s final report on guideline hourly rates (GHR) was published on 30 July 2021. Between September and November 2020, the working group collected data from the judiciary and the legal profession. The data was analysed by Professor Paul Fenn and Professor Neil Rickman and an Interim Report was published in January 2021.

Mr Justice Stewart, chair of the GHR working group, said: “This final report responds in detail to the concerns expressed and sets out why the working group was not sufficiently persuaded to make substantial modifications to any of the recommendations. It is hoped, if the recommendations are accepted, that the new rates will offer greater certainty to litigants, the professions and the judiciary.”

The recommended rates are as follows:

 

Grade A

Grade B

Grade C

Grade D

London 1

£512 (25.2%)

£348 (17.6%)

£270 (19.5%)

£186 (34.8%)

London 2

£373 (17.8%)

£289 (19.5%)

£244 (25%)

£139 (10.4%)

London 3

£282 (13.7%)

£232 (15.8%)

£185 (11.9%)

£129 (7%)

National 1

£261 (20.2%)

£218 (13.5%)

£178 (10.7%)

£126 (6.8%)

National 2

£255 (26.78%)

£218 (23.2%)

£177 (21.3%)

£126 (13.5%)

Impact

Small/medium cases

The new GHR will become a new baseline in all cases. Certainly, arguments for lower rates will be difficult to present. This will naturally see an increase in those rates sought and allowed in all cases.

Perhaps the most significant starting point will be those personal injury cases which fall outside the scope of fixed costs (over £25,000) and are subject to assessment (whether summary or detailed). Many such cases will see guideline grade A/B rates applied, with an increase of 18.81% on average in the regions and outer London.

Non-combative firms

Many firms have previously sought only guideline rates with a view to avoiding dispute and ensuring effective settlement, and thus cash flow. The release of updated hourly rates is likely to see an immediate uplift in such rates for such firms, with modest ability to dispute.

Large/complex cases

The greatest battle ground will relate to whether the new rates are really going to be a set rate, or the new starting point in large or complex cases.

Comfort should be found in the fact that London 1 is said to be expressly: “primarily be for very heavy commercial and corporate work, whether undertaken by firms geographically located in the City or central London”. That would naturally suggest that no injury claim should attract rates, or rates akin to, London 1.

A degree of caution is found in paragraph 29 of the report: “In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for grade A, B and C fee earners where other factors, for example the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element, would justify a significantly higher rate. It is important to note (a) that these are only examples and (b) they are not restricted to high level commercial work, but may apply, for example, to large and complex personal injury work.”

In our view, most courts will be reassured by the updated rates, applying these to all but the most complex of cases.

Remote working

One issue that was not addressed in the initial draft report, though has been subsequently included in the final report, is the issue of remote working. The final report states that the rates to be applied will be premised on the location of the office to which any file handler is “predominantly attached”. This is likely to lead to substantial disputes where remote working staff are “attached” to, for example, a London based office, with the effect of allowing recovery of higher rates.

Mitigation

Costs management 

Hourly rates are not set in costs budgeting/costs management hearings and, in theory at least, the new GHR should have modest impact. In practice, the surreptitious calculations by courts with regard to hourly rates will likely continue.

It must be acknowledged that, upon a costs management order being made, the estimated costs will be assessed with reference to the budget set (with any arguments as to “reasonable” rates rendered moot within any assessment).

Constraint by costs management will remain key and all efforts to avoid costs management should be refuted.

Proportionality

Despite the fact that the “new” proportionality rules have been in place for over eight years, modest law surrounds their effective application.

This issue requires judicial intervention at the highest levels to be effective. Any increase in costs, and thus a greater focus on proportionality, will naturally give rise to even greater opportunity to set new precedent.

Efforts need to be made to advance arguments as to proportionality both in relation to costs management and detailed assessment decisions, with significant regard likely to be focussed on value, complexity and opponent behaviours. As per West v Stockport NHS Foundation Trust and Demouilpied v Stockport NHS Foundation Trust [2019], the issue of high or excessive hourly rates may be an identifiable factor in considering whether costs are disproportionate and should be reduced on a global level.

Retrospective effect

Further arguments are likely to arise in relation to those rates claimed in years prior to the review. Certainly, we would expect blended rates and lower than the new GHR to be applied by the courts to account for the work done in previous years. The new GHR should not have retrospective effect.

Effective delegation/location

Challenging rates will require a focus on the correct construct of the legal team. Ever more arguments will arise as to which part of the legal team should undertake which element of the case.

The issue of “where the work is done” is likely to become more complex, with issues over the downsizing of, for example, City offices and remote working potentially impacting on future reviews of GHR (and arguably the application of the new GHR now).

We are aware of some claimant business models that have a London postal address yet in reality, operate from a shared office space with lawyers primarily working from home.

Fixed costs

The ultimate arbiter of excessive costs is the extension of fixed costs. Whether the review of GHR suggests a softening of attitudes towards any such extension is unknown, though plainly ongoing lobbying will have an impact on costs exposure and certainty.

Settlement strategies

The advent of updated GHR would not typically alter the traditional approach in relation to settlement. Costs inclusive offers can create uncertainty for claimants and their solicitors and as such, stall matters. Also, the lack of costs protection means that such offers would normally have to be made proximate to an “effective” offer.

What remains is to ensure compliance with the Serious Injury Guide where appropriate, utilise other areas of costs forecasting (budgeting etc.) and the making of early offers both in relation to damages (to limit extent) and costs (to control “costs of costs”).

Further, the likely greater application of GHR should lead to greater consideration of settlement of costs outside the usual scope of detailed assessment. Prime examples include the settlement of costs concurrent to the settlement of damages, such as at any joint settlement meeting. Ahead of or alongside any such settlement, costs advice should be obtained with a view to resolving costs quickly and without the need for costly assessment proceedings.