The Future of Guideline Hourly Rates and the Extension of Fixed Fees

It has been announced that the SCCO Guideline Hourly Rates (GHR) are to be frozen at the 2010 levels indefinitely after the Master of Rolls decided that the evidence required to change them would not be produced.

Perhaps, concerning for some is Lord Dyson’s comments that he would instead continue to press the government to extend the use of fixed fees.

Following a year-long study by the Civil Justice Council’s costs committee which concluded in July last year, Lord Dyson stated that there was a “fundamental” shortcoming in the evidence available to amend the GHR. He added that he would seek “urgent discussions” with the Law Society and the government to see what steps could be taken to obtain more.

Lord Dyson said last week that: “these discussions… have not made any material change to the position I was placed in last July – there is no funding available from any source for undertaking the sort of in-depth survey which the Civil Justice Council’s costs committee and its expert advisers consider is required to produce an adequate evidence base.

“There is also considerable doubt that even if such funds were forthcoming there would be sufficient numbers of firms willing to participate and provide the level of detailed data required to enable the committee (and in turn myself) to produce accurate and reasonable GHRs.”

Lord Dyson observed that the GHRs are becoming “less and less relevant” particularly given the judiciary’s use of proportionality as a driving principle in assessing costs, and the greater application of costs budgeting. The full effect of the new proportionality test under CPR 44.3 is only just beginning to bite for many.

He added: “Not least, I hope […] is a trend towards the greater use of fixed costs in litigation. I have long advocated their wider application, and will continue to press this point to ministers and others in the hope that this important element of the Jackson reforms is implemented.”

Lord Dyson stopped short of suggesting that the existing GHRs no longer apply and instead stated that “the existing rates will […] remain in force for the foreseeable future, and will remain a component in the assessment of costs, along with the application by the judiciary of proportionality and costs management.”

The decision represents something of a double edged sword with any decision over the Guideline Hourly Rates likely to be as unpredictable as the outcome of this year’s General Election. Paying Party firms will likely be relieved that hourly rates haven’t increased but there was also a feeling among many established figures that hourly rates could have decreased.

Solicitors have to remember that the GHR remain as precisely that a guideline and only as a starting point. Lord Dyson explicitly stated that “[the GHRs] remain an integral part of the process of judges making summary assessments of costs in proceedings. They also form a part, even if only a starting reference point, in the preparation of detailed assessments. They also provide a yardstick for comparison purposes in costs budgeting.”

Hourly Rates will inevitably continue to be a battleground until Lord Dyson has his way and the application of fixed costs is extended. Lord Dyson’s comments regarding the application of hourly rates to Costs Budgeting is also an interesting reference point given the on-going debate as to what role (if any) costs management should have on the assessment of hourly rates. Lord Dyson’s statement simply leaves the status quo which invariably carries with it the same issues as before.

The big question now is how is it possible for a receiving party seeking hourly rates above the GHRs able to predict what might or might not be allowed? The answer is that they can’t and can only base any predictions upon previous experience. My experience is that it is dealt with so inconsistently that the only fair comparison point is that of playing the lottery. If you don’t play you can’t win but by playing it doesn’t equal success.

The extension of fixed fees may well overcome the issue of GHRs but it is likely to be at the cost of solicitors. The only real option left is for solicitors to streamline processes and to become more efficient. On one hand fixed costs offers greater clarity for everyone but this does come at a cost. Does the solicitor suffer by getting reduced costs, does the client suffer as matters have to be passed to lower grade fee earners or less time spent in order to ensure a reasonable return. There will no doubt be time to have these arguments at a later point but whilst nothing may have changed, change is certainly coming.

What do you think about the decision to freeze GHRs, is this a good thing? Do you support the extension of fixed fees as suggested by Lord Dyson? As always let us have your comments below.

The full note published by Lord Dyson is available by clicking here.

If you have any questions or queries in relation to this blog please contact Sean Linley (sean.linley@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.

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