What role does the hourly rate play in the budget?

This continues to spark debate. The rules states that the hourly rate cannot be set (CPR 3 PD 3E, para 7.10), but further explain that the constituent elements of the budget should be considered when assessing the amount to approved (CPR 3 PD 3E, para 7.3). So, with the hourly rate falling under the umbrella of a ‘constituent element’ the hourly rate can be taken into account, but importantly, not fixed. There will usually be a number of factors that contribute to a reduction of the budget and on occasions the level of the hourly rate may be one of those contributing factors.

Parties are often working blind in respect of the logic that the case management Judge applied. If the court did take the hourly rate into account when reducing the amount of estimated costs sought, and no evidence exists to support the Judge’s thought process, what happens when the costs are finally assessed?

At the moment there is conflicting case law in this regard.

In RNB v London Borough of Newham [2017] EWHC B15 (Costs) Deputy Master Campbell said “If (as it is the case) the hourly rate is a mandatory component in Precedent H which is not and cannot be subjected to the rigours of detailed assessment at the CCMC, it makes no sense if it is automatically left untouched when the rates for the incurred work are scrutinised at the ‘conventional’ assessment.”

“Such an approach would offend against the guidance given in Harrison at paragraph 44. Indeed, as [counsel for the defendant] points out, it is only on that occasion that a paying party has an opportunity to challenge the rate.”

This was therefore a “good reason” to depart from the costs allowed in the claimant’s last approved budget.”

However in  Nash v Ministry of Defence [2018] EWHC B4 (Costs) –  Master Nagalingam found that “a reduction in hourly rates of the incurred costs is not a good reason to depart from the budget in respect of the budgeted (future) costs”.

And finally, in Jallow v Ministry of Defence [2018] EWHC B7 (Costs) Master Rowley found “that there is no good reason to depart from the budget by virtue of the reduction to the hourly rates in this case”.

How can the legal profession employ the rules as currently drafted? Is it possible to gain clarity and a clearer view of the blind logic/working approach adopted by the Judges? If, during the course of the CMC, the Judge does comment on the hourly rate, ask him/her to record a note on the case management order that the hourly rate was considered when approving the budget and that it played a role in the reduction to the rates.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

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