In the recent case of JXA -v- Kettering General Hospital NHS Foundation Trust  EWHC 1747 (QB) the Court provided clarification in relation to how solicitors’ hourly rates are to be assessed.
By way of brief background, the underlying claim related to a case of infant cerebral trauma. Th case ultimately settled on the basis of 90% liability attaching to the Defendant. Damages were not resolved but it was resolved that they would run into many millions of pounds, potentially £20 million.
The Claimant served a bill of costs in which the Claimant claimed hourly rates of £380 – £420 for Grade A fee earners, £270 for Grade C fee earners, and £150 – £190 for Grade D fee earners.
The initial assessment was carried out by Master Nagalingam of the Senior Courts Costs Office, who allowed rates of £350, £200 and £150 respectively.
On appeal, it was alleged that the Master had incorrectly applied the test in in Wraith -v- Sheffield Foremesters Ltd, Truscott -v- Truscott  EWCA Civ 2285 which provides that in assessing hourly rates the court must consider:-
- Whether the choice to instruct the firm of solicitors engaged was reasonable; and
- Whether the charges of that solicitor were reasonable, taking into account the broad averages of charges of firms practicing in that area.
If the answer to the first limb of the test is “no” then the court will determine what firm or class of firm it would have been reasonable to instruct, and then apply the second stage of the test on the basis of that notional firm.
The Claimant alleged that the Master had failed to directly address the first stage of the test in Wraith. In fact, the Master had implied a finding that he considered the appropriate comparator for the purpose of the first stage of the test to have been a solicitor practicing in Outer London.
In judgment, the appellate court held that the Master had not addressed the first limb of the test in Truscott. However, the court went on to find that despite this, the Master had correctly considered the charges of comparable solicitors undertaking comparable work and that therefore the hourly rates allowed were within the ambit of the Master’s wide discretion on costs. Accordingly the Court dismissed the appeal.
Following the decision in Surrey -v- Barnet & Chase Farm House Hospitals NHS Trust  EWCA Civ 451, “the choice does not have to be the best one, but merely a reasonable one”. This means that the mere fact that there is or was an alternative solicitor who could have conducted the matter at a lower hourly rate does not in itself indicate that the decision was unreasonable for the purpose of the test in Wraith.
Nevertheless, it is relatively easy for a paying party to conduct a search of solicitors practicing in the same area in the locality of the receiving party on the Law Society website. Of course, it is usually the case that even if other solicitors can be identified, neither party will be able to prove what their charging rates. However, on a standard basis assessment any doubt will be resolved in favour of the paying party (CPR 44.3). Furthermore, where there are a large number of firms it may be possible to argue that such competition will or should have the effect of forcing hourly rates down. What is more, it should be usual practice for paying parties to enquire what investigations were undertaken by the receiving party into the availability of alternative solicitors and any quotes or information regarding hourly rates were received. If the receiving party fails to provide such information, the paying party can argue that either it indicates that no investigations were undertaken (and that therefore the choice was unreasonable), or that the solicitors instructed charged rates in excess of those charged by other firms. In either case, doubt should be resolved in favour of the paying party.
Solicitors should carefully consider the level of their hourly rates at the outset, and be prepared to justify them. One case which will assist is Higgs -v- Camden & Islington Health Authority  EWHC 15 (QB) in which the Court set out a matrix for the calculation of hourly rates enhanced above guideline rates. Some form of “risk assessment” conducted at the outset, applying the test in Higgs, may well assist in justifying the hourly rates claimed on a detailed assessment of costs.
Matthew Rose is a Solicitor in the Costs and Litigation Funding department at Clarion Solicitors. You can contact him at firstname.lastname@example.org, or the Clarion Costs Team on 0113 2460622