The case of Sir Philip Green & Ors v Telegraph Media Group Limited  EWHC 96 (QB)
This matter revolved around the Claimant and two companies seeking an injunction against the Defendant to restrain them from publishing information about the Claimant. The information related to the alleged misconduct of the Claimants which had been subject to non-disclosure agreements.
A number of pre-trial applications were addressed by Warby J, including the issue of costs budgeting . Given the time-sensitive nature of proceedings, the issue of costs budgeting could only be addressed two weeks before trial.
The hourly rates claimed by the Claimant’s City of London-based solicitors ranged from £190 (for a Grade D trainee) to £690 (for a Grade A lawyer – a Partner). Other Partners’ rates claimed by the Claimants were between £510 and £635 per hour. Warby J noted that all these figures were well in excess of the guideline rates, which are £126 for Grade D and £409 for Grade A (emphasis added).
Warby J recognised that, due to the late stage of costs budgeting, the majority of costs were incurred, and as such he was restricted from budgeting incurred costs due to CPR PD 3E 7.4, and was limited to only making comments.
Warby J said he did not consider that hourly rates of more than £550 could be justified, and proportionate reductions should also be made to the lower Partners’ rates.
The Judge added: ‘Of course, fees in excess of the guidelines can be and often are allowed, and in this case the defendants (who themselves claim up to £450 per hour) and I both accept that fees above those rates are justified. But not to the extent of the differences here.’
The outcome of this hearing raises two interesting topics for discussion: the level of hourly rates in general, and, the approach the Court can take in respect of hourly rates in costs management.
Hourly rates in general
As a starting point, and as referenced by Warby J indirectly, it is well accepted that Guideline Hourly Rates are just that, a guideline. They are suitable for carrying out a summary assessment and can be a starting position for detailed assessment. Following this , the Court will take into account both CPR 44.3(5), and the 8 ‘pillars of wisdom’ contained within CPR 44.4(3), when considering whether costs are proportionate and reasonable in amount (when assessing on the standard basis). These factors can be used to support an enhancement, for instance, given the complexity of the matter, or the conduct of parties.
The Court has recently commented further on a case which claimed very high hourly rates, far in excess of the Guideline Hourly Rates. In the matter of Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors  EWHC 332 (Comm), the Court found that hourly rates in excess of £900 were unreasonable, even in a matter which was factually/legally complex, had an international element and was of significant value. The Court considered that hourly rates of half that amount (hence being very similar to the rates referred to as reasonable by Warby J in the case of Sir Philip Green & Ors v Telegraph Media Group Limited  EWHC 96 (QB)), were considered more reasonable to obtain competent representation in such a case.
There is technically no limit on the hourly rates which can be charged by a firm of solicitors, so long as the client agrees to pay them, but the Court is now taking a much tougher stance in respect of how much of that hourly rate can be recovered inter partes. This leaves the firm in an unenviable position: either write off those costs claimed, or, bill the client for the shortfall.
Perhaps this was a factor in Sir Philip deciding to abandon the claim?
It is well established that the Court must walk a tightrope when addressing hourly rates while setting a budget. The Court can have regard to the constituent elements of the budget, including hourly rates (CPR PD 3E 7.3), but the Court must not over step the mark and proceed to fix or approve hourly rates (CPR PD 3E 7.10). Warby J’s comments appear to strike the right balance between the two. Unfortunately, shortly after the hearing, the Claimants abandoned the claim, and we will therefore not see at detailed assessment stage how much weight is given to comments made at costs management stage.
The interplay between hourly rates, costs budgeting and detailed assessment is an interesting one, and a topic which will, no doubt, continue to develop as more and more budgeted cases proceed to detailed assessment.
This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team. Kris can be contacted at firstname.lastname@example.org or on 0113 227 3628.
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 email@example.com, or the Clarion Costs Team on 0113 2460622
In a statement dated 17 April 2015, Master of the Rolls the Rt Hon Lord Dyson said that the Guideline Hourly Rates (‘GHRs’) form ‘…an integral part of the process of… summary assessment… a starting reference point in the preparation of detailed assessments… [and] a yardstick for comparison purposes in costs budgeting’, something of a non sequitur following his previous statement that the GHRs are becoming ‘less and less relevant’. Nevertheless the GHRs remain, yet do they undermine the fundamental principles of access to justice?
Do you consider your hourly rate when preparing your retainer? Or do you rely on a template document?
It is worth considering at the outset of any claim the potential value of the matter and complexity of the claim in order to set the hourly rate accordingly. Failure to do so could result in you being limited to hourly rates that, on an assessment of costs, could have recovered an enhancement. In light of the indemnity principle, enhancement is not an option if your retainer restricts you to lower rates.
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 (firstname.lastname@example.org and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.