Tag: Solicitors fees

Avoiding Challenges to your Costs III: Talking about Money

Joanne Chase3 Comments

Discussing fees with a client is often one of the most stressful parts of a solicitor’s job. Social taboos around talking about money run deep; studies have consistently shown that personal finances rank high on the list of topics people find it hardest to talk about. Yet they have also shown links between reluctance to talk about money and the risk of falling into financial hardship. Getting these conversations right can protect you from challenges, and protects your client from falling into financial difficulty.

This is the third blog in a series covering various aspects of solicitor / own client relationships. You can find the other blogs here:-

Avoiding Challenges to your Costs I: Invoicing Clients

Avoiding Challenges to your Costs II: What is an Invoice

Avoiding Challenges to your Costs IV: Time Recording

When it comes to money, being proactive is key. Providing an early and accurate estimate of costs will enable your client to plan ahead and avoid difficult conversations later. You should also keep your client informed as the case progresses, and schedule regular updates to ensure that you are on track and the client is informed. If things change, update the client as soon as possible and explain what this means in relation to costs.

An accurate estimate helps your client understand what costs you are likely to incur and also allows them to plan the litigation. A client is far less likely to dispute your fees if they had a good idea of what it would cost in advance. And if they do dispute your fee, you can refer to the estimate and point out that they knew the cost when they authorised the work. If you have exceeded the estimate, you will be able to explain why the work done went beyond its scope.

Preparing an Estimate

Preparing an estimate can seem daunting, but following these simple rules will make estimates easy:-

  • Estimates should not be generic
  • Plan the case and how much time each element will take, e.g:-
Pre-Action
Review client documents4 hours£400
Letter of Claim2 hours£200
Advice and correspondence with client6 hours£600
  • Be realistic about the time you will spend. We tend to underestimate how long things will take. Bear that in mind.
  • Do not overthink it. Include anything you think is likely to happen, but do not try to estimate for every eventuality.
  • Factor in disbursements, such as court fees, counsel’s fees and experts’ fees

Communicating with the Client

One fear lawyers have is that they will “scare off” clients if the estimate is too high. However, most clients will appreciate transparency on fees. And if they are unwilling or unable to pay, it is better to know before you do the work. There is no benefit to you in obtaining work which is not profitable.

Once you have provided the estimate to the client, make sure that you give regular fee updates. For example, using the example estimate above when you send the letter of claim to your client you might include a sentence saying “I confirm that our unbilled fees to date total £xxx” and either confirm that this is below your estimate, or explain why it is above your estimate. If your client later questions your fees you will be able to refer them to your letter where you told them the level of your fees.

Conclusion

By preparing an estimate and updating your client about fees you avoid difficult conversations about fees at the end of the matter. If your client later disputes your fees you are in a strong position to resist any reductions because you can argue that they continued to instruct you in full knowledge of what the fees were. An estimate is a powerful tool in ensuring recovery of your own fees, and also in enabling your client to manage their finances.

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

Avoiding Challenges to your Costs II: What is an Invoice

Joanne Chase3 Comments

Until an invoice is delivered in accordance with the Act, a solicitor does not have any right to take client money. Doing so could (and probably would) be a breach of Rule 5.1 of the Solicitors Accounts Rules. Unfortunately there is no further explanation within the Act as to what a statute invoice is or what information it must contain.

This is the second blog in a series covering various aspects of solicitor / own client relationships. You can find the other blogs here:-

Avoiding Challenges to your Costs I: Invoicing Clients

Avoiding Challenges to your Costs III: Talking about Money

Avoiding Challenges to your Costs IV: Time Recording

Whether or not an invoice is a “statute” invoice is determined with reference to the authorities. There are a number of factors which the Court will take into account, but it is important to recognise that this is not a “check box” exercise. The mere fact that one or more factors are missing will not automatically mean that the invoice is not a statute invoice.

The following factors will be relevant:-

  • If the invoice is raised before the conclusion of the case, whether the solicitor is entitled to charge their client at that point (Underwood, Son & Piper v Lewis [1894] QB 306 A.L.). There is a rebuttable presumption that a solicitor has no right to invoice on an interim basis unless there is a contractual right to do so (Chamberlain v Boodle & King [1982] 1 WLR 1443 and Davidsons v Jones-Fenleigh [1980] Costs LR 70).
  • Whether the invoice contains a statement that it is a statute invoice and is final for the period covered (Adams v Al Malik [2014] 6 Costs LR 985).
  • There should be sufficient information within the bill to identify the work to which it relates (Ralph Hulme v Gwllim [2002] EWHC 9034 (Costs)). This could include a date range or breakdown of costs.

A final invoice also may only include work actually done, and cannot include a claim for future time. Any invoice which includes a claim for future time is therefore likely to be deemed to be an invoice for a on account of costs.

In summary, a client invoice should be clear that it is final for the period covered and identify the work done. Solicitors’ retainers should be careful to incorporate terms entitling them to raise interim invoices during the case.

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

Hourly Rates – How far can you depart from the Guideline Hourly Rates?

Joanne ChaseLeave a comment

The case of Sir Philip Green & Ors v Telegraph Media Group Limited [2019] EWHC 96 (QB)

Background

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.’

Comment

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 [2018] 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 [2019] 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?

Budgeting

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 kris.kilsby@clarionsolicitors.com or on 0113 227 3628.

 

Hourly Rates: Justification on Assessment

Joanne ChaseLeave a comment

In the recent case of JXA -v- Kettering General Hospital NHS Foundation Trust [2018] 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 [1997] EWCA Civ 2285 which provides that in assessing hourly rates the court must consider:-

  1. Whether the choice to instruct the firm of solicitors engaged was reasonable; and
  1. 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.

Analysis

Following the decision in Surrey -v- Barnet & Chase Farm House Hospitals NHS Trust [2018] 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.

Summary

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 [2003] 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.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com