Rate of Return

There’s not been much good news around of late, so let’s applaud the decision to review the guideline hourly rates (GHR).

The GHR have not been changed since 2010 despite solicitors’ rising costs, and the issue of updating them became live because last year after Mrs Justice O’Farrell said in Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC).

Dealing with a summary assessment, the claimant submitted that the defendant’s solicitors’ hourly rates were unreasonably high, particularly when compared against the GHR.

O’Farrell J said: “It is unsatisfactory that the guidelines are based on rates fixed in 2010 and reviewed in 2014, as they are not helpful in determining reasonable rates in 2019. The guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines would be very welcome.”

A survey of ACL members in the wake of the decision found that 60% of Costs Lawyers said a review was urgent, agreeing that the current GHR were doing more harm than good.

The Ohpen ruling led to the issue being raised at the Civil Procedure Rule Committee and, in March, the committee referring it to the Civil Justice Council (CJC). With the agreement of the Master of the Rolls, who chairs both bodies, a CJC sub-committee has been established to review the rates. It will report directly to Lord Justice Coulson, the deputy head of civil justice by the end of the year.

In 2015, the then Master of the Rolls, Lord Dyson, froze the guideline rates at their 2010 levels indefinitely after deciding there was no prospect of the evidence required to change them being produced.

Crucially, papers from the rule committee’s December 2019 meeting indicate that a different approach to collecting the evidence may be taken this time.

A report from its costs sub-committee said that, though the aim of the GHR was to provide “broad approximations of actual rates in the market”, the investigation that informed Lord Dyson’s decision focused too much on establishing the actual rates to a high degree of accuracy. This was a more rigorous examination than Lord Justice Jackson recommended in his final report on costs in 2010.

The report said: “It is hoped any review that ought now to take place ensures that it bears more firmly in mind the need to produce broad approximations of actual rates, rather than anything more accurate than that.

“Consideration might equally be given to revert to an approach closer to that which was originally taken to devising the guidelines. Originally, pre-Woolf, the guidelines were set locally. They were arrived at following discussions between the judiciary and local solicitors, and then set by the judiciary in the area.

“A similar approach could be taken now, with the rates being set for Circuits and for London. The guidelines could be based on recommendations by regional costs judges based on, for instance, their experience of costs budgets, with input from local law societies and CILEx.”

The report said the CJC could then review the results before submitting recommendations. “Such an approach could well ensure that sufficient data was gathered, thus overcoming a problem that hamstrung the costs committee in 2014.” The fear otherwise is that the same evidence-gathering problem will recur.

This was a hotly debated topic prior to lockdown and, as I see it, the main stumbling block should now have been removed.  It is true to say that most firms would be inherently reluctant to provide the sort of information required that would have seen the 2014 review result in a new set of guidelines. I have seen nothing in recent debate to get over that hurdle. 

However, a significant amount of cases would have now been through the budgeting process introduced at around that time. Although costs lawyers will have this data, there is always a question mark over our ability to put it forward without approval of our clients – a question I would probably be unwilling to ask. Surely the judiciary itself will have this data and I strongly suspect the budgets in cases are open documents on the court record. There would therefore not be the need to obtain permission if the court has been properly gathering this information for what must be thousands of cases in the relevant period.

The only real risk now is that proper weighting is applied to the data available. Setting an updated guideline based on geography has always been a problem for certain types of work. I have found that what is deemed ‘City’ work has quite a broad spectrum and I am certain the same will apply to the case loads of most courts across the country. When/if we receive new guidelines, the debates since their introduction will properly continue but a more relevant starting block should be welcome to all.

It goes without saying that this is a very difficult time with many competing priorities, but cash flow is particularly vital for many firms at the moment. A change in the GHR – not gratuitous, but still based on evidence – would be widely welcomed. We don’t want to go back to the old A + B formula.

But ultimately the future of the GHR is in solicitors’ own hands. Produce the evidence and the Master of the Rolls should act accordingly.



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Published date
02 Jul 2020

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