A costs judge has cast doubt on whether the working group reviewing the guideline hourly rates (GHR) will report by the end of the year as hoped.
High Court judge Sir Stephen Stewart has been appointed by the Master of the Rolls, Sir Terence Etherton, to lead the Civil Justice Council (CJC) group – which was first announced in April but was thrown off course by Covid-19 – and in an email sent to stakeholders said “it is hoped that a draft report will be ready for full consultation by the end of 2020”.
The group is currently gathering evidence, which includes details from practitioners of the hourly rates claimed and allowed by costs judges and costs officers on every detailed assessment between 1 September and 27 November 2020.
Practitioners are also being asked to provide information on assessments between 1 April 2019 and 31 August 2020, as well as agreements reached between lawyers on hourly rates whether or not there had been an assessment.
But Master Whalan said last week: “Reports in the media have suggested that this process may be completed by the end of 2020, but it seems to me that this timescale may prove to be optimistic.”
Other members of the GHR group include Senior Costs Judge Andrew Gordon-Saker, His Honour Judge Bird (the designated civil judge in Greater Manchester) and District Judge Simon Middleton, as well as practitioners, consumers and the Ministry of Justice.
The group’s remit is to conduct an evidence-based review of the basis and amount of the GHR and to make recommendations to the deputy head of civil justice, Lord Justice Coulson, and to the CJC.
Sir Stephen wrote: “If the recommendations in the report are accepted, the benefit to the judiciary, the legal profession and court users as a whole will be very substantial.”
Master Whalan made the comments in a decision in which he took the unprecedented step of directing costs officers in the Senior Courts Costs Office (SCCO) handling Court of Protection assessments to allow as reasonable rates 20% higher than the GHR.
He said he was satisfied that the GHR “cannot be applied reasonably or equitably without some form of monetary uplift that recognises the erosive effect of inflation and, no doubt, other commercial pressures since the last formal review in 2010”.
Acknowledging that he did not have the power to formally or informally change the GHR, he directed costs officers – who conduct most of the 8,000 CoP assessments the offices carries out each year – to exercise “some broad, pragmatic flexibility when applying the 2010 GHR to the hourly rates claimed”.
He continued: “If the hourly rates claimed fall within approximately 120% of the 2010 GHR, then they should be regarded as being prima facie reasonable. Rates claimed above this level will be correspondingly unreasonable.”
The ruling reflected the 21% increase in the consumer prices index since 2010, although the applicant law firms had argued for the 31% rise in the retail prices index instead.
“This approach can be adopted immediately and is applicable to all outstanding bills, regardless of whether the period is to 2018, 2019, 2020 or subsequently.
“It goes without saying that this approach is subject ultimately to the recommendations of Mr Justice Stewart and his hourly rates working group and the Civil Justice Council.
“Ultimately the recommendations of the working group must be adopted in preference to my findings.”
Meanwhile, leading defendant law firm Keoghs has expressed concern that the data being requested for the GHR review would lead to “fundamentally flawed” rates.
Howard Dean, director of costs at Keoghs, argued that, because of the prevalence of conditional fee agreements (CFAs), “the hourly rates claimed upon assessment are not representative of the hourly rates that a claimant would actually pay his solicitor for the services provided. The claimant is never going to pay those high hourly rates and has no interest in reducing them”.
How much the costs judge allowed on assessment was the “only one restraining force on hourly rates”, he said. “The vast majority of personal injury claims are funded under CFAs for this very reason. It follows that determining new GHR on the basis of a data set of distorted hourly rates is fundamentally flawed.”
Mr Dean went on that the courts’ knowledge of local hourly rates came from those that were claimed and allowed upon assessment. “Keoghs handle over 100,000 claims a year and less than 1% proceed to a hearing where costs are assessed with hourly rates being determined by the court.
“In the vast majority of that 1% of cases, the hourly rates are the pre-eminent issue because those claimed significantly exceed the hourly rates claimed in the 99% of cases that settle without a hearing.”
He added that using a dataset of historic hourly rates would only serve to ‘bake’ into any new GHR pre-Covid overheads that are currently reducing as a result of digitisation of legal services, as well as regional variations in prices highlighted recently by the Legal Services Board.
Mr Dean called for fixed recoverable hourly rates instead as an exception to the indemnity principle. “In effect can we now ‘decouple’ the hourly rate a party is contracted to pay and the rate the court will allow between the parties?” he asked.
For any queries about the CJC review, email CJC.GHR@judiciary.uk