Journal

Virtual Roundtable with Benjamin Williams QC - Guideline Hourly Rates

Guideline Hourly Rates

[Begins at 2:40]

Ben, Jeremy and Andy consider the effect of last year's changes to Guideline Hourly Rates (GHRs) following the 2021 Civil Justice Council Review.

Before the review, in relation to high value commercial work, GHRs were generally mentioned only to dismiss them as irrelevant.

By 2020, some judges were commenting that the GHRs were positively unhelpful. In Cohen v Fine, HHJ Hodge QC, a commercial judge in Manchester, decided that an increase on the GHRs ‘in the order of 35% would be justified as a starting point.’

As a result of the review, the 2010 GHRs were updated, but the 2010 rates themselves had not been based on any examination of the market. Even though there are plenty of summary assessments in the commercial courts and there could have been some investigation into the rates being claimed, there was no serious inquiry into market rates.

It will be interesting to see what commercial judges at first instance will do. Based on the summary assessment schedules, which they see frequently, will they conclude that an hourly rate of £500 is out of sync and is simply not available in the market for work done by a partner in a top firm? If they reach that conclusion, the real question will be whether the case merits the instruction of a top law firm. If it does, then it would not be unreasonable to recover the hourly rates that a top law firm charges.

Judgments are beginning to emerge where the market rates claimed have been reduced quite substantially.

In Samsung v LG, the Court of Appeal indicated that a litigant will need to make a strong case if it wants to recover rates higher than GHRs.

All of this will be an issue for firms in or at the threshold of the magic circle, because GHRs are a long way away from the rates that solicitors are charging for commercial work. For serious commercial work, partner rates are rarely below £600, rates as high as £900 per hour can be seen and the sterling equivalent of some US firms’ partner rates can top £1,000 per hour. The London 1 Grade A GHR of £512 seems out of step with the market.

The effects of the review will be unwelcome to the commercial clients who have negotiated hard to agree hourly rates with their law firm of choice. The client will be confident that they could not have secured hourly rates which are any lower and may be startled to hear that the rates being claimed by their law firm will be cut by more than 25% on assessment because a policy committee has said that GHRs are the reasonable rates to recover between the parties.

The review has detached the hourly rates allowed on assessment from the market. Detailed assessment is not supposed to entail setting an arbitrary tariff of the rates which can be recovered inter partes, almost like an extension of the fixed costs regime. It is meant to involve a determination of what is a reasonable market rate. But the current reality is that even a blue-chip company which is used to negotiating a tough deal on rates with its law firm will not be able to negotiate them down to the level of GHR.

There have been suggestions that cases with a significant international element could expect to see a departure from GHRs. We may also see the current high level of inflation being used as a smokescreen to allow increased hourly rates. For cases which are document heavy/go to trial etc, the expectation is that successful parties will continue to seek a significant uplift for care and conduct for Grade A and possibly Grade B fee earners.

There will need to be a granular process for requests to exceed GHRs. The courts will be asked to look at the factors which make a case exceptional compared to the generality of commercial litigation.

There must be a certain amount of schadenfreude amongst lawyers involved with routine county court litigation, particularly personal injury litigation, where GHRs have been applied more routinely. Until now, commercial work has largely been insulated from this approach.

Tensions between solicitors and clients may rise and it is likely that client care letters will need to reflect the possibility that clients might only recover 50%/60% of their costs if they win. Will clients start leaning on their lawyers? If the court says that the rates being charged are unreasonably high, will lawyers be expected to absorb the difference?

We could even see the perverse situation where solicitors are better off in terms of fees if their clients lose!

The discussion ends with an important reminder of the effect of CPR 46.9(3) – on an assessment of costs as between the solicitor and the client, costs will be assumed to have been unreasonably incurred if they are ‘of an unusual nature or amount’ and the solicitor did not tell the client that, as a result, the costs might not be recovered from the other party. There may well have to be specific warnings in retainers about hourly rates to explain that they will not necessarily be fully recovered on assessment.

[Ends at 18: 30]