MPS response to the consultation on guidelines hourly rate by the Civil Justice Council

Question 1: Comments on the methodology used by the working group.

Having considered the published report, we have considerable concerns insofar as the methodology and data sample is concerned.

Essentially the data is pulled from matters which proceeded to Detailed and Provisional Assessment only. This excludes a significant proportion of matters which resolved via negotiation. Most commonly, matters only proceed to Detailed or Provisional Assessment where a negotiated settlement is not possible due to the distance between the parties insofar as their expectation of what a reasonable costs settlement should be. Many of these matters have particularly complex issues or technical aspects to them which require such review and do not represent a fair cross section of data. 

Further, it is unclear as to what type of claims make up the data which was utilised in this analysis. If these rates are intended to apply to all manner of claims, then there should be a fair representation of all types, values, complexities for every region when formulating the rates. There is a risk that certain regions or claim types may not be representative of the rates which we would usually expect to observe in these types of claims or regions. For example, in high value commercial claims in London, the Guideline Hourly Rates have had very little relevance for several years. If these claims form part of the data, we would have serious concerns and would suggest that such claims should fall outside of the applicability of Guideline Rates, unless there is a specific enhanced band for such rates.

The Guideline Hourly Rates are accepted as being the “yardstick” or a starting point when considering the appropriate hourly rate to apply to any given matter. CPR 44.4 would usually be applied to matters which proceed to a Detailed or Provisional Assessment so that the Judge can consider all the relevant factors including:

“(a) the conduct of all the parties, including in particular –
(I) conduct before, as well as during, the proceedings; and
(ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;
(b) the amount or value of any money or property involved;
(c) the importance of the matter to all the parties;
(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(e) the skill, effort, specialised knowledge and responsibility involved;
(f) the time spent on the case;
(g) the place where and the circumstances in which work or any part of it was done; and
(h) the receiving party’s last approved or agreed budget.”

Often the Judge will consider these factors when assessing the reasonable hourly rate which should apply to the case being determined. 

The methodology which appears to have been used in this report appears to include such uplifts which have been applied on Assessment of Costs. Further, the rates which have been awarded by Judges in recent years have on occasion, taken into account the lack of increase in the guideline hourly rates in recent years and the rate awarded reflected both a potential inflationary increase and also an additional mark-up pursuant to CPR 44.4 .

As such, this approach could potentially lead to a further uplift being applied to new guideline rates where a mark up has already been included within the methodology. Also, this could lead to the scenario on a straightforward matter where no mark-up was appropriate in the circumstances though the new guideline rate would now be applied and which would include enhanced rates in its methodology. 

Further, it would not appear that the data takes into account any further reduction by virtue of the Proportionality test. Whilst certain hourly rates could be awarded on Provisional or Detailed Assessment, if this does not bring down costs to a proportionate level, there is the possibility that overall costs may have been reduced further, thereby implicitly suggesting that the rates themselves may not have been proportionate. 

The sample size itself is concerning, being as it is 754 cases which, when comprising of claims across all manner of different claim types, which cannot possibly be sufficient to provide an adequate cross representation for each respective claim type and value.

Further, the methodology has been based on hourly rates awarded at Detailed Assessment of costs and then this has been applied to various regions. There is nothing to suggest that the assessing Judge has considered the operational costs and overheads when reaching a decision on hourly rates. This is a fundamental consideration when seeking to apply differential rates based on location and is the primary reason as to why there was a distinction made when the rates were first introduced. 

Therefore, for a number of reasons provided above, the methodology is fundamentally flawed.

Question 2: Comments on the recommended changes to areas London 1 and London 2

The lack of transparency over the sample and what claim types it consists of, makes it very difficult to comment substantively. However, it would appear from the rates proposed, that a significant amount of high value commercial litigation was included in the sample.

It would appear that the purpose of the guideline hourly rates has shifted. These rates were of course, originally intended to provide the Court with guidance for the purposes of summarily assessing costs at conclusion of a Fast track trial. Indeed, they proved to be useful in Detailed Assessment of fast track matters also. 

However, this review would suggest that any new rates would be intended to have much greater applicability across all manner of case types and values. We would question the practicality of this. Indeed, Guideline Hourly Rates are not even a consideration in high value commercial litigation. Each case has an hourly rate awarded commensurate to the specific facts and circumstances. There is a risk in applying a blanket rate to a specific region as it may lead to overly enhanced hourly rates being awarded in relatively low value straightforward litigation or high value personal injury claims, which may not necessarily be technically complex but involve a large claim for special damages (including treatment) which would ultimately be subject to the same hourly rates as high value complex commercial litigation.

Question 3: Comments on the recommended GHRs set out in paragraph 4.18 of the report

The COVID-19 pandemic has led to a change in the landscape of how legal professionals operate. Many firms have moved towards increased remote working; some of which have now moved towards a permanent flexible working operating model, freeing up expensive office space and attached overheads.

A major component of the Guideline Hourly Rates was location. This influenced the various bands and distinguished rates because of increased operational office overheads. 

With remote working being prevalent, this is a much smaller concern than it would have been previously and indeed, many firms will be running at significantly lower operating costs than they did in 2010. 

Unfortunately, the data utilised was pre the COVID pandemic and would now unfortunately be outdated and not reflective of the new ways of working and increase in technology such as remote Court Hearings and video conference calls. 

Therefore, we consider that there has been a saving in overheads and operational costs and therefore, a strong argument that the Guideline Hourly Rates themselves should be reduced from their current levels.

Question 4: Comments on whether the rate of £186 for London 1 Grade D is too high; if so, at what rate it should be set and why?

The rate appears to be very high and a significant increase on the current guideline hourly rate. Unfortunately, in the absence of any detail provided as to the nature of the sample size, it is very hard to provide specific comments on this specific question.

We would be mindful of the fact that the sample may be significantly weighted towards commercial matters. We exclusively deal with medical negligence matters and have routinely agreed and have been awarded rates akin to the current guideline rates on the basis that the work undertake by this level of fee earner is unlikely to be complex and has essentially been delegated for such reason.

Question 5: Comments on the recommended changes to the geographical areas in section 5 of the report and the recommendation to have two national bands?

It would appear that no data has been gathered from law firms operating in the regions where suggested changes are being made. It would be extremely difficult to reach an informed decision in the absence of any comparative data from each region as to the operational costs and overheads of law firms operating in these regions and how these would vary from other areas in the same band.

Therefore, it would appear inappropriate for decisions to be made around moving regions into different bands in the absence of such information; particularly in view of the increased move towards remote working in the legal market, which would have the effect of significant reduction to overheads nationwide.

The methodology has been based on hourly rates awarded at Detailed Assessment of costs and then applied this to regions. There is nothing to suggest that the assessing Judge has considered the operational costs and overheads in applying such rates. This is a fundamental consideration when seeking to apply differential rates based on location and is the primary reason as to why there was a distinction made when the rates were first introduced.

Question 6: Comments on whether the working group should recommend that the Civil Procedure Rule Committee be requested to consider amending the summary assessment form N260 and the information provided on the detailed assessment bill - the amendment would be to require the signatory to specify the location of the fee earners carrying out the work. (See paragraph 7.4 of the report.)

In many instances, the fact that the work was done in a certain region should not have any bearing on the appropriate hourly rate to be awarded. The long established legal principle suggests that if it would have been reasonable to appoint a legal representative in Band 2 area for the specific case in question; then notwithstanding the work may have been done by a Band 1 firm, the hourly rate awarded should be the equivalent rate of had the Band 2 firm been instructed.

Of course, CPR 44.4 suggests that the place where the work was done is a factor to take into account when considering the reasonableness of the costs incurred, it is of course, one of many factors and should not be an overriding factor when considering the reasonableness of an hourly rate to award if it were to be considered in isolation.

Question 7: Comments on the recommended revisions to the text of the Guide in Appendix J

No specific comments on the wording itself, though the obvious issue here is the suggest additional uplift to the rates and the rates to remain as a starting point.

The data which informed this review included matters where an uplift had already been applied. In some instances, Judges may have applied a two-fold increase, inflationary and then pursuant to the 44.4 factors.  Further to earlier comments on methodology, this is fundamentally flawed.

Question 8: Comments on any other aspects

It is not unusual for claimants’ lawyers’ costs to exceed the damages awarded to claimants in lower value clinical negligence claims even where claims are settled at an early stage. The rising costs of litigation are well documented and concerns over the level of costs involved in litigation prompted the initial “Jackson Reforms” and LASPO legislation which followed in 2013; which brought about the abolition of recoverable success fees, introduction of qualified one way costs shifting and costs management, all with the aim of seeking to reduce the costs of litigation to a reasonable and proportionate level.

More recently, there has been a continued acknowledgement that the costs associated with claims and litigation is too high, particularly in lower value matters. This is what has led to the call for significant change by way of an extension of fixed recoverable costs to the fast track and low level multi track claims of £100,000 or less within Civil Litigation. This has already led to a Consultation and further report from Jackson LJ outlining how such a scheme could be implemented. Further, there has been a separate review undertaken into the potential extension of fixed costs to low value clinical negligence claims of £25,000 or less.

Whilst these reforms are yet to be implemented, they remain firmly on the agenda of the Government. However, the consultation in relation to the Guideline Hourly Rates seems to jar with the general principle of bringing legal costs under control to reasonable and proportionate levels.

With the extension of fixed recoverable costs on the horizon, we would question the need for any change to the Hourly Guideline Rates on the basis that they will have a diminishing relevance and applicability in future matters. Essentially most matters where the Guideline Hourly Rates would have been applicable would be subject to a fixed recoverable costs regime. The remaining matters where hourly rate charging would be utilised would be in higher value, more complex litigation, where the applicable charging rate should be assessed with reference to the specific facts and circumstances (in accordance with CPR 44.4).

Any increase in costs of clinical negligence will potentially lead to increases in costs for our members. It is particularly concerning that future costs of defending clinical negligence matters may be adversely impacted by data which may have been influenced by the costs of high value complex commercial litigation amongst others, which are entirely different forms of litigation.

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Contact

Should you require further information about any aspects of our response to this consultation, please do not hesitate to contact us.

Patricia Canedo
Policy and Public Affairs Manager
[email protected]