Malkinson v Trim and the sole practitioner

From time to time, solicitors pause from fighting like lions on behalf of their clients and need to go into battle on their own account, either pursuing a debt collection against their former clients who have had the ill grace not to pay their bills, or in some other context.

In such cases, an issue sometimes arises, as to what is the measure of costs, and in particular, the hourly rate that can be recovered when a solicitor is litigating his or her own case, as opposed to acting for someone else.

The starting point is that since 1884, and the seminal decision in London and Scottish Benefit Society v Chorley (1884) 13 QBD 872 a solicitor has been able to recover his full costs, in litigation rather than be regarded as a litigant in person, as a special concession due to the peculiar position of being a solicitor. That is a principle which was preserved in the old RSC.

The important question was whether it survived the introduction of the CPR on 26th April 1999. The Court of Appeal declared that it did in the important decision of Malkinson.v.Trim [2002] 1 WLR 463, where the then rule 48.6(6) and section 52.5 of the Costs Practice Direction were interepreted to mean that the common law rule in Chorley had survived the introduction of the Civil Procedure Rules 1998.

In the case of Zakirov.v Newmans [2012] SCCO Master Leonard an inventive attempt was made to argue that the decision in Malkinson, was per incuriam. This was rejected by Master Leonard.

That that principle survives the introduction of the CPR was expressly confirmed by the Court of Appeal’s decision in Malkinson v Trim. The point is simply one of interpretation, and the correct interpretation of the CPR 48.6, in the light of CPD 52.5, is summarised by Chadwick LJ (at paragraph 22):

‘As I have sought to point out earlier in this judgment, the basis of the principle that a solicitor who acts for himself in litigation is entitled to compensation, by way of costs, for his time and trouble is a recognition that he (in common with any other litigant) ought to be indemnified against the expense to which (on the hypothesis that he has been successful in the litigation) he has been unjustly put. The special position of a solicitor is that he does not need to employ others to provide professional skill and knowledge in the conduct of litigation. He can provide that skill and knowledge himself. Further, there is no difficulty in measuring what it costs him to do so; and there is a potential saving in costs if he is not discouraged from doing so. One effect of CPR r 48.6(6)(b), read in conjunction with section 52.5 of the Practice Direction, is that there is now more clearly recognised a distinction between the solicitor litigant who provides, in connection with his own litigation, professional skill and knowledge in the course of his practice as a solicitor-that is to say, who “is represented … by himself in his firm name”—and the solicitor litigant who provides skill and knowledge in what might be described as “his own time”—that is to say, outside the course of his practice as a solicitor and (typically) outside the office. The latter is treated as a litigant in person for the purposes of CPR r 48.6, and so is subject to the restrictions imposed by that rule, including the two-thirds restriction imposed by paragraph (2). The former is not. Nor is there any reason, consistent with the need to provide an indemnity, why he should be. Further, there is no reason, consistent with the need to provide an indemnity, why he should not recover the cost of providing professional skill and knowledge through employees of his practice’.

Mr William’s interpretation of CPR 48.6 (6)(b) as applying to all solicitors in all circumstances, says Mr Mallalieu, is one interpretation, but not the only one. The interpretation offered by Chadwick LJ is not per incuriam: it is the correct interpretation as well as the generally accepted interpretation and should be applied.

Master Leonard rejected the challenge in these words:

The distinction between a solicitor acting on his own behalf and a solicitor represented by his firm is not merely hypothetical, nor confined to procedural matters. For example a partnership of solicitors, if sued, will normally, by virtue of section 5A of Practice Direction 7A, be sued and defend in the name of the firm. However that name will represent the partners in the firm at the time the cause of action accrued. If the same firm of solicitors appears on the court record for the defendants, some of the partners in the firm as currently constituted may be defendants and some not.

It would seem to follow, on the Claimant’s interpretation of the rule, that the defendant partners would be litigants in person if no there have been no changes in the partnership since the cause of action accrued. If there have been changes, then any retired partners would not be litigants in person. Continuing partners would be litigants in person unless any new partners have joined, in which case (being represented by someone in addition to themselves) there is room for argument about whether they are or not. If they are then, unlike the former partners, their recoverable costs will be capped by CPR 48.6(2).

My conclusion is that the application of the rule is meant to be simpler, and more obviously fair, than that. A solicitor is a litigant in person, like any other litigant in person, if he is on the court record as acting for himself. If the record shows that he is represented by a firm of solicitors, he is not. That is the case whether or not he is a partner in or employee of the firm on the court record.

I respectfully agree with Chadwick LJ’s interpretation, which was not per incuriam. The Costs Practice Direction does no more than clarify the position by pointing out the significance of the words ‘acting for himself’ in CPR 48.6(6)(b).

Post April 2013, the rules have been amended yet again, so that apparently there is a surprising lacuna, in respect of sole practitioners due to the use of the word “partner” which might suggest that sole practitioners now can no longer claim their full hourly rate. The question then, is whether the rules have fundamentally changed, or changed so that they apply save where for example, a firm of solicitors with 2 partners represents one of them. The new rules provide:

(6) For the purposes of this rule, a litigant in person includes –

(a) a company or other corporation which is acting without a legal representative; and

(b) any of the following who acts in person (except where any such person is represented by a firm in which that person is a partner) –

(i) a barrister;

(ii) a solicitor;

(iii) a solicitor’s employee;

(iv) a manager of a body recognised under section 9 of the Administration of Justice Act 19851; or

(v) a person who, for the purposes of the 2007 Act, is an authorised person in relation to an activity which constitutes the conduct of litigation (within the meaning of that Act).

There is no suggestion in any material I have seen, such as the Explanatory Notes to the amending statutory instrument, or a consultation, or guidance from the SRA that there was any intention to change the existing law.

Indeed, the retention of the “firm” exception above, would point the other way. I think that the true construction which would apply in this situation, is that sole practitioner would not be acting as a litigant in person at all, per Chadwick’s formulation and Master Leonard’s explanation and rule 46.6 simply does not apply, with its limiting case of the requirement that there be representation by a firm, of which the solicitor is a partner.

Otherwise I think that as this is technical legislation, using words of art, known to and understood by the solicitors profession, that references to “a firm” and “a partner” when properly construed, are words which embrace this situation, of a sole practice and a sole principal.

I am strengthened in this view by the definitions under the Glossary in the Solicitors Handbook, which of course are made under rule 23 of the Solicitors Code of Conduct, itself made under the Solicitors Act 1974.

The glossary provides the following definition of what a “firm” is:

(i) save as provided in paragraphs (ii) and (iii) below, an authorised body or a body or person which should be authorised by the SRA as a recognised body or whose practice should be authorised as a recognised sole practice (but which could not be authorised by another approved regulator); and for the purposes of the SRA Code of Conduct and the SRA Accounts Rules can also include in-house practice;

(ii) in the SRA Indemnity Insurance Rules:

(A) any recognised body (as constituted from time to time); or

(B) any solicitor or REL who is a sole practitioner, unless that sole practitioner is a non-SRA firm; or

(C) any partnership (as constituted from time to time) which is eligible to become a recognised body and which meets the requirements applicable to recognised bodies set out in the SRA Practice Framework Rules and the SRA Authorisation Rules, unless that partnership is a non-SRA firm or an Exempt European Practice;or

(D) any licensed body in respect of its regulated activities;

whether before or during any relevant indemnity period;

(iii)in the SRA European Cross-border Practice Rules, means any business through which a solicitor or REL carries on practice other than in-house practice.

Thus it can be seen that for the purposes of the law established by the Solicitors Act 1974, a “firm” does not have to be a partnership, but can be a sole practice. In such a firm there can never be a partner, but there is of course a principal.

Later in the glossary a definition of a principal is:

(i) subject to paragraphs (ii) to (iv) means:

(A) a sole practitioner;

(B) a partner in a partnership;

(C) in the case of a recognised body which is an LLP or company, the recognised body itself;

(D) in the case of a licensed body which is an LLP or company, the licensed body itself;

(E) the principal solicitor or REL (or any one of them) employed by a non-solicitor employer (for example, in a law centre or in commerce and industry); or

(F) in relation to any other body, a member of its governing body;

(ii) in the SRA Authorisation Rules, SRA Practice Framework Rules and SRA Practising Regulations, means a sole practitioner or a partner in a partnership;

(iii) in the SRA Indemnity Insurance Rules means:

(A) where the firm is or was:

(I)a sole practitioner – that practitioner;

(II)a partnership – each partner;

(III)a company with a share capital – each director of that company and any person who:

(01)is held out as a director; or

(02)beneficially owns the whole or any part of a share in the company; or

(03)is the ultimate beneficial owner of the whole or any part of a share in the company;

(IV)a company without a share capital – each director of that company and any person who:

(01)is held out as a director; or

(02)is a member of the company; or

(03)is the ultimate owner of the whole or any part of a body corporate or other legal person which is a member of the company;

(V)an LLP – each member of that LLP, and any person who is the ultimate owner of the whole or any part of a body corporate or other legal person which is a member of the LLP;

(B)where a body corporate or other legal person is a partner in the firm, any person who is within paragraph (A)(III) of this definition (including sub-paragraphs (01) and (03) thereof), paragraph (A)(IV) of this definition (including sub-paragraphs (01) and (03) thereof), or paragraph (A)(V) of this definition;

(iv)in the SRA Indemnity Rules, means:

(A)a solicitor who is a partner or a sole solicitor within the meaning of section 87 of the SA, or an REL who is a partner, or who is a sole practitioner, or an RFL or non-registered European lawyer who is a partner, and includes any solicitor, REL, RFL or non-registered European lawyer held out as a principal; and

(B)additionally in relation to a practice carried on by a recognised body or a licensed body alone, or a practice in which a recognised body or a licensed body is or is held out to be a partner:

(I)a solicitor, REL, RFL or non-registered European lawyer (and in the case of a licensed body any other person) who:

(01)beneficially owns the whole or any part of a share in such recognised body or licensed body (in each case, where it is a company with a share capital); or

(02) is a member of such recognised body or licensed body (in each case, where it is a company without a share capital or an LLP or a partnership with legal personality); or

(II)a solicitor, REL, RFL or non-registered European lawyer (and in the case of a licensed body any other person) who is:

(01)the ultimate beneficial owner of the whole or any part of a share in such recognised body or licensed body (in each case, where the recognised body or licensed body is a company with a share capital); or

(02)the ultimate owner of a member or any part of a member of such recognised body or licensed body (in each case, where the recognised body or licensed body is a company without a share capital or an LLP or a partnership with legal personality).

And it can be seen, therefore that for the purposes of the Code of Conduct, the position of a sole practitioner and a partner, are equated as the principals of their various firms. It follows that there are reasonable grounds for suggesting that despite the slipshod wording in the CPR, the law has not changed after all.

 

BTE insurance and hourly rates

The post below was published as a newsletter in November 2011. Please note that the case of Brown-Quinn is due to be heard by the Court of Appeal on 21st-22nd November 2012 and may yet reverse the decision in the Commercial Court.

The controversies surrounding the provision of an indemnity to an insured by a before the event insurer (BTE) providing legal expenses insurance (LEI) are well known.

In particular, BTE insurers try to steer their insured towards their panel firms of solicitors in order to achieve the sensible tripartite aims of (i) securing the payment of referral fees for the case (ii) keeping costs incurred under the policy to a minimum and (iii) retaining a closer degree of control on the litigation.

A recent case that of Christine Brown-Quinn -v- Equity Syndicate Management Limited and Others (2011) EWHC 2661 indicates that the iron grip of BTE insurers on which firms of solicitors may undertake work for the lay client and under what terms as to payment is perhaps weaker than popularly perceived.

The Insurance Companies (Legal Expenses Insurance) Regulations 1990 were enacted to apply directly within the United Kingdom the provisions of Article 4 of EC Council Directive 87/344/EEC made on the 22nd June 1987 which in turn has been updated as article 201 of EU Directive 2009/138 EC.

Regulation 6 of the Regulations provides:

(1)Where under a legal expenses insurance contract recourse is to be had for a lawyer (or other person having such qualifications as may be necessary) to defend, represent or serve the interests of the insured in any enquiry or proceedings, the insured shall be free to chose that lawyer (or other person).

(2)The insured shall also be free to chose a lawyer (or other person having such qualifications as may be necessary) to serve his interest whenever a conflict of interest arises.

In practical terms, the wording of Regulation 6 has been invariably argued by the providers of legal expenses insurance to indicate that the freedom of choice provisions do not arise until proceedings are issued.

As the vast majority of litigation is compromised without the need for the issue of proceedings this has presented something of a hindrance to those who wish to instruct Solicitors of their own choice at a relatively early stage.

On the 19th July 2010 and re-issued on the 12th August 2010, the Financial Services Authority wrote a letter which set out its position which went much further than the Financial Services Ombudsman had done in preceding complaints made to him.  That letter says in terms of the FSA’s opinion on the Regulations:

Under the Regulations, the freedom to choose a lawyer arises in the following areas:

(i)Principally under Regulation 6, where recourse is had to a lawyer to represent the insured in any or any inquiry or proceedings.  It is important to note that freedom of choice arises before the commencement of any inquiry or proceedings;

(ii)Whenever there is a conflict of interest;

(iii)Finally if firms have chosen the option in Regulation 5(4) where the insured is afforded the right to entrust the defence of his interest to a lawyer of his choice, then the freedom to choose a lawyer exists as soon as the right to claim under the policy arises, and cannot be curtailed.

Thus the starting point has to be now that under the domestic law an insured pretty much has the right to chose who they wish to represent them, from the date of first instruction.

Does this mean that necessarily the BTE insurer is obliged to offer full indemnity to the insured when the insured chooses an expensive lawyer or more accurately a lawyer who will charge more than panel rates agreed by the BTE insurer with its own preferred panel of solicitors?

The point is of significance in two respects.  First the nature and extent of any indemnity is to a large degree going to be governed by the terms of the contract of insurance made between the lay client and the BTE insurer and secondly even if the policy is couched in prescriptive terms in terms of such things as hourly rates this may well not avail a BTE insurer at all if to do so would practically undermine the freedom choice expressed in European Union law and given direct effect in United Kingdom law.

There have been two cases of interest on this issue this year.  In the case of Pine -v- DAS Legal Expenses Insurance Company Limited (2011) EWHC 658 the issue arose in circumstances where a lay client wished to instruct not a Solicitor of her own choice but Counsel under the public access arrangements some members of the Bar accept instructions on.

The position adopted by DAS was that they were prepared to allow (and indeed could not realistically have prevented) Miss Pine to instruct Counsel of her own choice but wished to do so through the offices of a solicitor rather than on a
direct public access basis.

The action was therefore commenced by Miss Pine seeking declaratory relief and damages for breach of the terms of an insurance policy that she had effected with DAS.  It is noteworthy that Section D of the policy in issue in the case provided this.

Extra Definitions 

The lawyer, accountant or other suitable qualified person who has been appointed to act for you in line with the terms of this section.

Costs and expenses

(a) Legal costs

(a)All reasonable and necessary costs which the appointed representative may charge on a standard basis.  Also the costs your opponents have to pay in civil cases if you have been ordered to pay them or pay them without agreement.

On the face of those provisions, subject to the limit of indemnity DAS agreed to indemnify Miss Pine, in the events which have happened, the costs reasonably and necessarily incurred by her which her lawyer charged on a standard basis for his services in acting for her in the Solicitor’s action.  The limit of the indemnity was £50,000 so the terms of the insurance policy provided that subject to that long stop provision costs reasonably and necessarily incurred was the measure of benefit to be enjoyed by Miss Pine under the policy.

The issue of whether hourly rates and the quantum of costs which would be recoverable by the insured from the BTE insurer if she chose the services of a lawyer charging more than panel rates, would be limited to hourly rates, or only by the criteria of reasonableness was thrown into stark relief by the case of Christine Brown-Quinn -v- Equity Syndicate Management Limited and Others (2011) EWHC 2661.

In that case a number of clients represented by a firm of solicitors brought proceedings for declaratory relief against two insurance companies, Equity Redstar at Lloyds and ULR Norwich in order to recover their reasonable costs of acting for the lay clients.  Interestingly the solicitors were joined as parties to the proceedings.

The dispute however had a further complication to it.  The insurers in question had both panel rates and what they called non panel rates.  As the judge noted at paragraph 5 of his judgment:

BTE insurers traditionally, as did these insurers, retain a panel of Solicitors, with whom they have been able to negotiate reasonable, and no doubt discounted or reduced, fees for acting for their insured, in return for an expectation of receiving a quantity of such work, through clients being referred to them on a regular basis.  I have not seen evidence of what these rates are, but I shall call them panel rates.

The insurers also had a further set of rates described in these terms at paragraph 7 of the judgment:

The position taken by the insurers was that, so far as outset and transfer cases were concerned, they were entitled to insist that if an insured did not wish to instruct a panel solicitor, any other solicitor of the insured choice must not charge more than the rates prescribed by their terms of appointment for  non…. panel solicitors.  These included the following provisions….

(a)An hourly rate of £125 plus VAT which is expected to be fully inclusive of any relevant mark up;

(b)Letters out and in at 1/10 and 1/20 of the hourly rate respectively;

(c)Travelling and waiting time to be charged at two thirds of the agreed hourly rate.

The costs incurred on this basis as the learned judge found at paragraph 8 were described in these terms:

There were two significant constituents:

(i)There was a fixed hourly rate irrespective of the importance or complexity of the matter;

(ii)It was a flat rate chargeable in respect of whoever should carry out the work on behalf of the firm, be it partner, associate, assistant or trainee.  The rates which WD have sought to charge are very much more than that, in respect of the claim a very substantial global investment bank for redundancy, unfair dismissal and sex discrimination  (see BQ), race discrimination, constructive unfair dismissal, victimisation, breach of part time workers regulations and breach of flexible working regulations against a very large foreign investment bank (CJ) and unfair dismissal and disability discrimination against her former employer, an educational establishment (JB).  WD put forward hourly rates for a partner or associate (grades A/B) of £274, for a Solicitor £210 and for a trainee solicitor £205.

The insurers had informed the solicitors they would not agree to their acting for the clients.  The claim was accordingly brought against the insurers pursuant to Regulation 6 of the Insurance Companies (Legal Expenses) Insurance and the relevant terms of the policy provided as follows:

Definitions

Cost and Expenses

Legal and professional fees for which you are responsible, including reasonable fees, costs and expenses incurred by the appointed representative acting for you in connection with the pursuit for defence of legal proceedings (there is a limitation for such costs and expenses of a maximum of £50,000 provided for by the terms and conditions).

When matters came before the Court the issue was to what rate the insurers were obliged to indemnify the Solicitors who were instructed by the Claimants and in particular whether the Claimants are restricted to recover recovery of solicitor’s fees at the rate of £125 or £139 per hour.

The insurer’s case was predicated upon Part 48.3 of the Civil Procedural Rules which stated:

Where the Court assess (whether by the summary or detailed procedure) costs which are payable by the paying party to the receiving party under the terms of the contract, the costs payable under those  terms are, unless the contract expressly provides otherwise, to be presumed to be costs which:

(a)Had been reasonably incurred, and

(b)Are reasonable in amount and the Court will assess them accordingly.

The position noted by the judge at paragraph 18 that the insurers chose to adopt was as follows:

The Defendants do not contend that, in this case, the policy expressly provides otherwise.  They submit that by reference to the policy the starting point should be the rate of £125 (or £139) as contained in the non-panel costs and the assessment of what is reasonable should take place in the light of and by reference to those figures, effectively such that they should only be departed from if such rates can be shown to be unreasonable….

Both parties prayed in aid the case of Stark -v- DAS Oesterreich Algemeine Rechtsschutz Ver Sicherungag (2011) case C-293/10 which noted that the member states remained free to determine the body of rules applicable to legal expense insurance contracts on condition that those comply with EU Law, and in particular with Article 4 of Directive 87/344.  The Court’s conclusion was that Article 4(1):

Must be interpreted as not precluding a national provision under which it may be agreed that a person covered by legal expenses insurance may select…. only persons professional authorised to represent parties who have their Chambers at the place of the Court or administrative authority having jurisdiction at first instance, on condition that … that restriction relates only to the extent of the cover by the legal insurance provider in respect of costs linked to the involvement of a representative and that the reimbursement actually provided by that insurers is sufficient, as being a matter for the referring Court to determine.

The European Court said at paragraph 33:

Consequently freedom of choice, within the terms of Article 4(1) of Directive 87/344 does not mean that member states are obliged to require insurers, in all the circumstances, to cover in full the costs incurred in connection with the Defence of an insured person, irrespective of the place where the person professionally entitled to represent that person is established in relation to the Court of Administrative Authority with jurisdiction to deal with the dispute, on condition that that freedom is not rendered meaningless.  That would be the case if the restriction imposed on the payment of those costs were to render de facto impossible a reasonable choice of representative by the insured person.  In any event, it is for the national courts, if an action is brought before them in this regard to determine whether or not there is any such restriction.

The Learned Judge rejected the stance taken by the BTE insurers that in effect they could impose non-panel costs upon solicitors who were instructed by the claimants.  In particular terms, however it should be noted that this was a decision made within the context of the wording of the policies in this case.

Thus the statement by the High Court judge at paragraph 23 must be taken with that in mind.

I conclude that the correct position on the wording of these policies is closer to that contended for by Mr. Wynter, namely that the Claimant’s entitlement to recover legal costs (and thus WD’s expectation of receiving fees covered under the insurance policies) will fall to be assessed, in the absence of agreement under CPR 48.3, not as restricted to the provision for £139 or £125 per hour but taking it into account.

However the judge went a little bit further in paragraph 24:

It is plain from Eschig that an insured is entitled to conclude that he would rather have his own solicitor than be part of a group at discounted rates, and agree with Mr. Wynter that the analogy is a close one, though not identical to a situation in which an insured prefers to have a solicitor of his own choice rather than one imposed upon him at panel rates or non panel costs.

However, the significant difference is that as a result of the concession referred to in paragraph 16 above, the Defendants are no longer seeking to prevent the insured from taking that course, but only to pay for the consequences of doing so.  I take into account Mr. Wynter’s submissions that Stark is addressing a national legislative provision, but it was still necessary for the European Court to consider whether that provision offended against Article 4; and I find helpful the consideration referred to in paragraph 33 of the European Court’s Judgement as to whether a restriction, or in this case a Feta would render de facto impossible a reasonable of representative by the insured person.  I also take into account the commercial background of the need for availability of BTE insurance on the basis of economically viable but reasonable premiums.

The judge concluded at paragraph 25:

My judgment accordingly is that, in the absence of agreement between the insurer and the firm which will have been accepted de facto as Authorised Representative but will not have accepted the insurers non-panel costs any assessment of costs due pursuant to CPR 48 will address the non-panel costs not as a starting point but as a comparator.  As I have concluded, it will be necessary and right for the Court assessing the costs to take into account the availability of any other suitable firms on lesser rates negotiated with the insurers, but there will also fall to be taken into account and both sides can draw assistance in this regard from the words of Kennedy L.J. in Wraith -v- Sheffield Forge Masters Limited (1998) 1WLR 132 at 1.42:

 (i)The location of the chosen solicitors.

(ii)Their specialisation and in particular any special qualifications for taking on the instant claim.

(iii)The complexity of the claim.

(iv)The importance of the claim for the insured.

(v)The substance and strength of the proposed defendant to such claim.

(vi)The nature of the work to be carried out, in particular whether it should sensibly be carried out by senior solicitors or partners whose rates would inevitably be likely to be greater than the hourly rate provided for in the non-panel costs.

This to my mind leaves open a sufficient ambit for the interplay (necessary within these policy provisions) between the recovery of reasonable fees and the requirement that the insured keep the costs as low as possible.

This case then is a useful indicator not only of the breadth now to be afforded to the 1990 Regulations and their provisions as to freedom of choice for solicitors but also as indicative that when a case is obtained by non-panel solicitors who seek to  make a claim on behalf of the insured under the BTE policy, the majority, one suspects, of policies which are written at the current time providing as they do for reasonable costs to be paid by the insurer, subject to a longstop maximum of £50,000 or in some cases £100,000 mean that the solicitor is entitled to charge what could be described as their normal rate or the Court approved rate subject to the considerations noted in paragraph 25 above.

Conversely this case indicates that BTE insurers may wish to reconsider the wording of their BTE policies and in particular whether they should be writing into those policies contractually binding restrictions on hourly rates that an insured can claim under those policies whilst relying on a longstop cap of £50,000 or £100,000 or whatever the limit is set at alone.

However a caveat must be noted that were hourly rates to be set at a level which in effect rendered the choice of lawyer provisions in the 1990 Regulations otiose there is a very real risk that European Union law will be infringed as the ability to chose will be rendered meaningless if there are no solicitors who are prepared to take on the job.

Having said that, it remains to be seen if a BTE insurer could successfully use the facility in English law for solicitors to work on a contingency or conditional fee basis to argue that it provides a base level of cover in terms of hourly rates and thereafter a client is expected to “top up” their costs provision by the solicitor working on a conditional or contingency fee basis.

This could be put into place relatively easily, as it already is in many cases involving BTE cover and personal injury claims by means of a collective conditional fee agreement and, of course, “discounted” collective conditional fee agreements are lawful and indeed normal in respect of a lot of litigation carried out on behalf of insurance companies by their panel firms.

However, again it remains a very real danger that a person’s freedom of choice might be unduly restricted by provisions of this nature.   Plainly these considerations will have to await a further case before the interrelationship between the conditional fee regime contained in the Courts and Legal Services Act 1990 and European Law falls to be considered further.

Hourly rates

This post is derived from a paper that was first presented to the Association of Law Costs Draftsmen at their Annual Conference on 19th March 2010.

On the 14th January 2010 Lord Justice Jackson published his final report, his review of civil litigation costs.  The purpose of the report was to establish the causes of what are perceived to be disproportionate costs in civil litigation and to come up with proposals for their mitigation.

The report is a labyrinthine document of 584 pages including appendices.  It puts forward numerous eye catching and innovative proposals, many of which require primary legislation.  The prospect of implementation of the report is at the current time unclear.

This paper puts forward the thesis that much of the Jackson Report is actually unnecessary and a simple and rigorous empirically based approach to the issue of hourly rates on the part of costs judges, requires no primary or even secondary legislation to effect reform on the way hourly rates are calculated and used by the courts, to assess costs, yet would have the effect of making considerable progress towards making costs both more proportionate and transparent.

Fundamentally the law of costs is a subset of the law of damages.  The purpose of an award of costs is to compensate the injured party for the wrong that has been done to them whether that be a tort or a breach of contract or some other cause of action and which in turn has required them to pay for and obtain the assistance of lawyers in order to obtain just satisfaction through the legal process.

Thus any enquiry into the amount of costs which should be paid by the paying party to the receiving party must fundamentally focus on the issue of what loss or out of pocket expense the receiving party has been put to.

This principle lies at the heart of the law of costs and is termed the indemnity principle.  But just as any other enquiry into damage caused to the injured party is tempered by considerations of reasonableness and objectivity so is the law costs.

Thus an enquiry into what quantum of costs should be awarded has to take part in two stages.  First to consider what the receiving party is liable to pay or should properly pay and it is just that they should pay, followed by a secondary question as to what it is reasonably objectively to be recovered by the receiving party from the paying party on an inter partes basis.

So far so good.  But the difficulty and tension which lies at the heart of this exercise is to recognise that on a fundamental level the issue involves two complications.

The first point is to note that when enquiring on what has been agreed to be paid between solicitor and client, the market for legal services is not a single monolithic whole.

Rather, there are markets for legal services where great disparity in bargaining power between either the solicitor or the client can be observed.  For example, an insurance company as the lay client will have huge and disproportionate bargaining power when placing contracts for the provision of bulk legal services; whereas a single mother living on benefits in a council house who wishes to pursue a tripping action in the county court has no bargaining power at all in terms of the hourly rates which will be offered to her by a solicitor.

The second and fundamental point to note at this stage and which must inform any sensible discussion on any issue of costs is to recognise the market making power of the court.  The fact that there is an assessment, an award, with the coercive power of the court brought to bear to enforce any award of costs facilitates market failure.

In short, there will always be a temptation for lawyers to charge or ostensibly to charge whatever they perceive the court will allow.  Thus a gulf emerges between the court seeking to make an enquiry into what is the proper market price for legal services in order to inform its own decisions on what orders for costs and quantum of costs to allow and those who operate in the legal market who in turn will anticipate what the court is likely to allow and seek to maximise whatever recovery the court is prepared to permit.

Given that lawyers are perhaps one of the more inventive sections of society and like any other section of society would wish to maximise their income it can be observed that built into any assessment by the court to be an upward pressure on the part of those receiving the benefit of costs orders or awards to maximise their recovery.

Provided the court is mindful of this tendency and has in place appropriate machinery or mechanism to enable it to take an informed view as to what the market price for legal services is and to take due allowance for the ingenuity of lawyers, then it can focus on ensuring transparency in pricing and judge its interventions to facilitate rather then to contradict market forces, in order to maximise efficiency.

Thus on a simple level analysis anyone trying to achieve reform in the field of costs should bear in mind what could be regarded as three particular principles or lodestones to govern their efforts.

  • Where possible it is best to work with the grain of free market economics in order to maximise efficiency in this part of the economy.
  • To grasp the nettle that the any costs-shifting system has to ensure free market considerations are maximised with the market failure occasioned by the Court’s intervention minimised.
  • To seek to simplify and streamline the principles upon which costs are awarded to facilitate certainty and to remove frictional costs insofar as that is possible to do.

Solicitors charge clients on the basis of an hourly rate.  That is not the only basis upon which Solicitors may charge for their time but the widespread acceptance of time based charging owes much to the ubiquity of the hourly charge rate. As has been noted elsewhere the solicitors’ profession introduced time costing as it became increasingly clear that not all work was profitable and the aim was to see what work was being run at a profit and what work at a loss and had nothing to do with charging or indeed the former “bread and butter work” of conveyancing, which was paid on a fixed scale.

It is a familiar basis for many sophisticated purchasers of legal services as well.  Many clients accept the premise that time is money in a professional services firm and believe that time based charging is the only way of ensuring a fair day’s pay for a fair day’s work. There are many other clients whose acceptance of time based charging is a more passive acceptance:  in other words they are unaware of the alternatives or feel that they lack the necessary clout to demand a different basis for charging.

It should be noted that the more sophisticated consumers of legal services may well have a less altruistic purpose in favouring uncapped time based charging.  Such clients typically are experienced buyers of legal services or qualified lawyers in their own right and are able to assess the finesse of their legal bills by analysing their solicitors’ records of trial stand time taken and time records can be fair game for fee negotiation when the matter has been concluded.

After the event fee negotiations are heavily weighted in favour of the client who having already gained the value from the solicitors’ advice has nothing to lose by pressing for a reduced price.  Solicitors may feel compelled to give some ground in terms of pricing for fear of jeopardising the client relationship.

There are other ways upon which fees can be charged.  Fees may be calculated on the basis of expense of time but subject to a cap.  There may be fees which are fixed at arbitrary levels without regard to expense of time. Both capped and fixed fees may cause service quality to be compromised.

Success fees may be paid and are now recoverable between the parties both for contentious and non-contentious business.  But for mainstream litigation it is uncapped time based charging the hourly rate which remains the norm and which will remain the norm for many years to come.  Even the trumpeted expansion of “fixed costs” for Fast Track work, is dependent on a baseline assessment of time.v.hourly rate, in order to fix costs at an empirical level.

How should an hourly rate be calculated? From what factors can it be derived? Hourly rates have historically been calculated with clear reference to what have been described as the A element and the B element, formerly the (a) element and the (b) element. The capitalisation reflects the elevation of the twin factors in the years immediately prior to the Woolf reforms. A pithy summary of this exercise is perhaps set out most succinctly in the assessor’s advice given to Brightman J in the case of In re Eastwood [1973] 3 WLR 795 at 798 where Brightman J recorded this at paragraphs D and E:

“At the present day, on the taxation of a bill of costs of a firm of Solicitors in private practice which has been engaged in litigation on behalf of a client (the expression “firms of Solicitors” being used to include a sole Solicitor in private practice on his own account) the taxation invariably proceeds on the following basis.  The firm informs the taxing master of the period of time that has been spent by any partner or employee of the firm on any “relevant” aspect of the case; (the word “relevant” is intended to exclude time spent on a part of the case for which there is a fixed charge prescribed by statute or rule).  The firm submits (a) what is the proper costs for hours of time so spent having regard to a reasonable estimate of the overhead expenses of the Solicitor’s firm including (if the time spent is that of an employee) the reasonable salary of the employee or (if the time spent is that of a partner) the notional salary.  The firm will also submit at the conclusion of item 26 or item 27 set to in RSC Order 62, appendix 2(B) is a proper additional sum to be allowed over and above (a) by way of further profit costs.”

This method is known as the A + B method, where the A rates constituted the actual cost to the firm of doing the work and the B rate an appropriate uplift or increase marking the profit that the firm has made upon the work. The difference between the two figures in the Eastwood case was of particular importance as the receiving party’s work had been carried out by an in-house solicitor with the paying party seeking to contend that accordingly only the A rate should be recoverable. This argument was however rejected on appeal (1975 Ch 112) with Russell LJ stating that the A + B method should also be used in the case of in-house Solicitors. Interestingly the Eastwood case remains of considerable practical significance for, amongst others, the Treasury Solicitor as justification for the a lack of differentiation between their hourly rates and that of the private sector.

Since Eastwood further guidance developed on a calculation of the A + B rates most notably in the case of the former with the publication of the Law Society document The Expense of Time.  Although primarily intended to assist practice management, the guidelines provide the easiest means of calculating the A rate. It is important to note however that in any case the A rate recovered between the parties will not necessarily be the actual costs of the time of the firm. First the A rate must be reasonable within the context of firms operating within the same area.  Secondly and more importantly, the receiving party must have acted reasonably in instructing the firm of solicitors that he did.  This latter stricture has been well established for many years since the case of Wraith .v. Sheffield Forgemasters Limited [1998] 1 WLR 132 where it was emphasised by the Court of Appeal that any costs that were necessary are proper for the attainment of justice should be recoverable between the parties.  In that case it was held that the plaintiff had been unreasonable in simply going to the London firm that was used by his Union.  Reasonableness remains an issue to be assessed upon the facts of each individual case.

The Wraith case is increasingly one of those judgments which remains notionally good law, but is increasingly disregarded in practice: most costs judges seem to accept the argument that for most litigants, the geographical location of their solicitor is an irrelevance, with the availability of funding mechanisms and appropriate expertise more important considerations, particularly as in, for example, low value personal injury litigation a client will never visit his solicitors offices. Just as banks and insurance companies operate over the internet, and through letters and telephone calls, so do solicitors.

In comparison, calculating the B rate is a somewhat more complicated exercise as it encompasses all of the imponderables such as the difficulty of the case and the degree of care and skill involved. The standard B figure is a 50% increase on the A rate although this could be adjusted up and down in accordance with the factors now listed at Rule 44.5(3) of the Civil Procedure Rules 1998.  These factors, colloquially known as the 7 Pillars of Wisdom form a set of ostensibly objective criteria upon which the imponderables of any case fall to be assessed. It should be noted that the 7 pillars themselves could be open to criticism due to the degree of overlap between them and other areas or within them not least the amount of time spent and the place where work was done.  The factors should accordingly be borne in mind when calculating the B rate.

The system of A + B calculation had much to commend it.  The first point was to note that it operated as a practical application of the principle of subsidiarity.  In effect, local rates could be applied by local courts with judges using their local knowledge and expertise to determine what appropriate A rates to allow. In circumstances where many district judges will have been solicitors in private practice, who often will have sought appointment as close as they reasonably can, to where they have spent many years living and working, the district judge would have a very good grasp of what the A rate should be based upon their previous professional experience.

Equally, assessing the difficulty of a case and the issues that it throws up together with gaining an understanding from the litigation involved is a matter classically for the court and guided by the 7 pillars of wisdom a B rate could be arrived at on the basis of calculations that were l be assessed upon an objective basis.

Since, however, 1999 this system has become obscured both by introduction of the Civil Procedure Rules 1998 which tore up scales for costs, and the introduction of new conventions including the abolition of A + B calculation and the introduction of single composite rates.  This was an innovation of the then Lord Chancellor, Lord Irvine.The price of innovation in this case has been very high.  The single most stark failure of the Woolf reforms is the failure to control costs and indeed there was a marked increase in costs which followed from the introduction of the reforms on 1st April 1999.

Why was that? Leaving aside the vexed questions of ATE premiums and CFA success fees constituting additional liabilities recoverable from the 1st April 2000 a year later, it should be noted that in particular in the context of CFA success fees these only act as a multiple to the underlying base costs.

What Woolf did, with the introduction of a half written set of rules, was to effectively demolish the mechanism for the consideration and assessment of costs, and failed to put into place effective controls on costs. The concept of proportionality, for example, presented a real opportunity, if the concept had been properly thought through and formed part of the grain of redrafted costs rules, to control costs. But it never was. It follows that the current rage against success fees is only part of the problem, and in many ways, forms the tip of the iceberg: if the calculation of base costs is disproportionately high then in fact the percentage uplift only adds more fuel to a fire that is already raging out of control, to mangle metaphors.

The current approach of the court is markedly different to what took place in the period prior to 1999.  In particular it should be noted that the introduction of summary assessment requiring the consideration of hourly rates, not at the end of a case but part way through it, led in turn to the publication of Guideline Hourly Rates principally for use in summary assessment but which have de facto morphed into hourly rates to be used for the litigation as a whole. Although these rates are of their very nature and nomenclature only guidelines as to what should be allowed, they are in reality regularly used at detailed assessments not least because they save the costs and expense of conducting a full A + B calculation. They also form a de facto tariff for settlement: costs lawyers like all lawyers thrive on certainty and if the perception is that these rates are material for a detailed assessment of costs, then for every case that fights to assessment, 100 will settle working on the assumption of the published hourly rates.

The question of reasonableness in accordance with Wraith criteria still remains but now once it has been accepted by the selection of the firm used was reasonable their rates are assessed according to the guideline figures with departures from the figure in either direction being justified by reference to the 7 pillars of wisdom. The departure from the A + B approach is further supported by the current Senior Court Costs Office Guide which advocates the use of single charging rate.  This rate will in the majority of cases be that which the solicitors have agreed to charge the client but equally it should be noted that what the solicitors have agreed to charge the client will be informed what the guide says! The guide further emphasises the fact that the guideline figures referred to above are just that and they should not be a substitute for accurate local knowledge.

This is not to say that the use of A + B rates is entirely dead as is illustrated by the case of Higgs .v. Camden & Islington Health Authority [2003] EWHC 15.  This was an involved case of clinical negligence, solicitors charging a very high hourly rate and using specialist counsel.  At first instance the costs judge had sought to justify the solicitors’ hourly rate using the A + B method but this approach was objected to by the paying party who appealed to the High Court.  The appeal court stated that although the CPR and the costs Practice Direction discouraged the use of an A + B calculation the judge had not misdirected himself in carrying out such a calculation for the figure claimed.

It should be noted that one of the most damaging effects of a single composite charging rate has been to obscure the difference between overhead the A factor and profit the B factor.  A transaction paid for by a client, who retains a solicitor involves those solicitor’s charges containing both elements of overhead and profit to the solicitor.

What the outside world, and for these purposes the outside world constitutes the paying party and the costs judge, sees however is that the former transparency which applied no longer applies.

In particular terms it should be noted that there is the opportunity for solicitors who are astute or assiduous at driving down their own costs base to decrease the cost to them of the A factor, claim in their bills the single composite hourly rate which may be reflective of the guideline hourly rate established for the purposes of summary assessment and the issue as to how much profit they are making in terms of the B factor never sees the light of day.

It should be emphasised that there is nothing wrong with a solicitor doing this.  The solicitor is simply operating within the constraints of the current system.  However, it means that there is an opacity to the question of hourly rates which leads to suspicion which may or may not be justified due to the lack of hard empirical evidence on this point that hourly rates are far too high.  What is plain as a pikestaff is the lack of transparency in the A + B calculation together with the ossification of local knowledge as to what is a proper A factor to allow in solicitors’ bills and thus to consider in turn whether the B factor which is claimed is commensurate with a fair profit preserving the principle of proportionality and access to justice simply cannot be achieved.

If there is one area which needs to be grasped fundamentally, although it is not “sexy” or dynamic nor requiring primary legislation to achieve, it is the notion of an accurate gauge being applied to what solicitors’ A factors are and what is a proper level of B factor in any given case. Otherwise the court does not have the tools to take cognisance of market forces and to mitigate market failure.

There is a significant point being made that hourly rates are at the current time too high in the context particularly of personal injury litigation.  The reason that this can be put forward as a hypothesis which requires due consideration is not hard to discern. The first point to note is that in a simple piece of personal injury litigation run, for example, on the one hand by a panel firm of solicitors acting for one of the major insurance companies and a panel firm of solicitors instructed by a client through a trade union, the disparity between the hourly rates can be as much as 100%.

In terms of disparity, I am of course referring to the actual rates which are likely to be recovered because it should be noted that the mechanism of conditional fee agreements may be being deployed by both sides in such a hypothetical piece of litigation: which further illustrates the issue of market failure in this area.  In practical terms, the collective conditional fee agreement of a firm retained by an insurance company, is likely to provide for a low hourly rate of £100 per hour or thereabouts for the conduct of litigation or defensive litigation which is “lost”, or if the litigation is “won” then the recoverable hourly rate is to be the guideline rate published by the court for the area where the litigation takes place.  Thus the divorce between the A and B factors can be seen to be complete.

Conversely, under an ordinary collective conditional fee agreement made between the trade union, injured person and Solicitor the hourly rates which would typically be claimed in that agreement will reflect the guideline hourly rates for the court where the litigation is taking place together with an uplift or additional liability of a success fee which will vary from any figure up to 100% to reflect both the nature of the work and the time at which any litigation might be compromised. But the hourly rate contained within the collective conditional fee agreements on both sides, particularly if the collective conditional fee agreements are CCFAs “lite”, whereby the emphasis is that the solicitor will simply charge what is recovered from the other side indicates the market is shaped by the courts’ market making power as to what is a fair hourly rate to allow between the parties.

The further argument that hourly rates, particularly in the context of personal injury litigation are out of kilter also flows from the reform if not revolution that has taken place in the conduct of personal injury litigation over the last 10 to 15 years. The various factors which are obvious to anyone who practices in this field include the deskilling of personal injury litigation through, for example, lower grades of fee earner being given more responsibilities, albeit that they are usually backed up by a case management system replete with precedents, documents and standard forms.

Secondly, and related to the first point, it can be argued that there is an increasing reliance on information technology to create efficiencies, time savings and hence costs savings which would otherwise serve to reduce the A factor, but which are now comfortably subsumed within a composite hourly rate and hence have “leaked” unspotted into the B factor. Thirdly, but pushing the other way, a pressure which serves to distort the A factor, is the practice of the payment of referral fees which represents a business overhead for solicitors which must be incorporated into the A factor.

Fourthly, the lack of empirical evidence to support the hourly rates which are claimed.  If one were to pose the question why is a particular hourly rate for a particular fee earner in a particular group of courts pitched at a certain figure, and how much of that is overhead and so much of it is profit, it would be very difficult indeed to see on what basis an answer which had objective credibility would be forthcoming.

The final point to note is the effect of Rule 44.5.  In effect this rule which is now applied to hourly rates per se is of course peculiarly related to the B factor on a historical basis. But it is used as part of a springboard in order to argue for ever increasing hourly rates particularly in the context of litigation which runs some way removed from the norm. It should be noted that particularly in the context of personal injury litigation for those who operate on actual or de facto CFA lite terms, there is no benefit to understating the hourly rates nor indeed to shielding the client from it in circumstances where the client never ever has to pay for the Solicitors’ professional services.

In summary, if one wishes to draw together the threads of what is the actual problem in relation to hourly rates going forwards into the second decade of the 21st Century they can be summarised as three particular points.

The first point is the conceptual and practical one of the blurring of A + B elements.  If the court is serious about introducing or re-introducing transparency and controlling costs, then it has to separate out overhead and profit so that it has the raw material upon which to employ any objective assessment.

The second particular problem is the lack of data and the lack of systemisation in terms of the review of hourly rates.  Without a broad based empirical study into what it costs to litigate it is difficult to see how hourly rates will ever be anything other than arbitrary figures divorced from market reality.

The third point is that the failure to apply a uniform system across the country or jurisdiction, requiring the courts to apply informed consideration to the issue of hourly rates, albeit with regional and local assessment of applicable rates, means that there will be a failure to achieve consistency of approach not only on a national basis but also between cases, at a regional or local level due to the current crudity of the assessment of guideline hourly rates.

It is against this backdrop that I turn to consider whether the reports of Lord Justice Jackson published in May 2009 and January 2010 will cut the Gordian knot and achieve what should be one of the easiest conceptually, of reforms to achieve requiring as it does no overarching legislation to do so.

It is interesting to note that in terms of guideline hourly rates the Association of British Insurers commissioned a consultancy firm to undertake an independent assessment of the market for personal injury solicitors to compare marketing costs across different sectors and to assess whether reducing guideline hourly rates could have serious implications for access to justice. That consultancy firm apparently concluded that unlike in normal competitive markets where marketing costs are subject to constraints imposed by consumer behaviour and the personal injury claims market this constraint does not exist because claimants are protected from the costs incurred by their own solicitor.

This is likely to lead to marketing costs incurred by solicitors to be much higher than in a range of other sectors with the result that a reduction in hourly rates for claimant personal injury solicitors would reduce the amount spent on marketing but would be unlikely to have a significant impact on access to justice.

Conversely, within the same section of the Final Report, it is firmly put forward by one firm that arguments that claimants’ solicitor’ costs in the context of personal injury litigation are excessive and disproportionate is specious.  The ways in which claimants’ and defendants’ costs operates are not analogous in any way.  Defendants’ solicitors take on volume work which comes in on a regular basis; they are paid whether they win or lose.

They take cases on at a later stage when decisions have been made on liability and quantum.  This is not the case for claimants’ solicitors who have very little information at the outset and have to carry out investigations and incur expenses before assessing whether there are reasonable prospects of success. Other firms of solicitors have put forward arguments on the other side of the table to suggest the defendant’s solicitors are obliged to charge what the market can stand where there is no discernible market pressure on claimants’ solicitors.

Interestingly at paragraph 2.17 it is noted that the Liverpool District Judges, who appear as significant actors in the report, are cited as saying that more research is needed in order to determine what appropriate guideline hourly rates should be.

They note there has been a tendency to increase rates each year broadly in line with inflation without reference to solicitors’ overheads and profit margins.  Proper evaluation of the actual costs to solicitors and barristers of carrying out their instructions is needed and it is put forward that as regards solicitors there may be merit in returning to the old A + B formula with (in addition) greater clarity of the basis upon which barristers’ fees are charged.

Lord Justice Jackson is certainly aware of the problem.  In a sense he puts the matter off for another day.  He states at paragraph 3.9 that the level of guideline hourly rates is a critical element in the civil justice system but the proper body to review and revise the guideline hourly rates is a Costs Council which he sets out in Chapter 6 of his report.

He makes the point that he does not set out a proposed set of guideline hourly rates, instead he recommends a new mechanism for setting guideline hourly rates and draws attention to some of the factors which should be taken into account. He suggests that the aim of the guideline hourly rates should be to reflect market rates for the level of work being undertaken.  These would be the rates which an intelligent purchaser with time to shop around for the best deal would negotiate.

It says that the guideline hourly rates are blended rates unlike the old A + B rates which were formerly used, therefore as their name suggests they should only be guidelines or starting points with a judge on a summary assessment moving up or down from those rates as appropriate.

He also sets out a number of questions that the Costs Council may have to consider including whether there is any justification for paying city rates to firms of Solicitors which choose to set up in the City of London but are not doing City work, what reduction there should be in hourly rates for personal injury work if referral fees are banned or capped and if one takes defendant hourly rates as representing a reasonable rate set by the market in certain areas of civil litigation, what factors justify higher rates to claimants’ solicitors and what allowance should be made for those factors.

He does not say whether the intelligent purchaser is to be judged to be the single mother living on a council estate who wishes to pursue her tripping claim in circumstances where she takes the rates that are on offer or not at all or an insurance company who with the promise of thousands of cases has been able to negotiate £100 per  hour with its panel firms of solicitors, the point being that the markets in personal injury litigation are quite distinct.

The failure to grasp the nettle of hourly rates is the most glaring omission in Lord Justice Jackson’s Report.  In practical terms hourly rates levied in the county court are either rates agreed by insurers with their panel firms of solicitors who either take the rates on offer or fail to take first place in the beauty parade when tendering for work when insurers jig or re‑jig their panel firms of solicitors, or they represent the maximum that claimants’ solicitors feel that a costs judge will allow.

In the one case there is a market based on inequality of bargaining power and in the other there is no market in any recognised sense of the word.  The market is made by the court who alone dictates what in theological terms might have been called without conscious irony “the just price”.

The failure to require firms to lodge expense of time calculations, or for judges to educate themselves upon what it really costs a firm of solicitors to operate an hour of fee earners’ time continues.

Similarly, the question that must be asked sooner or later is what do the judges regard as an appropriate amount of profit to allow on top of overheads?  They must ensure that the solicitor is adequately remunerated but also that a disproportionate burden is not put upon the tax payer or of those who pay insurance premiums.

Perhaps more damagingly it should be noted that there is now a proposal to fix costs, particularly in relation to Fast Track cases, but the fixed costs which are proposed are derived from costs currently claimed which are essentially plucked out of the air and have been devoid of any reliable empirical basis since at least the mid 1990s.

In reality what is required is an “expense of time” style exercise in order to determine how much it is costing the claimants’ firms of solicitors to run these cases and for the court to accept that the only ceiling on the market rate of costs is what the court will contemplate.

With the removal of additional liabilities it remains to be seen whether a defendant’s solicitor will be able to recover the enhanced court approved rates allowed under their collective conditional fee agreements or whether they will be limited to lower rates of £100 per hour or thereabouts which are commonly negotiated with panel firms by insurers.

Accordingly, drawing the threads of this paper together, in effect 3 particular points can be said to represent what it is anticipated might be the conclusions of the issues under discussion.

The first is that although hourly rates do not represent the topic at the head of Lord Justice Jackson’s list, they are of vital importance because unless base costs can be arrived at a level which represents both proportionality and enhancing or ensuring access to justice, the fixed costs derived from the hourly rates currently in use are irredeemably flawed.

Secondly, if there is any area where empirical evidence is required, it is this area and the courts have more than sufficient opportunity to undertake the gathering of empirical data and to judge for themselves what constitutes proper levels of overhead and profit and to ensure that fees are cast with the considerations in mind.  At the moment the system is out of control, because there is no systematic approach to data gathering.

The third and final point to note is that in many ways some of the more enthusiastic reforms of the last 10 years have proved to be contra to what they were intended to do.  Woolf failed to control costs in civil litigation.  The recoverability of success fees in ATE premiums is now in the view of the senior judiciary a Bad Thing the pendulum has swung too far.

Similarly, the abolition of A + B charging, has also abolished the discipline and transparency that that requires, this can clearly can be seen to be a key area where the courts have effectively abdicated control over the issue of costs.

If this is a “once in a generation” opportunity to regain control of the cost of justice and if the courts are serious about controlling costs, then the nettle of hourly rates is one that must be firmly grasped.