Waiting for Godot

The tears of the world are a constant quantity. For each one who begins to weep somewhere else another stops. The same is true of the laugh.
― Samuel Beckett, Waiting for Godot

Last year, a review of hourly rates in civil cases was promised under the auspices of the Civil Justice Council. Seasoned observers of costs matters will be well aware, that the “current” hourly rates date back to 2010 and an attempt at a review in 2014, foundered for lack of evidence.

The current review has (so far) had better fortune. A document has now arrived and was published on Friday. A full copy of the document can be found here: 20210108-GHR-Report-for-consultation-FINAL. It will be immediately apparent that the review is not yet a “done deal” but rather a document with suggested hourly rates has been put out for the purposes of consultation.

For the benefit of impatient readers, I can reveal that the document proposes substantial increases in the 2010 rates and the figures which are suggested (with their percentage increase from the current rates) are these: 

On what basis have these rates been put forward? Well, not on the basis of evidence, as the paper itself notes:

1.16. The history of GHRs between 2010 and the present is one where it has become apparent that the holy grail of rigorous, fully evidence-based precision, sought but not achieved by the Foskett committee, is simply not possible.

The paper engagingly goes on to explain what the  working group was attempting to achieve:

1.17. The passages from the July 2014 statement of Lord Dyson MR cited above are important. GHRs are guideline rates. The intention of the rates is to provide a simplified scheme and the guidelines are intended to be broad approximations of actual rates in the market. The approach of the present working group, therefore, has been to attempt to guide the GHR ship through the narrow strait between the Scylla of comprehensive but unachievable evidence and the Charybdis of arbitrariness.

What this means is that rather than delve into the books and management accounts of the profession, which has historically refused to engage with surveys of hourly rates or to disclose the combination of overhead and profits which make up the hourly rate, the working group decided to approach the issue of evidence, from the other end of the telescope and set out its approach as follows:

2.8. Taking into account all these factors, and in particular that: (i) GHRs are broad approximations; (ii) there should be no difference in hourly rates allowed on detailed or summary assessment; (iii) the inappropriateness, especially given the CPR changes in 2013, of fixing rates by EOT/solicitors charging rates; (iv) the impossibility in any event of obtaining hard evidence of EOT/solicitors charging rates; – the working group resolved to seek evidence on what was in fact allowed by Costs Judges who have experience and expertise in reflecting what is reasonable and proportionate. The evidence was to be of the rates allowed on provisional and detailed assessment. Cases which go to a detailed assessment hearing will be predominantly multi-track and perhaps towards the more complex end of the multi-track spectrum. Provisional assessments apply to detailed assessment proceedings commenced after 1st April 2013 where the costs claimed are £75000 or less. If a party after a provisional assessment requests an oral hearing, it is at risk as to the costs of that hearing, unless it beats the provisional assessment by 20% or more. Summary assessment is required in many cases, including complex multi-track applications and appeals. The working group bore all these factors in mind in deciding on its methodology. The broad spectrum of evidence obtained has assisted it in recommending new GHRs in full cognisance of the fact that assessing judges will use them as a guideline or starting point.

The first port of call was the costs judges and officers: the working group did consider other evidence from members of the legal profession. The limitations of the evidence received was recognised:

3.8. The working group realised at the outset that the overall reliability of the evidence produced may suffer from shortcomings. These include:

(a) The relatively small number of cases that result in a detailed assessment may not be representative of the hourly rates effectively paid between parties by agreement. Further, the majority of cases where costs are agreed do not specify or record any hourly rate agreement. Costs are agreed in a global sum.

(b) Hourly rates awarded by Judges may be ‘contaminated’ to some extent by reliance on the 2010 GHRs with some uplift for inflation.

(c) Insufficient data on which to form sound recommendations.

The working group were also aware that they would not have the material to distinguish between overhead and profit, that only a very small proportion of cases go to assessment and that Covid-19, may have set in train significant changes in the way solicitors run their practises. These factors did not deter the working group from its task.

The working group also received representations, which delightfully blurred the line between evidence and submission and were based upon sectorial interests. All of this material was put into the pot, stirred appropriately and the key reasoning for the table above was explained thus:

4.18. Taking all those factors together, the working group concluded that the pooled data from experienced judges and professionals in Appendix H60 were, generally speaking, the best evidence upon which its recommendations should be made, the only exception being London 1 and London 2. The recommendations of the working group are therefore set out below. The working group is of the opinion that these recommended GHRs will give to the inexperienced judge a better steer, by providing a simplified scheme to assist such judges without them being a substitute for the proper exercise for judicial discretion. The numbers in brackets represent the mean percentage difference from the current GHRs.61 It can be seen that, despite the proposed redefining of London 1, apart from Grade D, the percentage increases for that area are not comparatively too high. The Senior Costs Judge’s view is that for London 1 work, the rate to be allowed for Grade D should be in the region of £165- £170. That would represent an increase of 20%-23% on the present GHR which would be more in line with percentage increases generally in the table below. The working group was loath to depart from the evidence of the mean based on the data, but seeks consultation responses on this specific matter.

Curiously, although the rates for grade B and grade D, are identical in national band 1, and national band 2, a grade C in band 1 attracts an hourly rate of £178, as opposed to £177 in band 2. This discrepancy, pointed out to me by an eagle eyed observer is unexplained in the paper.

Leaving aside rates, the paper also tinkers with geography: and only to a small extent it explains, because of the pending HMCTS reform programme which is intended to radically change the way in which litigation is conducted. But the existing band 3, is to be folded into band 2.

Moreover all those swathes of the country which are not currently named in the existing bands, are to be given a a formal designation, to reflect the de facto practice which they have happily enjoyed since at least 2010.

The paper sees the work of this review as having a relatively short lifespan for these reasons:

6.1. In an ideal world, the GHRs would be reviewed and updated on a very regular basis. This is currently impracticable. If the GHRs produced in this report are accepted as being soundly based, then in the short term they could be updated annually in line with an appropriate SPPI index.

6.2. As already mentioned, there are a number of important changes affecting and expected to affect the provision of legal services. A further review by a working group should be considered once the need is considered by the CJC to have arisen. This may well be within, say, 3 years, though it is difficult to predict, especially given the impact of the Covid-19 pandemic and the HMCTS reform programme. That would be the appropriate occasion to examine the methodology, how effective this working group’s work has been, and any appropriate, evidence-based amendments to geographical areas.

In the meantime the working group seeks consultative responses on the following questions:

8.1. The working group welcomes any comments on the contents of this draft report. In particular comments are sought on:
(i) The methodology used by the working group.
(ii) The recommended changes to areas London 1 and London 2.
(iii) The recommended GHRs set out in paragraph 4.18 of this report.
(iv) Specifically, whether the rate of £186 for London 1 Grade D is too high; if so, at what rate it should be set and why?
(v) The recommended changes to the geographical areas in section 5 of this report and the recommendation to have two national bands.
(vi) Should the working group 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.
(vii) The recommended revisions to the text of the Guide in Appendix J.

Having considered the paper in its entirety, I welcome its proposals as imperfect, but rational and workable. It is imperfect because the court, the judges and the Civil Justice Council are simply not equipped with the resources to grapple with the economic consequences of the quasi-monopoly that solicitors exercise in relation to litigation, and the market failure that results from this state of affairs. The court is woefully unable to gauge its role as market maker, by setting hourly rates. This is expressly recognised in the report: of the proposed hourly rates, what proportion are overheads, and what proportion is profit? No one knows.

Against that backdrop, the working group has carefully sought evidence and representations from the judges and judicial officers most closely concerned with the assessment and award of costs. It has been open to receiving representations and has moved to what instinctively a majority may see as the logical position, of an increase in rates largely grounded on considerations of an inflationary increase.

The paper might be criticised for lacking ambition, by putting in the box marked “too difficult” the wider issues, such as how changes in working practices whether Covid related or not might be reflected in the hourly rate, or the question raised but not answered in the Jackson Report, of how much lawyers should be permitted to earn by reason of passing their charges on to the losing party to litigation.

But the paper is a practical document, bent on securing a short term solution to a particular problem and noting that longer term considerations can be left for another day, particularly if, for example fixed costs are expanded to cover all claims worth up to £100,000 and the costs landscape changes dramatically.

So judged on its own criteria, I think the paper will command support amongst the profession, and its proposals may very well be adopted this year.

I would go further, and suggest that I suspect that already parties will start to argue, on current assessments, that equivalent figures to those proposed should be awarded on cases being decided now.