Under the bonnet

Autumn has arrived, the season of changes. One change orchestrated by me has already taken place. This week, fed up of this website taking more than 10 seconds to load, and regularly being off line I sacked the webhosting service I formerly used and have migrated the site across to Kinsta. It has been a disarmingly smooth process, not even marred by the copious acronyms used in the web hosting world: DNS, PHP, HTTPS, SWEETFA etc.

I am pleased to note that the site is now loading smoothly and appears to be much more stable. It should accordingly make for a more engaging read, and I intend to increase the amount of content I place upon this website, in the months to come.

This week saw an interesting decision on hourly rates, albeit in the context of Court of Protection costs. It should be noted that these are not inter partes costs per se: there is no insurance company or other paying party furiously contesting the bill. Instead the decision concern’s the SCCO’s role in being the “lion under the throne” in assessing the costs of deputies acting for people without capacity in the management of their affairs.

The case is In the matter of PLK and 3 other cases (SCCO Master Whalan 30th September 2020) and as noted by Master Whalan concerned the following issue:

1. These assessments raise a common point of principle applicable to the decisions of Costs Officers and Costs Judges when assessing costs incurred in the Court of Protection (‘COP’) by a court appointed Deputy (and his/her associates) in the general management of the affairs of a protected party. The issue for determination concerns the method of assessment of the hourly rates claimed by Deputies.  It is the applicants’ submission that the court’s current approach which, broadly speaking, relies on the application of the Guidelines Hourly Rates (‘GHR’) approved by the Costs Committee of the Civil Justice Council is, by 2020, incorrect and unjust.  Instead the assessment of COP work should be predicated on a more flexible exercise of the discretion conferred by CPR 44.3(3), whereby the GHR are utilised as merely a ‘starting point’ and not a ‘starting and end point’.

An argument for an increase based upon rising overheads, had echoes of an “expense of time” submission but was rejected in these terms:

29. Ultimately I am not satisfied that the evidence supports Mr Wilcock’s contention that COP firms have experienced ‘a significant increase in hard and soft overheads’ (SA, 45).  The evidence, both in respect of time and expenditure, is inconsistent and, in my view, incomplete.  Nor am I persuaded by the submission made in the oral hearing that ‘it is clear that no other area of practice requires such a level of unrecoverable time’. So far as the datum is consistent and stable – and, as noted, the most reliable figures are probably those produced by Clarion – it suggests a comparatively modest incidence of time and expenditure.  However reliable the figures produced may be, they do not, in my view, demonstrate that the burden is one that is exclusive to COP work or that it is atypically high in comparison with that experienced by practitioners in comparable areas of practice.  Fee earners in personal injury, medical and professional negligence, for example, incur invariably time and expense that is irrecoverable, in marketing, accessing cases that are not proceeded with or, indeed, pursued and lost.  These are burdens which do not apply to Deputy’s sources of work (on a case by case basis) which is often consistent and predictable over many years.

The secondary argument put forward on behalf of the Deputies, was based on an RPI linked increase. A tertiary argument was for a CPI linked increase. As the Master observed:

33. The Brown Shipley & Co. report entitled ‘SCCO Guideline Rates and the Impact of Inflation’ and dated October 2019 demonstrates an RPI inflation rate increase of 31% between 2010 and the end of 2018. The hourly rates claimed in the bills drafted by Clarion and considered in this assessment all apply RPI inflation to the 2010 GHR.  Indeed, this is the only basis upon which the hourly rates are argued in the PLK, Thakur, Chapman and Tate bills.  Mr Wilcock submits, as a secondary alternative to his primary argument, that the court ‘is invited to apply RPI inflation to the GHR and allow the rates as claimed’ (SA, paragraph 49).  But the problem with this approach (at least in empirical terms) is that most official indexes of the impact of inflation prefer the CPI to the RPI rate.  The official rate of UK inflation has used the CPI since 2004.  Dr Friston, as Mr Wilcock acknowledges, uses CPI inflation in his table(s) at 68.3 to 68.10 in the third edition of Friston on Costs.  CPI inflation from 2010 to 2019 is approximately 21%.

The conclusion that the Master reached was as follows:

I am satisfied that in 2020 the GHR cannot be applied reasonably or equitably without some form of monetary uplift that recognises the erosive effect of inflation and, no doubt, other commercial pressures since the last formal review in 2010. I am conscious equally of the fact that I have no power to review or amend the GHR.  Accordingly my finding and, in turn, my direction to Costs Officers conducting COP assessments is that they should exercise some broad, pragmatic flexibility when applying the 2010 GHR to the hourly rates claimed.  If the hourly rates claimed fall within approximately 120% of the 2010 GHR, then they should be regarded as being prima facie reasonable.  Rates claimed above this level will be correspondingly unreasonable. To assist with the practical conduct of COP assessments, I produce a table below which demonstrates the effect of a 20% uplift of the 2010 GHR.  I stress again that I do not purport to revise the GHR, as this court has no power to do so; instead this is a practical attempt to assist Costs Officers and avoid unnecessary delay (caused by individual re-calculation) in a busy department conducting over 8000 COP assessments per annum:

This approach can be adopted immediately and is applicable to all outstanding bills, regardless of whether the period is to 2018, 2019, 2020 or subsequently.  It goes without saying that this approach is subject ultimately to the recommendations of Mr Justice Stewart and his Hourly Rates Working Group and the Civil Justice Council. Ultimately the recommendations of the Working Group must be adopted in preference to my findings.

The last sentence is interesting. As is well known, Mr Justice Stewart is moving forward with a review of hourly rates, which is limited in scope: he is looking at the rates being charged and the rates being allowed in the cases that go to assessment.

This body of data will presumably inform his recommendations as to whether and to what extent guideline hourly rates will be increased. However, given that only a tiny fraction of cases ever go to assessment, and the rates allowed may be typical or atypical to the vast majority of cases which settle the data base may be thought to be very limited. 

What is also of concern is that the review is not going to look at what the rates should be on any wider or more objective basis. Let me be quite clear: lawyers in my view should be well paid for the job that they do.

It is a responsible job and all lawyers contribute to the maintenance of the rule of law in our society, whether they articulate that to themselves or not and play a valuable constitutional role.

Equally, as solicitors and barristers exercise a quasi-monopoly on the right to conduct litigation and advocacy in the courts, their charges should be both transparent and reasonable.

Moreover when those charges are to be paid by the opponent to litigation, there is a public interest in ensuring that those charges are reasonable to ensure that all parties have access to justice. 

It is therefore in the public interest to know how much of the hourly rates which are awarded by the courts on inter partes assessments represent overheads and how much profit.

Further, it cannot be ignored that due to the market making role of the courts in conditional fee funded litigation, the courts by allowing overheads at a given rate are sanctioning the way that solicitors run their cases: if the overhead of a solicitors firm includes the cost of typists, large premises, and big salaries, should the court be pricing those elements into the hourly rate, or should  they allow overheads on the basis that solicitors’ shouldn’t need typists and should be working from home?

But there is no possibility of even starting the consideration of these issues with the limited data sweep that is due to take place. The lack of utility of such an exercise was recognised nearly 20 years ago, at the start of the modern era of conditional fee funded litigation: in Callery v Gray (Nos 1 and 2)  2002] 1 WLR 2000 Lord Bingham observed:

5 Even if these contingencies did not occur, the new funding regime was obviously open to abuse in a number of ways. One possible abuse was that lawyers would be willing to act for claimants on a conditional fee basis but would charge excessive fees for their basic costs, knowing that their own client would not have to pay them and that the burden would in all probability fall on the defendant or his liability insurers. With this expectation the claimant’s lawyers would have no incentive to moderate their charges. Another possible abuse was that lawyers would be willing to act for claimants on a conditional fee basis but would contract for a success uplift grossly disproportionate to any fair assessment of the risks of failure in the litigation, again knowing that the burden of paying this uplifted fee *2004 would never fall on their client but would be borne by the defendant or his insurers. A third possible abuse was that claimants, although able to obtain after the event insurance, would be able to do so only at an unreasonably high price, the after the event insurers having no incentive to moderate a premium which would be paid by the defendant or his insurers and which might be grossly disproportionate to the risk which the insurer was underwriting. Under the new regime, a claimant who makes appropriate arrangements can litigate without any risk of ever having personally to pay costs either to those acting for him or to the other side and without any risk of ever having to pay an after the event insurance premium whatever the outcome: the practical result is to transfer the entire cost of funding this kind of litigation to the liability insurers of unsuccessful defendants (and defendants who settle the claims made against them) and thus, indirectly, to the wider public who pay premiums to insure themselves against liability to pay compensation for causing personal injury.

Lord Hoffman observed:

32 The reasoning of the Court of Appeal in paragraph 93 of its judgment, which I have quoted above, assumes that the present cost of motor accident litigation is a fixed sum which must be paid by liability insurers one way or the other. But that is the very question in issue. And the reason why it is disputed is that, in the circumstances in which such litigation is funded, market forces are insufficient to keep costs within reasonable limits. As I have already said, solicitors offering motor accident personal injury CFAs have no incentive to compete on the success fees they charge. So the next question is whether a decision of a costs judge, or the Court of Appeal on appeal from a costs judge, is the best way of compensating for the absence of price competition in the market. The traditional function of the costs judge, or taxing master, as he used to be called, was to decide what fees were reasonable by reference to his experience of the general level of fees being charged for comparable work. But this approach only makes sense if the general level of fees is itself directly or indirectly determined by market forces. Otherwise the exercise becomes circular and costs judges will be deciding what is reasonable according to general levels which costs judges themselves have determined. In such circumstances there is no restraint upon a ratchet effect whereby the highest success fees obtainable from a costs judge are relied upon in subsequent assessments.

And:

34 I rather doubt whether difficulty is likely to be removed merely by the passage of time. All that costs judges will learn is what other costs judges are allowing. Solicitors will charge whatever is currently allowed and exert upward pressure to be able to charge more. But that will not tell anyone whether the fees paid to the solicitors represent reasonable value for money.

(emphasis added)

Coming back to earth, the above rates should be argued for in every detailed assessment going forward, where the indemnity principle permits. The further question not yet asked, is to what extent there is scope for enhancement of these rates beyond inflationary considerations for the more complicated or more valuable cases?