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.

One thought on “Hourly rates

  1. We deal in the conveyancing market and hourly rates has now been taken over by a structured approach to costs. That way Homebuyers and investors know before the instruction is accepted what the conveyancing fees and disbursements costs will be.
    If it was based on hourly rates then the work would simply dry up

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