The Civil Justice Council (CJC) working group published an interim report on guideline hourly rates (GHRs) on 8 January 2021 and invited responses from the public. The consultation closed on 31 March 2021. In this article, Julian Chamberlayne set out some of Stewarts’ key responses to the consultation.

As many practitioners know, the GHRs have not increased since 2010. A series of reports and discussions since that time have led to no change in solicitors’ rates. This is illustrated by Lord Dyson’s decision in 2014, as Master of the Rolls, that the 2010 GHRs remain unchanged.

However, that will hopefully be changing in 2021 with this interim report of the CJC Working Group consultation suggesting a ‘modest’ increase in the GHRs ranging from 7% to 35%, dependent on grade and location. The report also recommended an annual inflation increase thereafter and highlighted that a more fundamental review of how the GHRs were calculated would be needed in the coming years.

The CJC invited comments on the contents of its draft report, in particular:

  1. The methodology used by the working group.
  2. The recommended changes to areas London 1 and London 2.
  3. The recommended GHRs set out in paragraph 4.18 of the report.
  4. 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?
  5. The recommended changes to the geographical areas in section 5 of the report and the recommendation to have two national bands.
  6. 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 require the signatory to specify the location of the fee earners carrying out the work.
  7. The recommended revisions to the text of the guide in Appendix J.

We have highlighted some of the key points from our submission below.

 

Methodology

The CJC gathered data from the profession and judiciary on claimed and assessed rates, then commissioned Professors Fenn and Rickman to analyse that data. The combined data pool, which is available in Appendix H of the report, produced a total of 754 cases with costs assessed or hourly rates agreed in two date ranges. Its findings were limited to the rates assessed as opposed to those claimed.

The CJC placed great emphasis on the fact the intention of the rates was to provide a simplified scheme, and the guideline rates are intended to be broad approximations of actual rates in the market.

While we agree with this, we raised concerns in our submission on the adopted methodology. In particular, the proposed methodology to set the new rate by reference to the average of rates assessed involves circularity, as those rates were influenced by the historic GHR, which it is widely acknowledged had fallen behind.

We also explained that looking only at the rates allowed without considering the rates claimed would effectively be a decision to curtate a distribution without first looking at the full spread. That would be an approach which, as we understand it, most statisticians would consider creates an inherent bias and breaches a fundamental principle of distribution theory. Only once you have considered the full spread can an informed decision be made on whether it is appropriate to curtate on one basis or another.

 

Further data analysis

Julian Chamberlayne, Head of KM & Compliance at Stewarts and the Chair of the Forum of Complex Injury Solicitors (FOCIS), obtained the CJC data on claimed rates from the same data set analysed by Professors Fenn and Rickman above. He then worked with Harmans Costs to conduct a separate data analysis, which compared the rates allowed with rates claimed.

The analysis demonstrated that most judges reduce the hourly rates claimed, even if they are below the average market rate paid by the average litigant. The working group’s current methodology, based on allowed rates, leads to proposed GHRs 15% lower than average claimed rates. In most bands and grades, they are also lower than consumer price inflation, let alone services producer price inflation (SPPI) Legal Services. However, that is easily fixed; using the same data set, the average claimed rates provide a more reliable proxy for market rates, which is in line with the closest matching inflationary measure, SPPI Legal Services.

While judicial discretion plays an important part in the cost assessment process, we suggested that it should only come into play at the later stages of assessing the costs of individual cases. This is because the further analysis, in our view, indicates that judicial moderation influenced by the legacy GHR 2010 is out of step with market inflation. Thus, the methodology for currently proposed rates understates the average market rate and so does not, in our view, meet the core aim of the GHR.

If it remains, then the average successful litigant, who reasonably chooses to instruct a solicitor who charges the average market rate, will be left with a cost shortfall that increases for every hour worked.

 

Final thoughts

We agree with the CJC that an annual indexation of the GHR should take place. Not only is it important, but it would also avoid a repetition of the unfairness that has been faced by litigants who have proved they suffered a civil wrong over the last 11 years.

Additionally, the indexation should be aligned with an appropriate SPPI. According to analysis by KPMG, legal services contributed £60bn to the economy in 2018. Therefore, there can be little doubt that SPPI Legal Services has statistical validity and is the closest match for inflation of solicitors’ hourly rates.

This consultation plays an important role and will have a major impact on our clients. Before the GHR is next reviewed, we consider it important that efforts are made to gather reliable data on the market rates paid by litigants for the type of high-value and complex litigation intended to be covered by the new London 1 band. Consideration should also be given to creating an equivalent National band.

 

Guideline Hourly Rates in more detail

Julian has written on Guideline Hourly Rates in more detail in the New Law Journal, click on the links below to view.

 

 

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