Are guideline hourly rates too high?

The Civil Justice Council Costs Committee is currently undertaking research for a major review '¨of guideline hourly rates (GHRs).

The purpose of the GHRs continues to cause confusion and disagreement. Many argue they are designed for summary assessment in fast track cases or bent metal RTA cases only, and have no role to play in detailed assessment hearings or more complex claims.

In this context it is worth considering the contents of the FAQs which the committee has prepared to assist those completing the survey into current rates being charged. '¨This explains:

"The issue of the GHR really found momentum, however, with the introduction of the Civil Procedure Rules in 1999, which required judges at all levels [emphasis added] to assess costs summarily at the end of a trial on the fast track, or at the conclusion of any other hearing which had lasted not more than one day.
'¦ [This] led to an immediate request from judges for some guidance as to how to go about summary assessment, as the result of which the SCCO published a Guide in 2002 which included guideline figures for a large number of places on the circuits."

Importantly, it adds: "The GHR are applicable to contentious litigation in all civil cases (excluding family law) that have been heard in a fast-track or (less frequently) multi-track case for which a judge is making a summary assessment of costs."

Set in stone rates

It can therefore be seen that the GHRs are relevant for all civil litigation both being heard on the fast track and multi-track. The only reason summary assessment is less frequent in the multi-track is because the courts have been more reluctant to make interim costs orders, and immediately assess them thereafter than had been anticipated at the time the CPR was introduced.

It was never intended that matters, or interim costs orders, subject to summary assessment would attract different, and lower, hourly rates to those claims subject to detailed assessment. However, the '¨GHRs are not set in stone and '¨the FAQs state:

"While the GHR are principally for use in summary assess-ments of costs, anecdotal evidence suggests that they are also widely used as a starting point in detailed assessments of costs."

The current review is against '¨a background where the GHRs have remained unaltered '¨since 2010.

It should not be anticipated that any change in the GHRs will necessarily be in an upward direction. The introduction of the ban on the payment of referral fees has arguably removed a large overheard for many personal injury firms, which would point to a downward direction for any update to the GHRs.

The current GHRs do not distinguish between different types of work. The committee is actively considering whether '¨to break down the GHRs to reflect different specialist '¨areas of litigation, such as commercial, personal injury or clinical negligence.

Reasonable profit

An interesting aspect of the committee's role in calculating new GHRs is to try to determine '¨a reasonable profit margin for firms. Currently:

"An initial analysis of data already available seems to suggest that for many practices something in the region of '¨a third of a firm's finances are to be accounted for in roughly equal proportions by the broad headings of salaries, overheads and profit."

Are profit margins of a third typical and, if so, are they reasonable?

Consideration is also being given as to whether to introduce a new category of fee earner in the GHRs for costs lawyers and costs clerks. Common sense would suggest that this highly specialised category of lawyer should attract rates at least equivalent to Grade A fee earners. But then, I would say that wouldn't I? SJ