Myth busting

With an end to recovery of success fees on the horizon, predictions are that the focus of costs disputes will shift to traditional areas such as hourly rates. Solicitors' overheads are largely fixed and therefore where a court can be persuaded to allow even an additional ten per cent on hourly rates this is likely to equate to an increase in profits of 50 per cent plus.

The debate over what hourly rates to allow on detailed assessment inevitably starts with the published 'guideline hourly rates for summary assessment of costs' (GHRs). The explanation given to these rates is: 'The guideline rates for solicitors provided here are broad approximations only. In any particular area the designated civil judge may supply more exact guidelines for rates in that area.'

The weight given to these rates on detailed assessment varies enormously and unpredictably. In some quarters they are treated as providing broadly fixed rates for the majority of cases. In the Senior Courts Costs Office (SCCO) they are often treated as being a 'starting point'. Yet others view them as having little or no relevance to the rates to allow on detailed assessment (usually translated as meaning much higher rates should be allowed on detailed assessment). It is worth exploring the latter view in more detail.

First, one needs to understand how these rates came into being. These rates have traditionally been arrived at by undertaking surveys as to the rates that firms of solicitors report they charge in different parts of the country. The last published investigation of this type was undertaken by the Advisory Committee on Civil Costs based on information collected in 2007 from a core survey of responses from 129 solicitors' offices and 'written and oral evidence provided by representatives of the main interest groups and others'. The committee recognised there were weaknesses with the data collected but it at least provided a starting place. This formed the basis for the 2009 GHRs.

Having previously been increased each January, the rates were then not increased until April 2010. A simple inflation-linked increase was applied. At the time of writing, there has been no increase in 2011. A similar inflation-related increase has been recommended, but the Master of the Rolls has asked for further information and evidence to justify the same.

Strange approach

Notwithstanding the weaknesses in how the GHRs were formulated, they are meant to be based on what solicitors actually charge. The original survey did not ask what solicitors charged for work that would be subject to summary assessment. The rates provided would have been those applied across the board. The suggestion that the GHRs are therefore not relevant for detailed assessment, as though solicitors charge different hourly rates for summary assessment work, is bizarre.

Second, what basis would there be for suggesting that the approach of the court as to what hourly rates to allow should differ depending on whether it is a summary or detailed assessment? In relation to interim applications and appeals it is often no more than a question of time constraint that dictates whether the court undertakes a summary assessment. It would be most peculiar to penalise a party who has their costs summarily assessed by imposing lower hourly rates than would otherwise apply.

The linked GHRs myth is that they are only intended for low-value straightforward claims. The argument usually goes something like this: GHRs are for summary assessment. The general rule is that the court should make a summary assessment at the conclusion of a trial that has been dealt with on the fast track (CPD 13.2(1)). Fast-track cases are low value in nature. The GHRs are therefore designed to cover low-value claims only.

It is difficult to understand how this argument has ever achieved any traction as it is so self-evidently flawed. First, one only has to look at the GHR for 2010 for Grade A solicitors in the City. The figure given is £409. If costs judges in the SCCO are allowing hourly rates of anything approaching £409 on detailed assessment for fast-track work it is a very well kept secret. The City rates given are for heavy 'City' work '“ a world apart from fast-track claims.

It is not just at the conclusion of fast-track trials that summary assessment may take place. The general rule is that summary assessment should take place at the end of any hearing that has lasted not more than one day (CPD 13.2(2)). This may include interim hearings in complex heavy commercial litigation (hence the City rates) and appeals. It is noteworthy that the practice directions to the Supreme Court Rules 2009 give guideline hourly rate figures for the provisional assessment of costs that match those for summary assessment in other courts. The GHRs are designed to cover the full range of work undertaken by solicitors and to assist all levels of the judiciary.

Deeply flawed though the GHRs may be, they at least provide an attempt at giving objective figures for what rates are reasonable. Although they may not provide the finishing point for what to allow in any particular assessment, they should certainly provide the starting point.