At present, solicitors’ guideline hourly rates (GHR) are separated by experience (‘Bands’ A-D) and location (‘London’ and ‘National’ Grades) – see the table below:
However, pressure has been mounting to bring about reform since Mrs. Justice O’Farrell criticised the existing system at paragraph 14 of her judgment in Ohpen Operations UK Ltd v Invesco Fund Managers Ltd  EWHC 2504 (TCC):
‘It is unsatisfactory that the guidelines are based on rates fixed in 2010 and reviewed in 2014, as they are not helpful in determining reasonable rates in 2019. The guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines would be very welcome’.
Indeed, the July 2014 review to which she referred sought to establish ‘actual rates to a high degree of accuracy’, sooner than form ‘broad approximations of actual rates in the market’ and it was this untenable ambition that influenced the then Lord Dyson MR’s decision to freeze 2010-established GHR indefinitely.
However, earlier this year (here), we reported that practitioners could expect new recommendations on GHR by the end of 2020, based on an assertion made at the March meeting of the Civil Procedure Rule Committee (CPRC).
We became aware, at that time, that a Civil Justice Council (CJC) sub-committee had been created to make proposals on adjusted GHR – the Guideline Hourly Rates Working Group. The Group is led by Mr. Justice Stewart QC, and reports directly to the Deputy Head of Civil Justice and Lead Judge on Costs in the Court of Appeal (Lord Justice Coulson).
It is understood that evidence is currently being gathered from practitioners, which conveys the hourly rates claimed and allowed by costs judges and costs officers on every detailed assessment between 1 April 2019 and 27 November 2020, as well as hourly rates reached between lawyers (whether or not there had been an assessment).[i]
Costs Master Whalan, in his judgment, considered that the timescale allotted to the CJC review ‘may prove to be optimistic’.
What makes PLK a ‘landmark’ judgment, though, is the fact that the Master took the ‘unprecedented step’ of directing Senior Courts Costs Officers to allow, with immediate applicability, rates that are up to around 20% higher than the 2010-fixed GHR (as long as they relate to outstanding billables from 2018, 2019 and 2020 onwards).
Despite having acknowledged that he was not empowered to (in)formally review or amend the GHR himself, he concluded that if, when applying the 2010 GHR to hourly rates claimed, a sense of ‘broad, pragmatic flexibility’ was adopted, then rates falling ‘within approximately 120% of the 2010 GHR should be regarded as being prima facie reasonable’ (still subject, of course, to assessment):
‘… 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’.
Essentially, the type of inflation reflected in this ruling is that of the consumer price index (CPI), which has increased by 21% since 2010. By contrast, retail price index (RPI) inflation has been more remarkable, at 31%.
Ultimately, though, Master Whalan’s approach in PLK will not necessarily sway the forthcoming recommendations of the Working Group and it goes without saying that whatever the CJC eventually advises will be adopted preferentially.
What is clear, though, is that costs judges are becoming more vocal about their dissatisfaction with GHR in their current state and this will certainly add weight to the determinations in both Ohpen and PLK.
For example, in June, Master Rowley defined current GHR as ‘much maligned’, ‘the roughest of rough guides’ and ‘barely even a starting point’, having emphasised that ‘there is a single figure for a particular level of lawyer in a particular locality’ and that the designated figure ‘takes no account of the size of the firm, the nature of the work undertaken et cetera in the particular case’ – see the ruling in Shulman v Kolomoisky & Bogolyubov (Unreported, Senior Courts Costs Office, 2020).
[i] Neil Rose, ‘Doubt over whether guideline rates review will report by end of 2020’ (5 October 2020 Litigation Futures) <https://www.litigationfutures.com/news/doubt-over-whether-guideline-rates-review-will-report-by-end-of-2020> accessed 5 October 2020.
[ii] John Hyde, ‘Costs ruling opens way for uplift on CoP guideline hourly rates’ (30 September 2020 Law Gazette) <https://www.lawgazette.co.uk/law/costs-ruling-opens-way-for-uplift-on-cop-guideline-hourly-rates/5105810.article> accessed 7 October 2020.