The defendant costs specialists

Inadequate hourly rates?

By on Aug 31, 2012 | 9 comments

A firm of solicitors is prepared to accept instructions to act in an RTA claim where the claimant has the benefit of BTE insurance and where the BTE policy will pay the solicitors an hourly rate of £130 across the board, including work done by Grade A fee earners. The limit of the BTE indemnity comes to an end and the solicitors at this stage enter into a CFA. At the same time the solicitors more than double the hourly rates being charged.

If the solicitors were initially prepared to act in the matter for £130, on what basis does that rate cease to be adequate simply because the terms of the retainer change?

Discuss.

    9 Comments

  1. The question is a bit misleading: just because the solicitors may take a lower rate under BTE doesn’t mean that particular rate was adequate to start with.

    It’s possible that they agreed to act at that rate in order to gain access to a greater number of cases than what they would otherwise have, i.e. lower rate leads to a greater volume of work, which leads to a greater benefit overall.

    D-Notice

    31st August 2012

  2. I agree this is misleading – I’ve known similar arrangements on both sides of the coin, to say this is just a claimant thing is simply untrue

    Anonymous

    31st August 2012

  3. I wonder why they were acting for the lower rate in the first place. Just because an insurer will only indemnify at up to £130 per hour, that doesn’t mean you can’t charge your client your usual rate. It just means if you lose you won’t recover more than £130 per hour – much better than not recovering anything!

    Richard

    31st August 2012

  4. You wont get more than £130 on assessment

    He who knows

    31st August 2012

  5. I’m with Richard – its only in the event that a claim is made under the ATE policy in the event the claim loses; assuming of course they have sent a TCB letter to their client providing for the higher rates, its merely then a partial indemnity.

    Its the exact same arrangement the vast majority of Defendant firms hide away in their TCB’s with their Insurer clients. At least the Claimants on such BTE funding arent also trying it on with a success fee, unlike the Defendants solicitors !!!!

    And. I agree with the original subject of Simons post. the usual terminoligy of a CFA is that the rates charged under a CFA will be the same as would be employed if the Solicitor was being payed privately. Surely if he has agreed to a “private rate” of £130.00 per hour with the Insurers, then the imposition of a much higher rate on a CFA could be construed as a “bonus” or “success” rate??

    Anonymous

    3rd September 2012

  6. Surely it is not a question of the hourly rate being “adequate” – it must be reasonable and proportionate. The BTE retainer ends and the client has to find someone to act to continue the claim. He will not find a solicitor to act under the same terms as the old BTE retainer and his current solicitor is presumably not obliged to continue to do so if he made it clear from the outset that he would only act at £130 per hour whilst client was being indemnified by the BTE insurer.

    Client must be reasonable in terms of new solicitors he instructs and the new hourly rate(s) must be reasonable and proportionate. I am unable to comment on whether £260 per hour is reasonable and proportionate because have no details of the case but it seems to me that client is reasonable in instructing the same solicitor under a CFA at higher rate than the BTE rate. Paying party is lucky to get away with paying such a low rate for even some of the time.

    Incidentally, in my experience most BTE insurers have terms of appoinment which prevent the solicitor from “topping up” by charging client direct as well as the insurer.

    Anonymous

    6th September 2012

  7. There is a difference between topping up and what is suggested earlier. In teh earlier post the client is liabile for the full amount

    And I agree, the question is what is reasonable after it has moved on to the CFA

    annon

    7th September 2012

  8. It’s a good thing that most people here are choosing to ID themselves as anon, because there is a view here that is misleading.

    The final para of Anon 12:46 is what I find to be commonly the case.

    Put to one side the matter of rates at the moment.

    Most insurers (all but DAS in my experience) say that ‘if you win, what the def pays is your lot and you cannot seek any shortfall in costs from the insured’ and ‘if you lose, we will pay you on the standard basis and what we don’t pay you cannot charge to the insured’.

    The latter means that a ToB with the client allowing greater recovery than that allowed under the agreement with the insurer creates a conflict in terms. If you win you can charge your client more than if you lose. It’s nothing more than an informal CFA (which will be unenforceable). It’s more or less Thai Trading v Taylor. How can you argue that the client has a genuine liablity of £10k when the insurer will only pay £8k and you are contractually obliged (rather than at discretion) to waive the difference?

    [There is potentially a contractual argument about the insurer terms interfering with the retainer, but that’s quite technical and beyond the immediate issue]

    I don’t see a problem in a solicitor entering into a CFA in such a scenario to allow higher rates on win and lower on lose (with the bonus of an uplift on the element in jeopardy if case is lost).

    DAS are different because they traditionally inserted a term into their ToB which said that it was only a partial indemnity and the solicitor should ensure that a primary retainer existed with the insured. Of course, now DAS only offer CFAs to solicitors (very shrewd – and something I believe should not be allowed – in view of the incoming reforms and likely increase in use of BTE).

    Robert Pettitt

    9th September 2012

  9. I can say that I have raised this very objection before a regional costs judge and lost. I have to say I found it deeply unsatisfactory. On an inter partes basis, the solicitor is entitled to recover reasonable costs, meaning, inter alia, charged at a reasonable hourly rate. If the solicitor him/herself considers £130 a reasonable rate to recover, as per the original retainer, why should any other rate be allowed? In fact even the guideline rate is irrelevant. It is calculated to allow a solicitor a reasonable level of profit, but this solicitor has decided that a reasonable rate can be generated at £130, so surely that is the applicable rate? Great argument, but one which failed. Take note.

    Jonathan James

    25th September 2012

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