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?
I note the suggestion that trainee solicitors could be paid as little as £2.60 an hour in their first year under an amendment to the Solicitors Regulation Authority's proposals for ending the minimum wage.
Presumably we can then expect a corresponding decrease in Guideline Hourly Rates for trainee solicitors to, say, £10 per hour. This should still give firms a reasonable profit margin. Obviously Guideline Rates ranging from £90-138 would be totally unsustainable with pay rates of £2.60 per hour.
One aspect of the preliminary issues judgment in Motto & Ors v Trafigura Ltd & Anor  EWHC 90201 (Costs) (15 February 2011) that I did not quite understand concerned the cost of security.
The claimants’ solicitors had needed to pay for security for their employees whilst working in a dangerous part of the world. These costs were claimed as a specific category of legal costs. Master Hurst allowed such costs and said:
“The decision which I have reached in relation to hourly rates does not reflect an additional element for the cost of security in the Ivory Coast, but rather, as Mr Williams submits, the overheads of a firm based in Clarkenwell. Had the hourly rates included an element for overseas security, I should have had to hear argument and details before arriving at a final figure. In the event, therefore, to the extent that it is reasonable and proportionate, the cost of security is recoverable.”
However, when dealing with the issue of what hourly rates to allow he ruled:
“In my view it is also necessary to take into account the inevitable increase in overheads that will be incurred by having to employ people to work in dangerous conditions overseas.”
Perhaps this was meant to mean that staff might have had to be paid more than normal to work in dangerous conditions, and thus the firm would be paying higher salaries (so incurring higher overheads) than would normally be the case. However, this might have been worded more clearly.
The amount of the claim for costs in the case of Motto & Ors v Trafigura Ltd & Anor  EWHC 90201 (Costs) (15 February 2011) - £104,707,772.72 – was truly eye-watering. This was, on any analysis, a complex group action involving 30,000 claimants. So, what did Master Hurst have to say about the appropriate hourly rates to allow for the law costs draftsmen who prepared the bill of costs in what must be one of the largest and most complex legal costs claims ever seen?
“The final matter raised by Mr Bacon was the rate payable to the costs draftsmen. He suggested this should be the grade D rate, and criticised the various mistakes which had been thrown up in the way in which the bill had been drawn. I have no details of the number of costs draftsmen involved, but am aware that Mr Ellis, who is a very experienced costs draftsman, has been in court throughout the hearing. I would expect Mr Ellis to be charged at the grade C rate, and for other more junior costs draftsmen to be charged at the grade D rate. This is a matter which may have to be argued further when the details of the costs draftsmen's involvement are known.”
One of the most well respected costs draftsman in the country, dealing with one of the most complex costs matters, and the provisional view was that grade C rates were appropriate with everyone else at grade D.
What a contrast with the views expressed in Cook on Costs:
“in heavy bills involving amounts considerably in excess of the fast track … the use of a Grade A or B draftsman … would be reasonable and proportionate”
When considering the issue of what hourly rates to allow, in the preliminary issues judgment in Motto & Ors v Trafigura Ltd & Anor  EWHC 90201 (Costs) (15 February 2011), amongst the relevant factors identified by Master Hurst was:
“I have no doubt in this case that Mr Day has taken responsibility for this litigation at great personal financial risk to himself, and financial risk to his firm generally.”
I don’t understand this.
The ‘financial risk’ was the risk that the claims would fail and, as they were being run on a ‘no win, no fee’ basis, no costs would be recovered. However, that is what the success fee is designed to cover and was considered elsewhere in the judgment.
To factor this in when considering what hourly rates to allow appears to be a case of double-counting.
Geoffrey Bindman, ex-lawyer for Private Eye, writing in New Law Journal:
“My initial inexperience of libel law did not prove a disadvantage. Nor - contrary to the belief encouraged by a coterie of specialist libel lawyers who have built up a lucrative cottage industry - was it a difficult area of law. The key skill is negotiation, which is distinct from specialised knowledge of the subject.”
Unless evidence can be produced of higher overheads, no more than Guideline Hourly Rates appropriate for this type of work then?
At the Association of Costs Lawyers national conference Master Hurst explained that although an increase in the Guideline Hourly Rates had been planned, this was due to be linked to the average earnings index but unfortunately that index no longer exists and an alternative index was being sought.
It has now been announced:
“The Master of the Rolls has received a recommendation from the Advisory Committee on Civil Costs on an increase to the Guideline Hourly Rates for 2011. The rates form the starting point for judges carrying out summary assessments of costs in certain cases, on reasonable hourly rates for solicitors and legal executives of varying levels of experience.
The Committee has recommended an earnings related increase for 2011, but the Master of the Rolls has asked the Committee to seek additional information and provide further evidence to allow him to make a more considered decision.
In the meantime, and until further notice, the Guideline Hourly Rates for 2010 will continue to be applied.”
This is all well and good but we are now going to have a start date for the new rates other than January or April, unless it is suggested they should apply retrospectively. Just one more thing to try and remember when reviewing Bills of Costs.
Is arranging a BT telephone conference fee earner work?
Should solicitors still expect to be able to charge hourly rates based on having full time, skilled, secretarial staff, when they no longer do?
A number of readers of the Legal Costs Blog receive this via email or feeds. They will therefore usually miss out on some of the interesting comments that are added by those who read online.
On a previous post, on the subject of whether personal injury work should attract "City rates", Jacques Hughes provided an answer so definitive that I must share this with all readers:
"The argument is just silly. PI and commercial work inhabit fundamentally different markets, and PI lawyers delude themselves if they think otherwise. Compare a topnotch PI practice like Irwin Mitchell to a real City firm and ask: does the PI firm have a 24 hr secretarial service? Does it have a 24/7/365 reprographics department capable of handling, say, 20 million pages a year? Do staff have to be paid to work all hours in order to liaise with NYC and Hong Kong? Does it have a library of 10,000 volumes plus, with subscriptions to all major Commonwealth and American law reports and journals? Does the PI firm have to run a recruitment drive targeted at the best candidates at Oxbridge and equivalents in the US & Australia, paying trainees 50K plus packages? Do middling assistants expect salaries in the 150K + bracket? Are international travel and worldwide offices a major PI overhead? The answer to all of these question is consistent, obvious, and negative. City rates for PI work is a nothing more than a mirthless joke."
An interesting article appeared in the latest edition of Solicitors Journal (see link) concerning whether City rates should be recovered in personal injury claims (obviously not).