I have a bill of costs which utilises various hourly rates for the “Grade C”, “Grade A” and “Costs Draftsman”. However, the bill fails to comply with Costs Practice Direction 4.5:

“The background information included in the bill of costs should set out:

(2) a statement of the status of the solicitor or solicitor’s employee in respect of whom costs are claimed and (if those costs are calculated on the basis of hourly rates) the hourly rates claimed for each such person.”

Therefore, at an early stage (July 2009), I requested details of the names, qualifications and PQE of each fee earner. The claimant’s “law costs specialists” subsequently gave the names of the various fees earners and indicated which of them they classified as Grade A or Grade C. Oddly, there was a total failure to deal with the question of qualifications or PQE.

The matter drags on and Points of Dispute are served in September which repeat the request for details of the qualifications and PQE of the fee earners.

Replies are served months out of time in December.

These Replies give the date of qualification of two of the fee earners (the Grade As) and state in relation to the other three fee earners that they “do not have the qualifications however all have the relevant experience to claim a Grade C Grade.”

Grade A and B fee earners are defined as follows:

A - Solicitors with over eight years post qualification experience including at least eight years litigation experience.

B - Solicitors and legal executives with over four years post qualification experience including at least four years litigation experience.

A Grade C fee earner is defined as: “Other solicitors and legal executives and fee earners of equivalent experience”.

The Guide to Summary Assessment of Costs (page 1494 of the White Book 2010) states: “Whether or not a fee earner has equivalent experience is ultimately a matter for the discretion of the court.”

More specifically, the Guide states:

“Unqualified clerks who are fee earners of equivalent experience may be entitled to similar rates and in this regard it should be borne in mind that Fellows of the Institute of Legal Executives generally spend two years in a solicitor’s office before passing their Part 1 general examinations, spend a further two years before passing the Part 2 specialist examinations and then complete a further two years in practice before being able to become Fellows. Fellows have therefore possess [sic] considerable practical experience and academic achievement. Clerks without the equivalent experience of legal executives will be treated as being in the bottom grade of fee earner ie. trainee solicitors and fee earners of equivalent experience [Grade D].”

So, a FILEX has six year’s experience and academic achievement under their belt. Those without this should be treated as Grade D. There may be arguments as to whether seven or eight year’s experience is sufficient to amount to Grade C status without having passed the exams required of a FILEX.

I advised my instructing solicitors to raise a formal Part 18 Request to drag a proper answer out of the other side.

The response that has just been received is that the experience of the unqualified fee earners is: six years, five years and two years respectively.

The first two fairly obviously aren’t the equivalent of a FILEX.  Although the first has the equivalent experience, just, neither has undertaken the academic training.  But what about the third?

Two years. Unqualified.

On what parallel legal costs world does that equate to the equivalent of a qualified solicitor or FILEX?

At what stage does wishful thinking concerning the rates that might be allowed move into outright fraud?
 

When flying back from holiday the other day I was glancing at the on-board bar prices. (Despite living a multi-millionaire playboy lifestyle, I am too mean to pay for a flight that has a free bar.)

They were selling 5cl miniatures of Bombay Sapphire gin (standard 40% strength) for £4 a bottle. By my maths, that works out at £80 a litre. The same flight was selling duty free (which unfortunately you are not meant to consume on the flight) Bombay Sapphire (at 47% strength: the good stuff) for £24 for two one litre bottles: £12 a litre. That, by any standards, is a significant price differential.

In the field of legal costs there is a similar level of surprising price gap between the hourly rates that claimant representatives claim and the rates charged by defendant lawyers. Claimants argue that this difference is not evidence that they are overpaid – and therefore that the Guideline Hourly Rates are too high - but rather is due to a combination of the fact that defendant lawyers have guaranteed work volumes and that claimant lawyers have different acquisition costs due to advertising and/or referral fees.

I will leave others to decide whether this explains the following example. This is simply one in my current case load and is far from being anything like the most extreme example I have seen.

The case concerns a high profile, high damages sporting injury claim. The main fee earner (a Grade A) for the claimant is based in a Northern city (Band One). The rate claimed for 2007 is £285. A 100% success fee is claimed in addition. With VAT at 15%, the total claimed is £655.50 per hour. The main fee earner (also Grade A) for the defendant is based in Central London. The rate charged to the defendant insurers for 2007 was £160 (£184 with VAT). Both fee earners are specialists in this type of claim. So, a rate of £655.50 as against £184.

It is no doubt fair to say that comparing a CFA funded case with a non-CFA funded case is something of an artificial comparison. Nevertheless, the base hourly rate claimed by the claimant's solicitor is 46% above the Guideline Hourly Rates for the area where the firm is based. The rate charged by the defendant solicitor is 45% below the Guideline Hourly Rates for the area where the defendant firm is based. Despite the claimant’s solicitors being based in an area where the Guideline Hourly Rates are lower, they are claiming a rate that is 78% higher than the defendant’s.

Of course, maybe claimant lawyers are just “worth” more.

Feel free to submit more extreme examples than this one. 
 

Ropewalk Chambers has an excellent article on their website by Andrew Hogan on how the current approach to hourly rates has led to a lack of proportionality and transparency in legal costs.  This article was first presented to the Association of Law Costs Draftsmen at this year's annual conference and has also appeared in the Personal Injury Law Journal.

In a previous post I wrote that I was going to admit to being wrong on three occasions.  Here is the second confession. 

Back in January, I predicted there would be no increase in the Guideline Hourly Rates.  That prediction turned out to be inaccurate and the rates were indeed increased in April.  However, as the Advisory Committee on Civil Costs observed, their decision to increase in line with the private wage index meant the 1.7% increase was “well below current RPI inflation and so will lead to a significant fall in the real pay of solicitors operating in this area”. 

They also made clear: “we  have  yet  to  complete  our  analyses  of  the  issues  raised  in  our  paper  The Derivation  of  New  Guideline  Hourly  Rates”.  So what is that review likely to conclude? 

The Senior Costs Judge, Master Hurst, commented at the Association of Law Costs Draftsmen’s National Conference that: “The chances of the advisory committee coming up with agreed hourly rates that would be universally accepted are absolutely zero”.    

Will there be an increase in the Guideline Hourly Rates for 2010?  The latest news is that the Master of the Rolls has decided to wait until after publication of Sir Rupert Jackson's report of his review of Civil Litigation Costs before deciding whether to make any changes to the current Guideline Hourly Rates. That report is due to be published on 14 January 2010.  My prediction: no change.

Click image to enlarge:

6 10 98
 
Lord Justice Jackson's Preliminary Report on civil costs raises a number of concerns about whether any proper market forces operate in relation to lawyers’ hourly rates in personal injury claims:
 
"For the claimant personal injury market in particular, where the majority of work is conducted under conditional fee agreements, the chargeable hourly rate recoverable in costs assessments will usually provide the benchmark for the chargeable hourly rate to the client (in respect of base costs). Claimant solicitors in this sector tend to offer 'no win no fee' arrangements under which they seek to ensure that clients recover 100% of their damages with no deductions for costs. This necessarily has the effect of removing market forces that would otherwise apply from the sector. Solicitors’ charges are dictated by the level of costs recovered from the losing defendant rather than the lay client."
 
Further:
 
"Insurers consider that the hourly rates being paid to claimant solicitors are too high. There is a substantial discrepancy between the hourly rates of claimant solicitors and the hourly rates of defendant solicitors."
 
He also reported the views of the Association of Law Costs Draftsmen in relation to CFA funded claims: "There is no control over hourly rates in a situation where the clients are indifferent to the rates charged".
 
This is to be contrasted with a recent report in The Times:
 
“The ‘magic circle’ has lost some of its power: average hourly rates for London’s top commercial lawyers fell by a third last year as law firms offered substantial discounts after competition intensified in the downturn.”
 
This shows the impact that market forces, when available, can exert even in the field of legal costs.
 
It will be interesting to see what recommendations the Advisory Committee on Civil Costs makes in relation to increasing (or decreasing) the Guideline Hourly Rates in 2010.  When announcing the figures for 2009 they made clear that a more thorough review of the way rates were calculated was necessary and they hoped to have looked at these issues by 2010.  Combined with the publication of Jackson LJ’s final report, 2010 looks to be an interesting year for the legal costs world.
Whether excessive legal costs are really a problem depends, in part, from what perspective you are considering matters. Defendants have little difficulty appreciating how problematic this issue is. However, claimant representatives have been far slower to join in the criticisms. How strange then that the Association of Personal Injury Lawyers (APIL) should now join in and what a strange area they have decided to highlight.

Responding to the Ministry of Justice consultation on increasing civil court fees, APIL said "injured people could be left high and dry as the increases will effectively price them out of the courts". APIL president Amanda Stevens said the changes would mean fees could rise, on average, by around 55 per cent, and more than 4,000 per cent in some areas. “Increases on this scale are staggering and will undoubtedly make it more difficult for injured, vulnerable people to receive assistance from the courts if a claim cannot be settled any other way,” she said.

In a previous blog I commented on one of the proposed fee increases. So what increases does APIL believe will prevent injured people receiving proper compensation? The only increases that APIL felt able to comment on are those in relation to detailed assessment proceedings. Other than the truly eye watering increase for LSC funded cases, the other increases raise, for example, the fee for a request for a default costs certificate from £45 to £60 and the fee for appealing a decision made in detailed assessment proceedings from £105 to £200.

Now, I may be somewhat naive here, but do any lawyers really believe that the court fees for certain aspects of detailed assessment are going to be a factor that discourages litigation? The average litigant will not have the slightest idea as to the potential costs of general litigation, let alone the costs of the costs. I would be fascinated to see a firm of solicitors that provides costs estimates to their clients that are so carefully calculated that these increases are going to be factored-in or, indeed, that any solicitors actually even consider the potential costs of detailed assessment proceedings when starting a claim and advising their client.

When the Guideline Hourly Rates were increased at the beginning of the year from, for example, £203 per hour for a Grade A fee earner in Band One to £213 per hour I must have missed the APIL press release complaining as to how this would price injured people out of the courts. Those increases will have a far larger impact on a far larger number of litigants than the proposed fee increases for detailed assessment proceedings. Of course, this is one area of legal costs that APIL has no interest in controlling.

Court fees represent a tiny proportion of the costs of personal injury litigation. The idea that these proposed fee increases will have any impact on the willingness or ability of potential claimants to bring claims is ludicrous. More interestingly, the fact that APIL has never expressed any concerns about ever increasing hourly rates highlights the real problem in the system. The combination of fee shifting, CFAs, trade union funding and BTE means most claimants in personal injury cases no longer have any interest whatsoever in the legal fees that their lawyers are incurring. It will be interesting to see whether the Jackson review is able to produce any solution to this problem and introduce some form of market control to the system.

Hourly Rates and the RPI

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The constant refrain from claimant representatives whenever a paying party seeks to question the accuracy of a bill of costs is that one should not seek to go behind the signature to the bill unless there is a “genuine issue” as to whether the bill is accurate, and the case of Bailey v IBC Vehicles Ltd [1998] EWCACiv 566 is cited in support. I’ll save for another day a full scale rant as to how misplaced the Bailey approach is.

However, one simple example of how naive the Bailey decision is can been seen on a daily basis following the routine disclosure of CFAs. I’m not now talking about whether the solicitor really has managed to comply with the onerous requirements of the now revoked CFA Regulations 2000. The issue I have in mind is the rather more straightforward one of the hourly rates claimed. A CFA will usually set out the hourly rates that are to be charged. However, the rates claimed in the corresponding bill often bear no relationship to the rates allowed for in the CFA itself. At its most basic, this is often an example of bills being signed without the slightest concern for accuracy or the indemnity principle. I don’t trust signatures on bills due to years of experience in the costs world.

A more subtle issue arises in relation to increases in the hourly rate. A common clause in many CFAs, and this follows one version of the Law Society’s Model CFA wording, is: “We will not increase the rate by more than the rise in the Retail Prices Index”. Despite this clear and unambiguous wording, bills are routinely presented where the hourly rates increases year-on-year by more than the RPI increase. When challenged, the response from some claimants is that they wrote to the client informing them of the purported increase and because the client did not challenge the RPI busting increase it is therefore binding on the client and can be recovered from the paying party. Not so said the Senior Costs Judge in Findley v Jones and MIB [2009] EWHC 90130 (Costs) (reaching the same conclusion as the judge in Puksis v Brumby [2008] EWHC 90095 (Costs)). Any increase allowable is limited to the rise in the RPI given the clear terms of such CFAs.

And this brings us on to a very topical issue. In recent years the increases in the Guideline Hourly Rates have been based on the Average Earnings Index for private sector service industries. This has tended to have a higher annual increase than the RPI, hence the problem created by the RPI clause. But now for the latest news. It has just been reported that that the RPI fell to 0% in February. If the RPI remains at this level, or even dips into negative territory, those firms who have the RPI clause will be unable to increase the hourly rates on any of their cases, regardless of whether the Guideline Hourly Rates increase. The only consolation to claimant lawyers is that these are not “tracker” clauses, otherwise firms would potentially be finding themselves having to reduce their rates in coming months. Defendant lawyers have been used to this prospect for years but this would come as something of a shock to the system for claimant lawyers.

The Advisory Committee on Civil Costs has released updated Guideline Hourly Rates to apply from 1st January 2009. It has been made clear that these are very much interim in nature and that further investigations will be conducted to determine whether the overall levels are appropriate. In particular, this will consider the 20-35% difference in rates charged by claimant’s solicitors compared with defendants’ solicitors and the extent to which the Guideline Hourly Rates allow for referral fees to be paid by claimants’ solicitors.

Other than a general increase to reflect earnings inflation, the main change to the Guideline Rates is to increase Band Three rates to Band Two levels.

2008 Guideline Hourly Rates

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The Advisory Committee on Civil Costs is in the process of a thorough review of the guideline hourly rates. However, pending its findings, the Committee has advised that the guideline rates from 1st January 2008 should be increased in line with the increase in average earnings in the private sector, currently 4%.

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