Legal Cost Specialists

Guideline Hourly Rate Consultation

The Civil Justice Council’s consultation on Guideline Hourly Rates (GHRs) ends today.

One of the questions put out for consultation was whether the N260 for summary assessment and the information provided in a formal Bill of Costs for detailed assessment should require the signatory to specify the location of the fee earners who carried out the work.

This appears to have been prompted by concerns raised in the previous 2014 Foskett report into GHRs that firms were charging for work at their Central London office rates, while much or all of the work was actually carried out in regional or outsourced offices.

The wording of any proposed rule change remains to be drafted, but it is difficult to see how an amendment requiring the location of the fee earners carrying out the work to be specified would only be relevant for work undertaken in a regional/outsourced office.

A statement that all work was undertaken in the City would clearly be fundamentally inaccurate if 50% of the work was undertaken from a shed at the bottom of a fee earner’s garden in Brighton.

It would also be illogical to require an N260/Bill of Costs to specify if work was undertaken from a regional/outsourced office but for there to be no matching requirement to make it clear if work is undertaken from a home office.

The traditional reason for differing GHRs for different geographical locations is:

  1. At least in the case of City firms and, to an extent, Central London firms, the recognition that the work they undertake is normally of a more specialised nature than that of firms practising elsewhere.
  2. The overheads (such as office rental, cost of support staff, etc) will vary depending on the location of the firm.

To the extent to which the latter of these applies when comparing the work of a personal injury firm based in central Manchester compared to a personal injury firm based in Skegness, how much more must this apply when the work is undertaken by a fee earner working from home with no office rental cost to the firm and, usually, much lower additional overheads?

Home working, at least part-time, is not an entirely new phenomenon, but Covid-19 has pushed the issue to the forefront.

The suggested amendment to the information required in an N260/Bill of Costs, would produce a logistical nightmare if applied literally.  Fee earners would need to record, and the N260/Bill of Costs reflect, whether work was undertaken in an office or at home.  There would be no logical reason not to also record whether the work was undertaken on the train or on a beach in Florida whilst on holiday.  How much more complex would an N260/Bill of Costs become where work has been undertaken from multiple-locations during the life of the case?

To what extent would a court on assessment then apply the updated GHRs?  Would a premium rate be appropriate if work is undertaken from a bespoke designed home-office as compared to a kitchen table?  Are higher rates appropriate if a fee earner is working in First Class on the train as opposed to slumming it in Second?  Are solicitors entitled to recover higher rates if they work from home and their home is a posher part of the country?

The current consultation mentions the fact that it was suggested the report be paused because of the effect Covid-19 was having on the business models of solicitors’ firms.  The report’s response to this was:

“It was not within our remit to pause the review. Nor did we believe it to be necessary or appropriate. We have taken this factor into account in our recommendation for a further review within a relatively short period of time. … Such future review should take into account changes in working practice brought about by new technology, the sequelae of the Covid-19 pandemic and the HMCTS reform programme.”

To an extent, the current consultation is proposing a sticking plaster solution to a fundamental change in the way the legal profession works.

However, another way of looking at the issue is to suggest that Covid-19 has done no more than highlight the outdated geographical approach to GHRs.  The horse bolted long before Covid-19 and not just because of homeworking.

Claims management company, trade union and insurer referrals broke much of the geographical link between clients and their solicitors many years ago in the field of claimant personal injury work.  Insurer panel work broke the link for large volumes of other work.  The destination for heavy commercial work is largely driven by where the firms are located, as opposed to the client.

Is there now any reason why the choice made by a client as to the geographical location of the solicitor they instruct should have any impact on what a paying party is liable for?  Should the solicitors’ choice as to where they open an office have an impact?  As Kerry Underwood has noted:

“Now lawyers and everyone else should be free to have offices wherever they want, but how can there be any justification now for a paying party to pay for very expensive London rents and salaries? …

Am I suddenly worth less because I am sitting in an office in Wellington in the Western Cape rather than in Hemel Hempstead?

What hourly rates do I charge for my colleagues sitting with me here in the office in South Africa?

If I am working on a file and I travel from Hemel Hempstead to the Western Cape via Qatar, as I have just done, do I charge different rates depending on where I happen to be?”

The only remaining justification for differential GHRs, other than to reflect the experience of the fee earner, is to acknowledge the widely different levels of complexity in the work solicitors undertake.  Oddly, the working group’s initial report does not do much more than address this in passing in the context of London GHRs:

“The working group concluded that the proper approach to London 1 and London 2 was to re-define London 1 by nature of work by centrally based London firms, rather than by geographical location in the City, and to use the BPC data as the recommended GHRs for such work.  London 1 would primarily be for very heavy commercial and corporate work, whether undertaken by firms geographically located in the City or central London.  London 2 would be for all other work carried out by firms geographically located in either the City of London or the area at present covered by London 2.”

The end result will be updated GHRs that provide one set of figures (even allowing for the fact they are guidelines only and no more than a starting point) for matters as diverse as routine low value personal injury claims (that are not subject to fixed fees), complex clinical negligence matters and heavy commercial disputes.  Surely the way forward is to scrap geographical differences and provide GHRs based on the broad nature of the litigation being undertaken.

1 thought on “Guideline Hourly Rate Consultation”

  1. William Whawell

    Some interesting thoughts. If one takes a look at the world of the virtual law firm many will have an address lets say Chancery Lane in Southampton Buildings itself a hub for numerous firms.
    The fee earners will be based all over the country (I have a client main office is London but two principle fee earners live one in North East and South West – they will never work in the office) and the IT function and accounts will be all based in London 3 or further out. Can those firms truly say they have the overhead of a physical office in London with all the costs associated?
    A solution could be an extension of fixed fees – many applications costs £000s but should they.
    Should there be tariffs for applications to deal with the question of costs.
    Should fixed fees be extended to all cases say to £500k and after that every matter is tightly budgeted and actual case management applied.
    The debate will be ongoing though many will still bury head in sand and insist that the good old days of pile it high charge the earth and argue costs at the end on assessment are the way forward.

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