Departing from Guideline Hourly Rates

In Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466 the Court of Appeal observed that a “clear and compelling justification must be provided” to depart upwards from London 1 Guideline Hourly Rates (GHRs) as “the guideline rates for London 1 already assume that the litigation in question qualifies as ‘very heavy commercial work’”.

The Court of Appeal has reinforced that message in Athena Capital Fund SICAV-FIS SCA & Ors v Secretariat of State for the Holy See (Costs) [2022] EWCA Civ 1061.

Lord Justice Males:

“the appellants’ solicitors’ costs comprised £175,000 (including hourly rates charged well in excess of the guideline rates set out in Appendix 2 to the ‘Summary Assessment of Costs’ guide published in the White Book) … This court has recently held that, in the case of solicitors’ fees, if a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided: Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466. No such justification has been advanced in this case.”

Lord Justice Birss:

“It may be worth emphasising one aspect. In my experience there has been a view that the previous set of Guideline Hourly Rates (before 2021) were not directed to the heaviest work such as takes place in the Business and Property Courts. In part no doubt this was because they were so out of date. Whatever the position was or was thought to be, it changed in the current set of Guideline Hourly Rates, which were approved by the Master of the Rolls in August 2021. As my Lord pointed out in Samsung v LG, the current set includes a band called ‘London 1’ which is a set of rates directed expressly to very heavy commercial and corporate work by centrally London based firms. I would add that the London 1 rates band in the current Guideline Hourly Rates is based on evidence from the Business and Property Courts themselves (see the Civil Justice Council’s Final Report of April 2021). Therefore the London 1 band is directly applicable to this case and so a justification for the much higher rates was needed.”

It remains to be seen as to how rigidly the courts will stick to GHRs when dealing with, for example, Manchester solicitors dealing with complex clinical negligence claims.

Separately, Lord Justice Males commented:

“It is a striking feature of the present situation, that although almost every possible point has been taken on both sides in the course of this appeal, there has been no challenge either to the appellants’ solicitors’ hourly rates or to the brief fees and other fees charged by their counsel. However, the costs payable by the losing party on the standard basis are limited to those which are reasonable and proportionate. Where the costs of the paying party are also disproportionately high, that can make no difference. In any event the court will scrutinise cost schedules in order to keep levels of recovery within reasonable bounds.”

In future, it may be no answer for a receiving party to argue that their hourly rates (or overall costs more generally) should be viewed as reasonable because they are similar to the paying party’s.