Under attack

Why City rates should not be recovered in personal injury claims

Much has been made recently of the proposed changes to our civil legal costs regime, particularly as regards the recovery from defendants of success fees and ATE premiums by claimants. These additional liabilities substantially increase a defendant’s liability in costs.

However, this is only one half of the story. Frequently, in injury claims the hourly rates claimed by claimants’ solicitors are excessively high – one reason for this is the basis on which those rates are claimed.

Solicitors based in Outer and Central London are often claiming what are termed City rates in the guideline rates for summary assessment of costs, while solicitors based outside London are often claiming rates commensurate with Central London or substantially (e.g. 70 per cent) more than the guideline rate applicable to their location.

Similarly, solicitors not based in or near to London might reasonably issue high-value claims at the Royal Courts of Justice but then, less reasonably, seek what appear to be City or Central London rates for their work, despite the fact that those firms will not bear any perceived additional cost of being based in London.

Lord Justice Jackson’s review has addressed this, advising that rates should be controlled (and that City rates should apply to City work only). However, until such time as his recommendations are implemented, it is vital that the courts exercise control over hourly rates.

City v non-City

The courts have demonstrated a willingness to reduce hourly rates for non-City work, the most notable recent example being Musa King v Telegraph Group Limited [2004] EWCA 613 (Civ), a defamation case.

The courts have not always adopted a consistent approach. For instance, in Higgins v MOD [2010] EWHC 654 (QB) Central London solicitors recovered Central London rates after acting for an asbestosis sufferer based in Broadstairs, Kent. However, an important factor taken into account by the court was the lack of a local solicitor with suitable expertise.

On the other hand, in A v Chief Constable of South Yorkshire [2008] EWHC 1658 specialist Central London solicitors acting in a claim against the police were awarded rates based on the claimant’s local (Sheffield) rates. Furthermore, at a detailed assessment hearing (in which the authors were involved'’ Ball v Barts and The London NHS Trust, 20 October 2009, unreported) Master O’Hare assessed the rates of solicitors geographically based in the City, but acting on a high-value clinical negligence claim, on the basis of Central London rates rather than City rates.

If not City rates, then what?

Often in cases where City rates are charged for non-City work, or in the analogous situation of London solicitors or London rates for work not based in London, the nature of the work is complex and of particular importance to the claimant, hence the application of higher hourly rates.

In such cases, the court should assess costs based on the relevant local guideline rate, if necessary with an uplift on that rate for care and conduct. That uplift should be a reasonable, but relatively small, figure, as appears to be supported by a number of recent cases.

In the Ball case, the City-based solicitor’s rate was assessed at the local (Central London) guideline rate plus ten per cent. In Holliday v EC Realisations [2008] EWHC 90103 a ten per cent uplift on the guideline rate was permitted in a mesothelioma claim. Similarly, in Sara Cox v MGN Ltd [2006] EWHC 1235 (QB), an invasion of privacy claim, the senior partner of a leading firm of libel solicitors was permitted a 19 per cent care and conduct uplift on the guideline rate.

Taking control

Pending the implementation of Lord Justice Jackson’s recommendations, it remains possible to secure a measure of control over what appear to be excessive costs claims. However, for now at least, it seems that to do so defendants must run the risk of detailed assessment and its attendant costs to secure this control. Arguably, controlling costs that have already been incurred is a more difficult exercise than restricting those costs from the outset.

Where attempts to control rates at detailed assessment are pursued, the court has demonstrated that it will prevent the use of City rates for non-City work and it will significantly limit the extent of any uplift on guideline rates for high-value clinical negligence claims (a restriction which presumably would also apply outside of London).

However, why should the paying party have to run the risk of detailed assessment and engage in the difficult exercise of controlling costs after they have been incurred? Is it time for defendants to ask the court, during the life of the claim, to cap hourly rates?

Mark Ashley is a solicitor in the clinical and healthcare risk group at national commercial law firm Beachcroft LLP. Carina Patterson is a partner at Masters Legal Costs Services

Why City rates are justified

It is puzzling when litigation solicitors complain about alleged unfairness, as they work within a system for the resolution of legitimate wrongs. It’s an evidence-based system applying a set of rules. In the case of costs these are the triumvirate of CPR, case law and judicially endorsed guideline hourly rates (GHR).

For once the angst is not success fees and the recovery of additional liabilities in the recent fashion but, surprisingly, the GHR that are described as an obstruction to justice. They are not. The reality is that something in the expression guideline hourly rate is not understood. Assuming that it is neither hourly nor rate, I will focus on the word guideline without troubling the reader on dictionary definitions.

Collecting evidence

In 1982 the three central London law societies encouraged by those responsible for adjudicating costs undertook a major survey to establish evidenced-based figures representing the fair cost of undertaking litigation work in the capital. It was anonymous, with results collated and assessed by leading independent accountants. It excluded matters then seen as luxuries – including marketing, carpets and overdraft costs.

The accountants drilled down the collective data to an average broad cost per hour by reference to the then three types of fee earners (pre paralegals). To no surprise the broad average cost in Holborn and Westminster was the same, but less than it was for City firms and thus the concept of fee earner-based regional rates was founded. In subsequent years further surveys confirmed the results adjusted year by year if rents and salaries etc. rose. Taking those rates forward to today, adding in the no longer luxurious items, and you arrive close to today’s GHR for City and Central London ABCD grades.

Reviewing the rates

More recently the MoJ advisory committee on civil costs spent three years re-examining the post-2006 rates to assess whether they continue to be fair and justifiable, concluding overwhelmingly that they were a reflection of actual current cost with only one adjustment – combing regional rates from three to two. The committee’s last report is a helpful summary of its conclusions (see judiciary.gov.uk, under ‘publications and reports’).

Among the issues it considered were the City rates only for City-based firms doing City work. The argument was rejected. It missed the point. The word is guideline. In any event ‘City’ work these days is as much done outside the City as within but who would deny that the overhead base, nature of the work and the notion of fair remuneration supports the case that generally City rates should apply rather than outer London (as it often would otherwise be).

And what of those firms on the west side of Chancery Lane (Central) whose work is identical to that done on the east side (City)? The ACCC rightly left such issues to the discretion of the court – a guideline is a guideline; so it is for the court always to decide what rate, on evidence-based argument, should apply.

Standing up to scrutiny

So the monetary rates and divisions are right and fair and stand the test of close scrutiny with a now judicially accepted criterion for annual review which can see them go up or down or remain as they are.

In exercising discretion on which rate the courts apply the “seven pillars of wisdom” set out in CPR 44.5 and elucidated on in Sara Cox v MGN Limited [2006] EWHC 1235 (QB): effort, specialist knowledge, responsibility, case importance, complexity, difficulty or novelty are considered.

As a consequence in Ryan v Trettol Group Limited London rates were considered reasonable for a claim issued in the Nottingham District Registry and in the unreported case of Wood v Worthing and Southlands Hospital NHS Trust (9 July 2004) allowed London rates for a complex clinical negligence case conducted in Hampstead. In Higgs v Camden and Islington Health Authority, a high-value complex clinical negligence matter was awarded an hourly rate of £300 for Outer London with the court commenting the rate was justified due to the unusually intensive level of input required from the solicitor and counsel.

So the rates are a starting point and if defendant firms are unhappy with the levels sought or awarded then they either lack conviction in taking their arguments or their evidence to hearing or, more likely, they have been proved wrong.

Fraser Whitehead is a partner in RJW and a member of the MoJ costs advisory committee