A recent report released by the Legal Services Board (LSB) on the cost of divorce, wills and conveyancing reveals that legal advice is generally 20% cheaper in the North of England and 17% cheaper in Wales. London-based solicitors’ practices are on average 33% more expensive than those based elsewhere. This has led the LSB to encourage consumers of legal services to shop around.
When it comes to personal injury work, the geographical differences in the cost of bringing a claim is measured with reference to the Guideline Hourly Rates (GHR). There is seldom any “shopping around” by personal injury claimants who generally chose a solicitor by way of a simple internet search or following personal recommendation. Given the manner in which most personal injury claims are funded, the cost of bringing the claim is a secondary consideration.
When it comes to assessing costs between the parties, one of the relevant factors for a court to consider is whether the successful party acted reasonably in employing the particular solicitors instructed and secondly, whether the rate is reasonable when compared to the average charged by similar firms in the same area. Geographical location has always been a relevant factor. Known as the Wraith principle - a well-established doctrine in the assessment of costs - the approach of allowing rates based on comparable firms doing comparable work received the support of the High Court in JXA v Kettering General Hospital NHS Foundation Trust [2018] EWHC 1747. Interestingly, the judge on appeal noted that the master at first instance had no evidence as to what rates other firms engaged in this type of work charged or the level of expertise of such firms. However, with the assistance of a costs judge, he was satisfied that the rates determined by the master fell within the reasonable band of decisions open to him.
The question as to what constitutes a reasonable hourly rate in any given case is a difficult one. This is in no small part because the GHR were originally intended to assist the court when carrying out summary assessments of costs and are said to have little relevance to detailed assessments. They are treated merely as a starting point from which the court can consider whether higher or lower rates ought to be awarded taking into account issues such as complexity, value and expertise. Furthermore, the current GHR date back to 2010 thereby questioning their relevance to claims conducted in 2020. This has resulted in a growing demand for the GHR to be increased to reflect solicitors’ rising costs with receiving parties often seeking rates far in excess of the GHR on the basis that there ought to be some additional allowance to reflect inflation.
In turn, paying parties have questioned how the cost of carrying out the work can be said to have risen exponentially during a period of economic stagnation. There is certainly no High Court guidance that inflation justifies higher rates. Given the ongoing advances in technology, increased home working and the potential reduction in overheads due to the rise in email communication, digital file sharing and so on, paying parties have asserted that there must have been a corresponding reduction in the cost of doing the work.
It is clear that a review of the GHR’s is long overdue and Mrs Justice O’Farrell’s comments in Ohpen in 2019 that the current GHR were “not helpful” added fuel to the fire. However, the reason why there have been no revisions issued since 2010 is highly relevant. The last review in 2014 failed to get off the ground since there was an inadequate response to the expense of time survey crucial to gathering evidence as to actual cost of running a litigation practice. The then Master of the Rolls, Lord Dyson, abandoned the review and made it clear that he wished to avoid arbitrary increases which would be unjustified in light of the recommendations that the average rates should in general be reduced.
A new Civil Procedure Rules Committee (CPRC) working group set up to carry out an evidence-based review of the GHR has faced the question of how the comparable cost of conducting litigation ought to be established. In order to avoid the pitfalls of the previous review, the group headed up by Mr Justice Stewart, is adopting a different approach. Referring back to the Jackson report, the CPRC sub-committed has identified that Sir Rupert’s vision for a review of the GHR was that it ought to be based on “broad approximations” rather than focusing on establishing the actual rates to “a high degree of accuracy”.
So, rather than gather evidence as to the cost of running a litigation practice, details are instead being collated from various professional organisations as to the hourly rates that have been allowed on assessment or agreed between the parties in a range of cases over a fixed period. Mr. Justice Stewart considers, “What costs judges in fact allow across a range of cases will be a highly important contribution to the report which the group has to prepare.”
This is all well and good and there can be no argument that local knowledge is valuable. But local knowledge of what? As outlined above, it was clear that the master assessing costs in JXA had no actual evidence as to what constituted a comparable hourly rate yet he felt able to allow a rate based, presumably, on his own experience of what the court had previously allowed in a case of that type. There is no evidence at all that what has historically been allowed or agreed between the parties necessarily reflects the actual cost of carrying out the work.
Setting GHRs with reference to broad approximations rather than on the basis of the cost of doing the work feels like a lost opportunity. Legal advisors acting for compensators are generally able to conduct claims at significantly lower hourly rates yet still make a profit. The age-old question as to why this is so usually receives a response referring to “buying power”. However, there must be more to it than that and an evidence-based review of the GHR based on cost presented the perfect moment to discover the answer.
The committee are due to report by the end of the year and it will be interesting to see what transpires.
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