Hourly Rates; the Latest Development

Background

All practising litigators will be aware that, in recent months, the landscape with regards to guideline hourly rates has been evolving. The first development of note is the matter of Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC), heard in 2019. Mrs Justice O’Farrell noted that it is unsatisfactory that the current guideline hourly rates are based on rates fixed in 2010 and reviewed in 2014. Mrs Justice O’Farrell noted that these are particularly unhelpful given that the guideline rates are significantly lower than those charged in practice and she commented that a further review would be welcomed.

At the beginning of the year, news arrived that the Civil Procedure Rules Committee would be undertaking a detailed review of the guideline hourly rates and the Committee sought details regarding agreed and assessed hourly rates from practitioners. It was initially expected that the review would be complete this year however doubt has now been cast on this timeframe.

Following this, on 30 September 2020, the judgment of PLK & Ors (Court of Protection:Costs) [2020] EWHC B28 (Costs) (heard in May) provided further guidance. Master Whalan noted that the guideline hourly rates of 2010 cannot be applied reasonably or equitably without some form of monetary uplift to recognise the effects of inflation. He concluded that a 20% uplift to the guideline rates would be reasonable and directed that this guidance could be applied to all outstanding Court of Protection Bills of Costs from 2018 onwards. That is of course subject to any increase in rates having been communicated to the client at the relevant time.

The very recent judgment of Harvey Cohen v Fine and Others [2020] EWHC 3278 (Ch), heard on 30 November 2020, brings us a further update with regards to hourly rates.

Harvey Cohen v Fine and Others [2020] EWHC 3278 (Ch)

This matter concerned two key issues; the application of guideline hourly rates and the correct approach to take when conducting summary assessments. The substantive proceedings involved a dispute regarding the sale of property which was held jointly due to clauses contained within a will. The Claimant, the professional executor of the will, attempted to sell the Deceased’s property however the three Defendants, the Deceased’s adult children, had resisted sale for various reasons. Consequently an action was brought under CPR 64; Part 8 proceedings were issued to obtain an order for sale and the Claimant also sought his costs on the indemnity basis out of the estate, as per CPR 46.3.

The matter was heard by District Judge Matharu by telephone on 11 June. The District Judge made an order for the sale of the property, with consequential directions, and thereafter summarily assessed the Claimant’s costs of the action. The Claimant’s N260 claimed costs totalling £48,846, inclusive of VAT and were summarily assessed by DJ Matharu in the sum of £27,000. Permission to appeal was refused at the hearing however, on 16 October 2020, the Vice-Chancellor of the County Palatine of Lancaster (Snowden J) granted permission to appeal on the basis that the decision of the District Judge had been flawed due to reasons set out in the grounds of appeal.

The Claimant’s appeal was based on three grounds:

1. The District Judge failed to have regard to or give proper weight to the fact that the costs were to be assessed on the indemnity basis due to the Claimant seeking costs as a professional executor
2. The District Judge had erred in failing to have sufficient regard for the components of the N260, instead making arbitrary reductions which were absent of clear reasons
3. The District Judge made a clear procedural error by failing to adjourn the hearing for costs to be either summarily assessed at a later date or subject to detailed assessment

The approach to summary assessment

The appeal was heard by HH Judge Hodge QC who found that District Judge has indeed erred in her approach to the summary assessment, which had produced an unjust result.

HH Judge Hodge QC referred to the cases of McLinden v Redbond [2006] EWHC 234 (Ch), Flowers Inc v Phonenames Ltd [2001] EWCA Civ 721, [2001] and Morgan v The Spirit Group Ltd [2011] EWCA Civ 68; it was noted that a summary assessment should include a line by line assessment and should not be limited to determining the amount of a proportionate sum. He noted that, in the present context, the summary assessment should include a line by line assessment and this was different from a full detailed assessment on the basis that there was no need for any formal costs pleadings.

The Claimant invited the court to direct that the costs should be subject to detailed assessment. HH Judge Hodge QC considered that this would be in contention with the overriding objective and instead conducted a further summary assessment of the costs. The total of the summarily assessed costs amounted to £35,703.

Guideline Hourly Rates

In addition to the approach to the summary assessment, the application guideline hourly rates was also considered. HH Judge Hodge QC referred to the decisions of Ohpen Operations UK Ltd and PLK & Ors in addition to the fact that a review was currently being undertaking by the Civil Justice Council. He noted that, until the review is complete, the position with regards to guideline hourly rates is somewhat unclear. He concluded that, pending the outcome of the review, the guideline hourly rates should at least to subject to an increase that takes account of inflation. Through utilising the Bank of England inflation calculator, he concluded that a 35% increase on the guideline hourly rates would be reasonable. He noted that this was of course subject to the indemnity principle and therefore, any rates would be capped in line with those charged to the client.

It is also worth noting that, in this instance, HH Judge Hodge QC referred specifically to the band one hourly rates and did not comment as to whether the same rate of inflation would apply across the board.

Summary of the guideline hourly rates by case

Current Guideline Hourly Rates

PLK Rates (20% uplift)

Cohen Rates (35% uplift)

Note that the 35% uplift was only discussed with regards to band 1 specifically, it was not considered whether these rates would be applicable across the board.