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How do we now get some progress on hourly rates paid to claimants?

29 July 2014

Yesterday saw the result of the year-long process of reviewing the emotive subject of what hourly rates should be paid to successful litigants and their lawyers in cases to which fixed costs do not apply. The area is an important one to claimants’ solicitors whose business plans will be substantially built on these rates, as well as to insurers who will be paying them. The rates have not changed since 2010.

Only very little change at the moment

The upshot is that the Master of the Rolls, Lord Dyson, has decided that apart from two bits of tweaking as to the categorisation of certain types of lawyers and how they fit into the current matrix of Guideline Hourly Rates, no changes to the actual rates themselves should be made at this time, because of fundamental shortcomings in the evidence underpinning the recommendations which he was reviewing.

The Costs Committee’s report

Also released yesterday was the report submitted to the Master of the Rolls by the Civil Justice Council’s Costs Committee which had been set up to review the GHRs and which provided those recommendations, and it is interesting to look at the changes which they made as a sign of what may happen in the future. But at the same time it is quite unclear as to how this issue will now be taken forward, and whether in fact all parties to litigation including insurers are now stuck with the current rates for some time yet.

The reason for Lord Dyson not accepting the Costs Committee’s recommendations is because of a lack of evidence underpinning them. He concludes his sign off rejecting the conclusions of the committee’s report by saying that there should be more discussions now with the MoJ and with the Law Society in order to obtain evidence upon which new GHRs can safely be based. 

The issue returns to the MoJ

Certainly the issue has now been returned to the MoJ for further thought, but it is quite unclear as yet how Mr Grayling and his team will want to take the issue forward, and with the General Election just over 9 months away any solution which they want to adopt if they want to see the issue through to a conclusion will have to be a quick one. The issues here are political as well as legal, and are connected with what the Government sees as the on-going need to control legal costs for various reasons including the reduction of the cost of motor insurance. Where it seems that there is acceptance that some rates are too high, this is surely an issue this it is worth continuing to tackle.

In his review of civil litigation costs, Lord Justice Jackson wanted a Costs Council which could itself resolve costs issues such as GHRs. The Government did not accept that recommendation and instead of that, the MoJ went for the Costs Committee not having the power to decide the level of GHRs but only to provide recommendations on them, with the MoJ itself controlling the level of fixed costs by making the decisions as to where they should be set.

Where the Costs Committee process has effectively failed in delivering an evidence-based solution which the Master of the Rolls was able to accept, is the committee in fact likely to be able to deliver a better solution given more time and resource? Is there a chance that the MoJ will instead see the need to take control of GHRs itself as it has done with the level of fixed costs, and taking account of current concerns of regular funders of litigation such as insurers, and the development of claims handling processes over the last 5 years, set out its own plans?

Leave it for now?

The other justification mentioned by Lord Dyson for not changing the position now was that the evidence which the Committee had seen was clearly not based on data from the post-Jackson era because it was too early for that to be available. This factor also provided justification to leave the issue for now, but in reality there are already important issues with the GHRs which need to be tackled, including, as the Committee saw, with the increased use of paralegals and the level of Grade D rates currently payable to them which over-value their work.

While the increased use of fixed fees is likely to be on the agenda, certain legal work will always be done on the hourly rate basis, and therefore GHRs continue to have a future.

The recommendations which are not happening

It will be recalled that currently there are 4 types of lawyer recognised by the GHRs, ranging from Grade A where the solicitor is 8 years or more qualified, though to Grade D for trainee solicitors and paralegals, as well as effectively 5 geographical bands, 3 of them covering London and 2 the rest of the country.

The committee’s report had recommended new figures in all cases, amounting to an average reduction in hourly rates across the board of 5%. Specifically, it advised an increase in 7 scenarios varying between 5 and 18%, but this was more than off-set by a proposed reduction in another 18 of between 13 and 36%. Part of the reason for the emphasis on reductions was the recommendation of a new Grade E specifically for paralegals, with lower rates than for Grade D. It also suggested combining London bands 1 and 2 to reduce the number of London bands to 2, and reducing the number of provincial bands from 2 to 1. These proposals are the recommendations which have not been accepted.

The committee’s report had made certain recommendations which the Master of the Rolls did accept. Firstly, he agreed with the committee that there should not be an extra top level banding (called A star) for solicitors with 20 years’ experience. Secondly, he agreed that there should not be different rates for different types of claim. Thirdly, he agreed that there should not be different rates for summary assessment on the one hand (where of course these rates originate), and detailed assessment on the other, though the Master of the Rolls did seem to accept the valid point that GHRs needed to be something which should apply across the piece on costs issues and not just to summary assessment.

Lord Dyson did though reject the Committee’s view that paralegals should have their own lower Grade E rate. The Committee thought there was enough evidence to know what those rates should be and proposed £75-83 per hour for most cases. The Master of the Rolls did not though think that there was enough evidence to set a paralegal rate and it is unclear whether he thinks the principle of a paralegal rate is made out. 

The recommendations which are happening

The two tweaks which have been made are these. Firstly, Costs Lawyers, a new breed since the rates were last updated in 2010, and who will usually work at Grade D level, can now look to recover at Grade C or indeed Grade B if they are properly qualified and the work is complex.

Secondly, fellows of the Chartered Institute of Legal Executives (do check whether the legal executive is properly qualified) with more than 8 years’ experience can like solicitors now be claimed at Grade A where the work demanded a Grade A lawyer.

Both of these adjustments will add a limited inflationary effect. But at least Lord Dyson recognised that where the thrust of the report’s recommendations had been towards a reduction in rates, he should avoid allowing an inflationary increase on the current rates as a short term measure and did not do so. The habit of allowing year-on-year inflationary increases in the GHRs is now in the past, perhaps because of the high level of hourly rate charges that would otherwise have been payable by now if the practice had continued.

So that is where the issue of GHRs now stands. No real change for now. We see the next key move in this area as one for Government. They may show their hand in the autumn. We will have to await developments.


For more information please contact Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.co.uk

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.