One year has now passed since May 2023, when the Civil Justice Council published its final report on the civil costs regime, in which the Costs Working Group (CWG) recommended that the concept of guideline hourly rates should be retained.
Of the recommendations made by the CWG, the fourth was that the test to be applied when considering a departure from the guideline hourly rates should be clearly stated. It is the purpose of this article to examine and analyse the present position of case law regarding departure from guideline hourly rates, and to clarify the circumstances in which receiving parties may and may not potentially expect to exceed the rates.
Having been static for the previous 11 years, the guideline hourly rates were increased in August 2021 and the Guide to the Summary Assessment of Costs was updated in October 2021 on the authority of the Master of the Rolls. Nevertheless, in April 2022, in the case of Samsung Electronics Co. Ltd [2022] EWCA Civ 466 the Court of Appeal had to consider hourly rates that were well above the guidelines. The Guide itself allowed that a departure from the guidelines may be appropriate “in substantial and complex litigation”, providing examples such as the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element. The claimants acknowledged that their hourly rates were above the guideline rates “but that is almost always the case in competition litigation”. Lord Justice Males deemed the claimant’s explanation to be no justification at all, and stated that 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.”
The Court of Appeal reiterated that a clear and compelling justification was needed in the case of Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See (Costs) [2022] EWCA Civ 1061 and Lord Justice Males further affirmed that although counsel’s fees are not calculated with reference to the guideline hourly rates, they must nevertheless be reasonable and proportionate. Lord Justice Birss further noted that the present guideline hourly rates include a “London 1” band of rates, which is “directed expressly to very heavy commercial and corporate work by centrally London based firms.”
Consideration was given to the uplift to guideline rates outside London in the case of EVX v Smith [2022] EWHC 1607 (SCCO), in which Costs Judge Brown was concerned about the hourly rate of fee earners whose work was claimed a Grade C rates. He affirmed in principle that the “instruction of specialist clinical negligence solicitors in a high value claim would justify some uplift on the ordinary guideline rates for, at least, the lead or Grade A fee earner” and specified that he did not consider the rates of £315 per hour and £320 per hour to be “unreasonably high.” Nevertheless, he considered the Grade C rates to be high because they exceeded the Grade B guideline hourly rate and were not far off the rate of a Grade A fee earner.
In the case of Otto v Inner Mongolia Happy Lamb Catering Management Company Ltd [2024] EWHC 497 (Ch), HHJ Paul Matthews considered two further arguments: (i) whether the rate of UK inflation, which had been 20.14% between 2021 and October 2023, warrants a higher rate and (ii) whether remote working means that the geographical location of a firm of solicitors was less relevant to costs. In response to the first point, the judge opined that “I do not think it would be right for me sitting here in effect to create a new guideline rate based on what I am told inflation has amounted to since the last guideline was issued. The issue of new guidelines is not a matter for me.” In response to the second point the judge opined that if working remotely meant an absence of overheads, “the allowable rates would actually be lower, not higher.”
In the case of Manek and Others v 360 One Wam Ltd (Formerly Known as IIFL Wealth Management Ltd) and Others [2023] EWHC 985 (Comm), the claimants attempted to justify rates in excess of guideline rates by arguing that the case was complex and “the litigation was substantial and of high value, involving an alleged international fraud. and that the overall level of costs… (showed) that the Claimants conducted the litigation economically and efficiently in terms of partner time when compared with the Defendants. Simon Rainey K.C. (sitting as a Judge of the High Court) opined that the complexity of the substantial litigation would justify an increased number of hours but not an uplift to the hourly rate, and that the points made regarding economy and efficiency were too generic and did not pertain specifically to this litigation.
In the case of Merricks v Mastercard Incorporated and Others [2023] CAT 53 (09 August 2023), the claimants argued that the hourly rates charged exceeded the guideline hourly rates because the issues were complex and required specialist knowledge. The judges accepted that in principle rates in excess of the guidelines may be justified but that in practice the rates that were respectively 70% and 60% over the guideline rates were not. “Taking a broad brush approach” the judges considered that 30% over the guideline was reasonable.
In summary, it appears from these cases that uplifts from the guideline rates will often be awarded but subject to justification. Each case will be different. The complexity of the litigation will always be one of the key features . Grade A fee earners will often we subject to higher uplifts than their junior colleagues.
