At first glance, awarding a law firm based in Canary Wharf (one of the main financial hubs in the world) hourly rates in line with City of London rates may not come as a huge surprise. You would be forgiven for not realising that the post code of Canary Wharf (E14) in fact classifies it as an outer London area in accordance with the bandings of the guideline hourly rates.
As such, in Shulman v Kolomoisky and another, the claimant challenged the hourly rates sought by the second defendant (represented by Canary Wharf-based Skadden Arps Slate Meagher & Flom, a leading US firm) on the basis that the starting point for the assessment should be the Band 3 London guideline rates, and that the nature of the work would mean that an hourly rate somewhere between the City and outer London rates would be appropriate.
Decision
In his ruling, Master Rowley referred to the claimant’s starting point as being “entirely opportunistic” and that “rates equivalent to those to be found in the City are much more appropriate”. Whilst reiterating the initial intention of the guideline hourly rates (GHRs) when they were first introduced (to assist judges on summary assessments), the Master acknowledged that GHRs were often referred to on detailed assessment but that this was likely due to the lack of evidence submitted by receiving parties to enable a comprehensive analysis of how their hourly rates claimed have been calculated. This has ultimately led to courts and advocates defaulting to the GHRs as an arbitrary starting position and relying on the CPR 44.4(3) factors to determine whether the rates claimed are justified, or what reasonable hourly rates would be given the circumstances.
Although critical of the claimant’s approach to determining a reasonable hourly rate, and in recognising the specialist work carried out by Skadden, the Master was unable to support the hourly rates claimed (the highest being £1,043.29 per hour) and ultimately concluded that £750 per hour for a Partner was more appropriate.
The utility of the GHRs
Criticism of the current GHRs does not come as a surprise. O’Farrell J, when conducting a summary assessment of a contested application in Ophen Operations UK Ltd v Invesco Fund Managers Ltd, deemed the rates set in 2010 as “not helpful in determining reasonable rates in 2019”. Master Whalen in the Court of Protection matter PLK and others echoed this view and directed costs officers conducting Court of Protection assessments to “exercise some broad, pragmatic flexibility when applying the 2010 GHR to the hourly rates claimed”. Going one step further, the Master stated that hourly rates claimed that were roughly around 120% of the 2010 GHRs should be considered prima facie reasonable. Equally, rates exceeding 120% would appear unreasonable.
The Civil Justice Council Working Group on Guideline Hourly Rates review
In light of the vanilla outcome of the 2014 review, the lack of data which ultimately led to the status quo, and despite Lord Dyson’s view that guideline rates were becoming “less and less relevant”, the findings of the current review being undertaken by the Civil Justice Council (CJC) is eagerly awaited by many and considered long overdue.
The working group formed by the Master of the Rolls and overseen by Stewart J will consider evidence provided by law firms across the country prior to putting forward their recommendations. However, in contrast to the approach adopted in 2014, data relating to “expense of time” calculations has not been requested. Rather, firms have been asked to provide information on actual case outcomes spanning the last 18 months, including case type, case value, total costs claimed, hourly rates sought and hourly rates awarded on assessment.
The lack of “expense of time” data in the current review may be a pragmatic approach to help achieve some consistency on detailed assessment outcomes of comparable cases across the courts. However, if we draw on Master Rowley’s comments in Shulman, given the range of litigation undertaken particularly in the City, one set of hourly rates per area may not offer the full insight to assist a judge conducting an assessment of costs, whether summarily or detailed. A matrix or framework, taking into account case type and value, with discretion to apply variances pursuant to the “seven pillars”, may be of greater assistance to all parties.
