Guideline hourly rates are to remain frozen at 2010 levels indefinitely, announced the Master of the Rolls Lord Dyson, on 17 April 2014.  The decision follows his July 2014 report, where he called for more detailed research to be undertaken; the funding for which has not been forthcoming. Lord Dyson’s decision was not made “in a vacuum” and is influenced by trends within the legal services market, including the impact of technological development, sub-specialisation, the changing role of proportionality and the impact of costs budgeting. Lord Dyson recognised that a role for guideline hourly rates does continue to exist, both in terms of summary assessment, as “a yardstick for comparison purposes in costs budgeting” and as a “national benchmark”.

The use of guideline hourly rates

Lord Dyson’s reference to trends within the market is an interesting one.  The practical value of guideline hourly rates exists only for summary assessment although their use for lower value bills or lower grade fee earners in bills of costs is common.  

Sub-specialisation

Conversely, departure from the rates in high value litigation is the norm and as such the freeze on the rates will make little difference.  The “sub-specialisation” of lawyers, as highlighted by Lord Dyson, has already led to a significant move away from guideline rates, with specialist Lawyers demanding and recovering hourly rates on a par with leading Counsel.  This however, appears to be primarily in high value cases in the High Court, as against the lower value PI/Civil cases which are not deemed to be of sufficient complexity to warrant a shift away from guideline rates. 

Going forward, it is possible that there will be a shift away from these rates in lower value bills of costs and summary assessment schedules, to reflect the true cost of running litigation.

Budgeting

Whilst Lord Dyson makes reference to guideline hourly rates being used as a “yardstick” in budgeting. in practice, consideration should not be given to the rates at the Costs and Case Management Conference (‘CCMC’).   In any event, given the higher entry threshold for cases to enter budgeting, it is unusual to see anyone but the grade D fee earners being claimed at guideline hourly rates.  Rates being included in their client’s budget tend to reflect the nature and complexity of the case.  

Proportionality

The impact of proportionality and more specifically the change to the proportionality test implemented by the Jackson reforms remains to be seen fully, as cases impacted are only now entering the Senior Courts Costs Office (‘SCCO’) and local Courts.  That said, the more global approach to considering the value of a claim being undertaken in CCMCs is certainly reducing the value of the guideline hourly rates and is likely to follow through to detailed assessment hearings.

Fixed costs

Lord Dyson expressed his hope of “a trend towards the greater use of fixed costs in litigation”, a method of costs recovery that he has long been advocating, stressing that he “will continue to press this point to Ministers”. To date, the introduction of fixed costs has been limited to lower value claims, although the impact of that introduction on such cases is not insignificant.  Whilst there does not appear to be any appetite for the expansion of the fixed costs regime from either the industry or the Ministry of Justice as this stage, this may change if the engagement from practitioners in budgeting does not continue to increase.  It would seem that Lord Dyson’s report merely reflects the move within the industry, both reflecting changing work practices and a more global market.  Whether this is a precursor of a move away from budgets and traditional assessment to fixed fees, only time will tell.

James Barrett is managing associate at Practico Costs Lawyers