Clear and Compelling reason required to recover rates exceeding guidelines
Posted on 2nd May 2023 at 16:09
By Sean Linley, Costs Draftsman
The case of Manek & Ors v 360 One WAM Ltd & Ors (Re Consequentials) [2023] EWHC 985 (Comm) is a reminder that a party claiming rates exceeding the Guideline Hourly Rates ("GHR") must have "a clear and compelling justification." In Manek the High Court declined to allow rates exceeding GHRs in a large commercial claim.
The decision on hourly rates
Simon Rainey K.C. (sitting as a Judge of the High Court) dealt with an objection raised by the Defendants as the hourly rates claimed. It was noted that the Grade A and C rates claimed were 88% and 117% higher than the applicable guideline rate.
The Judge noted that (underline is our emphasis):
"12. The Court of Appeal has stressed in a number of recent decisions that, in the case of solicitors' fees, 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: see e.g. Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466 and Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See (Costs) [2022] EWCA Civ 1061. The sorts of justifications which might apply are set out in PD44SC, para. 29.
13. The justification put forward by the Claimants is that the case is complex and that the litigation is substantial and of high value, involving an alleged international fraud (Consequentials Skeleton No. 1, para. 5(3)(b)) and that the overall level of costs (dealt with by me above) shows that the Claimants conducted the litigation economically and efficiently in terms of partner time when compared with the Defendants (ibid., para.. 5(3)(c) and Consequentials Skeleton No. 2, para. 2).
14. The latter point goes to numbers of hours claimed and does not address nor could it justify claiming rates substantially in excess of the Guideline Rates.
15. The other points relied upon in justification of the rates are, with respect, generic and could be made equally in many other jurisdiction challenges involving fraud, and involving much higher claim values.
16. I bear in mind that the updated Guideline Rates are meant to reflect heavy and complex Commercial Court and Chancery Division litigation. As it was put by Birss LJ in Athena Capital (supra) at [10]:
"In my experience there has been a view that the previous set of Guideline Hourly Rates (before 2021) were not directed to the heaviest work such as takes place in the Business and Property Courts. In part no doubt this was because they were so out of date. Whatever the position was or was thought to be, it changed in the current set of Guideline Hourly Rates, which were approved by the Master of the Rolls in August 2021. As my Lord pointed out in Samsung v LG, the current set includes a band called "London 1" which is a set of rates directed expressly to very heavy commercial and corporate work by centrally London based firms. I would add that the London 1 rates band in the current Guideline Hourly Rates is based on evidence from the Business and Property Courts themselves (see the Civil Justice Council's Final Report of April 2021). Therefore the London 1 band is directly applicable to this case and so a justification for the much higher rates was needed"
17. I note too that by comparison and handling the same litigation, the Defendants' hourly rates are only slightly higher than the Guideline Rates.
18. I do not consider that any real justification or special reason has been made out by the Claimants for allowing the recovery of costs from the Defendants at a level so far above the Guideline Rates.
19. Costs will therefore be summarily assessed on the basis of the hours claimed but only at the Guideline Rates.
20. I do not consider that any further discount is appropriate.
21. I therefore summarily assess the Claimants' costs on the basis claimed, save for the application of the Guideline Rates for Grades A, C and D, together with VAT. The parties are invited to agree the appropriate figure produced by my assessment."
What does this mean for me?
It's important to be clear that the case at hand and that of Samsung Electronics Co Ltd are focused on commercial claims. Many Paying Parties focus upon these sorts of cases as a means to challenge hourly rates, however, the distinction between commercial and non-commercial work is important. The GHRs have built into them (for London firms) GHRs for heavy commercial work. Other kinds of work do not carry this distinction within the GHRs. This is important as in principle it will be easier to distinguish a non-commercial case than a commercial one.
The SCCO Guide to the Summary Assessment of Costs 2021 provides that "the guideline rates are not scale figures: they are broad approximations only." It continues "the guideline figures are intended to provide a starting point for those face with summary assessment. They may also be a helpful starting point on detailed assessment." Paragraph 29 goes further (underline our emphasis):
"In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for grade A, B and C fee earners where other factors, for example the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element, would justify a significantly higher rate. It is important to note (a) that these are only examples and (b) they are not restricted to high level commercial work, but may apply, for example, to large and complex personal injury work. Further, London 1 is defined in Appendix 2 as ‘very heavy commercial and corporate work by centrally based London firms’. Within that pool of work there will be degrees of complexity and this paragraph will still be relevant."
The Guide tells us two important and non-controversial things:
1. That the GHRs remain a starting point only.
2. That justification must be given for a rate exceeding GHRs.
And it should also be stated that whilst rates were indeed reduced in the mentioned cases of Samsung Electronics Co. Ltd and Athena Capital Fund SICAV-FIS SCA there are plenty of recent cases where the reverse is true.
The cases of Various Claimants v News Group Newspapers Ltd [2023] EWHC 827 (SCCO) and Harlow District Council v Powerrapid Limited (Rev1) [2023] EWHC 586 (KB) hourly rates exceeding GHRs were allowed with the latter finding that the guideline rates do not need to be used as a starting point at all.
The key is that any receiving party should be prepared to justify hourly rates exceeding guideline hourly rates using the CPR 44.4 factors. Without justification then rates could be limited to guideline.
The argument that guideline rates apply in all cases is a lazy one and one adopted routinely by paying parties. Receiving parties must be robust in justifying their position. Parties must be alive to the distinctions between commercial and non-commercial cases but none-the-less the same principles around justification persist. In short justification must be offered, if it is not the default position will likely be guideline hourly rates.
Manek and similar cases do not reinvent the wheel, indeed they don't even redesign them but it does serve a reminder as to the approach and principles to be undertaken when the Court considers hourly rates. They do not show that rates should be limited to guideline, rather they show that there is always an opportunity to recover hourly rates which exceed them so long as it is justified.
Unsure what is an appropriate hourly rate for your cases? Do you just want a chat about the assessment of hourly rates? Should you have any queries arising from this article or upon costs generally then please do not hesitate to get in touch with our friendly team either via phone 01482 534567 or e-mail info@carterburnett.co.uk
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