1. The GHR
What are the GHR?
GHR stands for guideline hourly rates. They were originally intended to assist judges who were faced for the first time with the task of making a summary assessment of costs at the end of a short hearing as a result of the Woolf reforms and the implementation of the Civil Procedure Rules in the late 1990s. They have since become the widely-accepted guideline for the recoverable hourly rate for different grades of fee earner in different regions of England and Wales.
The GHR may also be used as a reference point for the purposes of costs budgeting and management.
How long has the GHR been around?
Although different regional GHRs had existed before the Woolf reforms, they were locally-derived and based on information gathered by district judges and solicitors on the practice in their county court, later communicated to the Supreme Court Costs Office (SCCO) for publication.
The issue of the GHR really found momentum, however, with the introduction of the Civil Procedure Rules in 1999, which required judges at all levels to assess costs summarily at the end of a trial on the fast track, or at the conclusion of any other hearing which had lasted not more than one day.
The introduction of the new Rules and Practice Directions in 1999 led to an immediate request from judges for some guidance as to how to go about summary assessment, as the result of which the SCCO published a Guide in 2002 which included guideline figures for a large number of places on the circuits.
When were the GHR last updated?
The GHR were last updated in 2010.
Why is there a four year gap between the last update and this one?
The bands for 2009 were based on recommendations made by the Advisory Committee on Civil Costs (ACCC) under the chairmanship of Professor Stephen Nickell.
The GHR for 2010 were based on a simple inflationary uplift of those 2009 figures, which were accepted by the then Master of the Rolls as an interim measure. He did not, however, feel able to set new rates, a year later in 2011, on the basis of a further recommendation from the ACCC for another purely inflationary index-linked calculation, without a broader base of evidence having been sought from practitioners. Thus, the 2010 rates have remained in force ever since.
What status does the GHR have – do I have to follow them?
The GHR are a guideline only. They were described by a previous Master of the Rolls as ‘broad approximations only’.
Do the GHR only apply to solicitors?
No – the GHR are used as a guideline to the rates charged for different types of fee earner, including legal executives, paralegal and trainee fee-earners of all kinds. While employed costs lawyers and costs clerks are not detailed in the GHR at present, consideration is being given to including them as a separate category in the new guidelines.
To what parts of the Country do the GHR apply?
The GHR apply to England and Wales only. Scotland and Northern Ireland have their own costs regimes.
Are there any regional differences in the GHR?
Yes. Three national bands (bands 2 and 3 are effectively the same since the rates were revised in 2009) and three London bands (City of London, Central London and Outer London). Rates for Outer London, Bands A and B are presented as ranges to reflect the wide range of work types transacted in these areas. The reason for regional differences is to reflect the differing costs of various locations, for example salary and accommodation costs.
Are the regional divisions likely to remain the same?
That depends on the evidence the Committee receives, but it is likely that there will be some variations..
To what areas of practice do the GHR apply?
The GHR are currently applicable to contentious litigation in all civil cases (excluding family cases) that have been heard in a fast-track or (less frequently) multi-track case for which a judge is making a summary assessment of costs. They are not of relevance to cases being heard in the small claims court or subject to a fixed costs regime.
The court’s power to make a summary assessment is couched in broad terms under the CPR, Practice Direction 44, para 9.1: ‘Whenever a court makes an order about costs which does not provide only for fixed costs to be paid the court should consider whether to make a summary assessment of costs.’
Are there different rates for different types of work?
Not currently – although this is one area that the Costs Committee will be considering.The GHR are often used as a starting point, in any event, for setting rates for specialist and complex work.
Rates for Outer London, Bands A and B are already presented as ranges to reflect the wide range of work types transacted in these areas. Whether or not it is possible in the future to further break down the GHR to reflect different specialist areas of litigation (such as commercial, personal injury or clinical negligence) will depend on the evidence the Committee receives.
What are the different grades of fee earner?
The 2010 GHR include a breakdown into four grades of fee earner, covering solicitors, legal executives, trainee solicitors, paralegals and “fee earners of equivalent experience”. There is currently no express reference to costs lawyers or costs clerks although this is under consideration.
2. The survey
Is the survey comprehensive enough to ensure that appropriate rates are assessed?
Yes. Given the limited time available to produce evidence-based recommendations and the limited resources available to the Committee, the Committee decided that it should draw on recent data made available by the Law Society, including the responses to theFirms’ Finance Survey 2011 and Practising Certificate Holders Survey 2012. CILEX has also made available the results of a survey of its members. The Committee also has available the questionnaire used to conduct the Annual Law Firm PWC Survey of 2012. The Committee’s own survey is intended to address areas where existing data might usefully be supplemented or to raise questions that will allow that data to be further interrogated.
How will you calculate a GHR based on this information?
The essential approach is to make an assessment of the ‘cost of time’ to which will be applied a reasonable profit margin. By assessing salaries, billed hours and overheads, all in relation to grade of fee-earner and geographical location of the firm, the ‘costs of time’ will be assessed and then a judgment on a reasonable profit margin will be made resulting in the Committee’s recommendations for the GHR(s) to be recommended submitted to the Master of the Rolls.
What is the methodology being employed by the Costs Committee in making its recommendations?
As indicated above, the Committee is supplementing and testing existing data gathered by the Law Society and others by inviting responses to the Committee’s own survey seeking additional data on salaries, fee income, hours claimed and overheads for each grade of fee earner in each geographical band, and information about the spread of income between different areas of work.
Having analysed this data, along with the results of the Committee’s call for evidence, the Committee may invite a number of individuals and organisations to oral submission in the New Year. An analysis of all of that material, along with an assessment of a reasonable profit margin for solicitors’ firms, will enable to Committee to reach a conclusion on the recommendation it is to make to the Master of the Rolls.
Is this survey the only additional material the Committee will be using to make its assessment of new GHRs?
No – the Committee is also making a general call for evidence to anyone wishing to make further written submissions on the new GHR. The Committee may also be inviting a small number of organisation and individuals to make oral submissions early in 2014. It will be meeting in mid-December to decide who should be invited to give an oral submission.
Do I have to answer all the questions in the survey?
Whilst we would prefer to receive comprehensive replies because the survey has been designed to meet our needs, part replies are better than no replies at all. None of the responses in the survey are mandatory, but the more data we have, the stronger and more representative the evidence base for our recommendations will be.Please remember this is an important opportunity for a firm such as yours to indicate its view on this important topic.
Who will see our response to the survey?
The Committee is acutely aware of the sensitivity of data from individual firms, particularly as to realised billing rates and overheads. The responses will be treated in strict confidence with the only members of the Costs Committee potentially having access to the full responses and the identities of the respondents being Mr Justice Foskett and Senior Costs Judge, Peter Hurst – the Chairman and Deputy Chairman of the Committee respectively. The Committee Secretariat comprising a very few individuals will also have access to the responses for administrative purposes.The ‘raw material’ from the responses will be analysed in the first instance by the Committee’s economic advisers, Professors Paul Fenn and Neil Rickman.
In question 11, what’s the difference between ‘billed’ and ‘billable’?
Hours recorded as billable. ‘Recorded’ or ‘billable’ time is simply time that is spent on a case that is recorded by solicitors on the time recording system for the case. The vast majority of solicitors have such a system. It is time potentially chargeable (or ‘billable’) to another party in the event of success in the litigation or to the client.
Hours billed to the client. ‘Billed’ time is time actually billed to the client – whether to be paid by the client or (in part or full) by the paying party. This is because wherever the money comes from to pay the bill, it is to the client that the bill has to be delivered. In question 11 of the survey,for the sake of claritywe have included reference to time that is payable by the paying party, either after an assessment or as agreed after negotiation.
If your firm’s systems do not permit an answer to question 11, please endeavour to give an approximate answer and in any event give a short explanation of the position under question 17 (‘Further comments’). It is recognised, for example, that figures for costs are often agreed on a lump sum basis, without specific attribution to hours and hourly rates.
The purpose of this distinction is to try to identify the number of hours which the receiving party claims as recoverable and the actual recovery.
The Costs Committee has met on four occasions between 16 April and 30 September 2013. Its next meeting is planned for mid-December 2013. Synopses of its meetings are available on the CJC’s website.
The deadline for responses to the survey and to the call for evidence is 29 November 2013.
After analysis of responses to the survey by the Committee and its advisory panel, oral sessions may be held with selected professional bodies, organisations and firms during February 2014
The Committee will then meet to agree upon the recommendations, to be submitted to the MR by the end of March 2014.
How are you taking into account the impact of the Jackson reforms?
As evidence emerges, there will be a need to consider the effect of the Jackson reforms including the abolition of the recoverability of success fees, ‘After the event’ (ATE) premiums and referral fees, and the introduction of alternative business structures and damages-based agreements.
The Committee has, however, been advised that the Supreme Court Costs Office (SCCO) and county courts generally have as yet seen little, if any, evidence of changed practices post-Jackson and has decided that a specific question on the impact of the reforms would not be helpful in the middle of an accounting period given the evidence-based nature of the present exercise. However, respondents are encouraged to make any observations on this area in the ‘Any other comments’ box to enable the Committee to gain an appreciation of the emerging picture.
When will the GHR next be updated?
The remit of the Committee is to keep the GHRs under review and it is likely that the Committee will be considering the position again next year in the light of any evidence that emerges.
3. The process
Who compiled the survey?
The survey has been put together by the Costs Committee, under the aegis of the Civil Justice Council – an independent, judicially-chaired body, with a membership drawn from the judiciary, hands-on legal practitioners, costs experts and representatives of interested bodies, and advised by senior academic economists
What is the membership of the Costs Committee?
The Committee is chaired by a High Court judge, Mr Justice Foskett and its Deputy Chairman is Senior Costs Judge, Peter Hurst. The members comprise a Circuit Judge, a District Judge, a consumer representative, a costs barrister, a ‘claimant’ solicitor, a ‘defendant’ solicitor, a commercial litigator, a costs lawyer, a chartered legal executive, an insurer, a business representative, a trade union representative, and an MoJ representative. The Committee has also had the benefit of help from an advisory panel which consists of two economists, Professor Paul Fenn (of Nottingham University) and Professor Neil Rickman (of Surrey University).
A full list of members of the Committee can be found on the website, along with synopses of its meetings.
What are the terms of reference of the Committee?
The terms of reference of the Committee are:
- To conduct a comprehensive evidence-based review of the nature of the GHR and to make recommendations to the MR by the end of March 2014 to assist him in setting the new rates
- On an annual basis to review the GHR and make recommendations to the MR regarding how they need to be updated
- To monitor the operation of the costs rules, in consultation with the MoJ, and, where appropriate, to make recommendations
Is this part of the Government’s continuing efforts to cut the costs of cases?
No. The Costs Committee is independent and chaired by a High Court judge. It has no pre-determined agenda or view and is approaching its task with an entirely open mind.
Who can complete the survey?
Responses to the survey are invited from all law firms in England and Wales.
Are responses only welcome from firms of solicitors firms that are members of a professional body?
No. The Committee welcomes – and encourages – responses from all law firms in England and Wales.
What will happen next?
The Committee’s survey and call for evidence were sent out on 1 November 2013, and responses invited by the end of that month. After analysis of responses to the survey and call for evidence by the Committee and its advisory panel, oral sessions may be held with selected professional bodies, organisations and firms during February 2014. The Committee will then meet to agree upon their recommendations, to be submitted to the Mater of the Rolls by the end of March.