THE HOURLY RATE FOR INCURRED COSTS: WHY IT IS IMPORTANT THAT THESE ARE SET OUT CORRECTLY: HIGHER HOURLY RATES THAN THE RETAINER SHOULD START THE ALARM
I am grateful to Benjamin Petrecz, Associate and Costs Lawyer at Keoghs LLP, for bringing my attention to a decision of Master Rowley in Tucker -v- Griffiths & Hampshire Hospitals NHS Foundation Trust (19/05/17) in relation to costs budgeting. A copy of the case is available here. Approved Judgment of Master Rowley 19 May 2017-1 This is a case that emphasises the need for a costs budget to be accurate in relation to hourly rates and incurred costs.
The Master was carrying out an assessment of costs in a clinical negligence case.
The case had been costs budgeted. When the budget was prepared the rate used was £340 an hour for Grade A fee hours. On assessment it was clear that the hourly rates agreed with the claimant ranged from £140 – £260 an hour. The hourly rates used in the budget exceeded the retainer rates.
The defendant complained that the use of these hourly rates in the incurred column rendered the statement of costs neither fair nor accurate.
The defendant also stated that there had been miscertification of the costs and the court should make disallow or all or part of the costs under CPR 44.11.
THE CLAIMANT’S RESPONSE
The claimant explained that it was using “blended” hourly rates to cover future increases in costs.
THE MASTER’S DECISION
The Master found that this could be a valid point in relation to future costs. However this “blended” approach to past costs was not justified.
Whatever the reason, it is an approach which must be It is self-evident that a solicitor preparing a costs budget should not overstate a party’s liability to his solicitor for costs that have already been incurred. It is to all intents and purposes a breach of the indemnity principle. It is bound to mislead both the opponent and the court in circumstances where neither has any opportunity to examine the costs claimed in any detail at a budgeting hearing. It is no answer to say that the opponent’s liability to pay such costs is ultimately protected by the option of going to a detailed assessment. The whole purpose of costs management is meant to limit the need for detailed assessments and part of that must involve the parties and the court being able to rely upon the information provided by the other party.
The costs that are necessarily estimated for work yet to be done can quite properly, in my view, be subject to calculation using an hourly rate which acknowledges that increases upon the current hourly rate are likely to be imposed by the solicitor before the case concludes. But I cannot see any justification for using that same ”blended” rate for work already carried out and for which the client is patently liable at only the contractual rate.
The Master went on to find that this was improper conduct, even if done inadvertently.
In my judgment, this is not an approach which would be endorsed by solicitors in general and as such it seems to me to satisfy the threshold of improper conduct in accordance with Ridehalgh. To the extent that this approach has been taken unknowingly, it would also merit the description of unreasonable conduct in failing to act with the competence required by the profession. But I did not gain the impression from Mr Green’s evidence that there is any happenstance in the approach taken. In my judgment the approach is improper and satisfies the test set out in CPR 11(1)(b).
The Master decided that the appropriate penalty was to disallow all the cost management elements of the bill (these amounted to £24,379.78).
The claimant applied for permission to appeal on the misconduct point. This was refused by the Master and the application was not renewed. The defendant, however, was successful in an appeal about the appropriate percentage success fee. On appeal May J held that the Master should have had regard to the medical reports in the case as they may have relevant to the appropriate success fee. The matter was remitted to the Master for a rehearing on this point.