GUIDELINE HOURLY RATES (NOT MUCH USE); CANARY WHARF (EXPENSIVE PLACE TO BE); EVIDENCE AND THE SEVEN PILLARS OF WISDOM (ALL FOR £750 AN HOUR)

I am grateful to Tom Jenkinson from Bolt Burdon Kemp for sending me a copy of the decision of Master Rowley in Shulman -v- Kolomoisky (24/06/20) where the issue of the guideline hourly rates was determined.  A copy of the judgment is available here.  Judgment Shulman v Bogolyubov (hourly rates)

 

“This case is a good example of why Guideline Rates are often relied upon by advocates and the court. Despite the points of dispute challenging the rates wholesale, there is no evidence whatsoever from the second defendant or Skadden as to how the level of the hourly rates charged to the second defendant have been determined.”

THE CASE

The Master was assessing the appropriate hourly rate for work carried out by the second defendant.  The solicitor’s firm involved was based on Canary Wharf.  This would place in the Outer London band for the Guideline Rates.  The work related to a claim that was put at US$500 million.

COMMENT ON THE GUIDELINE RATES

The Master set out the history of the Guideline Rates.

3. The Guideline Rates were last revised in 2010 and the length of time since then has led to them becoming much maligned, particularly since Mrs Justice O’Farrell said, in the case of Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC), at paragraph 14:
“…the hourly rates of the defendant’s solicitors are much higher than the SCCO guideline rates. It is unsatisfactory that the guidelines are based on rates fixed in 2010 and reviewed in 2014, as they are not helpful in determining reasonable rates in 2019. The guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines would be very welcome.”
4. When the Master of the Rolls considered a report proposing to vary the Guideline Rates in 2014, he accepted the conclusion that they could be used as a starting point in detailed assessments even though they had originally only been intended to be used in summary assessments. That was, in my view, a reflection of the fact that there is rarely any other starting point offered by the parties to the court when considering the appropriate level of hourly rates
The Guideline Rates were originally provided to judges when the Civil Procedure Rules arrived in April 1999 and the concept of summary assessment of costs first came into being. Many judges had little or no experience of costs and the guideline rates were there to provide assistance on summary assessment. They were not intended to replace a more thorough consideration of appropriate hourly rates in detailed assessments. But it is something of an indictment on the evidence usually provided at detailed assessment hearings that the Guideline Rates have often been used for detailed assessments as well without variation.

 

THE CANARY WHARF POSTCODE

The Master was not attracted by the argument that Canary Wharf rates could not be equivalent to City rates.

“In my view, the claimant’s starting point is entirely opportunistic. Whilst Canary Wharf may be located in a postcode outwith those allowed by the Guideline Rates for the City (EC1 to EC4), the presence of firms such as Skadden and Clifford Chance as well as many multinational financial institutions inevitably leads to the conclusion that rates equivalent to those to be found in the City are much more appropriate.”

THE RATES CLAIMED

The rates claimed were

Category A

£1,043.29 for a QC.

£940 and £717.95.

Category C

£665.87 and £636.33.

Category D

£286.44 (trainee)

£256.68 (legal assistant).

THE MASTER’S JUDGMENT

32. This case is a good example of why Guideline Rates are often relied upon by advocates and the court. Despite the points of dispute challenging the rates wholesale, there is no evidence whatsoever from the second defendant or Skadden as to how the level of the hourly rates charged to the second defendant have been determined.
33. However, one of the many issues that has arisen with the use of the Guideline Rates over time is the fact that there is a single figure for a particular level of lawyer in a particular locality. That figure takes no account of the size of the firm, the nature of the work undertaken et cetera in the particular case. It is described as a broad approximation and it is really the roughest of rough guides as to what might be allowed. The potential range of litigation in the City can be seen in this case and it explains why the Guideline Rates are barely even a starting point in a case such as this.
34. In the absence of any evidence, the court is required to consider the so-called seven pillars of Wisdom in CPR 44.4(3) in order to arrive at a conclusion as to whether or not the rates claimed are reasonable. Whilst the value of the claim and the amount of time spent may be capable of arithmetic calculation, most of the factors involved for assessing the “weight” of the case and the solicitors running it, simply lead to an evaluative decision.
35. It seems to me that caution has to be applied to deriving too many pointers from the Ohpen decision given that Mrs Justice O’Farrell was conducting a summary assessment of costs. There are many ways in which judges carry out a summary assessment and I consider that I should be slow to draw any conclusions about the hourly rate she considered to be appropriate based upon the fact that she did not expressly alter the rates claimed. It seems to me to be just as likely that she concluded that the amount of time she had reduced from the costs claimed led to a figure which she considered to be reasonable and so had no need to consider altering the rates themselves. In my view, it is only the general comment of paragraph 14 which holds any weight on a detailed assessment. I accept entirely the comment that hourly rates considerably above the Guideline Rates are regularly agreed by clients using City solicitors for what can properly be called City work.
36. The figures agreed by the claimant with Hogan Lovells demonstrate that there is a very fluid market in terms of what hourly rates can be obtained. Factors such as the solicitors’ appetite for the kind of work on offer or other potential work to be obtained from a client may be involved when setting rates. Such matters are not catered for directly in CPR 44.4(3). In my experience, discounted rates are often provided and, in my view, the figures agreed by Hogan Lovells with the claimant here represent figures below those that I would have expected in this sort of case. Whether that had anything to do with a contingency fee agreement is impossible to know. All I can say is that I would undoubtedly have allowed them as being reasonable if the claimant had been the receiving party but that does not mean that higher rates would necessarily be unreasonable.
37. I make these comments regarding Hogan Lovells’ rates simply from the figures set out on the invoice. Mr Mallalieu’s criticisms of their lack of provenance would only serve to give less weight to them if I thought they were determinative in any way of the  Skadden rates. In fact, even though they are considerably lower than the Skadden rates, they are still higher than the rates offered here by the Claimant. That confirms my view that the rates offered here by the Claimant are simply opportunistic based on the postcode of Skadden and the low level of Guideline Rates for truly City work, rather than any of the 44.4(3) factors.
38. As indicated above, the reasonable hourly rates have to be considered in the light of the factors in CPR 44.4(3). I have already set out my view of the nature of this case in that it was of significant value but was not otherwise unusual for a litigator in a City firm. That description does not seem to me to justify the hourly rates which the solicitors have claimed. Whilst it cannot be said that no client would pay the rates claimed in this case – since the second defendant has already paid these fees – I do not consider that they can be justified between the parties. If the case involved truly novel or ground breaking litigation, it might be possible to justify the figures claimed, or at least something close to them. But that is not the situation here and, in my view, competent representation, to use Leggatt LJ’s phrase, could easily be obtained from any number of similar firms to Skadden at considerably lower figures.
39. In my view, taking into account my conclusions on the relevant factors in CPR 44.4(3) set out in this decision and, in the absence of any evidence from the second defendant regarding the actual calculation of the hourly rates by Skadden, the reasonable hourly rates to be allowed in this case are Grade A – £750: Grade C – £400 and Grade D – £200. Where the relevant grade of fee earner is claimed at lower figures than these then obviously it is that lower rate which will apply.
Postscript
40. Prior to the formal handing down of the judgment consisting of the previous paragraphs, I heard argument and made decisions regarding appropriate hourly rates for Mr Van der Zwaan and Mr Bainsfair. Although I gave a short extempore ruling on these points on 22 June 2020 at the resumed hearing, I indicated that I would record the decisions made so that they would all be in one place. As discussed at the hearing, I have not as yet made any decisions on the hourly rates of the costs lawyers.
41. In respect of Mr Van der Zwaan, who is described as a Senior Associate, I allowed a rate of £550 per hour placing him between the Partners (£750) and the Associates (£400).
42. I allowed the hourly rate claimed of £325 for Mr Bainsfair on the basis that his experience as a barrister with two years’ call made him comparable with the Grade C solicitors (the Associates) who had previously been allowed a rate of £400.

 

SUMMARY: THE RATES ALLOWED (LEGAL AID LAWYERS, READ AND WEEP)

Grade A – £750:

Grade C – £400

Grade D – £200.