Hourly Rates and the Indemnity Principle

One of the most significant developments in the world of costs in 2021 was the Guideline Hourly Rate consultation and subsequent adoption of those rates from 1st October 2021. The first change in the Guideline Hourly Rates in more than a decade consisted of a number of different changes. The new rates are set out below:

GradeFee earnerLondon 1London 2London 3National 1National 2
ASolicitors and legal executives with over 8 years’ experience£512£373£282£261£255
BSolicitors and legal executives with over 4 years’ experience£348£289£232£218£218
COther solicitors or legal executives and fee earners of equivalent experience£270£244£185£178£177
DTrainee solicitors, paralegals and other fee earners£186£139£129£126£126

 

The main beneficiaries of the consultation will be the higher grade fee earners, where the greatest increases can be found, along with Solicitors working in National Band 2 areas. There is now very little to differentiate between National Band 1 and National Band 2 rates and partly this has to be put down to the increasing advances in technology and the use of flexible or agile working necessitated by the Covid-19 pandemic. On the other hand, the main ‘losers’ from the consultation will be London Band 1 firms who had previously been able to charge rates on all types of work. The London Band 1 rate is now reserved for the high value and complex litigation work that is carried out at large city firms.

Whilst the outcome of the consultation was largely celebrated by the majority of receiving parties, it is necessary to remember that these rates will not apply automatically in ongoing litigation. Where costs are recovered on an inter partes basis, the indemnity principle remains active. This means that the costs recoverable on an inter partes basis cannot exceed what the Client would have been liable for pursuant to the terms of the retainer or funding arrangements entered into. Therefore, if the hourly rates were limited to the old guideline rates or, in any event still lower than the new Guideline rates, then costs will remain to be limited to those rates.

It is therefore necessary for any receiving party looking to obtain the full benefit of the increase in the Guideline Rates to review their retainers, and where they allow, consider increasing the rates and notifying their Client of the increase.

Furthermore, it has been noted that the new Guideline Rates will be preferred in the Court of Protection than the rates that had previously considered reasonable in the decision of Master Whalan in PLK & Ors.

If you have any comments or queries regarding this post, please contact Kris Kilsby at [email protected]

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