Solicitors hourly rates are not to be artificially reduced by use of averages. The judge had placed too much weight on artificially low average hourly rates.
Neill LJ considered recent cases and set out five propositions to be applied by the taxing officer: (1) the general principle of taxation is that a solicitor’s remuneration should consist of two elements – first a sum computed on the basis of an hourly rate which represents what is called the ‘broad average direct cost’ of undertaking the work; and secondly, a sum, usually expressed as a percentage mark-up of the broad average direct cost for care and conduct:
(2) the broad average direct cost is to be assessed by reference to an average firm in the relevant area at the relevant time:
(3) the relevant time means the time at which the work was done. No allowance should be made for the consequences of later inflation:
(4) the District Judge can draw on his own experience and on information which is provided to him by local firms; the District Judge can also take account of surveys.
(5) an artificially inflated figure for uplift should not be used to correct or compensate for inadequate hourly rates: accordingly the appropriate hourly rates should be the rates which ‘represented the actual cost to the solicitor at the relevant time doing the relevant work (assuming always that the solicitor has acted reasonably and the costs are incurred at the appropriate level).
He added two qualifications. First that the words of Order 62 Rule 12(1) contain the key test ‘a reasonable amount in respect of all costs reasonably incurred’ and, second that ‘I would also wish to leave open the question, which does not arise in this case, as to whether it is always correct to consider only firms in the relevant area. There may cases where it might be arguable that though the costs were reasonable for the solicitor instructed, it was not reasonable to instruct a solicitor practising in an expensive inner city area rather than one practising, for example, in a suburb.’
Aldous LJ said: ‘The task of the taxing officer under Order 62 Rule 12 is to allow ‘a reasonable amount in respect of all costs reasonably incurred’. That requires two decisions. First, whether costs were reasonably incurred and secondly – what is the reasonable amount that should be allowed? We are not concerned with the first matter, as there is no dispute before us as to whether any particular work carried out should or should not have been carried out nor whether it should have been carried out by a partner or some other employee. The only issue before us is whether the reasonable amount should be calculated using as the Part A figure pounds 45 per hour for a partner and pounds 30 per hour for a legal executive . . The reasonable amount is not necessarily the amount that a solicitor charges, but is the reasonable amount that a party ordered to pay costs should pay. Thus the expense rate of certain solicitors may be totally irrelevant as their overheads and therefore their expense rate far exceeds that which other solicitors doing the relevant work would charge. A party ordered to pay costs should not be liable for the particular choice of solicitor of the winning party, but should pay the reasonable costs of the sort of solicitor that a person would have instructed with a view of the proper conduct of his case and minimising the costs of the litigation.’
Judges:
Aldous LJ, Neill LJ
Citations:
Gazette 28-Feb-1996, Times 26-Jan-1996, [1996] 1 FLR 873
Jurisdiction:
England and Wales
Cited by:
Cited – O’Beirne v Hudson CA 9-Feb-2010
The matter had been settled by a consent order providing for costs on a standard basis, however the costs judge had decided that the matter would if it had proceeded, have been allocated to the small claims track, and therefore limited his costs . .
Lists of cited by and citing cases may be incomplete.
Costs
Updated: 05 November 2022; Ref: scu.82885