Hourly Rates and the RPI

The constant refrain from claimant representatives whenever a paying party seeks to question the accuracy of a bill of costs is that one should not seek to go behind the signature to the bill unless there is a “genuine issue” as to whether the bill is accurate, and the case of Bailey v IBC Vehicles Ltd [1998] EWCACiv 566 is cited in support. I’ll save for another day a full scale rant as to how misplaced the Bailey approach is.

However, one simple example of how naive the Bailey decision is can been seen on a daily basis following the routine disclosure of CFAs. I’m not now talking about whether the solicitor really has managed to comply with the onerous requirements of the now revoked CFA Regulations 2000. The issue I have in mind is the rather more straightforward one of the hourly rates claimed. A CFA will usually set out the hourly rates that are to be charged. However, the rates claimed in the corresponding bill often bear no relationship to the rates allowed for in the CFA itself. At its most basic, this is often an example of bills being signed without the slightest concern for accuracy or the indemnity principle. I don’t trust signatures on bills due to years of experience in the costs world.

A more subtle issue arises in relation to increases in the hourly rate. A common clause in many CFAs, and this follows one version of the Law Society’s Model CFA wording, is: “We will not increase the rate by more than the rise in the Retail Prices Index”. Despite this clear and unambiguous wording, bills are routinely presented where the hourly rates increases year-on-year by more than the RPI increase. When challenged, the response from some claimants is that they wrote to the client informing them of the purported increase and because the client did not challenge the RPI busting increase it is therefore binding on the client and can be recovered from the paying party. Not so said the Senior Costs Judge in Findley v Jones and MIB [2009] EWHC 90130 (Costs) (reaching the same conclusion as the judge in Puksis v Brumby [2008] EWHC 90095 (Costs)). Any increase allowable is limited to the rise in the RPI given the clear terms of such CFAs.

And this brings us on to a very topical issue. In recent years the increases in the Guideline Hourly Rates have been based on the Average Earnings Index for private sector service industries. This has tended to have a higher annual increase than the RPI, hence the problem created by the RPI clause. But now for the latest news. It has just been reported that that the RPI fell to 0% in February. If the RPI remains at this level, or even dips into negative territory, those firms who have the RPI clause will be unable to increase the hourly rates on any of their cases, regardless of whether the Guideline Hourly Rates increase. The only consolation to claimant lawyers is that these are not “tracker” clauses, otherwise firms would potentially be finding themselves having to reduce their rates in coming months. Defendant lawyers have been used to this prospect for years but this would come as something of a shock to the system for claimant lawyers.

2 thoughts on “Hourly Rates and the RPI

  1. In many cases, this is correct but those judgments make it clear that the RPI limitation can be contracted out of as long as you expressly inform the client that the RPI limit is being scrapped.

  2. Anonymous comments that the judgments state the RPI limitation can be “contracted out”. In fact, neither of the judgments referred to say any such thing. The whole point of both judgments is that a solicitor cannot unilaterally vary the retainer. Simply writing to a client and informing them that the solicitor plans to scrap one of the terms of the CFA is not sufficient. There would be no consideration for the purported variation (see paragraph 134 of Findley). There is certainly no need to include the RPI clause in a CFA, but once it is there a solicitor is likely to be stuck with it.

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