Where a party (the 'Receiving Party') in civil litigation persuades a court, in principle, to impose an inter parties costs order[1] against another party in the litigation (the 'Paying Party') and in favour the Receiving Party, and the Receiving Party seeks to recover solicitor costs at solicitor hourly rates higher than those contained in the Solicitors Guideline Hourly Rates, can the Receiving Party justify such higher rates on the grounds that:
(a) there had been inflation since the Solicitors Guideline Hourly Rates were published? (paragraph 7) and/or
(b) "the increased use of remote working [means that] the geographical location of the solicitors is less relevant to costs than it once was" (paragraph 11)
This article will consider whether these grounds can justify a deviation from Solicitors Guideline Hourly Rates, in light of these grounds being argued in Re HLHP Oriental Food Ltd (also known as Otto v Inner Mongolia Happy Lamb Catering Management Co Ltd [2023] EWHC 3151 (Ch); [2024] Costs L.R. 47 ('Otto'), before HHJ Matthews, sitting as a Judge of the High Court. The Judge handed down judgment on 8.12.23, rejecting the argument that either ground justified the Court allowing solicitor hourly rates, higher than those prescribed in Solicitors Guideline Hourly Rates.
Solicitors Guidelines Rates
The 'Guide to the Summary Assessment of Costs' applies to civil proceedings[2a] and contains guideline rates for solicitors hourly rates (known as the 'Solicitors Guideline Hourly Rates'), recoverable in an inter parties costs order. The guideline rates vary depending on 2 factors:
(a) the geographic location of the solicitors offices. There are 5 bands[2b]:
(i) London 1;
(ii) London 2;
(iii) London 3,
(iv) National 1;
(v) National 2; and
(b) the level of fee earner. There are 4 Grades of fee earners[3a]:
(i) Grade A 'Solicitors and legal executives with over 8 years experience';
(ii) Grade B 'Solicitors and legal executives with over 4 years experience';
(iii) 'Other solicitors or legal executives and fee earners of equivalent experience;
(iv) Grade D 'Trainee solicitors, paralegals and other fee earners'
The Solicitors Guideline Hourly Rates are updated periodically:
(a) the current Solicitors Guideline Hourly Rates were published on 4.1.24, and have been in effect since 1.1.24; they can be viewed, here.
(b) the immediately prior[3b] Solicitors Guideline Hourly Rates, were published on c.1.10.21 (approved August 2021), and were in effect from 1.10.21 to 31.12.23.
Both the current, and immediately prior, Solicitor Guideline Hourly Rates, are set out in a table included in a footnote[4]
There is no equivalent for disbursements, including for counsel's fees[5].
Otto
In Otto, during a summary assessment of costs in ordinary civil proceedings, on the standard basis, the Judge turned first to the question of allowable solicitor rates. The Judge noted that:
(1) the Receiving Party claimed costs for fee earners Grade A and Grade C at hourly rates of £350 and £260 respectively (paragraph 1);
(2) the Receiving Party's solicitors were based in Bristol, which is Band National 1, Solicitors Guideline Hourly Rates. The (then) Solicitors Guideline Hourly Rates were, for fee earners Grade A and Grade C in Band National 1, respectively £178 and £261 (paragraph 5).
After dealing with one other issue (referred to below), the Judge summarised: (a) the status of the Solicitors Guideline Hourly Rates; and (b) when the Court might depart from them, and permit a Receiving Party to recover at a solicitors hourly rate higher than the hourly rates in the Solicitors Guideline Hourly Rates.
Status of Solicitors Guideline Hourly Rates and Threshold for Justifying Departure from them
Firstly, the Judge in Otto recognised that:
(a) the guidelines are merely guidelines; they are not set in stone; and
(b) the solicitors hourly rate allowed may be higher than the Solicitors Guideline Hourly Rates, where there is a clear and compelling justification for it.
The Judge in Otto said, at paragraph 6 (the Receiving Party in Otto were the petitioners):
'The rates claimed by the petitioners are therefore in excess of the guidelines. Of course, as the petitioners rightly say, they are just that, guidelines, and are not set in stone. But, as the Court of Appeal said, in relation to the 2021 guideline rates, in Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466, "If a rate in excess of the guideline rate for solicitors' fees is to be charged to the paying party, a clear and compelling justification must be provided." This point was reiterated in Athena Capital Services SICAV v Secretariat of State for the Holy See [2022] EWCA Civ 1061. It has been applied in many other decisions at first instance since.'[6]
Secondly, the Judge in Otto then turned to the two grounds the Receiving Party put forward as amounting to 'clear and compelling justification' for departing from the Solicitors Guideline Hourly Rates - as stated above, these were:
(a) that there has been inflation since the Solicitors Guideline Hourly Rates were published (paragraph 7); and
(b) "the increased use of remote working [means that] the geographical location of the solicitors is less relevant to costs than it once was" (paragraph 11)
Taking these in turn.
Inflation
The Receiving Party argued the Court should allow higher hourly rates than those in the Solicitors Guideline Hourly Rates because, since the (then) current Solicitors Guideline Hourly Rates had been published, there had been inflation of 20.14%, according to a Bank of England website. In other words, between 2021 and October 2023, there had been 20.14% inflation - which would, it was said, justify permitting solicitor hourly rates 20.14% higher than those in the Solicitors Guideline Hourly Rates. So £261 would become £313.57 (paragraph 7). Indeed, the Receiving Party argued further, that '...inflation in the legal services industry has been higher than in the broader economy, thereby warranting an even higher rate, such as the £350 sought by the [Receiving Party] in this case.' (paragraph 7)
The Judge in Otto rejected this as a justification for awarding solicitor hourly rates higher than those in the Solicitors Guideline Hourly Rates. The Judge said, at paragraphs 8 to 10:
'I do not know on what basis the guideline rates for solicitors' fees are arrived at. I certainly was not aware that it was calculated by taking any of the measures of inflation (and of course there is more than one) in the general economy and applying it to an earlier figure. I know from the Civil Justice Council Final Report that different charge rates were increased by different percentages, and not by a single across the board rate. But for present purposes let me assume for the sake of the argument that it were right to take the particular Bank of England inflation measure put forward as an appropriate measure for deciding how an increase in the guideline rates might be calculated, if that were otherwise appropriate.
I am quite sure that, when the Court of Appeal in Samsung Electronics and Athena Capital referred to "a clear and compelling justification", they did not have general cost and price inflation in mind. But, more than that, I do not think it would be right for me sitting here in effect to create a new guideline rate based on what I am told inflation has amounted to since the last guideline was issued. The issue of new guidelines is not a matter for me.
Even if it were, and even if the measure put forward were a sound basis to increase it, because inflation is different every month (and there are figures available to show what it is) it would mean having to recalculate inflation immediately before every assessment of costs in every case. For all these reasons, therefore, I decline to increase charge out rates mathematically on the basis of inflation.'
Remote Working
The Receiving Party argued, as stated above, that '..."the increased use of remote working [means that] the geographical location of the solicitors is less relevant to costs than it once was" (paragraph 11), and, rather counter-intuitively it might be thought, argued that this would justify higher solicitors hourly rates being allowed, compared to those Solicitors Guideline Hourly Rates. This might be thought counter-intuitive as it might be thought that solicitor remote working would lower, rather than increase, a solicitors firms' costs...but that was not the argument put forward by the Receiving Party in Otto.
As to this argument, the Judge, at paragraph 11, said he accepted '...the premise, but not the conclusion.'. The Judge said, at paragraphs 11 to 14:
'11...The regulations governing solicitors' practice require certain things, including employment of qualified staff to carry out certain functions. A sole practitioner plainly requires less in addition to his or her own input compared to a firm of a hundred or a thousand practitioners.
12. Whatever the position may be for barristers, so far as I am aware, there are no solicitors' firms in this country of any size that carry on a "virtual practice", with each of many fee earners working solely from home (or a rented "hot desk" nearby) and with no central base. As and when such firms become established, no doubt there will be evidence adduced to show what the overheads are and how the chargeable costs are made up. In the present case there is no such evidence.
13. The impact of home working on solicitors' costs was raised in the consultations conducted by the Civil Justice Council on Guideline Hourly Rates. But the Council's Final Report said that:
"2.6 … A number [of respondents] submitted that location of fee earner should be irrelevant and geographical areas abolished. These suggestions could not at this point in time be properly assessed and taken into account by the working group … "
Nevertheless, the working group had considered the possibility that Form N260 could be amended to require the location of individual fee- earners to be stated: see at [9.1]–[9.17].
14. So far as I can see, the 2021 edition of the Guide to the Summary Assessment of Costs does not deal with this matter at all, though it says:
"31. Where all or part of the work on a case is done in a different location from that of the solicitor's office on the court record, the appropriate hourly rate for that part should reflect the rates allowed for work in that location, whether that rate is lower or higher (provided that, if a higher rate is claimed, a decision to instruct solicitors in that location would have been reasonable). The location of a fee earner doing the work is determined by reference to the office to which s/he is, or is predominantly, attached."
15. In the present case, wherever their fee-earners actually work, the petitioners' solicitors do have a base, in Bristol, and there will be overheads arising out of that base which are built into their costs. Even if individual solicitors work from home on one or more days of the week, those fee earners also have a desk at the office, and make use of the services provided there, even when they are working remotely.
16. Moreover, even if I accepted the conclusion that "the geographical location of the solicitor is less relevant to costs than it once was", that would not mean that the chargeable rates allowable for costs would necessarily be greater than the guideline rates. Given that the guideline rates are higher for urban areas, and in particular London, but solicitors (especially outside London) like to live in rural areas, I would expect that, if the overheads were to be taken into account in that way, the allowable rates would actually be lower, not higher. But others may disagree, and anyway I do not have to decide that.'
Conclusion
Consequently, on the facts in Otto, the Judge found that there was no (sufficient) justification shown, for allowing more than the guideline rates (paragraph 17) - and so no deviation from them, was allowed/awarded.
Additional issue
While not the focus of this article, one other issue did arise in Otto, which readers might find interesting, in namely, a "But they did it too" submission[7]),
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[1] Under the CPR, this will be under CPR r.44, entitled 'General Rules about Costs' (particularly, CPR r.44.2, entitled 'Court's discretion as to costs'); whether other procedural rules apply, the relevant provision will be different
[2a] The 'Guide to the Summary Assessment of Costs' - Solicitors Guideline Hourly Rates, do not, strictly speaking, apply to costs in the Family Courts. However, following two authorities, it seems that they can be used in the Family Court as instructive. See:
(1) S v VS (Judgment – Summary Assessment of Costs – Civil Guide) [2024] EWHC 278 (Fam) (Arbuthnot J); and
(2) H v GH [2023] EWFC 235, [2024] Costs LR 27 (Simon Colton KC sitting as a Deputy High Court Judge).
[2b] The 'Guide to the Summary Assessment of Costs' contains a table showing a list of geographic areas, and into which band that geographic area falls into. National 2 is the 'sweeping up' band, which contains all geographic areas that do not fall into any of the other bands. See the table, here.
[3a] In the 'Guide to the Summary Assessment of Costs' 2021 Edition, Appendix II entitled 'Guideline Figures for the Summary Assessment of Costs Explanatory Notes', under subheading 'Grades of fee earner', provides:
'The categories of fee earners are as follows:
[A] Solicitors with over eight years post qualification experience including at least eight years litigation experience and Fellows of CILEX with 8 years’ post-qualification experience.
[B] Solicitors and Fellows of CILEX with over four years post qualification experience including at least four years litigation experience.
[C] Other solicitors and Fellows of CILEX and fee earners of equivalent experience.
[D] Trainee solicitors, trainee legal executives, paralegals and other fee earners.
Qualified Costs Lawyers will be eligible for payment as grades B or C depending on the complexity of the work done.
Employed barristers’ rates should be allowed at the grade which best reflects the length of their litigation experience.
“Legal executive” means a Fellow of the Chartered Institute of Legal Executives. Those who are not Fellows of the Institute are not entitled to call themselves legal executives and in principle are therefore not entitled to the same hourly rate as a legal executive.
Clerks without the equivalent experience of legal executives will be treated as being in the bottom grade of fee earner i.e. trainee solicitors, paralegals and fee earners of equivalent experience. Whether or not a fee earner has equivalent experience is ultimately a matter for the discretion of the court.'
Under the subheading 'Rates to allow for senior fee earners and for substantial and complex work' in Appendix II, two additional points are made:
(1) attendance behind counsel at the hearing - task could have been delegated to a more junior fee earner
Appendix II contains:
'Many High Court cases justify fee earners at a senior level. However the same may not be true of attendance at pre-trial hearings with counsel. The task of sitting behind counsel should be delegated to a more junior fee earner in all but the most important pre-trial hearings. The fact that the receiving party insisted upon the senior’s attendance, or the fact that the fee earner is a sole practitioner who has no juniors to delegate to, should not be the determinative factors. As with hourly rates the statement of costs supplied by the paying party may be of assistance. What grade of fee earner did they use?'
(2) Subtantial and complex litigation may justify a higher rate. Appendix II contains:
Appendix II contains:
'As stated in paragraph 29 of the Guide:
In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for grade A, B and C fee earners where other factors, for example the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element, would justify a significantly higher rate. It is important to note (a) that these are only examples and (b) they are not restricted to high level commercial work, but may apply, for example, to large and complex personal injury work. Further, London 1 is defined in Appendix 2 as ‘very heavy commercial and corporate work by centrally based London firms’. Within that pool of work there will be degrees of complexity and this paragraph will still be relevant.'
[3b] For those looking to go back further, the Solicitors Guidelines Hourly Rates were
(a) first published 19.4.10;
(b) first updated on 1.10.21;
(c) second updated on 1.1.24.
See here.
[4] The below table contains the current Solicitor Guideline Hourly Rates (as well as those in effect from 1.10.21 to 31.12.23 in brackets, below) 
This table was extracted from an announcement dated 1.12.23, on the Courts and Tribunal Judiciary website, entitled 'Responding to recommendations of the Civil Justice Council Costs Review and new Guideline Hourly Rates', accessible here.
[5] In Athena Capital Services SICAV v Secretariat of State for the Holy See [2022] EWCA Civ 1061, the Court of Appeal (Males LJ, Birss LJ and Peter Jackson LJ agreed) had determined an appeal, made a costs order in principle and had directed there to be a detailed assessment of costs, to be assessed on the standard basis. The Court of Appeal was then invited to make a order for a payment on account. In determining that issue, the Court of Appeal looked at the successful party's costs schedule. As to counsel's fees, Males LJ, (with whom Birss LJ and Peter Jackson LJ agreed), said at paragraph 7:
'Counsel's fees are not subject to guideline rates in the same way that solicitors' fees are, but it is nevertheless important to stress that, whatever clients may be prepared to pay their own counsel, only a reasonable and proportionate fee may be recovered from the other side.'
[6] For completeness, it was in paragraph 6, Athena Capital Services SICAV v Secretariat of State for the Holy See [2022] EWCA Civ 1061 ('Athena Capital') that Males LJ (with whom Birss LJ and Peter Jackson LJ agreed) said:
'This court has recently held that, in the case of solicitors' fees, if a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided: Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466.'
Attempts to justify solicitor hourly rates above the guideline rates because the work is very heavy commercial and corporate work by centrally London based firms, should no longer work. In Athena Capital, Birss LJ (with whom Peter Jackson LJ agreed) said, at paragraph 10:
'It may be worth emphasising one aspect. In my experience there has been a view that the previous set of Guideline Hourly Rates (before 2021) were not directed to the heaviest work such as takes place in the Business and Property Courts. In part no doubt this was because they were so out of date. Whatever the position was or was thought to be, it changed in the current set of Guideline Hourly Rates, which were approved by the Master of the Rolls in August 2021. As my Lord pointed out in Samsung v LG , the current set includes a band called "London 1" which is a set of rates directed expressly to very heavy commercial and corporate work by centrally London based firms. I would add that the London 1 rates band in the current Guideline Hourly Rates is based on evidence from the Business and Property Courts themselves (see the Civil Justice Council's Final Report of April 2021). Therefore the London 1 band is directly applicable to this case and so a justification for the much higher rates was needed.'
In Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466 ('Samsung'), the Court of Appeal (Males LJ, Snowden LJ and Lewison LJ) heard a 1 day appeal, in which LG Display Co Ltd ('LG') was successful. It was common ground that Samsung Electronics Co Ltd ('Samsung') should pay LG's costs, assessed on the standard basis. LB's schedule of costs claimed for costs of solicitors at rates of equivalent to between £801.40 and £1,131.75 for Grade A and between £443.27 and £704 for Grade C. Males LJ (with whom Snowden LJ and Lewison LJ agreed) stated that these '...are well above the guideline hourly rates set out in Appendix 2 to the "Summary Assessment of Costs" guide published in the White Book. Those guideline rates for London 1, which applies to "very heavy commercial and corporate work by centrally based London firms", are £512 for Grade A ...and £270 for Grade C...In some cases, therefore, the rates claimed are more than double the guideline rates.' (paragraph 3). Males LJ then said, at paragraphs 4 to 6:
'The guide recognises that in substantial and complex litigation an hourly rate in excess of the guideline figures may sometimes be appropriate, giving as examples "the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element". However, it is important to have in mind that the guideline rates for London 1 already assume that the litigation in question qualifies as "very heavy commercial work".
LG has not attempted to justify its solicitors charging at rates substantially in excess of the guideline rates. It observes merely "that its hourly rates are above the guideline rates, but that is almost always the case in competition litigation".
I regard that as no justification at all. If a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided. It is not enough to say that the case is a commercial case, or a competition case, or that it has an international element, unless there is something about these factors in the case in question which justifies exceeding the guideline rate.'
Note, in the 'Guide to the Summary Assessment of Costs' 2021 Edition:
(1) under the heading 'Guideline figures for solicitors' hourly rates, it states, at paragraphs 27 and 28:
'Guideline figures for solicitors’ charges are published in Appendix 2 to this Guide, which also contains some explanatory notes. The guideline rates are not scale figures: they are broad approximations only.
The guideline figures are intended to provide a starting point for those faced with summary assessment. They may also be a helpful starting point on detailed assessment.'
(2) Appendix II entitled 'Guideline Figures for the Summary Assessment of Costs Explanatory Notes', under subheading 'Rates to allow for senior fee earners and for substantial and complex work' in Appendix II, the following statement is made that subtantial and complex litigation may justify a higher rate:
'As stated in paragraph 29 of the Guide:
In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for grade A, B and C fee earners where other factors, for example the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element, would justify a significantly higher rate. It is important to note (a) that these are only examples and (b) they are not restricted to high level commercial work, but may apply, for example, to large and complex personal injury work. Further, London 1 is defined in Appendix 2 as ‘very heavy commercial and corporate work by centrally based London firms’. Within that pool of work there will be degrees of complexity and this paragraph will still be relevant.'
For the avoidance of doubt, paragraph 29 of the Guide is exactly as quoted in Appendix II above.
[7] The "But they did it too" was a submission that from the Receiving Party (the successful petitioner), that the Court should allow the Receiving Party's claimed hourly rate at £350, though the Guideline rate was £261, because the Paying Party's (respondent) N260 Costs Schedule also had sought to claim for a fee earner at £350 per hour.
In dismissing this as a valid argument, the Judge in Otto v Inner Mongolia Happy Lamb Catering Management Co Ltd [2023] EWHC 3151 (Ch); [2024] Costs L.R. 47 said, at paragraphs 4 and 5:
'The petitioners claim costs for grade A and grade C fee earners at hourly rates of £350 and £260 respectively. The petitioners' solicitors are based in Bristol...
The relevant figures in those guidelines for grade A and grade C fee earners' hourly rates are £261 and £178 respectively. As it happens, the hourly rate charged by the respondents' solicitor is also £350. But, in considering what to allow, that is irrelevant. "But they did it too" is not an answer to a charge rate otherwise found to be excessive. For one thing, the solicitor may be in a different band (as indeed the respondents' solicitor is, being based in London). More importantly, I am assessing the petitioners' costs, not the respondents'.
A similar view was expressed by Males LJ in Athena Capital Services SICAV v Secretariat of State for the Holy See [2022] EWCA Civ 1061. Males LJ (with whom Birss LJ and Peter Jackson LJ agreed) said, at paragraph 8 (while determining the quantum of a payment on account of costs figure, where costs had been ordered to be subject to a detailed assessment, on the standard basis):
'...the costs payable by the losing party on the standard basis are limited to those which are reasonable and proportionate. Where the costs of the paying party are also disproportionately high, that can make no difference. In any event the court will scrutinise cost schedules in order to keep levels of recovery within reasonable bounds.'