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10-01-2020

Solicitors’ Hourly Rates

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Re Peak Hotels & Resorts Ltd (in liquidation); Crumpler and another (joint liquidators) v Candey Ltd [2019] EWHC 3558 (Ch)

This case about hourly rates related to a Section 245 Insolvency Act 1986 application in the context of the provision of legal services by Candey Limited, a firm of solicitors, to Peak Resorts (“Peak”).  However the Judge made helpful comments regarding the appropriate rates for solicitors performing specialist work. There is often an issue with arguing appropriate rates because the guideline rates the courts use have not been updated since 2010. They are set out below. “City” rates are obviously highest but what if one is in the West End or elsewhere yet providing specialist services meriting a higher rate?

Guideline hourly rates.

Pay band

Fee earner

London grade 1

London grade 2

London grade 3

National grade 1

National grade 2

National grade 3

A

Solicitors and legal executives with over 8 years’ experience

£409

£317

£229–£267

£217

£201

£201

B

Solicitors and legal executives with over 4 years’ experience

£296

£242

£172–£229

£192

£177

£177

C

Other solicitors or legal executives and fee earners of equivalent experience

£226

£196

£165

£161

£146

£146

D

Trainee solicitors, paralegals and other fee earners

£138

£126

£121

£118

£111

£111

 

Candey had agreed a fixed fee of £3.8 million for some work, but also in addition to that the parties also entered into a Deed of Charge dated 21 October 2015. Under that Deed of Charge what had, at an earlier stage of the case, been determined by the Judge to be a floating charge over certain assets of Peak was created in favour of Candey, providing security to Candey for the payment of the liabilities to Candey under the fixed fee agreement. Peak entered liquidation on 08 February 2016, just over three months after the Deed was executed.

S245 IA 1986 avoids certain floating charges to a certain extent. The Judge set out in broad terms the four conditions he said needed to be met:-

1.  the company must be in liquidation or administration;

2.  the floating charge must have been created at a relevant time, that is within a certain period ending with the commencement of the relevant insolvency regime into which the company entered;

3.  where the charge was given to a person not connected with the company, the company must then have been insolvent or become insolvent in consequence of the charge;

4.  the charge must have been given, and will only be invalid to the extent that it is given, otherwise than for “appropriate new value”. In this case, the appropriate new value is the value of so much of the consideration for the charge as consists of services supplied to the company at the same time as, or after the creation of, the charge (see s245(2)(a) IA 1986).

The identification and valuation of those services supplied by Candey was, the “Valuation Issue” which caused the rates to be reviewed.

The Court held that Section 245(6) requires an objective and retrospective assessment of the amount that Candey would reasonably have charged for the services actually supplied in the ordinary course of its business (referring to a prior hearing in the Court of Appeal on this point.)

Candey’s terms said

Our services are charged according to the time incurred by our fee earners in six minute units in accordance with industry practice. Our fee earners’ rates are charged at between £100 and £700 plus VAT (currently 20%) per hour. We may require you to provide us with advance payment on account for costs and expenses. We will charge you for any expenses we incur on your behalf, most of which will be subject to VAT. These may include Court fees, barrister’s fees, expert’s fees, travelling costs, photocopying colour printing costs. All estimates of costs are for guidance only and may be revised because of changes in the parties’ strategy and evidence.

Initially an amount of £100,000 per month was charged but Candey reverted to an hourly rate when it became clear costs were in excess of that. Candey had achieved significant success for Peak.

During the case Mr Candey argued for DBA/value/CFA uplifts to be applied rather than pure hourly rates, but the Judge said that in considering value under s245 pricing was something different and that similarly, “as regards a fee payable only on the contingency of a win, that contingent risk is not taken into account under s245 because the basis of the valuation is that the legal services provided have a value which is to be valued. They are not valued on the basis that any hypothetical contract includes a provision that the value may not be payable because there is no “success”. In my view, there is therefore no scope for “merits risk” to play a role in the s245 valuation exercise.” He said if he was wrong about that then the value was calculated at the time of supply so the risk element at time of supply not with hindsight was the correct test.

Candey’s rates were Grade A £700 (2 solicitors) and £500 (one solicitor); Grade B £400 (1 solicitor) and £300 (one solicitor) Grade C –no one applicable used and Grade D £150.

Peak argued for Grade A £455; Grade B £350; Grade C £280; Grade D £180. Candey’s office was in Lincoln’s Inn WC2. The distance from Lincoln’s Inn to the City is one mile.

The Diamond Survey rates in 2015 showed Magic Circle partner rates of £700-£850 and other leading city firms £550-£800 per hour.

The Judge rejected the Guideline Hourly Rates (“GHR”) as the basis to use - he described this approach as “flawed.”  He considered that the starting point was the rate actually agreed with the solicitors though all judges would take notice of market rates. Also the GHR were for summary assessments. Further, the last edition of the Guide to the Summary Assessment of Costs dated 2005 contained the following paragraph 43:

“In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for Grade A fee earners where other factors, including the value of the litigation, the level of the complexity, the urgency and importance of the matter, as well as any international element, would justify a significantly higher rate to reflect higher average costs”.

Whilst he went on to deal with the time spent in various categories overall the Judge approved Candey’s rates.

This is a welcome case by HHJ Davis-White QC for specialist firms against whom it may be (and is) argued that their geographical location should determine the hourly rate value of their services.

Certainly we have had no difficulty in the specialist insolvency courts justifying our hourly rates to date, even inter partes.

About the author:
Frances Coulson is a Senior Partner and Head of Insolvency & Litigation at Moon Beever LLP.

If you have any questions regarding the article or would like some advice, please contact Frances on fcoulson@moonbeever.com.  

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