Firms that use a high proportion of paralegals to handle civil litigation will be the losers under new guideline hourly rates, costs lawyers have told the Gazette.
A decision on the new rates, which have been frozen since 2010, is imminent, the Gazette understands.
The Civil Justice Council committee charged with reviewing the rates sent its final report to master of the rolls Lord Dyson last week. On receiving the report, Dyson said that the new rates ‘may have far-reaching effects on the legal services market’.
Costs experts cite committee chair Mr Justice Foskett’s intention that ‘hours charged’ by seniority of fee-earner would be core to the calculation.
The Law Society’s Law Management Section’s 2013 financial benchmarking survey, part of the evidence available to the committee, shows a figure of 1,100 chargeable hours per fee-earner.
That is a moderate increase on the assumptions that prevailed in the early 1990s, when guideline rates emerged, for more experienced fee- earners – solicitors who are over eight years’ qualified.
But for paralegals it is a dramatic increase, significantly reducing the value of their hourly rate across the year. The value per hour that can be recovered for paralegals’ work is therefore vulnerable to a cut, moderated only by any increase in firms’ associated overheads.
Peter ‘PJ’ Kirby, a barrister specialising in costs at Hardwicke, told the Gazette: ‘Lord Dyson’s comment strikes me as ominous – and when the committee’s focus is set in the context of changes in the legal services market, it points to a painful readjustment for law firms that use a higher proportion of paralegals in civil litigation.
‘With the available evidence covering a volatile business period for lawyers, I would also expect other categories to see a net reduction in their guideline hourly rates.’
Robert Khan, the Law Society’s head of law reform, said Chancery Lane is eager to see the report, but warned: ‘Based upon the publicly available evidence, we anticipate that some rates will be reduced.’