The judiciary is set to dispel the 'aura of the Square Mile', it was claimed this week, after the Senior Costs Judge ruled that City charge-out rates cannot be recovered for work that could be done just as well elsewhere.

Peter Hurst said 'a City firm which undertakes work which could be competently handled by a number of central London solicitors is acting unreasonably and disproportionately if it seeks to charge City rates'. He described 'City work' as 'normally heavy commercial or corporate work'.


The decision came in the assessment of a defamation case - Musa King v Telegraph Group - in which Master Hurst said defamation is not City work and 'is never likely to be'. Leading London media firm Carter-Ruck claimed £375 an hour for partners, but was allowed £325.


The ruling could have a serious impact on defamation practice - and potentially other civil litigation - as it also called for 'a great deal more delegation to assistant solicitor level' and the use of just one counsel in an effort to introduce greater proportionality in costs.


Costs expert Tony Girling, a former Law Society President, said the ruling was a significant milestone in a growing trend, from which 'the City has been a bit protected until now by the aura of the Square Mile'. He explained: 'One has begun to see costs judges challenging the assumption that it is reasonable to instruct a City firm for anything substantial.' There could be a similar impact on the big firms in major cities, he said.


Andy Ellis of law costs consultants Ellis Grant added that it could be that City rates will only be allowed in future for the 'heaviest of heavy cases'. He said there seemed to be a move towards 'rates for the work rather than rates for the location'.


Lovells partner Graham Huntley, president of the London Solicitors Litigation Association, argued that 'City work' cannot be given a 'hard and fast meaning'.


He pointed out that the guideline figures for summary assessment of costs allow even higher hourly rates than the City rate in substantial and complex litigation, including where there is an international element.


'That reflects the fact that the City relies on the existence of firms which are structured to provide an international service to international clients,' he said. 'We must be careful not to undermine the economic basis of the firms on which the City depends to win work from major international clients.'


In the assessment, around one-third was knocked off the claimant's claimed costs of approximately £900,000, including success fees, according to the Telegraph's solicitors, London firm Farrer & Co. The case settled for £50,000 in damages. Master Hurst backed the 100% success fee, but he described as 'the correct approach' Carter-Ruck's policy now of staged success fees.


Carter-Ruck partner Alasdair Pepper, who did not handle the substantive claim, pointed out that the reduction in costs was down to the rulings on hourly rates and proportionality, rather than because much time had been disallowed.


Neither party will be appealing.