Both rulings, delivered by Costs Judge Leonard, highlight that rigid application of GHR risks misrepresenting the true costs of modern legal practice, in this instance, in cases involving:
- Exceptional financial stakes
- Cross-border complexities
- Indemnity basis costs pursuant to a contractual indemnity
This article examines the court’s reasoning, focusing on:
- The limitations of GHR in complex disputes;
- The factors justifying significant departures from GHR;
- Practical points when seeking a higher rate recovery.
CPR 44.4 and the Concept of Reasonableness
Under CPR 44.4, costs must be "reasonable and proportionate." The courts, in both cases considered:
- Case-specific factors (complexity, value, required expertise – Micula);
- Contractual terms (indemnity clauses overriding proportionality – St Francis Group);
- Market realities (GHR, as a baseline rather than a fixed standard – in contract to the approach that Judges typically adopt when summarily assessing costs).
Both cases confirm that while GHR provide a useful reference, they are not relevant for detailed assessment in high-stakes commercial litigation.
Judicial Departures from GHR: Key Examples
1. Micula & Ors v Romania – Complexity and International Implications
The court approved rates up to 71% above 2010 GHR for work done between 2014 and 2017 (e.g., £700/hour for Grade A vs. £409), citing:
- Existential risks: Enforcement of a €376m arbitration award with EU law implications;
- Novel legal issues: Conflict between investment treaties and EU competition law;
- Elevated responsibilities: Junior fee earners performing work justifying senior rates.
2. St Francis Group v Kelly – Contractual Indemnity and Market Rates
The court upheld £700/hour for a City firm partner in a £37m fraud dispute, noting:
- Indemnity basis costs: Contractual clause for recovery on an indemnity basis shifted the burden to the paying party to demonstrate the costs/rates were unreasonable;
- Task-specific demands: Disclosure and trial preparation required partner-level expertise;
- In-house counsel fees: Allowed at £255/hour where work mirrored external solicitors’ duties.
Common Themes: When GHR Are Insufficient
Practical Implications for Practitioners
- Detailed justification is key: In Micula, the claimants succeeded by demonstrating the international significance of the case.
- Indemnity costs shift the burden: As in St Francis Group, indemnity based costs safeguard against proportionality challenges.
- Junior fee earners at higher rates: Courts recognise enhanced responsibilities where juniors handle complex work.
Conclusion: GHR After Micula and St Francis Group
These rulings appear to confirm a judicial trend within the SCCO: GHR can be exceeded in high-value litigation.
Key takeaways:
✅ GHR are a baseline – Courts will permit significant uplifts for complexity, high stakes, or to reflect relevant contractual terms.
✅ Indemnity costs awards are a powerful tool when it comes to costs – They neutralise proportionality challenges.
✅ Evidence is essential – Practitioners must clearly demonstrate the market rates and how the cases warrant a departure from GHR by demonstrating the relevant CPR44.5 factors.
As the Civil Justice Committee considers the application of the current GHR, these cases highlight the divergence between summary and detailed assessment.
Specialist Costs Judges recognising market realities suggests that future GHR updates may better reflect the true cost of complex litigation. In the interim, practitioners must demonstrate a robust case (relying upon the CPR44.5 factors) to recover rates in excess of the GHR
