When the increase in the solicitors’ hourly rates for party and party taxation in the civil courts in Hong Kong was announced in December 2017 there was little or no fanfare. The “benchmark” hourly rates by which claims for costs are referenced had been frozen for years and were long overdue an increase.
In this context, the percentage increases are fully justified when (for example) taking into account inflation over the years. Of course, the principal justification for the rate increases is the widening “recoverability gap”; namely, the difference between what clients pay their lawyers and what they recover on a party and party taxation (assessment) of their costs by the courts.
Solicitors get paid their contractual rates (in a free market) and these rates increase with inflation (particularly, with respect to commercial rents and salaries – ask any managing partner of a law firm). The longer the benchmark hourly rates stood still, the greater the “recoverability gap”.
In a jurisdiction where an unsuccessful party is generally ordered to pay a successful party’s costs it was becoming increasingly incongruous to see the “recoverability gap” widen (while accepting that there are usually winners and losers in matters of costs).
In short, the increase in the costs recovery rates is justified as a matter of principle and on commercial grounds.
Much has been said about this development but a number of points are worth emphasizing:
- the new rates take effect with respect to work done on or after 1 January 2018 (not before);
- the new band for solicitors practising in Hong Kong with more than fifteen years’ post-qualification experience is welcome; experience counts and comes at an extra cost;
- the solicitor hourly rates are not set in stone. They are for guidance and going forward (as in the past) there will be cases where parties recover hourly rates that are more or less than the benchmark rates;
- the increase in the hourly rates applies in the District Court and is timely in light of plans to increase its monetary jurisdiction in 2018. Costs recovery as between parties in the District Court is limited to no more than two-thirds of the costs allowed in the High Court (RDC O. 62, r. 32(1A) (Cap. 336H)). While this rule appears to be sacrosanct (for now) there is an argument it is no longer appropriate given that (leaving aside certain specialist cases) litigation in the District Court and in the High Court is essentially the same;
- attention now turns to the review mechanism for the next adjustment, expected to take effect in three to four years’ time. The recently adjusted hourly rates are close to the rates recommended by the Law Society of Hong Kong in 2013–14. Therefore, if history is anything to go by, there is no time to lose with the next review.