Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> SCHOOL AND NURSERY MILK ALLIANCE LTD FOR JUDICIAL REVIEW OF THE FUNDING RATES SET IN THE MILK AND HEALTH SNACK SCHEME (SCOTLAND) REGULATIONS 2021 (AS AMENDED) AND THE GUIDANCE ISSUED BY THE SCOTTISH MINISTERS IN RELATION TO THE SCOTTISH MILK AND HEALTHY SNACK SCHEME [2023] ScotCS CSOH_32 (19 May 2023)
URL: http://www.bailii.org/scot/cases/ScotCS/2023/2023_CSOH_32.html
Cite as: [2023] CSOH 32, 2023 SLT 616, 2023 GWD 19-172, [2023] ScotCS CSOH_32

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OUTER HOUSE, COURT OF SESSION

[2023] CSOH 32

P583/21

OPINION OF LORD BRAID

in Petition of

SCHOOL AND NURSERY MILK ALLIANCE LIMITED

Petitioner

for

Judicial review of the funding rates set in the Milk and Healthy Snack Scheme (Scotland)

Regulations 2021 (as amended) and the guidance issued by the Scottish Ministers in relation

to the Scottish Milk and Healthy Snack Scheme

Petitioner: MacGregor KC; Balfour + Manson LLP

Respondent: Crawford KC, A McKinlay; Scottish Government Legal Department

19 May 2023

The issue

[1]

This is a note of objections to the auditor's report in a petition for judicial review.

The petitioner instructed English solicitors and counsel to undertake a considerable amount

of work in relation to that petition. In taxing the petitioner's account, the auditor refused to

allow the recovery of any fees for that work. The issue is whether he erred in so doing.

Background facts and circumstances

[2]

The stated aim of the petitioner, which is based in England, is to ensure that all

children receive the benefits to be derived from drinking milk in school or early years

settings. A consultation exercise was commenced by Scottish Ministers (the respondents) in

2018 in relation to a proposed Scottish Milk and Healthy Snack Scheme. A similar scheme

was proposed for England and Wales. The petitioner opposed the Scottish scheme, as it had

done the English one, as it considered the proposed rates would render it unworkable.

Although the English proposal was abandoned, the respondents proceeded to introduce the

Scottish scheme with the introduction of new funding rates. The petitioner challenged those

rates by judicial review, enjoying complete success (see 2022 SLT 262). It secured an award

of expenses against the respondents, including an additional fee.

[3]

The petitioner instructed an English firm of solicitors, Bates Wells, not only to

challenge the proposed English scheme, but to oppose the Scottish one. Its reason for doing

so was that it has for approximately 20 years been advised by a partner in that firm,

Melanie Carter, who has extensive experience of the petitioner's sector, and knowledge of

how it operates. Similarly, an English barrister, Mr Bates, who had been instructed in

relation to a judicial review of the English scheme, was instructed to undertake certain work

in relation to the Scottish one, including drafting the petition for judicial review and framing

a note of arguments. A Scottish firm, Balfour + Manson, was instructed as Edinburgh agents

and they instructed senior (but not junior) counsel. The account of expenses included

charges for all of the work undertaken by Bates Wells (which included preparing affidavits

of all the witnesses, including two witnesses who were based in England) and that

undertaken by Mr Bates. The respondents objected to all of those charges.

The arguments presented to the auditor

[4]

In his minute lodged in response to the petitioner's Note of Objections, the auditor

summarises the parties' arguments in relation to the employment of English solicitors and

counsel. The respondents argued that it would have been both feasible and reasonable to

have instructed Scottish agents at an earlier stage. The use of English agents and counsel

was unnecessary and an extravagance, superfluous and unreasonable. No documents had

to be recovered in England nor were any witnesses to be precognosced outwith Scotland

[the latter statement was conceded to be inaccurate, since two of the witnesses in question

were based in England]. In response, the petitioner founded upon Bates Wells' in-depth

knowledge of the sector in which it operated. It pointed out that the test was

reasonableness, rather than feasibility. Significant work had been undertaken by

Bates Wells, and by Mr Bates, in relation to the collation of documentation and preparation

of the case including work on pleadings and documentation, which benefitted greatly from

their expert knowledge of the sector and the issues at stake. The costs which Balfour +

Manson would have incurred had they done all the work would have been significantly

higher, if not more than the two firms put together, had Bates Wells and Mr Bates not

carried out their services. In support of this argument, it provided the auditor with details

of the hourly rates charged by various grades of fee earner at Bates Wells.

The auditor's decision

[5]

At paragraph 5 of his minute, the auditor (correctly) narrates the test for recovery of

work undertaken for a party by foreign agents: that he had to be satisfied that it was

reasonable for that party to have instructed the foreign agents to undertake that work. He

then summarises, at paragraph 6, his understanding of the reasons why the petitioner had

instructed Bates Wells: (a) their in-depth knowledge of the sector, which Balfour + Manson

did not have; (b) much of the relevant public law was English; and (c) that the time incurred

in dealing with various aspects of the litigation was less. He deals with (a) and (b) in

paragraph 7, stating that in his opinion, the required degree of knowledge of the legal

framework and the role of agents and dairies was available from the petitioner such as to

allow the litigation to be competently raised and conducted by Scottish agents. They would

have been able to have familiarised themselves with the relevant aspects of the matter and

then conduct the litigation without such difficulty that would have required assistance from

English agents. He states that he was "unable to identify any aspect of the litigation that

required the input of English agents". As far as (c) is concerned the auditor deals with that

at paragraphs 8 to 10. After quoting from Lord Menzies in Kirkwood v Thelem Assurances

[2022] CSOH 53, where he made reference to recovery being effectively on an agent and

client basis, were English solicitors' charges to be recovered, the auditor stated that in his

experience where he has determined that expenses claimed in respect of work undertaken

by foreign agents have been reasonably incurred for conducting the proceedings in a proper

manner, that invariably results in the paying party having to pay expenses at a greater level

than they would have, had the work been undertaken by Scottish agents. This is said to be

on the basis that although the allowance of work undertaken by foreign agents requires to

be determined on the same party and party basis as Scottish agents, there is often additional

work in respect of liaising with Scottish agents, and the allowance of all recoverable work on

a time basis is often more favourable than the Scottish method of allowing some work on a

time basis and some work on a sheetage or page basis. In addition, according to the auditor,

the hourly rate to be applied to the recoverable work is often greater than the hourly rate

allowed in Scotland. He concluded this chapter of his reasoning at paragraph 11 by stating

that in his opinion, based on his knowledge and experience of litigation in similar matters

and having considered the work required in this litigation, the instruction of the English

agents had resulted in the claim being at a higher level than it would have, had the work

been undertaken by Scottish agents. Overall, the auditor determined (paragraph 12 of his

minute) that the expenses claimed in respect of the English agents were not expenses

reasonable for conducting the proceedings in a proper manner. He then applied similar

reasoning in relation to Mr Bates, concluding that he was unable to identify any aspect of the

litigation that required the instruction of an English barrister and on that basis he was not

persuaded that the knowledge and experience of Mr Bates was sufficient reason to justify his

instruction. He also concluded that the instruction of Mr Bates had resulted in the claim for

expenses against the paying party being at a higher level than it would have been, had the

work been undertaken by Scottish counsel on the instruction of Scottish agents.

The law

[6]

Rule 2.2(1) of the Act of Sederunt (Taxation of Judicial Expenses Rules) 2019

(SSI 2019/75) provides that the auditor is to allow only such expenses as are reasonable for

conducting the proceedings in a proper manner. Rule 4.2 provides that outlays reasonably

incurred in order to conduct the proceedings in a proper manner are to be allowed.

[7]

In deciding whether or not expenses are reasonable, or reasonably incurred, for

conducting the proceedings in a proper manner, the auditor is exercising a wide discretion;

the court's role in challenges to the exercise of that discretion is a limited one, the available

grounds of objection being analogous to those in a judicial review: Shanley v Stewart 2019

SLT 1090, Lord President (Carloway) at [25]. The court can interfere only if the auditor has

erred in law in some way, for example, by misdirecting himself in law, or taking into

account irrelevant considerations, ignoring relevant ones or misunderstanding the factual

material placed before him.

[8]

As regards the fees of solicitors or counsel outwith the jurisdiction, there is no

prohibition on these being recovered, provided that they satisfy the reasonableness test:

Kirkwood v Thelem Assurances, above, Lord Menzies at [24]. If they do satisfy that test, the

amount recoverable will be assessed in accordance with the rules of that jurisdiction. So, in

Ebbw Vale Steel, Iron and Coal Company Ltd v Murray (1898) 25 R 925, while the auditor had

allowed, as a good charge, the expense of instructing an English solicitor to precognosce

witnesses who were resident in England, he had taxed that expense on the Scottish scale,

resulting in a significant reduction to the account. The Inner House sustained an objection

by the party entitled to payment, holding that the outlay must be taxed according to English

rules. The Lord President observed (at 927) that the losing party could "only" be charged

with the cost of having witnesses away from the seat of the Court precognosced by a local

solicitor, this being less expensive than an Edinburgh agent doing the work: in other words,

cost was a relevant consideration, albeit in Ebbw Vale it was cheaper to instruct an English

agent than to have the Scottish solicitor do the work.

[9]

The seven judge case of Wimpey Construction (UK) Ltd v Martin Black & Co (Wire

Ropes) Ltd 1988 SLT 637 gave consideration to the correct approach where an account of

expenses incurred by English solicitors was sought to be recovered in a Scottish litigation.

The principles derived from that case were summarised by Lord Drummond Young in

Scottish Lion Insurance Co Ltd, Petr 2006 SLT 606 at [8] as follows:

an English solicitor properly employed in a Scottish litigation is entitled to be

remunerated for their work according to an English scale of remuneration [as had

been decided in Ebbw Vale];

such remuneration is treated as part of the outlays in the account of expenses;

in considering the English account, the auditor must first determine which

items would be admissible in a Scottish party and party account (applying Scottish

principles);

thereafter, having made such inquiries as may be appropriate to ascertain

what charges may be appropriate, the auditor must apply the relevant English scale

of charges.

[10]

In relation to the instruction of English counsel, the Lord President said, in Shanley,

at [29], that it would be "most unusual" for the auditor to allow, as an expense reasonably

incurred for the proper conduct of an action in Scotland, the fees of English counsel. He

went on to say:

"Such counsel have no rights of audience in the Court of Session and it is difficult to

see why it would be reasonable to instruct English counsel, given the instruction of,

and advice by, Scottish counsel and solicitors on liability and quantum. Any advice

from English counsel was superfluous. In any event, the auditor considered,

reasonably, that the case as finally pled did not require this advice. If there had

been a matter of English law to be considered, the matter may have been different.

In that event, as the auditor noted, certification as a skilled person would be

needed."

Submissions

Petitioner

[11]

Senior counsel for the petitioner submitted that the auditor had erred in the

following respects. First, he had applied a test of necessity, rather than one of

reasonableness, as his use of the word "required" showed. Second, he had wrongly taken

into account the cost of doing the work in assessing whether or not it was reasonable to

instruct English solicitors and counsel, thereby conflating what ought to have been a two

stage approach required by Wimpey Construction. Third, he had taken into account

irrelevant factors, and failed to take into account relevant ones: he had failed to appreciate

that the rates charged by Bates Wells were, in the main, lower than the hourly rate which

Balfour + Manson was entitled to charge following allowance of the additional fee, which

was £287; and had wrongly proceeded on the basis that all of the witnesses were situated in

Scotland. Finally, his decision to impose a blanket prohibition on the recovery of any

charges for work done in England was irrational. The charges for precognoscing, and then

preparing affidavits for, the two witnesses who were based in England, should have been

allowed. As regards the instruction of counsel, the auditor had erred in concluding that

Shanley was directly in point: the case merited the instruction of senior and junior counsel

and the question ought to have been whether recovery of fees for junior counsel was

reasonable: if so, the work of Mr Bates was not superfluous and ought to have been allowed.

The refusal to allow any charges in respect of that work was irrational.

Respondent

[12]

Senior counsel for the respondent submitted that reading his minute as a whole, the

auditor had identified, and then applied, the correct test of whether the instruction of

English solicitors and counsel had been reasonable. He was entitled to come to the view he

had reached, that the instruction was not reasonable. The auditor had dealt with the

arguments which had been presented to him, and his minute must be read in that context.

The Note of Objections amounted to no more than a disagreement with the reasons given by

the auditor as to why he had found the instruction of English advice to be unreasonable. It

could not be said that the auditor's decision was irrational. Ebbw Vale must be read in the

context that Zoom, and other such platforms, did not exist in the late 19

century, and it did

not lay down a rule of general application that it was always reasonable to instruct foreign

agents to precognosce witnesses outwith the jurisdiction. The court should not interfere

with the auditor's decision.

Decision

[13]

Since the respondents concede that if the auditor applied a test of necessity rather

than reasonableness that would be an error of law which would vitiate his decision, I will

address that question first. The auditor correctly notes, at paragraph 3 of his minute, the

tests set out in rules 2.2(1) and 4.(2), which are tests of reasonableness. He had before him,

and narrates in his minute, not only the respondent's argument that it would have been

"feasible" to instruct Scottish agents sooner, but the petitioner's riposte that feasibility was

not the test. At paragraph 5, under reference to Wimpey Construction and Scottish Lion, he

notes, correctly, that to allow a party to recover English charges, he would have to be

satisfied that it was reasonable for the party to instruct foreign agents to undertake that

work. Having then given his reasons for reaching his opinion, the auditor then concludes

that the expenses claimed were not expenses reasonable for conducting the proceedings in a

proper manner. Reading his minute as a whole, it is clear that the auditor had the correct

test in mind. It is true that in considering reasonableness, he stated (among other factors)

that he was unable to identify any aspect of the litigation which required the role of English

agents; then again, the same language appears to have been used by the auditor in Shanley

without attracting any adverse comment from the Lord President (see paragraph [10]

above). In any event, I see no reason why, in considering whether it was reasonable to

obtain English advice, the need for such advice should not be a relevant factor. More to the

point, the auditor makes clear that he took into account the arguments before him about the

particular knowledge of the English agents and the aspects of English public law involved,

but was not persuaded that they were sufficient reasons to justify the instruction of English

agents (see paragraph [5] above): nothing about the expression of that conclusion is redolent

of the application of a test of necessity.

[14]

The next ground of challenge is that the auditor wrongly applied what was said to be

a two-stage test, by having regard to the costs of doing the work (which arose only at stage

two) when considering the reasonableness of instructing the work. However, as the auditor

points out at paragraph 5 of his minute, at least on Lord Drummond Young's summary of

the principles in Scottish Lion, there is an anterior test, which is whether or not English

agents were properly instructed in the first place. Only if they were, does the auditor then

go on to consider which items would then be allowed in a Scottish party party account; and

those items which would be so allowed are then taxed at English rates. Even proceeding on

the basis that "properly instructed" is synonymous with "reasonably instructed", it must be

relevant, in considering that question, to have regard to the costs of instructing English

agents. By way of example, suppose work could be done with equal efficiency and

proficiency by solicitors based in London and Edinburgh, say the precognition of a witness

in Berwick: it must be a relevant consideration in weighing up reasonableness, if the cost of

the English solicitor doing so were twice as high that of the Scottish solicitor. Indeed, in

Ebbw Vale, the rationale for allowing the charges of English solicitors for precognoscing a

witness, was that it was less expensive than sending an Edinburgh solicitor to do the work.

Similarly, in assessing the reasonableness of instructing English counsel, the respective costs

of English and Scottish junior counsel must, at the very least, be a factor to be weighed in the

balance. Accordingly I do not consider that the auditor erred, in principle, in having regard

to cost considerations in assessing reasonableness.

[15]

The next question is whether the auditor erred in his treatment of certain factual

matters, principally, in apparently accepting (or at least not correcting) the respondents'

erroneous suggestion that none of the witnesses was outwith Scotland; and in proceeding on

the basis that the hourly rate charged by Bates Wells was higher than the Scottish hourly

rate. In relation to the first of these, it appears that the petitioner itself did not correct this in

its submissions to the auditor; it is hard therefore to criticise the auditor for any error in this

regard. Further, it emerged, in response to a query raised by me at the hearing, that the

witnesses were in any event precognosced by Zoom. Thus, it is correct to say that no

witnesses outwith the jurisdiction had to be visited by agents. The location of the witnesses

is ultimately a neutral factor.

[16]

I have more difficulty with the auditor's approach to hourly rates. He states (at

paragraph 9) that in his experience, the instruction of foreign agents "invariably" results in

the paying party having to pay expenses at a greater level than they would have had the

work been undertaken by Scottish agents; that the hourly rate "is often greater" than the

hourly rate allowed under Scottish statute; and (at paragraph 10) that "based on his

knowledge and experience of expenses in similar matters and having considered the work

required in this litigation", the instruction of English agents had resulted in the claim for

expenses being at a higher level than it would have been had the work been undertaken by

Scottish agents. In other words, the auditor had regard to what was either "invariably" or,

in his second formulation, "usually" the case. What is lacking in that analysis is any

consideration of what the respective costs of the English and Scottish agents were in this

case. I consider that this was a misunderstanding, or at least a failure to appreciate, or

investigate, the factual matrix which does go to the heart of the auditor's decision. Had he

concluded that that the costs were broadly similar, then, taking into account the embedded

knowledge of Ms Carter, he might have come to a different decision on the reasonableness

of instructing Bates Wells, if not that of instructing Mr Bates. For this reason, the auditor did

err in law, in failing to take into account a material factual matter (or misunderstanding or

failing to investigate the respective rates in this case), which renders his decision susceptible

to challenge. In relation to Bates Wells's fees (but not those of counsel, where it is not

suggested that the auditor misunderstood the respective costs of English and Scottish junior

counsel), the matter must be remitted for reconsideration.

[17]

The final argument was irrationality. The petitioner's argument on this issue is, in

effect, that certain work (for example, preparing affidavits; drafting a petition; preparing a

note of arguments) had to be undertaken; had it been undertaken by Scottish solicitors and

counsel, the charges would have been recoverable; and it is irrational not to allow any

recovery for such work where it happened to be undertaken by English solicitors and

counsel. The flaw in that argument is that it flies in the face of the established principles,

whereby one first enquires whether it was reasonable to instruct English solicitors and

counsel to do the work, and only if it was are the costs of that work to be recoverable. If

work had to be done, but was (unreasonably) done by a foreign solicitor, then one can see

the logic in taxing that work at Scottish rates. However, that approach is ruled out by the

authorities; and the auditor's decision to disallow the English charges in their entirety

cannot be categorised as irrational. Indeed, having reached the view that he did on

reasonableness, he had no option other than to disallow the charges in their entirety.

[18]

In summary, the auditor did not apply a test of necessity; his decision was not

irrational; however insofar as his approach to assessing reasonableness was concerned, he

failed to have regard to the actual charges of Bates Wells on the one hand, and Balfour +

Manson (after allowance of the additional fee) on the other. To that extent only, he fell into

error. He did not fall into error in disallowing the fees of Mr Bates.

Disposal

[19]

I will sustain the objection to the abatement of the fees of Bates Wells, and repel that

to the abatement of English counsel's fees. I will remit to the auditor to give further

consideration to Bates Wells' fees. I will reserve the question of expenses.