Assessing the Reasonableness of Foreign Legal Costs in Scottish Judicial Proceedings: Insights from [2023] CSOH 32

Introduction

The case of School and Nursery Milk Alliance Ltd v Scottish Government ([2023] CSOH 32) presents a pivotal examination of the criteria governing the recovery of legal expenses incurred by foreign solicitors and counsel in Scottish judicial proceedings. This comprehensive commentary delves into the background, key issues, and the court's nuanced deliberations, offering a structured analysis of the legal principles and their implications for future litigation within Scotland.

Summary of the Judgment

In this case, the petitioner, School and Nursery Milk Alliance Ltd, sought judicial review of the funding rates set under the Milk and Healthy Snack Scheme (Scotland) Regulations 2021 and associated guidance issued by Scottish Ministers. The central dispute revolved around the auditor's refusal to allow the recovery of legal fees incurred by the petitioner for engaging English solicitors and counsel. The auditor deemed these expenses unreasonable, asserting that Scottish agents could have competently handled the litigation at a lower cost.

Lord Braid, delivering the judgment, upheld the auditor's decision in part. The court affirmed that the auditor correctly applied the reasonableness test as stipulated by the relevant rules but identified errors in assessing the actual costs and factual circumstances, particularly concerning the fees charged by Bates Wells. Consequently, the court remitted certain aspects of the case for reconsideration while dismissing others.

Analysis

Precedents Cited

The judgment extensively references key precedents that shape the framework for evaluating the recoverability of foreign legal costs in Scottish proceedings:

Kirkwood v Thelem Assurances [2022] CSOH 53: Emphasizes that expenses must be reasonable and aligns with the principle that recovery is on a party-and-party basis.
Ebbw Vale Steel, Iron and Coal Company Ltd v Murray (1898) 25 R 925: Discusses the taxation of expenses for out-of-jurisdiction solicitors, underscoring the necessity to assess costs based on the relevant jurisdiction's standards.
Wimpey Construction (UK) Ltd v Martin Black & Co (Wire Ropes) Ltd 1988 SLT 637: Provides a multi-step approach for auditing expenses incurred by English solicitors in Scottish litigation, which was further summarized in Scottish Lion Insurance Co Ltd, Petr 2006 SLT 606.
Shanley v Stewart 2019 SLT 1090: Highlights the limited grounds for court interference in the auditor's discretion, focusing on legal errors rather than factual disagreements.

These precedents collectively establish a stringent framework ensuring that only necessary and cost-effective legal expenses are recoverable, thereby maintaining the integrity and efficiency of judicial proceedings.

Legal Reasoning

Lord Braid meticulously dissected the legal reasoning applied by the auditor, focusing on the adherence to the reasonableness test under Rule 2.2(1) and Rule 4.2 of the Act of Sederunt (Taxation of Judicial Expenses Rules) 2019. The court evaluated whether the auditor appropriately determined that engaging English solicitors and counsel was unreasonable, given the availability of competent Scottish alternatives.

The auditor concluded that the petitioner did not demonstrate a compelling need to hire foreign legal professionals, as Scottish agents possessed adequate knowledge and could conduct the litigation effectively. Moreover, the auditor highlighted that the overall expenses were inflated due to higher hourly rates charged by the English firm, which was inconsistent with the principles established in prior cases.

However, Lord Braid identified a critical oversight in the auditor's assessment of hourly rates. The court noted that the auditor failed to consider the actual costs incurred by Bates Wells compared to Scottish firms, which could have potentially justified the reasonableness of the expenses. This factual misapprehension necessitated a partial remittance of the case for further consideration of Bates Wells' fees.

Impact

The judgment in [2023] CSOH 32 reinforces the stringent criteria for the recovery of foreign legal costs in Scotland, emphasizing the paramount importance of the reasonableness test. This decision serves as a critical reference point for future litigants and auditors by:

Highlighting the necessity for precise and accurate assessment of legal expenses, particularly when involving foreign solicitors and counsel.
Clarifying the application of precedents in evaluating the recoverability of out-of-jurisdiction legal costs.
Emphasizing the limited scope for court intervention in audit decisions unless significant legal errors are evident.

Consequently, legal practitioners must ensure rigorous justification for engaging foreign legal professionals and provide comprehensive evidence of cost-effectiveness to withstand scrutiny in similar judicial reviews.

Complex Concepts Simplified

Reasonableness Test

The reasonableness test assesses whether the expenses claimed are appropriate and necessary for properly conducting legal proceedings. It considers factors such as the expertise required, the necessity of foreign legal input, and the comparative costs of utilizing local versus foreign solicitors.

Judicial Review

A judicial review is a legal process where the courts examine the actions of public bodies to ensure they comply with the law. In this context, the petitioner challenged the auditor's decision to disallow certain legal expenses, seeking a review of the auditor's handling of the funding rates.

Act of Sederunt (Taxation of Judicial Expenses Rules) 2019

This is a set of rules established under Scottish law that governs the taxation, or allocation, of legal expenses in judicial proceedings. Rules 2.2(1) and 4.2 specifically address the allowance of reasonable and necessary costs incurred during litigation.

Conclusion

The judgment in School and Nursery Milk Alliance Ltd v Scottish Government underscores the meticulous scrutiny applied to the recovery of legal expenses, particularly those involving foreign solicitors and counsel. By affirming the necessity of the reasonableness test and highlighting the importance of factual accuracy in cost assessments, the court reinforces the principles that govern the allocation of legal costs in Scotland. This decision not only clarifies the boundaries within which auditors must operate but also serves as a cautionary tale for litigants to ensure that any engagement of foreign legal professionals is both justified and cost-effective. Ultimately, this case contributes significantly to the jurisprudence surrounding judicial expenses, promoting fairness and efficiency within the Scottish legal system.