Chapter 10 Legal fees and the taxation of costs
Part I : Introduction
10. This chapter discusses solicitors' and advocates' fees (Parts II and III), how litigation is funded (part IV) and how cases are funded by legal aid (part V). It also reports on research carried out on behalf of the Group into the functions of the auditor of court in relation to the taxation of fees (part VI).
10.1 The EC Report on Competition in Professional Services 104 argued that fees charged for professional services should be negotiated freely between practitioners and clients and that fixed prices had detrimental effects on competition, eradicating or seriously reducing the benefits that competitive markets delivered for consumers. Scale fees for solicitors (ie fixed prices) were abolished in Scotland at the end of 1984.
10.2 The EC Report also expressed reservations about recommended prices 105 which the Commission believed might have a significant negative effect on competition, as recommended prices might facilitate the co-ordination of prices between service providers and could mislead consumers about reasonable price levels. The Office of Fair Trading for its part had been concerned that fee guidance might inhibit or distort price competition 106.
10.3 On 25 June 2004 the European Commission fined the Belgian Architects' Association 100,000 Euros for failing to abolish the system of recommended fees that applied to its members 107. The view of the Commission was that the recommended minimum fee scale of the Association was in breach of competition rules because it sought to co-ordinate the pricing behaviour of architects.
10.4 The Group decided to consider solicitors' and advocates' fees separately in view of the different statutory and regulatory contexts which applied to each (Parts II and III below).
10.5 The funding of litigation also required separate consideration because :
- Litigation involved the interests not only of the lawyer and client but also of the other party or parties to the litigation, as well as the interests of the Court itself in the efficient and proper dispatch of business 108;
- The time and work involved in litigation could not be predicted and controlled as readily by lawyer and client as might be the case with other types of legal work. These matters would be affected not only by the way in which the other party or parties to the litigation chose (quite legitimately) to conduct the case, but also by the Court and by the professional responsibilities which lawyers had to the Court.
- The constitutional significance of access to the courts for the determination of civil rights and obligations and criminal charges, and the availability of proper representation for that purpose, was recognised both at common law 109 and under the European Convention on Human Rights 110;
10.6 In the context of litigation it was necessary to keep in mind the distinction between:
- the question of funding as between the client and his own lawyer ("agent and client expenses"); and
- the questions which arose where one party to an action (usually the losing party) was required to pay the expenses of another party (usually the winning party) ("party and party expenses").
A party against whom an award of expenses was made was an involuntary funder of at least part of the other party's legal expenses. Such a party had had no opportunity to bargain with the lawyer and accordingly was not protected by the ordinary working of the market. The present law did not regard it as appropriate or fair to require a party against whom an award of expenses had been made to bear all the costs in terms of fees and outlays which, as between the client and his own lawyer, were entirely reasonable. The present law accordingly drew a distinction between the fees and outlays which it was appropriate to require a client to pay his own legal representatives and the expenses which it was appropriate to require a party to an action to pay to the other party to the action.
10.7 Civil and criminal litigation also needed to be considered separately :
- Civil litigation, in practice, exhibited a greater variety of types of funding. A relatively small proportion of civil litigation was funded by civil legal aid. Expenses were routinely awarded against the losing party in civil cases.
- By contrast, criminal prosecutions were brought by agencies of the state. The great majority (although not all) of accused persons and persons appealing against conviction were funded by criminal legal aid. There was only very limited provision for the recovery of expenses from another party in criminal proceedings. Thus, criminal litigation was a market which was dominated by state funding.
10.8 Accordingly, the funding of litigation is addressed separately in Part IV below. The legal aid system is described in Part V.
Part II: Solicitors' fees
(a) Current statutory provisions
10.9 The Competition Act 1998, the main provisions of which were modelled on and had to be applied consistently with Articles 81 and 82 EC, prohibited agreements between undertakings, decisions by associations of undertakings or concerted practices which:
(a) might affect trade within the United Kingdom, and
(b) had as their object or effect the prevention, restriction or distortion of competition within the United Kingdom.
As the legal professional bodies fell within the classification of associations of undertakings, their decisions on fees were within the ambit of the 1998 Act.
10.10 Other statutory provisions relevant to solicitors' fees were as follows :
- Excessive fee charging by a solicitor might amount to professional misconduct in terms of section 39A of the Solicitors (Scotland) Act 1980.
- Where a solicitor and his client had reached an agreement in writing as to the solicitor's fees, section 61A of the Solicitors (Scotland) Act 1980 provided that it was not competent to remit the solicitor's account for taxation.
- The Council of the Law Society of Scotland had powers to reduce or set aside a solicitor's fees and outlays where it held the services rendered to have been inadequate (in terms of section 42A of the 1980 Act); or, where it held a fee to have been grossly excessive, to withdraw the solicitor's practising certificate (section 39A of the 1980 Act).
(b) Current professional rules
10.11 The Code of Conduct for Scottish Solicitors required the fees charged by solicitors to be fair and reasonable in all the circumstances. Factors to be considered in relation to the reasonableness of fees included :
(a) The importance of the matter to the client;
(b) The amount or value of any money, property or transaction involved;
(c) The complexity of the matter or the difficulty or novelty of the question raised;
(d) The skill, labour, specialised knowledge and responsibility involved on the part of the solicitor;
(e) The time expended;
(f) The length, number and importance of any documents or other papers prepared or perused; and
(g) The place where and the circumstances in which the services or any part thereof were rendered and the degree of urgency involved.
10.12 The Law Society of Scotland issued a Practice Guideline to Scottish solicitors in November 2005 on how they should present their accounts to their clients and the further information they should make available if their clients seek a breakdown of the fees (see annex F).
(c) Fees for non-court business
10.13 Until the end of 1984, solicitors' fees for non-court business such as conveyancing, trust and executry work, corporate work and general business were regulated by the Law Society of Scotland by means of a prescribed scale of fees. From 1 January 1985 the Law Society of Scotland ceased to prescribe the level of fees. From that date until its withdrawal on 1 August 2005 the Society published an annual Table of Fees for General Business, the purpose of which was to recommend charges for professional services rendered by solicitors in Scotland.
(d) Cost of Time Survey
10.14 Since the late 1970s the Law Society of Scotland had carried out an annual survey of the cost of running a solicitor's practice, known as the Cost of Time Survey. The survey was used to calculate the value of the unit in the Society's recommended table of fees which it published each year. The purpose of the annual Table of Fees for General Business was to "… recommend charges for professional services rendered by solicitors in Scotland…" and the Society's annual cost of time informed the unit cost figures recommended. The Society recommended an hourly charge rate, but explained that it was for the solicitor and client to agree on an acceptable method of pricing the work done, whether by an agreed hourly rate or by a fixed fee for the whole work.
10.15 The Law Society of Scotland considered the implications of the Commission's decision in the case of the Belgian Architects' Association for its Table of Fees for General Business and the implications for the profession of withdrawing the recommended fees table. The Council of the Law Society of Scotland decided to withdraw the table of recommended fees on 25 February 2005. The legal opinion on which the Society based that decision did however advise that the Society might continue to carry out its annual Cost of Time Survey of legal firms. The survey was prepared by an independent actuary who worked out the average cost of running a solicitor's practice from figures provided to him by firms across Scotland about the previous year's costs 111. The annual survey assisted individual firms to calculate what they needed to earn to meet their overheads, including staff wages and running costs 112. With the abolition of that table, the Society decided in future to publish the annual Cost of Time Survey as a historical hourly cost rate.
10.16 The Society's guidance on recommended fees, which was withdrawn with effect from 1 July 2005, accepted that solicitors might assess their own unit values, though noted these would have to be justified at a taxation if challenged. Though the withdrawal of the Society's guidance on fees might increase competition in the legal services market (as argued by the European Commission Report), there was a risk that its withdrawal might also reduce transparency for consumers wishing to complain about the level of fees charged.
10.17 Where a client considered a proposed fee to be excessive or declined to pay it or when a solicitor wished to enforce the fee in such circumstances, the Auditor of Court (an official based in every Sheriff Court in Scotland) could "tax" or assess the reasonableness of the fee in question (see Part VI).
(e) Competition issues
10.18 The Office of Fair Trading noted that to achieve compliance with competition law, it would be important to ensure that any information on price provided by a professional body was historical only, collated and aggregated by a third party and framed to show that it was not intended as a recommendation but as a description of historical prices. The Law Society of Scotland confirmed that it planned to take the Cost of Time Survey forward on that basis, and suggested that auditors could use survey data to develop their own table.
10.19 With the Society's agreement, a researcher discussed the methodology used with the actuary responsible for the Cost of Time Survey. Historically, the Cost of Time Survey had been used in conjunction with 'notional salaries…for senior and junior profit-sharing partners. Those salaries were estimated by increasing the figure for the previous year in line with national average earnings' 113. It was understood that those notional salaries had been produced by the Society's Remuneration Committee. In calculating the hourly expense rates a number of specific assumptions were made about chargeable hours for different categories of fee earners, rates of return for interest on working capital, pension provisions and changes in the retail price index. Participants in the Survey were offered the possibility of having their firm's benchmarks generated for them by the consulting actuary and an Appendix provided a pro forma through which others could calculate their firm's benchmarks (Appendix II to the Survey).
10.20 From the 2005 Cost of Time Survey the method had changed (the questionnaire used for the 2005 Survey is at annex G). The notional salary for profit-sharing partners was now the median level of profitability (excluding return on capital and pension provisions) from the 2004 Cost of Time Survey. The researcher noted that this notional salary although derived from the median level of profitability could be, possibly, indirectly influenced by the Remuneration Committee's choice of notional salary from the previous year. This would occur if firms responding to the 2004 Cost of Time Survey used the hourly rates produced from the 2003 Survey when setting their charging rates for 2004. In such a case their profitability level would be determined, inter alia, by the notional salary level. Indeed, even if firms did not use the actual rate from the Cost of Time Survey but their choice of rate had been influenced by the actual rate that influence would be perpetuated through the use of the median profitability figure as a benchmark in the future. The Law Society of Scotland agreed to discuss the matter with the actuary.
(f) Client Paying
10.21 By far the greatest proportion of work done by solicitors was charged against the solicitor's own client.
i) Written fee charging agreements
10.22 In terms of Section 61A of the Solicitors (Scotland) Act 1980 solicitors and clients could enter into a written fee charging agreement in respect of any work done or to be done. Where such agreements had been entered into, it was not competent in any litigation arising out of any dispute as to the fees to be paid under such an agreement for the Court to remit the solicitor's account for taxation. In 1993 the Law Society of Scotland passed a practice rule, with the concurrence of the Lord President, the effect of which was to require solicitors to raise a Court action for payment of outstanding fees and give the client an opportunity to defend the action before the solicitor could obtain a decree on which diligence could be done. They could not go straight to diligence (ie enforcement of an unpaid debt).
10.23 From 1 August 2005 solicitors had been required by virtue of the Solicitors (Scotland) (Client Communication) Practice Rules 2005 to advise clients in writing of certain information at the outset of a matter, including either an estimate of the total fee to be charged plus VAT and outlays, or the basis upon which the fee would be charged (including VAT and outlays which might be incurred). A separate Guidance Note issued with the Rules 114 made clear that where an external fee charger, such as an auditor or law accountant, was asked to assess the fees to be charged (for example, in an executry), solicitors should explain to their clients the basis on which the auditor or accountant would be asked to fee up the file. If the work was being charged at an hourly rate, the actual rates applicable to different personnel carrying out the work would need to be stated as well as any commission charged on capital transactions such as the sale of a house. Where an account was to be rendered on a detailed basis, the charges for letters, drafting papers, etc also needed to be expressed as well as the hourly rate.
10.24 Intimation of such an estimate would not necessarily constitute a written fee charging agreement, but if the client accepted such proposed fees in writing, such acceptance would in the Society's view be an agreement in terms of section 61A of the Solicitors (Scotland) Act 1980. If the agreement set out an hourly rate or basis of charging but did not quote a total fee, the client would still be entitled to challenge whether or not all the work done was necessary, but would not be entitled in the Society's view to challenge the rates to which he had previously agreed.
10.25 If there was no written fee charging agreement, the client was entitled to require the solicitor to submit the account to the auditor for taxation. It was also possible for a solicitor on his own initiative and for his own guidance to send a file to an auditor of court or an independent law accountant to have a fee assessed; such unilateral action was not improper, but such an assessment could not be represented as a taxation or as having any official status. The fee for such a reference was not chargeable to the client unless it was included in a terms of business letter issued by the solicitor at the commencement of the work and the work had been instructed on that basis.
10.26 Taxation was a formal process where both the solicitor and the client had the opportunity to make representations to the Auditor about the reasonableness or otherwise of the fees. The outcome of a taxation was binding on both solicitor and client and the expenses of the taxation were entirely at the discretion of the Auditor, the latter being an issue which attracted adverse comment in the research on auditors reported in part VI of this chapter.
10.27 If a solicitor required to sue a client for unpaid fees, the Court might, but did not necessarily require to, remit the account to the auditor of court for taxation. The law on this question was fully reviewed by Sheriff Principal Sir Stephen Young 115 who held that a Sheriff had discretion as to whether to remit to the Auditor by virtue of the relevant rule of court 116. The exercise of such discretion would depend on the particular circumstances of the case. In the case in question the Sheriff Principal decided not to remit the account to the auditor and granted decree for the sum sued for.
10.28 The Scottish Consumer Council thought that the taxation process could be viewed as a useful consumer protection mechanism in theory, but had concerns that it might not be widely used and that consumers either might not know about it or might be deterred from using it for fear of the cost should the auditor not find in their favour. It was also clear from the auditor of court research that the taxation process was complex, lacked transparency and had considerable potential for inconsistency. The Council was concerned that there was no clear evidence as to whether the process did provide adequate protection for consumers, as it had not been possible for the auditor of court research to include a survey of the views and experiences of individual court users.
10.29 The functions and operation in practice of the auditor of court in relation to taxation are examined in greater detail in part VI to this chapter.
iii) Speculative fees
10.30 There was no prohibition on a solicitor carrying out work on a speculative basis, where a fee was only charged in the event of success. That basis was common in litigation, particularly personal injury cases (see Part IV), but was also very common in estate agency (no sale - no fee) and commercial work. In such transactions, the fee might be enhanced in the event of success, and might either be substantially discounted or waived altogether if the matter was unsuccessful. Such arrangements had to be agreed between solicitors and clients, preferably in writing to eliminate problems caused by differing recollections of verbal agreements. Such an arrangement was not truly pro bono work (see below).
(g) Third Party Paying
10.31 In the context of a litigation, one party to the litigation might be found liable to the other party for some or all of the latter's legal expenses. The party entitled to an award of expenses was liable in the first instance to pay his own expenses, but was entitled to recover some or all of the expenses from the other party. This is discussed further in Part III below.
10.32 Apart from litigation, there were several situations where the solicitor's own client was not responsible for payment of the solicitor's fee. The most common of these were:
- leases where the tenant was normally liable for the landlord's solicitor's fees and outlays;
- secured loans where the borrower was liable by statute for the lender's solicitors fees and outlays;
- executries where the residuary beneficiaries were not executors (in an executry the clients are the executors not the beneficiaries 117);
- business relocation where the individual's legal expenses were to be paid by the employer or a relocation company;
- legal expenses insurance;
- any other contractual arrangement for payment of one person's legal expenses by another person.
In all of these situations the third party paying had the right to require a taxation of the solicitor's account, unless such a right had been contractually excluded. The taxation would be conducted on the same basis as if the client was paying, except that the auditor might disallow a particular charge notwithstanding that the client had specifically instructed that item to be carried out.
(h) Clients in receipt of legal advice and assistance under the Advice and Assistance Scheme
10.33 Advice and Assistance under legal aid legislation was also available for general business where the client was financially eligible and the position is dealt with fully in Part IV below. If the authorised expenditure under the Advice and Assistance scheme had been exhausted, it was open to the solicitor and client to agree that work could continue to be done, treating the client as a private fee paying client for such work subsequent to such an agreement. That could not be retrospective, and fees had to be charged at Advice and Assistance rates for the period when the client was under the scheme and subject to the level of authorised expenditure available when the work was done. The client had a statutory right to taxation.
(i) Solicitor advocates
10.34 For the purposes of the regulation of fees (apart from legal aid and party and party expenses in litigation), solicitor advocates were solicitors and subject to the same regulation as other solicitors. No research had been carried out as to the fees charged by solicitor advocates.
(j) Pro Bono
10.35 Solicitors could undertake work without charging a fee, known as pro bono118 work. Many firms did so for charities, or for long standing clients needing advice about a particular matter. Many firms prepared wills for no charge, or for a donation by the client to charity; the Will Aid scheme was the best known example of that but there were others. In some circumstances outlays would be incurred.
Part III : Advocates' fees
(a) Current statutory provisions
10.36 Except in legal aid cases, there were no statutory provisions which controlled or regulated the fees which advocates might charge.
(b) Professional Guidance
10.37 The Faculty of Advocates did not set any scale of fees and did not offer any indication as to the fees which it was appropriate for advocates to charge.
10.38 The Faculty's Guide to the Professional Conduct of Advocates contained the following guidance on fees :
"5.2 It is thought that, as the law stands, an advocate is not entitled to sue for his fees unless the solicitor has claimed payment of them from the client and the client has paid them to the solicitor - Cullen v. Buchanan (1862) 24 D. 1132; Keay v. A.B. (1837) 15 S. 748 (note). See also Drummond v. The Law Society of Scotland 1980 S.C. 175.
5.3 Although he may not be entitled to sue for his fees, it is recognised that an advocate is entitled to payment of a reasonable fee for his services. In the absence of express prior arrangement to the contrary, the instructing solicitor impliedly undertakes a professional commitment to pay a reasonable fee. The arrangements between the Faculty of Advocates and the Law Society of Scotland for payment of fees to counsel are published separately, as are the arrangements for payment of fees in Legal Aid cases.
5.4 What is a "reasonable fee" depends on the whole circumstances of the particular case. Unless otherwise stipulated, counsel's fees cover all expenses incurred by counsel in the conduct of the case, such as travelling expenses.
5.5 Fees are normally charged after the work is done. Faculty Services Limited, acting on counsel's behalf, issues a Note of Proposed Fee to the solicitor. The solicitor is entitled to challenge the amount of the fee proposed within the time agreed between the Faculty and the Law Society. Failing such challenge, the solicitor is presumed to agree that the fee proposed is reasonable and comes under a professional obligation to pay it.
5.6 If the solicitor challenges the fee proposed, the matter will normally be resolved by negotiation between the solicitor and counsel's clerk. If they cannot agree, the solicitor and/or counsel is entitled to require that the matter be determined by the Auditor of the Court of Session. The Auditor is entitled to have regard to all the circumstances and is, in particular, entitled to allow a higher fee than would be allowed on party-and-party taxation.
5.7 Except in Legal Aid cases, where fees are regulated by Statutory Instrument, there is no scale of fees nor does the Faculty offer any indication as to the fees which it is appropriate for counsel to charge. Counsel is entitled to charge his fee on any basis appropriate to the work involved - for example, a composite or "block" fee for all work done, a daily rate, an hourly rate, etc. The solicitor is entitled to challenge the basis of the charge as well as the amount.
5.8 The amount of the fee and/or the basis of charging may be agreed in advance between the solicitor and counsel's clerk. Provided that an unequivocal agreement has been reached, the solicitor is not entitled to challenge it later.
5.9 It is not appropriate for counsel to negotiate fees with his instructing solicitor. This is the function of counsel's clerk. All fees should be paid to Faculty Services Limited. If any fee happens to be paid direct to counsel, counsel must account for it forthwith to Faculty Services Limited. Counsel should not under any circumstances whatever discuss or negotiate fees with or receive fees directly from the lay client.
5.10 Speculative actions. It is permissible for counsel to accept instructions "on the footing that the [client is] unable to meet the expenses of the litigation and that there [will] be no remuneration for [his] services except in the event of success... It has long been recognised by our courts that this is a perfectly legitimate basis on which to carry on litigation and a reasonable indulgence to people who, while they are not qualified for admission to [Legal Aid], are nevertheless unable to finance a costly litigation", per Lord President Normand in X Insurance Co. v. A. & B. 1936 S.C. 225, 238-9. The rules governing the conduct of speculative actions are set out in paragraph 9.6 below. So far as fees are concerned, counsel is only entitled to the fees recovered on taxation from the party found liable in expenses. (The instructing solicitor may include fees to counsel, although not paid, in his account of expenses - see Sim v. Scottish National Heritable Property Co. Ltd. (1889) 16 R. 583 and earlier cases there cited.) Counsel may not agree to act on the basis that additional fees will be paid by the client out of the principal sum recovered in the action ….
5.11 Retainers …. The purpose of a general retainer is to ensure that, during the currency of the retainer, counsel will not accept instructions to advise or appear for any other party in any proceedings involving the client giving the retainer. A special retainer has the same purpose but is restricted to the specific subject matter of the retainer. A general retainer endures for the lifetime of the client and counsel, unless otherwise specified. A special retainer falls after one year if not renewed or, in the case of a depending process, on completion of the case or matter to which the retainer relates. A general retainer falls if the client fails to instruct the advocate retained in any case or matter whatever. A special retainer falls if the client fails to instruct the advocate retained in the case or matter to which the retainer relates. There is no rule as to the amount of the fee payable for a retainer, other than that it must be reasonable in the circumstances.
5.12 Fees for settled or discharged cases. Normally, a fee is only chargeable when instructions have been given and accepted. Where instructions have been given and accepted, an advocate is entitled to charge the full fee for the work instructed even if the case is subsequently settled or the diet is discharged. In addition, where the solicitor knows, or ought in the circumstances reasonably to be aware, that counsel, in order to comply with his obligations under paragraphs 4.6.1-8 above, has kept himself free from other commitments, a fee appropriate to the circumstances may be charged. Relevant circumstances will include time spent in preparation and the extent to which counsel has been unable to accept other instructions. Counsel may also charge a fee for negotiating a settlement.
5.13 Paragraph 5.12 applies equally, mutatis mutandis, where a case is settled after the hearing has begun. Counsel's fees are a matter for discussion between the instructing solicitor and counsel's clerk in the individual case. Advocates' clerks are available to discuss feeing arrangements with instructing solicitors in advance of the work being done. The level of fee will depend on such matters as the seniority, experience and specialist expertise of the advocate in question and the nature of the piece of work in question, having regard to such matters as its difficulty, the level of responsibility involved, the time taken and any other special features of the case."
10.39 There was no objection to counsel undertaking work on a speculative or pro bono basis. Counsel might not lawfully agree to act on the basis that he or she would be paid a share of the amount recovered 119.
10.40 Each advocate had a clerk who was available to discuss with solicitors or with direct access professionals the basis upon which the advocate would charge for a particular item of work in advance of any instruction being given and to discuss and agree fees either before or after the work had been done. Clerking services were provided by Faculty Services Limited to advocates who chose to subscribe to the company. Almost all advocates did so. Clerking services within Faculty Services Limited were provided on the basis of "stables" ( i.e. groups of advocates who shared a clerk and deputy clerks). There were currently eleven stables, each served by a clerk and between one and three deputy clerks.
10.41 A solicitor or other direct access professional who wished to instruct counsel could contact advocates' clerks and seek advice from them as to such matters as the availability of a range of counsel, the basis upon which different counsel would charge for a particular item of work and the relative experience of different counsel. The choice of advocate would depend on various considerations, apart from fee levels, including the nature of the work, the seniority and experience of advocate considered appropriate, and (for written work) the timescale within which the work could be done. Once the solicitor (or other instructing professional) had decided to instruct a particular advocate, the basis and level of fees which would be charged could be agreed in advance with that advocate's clerk. If the level and basis of feeing had not been agreed in advance, the fee could be discussed between the advocate's clerk and the instructing agent after the work had been done, either before or after the issue of a proposed note of fee.
10.42 The instructing solicitor had a duty to act in the client's best interests and to advise the client as to the appropriateness of instructing counsel, the advocate who should be instructed and about the level of fees which would or might be incurred. As a relatively informed intermediary, the instructing professional was normally in a better position than the lay client to consider whether or not counsel should be instructed and (having obtained such information as the instructing professional should consider appropriate from advocates' clerks or otherwise) which advocate should be instructed, and to negotiate an appropriate basis and level of fee with the clerk to the advocate instructed.
10.43 The arrangements for the accounting for and recovery of counsel's fees from solicitors were set out in a Scheme for the Accounting for and Recovery of Counsel's Fees issued by the authority of the Faculty of Advocates and the Council of the Law Society of Scotland (the full text of which is available at http://www.advocates.org.uk/2002scheme.html ).
10.44 In terms of the Scheme it was open to a solicitor to negotiate and agree the fees to be paid and the basis upon which fees were to be settled with the advocate's clerk in advance of the work being done. Where an agreement of this kind had been made then, unless the right to taxation had been reserved, the agreement could not be altered nor could the fees charged be taken to the Auditor for adjudication except by subsequent agreement between counsel and solicitor 120.
10.45 If the fee to be charged had not been agreed in advance, then following each item of work a note of proposed fee was to be issued. If the solicitor wished to question the fee proposed, he had to inform Faculty Services Limited within 6 weeks. If he felt that the fee was grossly excessive he might refer the matter to the Dean. If, following notification to Faculty Services Limited, the fee could not be agreed between the solicitor and counsel's clerk, the Auditor of the Court of Session or the Auditor of the appropriate Sheriff court was to adjudicate on what was a reasonable fee. Unless otherwise agreed in advance, this would be on an agent and client, client paying basis 121.
10.46 If an advocate were to charge a grossly excessive fee, this could in principle amount to misconduct and be dealt with under the Faculty's disciplinary procedures.
(d) Rule that advocates may not sue for their fees
10.47 The legal position of advocates in relation to fees was anomalous. Uniquely among professionals, as the law currently stood, advocates were not entitled to sue either the instructing solicitor or client for their fees unless the solicitor had been put in funds for the payment of counsel's fees 122. The rule was based on the fact that an advocate had no contract either with the client or the instructing solicitor but held an office in which he owed duties to the public and to the Court as well as to his client 123.
10.48 The rule that advocates might not sue for their fees meant that advocates might not, ultimately, enforce the payment of fees by legal process. They depended on the professional responsibility of those who instructed them for the payment of fees. The rule potentially put advocates at a disadvantage as compared with other professionals, including solicitor advocates. The principle that counsel had no contractual relationship either with client or instructing solicitor was not, as a matter of logic, incompatible with the notion that counsel should have an enforceable right to payment of fees. The rule would require to be changed if advocates were to be permitted to accept instructions directly from lay clients.
(e) Retaining fees for advocates
10.49 The Faculty's Guide to the Professional Conduct of Advocates sets out arrangements for retaining fees (at paragraphs 5.11 and 5.12, set out above). The Group concluded that retainers might raise an issue about equal access to justice, but not about competition.
(f) Office of Fair Trading view
10.50 The OFT noted that the role of the clerk generally appeared to involve the negotiation of fees on behalf of a number of advocates. The OFT believed that it was likely to arise that the advocates in question would be practising within the same specialist area and might be in direct competition with one another. Given that role, it would be important to ensure that, in carrying out those duties, clerks were fully aware of each advocate's responsibility under competition law. As independent undertakings, advocates should be competing on price for the supply of their services and were obliged to ensure that, through the medium of the clerk or otherwise, competition on price was not restricted or distorted.
Part IV : Funding of litigation
10.51 As explained at the beginning of this chapter, the funding of litigation raises some special considerations which this Part considers.
(a) Agent and Client Expenses
10.52 Litigation might be funded by the party (self-funding) or funded by a third party.
(i) Self-funding : availability of taxation
10.53 Litigation which was self-funded was subject to the same rules and arrangements which applied to the funding of other legal services. In relation to solicitors' fees, in the absence of a written fee-charging agreement, the client was entitled to have the solicitor's account taxed 124. In relation to counsels' fees, in the absence of an agreement in advance between the instructing solicitor and the advocate's clerk, the account was subject to taxation 125.
10.54 Rules dealt with the taxation process and set out a procedure where the sheriff remitted the account of a solicitor payable by his client to the auditor of court for taxation 126. The rules provided the auditor of court with principles to be applied in such a taxation where the account related to litigation work.
10.55 The rules provided that where the auditor taxed the account of a solicitor to his client in respect of the conduct of a litigation on behalf of the client, he should
(a) allow a sum in respect of such work and outlays as had been reasonably incurred;
(b) allow in respect of each item of work and outlay such sum as might be fair and reasonable having regard to all the circumstances of the case;
(c) in determining whether a sum charged in respect of an item of work was fair and reasonable, take into account :
(i) the complexity of the litigation and the number, difficulty or novelty of the questions raised;
(ii) the skill, labour, specialised knowledge and responsibility involved;
(iii) the time spent on the item of work and on the litigation as a whole;
(iv) the number and importance of any documents or other papers prepared or perused without regard to length;
(v) the place where and the circumstances (including the degree of expedition required) in which the solicitor's work or any part of it has been done;
(vi) the amount or value of any money or property involved in the litigation; and
(vii) the importance of the litigation or its subject matter to the client;
(d) should presume (unless the contrary was demonstrated to his satisfaction) that :
(i) an item of work or outlay was reasonably incurred if it was incurred with the express or implied approval of the client;
(ii) the fee charged in respect of an item of work or outlay was reasonable if the amount of the fee or the outlay was expressly or impliedly approved by the client; and
(iii) an item of work or outlay was not reasonably incurred, or that the fee charged in respect of an item of work or outlay was not reasonable if the item of work, outlay or fee charged, was unusual in the circumstances of the case, unless the solicitor informed the client prior to carrying out the item of work or incurring the outlay that it might not be allowed (or that the fee charged might not be allowed in full) in a taxation in judicial proceedings between party and party; and
(e) might disallow any item of work or outlay which was not vouched to his satisfaction.
(ii) Special arrangements
10.56 Pro bono and restricted fees There was no rule of law which prohibited a solicitor or advocate from acting on a pro bono basis 127 or from restricting the fees charged for litigation.
10.57 Pacta de quota litis (bargains for a share of the amount recovered). A bargain by a legal adviser for a share of the amount recovered or for commission on property recovered in a litigation was unenforceable at common law 128. This rule of Scots law, which had its roots in Roman Law, was recognised in other jurisdictions and was reflected in the CCBE Code of Conduct which prohibited lawyers from entering into such arrangements 129. The rule applied only to lawyers: there was no rule of law which prohibited other parties from agreeing to fund or handle a claim in return for a percentage of any sum which might be awarded 130.
10.58 Speculative fees ("no-win-no-fee"). There was no rule of law which prohibited a solicitor or advocate from acting on the basis that a fee would be charged only if the action was successful 131. In such circumstances, a solicitor or advocate might charge an enhanced fee. The increase which might be charged was limited by statute to 100% of the fee 132. Rules of court applied to speculative actions in both the Court of Session and the sheriff court 133. They defined "success" for the purpose of determining whether the solicitor was entitled to a fee; and defined the fees element for the purpose of applying the agreed percentage increases.
10.59 It could be argued that a speculative basis for litigation involving either solicitors or advocates improved access to justice for clients who could not otherwise afford legal fees or would not be eligible for legal aid. The purpose of the enhancement was to compensate the solicitor or advocate for the risk of receiving no fee at all if the action failed. The Group was not aware of any evidence that these rules had a negative impact on competition in the legal services market and noted that no win - no fee arrangements were commonplace in relation to personal injury work.
(iii) Third party funding
10.60 There was no prohibition or restriction in Scots law on a litigation being funded in whole or in part by a third party 134. The most common sources of third party funding were insurance, trade union or professional body funding, and the Legal Aid Fund. Payments from the Legal Aid Fund were made in accordance with the relevant statutory provisions.
10.61 Insurance It was necessary to distinguish, when considering the funding of litigation by way of insurance, between (a) legal expenses insurance and (b) liability insurance 135. Legal expenses insurance was insurance specifically against legal costs. The cover was for the costs of pursuing or defending a case which fell within the terms of the policy. The insurer had no other interest in the outcome of the litigation. By contrast, in the case of liability insurance, the cover was against a liability within the terms of the policy which the insurer might incur to a third party. If an action against the insured within the terms of the policy was lost, then it was the insurer who would require to meet the pursuer's claim. It was a normal incident of liability insurance that the insurer would have control and conduct of the defence of the action as well as being responsible for its funding (subject to any excess). Many (but not all) personal injury, property damage and professional negligence claims were in fact defended at the expense of the defender's liability insurer.
10.62 Trade union/professional organisation Trade unions and professional organisations might offer to fund litigation for their members. A proportion of personal injury claims were, in practice, funded by the pursuer's trade union.
10.63 Civil legal aid Civil legal aid could be made available to a person (excluding a body corporate or unincorporate) if the Scottish Legal Aid Board was satisfied that there was probable cause, that it was reasonable to grant legal aid and the person was financially eligible. A person in receipt of legal aid was referred to in the Process as an "assisted person". The statutory provisions set out in Part V below apply.
10.64 Taxation of agent and client expenses Except where the solicitor and client had a written fee-charging agreement 136, a solicitor instructed for a litigation in the Court of Session might, by motion to the Court, have his own account to his client remitted to the Auditor for taxation 137. Likewise, in any action in which the solicitor sued his client for payment of the solicitor's account, the Court might remit the account to the Auditor for taxation 138. Equally, in the Sheriff Court, there was provision for expenses allowed in any cause to be taxed before decree was granted and a structure was set down for the procedure at taxation 139.
(b) Party and party expenses140
10.65 Liability to expenses The Court had an inherent discretionary power to determine whether to make an award of expenses in any case which might come before it and, if making an award, to determine by whom, on what basis and to what extent expenses were to be paid. The general rule was that "the cost of litigation should fall on him who has caused it" 141 - and might be summarised, albeit somewhat inaccurately, by the notion that "expenses follow success".
10.66 Questions of expenses were, however, generally dealt with in respect of incidental steps in a litigation ( e.g. motions, debates, preliminary proofs) as they occurred. The Court might :
- make an award of expenses in relation to the incidental matter (which would, following the general rule, usually reflect success in relation to the incidental matter);
- reserve the question of expenses ( i.e. hold over the question of expenses until later);
- award expenses in the cause ( i.e. the expenses of the incidental matter would follow any award of expenses made at the end of the litigation in relation to the litigation as a whole); or
- find no expenses due to or by ( i.e. each party bore its own expenses of that matter).
10.67 At the end of a litigation there would usually also be an award of expenses of the litigation as a whole (insofar as expenses had not already dealt with). A party who was ultimately successful and who received an award of expenses in his favour at the end of the litigation might accordingly (by virtue of incidental findings in relation to expenses) be liable for part of his own expenses, or indeed for some of the other party's expenses.
10.68 The general rule that "expenses follow success" was subject to exceptions.
10.69 Modification, etc. In some cases, the expenses of the successful party might be modified ( i.e. restricted to a proportion of the taxed expenses or to a specific sum), that party might be refused expenses, or might even be found liable for the unsuccessful party's expenses. Such awards typically reflected disapproval or dissatisfaction by the Court of some aspect of the successful party's conduct of the litigation.
10.70 Litigation against a legally aided party Where a party found liable in expenses was litigating with the benefit of legal aid, the Court might (and in general did) modify the expenses to be paid by the legally aided party to a fixed sum or to nil 142. Separately, an award of expenses might be made against the Legal Aid Fund in favour of an unassisted party in whose favour the proceedings were finally decided, but only where (a) the Court was satisfied that in a Court of first instance the unassisted party would suffer severe financial hardship unless such an order was made; and (b) in any case, the Court was satisfied that it was just and equitable in all the circumstances that the award should be paid out of public funds 143. In a court of first instance, that was only available to an unassisted party who did not institute the proceedings.
10.71 Tenders The application of the general rule might be affected by the lodging of a tender. That was a formal offer on the part of the defender to pay a particular sum of money, plus taxed expenses to the date of the tender, in settlement of the action 144. If the pursuer succeeded at the end of the day, but did not "beat the tender" by being awarded a greater sum than that offered, the pursuer would normally be found liable for the defender's expenses from the date of the tender. The theory was that, from that date, the costs of the litigation had been incurred as a result of the successful party's failure to accept the offer which, having regard to the outcome of the litigation, was one which should have been accepted.
10.72 Particular types of cases The general rule that "expenses follow success" was not applied in certain types of cases. For example, in an action brought to determine a question involving the construction of a testamentary writing, all parties were usually found entitled to expenses out of the estate 145. In many matrimonial cases, no award of expenses was made against either party.
10.73 The Auditor had power, where it appeared that a party found entitled to expenses was unsuccessful or incurred expenses through his own fault in respect of a matter which would otherwise be included in those expenses, to disallow those expenses in whole or in part 146.
10.74 Basis of award of expenses There were three different bases available to the auditor for the taxation of expenses: (a) party and party; (b) agent and client, third party paying; and (c) agent and client, client paying. The normal basis for an award of expenses between parties to a litigation was "party and party". In practical terms, an award on a party and party basis was unlikely to cover the whole of the expense which the party entitled to the award of expenses would require to pay his solicitor. Exceptionally, the Court might award expenses on an agent and client, client paying basis, in order, for example, to express its disapproval of the manner in which the party found liable had conducted itself in the litigation 147.
10.75 Taxation Unless expenses were modified in a fixed amount, or the amount of expenses to be paid had been agreed between the parties, the expenses had to be taxed 148.
10.76 Recoverable expenses The basic rule, in a question between the parties to a litigation, was that only such expenses as were reasonable for conducting the cause in a proper manner were allowed to be recovered from a party found liable in expenses 149. Expenditure which was not incurred "for conducting the cause" was not recoverable 150. It had been said that expenditure incurred for that purpose should be disallowed only if a competent solicitor acting reasonably would not have incurred it 151.
10.77 The basis upon which the solicitor was entitled to prepare his account in the Court of Session was set out in Tables in the Rules of Court. The basis upon which the solicitor was entitled to prepare his account in the sheriff court was set out in the Table of Fees attached to the Act of Sederunt (Fees of Solicitors in the Sheriff Court) 1993. In the sheriff court there were two scales of expenses, namely the ordinary cause scale and the summary cause scale. In a Court of Session action, an award of expenses might be made on the sheriff court ordinary cause or summary cause scale. That might be done, for example, to reflect the Court's view that the action should have been raised in the sheriff court rather than in the Court of Session. Likewise, the sheriff might direct that expenses in an ordinary cause should be taxed on the summary cause scale.
10.78 The element of solicitors fees in party and party expenses were regulated by statutory instrument made by the Scottish Parliament. In practice the Lord President of the Court of Session put forward proposals for solicitors fees in party and party expenses on the recommendation of his Advisory Committee. There was no statutory basis on which advocates fees were regulated. 152 .
10.79 The Law Society of Scotland, the Lord President's Office and the Scottish Executive were considering the impact of withdrawing the table of recommended fees,
- because auditors of court used it as a basis for the taxation of solicitors' accounts; and
- the hourly rate for judicial fees (payable by the unsuccessful party in a court action to the other party involved) was fixed annually by the Lord President of the Court of Session with regard to the unit suggested in the Society's table of fees.
It was clear from the research into the role and functions of the auditor of court set out in part VI of this chapter that auditors regarded the loss of guidance from the Society's table of fees as a significant problem and that some kind of objective replacement was required.
10.80 In the Court of Session, the solicitor might charge an account either on the basis of Chapter I or on the basis of Chapter III of the Table of Fees but not a mixture of the two 153. Chapter III set out inclusive fees for particular types of cases or for separate stages or procedures within a case without reference to the actual level of work done. The auditor had power to increase or reduce an inclusive fee in appropriate circumstances 154. Chapter I of the Table of Fees set out detailed charges for particular items of work. An account might be charged on the basis of Chapter I if the inclusive fees set out in Chapter III were not conveniently applicable or did not properly cover the work involved 155. (The current Sheriff Court and Court of Session Tables of Fees are to be found in the Parliament House Book at pages A239 - 258 of Volume 1 and pages C341-351 of Volume 2 respectively). Counsel's fees would be set out in the solicitor's account and were subject to taxation. The auditor might, for example, decide that it was unreasonable to instruct senior counsel 156, or conversely, to instruct junior counsel where the case required only the instruction of senior.
10.81 In the sheriff court, the solicitor might charge either on the basis of inclusive fees set out in Chapters I and II of the Table of Fees or on the basis of the detailed fees of Chapter III but not partly on one basis and partly on the other 157. Where an action had been brought under summary cause procedure, only expenses under Chapter IV of the Table of Fees should be allowed unless the Court otherwise directed 158. In the taxation of accounts where counsel was employed, counsel's fees and fees for the instruction of counsel were allowed only if the Court had sanctioned the employment of counsel, and, except on cause shown, fees to counsel and solicitor for only two consultations in the course of the cause were allowed 159.
10.82 Additional fee A party who had been awarded expenses might, by motion, seek an additional fee 160 to reflect one or more of the following factors:
(a) the complexity of the cause, and the number, difficulty or novelty of the questions raised;
(b) the skill, time and labour and specialised knowledge required of the solicitor or the exceptional urgency of the steps taken by him;
(c) the number or importance of any documents prepared or perused;
(d) the place and circumstances of the cause or in which the work of the solicitor in preparation for, and conduct of, the cause had been carried out;
(e) the importance of the cause or the subject-matter of it to the client;
(f) the amount or value of money or property involved in the cause;
(g) the steps taken with a view to settling the cause, limiting the matters in dispute or limiting the scope of any hearing.
In the Court of Session the Court might determine whether an additional fee was appropriate or might remit that question to the auditor 161; and the amount of the additional fee was for the auditor 162.
Advocates and solicitor advocates fees
10.83 In party and party expenses in the Court of Session, auditors had unfettered discretion on the fees they allowed for work done by advocates and solicitor advocates. Where solicitor advocates were instructed by their own firms, the work done by them in that capacity would be shown separately in the account. Such work would comprise drafting Court documents and appearing in Court. Such work was reserved for advocates and solicitor advocates. Where a solicitor advocate was instructed by a different firm of solicitors, the position was indistinguishable from that of an advocate.
(c) Expenses in Tribunal proceedings
10.84 The question of whether a statutory tribunal had power to award expenses, and if so, in what circumstances, depended on the terms of the relevant statutory provisions. For example, an Employment Tribunal had power to make a costs order only in restricted circumstances and the amount of the award might not exceed a statutory maximum 163.
10.85 Prosecution Criminal prosecutions were brought by the state. In practice, almost all prosecutions in Scotland were at the instance of (a) the procurator fiscal (in the Sheriff Court); or (b) the Lord Advocate (in the High Court). In the Sheriff Court most cases were, in practice, prosecuted by the procurator fiscal or his staff. Temporary fiscals depute might be appointed from the profession. In the High Court indictments ran in the name of the Lord Advocate and were prosecuted by an advocate depute, who might be assisted by a Crown Junior.
10.86 Defence While self-funding of criminal defence work was not unknown, the representation of the great majority of accused persons and of appellants following conviction was funded by the Criminal Legal Aid Fund.
10.87 Awards of expenses in criminal proceedings In general, no award of expenses might be made in connection with solemn procedure. That rule was subject to the following exceptions:
(a) in the event of an appeal against the grant of bail being refused, the Court might make an award of expenses against the public prosecutor 164;
(b) any Court before which a prosecution was instituted on indictment for a corrupt election practice might order the accused to pay the prosecutor's reasonable expenses 165; and
(c) a private prosecutor might be found liable in expenses 166.
In stated cases and appeals against summary sentences by note of appeal, the High Court had power to award such expenses, both in the High Court and in the inferior court, as it thought fit 167.
10.88 Criminal Legal Aid Criminal legal aid was made available by the court in solemn proceedings (High Court and Sheriff and Jury) or by the Board in summary cases. The term "criminal legal aid" included a variety of forms of legal assistance including automatic criminal legal aid, the Duty Solicitor Scheme and appeals. The statutory provisions set out in Part 4 apply as regards the remuneration of solicitors and, where appropriate, counsel providing legal aid.
10.89 Since 1992 the fees that solicitors charged their own clients for litigation work had not been covered by Rules of Court. There were no restrictions on the fees that solicitors could charge their own clients for litigation, except for the general requirement in Article 6 of the Solicitors' Code of Conduct that all fees had to be fair and reasonable in the circumstances.
10.90 The only fees that were governed by Rules of Court were fees that could be recovered from the other party following an award of expenses (judicial fees). Those fees were regulated by the Court in the public interest to ensure that there was proper control over what the unsuccessful party required to pay in expenses to the successful party.
10.91 Solicitors fees in party and party expenses were set by the Lord President of the Court of Session on the advice of his Advisory Committee on Court Fees, which was chaired by a Judge and included the Auditor of the Court of Session, solicitors representing firms who acted for pursuers, solicitors representing firms who acted for defenders such as insurance companies, and a member of the Faculty of Advocates. These fees were contained in Tables made by Act of Sederunt 168. The Office of Fair Trading and the Scottish Consumer Council were concerned that the Lord President's Advisory Committee did not include any consumer representation.
10.92 The Law Society of Scotland considered that tables of fees for party and party expenses did not distort competition, though the Office of Fair Trading took the view that the setting of solicitors' fees by Courts or public authorities could have a negative impact on price competition if it served as a focal point for fee levels in other contexts. The extent to which this might be a problem would depend on the way in which the Court set fees. The Scottish Legal Aid Board saw the setting of fees by the Court as a useful means of regulating the costs which would be payable by an unsuccessful opponent. In the absence of any set fees, that opponent would have no benchmark against which he could assess the likely costs he might have to pay, at least insofar as they related to solicitors' fees. Likewise, the successful party would have no basis for knowing the likely shortfall between his own solicitor's bill, and the sums payable by the opponent, and thus the amount he would have to find from other sources. The Scottish Consumer Council agreed with the Board's view on this issue.
10.93 The Faculty pointed out that it was necessary to distinguish between agent and client fees on the one hand (the fees which a client would pay his own solicitor) and party and party fees on the other (the legal expenses which a losing party might have to pay a winning party in a litigation). The Faculty believed that fairness dictated that a party to a litigation which was found liable for the expenses of another party should not be at the mercy of the level of fees which the latter's solicitor might charge. Moreover, if the current approach to taxation of party and party expenses was to be abandoned, such a step could make it much more difficult for litigations to be settled, since the implications in expenses of a settlement could be much more difficult to predict. That could have an impact on the administration of justice.
10.94 The OFT recognised that where a losing party might have to pay the fees of the solicitor of the winning party ( i.e. in party and party costs), it was in the public interest that fees be subject to taxation by the courts. In the OFT's view, therefore, the issue was not whether there should be a taxation process, but what information should inform the taxation process in order to ensure that any damage to competition resulting from the process was kept to a minimum. In particular, the OFT was concerned that where a professional body was engaged in providing fee information to the courts for that purpose, the manner in which the information was collected and presented might give rise to competition concerns. In order to minimise this risk and to achieve compliance with competition law, it would be important to ensure that any information on price provided by a professional body was historical only, collated and aggregated by a third party and framed to show that it was not intended as a recommendation but as a description of historical prices .
10.95 Additionally, where fees were set by public authorities, such as for example judicial fees for taxation purposes, it would be important in the OFT's view to ensure that a consultation process operated to ensure that the wider public interest and not just the interests of suppliers, was fully represented. With regard to the information on which the process relied, the OFT welcomed the fact that following withdrawal of the Law Society's table of recommended fees with effect from 1 August 2005, reliance would in future be placed on the Law Society's Cost of Time survey. The OFT remained concerned, however, that if the current consultation mechanism was retained (see paragraph 10.91), it did not appear likely to ensure that the wider public interest was represented. It would be important to ensure that any such arrangements met requirements set out in EC law. In the Arduino 169 case, for example, the European Court of Justice considered the compatibility with EC competition rules of the participation by a legal professional body in a process where lawyers' fees were set by public authorities.
10.96 The Law Society of Scotland regarded the process of taxation of judicial accounts potentially as a safeguard in the public interest. The only possible impact on price competition was to encourage volume referrers of personal injury work such as trade unions to seek referral arrangements where the solicitors would not charge the referrer or the individual client fees over and above those that could be recovered from the other side in the event of success. Such arrangements had been developed in the last few years, particularly by the trade unions.
10.97 The value of auditors of court in protecting the public was touched on in the research into the operation of taxation in Scotland, reported in part VI of this chapter. The research findings suggested that the training of auditors, the guidance available to them and the consistency of their decisions, including those in relation to who should pay for the cost of a taxation, were areas for potential concern.
10.98 The fees payable to the Court itself were set in statutory instruments made by the Scottish Executive 170. They had increased very significantly in recent years to reflect a policy of recovering the cost of running the civil side of the Courts from the litigants.
Part V: Funding of legal aid cases
10.99 The Scottish Legal Aid Board ("the Board") was established under the Legal Aid (Scotland) Act 1986 and had a statutory duty to establish and maintain the Scottish Legal Aid Fund.
10.100 The Act expressly provided what should be paid out of the Fund and what should be paid into the Fund. Payments out of the Fund 171 included the fees and outlays of solicitors and counsel properly incurred in accordance with the Act and Regulations, and expenses awarded by the Court to an unassisted person.
10.101 Payments into the Fund 172 included contributions from assisted persons, expenses and property recovered or preserved for any party to any proceedings who was in receipt of civil legal aid. Contributions and expenses had to be paid into the Fund, property recovered and preserved only to the extent of the net liability of the assisted person.
10.102 There were four main types of legal aid :
(i) Advice and Assistance;
(ii) Civil legal aid;
(iii) Criminal legal aid; and
(iv) Children's legal aid.
Each category had a different feeing structure. The Board was seeking to move towards a system of civil legal assistance, criminal legal assistance and children's legal assistance, recognising the need for a unified, integrated applications and feeing structure within what was often the same process.
10.103 Legal aid and advice and assistance were only available through solicitors, and where appropriate counsel, although proposals for a wider system of publicly funded assistance including the "not for profit" sector were presently being consulted on as part of the strategic review of legal aid.
10.104 Advice and assistance was defined 173 as "oral or written advice provided to a person by a solicitor on the application of Scots law to any particular circumstances which had arisen in relation to the person seeking the advice" including advice as to any steps which that person might appropriately take having regard to the application of Scots law to those circumstances and assistance provided to the person in taking such steps.
10.105 Assistance By Way of Representation (" ABWOR") was a form of advice and assistance provided to a person by "taking on his behalf any step in instituting, conducting or defending any proceedings" 174 This allowed a solicitor to represent (and not just advise and assist) a client in certain specified proceedings set out in the ABWOR Regulations, for example an Employment Tribunal.
10.106 Civil legal aid was defined 175 as "representation by a solicitor and, where appropriate, by counsel in civil proceedings and includes all such assistance as is usually given by a solicitor or counsel in steps preliminary to or incidental to proceedings, or in arriving at or giving effect to a settlement to prevent them or bring them to an end".
10.107 Similarly, criminal legal aid was defined 176 as "representation by a solicitor and, where appropriate, by counsel in criminal proceedings and includes all such assistance as is usually given by a solicitor or counsel in the steps preliminary to or incidental to criminal proceedings".
10.108 Children's legal aid was defined 177 as "representation by a solicitor and, where appropriate, by counsel in proceedings under Chapter 2 or 3 of Part II of the Children (Scotland) Act 1995 and includes all such assistance as is usually given by a solicitor or counsel in the steps preliminary or incidental to such proceedings".
(c) Standard (or Scale) of Taxation - Solicitor and client, third party paying
10.109 The Board had a statutory obligation to pay solicitors and counsel who had provided advice and assistance or legal aid fees and outlays properly incurred or the fixed payments prescribed in the regulations 178. A solicitor or counsel providing legal aid could not take any payment in connection with advice given or anything done in the proceedings except for such payment as might be made in accordance with the Act 179.
10.110 The Board was not a party to proceedings. Nothing done by the Board for the purpose of securing that legal aid or advice and assistance was available to any person in connection with any proceedings rendered it liable to be held dominus litis (the master of the litigation) in relation to the proceedings 180. The Board funded the provision of legal services, as a third party, and the scale of taxation that determined the basis on which accounts should be assessed was that of "solicitor (or agent) and client, third party paying".
10.111 While specific reference was made in the civil regulations to the test of solicitor and client, third party paying, the tests for advice and assistance and criminal legal aid were stated in different but equivalent terms 181.
10.112 Maclaren 182 stated that "in taxing the account of an agent against the third party on the basis of agent and client the fact that the agent had done the work for his own client and may be a good charge against the latter does not conclude the matter in a question with a third party, as many items may be modified or taxed off, though not to so great an extent as in a taxation between party and party". The test had been described as that "when a statute authorises the taxation of expenses as between agent and client, what is given is the expenses which would be incurred by a prudent man of business without special instruction from his client would incur in the knowledge that his account would be taxed" 183. The assessment of advice and assistance and legal aid accounts had to be seen within that context. Work done for a client, even on the client's instructions, was not necessarily chargeable to the Fund.
10.113 In a recent significant Court of Session Judgement 184 Lord Eassie, having reviewed the case law on the issue, stated that "…general observations about the generosity of one basis of taxation as opposed to another have a capacity to mislead. There are different ways in which comparative generosity may arise. Items of work or expenditure may be eligible under the one, but not under the other, scale of taxation. But that does not mean that as respects the recoverable amount of items eligible under both scales a more generous remuneration must be allowed in the amount recoverable for those common items in the one account as opposed to the other." He stated (and this was in the context of counsel's fees) that "the amount of the fee to counsel recoverable under a party and party award ought not to diverge markedly from that recoverable on an agent and client, third party paying basis".
10.114 Lord Eassie further observed that "…so far as fees to counsel are concerned, it appears to me that, given the propriety and reasonableness of the particular instruction to counsel in question, the amount found on taxation on a party and party basis to be recoverable should equiparate with what someone who is not in control of the amount of the fee payable would consider to be reasonable remuneration to counsel for the work encompassed by the instruction".
10.115 These remarks recognised that the Board, like a party against whom an award of expenses was made, had had no opportunity to bargain with the lawyer and was not protected by the ordinary working of the market (see paragraph 10.6 above).
(d) The Payment Structures
10.116 Legal aid payment structures and the levels of fees were all set out in subordinate legislation and consisted of a complex mix of remuneration structures.
10.117 Payment of Solicitors There were three principal methods of payment employed across the various aid types:
(i) Detailed Fees
10.118 Detailed ("time and line") fees remunerated the solicitor for time spent on work (the actual time spent in court or in a meeting with the client) as well as for individual items of work (letters or telephone calls). There were 'sheetage' charges for drafting documents. The legal aid regulations provided Tables of Fees for time spent on specified items of work at set rates, usually distinguishing between advocacy and non-advocacy rates.
10.119 Although flexible, it was a system which created complicated and lengthy accounting, both for the solicitor in preparing the account and the Board in assessing it, and it could be difficult to identify whether all work was necessary and reasonable. It could also allow the slow and inefficient worker to be remunerated at the expense of the efficient solicitor, and might not actively encourage the efficient conduct of the case.
10.120 This type of charging was found, in the main, in:
- advice and assistance cases (including ABWOR cases);
- all types of civil proceedings in the Court of Session, House of Lords and Judicial Committee of the Privy Council; and
- civil cases in the Sheriff Court, listed in the Civil (Fees) Regulations 185 as chargeable under Schedule 5, including adoption proceedings in the Sheriff Court, fatal accident inquiries, proceedings in the Sheriff Court where the assisted person was a curator ad litem186 or a third party minuter in a family action; and summary applications.
- Childrens Proceedings under Part II of the (Children) (Scotland) Act 1995 in the Sheriff Court and the Court of Session;
- solemn criminal proceedings;
- summary criminal proceedings which were "excluded proceedings" set out in the Fixed Payment Regulations eg. a solemn case reduced to summary, or the Board had considered the case to have "exceptional status" ; or
- criminal appeal proceedings, including proceedings before the Judicial Committee of the Privy Council.
(ii) Block Fees
10.121 Block fees were a type of inclusive fee relating to stages of or procedures within a case. Such fees remunerated the solicitor for defined stages of proceedings by reference to completed work. They could encourage efficient conduct by only paying for completed stages, reflecting what needed to be done in a case. There was no encouragement to have unnecessary meetings or correspondence, as the payment was capped for all work within the stage. They could be inflexible and had to be geared towards cases of similar profile or include provision for variations. The initial block Table of Fees introduced with civil reform in October 2003 was currently being reviewed to address certain flaws identified by the Board and practitioners.
10.122 Block fees had been adopted for most Sheriff Court civil cases as a result of the recent civil reforms. Most civil cases in the Sheriff Court (other than adoption, fatal accident inquiries and where the assisted person was the curator ad litem or third party minuter, and others listed in Schedule 7) would now be charged on a block fee basis in terms of Schedule 6 of the Civil (Fees) Regulations.
10.123 Travel and court work in these cases were paid on a detailed basis, the blocks dealing more with the progress and preparation of the case.
10.124 There was also an initial block fee in place for criminal ABWOR cases where the accused was pleading guilty or making a preliminary plea. The block fee in that respect currently stood at £70 187 and covered all work prior to and including the first court appearance where the plea was tendered.
(iii) Fixed Payments
10.125 Fixed payments were similar to an inclusive fee payable for a case (see paragraph 10.80). They were used in most summary criminal cases 188 and were based on a "core" payment for the case, with additional "add on" block payments where necessary, eg. trials per day, deferred sentences.
10.126 The core payment in a Sheriff Court summary case currently stood at £500 (supplemented by £50 in rural courts) and £300 in the District Court.
10.127 A single core fixed payment allowed more certainty as to the case cost, but could be criticised for lack of flexibility by remunerating the whole case as opposed to paying on a stage by stage basis. An issue to be discussed in implementing the McInnes proposals was whether those fees should be split up and adjusted to recognise and promote early pleas and pleas after investigation as well as those which might proceed to trial. The current arrangement anticipated all cases going to trial.
10.128 Payment of Counsel The methods for remunerating counsel were equally varied. The cost of counsel was an outlay in advice and assistance (including ABWOR) but not in legal aid, although for historic reasons counsels' fees were lodged by the solicitor in civil cases but direct by Faculty Services Limited in criminal cases. Solicitor advocates were defined as "counsel" when and only when exercising their right of audience in the Supreme Courts. They were treated as "junior" or "senior" counsel, for the purposes of payment, depending on the level of counsel available, either automatically or sanctioned by the Board, in the proceedings. Again there were three principal methods of payment:
(iv) Commercial Rates
10.129 As no Table of Fees had been prescribed as yet by regulations, commercial rates were allowable in advice and assistance and ABWOR accounts, essentially by default. That method of charging could expose the Fund to the full cost of commercial charging and thus gave little cost control provided the fee was incurred within the maximum level of authorised expenditure available to the solicitor. On the other hand, as counsel's fee was an outlay in advice and assistance and ABWOR, the outlay had to be reasonable and the only effective comparison was the level of criminal fees paid, apart from a tiny minority, from public funds.
(v) Prescribed Fees
10.130 Prescribed fees, considered by Parliament to be appropriate for a day in court and individual pieces of work undertaken by counsel, followed two models at present.
10.131 Currently those prescribed fees set down in Schedule 4 of the Civil (Fees) Regulations for counsel in Court of Session cases were set at a fairly low level, subject to enhancement by the auditor. The auditor also had power to create fees for work which had not been prescribed. The aim of prescribed fees was to provide a level of cost certainty within broad limits. However in recent years the contrary had proved to be the case. Discussions were presently taking place with the Faculty of Advocates and the Executive with a view to prescribing a new Table of Fees in civil proceedings in the Court of Session and the Sheriff Court moving away from the concept of a fairly low prescribed fee capable of being enhanced to a prescribed fee set at higher levels, including a level of preparation likely to be incurred in most cases, but providing a clear structure for dealing with unusual or exceptional levels of preparatory work.
10.132 Criminal (Fees) Regulations 189 had been introduced setting down new fees for the remuneration of counsel (including solicitor advocates) providing criminal legal aid. The Regulations substituted a new Schedule 2, which Schedule provided an example, at least in cases of first instance, of moving away from the concept of the prescribed fee subject to enhancement in the individual circumstances of the case. There was also now a clear basis on which preparation would be payable referable to objectively verifiable criteria, ie the number of sheets contained in the case documentation. Where the case proceeded to trial most of the preparatory work would be subsumed within the trial fee except in cases involving an exceptional level of preparation, where the additional level of preparation would always be payable. There was a minimum level of preparation which was not separately payable and was always subsumed within the instructions. Those Tables were being reviewed and a new Table of Fees for criminal appeals was being devised with the Faculty of Advocates. The principle upon which such Regulations operated was that counsel was entitled to receive reasonable remuneration and was thereby subject to the cab-rank rule.
(vi) "90%" Fees
10.133 Counsel's fees for any work done in certain courts and tribunals was prescribed to be 90% of the amount of fees which would be allowed for that work on a taxation of expenses between solicitor and client, third party paying, if the work done were not legal aid. That was the method for charging for the provision of civil legal aid in the Sheriff Court, House of Lords, the Judicial Committee of the Privy Council, Employment Appeal Tribunal, Social Security Commissioners, Lands Tribunal, Lands Court and Lands Valuation Appeal Court and for children's legal aid. Regulations did not define that further and thus created great uncertainty over levels of payment. Matters often ended up before the Auditor of Court who would decide on the level of fee to be awarded.
(e) Levels of Payment in civil legal assistance
10.134 Advice and Assistance and legal aid fees are set by the Scottish Executive by way of a Scottish statutory instrument. Party and party fees, dealt with in Part IV of this chapter, are not prescribed by Parliament. The Lord President of the Court of Session had, among his many roles, the function of making Acts of Sederunt, subordinate legislation which regulated the Tables of Fees for solicitors in the Court of Session and the Sheriff Courts so far as they related to civil business. In exercising that function, he obtained guidance from the Lord President's Advisory Committee ( LPAC). The Committee made recommendations to deal with changes in the fee structure appropriate where there had been changes in procedure and recommended increases from time to time having regard to the effect of inflation and other factors. There was no nexus between the party and party fees prescribed by the Act of Sederunt and the fees prescribed by Parliament for legal aid. Historically legal aid fees were set at between 85% and 90% of judicial fees reflecting the "statutory discount" recognising the greater certainty of payment and also speed of payment attached to undertaking publicly funded work.
10.135 The difference between judicial fees and legal aid fees was now greater than the 10% to 15% in previous years. Solicitors' perception would be that the legal aid fees were too low. However, given the absence of any connection between the way in which the respective fees were set, it was not possible to identify the "reasonable fee" to be adjusted by reference to the statutory discount for legal aid purposes.
10.136 The level of judicial fees did not generally affect the Fund except at the margins, such as for example a successful claim by an unassisted party for payment from the Fund on a party and party scale of taxation. However, the perception of the profession as to the general level of legal aid fees was an issue for the Board and was affected by the general level of judicial fees. A Table showing a comparison between the various levels of fees is at annex 1 to this Part (see below).
10.137 A Table headed "Remuneration Systems in Legal Aid" is also found at annex 2 to this Part and provides a summary of the various types of legal aid payments described above 190 and the current level of fees. The Board was gradually seeking to rationalise the tests set out in each of the Fees Regulations, the feeing regimes themselves and to introduce clearer taxation rules to the various Tables of Fees to avoid unnecessary disputes and achieve where appropriate a level of consistency of approach across aid types.
(f) Payment Arrangements
10.138 The Board was committed to payment of a properly prepared account setting out fees and outlays within 30 working days of submission. To assist solicitors' cash flow, arrangements for payments to account of outlays had been extended and improved in recent years, although there were some difficulties in applying these arrangements to advice and assistance in all cases.
(g) Referral to Auditor
10.139 Legal aid fees did not require to be taxed before the auditor as a matter of course. The Board's Accounts Area would assess and adjust accounts and, in the vast majority of cases, settle with solicitors and counsel.
10.140 The subordinate fees regulations for most legal aid types provided that any "question or dispute" between the Board and a solicitor or counsel as to the amount of fees or outlays allowable to the solicitor, or as to the amount of fees allowable to counsel, from the Fund, should be referred for taxation by the Auditor 191. That was not a joint referral but, rather, a referral by the solicitor or counsel to the Auditor.
10.141 For Court of Session, House of Lords and High Court of Justiciary proceedings the matter would be referred to the Auditor of the Court of Session.
10.142 For Sheriff and District Court proceedings (both civil and criminal) and advice and assistance accounts (including ABWOR) the disputed fees would be referred to the Auditor of that Sheriff Court, who might be the Sheriff Clerk or an Auditor separately appointed.
(h) Role of the auditor of court
10.143 The role of the auditor in legal aid cases is discussed in paragraph 10.204 of Part VI below.
(i) Option to be paid judicial expenses
10.144 Legal aid regulations allow a solicitor to opt to be paid judicial expenses rather than legal aid rates in any case where fees and outlays are recovered by virtue of an award of expenses in favour of a person who has received legal aid or where there has been an agreement as to expenses in favour of such a person. Where the solicitor so opted counsel would also be paid Judicial Expenses, after consultation with counsel.
10.145 If the account was taxed, it was to be taxed on a judicial basis as if the work done for that person were not legal aid.
10.146 The Board might pay out to the solicitor the judicial fees and outlays recovered provided that it received a request for such payment from the solicitor who, at the conclusion of the proceedings, was acting for the person in receipt of legal aid, and the solicitor had consulted with any counsel who was acting for that person at the conclusion of the proceedings.
10.147 The Board was currently developing, along with the Law Society of Scotland, a proposal by the Faculty of Advocates that similar arrangements be introduced for payment of counsel's fees at counsel's discretion.
(j) Additional Fee/Increase in Fees
10.148 Where a party was in receipt of civil legal aid or children's legal aid (under the old system), there was provision in the Regulations for a solicitor to apply for an increase to the legal aid fees. The circumstances in which an increase in fees could be awarded and the nature of the increase would depend on when the legal aid certificate was granted, as a result of the new civil legal aid feeing regime introduced in October 2003 192.
10.149 For certificates pre dating 1 October 2003 Regulation 5(4) of the Civil Legal Aid (Scotland) (Fees) Regulations 1989 provided that in all Court of Session proceedings (both civil and children's legal aid) an additional fee might be allowed at the discretion of the court to cover the responsibility undertaken by a solicitor in the conduct of the proceedings. There was no maximum additional fee and awards could be in excess of 100%. The Court authorised the additional fee and the Auditor of the Court of Session, on being addressed by parties, set the level of the fee.
10.150 Provision was also made for the allowance of a percentage increase in fees in Sheriff Court proceedings (both civil and children's legal aid) "of importance or requiring special preparation". The maximum percentage increase that could be granted by the Sheriff in ordinary actions was 50% and in summary cause actions 100%. The level of fee was decided by the Sheriff.
10.151 The regulation specified a number of factors to be taken into account by the Court of Session in deciding whether to allow an additional fee and the Auditor of Court in determining that fee, and also by the Sheriff in fixing the amount of percentage increase. Those factors were:-
(a) the complexity of the proceedings and the number, difficulty or novelty of the questions involved;
(b) the skill, specialised knowledge and responsibility required of, and the time and labour expended by, the solicitor;
(c) the number and importance of the documents prepared or perused;
(d) the place and circumstances of the proceedings or in which the solicitor's work of preparation for and conduct of it has been carried out;
(e) the importance of the proceedings or the subject matter thereof to the client;
(f) the amount or value of money or property involved;
(g) the steps taken with a view to settling the proceedings, limiting the matters in dispute or limiting the scope of any hearing; and
(h) any other fees and allowances payable to the solicitor in respect of other items in the same proceedings and otherwise charged for in the account.
10.152 The court procedure to be followed where an additional fee or increase in fee was sought was set out in Rule 7 of the Act of Sederunt (Civil Legal Aid Rules) 1987 (as amended).
10.153 Certificates dated on or after 1 October 2003 Regulation 5(4) of the Civil Legal Aid (Scotland) (Fees) Regulations 1989 has been amended by the Civil Legal Aid (Scotland) (Fees) Amendment Regulations 2003.
10.154 An additional fee could still be sought in all Court of Session proceedings (both civil legal aid and children's legal aid) but the maximum additional fee that could now be awarded was now set at 50%. A percentage increase in fees in the Sheriff Court could now only be sought for summary cause proceedings, the maximum percentage increase in this respect remaining at 100%. The factors to be taken into account remained the same as those laid out in the unamended Civil Legal Aid (Scotland) (Fees) Regulations 1989.
10.155 There was no longer any provision for an increase in fees in Sheriff Court proceedings chargeable under the detailed fees set out in Schedule 5 to the 1989 Regulations as amended for:
- children's legal aid cases;
- adoption cases;
- fatal accident inquiries;
- summary applications;
- where party is a third party minuter;
- where party is acting as a curator ad litem;
- minute procedure in a closed process;
- work done under special urgency provisions which did not proceed to a grant of civil legal aid;
- drafting an account of expenses (taxation);
- conveyancing work to implement an Order of Court.
Certain other procedures had been identified and would be added to that list in the current civil review.
10.156 For all other defended civil court cases, payable under Schedule 6 to the 1989 Regulations as amended, new rules had been introduced for considering payment of an additional fee (previously known as a percentage uplift). Both the factors to be applied and the procedures had changed.
10.157 The eight factors stipulated in regulation 5(4) no longer applied and had been replaced by six clearly identifiable and objectively verifiable criteria which the Board (not the Court) would now consider before allowing any additional fee. The factors were set out in Schedule 6, Chapter III of the Civil Legal Aid (Scotland) (Fees) Amendment Regulations 2003 and were as follows:-
1. that the client's inadequate knowledge of English required the obtaining of instructions through an interpreter;
2. that the assisted person although able to attend at the solicitor's office suffered for a significant period of the case from a mental disorder within the meaning of Section 1 of the Mental Health (Scotland) Act 1984;
3. that the assisted person suffered from a physical disability which necessitated a significantly lengthier process than would normally have been encountered in the taking and obtaining of instructions;
4. that the assisted person was, for a significant period in relation to the overall duration of the case, unable to attend at the solicitor's office by reason of disability, illness or imprisonment;
5. that the nature or circumstances of the case necessitated significant attendance to its progress outwith normal office hours.
6. that the law in relation to the matter at issue was particularly complex and involved an area of law with which a solicitor engaged in general court practice would be unlikely to be familiar.
10.158 It was important that the solicitor could demonstrate in the application to the Board for an additional fee that any or all of the circumstances listed above had had a significant effect on the conduct of the case which justified a payment over and above the prescribed fee. The Board had sole discretion when considering whether or not to allow any uplift.
10.159 The additional fee allowable should be 10% of the fee authorised under Schedule 6, Chapter II in respect of each factor which existed, up to a maximum in any case of 40% of that fee. Only one of factors (2), (3) and (4) above might be claimed in any one case. Those factors might be revisited in the current review of the block fees set out in Schedule 6.
(k) Modification of Expenses
10.160 Where a party was in receipt of civil legal aid for the court proceedings and was found liable in expenses, section 18(2) of the Legal Aid (Scotland) Act 1986 enabled the party to apply to the Court to restrict his liability to pay the expenses to such amount as the Court considered reasonable in all the circumstances of the case and having regard to the means of the parties and their conduct in connection with the dispute. In many cases, the court would assess the assisted person's liability as "nil". That procedure was generally referred to as "modification" and was one of the prime benefits of being an assisted person.
10.161 The court procedure to be followed where modification was sought was set out in Rule 4 of the Act of Sederunt (Civil Legal Aid Rules) 1987 (as amended).
(l) Expenses of an Unassisted Party out of the Legal Aid Fund
10.162 Section 19 of the 1986 Act made provision for the circumstances in which an unassisted party in civil proceedings might obtain a court order for payment of his expenses out of the Legal Aid Fund. Such an order would normally only be sought where the court had modified an assisted person's liability in terms of section 18(2) although an order might be sought in the absence of modification where the decree for expenses could not be enforced for some reason, perhaps because the assisted person had been sequestrated.
10.163 The main features of those statutory provisions were:
(a) an order for payment of expenses out of the Fund was competent only where the proceedings were finally decided in favour of the unassisted party;
(b) the whole or part only of the unassisted party's expenses might be awarded out of the Fund;
(c) the order might only relate to expenses attributable to any part of the proceedings for which the assisted person was in receipt of legal aid;
(d) the court had to consider making an award of expenses against the legally assisted person before awarding expenses out of the Fund;
(e) the proceedings had to be such that an order for expenses might be made;
(f) in the case of proceedings at first instance, an order might be made only if the proceedings were instituted by the assisted person and the court was satisfied that the unassisted party would suffer severe financial hardship if the award was not made;
(g) in all cases, the court had to be satisfied that it was just and equitable in all the circumstances that the award should be made out of public funds.
10.164 The court procedure to be followed for such an award from the Fund was set out in Rules 6 and 8 of the Act of Sederunt (Civil Legal Aid Rules)1987 (as amended).
10.165 Expenses to be assessed on party and party basis at non-legal aidrates If an order was made in accordance with the provisions of section 19 of the 1986 Act and Rule 6 for payment to an unassisted party of his expenses out of the Fund, those expenses were in terms of section 20(6) to be assessed on the "party and party" (judicial) basis and included the expenses of applying for the order for payment out of the Fund. The expenses would therefore be calculated in accordance with the ordinary Judicial Table of Fees, not the legal aid tables.
(m) Civil Legal Aid - "Clawback"
10.166 It was important to note that although civil legal aid had been made available, that would not necessarily mean that all the costs of the case would be paid from the Fund. The Board could look to any property recovered or preserved by the assisted person. That was referred to as "clawback". The provisions relating to clawback were to be found in Section 4(3)(c) and 17(2B) of the 1986 Act.
10.167 Section 4(3)(c) required the Board to pay into the Fund "any sum which is to be paid in accordance with section 17 of this Act out of property recovered or preserved for any party to any proceedings who is in receipt of legal aid".
10.168 Section 17(2B) provided "Except in so far as regulations made under this section otherwise provide, where, in any proceedings, there is a net liability of the Fund on the account of any party, the amount of that liability shall be paid to the Board by that party, in priority to any other debts, out of any property (wherever situate) which is recovered or preserved for him -
(a) in the proceedings; or
b) under any settlement to avoid them or to bring them to an end".
In addition, regulation 33 of the Civil Legal Aid (Scotland) Regulations 2002 provided for a list of exemptions from clawback. Regulation 40 provided the Board with enforcement powers.
10.169 Net Liability Section 17(2B) did not provide a definition of "net liability". To understand that phrase, it was important however to understand how the Fund worked. Section 4 of the 1986 Act explained what had to be paid into the Fund and what was paid out of the Fund. Section 4(2)(a) required the Board to pay the fees and outlays of solicitors and counsel properly incurred in the provision of civil legal aid in accordance with the Act and regulations made thereunder.
10.170 To offset those payments section 4(3) required certain payments to be made into the Fund, which included
(i) any contribution required from the assisted person, (ie a fixed sum of money determined by the Board, after consideration of the party's financial circumstances, to be paid towards the cost of the case);
(ii) any expenses recovered from the opponent;
(iii) any property recovered or preserved (to the extent of the net liability).
10.171 The "net liability" was therefore the loss to the Fund which arose when the fees and outlays paid to the solicitor and counsel exceeded any payment into the Fund by way of contribution and expenses. Once that loss had been created, section 17(2B)of the 1986 Act explained that the loss should be paid to the Board by the assisted person from any property recovered or preserved. Thus, the higher the solicitor's account and fees claimed by counsel, the higher the likely net liability.
10.172 What was not generally realised was that an assisted person, like any litigant, had to make up any shortfall in legal expenses, not covered by expenses, from their "winnings".
10.173 Where a solicitor sought an increase in fees, any increase awarded would effectively be funded from property recovered or preserved by the client, unless sufficient expenses were recovered from the opponent to offset the solicitor's additional fee. The net liability would be minimised by maximising the judicial expenses actually paid by the opponent. The higher the expenses recovered from the opponent, the lower the net liability was likely to be.
10.174 The way in which net liability was calculated could be illustrated by a simple example :
Fees and outlays charged and paid to solicitor
Contribution paid by assisted party
Expenses recovered from the opponent
The net liability of £500 was payable from any property recovered or preserved, and in that respect the assisted person was in the same position as a privately paying litigant. That was the final accounting created by sections 4 and 17 of the 1986 Act.
10.175 The "recovery" of property involved the acquiring of property, including the benefits accruing from property. "Preservation" meant that someone had kept property which had been put at issue in the proceedings. The Board had to look objectively at what was acquired or retained by the assisted person in the proceedings, or under a settlement to avoid them, or bring them to an end. Obtaining a sum of money under a decree for payment was an example of property recovered. Successfully opposing an order for transfer of property upon divorce was an example of a case in which property might be preserved.
(n) Advice and Assistance - Source of payment of fees and outlays including "clawback"
10.176 It was important to emphasise that in advice and assistance the Fund was a source of payment of last resort. In advice and assistance (including ABWOR) accounts 193, the solicitor had to consider the hierarchy of payment of his fees and outlays :
(i) firstly, look to his client's contribution for payment of his account. If that was enough to cover the account, the solicitor could not seek payment from the Fund;
(ii) secondly, look to any expenses recovered on behalf of the client;
(iii) thirdly, look to any property recovered or preserved on behalf of the client ("clawback").
Only if there was any shortfall from the sources listed above should an account be rendered to the Board.
10.177 Even where an account was not rendered to the Board, the client had been in receipt of advice and assistance in accordance with the Act and the solicitor's account had to be charged at Advice and Assistance rates in line with the Fees Table (ie. on a detailed basis) - see Part V, paragraph 10.118). The Table of Fees was laid down in Schedule 3 to the Advice and Assistance (Scotland) Regulations 1996. The client could not be charged on a private fee paying client basis. A client might require the solicitor's account to be taxed by the Auditor of the Sheriff Court if he was dissatisfied with the solicitor's account. The Law Society was interested in developing that "safety net" arrangement and introducing a system whereby the solicitor, in certain circumstances, could opt to charge the client at a higher rate.
10.178 If the total fees and outlays amounted to less than the client's contribution, the balance had to be refunded to the client by his solicitor. Where expenses were payable to the client or property had been recovered or preserved for him, the solicitor's claim for his fees and outlays from these sources was in priority to all other debts.
10.179 Unlike civil legal aid, expenses recovered or property recovered or preserved did not require to be paid into the Legal Aid Fund. The solicitor simply deducted his fees and outlays and made over the balance to the client with an appropriate accounting. For that reason there were difficulties in making payments to account of outlays incurred by solicitor except in cases where there was no potential for recovery of expenses or property.
10.180 Property recovered or preserved was subject to the exceptions contained within Regulation 16(2) of the Advice and Assistance (Scotland) Regulations 1996. Aliment, periodical allowance and state benefits, for example, were not taken into account and a claim could be made against the Fund.
10.181 In advice and assistance cases, and again unlike civil legal aid, the Board had a discretion to waive the clawback provision. Regulation 16(2) of the 1996 Regulations provided for exemptions where payment out of the property would cause "grave hardship or distress" to the client.
10.182 The Board's discretionary power also applied where it was clear that payment of the solicitor's fees and outlays out of the property could only be effected with unreasonable difficulty or after unreasonable delay, and the Board was also satisfied that the solicitor had taken all reasonable steps to obtain payment out of the property. "Clawback" could now be made from future recovery by the client or future expenses recovered on the client's behalf.
(o) Criminal Legal Aid
10.183 There were no clawback provisions in criminal legal aid due to the nature of the proceedings. No property would be recovered or preserved. If a party had a criminal legal aid certificate, he would not require to contribute in any way to the expenses of the action.
10.184 Payment of counsel's fees in all criminal cases was governed by the Criminal Legal Aid (Scotland) (Fees) Regulations 1989 (as amended).
10.185 Payment to solicitors for solemn and appeal cases was made on a detailed basis in accordance with Schedule 1 of the Criminal Legal Aid (Scotland) (Fees) Regulations 1989, although discussions were presently taking place with the Law Society of Scotland and the Scottish Executive to introduce block Tables of Fees in solemn cases.
10.186 Payment to solicitors for most summary cases in the district court and sheriff court were made on a fixed payment basis in terms of the Criminal Legal Aid (Fixed Payments) (Scotland) Regulations 1999, except in "Excluded Proceedings" and "Exceptional Cases".
10.187 The Criminal Legal Aid (Fixed Payments) (Scotland) Amendment Regulations 2002 allowed the Board, on receipt of a request from a solicitor, to determine that the solicitor should not receive fixed payments but, instead, should be entitled to lodge a detailed account at the conclusion of the proceedings. The Board could only allow "exceptional status" where it was shown that an assisted person would be deprived of the right to a fair trial because of the amount of the fixed payment payable for the criminal legal assistance to be provided.
10.188 The Regulations prescribed a number of factors 194 to be taken into account by the Board in considering whether the test had been met. The main factors listed were:
(i) the number, nature and location of witnesses;
(ii) the number and nature of productions;
(iii) the complexity of the law (including procedural complexity); and
(iv) whether the assisted person, or any witness, might be unable to understand the proceedings because of age, inadequate knowledge of English, mental illness, other mental or physical disability or otherwise.
Very few applications were made, most solicitors being content to claim the fixed payments.
10.189 As discussed in Part III, there was little scope for the payment of expenses in criminal cases in Scotland. Indeed, there was currently no provision to make payment of expenses recovered in a criminal case into the Fund 195. That was not the case in England where payment of expenses or "payment from public funds" was common.
Annex 1 Comparison of fluctuation of hourly rates 1984 - 2005
LEGAL AID: NON ADVOCACY (CHAMBER RATE)
JUDICIAL/PARTY AND PARTY: NON ADVOCACY
LEGAL AID: ADVOCACY (COURT RATE)
JUDICIAL/PARTY AND PARTY: ADVOCACY
GENERAL TABLE (PRIVATE CLIENT)
The third schedule of the Legal Aid (Scotland) Act 1949 and the second schedule of the Legal Aid (Scotland) Act 1967 allowed for solicitors and counsel to be paid 85% of the rate allowed in taxation in a privately funded case1, the 15% being referred to as the "statutory discount" to reflect certainty of payment. The Divorce Jurisdiction, Court Fees and Legal Aid (Scotland) Act 1983 removed the power of the Court to prescribe fees in the Scottish courts2. The Secretary of State commenced to prescribe tables of fees in legal aid cases. Since at least the early 1970s the "statutory discount" was 10%.
Legal aid fees (A+C) are 90% of judicial/party and party fees (B+D). The judicial advocacy rate (D) is 78.9% of the General Table (E). Legal aid chamber rate (A) is 52% of General Table (E).
Judicial chamber rate (B) is increased. This coincides with the reduction of the 30 minute minimum block to 15 minutes.
Judicial advocacy (D) 30 minute minimum block also reduced to 15 minutes.
Fee increase (A+C) coincides with 1) reduction of chamber rate block to 15 minutes and 2) removal of posts and incidents at 12% in detailed fees (subsumed into the increased fee)3.
Legal aid advocacy rate is now 104.58% of the judicial rate although the latter subsumes posts and incidents. It is still, however, 93% of the judicial advocacy fee excluding posts £58.68 [£52.40 +12% posts and incidents = £58.68].
LEGAL AID: NON ADVOCACY
JUDICIAL: NON ADVOCACY
LEGAL AID: ADVOCACY
The legal aid rate is now 85.45% of judicial (the original 1949 discount), although legal aid rates subsume posts and incidents. Still 76.3% of the judicial rate excluding posts etc.
Lord President's Advisory Committee advice to increase party and party (judicial rates) to agent and client levels (although subsuming posts and incidents in the fees).
The judicial block fees continue to attract a fee in the Sheriff Court of 10% or a session fee (Court of Session) of 7_% where the Edinburgh agent is acting alone, or 10% where there is also a local agent involved. Judicial detailed fees are not subject to a process or session fee.
Legal aid rates, consequentially, now drop to about 59% of the increased judicial rates.
Court advocacy rates (D), 78.9% of the recommended level of fees in the General Table in 1984, now exceed private client hourly rate, sitting at 106.22% of the General Table rate.
The judicial block fees remain subject to a session/process fee. Hourly rate, therefore, is now £108.80 plus 10% = £119.68.
Legal aid block fees remain subject to 12% posts and incidents and process/session fee.
LEGAL AID: NON ADVOCACY
JUDICIAL: NON ADVOCACY
LEGAL AID: ADVOCACY
The legal aid block fee is based on a unit of £19 (£76 per hour). The detailed fees reflect an increase of 21% on the existing Schedule 3 fees in post 1 October 2003 cases. The new block fees subsume 1) process fees and 2) posts and incidents. The block fees, having carried out a costing exercise on a cost neutral basis, also attracted a 21% increase. Old cases continue to be remunerated on the 2002 basis.
It is a feature of the legislation that a solicitor cannot opt to lodge a detailed account or a block fee account depending on the circumstances of the case. Currently, all Court of Session cases are fee'd on a detailed basis and Sheriff Court cases are fee'd either on a detailed or block basis depending on the nature of the case. Block fees are subject to a percentage uplift in respect of certain objectively verifiable criteria calculated at 10% per factor to a maximum of 40% to reflect additional time spent on the case and likely to take the fee outwith the restriction of the blocks. No uplift is available in a case fee'd on a detailed basis.
In respect of judicial fees, the solicitor always has the option whether to charge on a detailed or a block fee basis according to the circumstances of the case and judicial fees are subject to an uplift, it is understood without limit, on a range of factors including complexity, novelty and responsibility.
The general table has been withdrawn.
1 The Judicial Table of Fees used to apply to (a) solicitor and client, (b) solicitor and client, third party paying and (c) party and party fees. Following amendment in 1992 the preamble to the General Regulations in the Act of Sederunt (Fees of Solicitors in the Sheriff Court) 1989 now states that:-
(i) the Table of Fees in this Schedule shall regulate the taxation of accounts between party and party….". There is, accordingly, no universal figure against which a legal aid fee can now be compared.
2 The fees referred to are the dues paid to the Court Offices during litigation and do not relate to fees paid to solicitors or counsel.
3 Block fees prescribed by Schedules 1 and 2 of the Civil Legal Aid (Scotland) Regulations 1989 still attract
(i) session/process fee of 10% and
(ii) posts and incidents at 12%
Annex 2 Remuneration systems in legal aid
Advice and Assistance
Civil and Childrens
1 hour in court = £76
= £300 per case
= £500 per case
(+ £50 rural uplift)
£51.00 (Civil and Children)
Criminal Advocacy £54.80
Civil etc Advocacy £66.40
Court of Session
House of Lords
1 hour = £54.80
1 hour = £42.20
Variable daily rate
No fees prescribed
No fees prescribed
No fees prescribed (Proof fees of between £600 and £1500 have been allowed by Auditors).
Court of Session3
Junior - 1 day at proof = £240.50
Senior - 1 day at proof =£320.80
House of Lords
No fees prescribed
Junior: 1 day trial =
£210 - £647.50
Senior: 1 day trial =
£325 - £720
Junior: 1 day trial =
£225 - £750
Senior: 1 day trial = £410 - £900
1 £70.00 for preliminary stages of guilty pleas, pleas to competency and referrals to ECJ and £27.40 or £45.00 for sequestration.
2 Normally summary criminal attracts a fixed payment but certain cases are exempt from fixed payments and are paid on an hourly basis (see Point 17.4).
3 Although daily rates are prescribed in Regulations, often counsel are paid at higher rates. Auditor of Court has been given a wide discretion to allow a higher fee.
Part VI : Functions of the auditor of court in relation to the taxation of fees
10.190 As indicated in Chapter 1, one of the research objectives of the Working Group was to look into the role of the auditor of court and to provide an account of the way in which the system of taxation worked in practice both from the perspective of consumer protection and competition policy.
10.191 Auditors of court are independent persons of skill who are appointed by the Scottish Executive or senior judges, primarily to "tax" or officially determine the total amount of the legal fees and outlays which have been appropriately incurred by parties in a civil litigation. 196 These are described as " judicial taxations" since they are remitted by the court. A second form of "judicial taxation" arises when a solicitor requires to sue a client for unpaid fees, the court may - but does not necessarily require to - remit the account to the auditor of court for taxation, before granting decree. However, the auditor of court carries out a wider range of functions than these, though sometimes in a private capacity. Thus auditors also conduct " extra judicial" taxations, where a solicitor and client enters into a joint remit to the auditor in order that the latter could tax the solicitor's account. In the foregoing three situations the solicitor will have compiled the account or commissioned a law accountant to compile the account before sending it to the auditor. The final principal area of work 197 conducted by auditors is where they are asked by the solicitor alone to " assess" or fix the appropriate fee for a transaction e.g. handling an executry, in which case the file(s) are sent to the auditor to be assessed. 198 Taxations are formal processes which can involve a hearing and representations from all parties. Assessments are informal, and do not involve hearings or representations. Whilst the result of a taxation is binding on the parties, the result of an assessment is not, unless the client has agreed to this, in the knowledge of his or her right to ask for a taxation.
10.192 There is one Court of Session Auditor and many Sheriff Court Auditors throughout Scotland. The former is a solicitor appointed by the Scottish Ministers. The latter are overwhelmingly 199 Sheriff Clerks or Sheriff-Clerk Deputes who have been appointed by their Sheriff Principal to be an auditor of court. Auditors are expected to be independent, i.e. neutral and impartial as between the competing parties. Their duty is to carry out the taxation of accounts remitted to them without fear and favour. Depending on the circumstances and the type of case they will tax or assess the accounts/ files according to what is "fair and reasonable in all the circumstances", whether the case was conducted in a "reasonable manner", and whether the work in a case was done, but not, generally, whether the work was done adequately. Taxing or assessing a fee involves the use of professional judgement; in addition the various tables of fees left the auditors (and the Court of Session auditor in particular) with varying degrees of discretion. Auditors are financed in differing ways. The Court of Session Auditor receives all the fees for the taxations and assessments which he conducts but from those he has to pay his and his staff's salary costs as well as all his office costs. Similarly, the independent sheriff court auditors retain all the fees for their work. However, sheriff court auditors who are serving sheriff clerks retained only the fees for their extra-judicial or assessment work, with the fees for judicial taxations going to the Treasury. The size of the fees for judicial taxations is set by Act of Sederunt and increases proportionately with the size of the account submitted (in legal aid cases, however, it is usually 4% of the account as rendered). The size of extra-judicial fees is at the discretion of the auditor but is usually 3% or 4% of the account after taxation. The fees for assessments are similarly at the auditor's discretion but are usually 3% or 4% of the fee arrived at by the auditor. The decision as to who should pay the auditor's fees for taxation is wholly within the discretion of the auditor. Liability for the cost of an assessment, however, lies with the submitting solicitor, unless the client has otherwise agreed. There are no published statistics indicating the number of taxations (or the breakdown thereof) or assessments conducted by each auditor.
10.193 The research work for the project involved the examination of background documents and a series of interviews with key stakeholders and those working within the taxation system. 200 A range of issues emerged from the research, not least the degree of concern felt by several stakeholders in relation to aspects of the role of the auditor, and the way in which duties in relation to taxation were carried out. While some stakeholders were broadly happy with the operation of the taxation process, others perceived the system of taxation and auditing to be insufficiently transparent, accountable, impartial, or consistent.
Appointment, skills, and training of auditors
10.194 The evidence from the interviews suggested that the appointment process for auditors may be insufficiently transparent. While it is clear who appoints them, the process adopted and its compatibility with best practice in the modern era, is less clear. That said, the methods of appointment differ between the Court of Session and the sheriff courts and, within the sheriff courts, between the sheriff clerk auditors and independent auditors. Each of the independent auditors is highly experienced, but each was selected in a slightly different way, and no guidelines exist for requiring that their successors are selected by standard public appointment procedures. While it is true that the appointment of sheriff clerk auditors does conform to modern procedures when they were being selected as sheriff clerks, their appointment as auditors (by a Commission from the Sheriff Principal) follows almost automatically on their selection as Sheriff Clerk. Thus while sheriff clerk posts are generally advertised and potential candidates interviewed and formally assessed by a civil service selection board on their skills and competencies to carry out the role of sheriff clerk, there is no formal assessment of their skills and competencies to carry out the role of auditor. It follows that there is no requirement for formal qualifications or evidence of the attainment of competency in auditing/taxation; indeed, it seems that auditing is rarely mentioned in the job specification for the position of Sheriff Clerk and that aptitude to perform the role of auditor is not explored in appointment interviews. It appears that this is because the Scottish Courts Service is responsible for the appointment of sheriff clerks but not of auditors, who are appointed by Sheriff Principals. However, the latter take it very much on trust that those who are selected as Sheriff Clerks are competent as auditors, knowing that they will have received "on-the-job" experience in their earlier career, and are perhaps unaware that competence in auditing is not explored by those appointing sheriff clerks. Likewise, depute sheriff clerks are appointed as depute auditors, again with no formal assessment of their competencies to undertake the role in taxation, and often simply on the recommendation of the sheriff clerk appointed as auditor. There is less uniformity over ceasing to be an auditor. Sometimes the Commission lapses automatically when the sheriff clerk or depute moves on, in other cases the Commission continues even after the incumbent has left the service, until it is withdrawn by the Sheriff Principal.
Skills and experience
10.195 Issues also emerged from the research interviews in relation to the training and experience of some of the "sheriff clerk" auditors. Whilst the Sheriffs Principals and the Sheriff Court Auditors' Society were happy with the experience and on-the job training of sheriff clerk auditors, other respondents were less sanguine on the matter. Many auditors were widely regarded as highly skilled and competent by those working within the system. However, a few respondents questioned whether the experience of some sheriff clerks, especially in relation to non-litigation fields afforded them the necessary skills and experience to undertake aspects of the role effectively.
10.196 Skills, experience and guidance were seen as crucial given the element of discretion built into the role of auditor (discussed below), and perceived deficiencies in skills, experience or guidance were referred to by a few respondents as contributing to a lack of consistency amongst auditors in decisions, as well as a variable quality of decision making. These perceptions seemed to arise most acutely in the area of assessments, judicial taxations where a solicitor was seeking to enforce his/ her fee, or extra judicial taxation, (especially in legal aid cases, 201 or in executries) where the role of auditor was viewed as having a higher element of discretion than in judicial taxations relating to the expenses of a litigation. 202 In addition, extra judicial taxation (and judicial taxations of non-litigation accounts) were seen as raising a range of areas of legal practice outwith the litigation field which might not be within the experience of many sheriff clerk auditors, who, while experienced in procedural matters, were not necessarily so in matters of chamber practice. The removal of the recommended Table of Fees for General Business (on which auditors were found in the researchers' interviews to rely heavily in the context of judicial taxations for non-litigation accounts, extra-judicial taxations and assessments) was considered by a number of respondents to be a retrograde development in that it removed the principal source of guidance for auditors in extra-judicial work and was viewed by some as likely to impact adversely on more inexperienced auditors. The view was also expressed by several respondents that the removal of the Table and the guidelines contained therein might not serve the public interest well, since it would serve to increase inconsistency between auditors and because auditors might in future find it harder to conclude that an extra-judicial fee was excessive.
10.197 The lack of a job description or specific skills set for all appointees was considered by a few respondents to be exacerbated by the lack of formal training given to auditors (this concern tended to be confined to sheriff clerks who became auditors). The absence of sheriff clerk auditors from the research meant that the issue of training for auditors could not be explored fully and the views and experiences of these auditors was absent. However, training of sheriff clerk auditors appears to be in the main 'on the job' and through shadowing and may, inevitably in some cases be rather patchy. In addition, in the case of sheriff clerk auditors, auditing is nothing like a full time job unlike independent auditors, (moreover sheriff clerk auditors may move on to new posts once they have acquired the necessary skills and experience). The interviews also suggested that auditors had little by way of continuing professional development. There are twice yearly meetings of the Sheriff Court Auditors Society where tricky issues can be raised and there is an introductory guidance pack for new auditors, although the researchers were unable to ascertain how comprehensive it was. The Society is also thought to have database of judicial decisions in taxation cases. Further, one Sheriff Principal noted that sheriff clerks have the advantage of sharing a common culture and background which aids consistency of decision-making. In keeping with this, auditors indicated that it was not uncommon for them to consult another auditor when a novel or unusual problem arose. On the other hand, however, some interviewees were of the view that auditors do not discuss what they do in their private work (extra-judicial and assessment) with each other - again however the absence of sheriff clerk auditors from the research precluded further investigation of that issue. At any rate the limited guidance available to sheriff clerk auditors was seen by several respondents from a range of backgrounds as contributing to a lack of consistency amongst auditors, especially in extra-judicial and assessment work. For them, the issue of ensuring that all auditors were fully trained and qualified for the post was seen as more problematic than the system of auditing itself.
The role of the auditor in taxation
10.198 There was clear evidence of confusion and disagreement amongst respondents as to the nature of taxation and the role and office of the auditor, and the consequences flowing from this. The system is complex, and its operation appears open to varying interpretation by those working within the system. Thus at the outset of the research, it became clear that there was considerable confusion or outright disagreement over the meaning of 'taxation', and the difference between judicial taxation, extra judicial taxation, and assessment. That was true for all kinds of respondents. One highly experienced former sheriff court auditor referred to a widespread myth in smaller towns that assessments by sheriff clerk auditors were binding on clients in the same way as taxations. He added that this confusion in his experience was not restricted to clients but extended also to solicitors.
Nature of the role
10.199 Similar confusion emerged in relation to the role of the auditor. During the course of the research it became clear that there was no clear consensus amongst respondents as to the role and status of the auditor, with views differing as to whether the role was judicial, quasi judicial, (one auditor described his role as that of an independent arbiter) or (as another interviewee suggested) administrative. Again respondents were at odds with each other as to whether auditors were public officials, 203 but they generally viewed them as officers of the court. Given this confusion, the implications flowing from the position and status of auditor were unsurprisingly unclear (for example as to whether auditors should publish accounts, or provide written reasons for their decisions, or statistics on workloads, and the nature of the work carried out 204). However, the majority view appeared to be that the auditor does, along with the duty to be fair and impartial, have a duty to protect the public, as indeed is suggested in the case law. 205
10.200 In general, more concern was expressed in relation to extra-judicial taxations and assessments since they were widely regarded as outwith the control or direction of the courts, and essentially a private contract matter between auditors and solicitors. Indeed, some Sheriff Principals were of the view that this aspect of the work of auditors was not a concern for the courts. Nevertheless it was an area which troubled respondents from several backgrounds. The private nature of much extra-judicial or assessment work was highlighted by the reference by two former sheriff clerks to solicitors who sent them private assessments as "clients", and to the practice of some sheriff clerks of retaining "solicitor clients" even after they had moved from one sheriff court to another. As one or two respondents observed, such an outlook runs the risk of appearing to compromise the perceived impartiality of the system, in that an auditor may be required to adjudicate in a judicial taxation in relation to a solicitor who is essentially a paying 'client' of the auditor's in relation to extra judicial and assessment work, and one who is not. This potential conflict of interest was recognised by one or two former auditors who acknowledged a 'pressure' in this situation (however the system does provide for avoidance of conflict by allowing referral of the case to another auditor, although that option may not exist in the smaller courts). A small minority of interviewees expressed the view that it was inappropriate for auditors to carry out both judicial and extra judicial taxation, as questions of independence could be raised.
Role of the auditor in legal aid cases
10.201 The statutory referral and the basis of the referral to the auditor and the role of the auditor in legal cases raises a number of issues :
- the reference to the auditor in the event of any "question or dispute" arising from an account results in matters of fundamental interpretation of the Act and Regulations being determined by the auditor. That is not satisfactory and is not generally welcomed by auditors who, correctly, see their role as quantifying fees rather than interpreting the law.
- Auditors are experienced in dealing with judicial taxations. Where expenses are awarded to a party, it is usually on the basis that the expenses will be "as taxed". Sheriff Court auditors, usually the Sheriff Clerk, are not always conversant or experienced in dealing with the legal aid legislation or, indeed, in counsel's fees. It is quite common for a taxation to commence with the Board representative explaining to the auditor the nature and purpose of a provision in the legislation and, in the Board's view, the plain interpretation of it in the context of the wider Act and Regulations. That is not generally satisfactory.
- There is no hierarchy of Sheriff Court auditors and the decision of an individual auditor, perhaps not in any way conversant with the legal aid provisions or experienced in the level of counsel's fees could be used as a benchmark for future fee claims by counsel. Although there is access to the Sheriff by means of a Note of Objections, the courts are reluctant to interfere with an auditor's decision unless, in the extreme, it is plainly wrong.
- These circumstances combine to introduce a high element of inconsistency throughout the country. For example, different auditors may arrive at different conclusions on the same issue leading to the Board's Accounts Area having to deal in a different way with the same issue depending on the location of the solicitor. That is not helpful in seeking to run a national system.
- Decisions of auditors relating to levels of counsels' fees have had an inflationary effect on claims for payment from the legal aid Fund.
- The standard basis on which auditors charge, a percentage of the total fee claimed inclusive of VAT, may be appropriate in assessing judicial expenses on the basis of a detailed time and line account. It may be argued that the longer the account, the more work involved. In the context of statutory references to the auditor in legal aid cases, however, the arrangements can be odd. A specific issue may arise in the context of a handful of entries in the account or with regard to the interpretation of a legal aid provision as it affects certain charges. Nevertheless, the auditor is entitled to charge the fee based on the total account, which in some cases can be wholly disproportionate to the level of work involved.
Discretion and Consistency
10.202 A wide variety of different standards are properly applied by auditors in taxation matters. While this was not necessarily regarded as a problem in itself during interviews (it was sometimes expressed as an issue of 'knowing the rules', although lack of training and experience are relevant in that context), what was clearly highlighted was the element of discretion built into the system, and the problems which that could cause in relation to transparency and quality of decision making. The amount of discretion given to auditors was seen to vary as between judicial and extra judicial taxations and assessments, with judicial taxations relating to litigation accounts seen as involving less discretionary elements than judicial taxations of non-litigation accounts, extra judicial and assessment work. Discretion was viewed as widest in the Court of Session. In judicial taxations for non-litigation accounts and extra judicial taxations, while the Table of Fees for General Business appeared to have been very widely used as the benchmark in extra judicial work, auditors were reported as going both above and, occasionally, below it. In the absence of written reasons for decisions (unless challenged), interviewees felt that the basis of decisions was not always clear. This variability in auditors' decisions seemed to have the potential to cause problems for the system. Thus several respondents whether auditors, former auditors, law accountants or practitioners referred to knowing solicitors who chose to send their private assessments to non-local auditors who they perceived to be more "generous" than their local counterparts. 206
10.203 However discretion within the system per se was not necessarily regarded as problematic (and was often regarded as necessary), rather the potential for inconsistency in decisions was seen as high, given the concerns over skills and training, and a lack of sufficient clear guidelines to auditors to encourage consistency. The potential for inconsistency was framed both in terms of individual auditors' decisions, and decisions between different auditors. Two areas where this emerged during the research were (1) the taxing of counsel's fees in judicial and legal aid cases and (2) determining liability for the auditor's fee for a taxation. In relation to the latter for many years the rule of thumb in Court of Session cases was that if the party due to pay the account being taxed succeeded in getting 20% or more of the account taxed off, then the cost of the taxation would shift to the other side. However, the research revealed that there was no uniformity amongst sheriff court auditors on the matter. Some relied strongly on the 20% rule of thumb, others preferred to operate a tapering system whereby if 30% of the account was taxed off then 30% of the costs of the taxation would be met by the party lodging the account. Others still appeared to operate on an ad hoc basis. Thus in one case in 2004 although the auditor taxed off 45% of the account - the party paying the expenses still ended up paying for the whole cost of the taxation. It seems unlikely that such a degree of variation and its accompanying lack of transparency, is perceived by the paying parties or the public as a strength of the taxation system.
10.204 The final area of note touched on in the research relates to the potential tension between the auditor as private contractor and the auditor as an independent and impartial officer of the court. The potential conflict of interest where the auditor is asked to preside in a taxation between a solicitor who frequently instructs the auditor to do private work for him or her, and one who does not, has already been noted. Another area which one or two respondents considered raised similar issues occurs from the fact that in extra-judicial taxations the auditor's fee for taxation decreases the more he or she taxes off the account lodged. While the one or two respondents considered that this created at least a perceived potential for a conflict of interest, the Society of Sheriff Court Auditors and other respondents strongly denied that any auditor would be influenced by this anomaly.
10.205 The Group discussed the research findings and agreed to recommend to Scottish Ministers that the arrangements for the taxation of solicitors' and counsels' fees should be reformed and modernised in the light of the weaknesses which the research had identified in the present system; and that the views and experiences of users should be taken into account when such reforms were being considered.