Ormistons Law Practice Ltd v Scottish Legal Aid Board
| Jurisdiction | Scotland |
| Judge | Sheriff Principal MM Stephen QC,Sheriff Principal DL Murray,Sheriff Principal CD Turnbull |
| Judgment Date | 11 June 2021 |
| Court | Sheriff Appeal Court |
| Docket Number | No 1 |
[2021] SAC (Civ) 22
Sheriff Principal MM Stephen QC, Sheriff Principal DL Murray and Sheriff Principal CD Turnbull
Barton v Advocate General for Scotland sub nom Barton v Secretary of State for Scotland [2015] CSIH 92; 2016 SC 258; 2016 SLT 449; [2016] IRLR 210
Ghaidan v Godin-Mendoza [2004] UKHL 30; [2004] 2 AC 557; [2004] 3 WLR 113; [2004] 3 All ER 411; [2004] 2 FLR 600; [2004] 2 FCR 481; [2004] HRLR 31; [2004] UKHRR 827; 16 BHRC 671; [2004] HLR 46; [2005] 1 P & CR 18; [2005] L & TR 3; [2004] 2 EGLR 132; [2004] Fam Law 641; [2004] 27 EG 128 (CS); 101 (27) LSG 30; 154 NLJ 1013; 148 SJLB 792; [2004] NPC 100; [2004] 2 P & CR DG17; The Times, 24 June 2004
Litster v Forth Dry Dock and Engineering Co Ltd 1989 SC (HL) 96; 1989 SLT 540; [1990] 1 AC 546; [1989] 2 WLR 634; [1989] 1 All ER 1134; [1989] 2 CMLR 194; [1989] ICR 341; [1989] IRLR 161; 86 (23) LSG 18; 139 NLJ 400; 133 SJ 455
Marleasing SA v La Comercial Internacional de Alimentacion SA (C-106/89) ECLI:EU:C:1990:395; [1990] ECR I-4135; [1993] BCC 421; [1992] 1 CMLR 305
Smith v Scottish Legal Aid Board [2012] CSIH 14; 2013 SC 45; 2012 SLT 703; 2012 SCLR 319 and [2011] CSOH 168; 2012 SLT 694
Techbau SpA v Azienda Sanitaria Locale AL (C-299/19) ECLI:EU:C:2020:937
Vidal-Hall v Google Inc [2015] EWCA Civ 311; [2016] QB 1003; [2015] 3 WLR 409; [2016] 2 All ER 337; [2015] CP Rep 28; [2015] 1 CLC 526; [2015] 3 CMLR 2; [2015] EMLR 15; [2015] Info TLR 373; [2015] FSR 25
De Smith, SA, Judicial Review (8th Woolf et al ed, Sweet and Maxwell, London, 2018), para 14.066
Legal aid — Interest — Whether statutory interest exigible on legal aid accounts overdue for payment — Late Payment of Commercial Debts (Interest) Act 1998 (cap 20), sec 2
Ormistons Law Practice ltd raised a commercial action in the sheriffdom of Lothian and Borders at Edinburgh for declarator that the Scottish Legal Aid Board was liable to pay statutory interest on a legal aid account submitted to it and for payment of statutory interest and statutory compensation for late payment in terms of the Late Payment of Commercial Debts (Interest) Act 1998 in relation to the account.
The cause called before the sheriff (WH Holligan) for debate. The sheriff refused the motion for the Board for dismissal of the action ([2020] EDIN 11). At a subsequent hearing to determine further procedure, the sheriff granted decree of declarator and payment. The Board appealed to the Sheriff Appeal Court.
Article 2(1) of Directive 2011/7/EU of the European Parliament and of the Council on combating late payment in commercial transactions ([2011] OJ L48/1) (‘the Directive’) provides, “‘commercial transactions’ means transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration”. Article 4(1) provides, in part, “Member States shall ensure that, in commercial transactions where the debtor is a public authority, the creditor is entitled … to statutory interest for late payment … where the following conditions are satisfied: (a) the creditor has fulfilled its contractual and legal obligations; and (b) the creditor has not received the amount due on time, unless the debtor is not responsible for the delay.”
Section 1 of the Late Payment of Commercial Debts (Interest) Act 1998 (cap 20) (‘1998 Act’) provides, in part, “(1) It is an implied term in a contract to which this Act applies that any qualifying debt created by the contract carries simple interest subject to and in accordance with this Part. (2) Interest carried under that implied term (in this Act referred to as ‘statutory interest’) shall be treated, for the purposes of any rule of law or enactment (other than this Act) relating to interest on debts, in the same way as interest carried under an express contract term.” Section 2 provides, in part, “(1) This Act applies to a contract for the supply of goods or services where the purchaser and the supplier are each acting in the course of a business, other than an excepted contract. (2) In this Act ‘contract for the supply of goods or services’ means– … (b) a contract (other than a contract of sale of goods) by which a person does any, or any combination, of the things mentioned in subsection (3) for a consideration that is (or includes) a money consideration. (3) Those things are– … (c) agreeing to carry out a service. … (7) In this section– ‘business’ includes a profession and the activities of any government department or local or public authority”.
A firm of solicitors submitted an account to the Scottish Legal Aid Board (‘the Board’) for work carried out on behalf of a client of the firm. The Board made a payment of less than the total remuneration and outlays claimed. Following taxation of the account, a further sum was found due to be paid by the Board. The firm raised a commercial action for declarator that statutory interest was exigible on the account in terms of the 1998 Act and for payment of statutory interest and statutory compensation for late payment in respect of the account.
After debate, the sheriff granted decree of declarator and payment. The sheriff held that, subject to certain conditions being satisfied, the Board had a statutory obligation to pay solicitors; that the relationship between a solicitor and the Board could properly be described as a “commercial transaction” within the meaning of the Directive; and that the term “contract” in sec 2 of the 1998 Act could be interpreted as including a “commercial transaction” within the meaning of the Directive. As a result, the sheriff held that the 1998 Act imposed an obligation to pay statutory interest on the Board in the present case. The Board appealed to the Sheriff Appeal Court.
Held that: (1) the relationship between the firm and the Board was one of regulated indemnity for fees and outlays reasonably and necessarily incurred by the solicitor on behalf of the client; no goods or services were provided by the firm to the Board; and, as a result, the relationship between the parties was not in the nature of a commercial transaction as defined and envisaged by the Directive (paras 32–34); (2) the court was required, as far as possible, to interpret the 1998 Act in light of the wording and purpose of the Directive in order to achieve the result pursued by the Directive, but it had to take care to respect the intention of Parliament and it could not interpret the 1998 Act in a way that was inconsistent with a fundamental feature of the legislation (paras 37–40); (3) it was not disputed that there was no contract between the parties in the sense that the Board purchased the services of the firm and so, even if the relationship between the parties had been a commercial transaction within the meaning of the Directive, the 1998 Act could not be interpreted to encompass the statutory scheme for the provision of legal aid as that would alter the fundamental wording and purpose of the legislation (para 41); and appeal allowed and the Board assoilzied.
Observed that the Board's position in the present case sat awkwardly with its concession in Smith v Scottish Legal Aid Board that statutory interest could accrue on counsel's fees. It gave rise to an unattractive and surprising anomaly that the Board accepted that it was liable to pay interest on counsel's fees, but the court had held that the Board was not liable to pay interest on solicitors' fees and outlays (para 50).
Smith v Scottish Legal Aid Board 2013 SC 45 commented upon.
The cause called before the Sheriff Appeal Court, comprising Sheriff Principal MM Stephen QC, Sheriff Principal DL Murray and Sheriff Principal CD Turnbull, for a hearing,
At advising, on 11 June 2021, the opinion of the Court was delivered by Sheriff Principal MM Stephen QC—
Opinion of the Court—[1] The first issue in this appeal involves the scope of Directive 2011/7/EU of the European Parliament and of the Council on combating late payment in commercial transactions ([2011] OJ L48/1) (‘the Directive’) (which supersedes Directive 2000/35/EC ([2000] OJ L200/35)) and the interaction between the Directive and the Late Payment of Commercial Debts (Interest) Act 1998 (cap 20) (‘the 1998 Act’) which falls to be construed against the terms of the Directive. The second and operative issue is whether the terms of the 1998 Act require the appellant to make payment to the respondent of statutory interest on an account submitted to them in terms of the Legal Aid (Scotland) Act 1986 (cap 47) (‘the 1986 Act’).
[2] The respondent, a firm of solicitors, raised a commercial action against the appellant, The Scottish Legal Aid Board (‘the Board’), seeking declarator that the Board is liable to pay statutory interest to the respondent on part of their account submitted to the Board and remaining unpaid more than 30 days after that account had been taxed. The action relates to a particular case involving a client of the firm CM. On 3 August 2016 the appellant made payment of the sum of £1,796 within 30 days of the account being submitted. However, this was less than the total of remuneration and outlays claimed. On 29 March 2017 the respondent submitted the account for taxation and on 8 June 2018 the auditor determined that £131.70 remained due to the respondent. That balance was ultimately paid by the Board on 14 September 2018. The interest claimed amounts to £23.59. However the issue relating to payment of interest on overdue accounts is said to affect many thousands of legal aid accounts and is therefore of wider importance. Only the crave for declarator was debated before the sheriff. For the purpose of these proceedings the Board did not resist the respondent's computation of interest in crave 2. Crave 3 seeks payment of £40 being the fixed sum of compensation due in terms of sec 5A...
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