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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> McNamara v. Alexander Stone Company [2004] ScotCS 84 (01 April 2004) URL: http://www.bailii.org/scot/cases/ScotCS/2004/84.html Cite as: [2004] ScotCS 84 |
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FIRST DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord President Lord Hamilton Lord Weir
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A3288/02 OPINION OF THE COURT delivered by LORD HAMILTON in RECLAIMING MOTION in the cause ANDREW McNAMARA Pursuer and Reclaimer; against ALEXANDER STONE & COMPANY Defenders and Respondents: _______ |
Act: Party (Pursuer and Reclaimer)
Alt: Connal, Solicitor Advocate, Q.C.; McGrigor Donald (Defenders and Respondents)
1 April 2004
[1] From about 1989 until about 1997 Arakin Limited ("Arakin") was a party to litigation in Glasgow Sheriff Court, its opponent being a firm of accountants. In the latter stages of that litigation the defenders in the present action acted as Arakin's solicitors. At various times the present defenders rendered to Arakin fee notes for professional services and outlays (including counsel's fees) in relation to that litigation. Certain of the fee notes rendered were paid but issues arose as to liability for the remainder and as to other matters. [2] Eventually the present defenders raised an action, again in Glasgow Sheriff Court, for payment of the outstanding fees claimed by them. In accordance with the usual practice the issue was remitted by the sheriff to the auditor of that court for taxation. After a taxation hearing, which ran in total for about four days and at which Arakin was represented by a law accountant, the auditor taxed the fees at the sum of £194,885.53. After sundry further procedure the sheriff on 17 July 2001 granted summary decree against Arakin in a principal sum, being the balance of the taxed fees less sums paid to account. By interlocutor dated 6 August 2001 the sheriff found Arakin liable to the present defenders in interest on the principal sum and in expenses. [3] Arakin, which had hitherto been represented in those Sheriff Court proceedings by solicitors, appealed to the sheriff principal. On 2 May 2002 the sheriff principal allowed those solicitors to withdraw from acting and, in respect that Arakin was not represented at the diet fixed for the appeal, refused the appeal for want of insistence. An attempt was made to appeal to this court against the sheriff principal's interlocutor but that attempt was made at the instance not of Arakin but of Mr. Andrew McNamara, a shareholder of Arakin, and of a Mr. Martin Frost, these individuals purporting to act together on Arakin's behalf. A Lord Ordinary held that the appeal to this court was incompetent and, exercising the powers conferred by Rule of Court 40.12(5), on 11 October 2002 refused it on that ground. [4] The sum decerned for by the sheriff in terms of his interlocutor of 17 July 2001, as read with certain subsequent interlocutors, was a principal sum of £59,464.18 with interest at 8% a year from 24 February 1998 until payment. The competent appeal procedures having been exhausted, that decree is final. It is also a decree in foro. [5] The sum decerned for not having been paid, the present defenders sought to recover it by diligence. By 19 December 2002 the principal sum and interest, together with the requisite fees for the diligence, amounted to £79,358.26. On that day a charge in that sum was served on Arakin by sheriff officers. [6] Shortly thereafter a summons at the instance of Mr. Frost and Mr. McNamara was presented to the General Department of this court. Reference was made in it to certain assignations said to have been made by Arakin to the pursuers of their whole right, title and interest in the subject matter of the proceedings. The summons was not signed by an agent as provided for by Rule of Court 4.2(1) but a Lord Ordinary, acting under Rule of Court 4.2(5), granted leave to proceed without such a signature. The summons contained various conclusions, including conclusions for reduction, for suspension and for interdict. The Lord Ordinary on 30 December 2002, ex parte and before calling, granted to the present pursuers interim orders suspending the charge dated 19 December 2002 and interdicting the present defenders from attempting to procure enforcement of the decree or charge. [7] The defenders enrolled a motion for recall of these interim orders. The motion first called (before another Lord Ordinary) on 31 January 2003 when Mr. McNamara and Mr. Frost appeared in person and the defenders were represented by Mr. Connal, solicitor advocate. Mr. Connal questioned whether Mr. McNamara and Mr. Frost had a title to reduce a decree granted against Arakin but made it plain that resolution of that question was not central to his motion for recall of the interim orders. His contention was that, the decree sought to be challenged being a decree in foro, the summons did not disclose any prima facie legal basis for setting aside such a decree. Various authorities touching on that issue were cited and relied on. Mr. Frost and Mr. McNamara each spoke in response but neither disputed Mr. Connal's submissions as to the applicable law. [8] At the outset of that discussion Mr. Frost asked the Lord Ordinary to continue the hearing of the motion for seven days. That motion was renewed by him at the end of the discussion, the purpose of such continuation being to allow the pursuers (1) to lodge the summons for calling and (2) to introduce by way of amendment substantial further specification of the ground of action. The Lord Ordinary decided to continue the hearing for fourteen days to allow the pursuers, if so advised, to take these steps. In the event the pursuers took neither of these steps. On the morning of the continued diet (14 February 2003) they faxed to the court a document in the form of a new summons. That document had not passed the signet and had no status before the court. The Lord Ordinary took the view that he required to base his decision on the pleadings as they stood together with the submissions made at the bar. Having considered these, he concluded that the defenders' submissions were well-founded and granted their motion for recall of the interim orders. The Lord Ordinary having intimated his decision, Mr. Frost moved him to allow amendment of the summons by incorporating into it the contents of the document which had been faxed to the court that morning. The Lord Ordinary, having heard Mr. Connal in reply, refused the motion made at the bar to amend. The Lord Ordinary's interlocutor of 14 February 2003 encompassed both his recall of the interim orders and his refusal of the motion to amend. [9] The Lord Ordinary issued a written Opinion in which he set out, under reference to the relevant authorities, the applicable principles of law. Among other authorities to which he referred was a passage from the speech of Lord Sumner in McCarroll v. McKinstery 1926 S.C. (H.L.) 1 dealing with the matter of res noviter in an action of reduction of a decree in foro. At p. 7 Lord Sumner said:"There is abundant authority for saying that, where the pursuer relies on res noviter, he must not merely aver that something material has newly come to his knowledge, but he must aver it with such circumstantiality as will show that he could not by the exercise of reasonable diligence have known of it in time to have made use of it in the original action. He must give particulars of its discovery and of the circumstances which bear upon the possibility of his having acquired earlier knowledge of it".
"Had the Lord Ordinary so allowed the motion, the revision made out not only a prima facie case but a case which no reasonable Lord Ordinary would have refused as the balance of convenience therein favoured the pursuers to continue the interim interdict and suspension. In particular, the Lord Ordinary erred in holding that there were not exceptional factual circumstances and legal principles which required full and considered determination in the interest of substantial justice. As a matter of fact and law the pursuers in their adjustment relied on res noviter; material which had newly come to their knowledge in circumstances which Arakin even if by the exercising of reasonable diligence could not have known of it in time to have made use of it in the original action ... " (sic).
"to call By Order on a date to be afterwards fixed to determine (1) whether the reclaiming motion should be entertained and (2) if so, the scope thereof".
It further allowed parties to adjust pleadings for a period of twenty one days from that date. A date for such a By Order hearing was subsequently fixed for 19 March 2004.
[12] Meantime Mr. Frost and Mr. McNamara came to differ as to the future conduct of these proceedings. In the event, for reasons into which it is unnecessary to enter, Mr. Frost sought to withdraw from the proceedings while Mr. McNamara sought to insist in them. The difficulty presented by their initially proceeding on the basis of an assignation by Arakin to them jointly was overcome by a further assignation being granted and accepted, on this occasion by Mr. Frost to Mr. McNamara of the former's right to pursue this action. As a result of that arrangement Mr. McNamara, by the time the case called before us By Order on 19 March 2004, was the sole pursuer now insisting in the action and this reclaiming motion. Mr. McNamara again appeared in person, the defenders and respondents again being represented by Mr. Connal. [13] Mr. McNamara submitted that Arakin was not indebted to the defenders in the sum for which the sheriff had granted decree. The averment made by the present defenders in their action for fees as to the amount of Arakin's indebtedness was erroneous, since the total sum which had been invoiced by them to Arakin was in a substantially lower figure than that claimed - indeed substantially less than the amount already paid by Arakin. The present defenders had a statutory duty to render invoices (The Value Added Tax Regulations 1995, Regulation 13(1)). They had failed to do so except to the extent of about £67,000. This error had been drawn to the attention of the auditor at the taxation but he had failed to acknowledge it. Arakin, which was registered for VAT purposes, was not obliged to pay otherwise than on the basis of a VAT invoice. Its right to recover VAT from Customs and Excise would otherwise be prejudiced. Arakin had repeatedly called on the present defenders to supply relevant invoices but they had failed to do so. Any right to recover un-invoiced fees had now prescribed. Moreover, the present defenders were liable, under section 36(1)(b) of the Solicitors (Scotland) Act 1980, to make good to Arakin a sum equivalent to the interest which would have accrued had they fulfilled the duties incumbent on them under that section. The present defenders were also obliged to repay the overpayment in respect of un-invoiced fees. The taxation by the auditor had been incompetently conducted. [14] In the course of his submissions Mr. McNamara made it plain that he did not adopt the largest part of the pleadings document (entitled "Draft Record") framed on behalf of the pursuers at a stage prior to the difference emerging between him and Mr. Frost. There is a question as to whether, and if so, to what extent the pleadings have been duly altered in terms of that document; but it is unnecessary to resolve that question at this stage since, apart from disassociating himself from the largest part of that document, Mr. McNamara before us made no reference to it. [15] The complaint which Mr. McNamara pressed before us was essentially founded on the contention that charges included in the professional account as taxed by the auditor (and for which the sheriff had ultimately granted decree) had not been duly presented against Arakin. In particular, they were not supported by rendered VAT invoices. As, however, Mr. McNamara more than once acknowledged before us, this complaint had been made to the auditor who had rejected it. Decree in foro thereafter passed on the basis of the account as taxed. A decree in foro is capable of being reduced by action in the Court of Session but only on limited and well-recognised grounds. Among the limitations is that described by Lord Sumner in the passage in McCarroll v. McKinstery set forth above. The Lord Ordinary in his Opinion recited that passage. Mr. McNamara did not suggest that that passage was in any respect unsound or that it was inapplicable to the present situation. Although repeatedly invited by this court to address the problem which it presented for his contention, he at no stage did so. His own narrative of events was fatal to that contention. (See also Stewart v. Gelot (1871) 9 Macph. 1057 at p. 1060; Mackintosh v. Smith (1878) 6 R. 206 at p. 210). [16] In these circumstances the pursuer's summons contains no material (at least in so far as relied on by Mr. McNamara) which could found a prima facie case for reduction of the decree in foro. Nor was any material brought to our attention by Mr. McNamara which could found such a case, the documentation recovered under the diligence granted by this court simply confirming that not all the fees charged had been presented in the form of VAT invoices. The grounds of appeal as framed provide no such foundation. Although they were framed as long ago as March 2003, no amendment of them is made or proposed. [17] The court, by its interlocutor of 10 June 2003, envisaged that at the By Order hearing to be fixed it would determine whether the reclaiming motion should be entertained and, if so, what is scope would be. It did so against the possibility that in the meantime there might emerge a pleaded ground upon the basis of which a challenge to the Lord Ordinary's interlocutor could be entertained. Despite ample opportunity having been afforded for the purpose, no such ground has emerged. In the absence of a prima facie ground for reducing the decree in foro, there can be no justification for interfering with the Lord Ordinary's interlocutor recalling the interim orders. In these circumstances the only proper course is to decline to entertain the reclaiming motion and to refuse it. That we shall do. We shall thereafter remit to the Lord Ordinary to proceed as accords.