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OUTER
HOUSE, COURT OF SESSION
[2007] CSOH 95
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XA1/02
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OPINION OF LORD MACPHAIL
in the cause
ANDREW McNAMARA and
MARTIN FROST
Pursuers;
against
LEVY and McRAE
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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First Pursuer: Party
Defenders: McGregor; Dundas & Wilson CS, LLP
5 June 2007
Introduction
[1] These are two
notes of objections to reports by the Auditor of Court. The pursuers raised an action of damages
against the defenders in Glasgow Sheriff Court. The action was thereafter remitted to the
Court of Session. On 8
February 2005
the Court made an award of the expenses of certain procedure against the first
pursuer. On 15
February 2005
the Court dismissed the action and found the pursuers jointly and severally
liable to the defenders in the expenses of the action. The defenders lodged accounts of expenses
relative to each award. On 17
March 2006
the first pursuer lodged a single note of objections both to the Auditor's report
on the account of expenses relative to the award of 8 February
2005 and to
his report on the account of expenses relative to the award of 15
February 2005.
The defenders lodged a note of
objections to the Auditor's report relative to the award of 15
February 2005.
[2] I heard the
first pursuer personally and counsel for the defenders on both notes of
objections at a hearing on 10 May 2007. I shall consider, first, the note of
objections for the first pursuer in so far as it relates to the Auditor's report
on the account relative to the award of 8 February 2005. Next, I shall consider the same note in so far
as it relates to the Auditor's report on the account relative to the award of 15
February 2005.
Finally, I shall consider the defenders'
note of objections to the Auditor's report on the latter account.
Report on account
relative to award of 8 February 2005
[3] The defenders
lodged their account of expenses (no 39 of process) on 10
June 2005. Before the diet of taxation, the first pursuer
lodged with the Auditor written points of objection to the account. On 14 December 2005 a diet of taxation took place at
which the first pursuer and representatives of the defenders' solicitors were
present. The Auditor issued his report
(no 42 of process) on 6 March 2006. On 17 March 2006 the first pursuer lodged the note of
objections to which I have already referred (no 43 of process). On 26 May 2006 the Auditor lodged a minute (no 46
of process) in response to the note of objections. In his minute the Auditor helpfully
reproduced the first pursuer's written points of objection.
[4] At the
hearing before me the first pursuer agreed that paragraph 1 of his note of
objections was directed to the Auditor's report no 42 of process relative to
the award of 8 February 2005. Paragraph
1 reads:
"The auditor exceeded his authority
by effectively making a judicial decision through disregarding the claimant's
non-compliance with the Rules of the Court of Session, specifically the
claimant's breaches of Rule 42.1.7 and Rule 42.1.5 regarding the intimation and
lodging of expenses under the 'four month
rule', which decision was incompetent given the lack of any Judicial
decision allowing relief from complying therewith, under Rule 2.1."
[5] There is no
rule 42.1.7 or 42.1.5: the first pursuer's references are to the paragraphs
bearing these numbers in the annotations to the Rules in The Parliament House Book. As the Auditor points out in his minute,
no 46 of process, the "four month rule" to which the first pursuer refers is
rule 42.1(2)(a) of the Rules of the Court of Session
1995, as amended. The Auditor's reading
of the rule is that it requires an account of expenses which proceeds under a
final interlocutor to be lodged not later than four months after the final
interlocutor. The interlocutor of 8
February 2005,
however, was not a final interlocutor and thus, in the Auditor's view, the
"four month rule" does not apply to an account of the expenses awarded
thereunder. As to intimation of a copy
of the account to the paying party, rule 42.1(2)(b)
requires intimation to be given, but the Rules do not specify any time by which
that should be done. The first pursuer
referred to paragraph 2.1 of the Practice Note No 3 of 1993 which requires
intimation not later than 10 days prior to the lodging of the account unless
exceptional circumstances indicate that a shorter period of intimation be
given. I invited the first pursuer to
explain how he had been prejudiced by any failure to observe the terms of rule
42.1(2)(a) and paragraph 2.1, but he was unable to do
so. At the end of the day, as I
understood him, the first pursuer no longer insisted in the objections in
paragraph 1 of his note. Accordingly I
shall repel the first pursuer's objections to the Auditor's report no 42 of
process. Since the objections have been
withdrawn it is unnecessary for me to express any opinion as to the correctness
of the Auditor's view that rule 42.1(2)(b) applies
only to expenses awarded by a final interlocutor.
Report on the account relative to the award of 15 February 2005: first
pursuer's objections
[6] The remaining
paragraphs of the first pursuer's note of objections are concerned with the
Auditor's report no 41 of process on the defenders' account of expenses no 40
of process which relates to the expenses of the action in which the pursuers
were found jointly and severally liable by the interlocutor of 15 February
2005.
[7] In his second
paragraph the first pursuer contends that the defenders' account of expenses
should have been intimated in writing by 5 June 2005 at the latest,
"thereby
allowing compliance with the 'four month
rule' (Rule 42.1.5), which required that the account of expenses be lodged
not later than four months after the interlocutor of Lord Dawson [i.e. the interlocutor of 15
February 2005].
It is clearly noted on the account of
expenses that they were intimated on the 10th
June 2005.
For compliance with Rule 42.1.7 to have occurred, the account cannot have been
properly lodged until the 20th June 2005, and would therefore have been
outside the 'four month rule' per
Rule 42.1.5."
[8] In my opinion
this objection is misconceived. The
account was lodged and intimated on 10 June 2005, which was within four months after
the final interlocutor of 15 February 2005. It was not intimated at least 10 days before
it was lodged, but again, the first pursuer was unable to demonstrate that he
had been prejudiced thereby. Paragraph
2.1 of Practice Note No 3 of 1993 is in my view directory rather than mandatory
in effect: its function is to provide guidance, and a failure to comply with it,
which causes no prejudice, cannot invalidate the taxation procedure.
[9] The third
paragraph of the first pursuer's note of objections states that the defenders,
having failed to comply with "rules 42.1.5 and 42.1.7", failed "to seek relief,
by a motion for prorogation of the time, by making an application under Rule
2.1 to be so relieved." Rule 2.1 makes
provision for relief for failure to comply with the Rules of Court, not for
failure to comply with the provisions of a practice note. Since there was no failure to comply with rule
42.1(2)(a), this objection falls.
[10] In his fourth
paragraph the first pursuer states, "The Rules of the Court of Session having
been strictly construed where they fall against the Noter,
the Noter seeks equality of treatment by the Court in
its application of the rules where they fall to assist him." He goes on to refer to three cases in which he
appeared as a party litigant. In these
cases, he maintains, the Rules had been strictly applied contrary to his
interests. No documentation relative to
any of these cases was placed before me. In any event, in the present case the
defenders have not been shown to be in breach of any of the Rules of Court,
however strictly they might be construed.
[11] The fifth and
final paragraph of the first pursuer's note of objections states that even if
the defenders' account had been rendered in compliance with the Rules of Court,
the sums claimed in the account should be further abated on three grounds. First, the account is an agent and client
account and not a party and party account. Secondly, the first pursuer had not "had sight
of the claimant's invoices/ledger showing costs rendered to the claimant's
paying client (thereby refusing, through their non-provision of these
invoices/ledgers, confirmation of the accuracy of the time and line accounts
submitted to the Auditor viz the actual payments
received from their client/insurer)." Thirdly, the Auditor had not given a proper
explanation or response to the written objections submitted before the diet of
taxation.
[12] As to the
first point, the Auditor accurately observes in his minute that the defenders'
solicitors had been entitled by rule 42.10(3) to charge their account either on
Chapter I or on Chapter III, and they had chosen to do so on
Chapter I. The Auditor further states
that on checking the account in detail with the solicitors' files, he was
satisfied that the account had been prepared on a party and party basis. I invited the first pursuer to point to any
entry in the account which indicated that it had been prepared on an agent and
client basis, but he was unable to do so.
[13] As to the
second point, the Auditor states that there were attached to the account
vouchers to satisfy the disbursements incurred and charged for within the
account, and that he was satisfied that they had been properly incurred and
paid in terms of rule 42.2(3). The first
pursuer was unable to contradict these statements. He complained about the rule that the Auditor
alone has the right to see the vouchers for disbursements in respect of fees to
counsel and he made general, unspecific complaints about the quality of the
Auditor's work, based on his experience in other cases, but these are not valid
grounds of objection to the Auditor's report in this case.
[14] As to the
final point, in his minute the Auditor has quoted each of the twelve points
stated in the first pursuer's written points of objection, and has provided a
response to each of them. At the hearing
before me the first pursuer did not make any specific complaint about any of
these responses, although I asked him more than once whether there was anything
more that he wished to say.
[15] In my opinion,
accordingly, there is no substance in any of the objections stated by the first
pursuer to the Auditor's report no 41 of process on the defenders' account no
40 of process. I shall therefore repel
those objections also.
Report on the account relative to the award of 15 February 2005: defenders'
objections
Procedural
history
[16] The defenders
in their note of objections no 44 of process object to the Auditor's report no
40 of process in so far as it abates all work involving senior counsel before
the sheriff court in Glasgow. In order to address this objection it is
necessary to set out some details of the procedural history of the case.
[17] The action was
raised in Glasgow Sheriff Court on 7 April 2000. The pursuers were the first pursuer and Martin
Frost, suing as assignees of Arakin Ltd and as the
trustees of Arakin Building Services Ltd Executive
Pension Scheme. The defenders were, and
are, a firm of Glasgow solicitors. The grounds of action were breach of contract
and professional negligence, and the sum sued for was ฃ5,342,664. Before the service of the action, arrestments had been used which had had the effect of
attaching obligations to account in respect of the firm's bank account and the
personal bank account of one of the partners. The defenders lodged a motion for the recall
of the arrestments and instructed senior counsel to
appear for them at the hearing of the motion, which was opposed by the
pursuers. The arrestments
were recalled at a hearing on 4 May 2000. The action proceeded, and the defenders next
instructed senior counsel to appear for them at a diet of debate on 23
February 2001.
The debate was part heard on that date. Senior counsel again appeared at the continued
diet of debate on 21 May 2001.
[18] On 23
November 2001
the Sheriff remitted the case to the Court of Session on the unopposed motion
of the pursuers. The defenders were
represented by a solicitor at the hearing of the motion. Neither at that hearing nor at any previous
hearing in the Sheriff Court was any motion made on behalf of the
defenders for certification of any part of the cause as suitable for the
employment of counsel.
[19] After the case
had been remitted, the procedure in the case was lengthy and complex. It is sufficient, however, to notice that, as
already mentioned, on 15
February 2005
Lord Dawson dismissed the action and found the pursuers liable jointly and
severally to the defenders in the expenses of the action. On 10 June 2005 the defenders lodged and intimated
their account of expenses no 40 of process, and in due course a diet of
taxation was fixed for 14 December 2005.
[20] The defenders'
account of expenses included a number of entries relative to the employment of
senior counsel in the sheriff court. The
first pursuer's written points of objection to the account, which he intimated
to the Auditor prior to the diet of taxation, included the following:
"All counsel's costs incurred in the
Sheriff Court, and all expenses relating to communications with and briefings
of Counsel, there being no Court authority for the utilization of Counsel in
the sheriff court (in particular in light of opposing a Party Litigant) these
costs should be abated."
[21] On 13
December 2005,
the day before the diet of taxation, Lord Dawson heard junior counsel for the
defenders and the first pursuer personally on a motion which had been enrolled
by the defenders and opposed by the first pursuer. The motion was in these terms:
"On behalf of the
defenders, to grant sanction for the employment of Senior Counsel in the Sheriff Court in the period
prior to 23 November 2001."
Lord Dawson pronounced the following interlocutor:
"The Lord Ordinary having heard
Counsel for the defenders and party pursuer, on the defenders' opposed motion
in respect of the sanction of Senior Counsel in the Sheriff Court for the period prior to 23
November 2001;
makes no order."
[22] It is perhaps
unfortunate that his Lordship was not invited to issue an Opinion. Junior counsel for the defenders who appeared
at the hearing before me was not the counsel who had appeared for them before
Lord Dawson. He did, however, give the
following narrative with which he had been provided by his instructing
solicitors. The first pursuer, who had
been personally present at the hearing of the motion before Lord Dawson, did
not contradict that narrative, and I have no hesitation in accepting it.
[23] Counsel stated
that the Lord Ordinary had made no order because he considered the motion to be
unnecessary. The reason for his view was
that the action was deemed to be treated as if it had originated in the Court
of Session. It was accordingly
unnecessary to grant the motion for sanction of the employment of senior
counsel in the sheriff court.
[24] Counsel
observed that his Lordship's reasoning seemed to refer to rule 32.4(2) of the
Rules of the Court of Session. That rule
appears in Chapter 32 of the Rules, which is concerned with the transmission
and remit of causes. Rules 32.3 to 32.7
deal with causes transmitted from the sheriff court. Rule 32.4 makes provision for the lodging of a
process and a motion for further procedure. Rule 32.4(1) enacts the rule as to the
process. Rule 32.4(2) provides:
"(2) On lodging a process under
paragraph (1), the party lodging it shall apply by motion for an order for such
further procedure as he desires; and the cause shall proceed as if it had been
an action in the court initiated by summons."
The diet of taxation
[25] At the diet of taxation the first pursuer
and the representative of the defenders made submissions as to the first
pursuer's objection to the entries relative to the employment of counsel in the
sheriff court. The Auditor's minute no
46 of process records (at page 13):
"The Auditor accepted Mr McNamara's
argument that Counsel's fees in the Sheriff Court should not be allowed. There was no certification of Counsel in the
Sheriff Court Process and by Interlocutor of 13
December 2005
the Court made no order on the Defenders' motion for the retrospective sanction
for Senior Counsel in the Sheriff Court for the period prior to 23
November 2001.
The relevant entries were abated."
The defenders' note of objections
[26] The defenders thereafter lodged their note
of objections (no 44 of process) in which they object to the Auditor's Report
(no 41 of process) "insofar as it abates all work involving Counsel before the Sheriff Court in Glasgow." Their objection is concisely stated in these
terms:
"It is the Defenders' position that
sanction for the employment of Senior Counsel in the Sheriff Court is not required in an action
thereafter remitted to the Court of Session. In a remitted action the action proceeds as if
it had originated in the Court of Session and there is no requirement to seek
specific sanction for the employment of Counsel for the Sheriff Court
Procedure. Rule 26.2 of the Sheriff Court rules and rule 32.4 of the Court of
Session Rules are referred to for their terms."
The Auditor's response
[27] The Auditor in his minute no 45 of
process, which is his response to the defenders' note of objections, states:
"The Auditor has no power to allow
such fees. Only when sanction is given
by the Sheriff may they form a relevant charge for determination at taxation in
terms of the General Regulations to the Act of Sederunt (Fees of Solicitors in
the Sheriff Court) (Amendment and further provisions) 1993. Regulation 8 thereof states, "In order that the expenses of litigation may
be kept within proper and reasonable limits only such expenses shall be allowed
in taxation of accounts as are reasonable for conducting it in a proper manner.
It shall be competent for the auditor to
disallow all charges for papers, parts of papers or particular procedure or
agency which he shall judge irregular or unnecessary," and Regulation 12(a)
makes it clear that, "Counsel's fees and
the fees for instruction of counsel in Chapter II and Chapter III of the Table
of Fees are to be allowed only where the court has sanctioned the employment of
counsel." The fees which may be
charged for work done in the Sheriff Court are set out in the Table of Fees in
that Schedule and, in particular, those fees set out in Chapter III (under
which this Account has been framed), are subject to the provisions in the said
General Regulations."
[28] The Auditor
goes on to refer to Lord Dawson's interlocutor of 13
December 2005
in terms which make it clear that he did not have the advantage of an
explanation of the reasoning which led his Lordship to conclude that he should
make no order. The Auditor then refers
to rule 26.2 of the Ordinary Cause Rules 1993 which form the First Schedule to
the Sheriff Courts (Scotland) Act 1907, as amended, and to rule
32.4 of the Rules of the Court of Session. Rule 26.2, as the Auditor observes, merely
gives directions as to the duties of the sheriff clerk when an interlocutor
remitting a cause to the Court of Session has been pronounced, and is of no
consequence for present purposes. As to rule 32.4(2), the Auditor states, "The
section relates solely to procedure in the Court of Session and clarifies the
status of a remitted cause." He
concludes:
"Neither of these sections overrides
the requirements of Regulations 8 and 12(a) of the General Regulations (supra). Accordingly, without sanction from the
Sheriff, the Auditor has no power to consider Senior Counsel's fees."
Submissions at the hearing
[29] At the hearing before me, the first
pursuer addressed me briefly in support of the approach of the Auditor. Counsel for the defenders accepted that the
defenders had had an opportunity to make a motion in the sheriff court to
sanction the employment of counsel, and that they had not made any such motion.
Counsel submitted, however, that the
Auditor had erred in holding that he had no power to consider senior counsel's
fees in the absence of sanction from the sheriff. Counsel founded on the second part of rule
32.4(2): "and the action shall proceed as if it had been an action in the court
initiated by a summons." It was implicit
in that provision that counsel could be instructed without the necessity of
seeking the sanction of the court. Any
procedure that predated the remit fell within the ambit of being treated as if
the action had always been in the Court of Session.
[30] Counsel also
discussed section 37(1)(b) of the Sheriff Courts (Scotland) Act 1971 which makes provision for
remits from the sheriff courts to the Court of Session. It provides:
"(1) In the case of any ordinary
cause brought in the sheriff court the sheriff -
[ . . . ]
(b) may, subject to section 7 of the
Sheriff Courts (Scotland) Act 1907 [which is irrelevant in this case], on the
motion of any of the parties to the cause, if he is of the opinion that the
importance or difficulty of the cause make it appropriate to do so, remit the
cause to the Court of Session."
Counsel submitted that it might be said that the sanction of
the employment of counsel prior to the remit was implied in the interlocutor
remitting the cause, in view of the test of "importance or difficulty". It might be implicit that the sheriff
considered that the satisfaction of that test warranted the employment of
counsel.
Decision
[31] In my opinion the Auditor has fallen into
error by failing to observe the provisions of rule 32.4(2) of the Rules of
Court and instead attaching significance to the terms of regulation 12(a) of
the General Regulations in Schedule 1 to the Act of Sederunt of 1993. Rule 32.4(2) makes it clear that once a
process has been transmitted from the sheriff court and a process has been
lodged under paragraph (1) of the rule, "the cause shall proceed as if it had
been an action in the court initiated by a summons." That provision is general in its terms. It must mean that when the procedure in the
cause reaches the stage of the taxation of an account of expenses, the taxation
is to be conducted on the footing that the action has been brought in the Court
of Session, and not in the sheriff court from which it has been transmitted.
Accordingly, since the cause is to be regarded as a Court of Session action,
sheriff court rules as to the allowance of counsel's fees and fees for the
instruction of counsel cannot be applied. I respectfully agree with Lord Dawson's view
that in a cause remitted from the sheriff court, a motion in the Court of
Session to sanction the employment of senior counsel in the sheriff court prior
to the remit is unnecessary.
[32] I shall
therefore sustain the defenders' objection in their note of objections no 44 of
process to the Auditor's report no 41 of process and remit the defenders'
account of expenses no 40 of process to the Auditor for reconsideration of the
entries relative to senior counsel's fees and fees for the instruction of
senior counsel in the sheriff court.
Defenders' alternative motion
[33] Counsel for the defenders made an
alternative motion in the event that I did not accept his primary submission. He moved that if I reached the view that
sanction of the employment of counsel was necessary, I should myself now
sanction the employment of counsel in the sheriff court. He submitted that such a course was competent
at this stage, and discussed Reid v The
Northern Isles District Committee of the County Council of Orkney 1912 SC
627 and Baird v Scottish Motor Traction Co Ltd 1949 SC 526. Counsel also referred to McKercher v McQuarrie
(1887) 14 R 1038. He further
submitted that that course should be followed because, although there had been
an oversight in failing to move for sanction in the sheriff court, the terms of
rule 32.4(2) were sufficiently ambiguous to warrant the interpretation for
which counsel had contended, and it was no doubt that interpretation which had
persuaded Lord Dawson that a motion for sanction was unnecessary. As to the reasons why a motion for sanction
should be granted, counsel referred to the serious effect of the pre-service arrestments; the size of the sum sued for; the gravity of
the allegations of breach of contract and professional negligence brought
against the defenders, who were a prominent firm of Glasgow solicitors; and the
difficulty in understanding the averments in the initial writ.
[34] The first
pursuer submitted that I should refuse the defenders' alternative motion for
sanction. He argued that the reasons
advanced for granting sanction were insufficient. In my opinion, however, those reasons are
sound. I also note that the sheriff
remitted the cause to this Court on the motion of the pursuers, and that that
motion can only have been made on the statutory ground that the importance or
difficulty of the cause made a remit appropriate. In this case it is not rational for the first
pursuer, having contended in the sheriff court that that test was satisfied, to
assert now that the employment of counsel by the defenders in the sheriff court
should not be sanctioned. In the highly
exceptional circumstances of this action I would have been prepared not only to
entertain the defenders' alternative motion as competent in the Outer House but
also to certify the cause as suitable for the employment of senior counsel in
the sheriff court. In reaching that view
I would have taken into account, first, that the failure to move for sanction
in the sheriff court was due to the inadvertence of the defenders' agents and
not of the defenders themselves, and that in this very unusual case it was not
in the interests of justice that the defenders should be disadvantaged by their
agents' failure. Secondly, the grounds
for the motion are many and sound while the grounds of opposition are wholly
devoid of merit. It is, in my view,
obvious that the reasons advanced for granting sanction amply justify the
instruction of senior counsel in the sheriff court.
Result
[35] In the result, however, I shall repel the
objections stated in the first pursuer's note of objections no 43 of process to
the Auditor's reports nos 41 and 42 of process;
sustain the defenders' objection in their note of objections no 44 of process
to the Auditor's report no 41 of process; and remit the defenders' account of
expenses no 40 of process to the Auditor for reconsideration of the entries
relative to senior counsel's fees and fees for the instruction of senior
counsel in the sheriff court in the light of the observations in this
Opinion. I shall reserve all questions
of expenses.
