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OUTER HOUSE, COURT OF SESSION
[2008] CSOH 181
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CA91/04
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OPINION OF LORD DRUMMOND YOUNG
in the cause
LUJO PROPERTIES
LIMITED
Pursuers;
against
SCHUH LIMITED
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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Pursuers: Reid, QC; McClure Naismith
Defenders: Sandison;
Morton Fraser
23 December 2008
[1] The
pursuers are the proprietors of a property situated in Sauchiehall
Street, West Nile Street
and East Bath Lane, in Glasgow. The property consists of a building that is
let for use as shops and offices. The
defenders are the tenants of premises situated on the ground, first, second and
third floors of the property. Certain
other parts of the property are let to the Royal Bank of Scotland PLC. The leases in favour of both of those tenants
impose certain obligations relating to the maintenance and repair of the common
parts of the property; in particular, the tenant is obliged to contribute
towards the cost of any works on the common parts. From February 1999 onwards flooding
occurred intermittently in the basement of the building. It was discovered that this was the result of
cracking in the tanking that had been placed around the basement. As a result repair works were required. These were instructed by the pursuers, and
were duly carried out. Thereafter the
pursuers raised the present action against the defenders to recover a
proportion of the cost of the works of repair and associated professional
fees. The action was grounded on the
terms of the lease between the parties.
At the same time the pursuers raised a further action against the Royal Bank
of Scotland to
recover a proportion of the cost of the works of repair. That action was grounded on the terms of the
lease between the pursuers and the Royal Bank.
It was a matter of agreement that the two leases were in substantially
similar terms apart, obviously, from the parties, the subjects and the amount
of the rent and other sums due under the lease.
Consequently the pleadings were almost identical in each case. It was accepted by the pursuers that they
were bound to succeed or fail against both defenders, in respect of both merits
and quantum.
[2] Because
similar issues were involved in the two cases, their case management procedure
generally proceeded in tandem. The actions
were ultimately appointed to a proof before answer, the same diet being
assigned to both cases. The same counsel
acted for the pursuers in both actions but the present defenders and the Royal Bank
were separately represented. On the
third day of the proof a compromise was agreed in the action against the Royal
Bank. The Royal Bank made an offer to
pay a sum to the pursuers on the basis that no expenses would be due to or by
either party; that offer was accepted. I
was informed by counsel for the pursuers that in the agreement with the Royal
Bank a straightforward payment to the pursuers was agreed; in that payment no
sum was attributed to expenses either formally or informally. Shortly after that the defenders made an
offer to settle the present action, also on a no expenses basis. The defenders' offer was initially rejected,
but following further negotiations a figure was agreed and counsel entered into
a joint minute, to which authority was interponed by the court. The joint minute and the court's interlocutor
found the defenders liable to the pursuers in the expenses of the cause.
[3] Thereafter
the pursuers' account of expenses was remitted to taxation. In advance of the diet of taxation the
defenders lodged points of objection with the Auditor of Court, in which they
objected to numerous entries in the account which, they submitted, related to
the action against the Royal Bank as well as the present action. The defenders objected to the failure of the
pursuers to apportion those entries between the two actions, on the ground that
the two actions had run in tandem and much of the work in respect of the actions
was duplicated; the pursuers' account of expenses did not take account of the
duplication. At the diet of taxation the
pursuers advanced oral argument in response to the objection on the ground that
the action against the Royal Bank had been settled extrajudicially on the
ground that no expenses would be due to or by either party. As a result, they argued, there was no reason
for reducing the award of expenses in the present action, which would confer a
windfall benefit on the defenders.
[4] The
Auditor in large measure sustained the defenders' objection. In particular, a significant number of the
fees and their outlays included in the pursuers' account were reduced significantly,
in some cases by 50%, and the total sum included in the account was
reduced by more than 60%.
Thereafter the pursuers lodged a note of objections to the Auditor's
report in which they reiterated the arguments presented at the diet of
taxation. The Auditor then lodged a
minute in response to the note of objections.
In his minute the Auditor stated that the matter for the court's
determination is whether he was entitled, on the submissions at taxation, to
apply abatements of 50% to entries in the account of expenses. After summarizing the history of the action, he
stated that the pursuers' account of expenses was presented as if this action
were the only action arising out of the same question. No explanation had been given of the terms a
settlement between the pursuers and the Royal Bank. The Auditor continued:
"In the Auditor's
considerable experience, where an action settles on a no expenses due to or by
basis, it is most unusual for there to be no specific agreement to the level of
expenses agreed in the overall terms of settlement. This is particularly the case here where
three days of evidence were heard before the Commercial
Court and it is inconceivable that the settlement
with Royal Bank of Scotland
did not include a payment of expenses.
The position was never fully explained to the Auditor".
The Auditor also referred to the
Faculty Services fee notes, where certain fees were said to be apportionable
between the two actions, and to vouchers produced by an expert witness, which
referred to work undertaken with regard to both actions.
[5] A
hearing was fixed on the pursuers' note of objections to the Auditor's report,
at which counsel for both parties presented arguments. Counsel for the pursuers accepted that the
pursuers' solicitors should not be paid twice for the same work or reimbursed
twice for the same outlays. Consequently
any charge for work that involved mere duplication should be discounted. He further accepted, under reference to Rule
of Court 42.10(1), that only
such expenses as are reasonable for conducting the cause in a proper manner
should be allowed. He nevertheless
submitted that, where several actions are raised and the pursuer is successful
against one defender with a finding that he is entitled to expenses from that
defender, the pursuer is entitled to the whole of the reasonable expenses to
which he has been put in having to proceed against that defender. That rule applied to the present case. The Auditor was not, in the exercise of his
discretion, entitled to convert an agreed finding of liability for unrestricted
expenses of process into a qualified finding of liability for half of the
expenses of process. That, counsel
submitted, is what happened in the present case. In support of his argument counsel referred
to a number of cases; I discuss these below.
[6] Counsel
for the defenders submitted under reference to Wood v Miller, 1960
SC 86, that the grounds on which the court can interfere with a decision
of the Auditor are limited; they are confined to errors of law, or a lack of
factual material to support a decision, or unreasonableness. Counsel then referred to two cases, Keith v Smart, 1833, 11 S 530 (a case cited by the pursuers) and Magistrates of Campbelton v Galbreath, 1845, 7 D 828,
which he submitted were the only two cases directly in point in the present
action. On the basis of those cases, he
submitted that, when a pursuer raises a single action or concurrent actions
against more than one defender, and those actions involve the same issue (that
being crucial), and the pursuer incurs expenses in common in the preparation of
his case against each defender, those expenses are not properly chargeable
against one defender alone as expenses of the case against him.
[7] In
my opinion the Auditor's approach was correct.
The present action was one of two actions raised by the pursuers which
involved substantially identical issues, although they were brought against two
different defenders and the grounds of action were technically distinct in both
fact and law. The two actions proceeded
in tandem, and were appointed to the same diet of proof. The same counsel and the same expert
witnesses were employed by the pursuers in both actions. In these circumstances it is clear that there
would be a substantial duplication of effort. Against that background, the issue that arises
is the meaning of the unqualified finding of liability in expenses of the cause
that has been made against the defenders.
In my opinion the principle that applies in a case such as the present
is this: where expenses are incurred in proceedings against more than one
defender that are based on substantially the same grounds of action, those
expenses must normally be apportioned among the defenders, with a result that
each defender is only liable for a proportionate part. That in my opinion is the meaning of an
unqualified finding in expenses in such a case.
The principle applies in the normal case, but exceptional cases may
exist. For example, where one or more
actions are raised against two defenders for a single debt and the debt is
found to be the liability of one defender only, it may be appropriate to make
that defender liable for the whole expenses of process (Stewart v Robertson, 1852,
15 D 94). Likewise, where one or
more actions arise out of a single delict that is said to have been committed
by more than one defender but only one defender is found liable, liability for
the whole of the pursuer's expenses may be appropriate (Crawford v Adams, 1900,
3F. 296). Other exceptional cases
may exist, turning on their individual facts.
Nevertheless, the general rule is that expenses that are common to more
than one action brought on the same grounds must normally be apportioned. Consequently, when there is an unqualified
finding of expenses in one such action, that implies that the common expenses
will be apportioned, and only the due proportion will be payable by the
defender against whom the finding is made.
[8] The
general rule is in my opinion established by two cases, Keith v Smart, supra, and Magistrates of Campbelton v Galbreath, supra. In Keith
the pursuer raised three separate actions in connection with the sale of
certain bank stock, in each case concluding for reduction of the sale by the
particular defender. The question raised
in each action was whether the sale had been induced by fraudulent
misrepresentation or concealment on the part of the relevant defender as to the
solvency of the bank. Two of the actions
were compromised, with each party paying his own expenses. The third action went to jury trial, as a
result of which judgment was given against the defender with expenses. When the account of expenses was laid before
the auditor the defender objected that a large proportion of the charges for
preparation of the action had reference equally to all three defenders and that
they ought not to form a charge against the remaining defender alone. The pursuer contended that all of the
business charged was truly necessary for the action against the remaining
defender, and that that defender ought not to be relieved merely because the
work might have been useful as against the other two defenders. The Auditor reserved the point for
consideration of the court. The Second
Division held that business common to all three parties ought not be charged as
against one only, and remitted to the Auditor to tax and report on that
principle. The facts of that case and
the arguments advanced seem to me to be similar in all respects to the present
case. In Magistrates of Campbelton v Galbreath, a single action was raised against a number of
defenders. After some time certain of
the defenders consented to decree, and the pursuer took no finding of expenses
against them. The remaining defender
continued to resist the action but was unsuccessful. In disposing of the pursuer's claim for
expenses the court deducted one half as the sum of which the remaining defender
would have been relieved by his co-defenders had the pursuer not passed from
his claim for expenses against them.
Once again, this case appears to me to vouch the principle stated
above.
[9] Other
cases were cited by the pursuers, but they are all in my opinion consistent
with the general principle that I have followed; in each case special reasons
existed for not following the principle.
In Cowan v Campbell, 1833,
12 S 221; 1834, 12 S 359, the pursuer raised proceedings for wrongous
apprehension and imprisonment against four defenders. The jury found in favour of three defenders
but awarded damages of one shilling against the fourth. The pursuer was found entitled to expenses. The First Division, of consent, modified the
pursuer's account of expenses against that defender to one half in respect that
part of the record and proof adduced applied to the defenders who were assoilzied
and not to the defender against whom the pursuer succeeded. The defenders who were assoilzied maintained
distinct pleas, and at the trial additional proof was led against them. The case is thus distinguishable from the
present, in that the grounds of action were quite distinct. Nevertheless, nothing said in the case casts
any doubt on the principle stated above.
In Stewat v Robertson, supra, the pursuers brought an action against two defenders, a
father and son, as conjunctly and severally liable for a debt
of ฃ200. The Lord Ordinary
assoilzied the son and found him entitled to his expenses but found the father
liable for the debt. The Auditor
remitted to the court the question as to whether the expenses down to the date
of the Lord Ordinary's decision ought to be abated by one half as
applicable to the successful defender.
The Second Division was of opinion that no separate expense had been
incurred in the procedure against the son and refused to make any deduction
from the pursuers' account. The critical
point in this case is in my opinion that a single debt was involved, the
question being who was liable for that debt.
The present case, by contrast, involves two district liabilities.
[10] In
Elmsly v Duncan, 1857,
20 D 307, four actions of damages arising out of a single libel were
raised against the same defender, and were conducted by the same agents. The First Division held that only one charge
should be allowed in relation to attendances and the writing of letters, which
covered exactly the same matters in all four cases. The applicable principle is clearly that a
solicitor should not be paid more than once for the same item of work. In
Macleod v Heritors of Morvern, 1870,
8 M 528, a parish minister raised proceedings for augmentation in the
event of its being shown that there was free teind. He condescended on twelve subjects as
unvalued, those subjects belonging to four heritors. Answers were lodged for each of the
heritors. The Inner House held that all
of the subjects except one had been valued.
They found the pursuer entitled to his expenses, subject to
modification, against the proprietor of the unvalued subjects, and liable in
expenses to the three other heritors, whose subjects had already been
valued. Lord Cowan, who delivered
the opinion of the court, began his opinion by stating that it was not
necessary to lay down any general rule, but that the case might be dealt with
on its own circumstances. He continued:
"The minister
was bound to bring the parties into the field who, as he thought, had free
teind, and Mrs Campbell Paterson [the unsuccessful defender] has been
found wrong in her pleadings with him. I
see no reason, therefore, why the minister should not get the full expenses of
which Mrs. Paterson has been the sole cause".
The court did, however, modify the
expenses, reducing them by approximately 20%. I do think that any general principle can be
drawn from this case; it turned on its own facts and on the specialties of
teind procedure. In particular,
Lord Cowan notes that the minister was obliged to bring into the
proceedings those whom he thought to have free teind.
[11] In Crawford v Adams, supra,
the pursuer raised two actions against separate defenders in respect of certain
letters that were alleged to be defamatory; one defender, Adams, was the
individual who had instructed the letters and the other, Dunlop, was Adams'
law agent, who had written the letters on his instructions. The pursuer alleged that those letters
contained expressions which showed that Dunlop had adopted the statements as
his own. The two cases were heard
together in a single jury trial, at which the two defenders were represented by
the same counsel and agents; the jury found for the pursuer against Adams
but against the pursuer in the action against Dunlop. It was held by the Second Division that the
pursuer was entitled to the whole expenses incurred by him, including his own
expenses at the trial, against Adams, as these were expenses
to which the pursuer was put by having to proceed against Adams
and nothing more. Dunlop was awarded his
full expenses down to the trial and one half of the defenders' expenses at the
trial; that represented the outlays to which Dunlop had been put in the
action. The distinctive feature of the
case, however, was the fact that it involved a single delict which had been
instigated by Adams; both actions arose out of precisely the same
letters, which had been written on Adams'
instructions. The difference between the
two defenders was that the pursuer required to establish malice to succeed
against Dunlop (see the earlier report of the case at 2 F 987). In the circumstances it is entirely
understandable that Adams was held responsible for the
whole expenses of the trial, since it was necessitated by his actions. In the present case, by contrast, the grounds
of action against the two defenders, the present defenders and the Royal Bank,
are factually and legally distinct. I am
accordingly of opinion that Crawford
is readily distinguishable from the present case.
[12] Counsel for the pursuers further relied on the proposition that
the Auditor was not entitled to convert an agreed finding of liability for
unrestricted expenses into a qualified finding of liability for half of the
expenses of process. In support, he
cited the decision of Lord Guthrie in
O'Reilly v Turnbull, 1908,
16 SLT 519. So far as it goes, I am
of opinion that that proposition is quite correct. Nevertheless, the critical question in the
present case is the meaning of the expression "expenses of the cause" as used
in the interlocutor awarding expenses to the pursuers. In the circumstances of the present case I am
of opinion that that expression bears the meaning set out at paragraph [7]
above.
[13] Finally, I should mention a further point made by counsel for
the pursuers. He submitted that, if the
defenders were not found liable for the whole expenses of process, that would
amount to a windfall benefit to them. I
do not agree. If the defenders had been
the only party sued they would clearly had been liable for the whole of the
pursuers' expenses. That was not what
happened, however; an action was raised against another defender, and many of
the expenses were common to the two actions. The Auditor's decision does no more than take
account of that fact. The reason that
the pursuers will not recover the whole of their expenses is that in the
settlement reached with the Royal Bank they did not stipulate for a finding of
expenses. That was their decision, and
they must live with its consequences. By
contrast, the present defenders were not a party to that settlement and cannot
be held in any way responsible for its terms.
In the circumstances it seems to me that it would be unfair to make them
liable for the whole of the expenses that were common to both actions.
[14] For the foregoing reasons I am of opinion that the Auditor was
correct in the approach that he took. I
will accordingly repel the note of objections.
It was agreed by counsel that the expenses of the present hearing should
follow success. I will accordingly award
those expenses to the defenders.
