EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Menzies Lord Bracadale Lady Cosgrove	[2012] CSIH 85 XA59/01 OPINION OF THE COURT delivered by LORD MENZIES in Reclaiming Motion in the cause TODS MURRAY LLP Pursuers and Respondents: against ARAKIN LIMITED Defenders and Reclaimers: _______________

Act: Duncan, Ms Watts; Simpson & Marwick

Alt: Mr McNamara (Party)

14 November 2012

[1] The pursuers are a firm of solicitors. Between about 1986 and 1996 they carried out legal services on behalf of the defenders in respect of certain disputes in which the defenders were involved. In this action they sue for payment of professional fees and outlays. After amendment, the principal sum concluded for is £86,376.40. By interlocutor dated 14 February 2012 the Lord Ordinary granted decree for this sum in favour of the pursuers. The defenders have reclaimed against this interlocutor.

[2] It is appropriate to give an abbreviated summary of the history of this action, which was described in April 2006 as "long and complicated". The summons was signetted on 27 May 1996. There followed protracted proceedings which included the remit of the pursuers' accounts to the Auditor to tax and report, and the receipt of notes of objections from the pursuers and the defenders. In March 2000 the defenders' agents intimated to the court that they no longer acted on behalf of the defenders. In May 2000 Mr Andrew McNamara and Mr Martin Frost sought to be sisted as minuters to the action. On 9 May 2000 their motion was refused as incompetent. They reclaimed against this interlocutor, but on 10 April 2001 their motion for review was refused by the Inner House. Thereafter, on the basis of two assignations by the defenders to Mr McNamara and Mr Frost of the defenders' outstanding claims (past, current and future) against several law firms and individuals, including the pursuers, and of the defenders' outstanding liability and obligations (past and current) to two law firms, one of which was the pursuers, on 29 May 2001 Mr McNamara and Mr Frost were sisted as parties to the action in room and in place of Arakin Limited. Mr Frost is no longer a party; since 2001 Mr McNamara has represented himself in these proceedings.

[3] On 6 March 2002 a hearing was allowed to determine the validity or otherwise of certain allegations made by Mr McNamara and Mr Frost about certain documents which had been lodged in the court process. That hearing took place before Lady Smith over several days in May 2002, December 2002 and August 2003. By interlocutor dated 22 January 2004 Lady Smith found that the allegations were not well founded. Mr McNamara and Mr Frost sought to reclaim against this interlocutor, but on 21 April 2004 the Inner House dismissed the motion as incompetent.

[4] Over several days during the period between June and November 2004 Lord Mackay of Drumadoon heard the parties on their respective notes of objections to the Auditor's reports. Having issued his Opinion on these objections ([2006] CSOH 64), by interlocutor dated 8 June 2006 he repelled certain objections and sustained others. The pursuers reclaimed against his decision to repel one of their objections and to sustain two of the defenders' objections, and by interlocutor dated 21 March 2007 the Inner House allowed the pursuers' reclaiming motion. (See 2007 CSIH 19).

[5] The Auditor having reported, Lord Mackay of Drumadoon determined the remaining issues raised by the parties' notes of objections on 2 October 2008. Over a period of eight days in December 2009 Lord Woolman heard arguments for the parties at procedure roll debate. On 9 July 2010 he sustained the pursuers' first, second and third pleas-in-law, repelled the defenders' pleas and dismissed the counterclaim. He set out the submissions which were made to him, and his decisions on the issues raised, in his Opinion of even date, [2010] CSOH 90. It is worth noting that the Lord Ordinary rejected the defenders' submission that the taxed accounts do not supersede the individual fee notes. He also held that the defenders could not re-open the taxation. He described the defenders' argument based on the absence of VAT invoices as being the principal argument relied upon by them, and he rejected it. In dismissing the defenders' counterclaim, he referred to the observation of Lord Justice Clerk Gill in Clarke v Fennoscandia Limited (No 3) 2005 SLT 511, at paragraph 17, that an abuse of process may occur if a case "wastefully occupied the time and resources of the court in a claim that was obviously without merit". He was of the view that the defenders' counterclaim clearly fitted that description. He concluded by stating, at paragraph [144] that "The proof before answer will be restricted to the sole issue of the sums paid by the defenders in respect of the taxed accounts and whether any sum is due by them to the pursuers", and at paragraph [145] he stated

"It follows that in the principal action, I shall sustain the pursuers' first, second and third pleas-in-law and delete all the defenders' averments and pleas which are not directed to the issue which I have outlined above relating to the sums paid by the defenders."

[6] The defenders reclaimed against Lord Woolman's interlocutor. On 3 March 2011 the Inner House refused the defenders and reclaimers' motion for review. In July 2011 Lord Woolman heard a proof before answer restricted to the sole issue identified in paragraph [144] of his earlier Opinion. On 14 February 2012 he issued his Opinion on this issue ([2012] CSOH 26) and by interlocutor of the same date decerned against the defenders for payment to the pursuers of the sum sued for. At paragraph [17] of his Opinion he made the following observation:

"I found it very difficult to discern the defence to the action. It became evident that Mr McNamara wished to revisit many points which had already been decided. In particular, he wished to re-open the taxations and to scrutinise the original invoices rendered by the pursuers. He did not appear to accept my ruling that the taxations superseded the individual fee notes and invoices."

[7] At the hearing of the reclaiming motion Mr McNamara appeared on his own behalf. Prior to the hearing he had helpfully lodged amended grounds of appeal extending to ten pages (No 437 of process), a note of argument extending to 29 pages (No 443 of process) together with an addendum extending to six pages (No 444 of process). On the second day of the reclaiming motion he lodged a further document extending to nine pages raising additional points. We have considered all of the material presented by Mr McNamara in his written submissions and in his oral submissions at the Bar. However, we have not found it easy to understand the arguments which he sought to advance. There were four broad lines of argument advanced in the note of argument for the defenders and reclaimers, which may be summarised briefly as follows:

1. What are the pursuers entitled to be paid, having regard to the allegation that the action was raised "in breach of the rules and guidelines" and amounted to an abuse of process.

2. The doctrine of settled accounts.

3. The absence of VAT invoices

4. Wrongful diligence, and the Lord Ordinary's refusal to allow an amendment after conclusion of the evidence to introduce a counterclaim for wrongful diligence.

[8] These arguments were developed at some length in the defenders' note of argument and addendum thereto. It is not necessary to recite these written arguments here. In his oral submissions to us Mr McNamara developed these arguments, albeit with a rather different emphasis. He indicated that he accepted the taxed accounts, apart from the issue of uplift. He maintained that the Auditor was misled by the pursuers at taxation, and that there was no justification for any additional fee uplift (or in any event that any such uplift should be significantly less than the figure allowed at taxation). Mr McNamara sought to justify his position by reference to the views expressed by Mr Miller of Rand Associates, despite the views expressed by Lord Woolman at paragraphs [100] to [109] of his Opinion dated 9 July 2010 to the effect that Mr Miller cannot be treated as a skilled witness, that his Opinion was upheld by the Inner House, and that Mr Miller was not called to give evidence at the proof before answer. On the question of the doctrine of settled accounts, Mr McNamara referred us to the submission of counsel for the pursuers at the proof (appendix 9, part 1, pages 31-33), and to paragraph [40] of the Opinion of Lord Mackay of Drumadoon dated 28 April 2006. He also drew our attention to the evidence of Mr Dobie in cross-examination (appendix volume 6 at page 203) in which the witness indicated that at the outset the pursuers were charging their normal hourly rate. Mr McNamara suggested to us that the question was whether the pursuers should be paid at all, and if so, should they receive a 60% uplift.

[9] Mr McNamara maintained his argument on the VAT issue to the effect that the defenders have suffered loss as a result of the pursuer's failure to provide invoices including VAT, which he submitted was inequitable and unjust. He suggested that the pursuers were being rewarded for not complying with their statutory obligations. He also maintained an argument that the pursuers were not entitled to recover the full amount of counsel's fees which he argued had been increased because of work which counsel had carried out in relation to issues of quantum, despite the pursuers having been instructed that they should not involve themselves in issues of quantum. He submitted that counsel's fees should be restricted to £5,000 by way of preparation. Finally, Mr McNamara maintained the fourth argument for the defenders and reclaimers to the effect that the pursuers' use of diligence on the dependence of the action was wrongful, and that the Lord Ordinary's decision to refuse amendment to allow a counterclaim following the conclusion of the evidence in the proof was unreasonable.

[10] Not all of these submissions were reflected in the nine page written note provided to us on the second day of the summar roll hearing. Again, it is unnecessary to repeat these in full, but Mr McNamara's final position appears to be contained in the four paragraphs (a) - (d) at pages 8-9 of that note. Briefly summarised, these are as follows:-

(a) Any uplift in fees should have been at most £15,753.22, rather than the sum of £61,059.33 which was granted. The decree should be reduced by the difference, together with the appropriate VAT thereon.

(b) The sum for which decree was pronounced should be further reduced to take account of the loss accrued to the defenders because of the pursuers' failure to render VAT invoices timeously

(c) That part of the taxed accounts which related to counsel's fees should be restricted to £5,000 preparation plus the first day of proof.

(d) The defenders were not liable to pay the 60% uplift for process 36 as there was no extant court process at the time.

[11] For the pursuers and respondents Mr Duncan moved us to adhere to the interlocutor of the Lord Ordinary, to refuse the reclaiming motion, and to remit to the Lord Ordinary to proceed as accords. He adopted the terms of his final note of argument (No 445 of process) which fell to be read together with the written submissions for the pursuers in the proof before answer (at pages 222 to 264 of vol III of the appendix to the reclaiming print).

[12] Mr Duncan drew our attention to allegations made by Mr McNamara before us, which Mr Duncan described as unfounded, reckless and unsubstantiated. Mr McNamara had a history of making such allegations throughout this litigation; counsel referred us to Lord Advocate v Andrew McNamara 2009 SCLR 551, to paragraphs [118] to [120] of the Lord Ordinary's Opinion dated 9 July 2010, and to paragraphs [12], [15], [19] and [20] of the Lord Ordinary's Opinion dated 14 February 2012. Counsel gave several examples of similar reckless and unsubstantiated allegations made by Mr McNamara in the course of the summar roll hearing before us. This was conduct which counsel submitted was relevant when considering the exercise by the Lord Ordinary to refuse to allow the minute of amendment for the defenders and reclaimers tendered at the Bar after counsel for the pursuers had finished his oral argument.

[13] Counsel submitted that there could be no question of challenge at this stage to the Lord Ordinary's decision dated 9 July 2010 which set out the scope of the proof and dealt with several arguments advanced on behalf of the defenders. Moreover, there can be no question of challenge to the various interlocutors of the Inner House to which reference has already been made. Issues such as might have been raised in notes of objection to the taxed accounts, such as uplift in the pursuers' fees or the level of counsel's fees, could not be revisited now. There was no real challenge by the defenders and reclaimers to the starting figures for the exercise which required to be conducted by the Lord Ordinary, namely the total of the taxed accounts together with the uplift, as shown in paragraph [9] of the Lord Ordinary's Opinion dated 14 February 2012. Nor was there any significant dispute between the parties as to the amount which the defenders have paid to the pursuers towards this sum; Mr Quinn put this at £315,083.19 (appendix vol III, page 46), and Mr McNamara stated in his closing submissions to the Lord Ordinary (appendix vol IX, Part 2, page 6) that the defenders had paid £314,000. There is a suggestion in the arguments advanced for the defenders that they have moved away from this position and have in fact over paid the pursuers, but there was nothing to support such an argument. It is not accepted by the pursuers, and a close examination of Mr Dobie's evidence shows that it is without foundation and there has never been any overpayment.

[14] Counsel submitted that Mr McNamara's submissions on the doctrine of settled accounts were entirely misconceived. Counsel addressed the effects of this doctrine in detail in his final note of argument, and also referred to the written submissions for the pursuers at proof (appendix vol III, pages 239/240) and to the statement on behalf of the pursuers set out in paragraph [40] of Lord Mackay of Drumadoon's Opinion dated 28 April 2006. He submitted that the doctrine had no application after taxation has been completed. Mr McNamara was unable to point to any authority to support his position; the Lord Ordinary dealt with this correctly and succinctly in paragraph [17] of his Opinion.

[15] The defenders cannot now competently challenge the additional fee uplift. This issue has already been foreclosed by the decision of the Second Division dated 21 March 2007. Moreover, this was an issue which could and should have been the subject of a note of objection when the Auditor allowed the uplift in 2008. There was no such note of objection. (For completeness, it should be noted that Mr McNamara made submissions to the Auditor about the effect of the doctrine of settled accounts on the pursuers' fees in their account No 6 of process in March 1998; there was no suggestion that the doctrine prevented an uplift in fees.)

[16] With regard to counsel's fees, not only is the point no longer open to the defenders to argue, there is no substance to it in any event. Mr McNamara alleged that Lord Mackay of Drumadoon had allowed this issue to go to proof before answer. However, the operative decision with regard to the scope of the proof was that of Lord Woolman of 9 July 2010, which was upheld by the Inner House. In any event, Lord Mackay of Drumadoon did not allow this matter to go to proof. He observed (at the end of paragraph [190] of his Opinion, at page 204 of the reclaiming print) that "It is for the defenders to decide whether they wish to pursue these allegations by seeking to amend their defences to the action." There was nothing in the defences on which this argument could be founded.

[17] Similar considerations applied to the defenders' arguments that they have suffered loss as a result of the pursuers not providing them with VAT invoices. Not only is this a matter which was decided by Lord Woolman in his Opinion dated 9 July 2010, and upheld by the Inner House thereafter, there was in any event no material to support the suggestion that the defenders have suffered any loss in this regard. Mr McNamara was cross-examined on this issue (appendix VIII, page 106), but no VAT returns were placed in evidence before the court, nor was there any evidence of loss in this regard. Mr Stephen Clark gave no assistance to the defenders on this matter in his evidence (see appendix vol VII at pages 41/42). In any event, the Lord Ordinary did not accept Mr Clark's evidence, and accepted that of Mr Dobie and Mr Simpson. He dealt with the issue relating to VAT correctly at paragraph [18] of his Opinion.

Discussion

[18] Throughout the course of this protracted litigation Mr McNamara has sought to revisit arguments and allegations which have not found favour with the court on previous occasions. It must be clearly understood that it is not open to him to seek to present arguments to this court which could and should have been raised at taxation but which were not, or which have been determined in favour of the pursuers by this court. He has already sought review of the interlocutors of various Lords Ordinary. As the abbreviated history which we have narrated above discloses, the Inner House has considered reclaiming motions in April 2001, April 2004, March 2007 and March 2011. It is not open to us to revisit or reverse those decisions.

[19] The scope of the proof before answer before Lord Woolman in July 2011 was restricted, the Inner House having refused the defenders' motion for review of the interlocutor of 9 July 2010. Mr McNamara's position before us appeared to ignore this restriction, but we are in no doubt that it cannot properly be ignored. Many of the issues which Mr McNamara has sought to argue before us cannot be argued competently before us now.

[20] The defenders' argument about the absence of VAT invoices is an example of this. This argument was maintained before the Lord Ordinary at procedure roll debate, and was described in his Opinion dated 9 July 2010 as being "the principal argument relied upon by the defenders". He dealt with this at paragraphs [56] to [63] of his Opinion of that date, and rejected the defenders' argument on this point. The defenders reclaimed against this decision, and their reclaiming motion was unsuccessful. Notwithstanding this, Mr McNamara continued to maintain the argument at the proof before answer in July 2011. The Lord Ordinary dealt with it at paragraph [18] of his Opinion dated 14 February 2012. Even if it were competent for Mr McNamara to argue this point before us, nothing in his arguments persuade us that the Lord Ordinary erred in his disposal of this issue. There was, in any event, no evidence led on behalf of the defenders that they had sustained any loss as a result of the non-provision of VAT invoices. We do not consider that there is any force in the defenders' argument about the absence of VAT invoices.

[21] We regard the arguments advanced on behalf of the defenders and reclaimers on the basis of the doctrine of settled accounts as being wholly misconceived, for the reasons advanced on behalf of the pursuers and respondents. As observed by the Lord Ordinary at paragraph [17] of his Opinion dated 14 February 2012, Mr McNamara wished to re-open the taxations and to scrutinise the original invoices rendered by the pursuers. He did not appear to accept the Lord Ordinary's earlier ruling that the taxations superseded the individual fee notes and invoices. That ruling was upheld by the Inner House. It is not something that may be revisited now. In any event, we regard Mr Duncan's submissions on this point as being consistent with authority, and well-founded. There is nothing in the doctrine of settled accounts which supports the defenders' position.

[22] We also regard Mr McNamara's challenge to the uplift in the pursuers' fees as incompetent. This matter has already been determined by the Second Division, and is not open for redetermination by us. Moreover, it is a matter which ought properly to have been the subject of a note of objection when the Auditor allowed the uplift. There was no such note of objection. The defenders cannot avoid the provisions for objections to a report from the Auditor by making objections to this court now.

[23] There is no substance to the criticism by Mr McNamara that this action was raised "in breach of the rules and guidelines" and amounting to an abuse of process. The pursuers are a firm of solicitors who performed professional services for the defenders. They are entitled to be paid for those services. If the amount paid by the defenders falls short of the amount to which the pursuers are properly entitled, the pursuers may raise an action seeking payment of the balance. The defenders are entitled to defend the action, and to put the pursuers to their proof. However, nothing in the written arguments or oral submissions for the defenders persuades us that there has been any abuse of process on the part of the pursuers in the raising of the present action.

[24] Finally, nothing presented to us by Mr McNamara persuaded us that the Lord Ordinary erred in the exercise of his discretion when he refused to allow the defenders' minute of amendment presented at the Bar after counsel for the pursuers has concluded his oral submissions at the proof before answer. The Lord Ordinary gave his reasons for refusing to allow the minute at paragraph [15] of his Opinion. He observed as follows:

"I refused to allow the Minute. I did so having regard to the interests of justice and in particular (i) the stage at which the Minute was tendered; and (ii) the fact that the allegations appeared unfounded; and (iii) Mr McNamara's history of making such allegations."

[25] In his Opinion dated 9 July 2010 the Lord Ordinary gave very full reasons for dismissing the counterclaim (see paragraphs [66] to [143] of his Opinion). He regarded the counterclaim as an abuse of process, as being unintelligible, and as representing the unsupported assertions of Mr McNamara. Thereafter the Inner House refused the defenders' motion for review of that interlocutor. The Lord Ordinary heard evidence over three days in July 2011, and heard submissions for the pursuers on 17 October 2011. Only at that time did Mr McNamara move for his minute of amendment and counterclaim to be received. The minute of amendment alleged fraudulent misrepresentation on the part of the pursuers, without any apparent foundation. The Lord Ordinary refused to allow the minute having regard

to the interests of justice; we cannot say that any of the particular considerations to which he referred were unfounded, or that he fell into any error of law when reaching his decision. The question of whether or not to allow the defenders' minute of amendment and counterclaim to be received at that stage was a matter for the discretion of the Lord Ordinary. We cannot say that he erred in the exercise of that discretion.

[26] In all the circumstances, there is nothing in the Lord Ordinary's Opinion dated 14 February 2012 which indicates that he has fallen into any error of law. We shall refuse the reclaiming motion, adhere to the Lord Ordinary's interlocutor, and remit to the Lord Ordinary to proceed as accords.