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Cite as: [1868] ScotLR 5_671, [1868] SLR 5_671

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SCOTTISH_SLR_Court_of_Session

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Court of Session Inner House Second Division.

Friday, July 10. 1868.

5 SLR 671

The Liquidators of the Western Bank

v.

Baird's Trustees.

Subject_1Accountant
Subject_2Remit.

Facts:

Circumstances in which the Court refused to interfere with or control the discretion of an accountant to whom a remit had been made to carry through certain investigations.

Headnote:

The pursuers of this case presented the following note to the Court:—

“In this action their Lordships of the Second Division, on July 10, 1866, pronounced an interlocutor, inter alia, making the following remit:—‘Before further answer as to the whole other pleas of the parties hinc inde, remit to Mr Charles Pearson, accountant in Edinburgh, to examine the books and relative documents of the Western Bank, and (1) to report the commencement, progress, and final termination of each of the accounts mentioned in the Schedule A, appended to the record; what securities, if any, the bank held at any time for the advances made on the said accounts; what was the balance, if any at the debit of each of the said accounts, as at the 23d June 1852; what payments were after that date received to the credit of each of the said accounts, and (so far as the books show) from what sources these payments were received by the bank, or made by the customers, debtors in the said accounts, or any persons on their behalf; and further, what was the lowest balance at the debit of each of the said accounts at any time after June 23d, 1852; and whether after said date the balances were ever shifted, and to what extent, to the credit side of any of the said accounts; (2) to report what was the amount of bills which had been discounted to each of the firms mentioned in the 35th article of the condescendence, and were unretired at the 24th June 1846; to prepare and report a descriptive list of the bills discounted to each of the said firms between 24th June 1846 and 23d June 1852, showing whether, when, and how, these bills were retired at or after maturity, what bills discounted to each of the said firms were unretired at 23d June 1852, and whether, when, and how, the said last-mentioned bills were retired; (3) to report what policies (if any) the bank held on the lives of debtors to the bank at or prior to 1846; what policies on lives of the bank's debtors were subsequently opened by the bank; what were the premiums payable, and paid, on each of said policies; and what was the ultimate result of each of such insurances: Further, authorize the accountant to report any other matter appearing in the books of the bank fairly falling within the general scope of this remit which either party may request him to report.’

On June 4, 1867, the foregoing interlocutor was affirmed, on appeal, by the House of Lords.

On June 12, 1867, the remit was intimated to the accountant; and the pursuers thereafter furnished to the accountant prints from the bank's books of the accounts embraced in the first branch of the remit, and full notes on these accounts.

The liquidators of the Western Bank represent upwards of 700 shareholders of the bank, who are deeply interested in the result of this action, and in having the liquidation wound up without any delay which can be avoided. Many of these shareholders having recently applied to the liquidators in regard to the present position of the case, a note was, on June 3, 1868, submitted to the accountant by the pursuers, requesting information as to the progress hitherto made with the remit, and the probable time within which it would be brought to a close. To this note, the accountant replied by minute of date June 4, 1868, stating that the first head of the remit had been all but completed,
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and also the third head of the remit; but that the second head had scarcely been touched upon.

On June 16, 1868, a further note was submitted to the accountant by the pursuers, requesting him to furnish the parties in the meantime with the results at which he had arrived in regard to the first head of the remit, and suggesting that he should require them to furnish him with information and statements in regard to the remaining heads, in order to facilitate, and, in so far as practicable, limit the very extensive inquiry which these involved.

On June 22, 1868, the accountant issued a reply to this note, substantially declining both of the pursuers’ proposals.

In these circumstances the pursuers have no alternative but to make the present application to your Lordship.

From the accountant's notes, it will be observed that he declines to communicate any notes, or any part of his report, to the parties until the whole report is completed. This appears to the pursuers to be very unsatisfactory. The accountant must be proceeding on principles which will guide him throughout the remaining branches of the remit, and should these principles be erroneous, great labour and expense, and much time, may be thrown away.

The pursuers are anxious, in order to facilitate the execution of the remit, to give the accountant further assistance and notes on the remaining branches. But, in the absence of any information whatever from the accountant as to the principle on which he has proceeded in dealing with branch first, they are unable to judge how far such additional information or notes would be of any service to him, and whether, in preparing their additional notes and information, they should adopt the same plan as that already followed in regard to branch first, or not.

The second head of the remit is the most difficult and extensive. It involves an inquiry into details of a voluminous character, and if the accountant proceeds with it unaided, and without taking steps to limit the range of his investigations by obtaining statements and admissions from the parties, the pursuers are satisfied that, looking to the rate of progress which has hitherto been made, and the fact that the accountant is unable to give any idea of the time within which his labours will be completed, the delay may be so great as, in the circumstances, to amount to a denial of justice.

If the accountant would communicate to the parties the results at which he has arrived in regard to the first head of the remit, they would have no difficulty—from the lengthened investigations they have already made through their respective accountants into the whole books and papers of the bank, and their consequent acquaintance therewith—in furnishing to the accountant, if ordered by him to do so, information in regard to the remaining heads of the remit, which would greatly diminish the time and labour which would otherwise require to be expended on them.

The pursuers therefore humbly crave your Lordship to move the Court (1) to direct the accountant to communicate to the parties notes in regard to the first head of the remit as soon as these are completed; (2) to direct the accountant to require the aid of the parties in dealing with the parts of the remit not yet completed; and to limit his investigations to these points in regard to which, on the statements and admissions of the parties, they appear to be at issue; (3) to conjoin another accountant with Mr Pearson in the execution of the remit; or (4) to take such other and further steps as may appear expedient to the Court with a view to obviating all unnecessary delay in obtaining a final report under the remit.”

Solicitor-General (Millar), Shand, and Asher, in support of the note.

Dean of Faculty (Moncreiff), Young, Gifford, and Lee, for defenders.

At advising—

Judgment:

Lord Cowan—were it not for the long discussion we have had from the bar in support of this note, i certainly would have contented myself with simply saying that it ought to be refused in all its parts; but so much has been said, and so many propositions have been advanced on the one side, and on the other also, that i think i should express the views i entertain in reference to some of those matters. the appointment of an accountant in this case was a matter of very deliberate, careful, anxious consideration by the court after lengthened pleadings at the bar. having made up our minds that the accounts should be laid before us in a proper shape, we were anxious to have the aid of the most distinguished accountant we could find who was not concerned with either of the parties in the management of the case. there were accountants of the greatest eminence whose services were secured on the part of the pursuers, and there were also accountants of the greatest eminence secured on the part of the defenders. therefore, no doubt our selection was narrowed to a certain degree. i am not sure whether it was not on the suggestion of the parties that mr pearson was appointed; if he was not suggested by the parties, he was at all events the nominee of the court; because, not having been concerned on either side of this great question, we considered him the most able, the most experienced, the most honourable man in his profession to whom we could make the remit. having said so much as to the nominee, let me say this, that i am by no means satisfied that there is any incompetency in a party coming forward and asking for directions to the accountant, even though the accountant may not have made an interim report. it is true that that usually follows on an interim report, or on some matter which the accountant has brought before us for our consideration; but the court may, when they see ground for doing so, interfere even at such a stage of the case as this, and ask explanations from the accountant as to how the case is going on, and whether he is taking the necessary steps to expedite the case. but, my lord, important grounds must be stated to justify the interference of the court. if there has been undue delay, an application might be made to the court to expedite the investigation. if there has been any improper acting on the part of the accountant, evidently showing a spirit of bias towards one party or the other, the court will require explanations of it. but what have we here? as regards delay in the execution of the important duty remitted to mr pearson i firmly believe that no man in the profession—no man of eminence in the profession—could have expedited the case, looking at the dates before us, better than mr pearson has done; and we have had no complaints of his conduct in that matter even from the bar. then, in regard to his acting in the matter, where is there any trace or insinuation of his not acting fairly in carrying out

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the remit? there is not a trace or insinuation of the kind. as to the statement that he has not called parties, we ought to have it alleged that they had made application to be heard; and that he had refused. what is it that we have? we have an application to direct the accountant to communicate to the parties notes in regard to the first head of the remit, as soon as these are completed; and second, to direct the accountant to require the aid of the parties in dealing with the parts of the remit not yet completed, and to limit his investigations to those points in regard to which, on the statements and admissions of the parties, they appear to be at issue. these are the two important matters. now, let me just say that it would be derogatory to the profession of accountants, and of mr pearson, whom we have selected, to hold that he is not well acquainted with his duty as an accountant. when any difficulty occurs in the principle of accounting, that may lead to different results; when anything of that kind occurs, mr pearson may issue an interim report and ask directions if he pleases. if he finds it necessary he will make an interim report, and act according to the well-known duty of a reporter to whom the court intrusts a matter of this kind. but has he refused to take the aid of the parties? has he not taken all the documents which the solicitor-general referred to? has he not taken all the papers as to the bills? i do not see that it is alleged or stated that he has not. he will take them, if he requires them, when he enters on that part of the report. we are actually asked to direct him to communicate notes in regard to the first head of the remit. i could quite understand the application had it been directed to this, that the matters of the remit to the accountant, the first and second head, were so separable from each other; but that is not the nature of this application. on the contrary, it implies that the whole of the report ought to be prepared just as the accountant proposes to do before it shall be laid before the court, and i can understand that there are more satisfactory grounds on which that resolution has been come to by the accountant. it is plain, from the statement of the solicitor-general, that the same principle pervades the whole of these accounts, and mr shand referred to the matter of bills, which forms a part of the second head of the remit, as running into the first part or accounts current. thus one principle pervades the whole, according to their own statement of it, and therefore the accountant is perfectly right in saying that he will not make a report to the court till he has completed his investigations, and can lay it all before us, so that he shall then communicate his final views in the shape of a report, leaving it to the parties to object if it is not in accordance with their views. now, that being the nature of the case, are we not to trust the accountant that he is acting to the best of his ability, and to the best of his capacities, in completing this report. he is proceeding as fast as he can consistently with the due execution of his duty. it is said the first part of his report is ready, and that the second part is not begun, but he says he will get on with it as fast as he can. the pursuers say they must have an opportunity of seeing the draft of the first part of the report in order to influence him in his proceedings under the remit. but are his labours in completing his final report to the court under the second branch to be interrupted by pleadings, objections, and replies, calling for new investigation under the first branch, and thereby causing infinite delay? i never was clearer on any point than that to grant such an application as this would interfere with the labours of the accountant to whom we have remitted this matter, and would not only be unprecedented, but would be most unsatisfactory in the circumstances.

Lord Benholme—This is certainly a very grave and interesting case, and I am not sorry that we have had the assistance of the parlies on both sides to the fullest extent. But I confess that after all I have heard I have arrived at the same conclusion as Lord Cowan. I think it is very possible that in the execution of so important and enlarged investigations as this, consisting of so many ditferent heads, an accountant may mistake the principles upon which he is to go with reference to one or other of them. On the other hand, we ought to trust the accountant to whom we have committed this labour, that he will come to us in one shape or another, and at the proper time, to ask our assistance or direction if he is at a loss. I have that confidence in Mr Pearson's character that I think he will do so, and that if there be any question of law which will influence the course of his investigations upon which he has any doubt, or which the parties suggest to him as being important, he will take our direction upon it, in order to save future trouble and expense; but I have that confidence in him that I would leave it to him to ask our advice. He may do that in several ways, and he may do it in any way he thinks proper. He may ask it at the close of the first part of his investigation if the parties suggest to him that any advantage is to be gained by doing so. But I am not for interfering in the way that is here proposed, “ to direct the accountant to communicate to the parties notes in regard to the first head of the remit, as soon as these are completed.” If Mr Pearson thinks it proper and expedient he will communicate the first part of his report to them, or he will make an interim report to the Court; but I am not for interfering with him in the course of his very difficult task. As to appointing another accountant to help him in the execution of the remit, it really appears to me to be almost an insult or an imputation against Mr Pearson, and I think the objection stated by Mr Young is invincible, because if the one accountant were to take a different view from the other, it would lead us into inextricable confusion. I would rather run the risk of an erroneous view being taken by one accountant, and having that ultimately corrected, than have two accountants differing in their views and probably requiring the interposition of the court, or the appointment of a third accountant, to decide between them. I am entirely of Lord Cowan's opinion, that this note ought to be refused.

Lord Neaves—I concur without any difficulty. I am far from wishing to discourage the recognition on our part of a complete control over any officer of Court employed by us, whether recommended by the parties, or concurred in by them, or selected by ourselves. It is open to come to us with any complaint, or to facilitate the despatch of business; but I must say I see very little ground for coming to us here, and I think the application is rather a singular one in the circumstances. This case went to Mr Pearson in June 1867, and he summoned the parties to meet him, and at that meeting he took the very judicious step of allowing

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them to state in writing their views with regard to the mode in which the remit should be conducted. The parties did so; the pursuers lodged a statement of their views, accompanied with a number of documents; and the defenders lodged a statement, in answer, of their views of the mode in which the remit should be conducted; and on 30th October 1867, the accountant having considered these papers, pronounced a deliverance stating that having given them an opportunity of lodging these papers, he would now proceed to the discharge of his duty. As I understand, from that date till June 1868, no further application whatever was made to the accountant. He is allowed to go on, and he proceeds with great diligence as far as I can see; but in June 1868, when he is nearly done with the first branch, a paper is presented to him, asking what he has done, and what he has to do; and his replies not being satisfactory to the pursuers, they come to us upon some point of law, apparently, which was disclosed in the papers lodged in October, sufficiently to raise the issue as much as it has been raised now, for there has been no discussion on it since, and that point of law was equally involved in the investigation which is now closed as in the investigation about to proceed. Well, that is not very reasonable. It was competent for the pursuers, when they saw the answers lodged, to say to the accountant that a very important difference arose as to the range of the documents, and that he should either report it to the Court, or hear the parties upon it, as being a matter in law for his guidance; but nothing of that kind was done, and Mr Pearson was allowed to go on. As to the documents lodged before him, they can only be of assistance in this way, that so far as either party makes an admission adverse to himself, that admission may be so far taken as true, but it cannot be expected that, except of consent, the accountant is to adopt the edition or version, or even the transcript of accounts, without express consent, or without seeing how that matter stands according to the other party. He cannot compel parties to grant more admissions than they wish to do. I don't retract a word of what was said at the advising, that it is quite in the power of the parties here, and more especially of the liquidators,—who have far greater means of knowledge of the affairs of the Bank than the individual directors who are accused of negligence and of never attending to these matters,—to make many admissions, and Mr Shand indicates that they have done so; and they can shorten the inquiry as regards them, and make it unnecessary for the accountant to see whether things are true which they are willing to admit. That may save a great deal of trouble, and, I cannot help thinking, a speedy attainment of the first part of the investigation; but, so far from thinking that there is room for alleging delay, I think the delay has been exceedingly small indeed. Now, it is said the pursuers must know what is to be done, not so much for the purpose of correcting the report which has already been prepared, as with a view of seeing that the next report shall not be inconsistent with it, and also to see whether the information already given has been of use or not. Now I think they have a very plain remedy there. Let them tender, if they have not already done so, similar documents with reference to the second branch, if the accountant desires it, and if he has found the previous ones of use he will avail himself of that assistance; if not, they will not be put to the trouble of supplying it. But the accountant must in the first instance be the judge of that; and I cannot see why we should interfere. There has been no delay, no refusal to report on points of law which have been seriously argued before him as points to be reported. There is no reason to know farther about the matter than was known on 30th October 1867. And for us to order him to exhibit partially notes that are not to be final, because they are to give rise to a discussion on the principle affecting the next part of his report, would be, I think, to interfere with his discretion in a way which we ought not to do. As to the proposition to conjoin with Mr Pearson another accountant, I look upon it as really quite ludicrous. To appoint two accountants with co-ordinate authority in a case where unity of principle is declared to be essential for the due investigation of the matter, would be like setting up two kings of Brentford to govern this matter, or like two pointer dogs in a leash pulling against each other in opposite directions, and, instead of helping Mr Pearson, it would be more likely to be an interference with him. We must choose our man, and if there is a probabilis causa of difference it will be reported by him to us, and it is in the power of the parties to ask him to do so; but to take it out of his hands is quite out of the question. The last prayer of the note can mean no more than that as there has been undue delay we shall take steps to prevent it. That would be a stigma which I am not at all prepared to inflict on the accountant, but it is contradicted by the whole circumstances of the case. With reference to his not pledging himself, or not fixing a day, that must depend on many circumstances, and it would have gone very far to prove his incapacity for the remit if he had done so. He will do his best, and in no inconsiderable time we shall have to consider his report. There is no reason to suspect any desire on either party to court delay. I don't think it is to be supposed that any man would desire to keep hanging over his own head, or that of his family, a claim of such magnitude as this; and it is most natural that the liquidators should wish to expedite the matter, but I cannot suspect either side of wishing undue delay, nor can I suppose that Mr Pearson will delay longer than is absolutely necessary.

Lord Justice-Clerk—I entirely concur with your Lordships. I think that such applications as the present, though not incompetent, require to be justified by the allegation of circumstances that create a good ground for our interfering with the execution of the duty which we have remitted to a gentleman in whom we have confidence. I do not think that any allegation is here made which can suggest to us the necessity, or even the propriety, of interfering with the course which has been taken by Mr Pearson. We are asked in the first place to direct the accountant to communicate notes on the first branch of the intended report. I agree entirely with Lord Cowan that the effect of our interposition would not be to facilitate proceedings, but to interpose causes of delay. On that matter I think we are bound to take the opinion of the accountant, and we would require to have the clearest possible ground for differing from that opinion before directing him to follow a course different from that which he intends in this instance to carry out. With regard to our directing him to require the aid of the parties, I have infinite difficulty in comprehending the precise effect of such a direction.

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Supposing that were done, does it simply mean that they are to be called before him in order that they may state how far they are prepared to agree on certain matters of fact or not? Is there any reason for calling on the Court to give such a direction? Is it not necessary that a party who desires that there shall be such a meeting with such a purpose, should ask Mr Pearson to direct such a meeting to be held? Nay, more, I think that in such a case if a party considers that admissions may be made which will go greatly to save time and trouble, he should tender the form of the admissions which he requires the other party to make, and specify those matters on which, with a view to facilitate the further progress of the cause, he thinks they may be fairly called on to make admissions. So far as I understand, nothing of that kind has been done here, and we are asked to prevent what must be assumed to be a wrong course, and to call on Mr Pearson to do what would probably not facilitate matters, but which may be done otherwise without our interference. With respect to the proposition to conjoin an accountant with Mr Pearson, your Lordships have already expressed your opinions in terms which make it totally unnecessary for me to say anything; and on the whole matter I quite concur with your Lordships in thinking that in the circumstances there is nothing calling for this note, and that it should be refused.

Note accordingly refused.

Solicitors: Agents for Pursuers— Morton, Whitehead, & Greig, W.S.

Agent for Defenders— James Webster, S.S.C.

1868