Scottish Court of Session Decisions

On 9th May 1905 Brownlie, Watson, & Beckett, law agents and conveyancers, 225 West George Street, Glasgow, raised an action against the Caledonian Railway Company to recover £4095, 13s. 7d., the amount of a part of their business account, relating to the sale and transfer to the

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defenders of the Paisley and Barrhead District Railway. The pursuers had been the law-agents of the Paisley and Barrhead District Railway Company, and it was not disputed that the defenders were liable for that company's debts, including the pursuers' claim. The question at issue between the parties was the basis on which the pursuers were to be paid.

The considerations upon which the undertaking of the Paisley and Barrhead District Railway Company had been transferred were stated, in Cond. IV., as follows”

1. Cancellation of the Caledonian Railway Company's share capital in the company

£212,000

2. Cancellation of the money borrowed from them

79,630

3. Advance by the Caledonian Railway Company of the sums necessary to carry on the line till amalgamation

78,985

4. Repayment of temporary loans to the bank and others

100,000

5. Repayment to the shareholders

of the company other than the Caledonian Railway Company

66,000

Total £536,615”

The facts of the case are given in the findings in fact of the Lord Ordinary (Ardwall), who, after a proof, on 8th November 1905, pronounced this interlocutor.—“… Finds (1) that the Paisley and Barrhead District Railway Company, hereinafter referred to as ‘the company,’ was incorporated by Act of Parliament in 1897; (2) that on 6th October 1897 Mr Joseph Watson, a partner of the pursuers' firm, was appointed secretary of the company, and on the same date the pursuers were appointed to be law-agents of the company; … (4) that under the foregoing general appointment as law-agents the pursuers performed various business for the company, and that their general account for business up to 31st July 1902 has been paid and settled; (5) that the account now sued for is a special account headed ‘Transfer of Railway to Caledonian Railway Company’; (6) that by 17th September 1901 it had become apparent that there would be some difficulty in financing the company, and a memorandum from Sir James Thompson, general manager of the Caledonian Railway Company, on the matter was submitted to the directors of the company; (7) that on 1st October the Caledonian Railway Company directors remitted to Mr Neave, their solicitor, to prepare a draft minute of agreement between them and the company; that by minute of that date the directors of the company instructed the secretary ‘to communicate with Mr Neave regarding the draft agreement,’ and that this agreement had for its object the amalgamation of the company with the Caledonian Railway Company; (8) that on 24th October 1901 the directors of the company took into consideration the proposals of the Caledonian Railway Company, and after consideration agreed to the principle of amalgamating the company with the Caledonian Railway Company, and remitted to the law-agents to ‘negotiate and advise them as to the terms of amalgamation with the Caledonian Railway Company, and thereafter to revise the draft agreement and submit the proposals to an early meeting of the directors’; (9) that on 7th November 1901 the directors of the company agreed unanimously with the directors of the Caledonian Railway Company to take over the line per draft agreement submitted by the Caledonian Railway Company, ‘subject to the approval of the draft agreement by the company's solicitors, and it was remitted to the solicitors to revise the agreement on behalf of the company, and conclude the negotiations’; (10) that the two remits above quoted constitute the only special employment of the pursuers in connection with the amalgamation of the company with the Caledonian Railway Company; (11) that thereafter the pursuers, or the said Mr Joseph Watson, performed the various pieces of business set forth in the account sued for, but that if the said account falls to be taxed item by item it will require to be determined in such taxation what items in the said account were properly incurred under the remits above quoted, or may be fairly viewed as work done in connection with said remits, and what items, if any, may be considered as attributable to Mr Watson's position and duties as secretary, or as chargeable against other clients of the pursuers' firm; (12) that the pursuers' said account as now stated practically consists of two items, viz., an ad valorem fee of £1410, 3s. for revising the Amalgamation Bill, and another ad valorem fee of £2683, 1s. charged for agency in negotiating the sale of the Paisley and Barrhead District Railway to the Caledonian Railway Company; (13) that the sum on which the said fees are charged is £536,615, as stated in Cond. IV ( supra), but that the only consideration which passed from the Caledonian Railway Company to the shareholders of the company in respect of said amalgamation was £66,885, 9s. 1d., the remainder of the first-mentioned sum consisting of moneys which either belonged to the Caledonian Railway Company or for which they were liable: With these findings, remits the said account to the Auditor to tax and report: Reserves meantime all questions of expenses.” Opinion.—“The foregoing findings sufficiently set forth my views on the facts of this case, and I do not think it necessary to deal further with these except to remark that the interposition of the Caledonian Railway Company in the affairs of the company is explained by the fact that the latter was really the creature of the former.

… Before deciding whether the pursuers are entitled to charge their account as they have done, or whether I should order the account to be restated and thereafter to be remitted to the Auditor for taxation, I desire to have the opinion of the Auditor upon the account as it at present stands, as I desire to be informed on the question whether, in view of the terms of the pursuers'

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employment, the mode of stating and charging the account has or has not the sanction of practice, or to what extent it has that sanction. Should the Auditor be of opinion that the account is properly charged by way of ad valorem fees, he will tax it as it stands; if, on the contrary, he thinks it should be remodelled and stated as an ordinary business account, with charges entered opposite to each item, I should, upon his report to that effect, order a remodelled account to be lodged, and remit it to him for taxation and report, so that I may have the whole matter before me before finally deciding the case.”

On 30th January 1906 the Auditor reported—“1. That in his opinion the method adopted by the pursuers of stating their account is so far improper, inasmuch as there is no precedent for charging an ad valorem fee for revising a disposition in a case such as the present, where there has been no disposition, but the property has been transferred by force of statute. The agents in such a case fall to be remunerated by their proper charges for work done in connection with the procuring of the Act of Parliament under which the undertaking is transferred.

2. That in the Auditor's opinion a commission for negotiating the sale by the Paisley and Barrhead Railway Company to the Caledonian Railway Company is fairly Chargeable, the pursuers having been instructed to negotiate and having in point of fact done so. The Auditor refers to the Note No. 6 appended to the Table of Fees for conveyancing and general purposes which states—‘A commission is a remuneration for trouble and responsibility, and its amount should therefore be regulated by the extent of that trouble and responsibility.’ Acting on this principle, the Auditor's practice has been, where an agent of a company has negotiated a sale in conjunction with the directors to allow a modified commission, and in the present case he considers a quarter per cent would be suitable remuneration. If, however, the pursuers should prefer to have their detailed charges for the business covered by commission, they ought to be allowed the option of stating them.

3. The other items in the business account, amounting to £2, 9s. 7d., were not objected to, and have been sustained by the Auditor.”

On 7th March 1906 the Lord Ordinary pronounced this interlocutor—“Appoints the pursuers to restate their account so far as they consider the items thereof are not covered by the commission proposed to be allowed by the Auditor, and that either by filling in upon the account the fees applicable to the various pieces of business there charged, or by lodging a new account containing the items of business performed by them which they consider are not covered by the commission proposed to be allowed by the Auditor; and further, of new remits to the Auditor to state upon what sum, in his opinion, the proposed commission of 1 4 per cent. ought to be allowed, and to tax the restated account as above allowed to be lodged, and to report.”

In obedience to this second remit the Auditor reported—“1. That he has re-taxed the business account at the sum of seventy-nine pounds and elevenpence (£79, 0s. 11d.) sterling.

2. That in the Auditor's opinion the sum on which commission should be allowed is One hundred and seventy-four thousand two hundred pounds eighteen shillings and eightpence (£174,200, 18s. 8d.). At one-quarter per cent., the rate proposed by the Auditor in his former report, commission on this sum amounts to four hundred and thirty-five pounds ten shillings (£435, 10s.).

Strictly speaking, the sum on which commission is to be allowed should probably be the full value of the undertaking transferred, which amounted to £536,615, but the Auditor considers that it would in the circumstances be unreasonable to deal with the matter on that footing, the defenders being already in a sense proprietors as regards upwards of £360,000. The basis proposed by the Auditor is that on which the Inland Revenue has proceeded in fixing the amount of stamp duty. In any view the Auditor thinks the amount of commission proposed by him a sufficient remuneration for the pursuers' services in the negotiations.”

On 20th March 1906 the Lord Ordinary gave decree against the defenders for £514, 10s. 11d. in full of the conclusions of the summons, with expenses.

Opinion.—“Several questions arise here on the two reports which have been lodged by the Auditor. The first is as to the fee of £1410, 3s. which is charged for revising the conveyance of the Barrhead Railway by way of provisions in the bill before Parliament, and the consideration is said to be £536,615, and upon that the usual ad valorem fee is charged. The Auditor has reported, and I entirely agree with him, that it is out of the question to charge an ad valorem conveyancing fee as for a disposition following a sale in respect of an Act of Parliament, and that for this obvious reason that the clauses of the Act of Parliament which, taking the most favourable view for the pursuers, embodies a sale, are adjusted most carefully, and expenses are incurred in adjusting these clauses and otherwise in promoting the bill and in getting it passed in Parliament, and to say that in addition to these expenses the Railway Company should be charged as for a disposition following a sale seems to me to be ridiculous; and I am very glad to say that the same view was taken by Lord (Thomas) Mackenzie in a case decided a good many years ago, and a copy of the valuable decision in which the Auditor has transmitted with his report. I entirely agree with the Auditor that that sum of £1410, 3s. must be struck out.

The next question is, what is the remuneration that is to be given to the pursuers for what is called negotiating the amalgamation of the two railway companies?

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Now, that there were negotiations does not, in my opinion, admit of doubt, and it is still less doubtful that instructions remitting to the law agents to negotiate and advise as to the terms of amalgamation with the Caledonian Railway Company were given in the terms quoted in my interlocutor of 8th November 1905.

Now, the question is, what remuneration are the solicitors to get for carrying out these remits? and I may say at once that I think that that remuneration can hardly be calculated by mere ordinary business charges. As is well known, there is a great amount of trouble which cannot very well be charged under the table of fees, and I think therefore the pursuers are entitled to a special fee for these negotiations. The question comes to be, on what basis is that fee to be fixed? The Auditor has suggested that it might be fixed by way of commission, and he has suggested that the sum on which that commission should be fixed should be the sum of £174,200, which is the sum at which the railway changed hands, less the sums which belonged really to the Caledonian Railway Company. Now it may be said that the Auditor has not followed altogether a logical course in taking that sum. There are stateable objections to his view, but on the whole I think he has taken a commonsense view of the question, and has dealt with it on sound business lines; and further, this has to be said, that the Auditor has really to consider what would be a fair fee in the circumstances. If a sum on which commission is to be charged is a very large one, the rate of commission will probably be less, and the Auditor might have seen fit and proper to allow a less commission than he has done if there had been a larger sum on which it fell to be charged. Everyone knows that there is, so to speak, a system of give and take in fixing remuneration by commission.

The Auditor has fixed the commission in relation to the particular sum of £174,200, and he supports the fee he recommends by saying that the amount of commission proposed by him is a sufficient remuneration for the pursuers' services and negotiations. Nobody is better qualified to judge of that than the Auditor is, and I think when we consider the sum at which he has arrived, and further that the fee allowed is a sufficient and proper fee for the services rendered, I think the proper course is to approve of what the Auditor has done in fixing the fee for negotiations at £435, 10s. The rest of the account has been taxed in the usual way, and amounts to the sum of £79, 0s. 11d., bringing out in all £514, 10s. 11d. as due to the pursuers.

But two questions raised are still to be dealt with, viz., interest and expenses. In the first place, with regard to expenses, there is no tender in the case, and I never, unless I am compelled to do so, depart from the salutary rule that where there is no tender a decree for expenses must follow the result of the action, and I shall accordingly find that the pursuers are entitled to their expenses. But with regard to interest the matter stands in a different position altogether. The pursuers rendered their account in a form very different from that in which they are now getting it paid after a considerable amount of procedure, and I cannot say that the defenders were in mora in refusing to pay an account rendered in the form the account in question was. The rule about interest is that it only runs on sums that have been properly demanded, and it cannot be said that this was so in this case when the sum originally demanded was no less than £4095, and the pursuers have ultimately been found entitled to only £514, 10s. 11d.

I shall therefore grant decree for that sum without interest, but with expenses to the pursuers in respect that there was no tender of any sum.”

The defenders reclaimed, and argued—The Lord Ordinary was right in disallowing the ad valorem fee for revising a disposition which had been charged in the pursuers' account, but he had erred, following the Auditor, in allowing the pursuers a commission for agency in negotiating the transfer. That was a wrong principle, and it was the principle more than the amount that the reclaimers objected to. The transaction here was of a peculiar character, and the table of fees did not apply. The pursuers had likened it to a sale of heritage, but it was not a sale of heritage as was shown by there being no disposition, and consequently none of the trouble preliminary to a disposition. All the solicitor had done was to see that the terms on which the directors had agreed to transfer the undertaking were given effect to. He could at most have asked a fee for revising, say 200 guineas, and to be paid ordinary business charges for any incidental work. The account should be sent back to the Auditor to be taxed as an ordinary business account.

Argued for respondents—The interlocutor of the Lord Ordinary should be affirmed. The transaction between the companies was a transfer of properties for a price—the sum paid being at least £174,000. It was really therefore a sale. Mr Watson had conducted the negotiations, and acted as solicitor throughout. In so doing he had performed the kind of work contemplated in head 20 of the table of fees (P.H. Book, G. 21), for which a commission on the purchase money was properly chargeable—the commission to cover everything, negotiations, meetings, correspondence, and interviews prior to the transfer.