Scottish Court of Session Decisions

This is a reclaiming motion at the instance of the defender against an interlocutor of the Lord Ordinary dated 9 October 1998 allowing parties a proof before answer of their respective averments on record.

The pursuers aver that on 30 April 1973 the defender granted in their favour a standard security over subjects in Leslie and the standard security was recorded on 8 May 1973. They also aver that on 25 September 1978 the defender granted in their favour a standard security over subjects in Stirling, that standard security being recorded on 28 September 1978. It is averred that paragraph 12 of Schedule 3 to the Conveyancing and Feudal Reform (Scotland) Act 1970 applied in the case of each of the standard securities. Paragraph 12 is in the following terms:

The pursuers go on to aver that they instructed their law agents to call up both securities and realise both of the security subjects. A business account rendered by their law agents (which is No. 15/1 of process) has been lodged by the pursuers and is averred to contain details of the expenses which have been reasonably incurred by them in calling-up the securities and realising both security subjects. The business account brings out a total figure of £30,008.51 which is the sum sued for.

Before turning to the submissions which were made by the parties we propose to set out the background. The defender was the owner of both security subjects, one of which was in Stirling and the other in Leslie. In the course of calling-up each security and realising the security subjects, the pursuers raised actions in Stirling Sheriff Court, in Kirkcaldy Sheriff Court and in the Court of Session. In the case of the action in Stirling Sheriff Court, the decision of the sheriff was appealed to the sheriff principal and a further appeal was taken to the Court of Session. Two actions were raised by the pursuers in Kirkcaldy Sheriff Court. In the first of those actions the pursuers failed to lodge the closed record timeously and the action was dismissed, an award of expenses being made in favour of the defender. The second action which was raised in Kirkcaldy Sheriff Court went on appeal to the Court of Session. The pursuers also raised a petition in the Court of Session seeking interdict and interim interdict. That petition was apparently raised because there had been difficulties in marketing the property in Leslie. Once that property had been sold the petition was dismissed, and the Second Division found no expenses due to or by either party. The pursuers obtained an award of expenses in the action in Stirling Sheriff Court and in the second action in Kirkcaldy Sheriff Court, these awards being on a party and party basis but no attempt has been made by the pursuers to enforce these awards of expenses. In particular, no accounts of expenses have been taxed. What the pursuers have done is to include in the business account all the judicial expenses incurred by them and for which the defender has been found liable and they have also claimed expenses which they say they have incurred but which could not be recovered by them on a party and party basis. The effect is that in the business account the pursuers are seeking to recover judicial expenses on an agent and client basis, these expenses including the expenses on a party and party basis which they could have recovered if they had chosen to enforce the decrees for expenses which they obtained in the two Sheriff Court actions. In the business account all the expenses sought by the pursuers are set out but it is not possible at this stage to identify the judicial expenses to which the pursuers would be entitled on a party and party basis and the additional expenses which they are seeking to recover on the basis that they are, in effect, entitled to expenses from the defender on an agent and client basis. The business account also includes other heads of claim such as the cost of conveyancing and the costs incurred in advertising and clearing the properties.

In the course of the present action a motion was enrolled by the pursuer to have the business account remitted to the Auditor of Court for taxation. That motion came before Lord Osborne on 16 March 1995 and the motion was granted, although no opinion was issued. We were informed that parties appeared before the Auditor on 30 June, 21 July, 28 July and 8 September 1995 and on those days part of the taxation process took place. A further diet of taxation was fixed for 8 December 1995 but it did not proceed as the defender had been sequestrated. The sequestration was recalled on 14 January 1998 and fresh diets of taxation were fixed for 19, 20 and 21 March 1998 but they were cancelled in view of the imminent retirement of the Auditor. The new Auditor, Mr. Crichton, fixed fresh dates for the taxation on 8, 9 and 10 September 1998 but these diets were postponed due to the ill-health of the defender and his wife. New diets were fixed for 30 November and 1 and 2 December 1998 but the taxation did not proceed on those dates as the Auditor wished to consider the opinion of the Lord Ordinary which had been issued on 9 October 1998. The continued diet of taxation was re-arranged for 11, 12 and 13 May 1999 but was cancelled as the defender had to attend at Glasgow Sheriff Court on 11 May and he had also produced a medical certificate stating that he was unfit to attend. A new diet was fixed for 30 September 1999 but the continued taxation did not proceed on that date as the defender again produced a medical certificate stating that he was unfit to attend. Accordingly, while the taxation process commenced before the original Auditor, Mr. Haldane Tait, over a period of four days, there has been no continued diet of taxation before the new Auditor and the taxation of the business account has not been completed.

The case came before the Lord Ordinary on procedure roll on 1 October 1998 and on 9 October 1998 he repelled the first, second and fourth pleas in law for the defender and allowed a proof before answer. He was informed by counsel for the pursuer that she did not intend to argue her third plea in law, in terms of which the pursuers sought decree de plano, as she recognised that she could not obtain such a decree until the total sum which the pursuers had incurred had been determined by the Auditor. Before the Lord Ordinary the principal argument submitted by the defender was that the action was incompetent because it was not competent to raise a separate action for the recovery of expenses of process. The pursuers were, in effect, seeking judicial expenses on an agent and client basis whereas the interlocutors pronounced in the Sheriff Court and in the Court of Session had awarded them only expenses on a party and party basis. In any event, in these other actions accounts of expenses had not been taxed and the actions were still current. The Lord Ordinary held that the pursuers were not bound to enforce the decrees in their favour for judicial expenses on a party and party basis. A judicial award of expenses on that basis may not be the sole measure of the expenses to which they were entitled. Condition 12 of Schedule 3 is broadly expressed and what the court had to determine, assisted by the Auditor of Court, was what expenses the pursuers had reasonably incurred in calling-up the securities and realising or attempting to realise the security subjects. These expenses, in the view of the Lord Ordinary, were not restricted in the way which the defender had maintained. The Lord Ordinary also rejected the submissions which the defender had made in support of his second and fourth pleas in law, and he repelled the first, second and fourth pleas in law of the defender and allowed a proof before answer.

The defender appeared before us on his own behalf and made submissions along the lines contained in his amended Grounds of Appeal. He submitted that the reclaiming motion had the effect of opening up all prior interlocutors and he desired to attack the interlocutor of 16 March 1995, which had remitted the business account to the Auditor for taxation, as well as the interlocutor of 9 October 1998 allowing a proof before answer. So far as the interlocutor of 16 March 1995 was concerned, the defender submitted that the Lord Ordinary had been wrong to remit the business account to the Auditor at that stage of the case. The pursuers' motion for a remit had not been valid or competent and Lord Osborne had not issued an opinion giving reasons for his decision. In the circumstances it had been premature to remit the whole business account to the Auditor for taxation as the defender had not had an opportunity of arguing that the pursuers' action was incompetent. The taxation process, although it had begun, had not been completed and the interlocutor of 16 March 1995 should be recalled. With regard to the interlocutor of 9 October 1998, the Lord Ordinary had erred in allowing a proof before answer as the pursuers' action was incompetent. They had been granted decrees for expenses in the two Sheriff Court actions but these decrees had been on a party and party basis. The liability for expenses of a court action could only be determined in the court process and it was not competent to raise a separate action for recovery of such expenses (Maclaren on Expenses, page 19). In this case the pursuers, having been awarded judicial expenses on a party and party basis, were now endeavouring to get round each award by suing for judicial expenses on an agent and client basis and it was not competent for them to do so. Their proper remedy, so far as the expenses to which they had been found liable were concerned, was to enforce each decree for expenses after lodging an account and having it taxed. The processes in the other actions remained alive until the question of expenses had been dealt with. Further, the pursuers had included in their business account the expenses which they had allegedly incurred in the Court of Session petition for interdict and interim interdict even though the Second Division had found no expenses due to or by either party. The defender referred to Fletcher's Trustees v. Fletcher (1888) 15 R. 862, Commissioners for Leith Harbour and Docks v. North British Railway Co. (1904) 12 S.L.T. 192 and Wood v. Wood's Trustees (1904) 6 F. 640. In the circumstances the reclaiming motion should be allowed and the action should be dismissed.

Counsel for the pursuers invited us to refuse the reclaiming motion. While it was accepted that a reclaiming motion opened up all prior interlocutors (McCue v. Scottish Daily Record and Sunday Mail Ltd. 1998 S.C. 811) there were circumstances in which the court would not be prepared to review an earlier interlocutor. The pursuers were seeking payment of all the expenses which they had reasonably incurred in calling-up the securities and realising the security subjects. The Sheriff Court actions had arisen from the service of calling-up notices. Lord Osborne's decision to grant the pursuers' motion to have the business account remitted to the Auditor for taxation had been a proper exercise of his discretion. The taxation would have the effect of narrowing the issues between the parties as the Auditor would determine what sums had, in fact, been incurred by the pursuers in a question with their solicitors. The Auditor could decide to tax off items which were contained in the business account. After the account had been taxed, and it had been ascertained what sum the pursuers were obliged to pay their solicitors, it would still be for the pursuers at the proof before answer to satisfy the court that the items in the taxed account had been reasonably incurred by them, in a question with the defender, in calling-up the securities and realising the security subjects, both of which had been sold. In the circumstances the remit to the Auditor in March 1995 had been justified and that interlocutor had not been reclaimed. In any event, the defender had lodged a Note of Objections and four days had already been spent on the taxation. In the circumstances the interlocutor of 16 March 1995 should not be reviewed at this stage. As the taxation had not yet been completed it may be that the appropriate course would be sist the action until the whole of the business account had been taxed.

Counsel then turned to deal with the defender's argument that the action was incompetent. She informed us that the pursuers held decrees for expenses in both Sheriff Court actions but in neither case had accounts of expenses been taxed. If the pursuers succeeded in the present action, they would not seek to enforce the Sheriff Court decrees for expenses in their favour. These expenses had been included in the pursuers' business account in the present action but the pursuers were seeking to recover judicial expenses on an agent and client basis (including the party and party expenses to which they had been found entitled). The pursuers' position was that they were entitled to expenses on a party and party basis but they were also entitled to claim the difference between party and party expenses and agent and client expenses. Paragraph 12 of Schedule 3 to the 1970 Act entitled them to recover expenses, provided they were reasonably incurred, on an agent and client basis. The pursuers had deducted from their account the expenses incurred by them in the first action in Kirkcaldy Sheriff Court when they had been found liable in expenses to the defender. Counsel accepted that it would have been open to the pursuers to recover the expenses which they have been awarded on a party and party basis and then seek to recover the difference between those expenses and expenses on an agent and client basis. It was also important to note that the business account contained the expenses claimed by the pursuers arising from the sale of the properties, including the costs of advertising and conveyancing and the clearing of each property. None of the authorities referred to by the defender supported the proposition that the action was incompetent. So far as the interlocutor of 9 October 1998 was concerned, counsel submitted that the Lord Ordinary had been right to allow a proof before answer. It could not be said that no reasonable Lord Ordinary would have taken that course. The pursuers' claim was based on contract and, in terms of paragraph 12, they were justified in including in the business account the judicial expenses to which they were admittedly entitled. They were not bound to enforce the Sheriff Court decrees for expenses. They were entitled to include these expenses in their overall claim under paragraph 12. As counsel was not now proposing to argue that decree de plano should be pronounced she sought leave to amend the pursuers' third plea in law and we allowed that amendment to be made.

The defender's principal submissions in support of his reclaiming motion were directed at the interlocutors of 16 March 1995 and 9 October 1998. So far as the interlocutor remitting the pursuers' business account to the Auditor is concerned, we do not have the benefit of an opinion from the Lord Ordinary because the defender did not seek leave to reclaim. However, it seems to us that there was considerable attraction in having the account taxed by the Auditor. The taxation will determine what expenses were properly incurred by the pursuers in a question with their solicitors and it was accepted that any expenses taxed off by the Auditor will not be able to be claimed from the defender in the present action. However, once the account has been taxed the pursuers will still have to satisfy the court that the taxed expenses were expenses reasonably incurred by them in calling-up the securities and realising the security subjects and the defender will be entitled to challenge items contained in the taxed account. We have also noted that the account was remitted to the Auditor in March 1995 and there have already been four days of taxation. In the circumstances we are not prepared to recall the interlocutor of 16 March 1995.

With regard to the defender's submission that the pursuers' action is incompetent, it is clear that the business account includes not only the pursuers' claim for judicial expenses but also other heads of expenses, including the cost of advertisement, conveyancing and other costs associated with the sale of the properties. The defender did not seek to challenge the validity of these other heads of claim and in these circumstances it cannot, on any view, be said that the whole action is incompetent and it is clear that a proof before answer will be necessary. The main thrust of the defender's submission was that it was not competent for the pursuers to include in the sum sued for the judicial expenses of the other actions. Thus, the defender said that his liability for those expenses had to be determined in the court processes and the pursuers had been found entitled, in each process, to expenses on a party and party basis and that was all. What the pursuers were trying to do was to get round that limitation on their claim for expenses by claiming expenses on an agent and client basis in the present action and it was not competent for them to do so. However, there was no information before the Lord Ordinary, or before this court, to enable it to be determined at this stage what sums are being claimed by the pursuers as judicial expenses on a party and party basis and what additional sums are being sought by them to make their claim equivalent to expenses on an agent and client basis. While we heard submissions on the issue of the competency of claiming in the present process judicial expenses in respect of which the pursuers already hold court decrees, we did not feel that the matter was fully argued, particularly so far as the defender, who appeared on his own behalf, was concerned. As we have said, it is clear that certain of the heads of claim put forward by the pursuers are competent, although individual items will be open to challenge. It will be for the pursuers to establish that the expenses which they are claiming are expenses which were reasonably incurred by them in calling-up the securities and realising the security subjects. In our opinion a proof before answer will be necessary and in the circumstances we consider that the issue of the competency of certain elements of the pursuers' claim should be reserved until the facts have been ascertained, and counsel for the pursuers conceded that that would be an appropriate course. The defender made a number of other submissions along the lines set out in his amended Grounds of Appeal. We found certain of them difficult to follow but we were not persuaded that a proof before answer would not be appropriate. While he disputed the existence of the two standard securities, it will be for the pursuers to prove their averments in that respect. On the whole matter we shall recall that part of the interlocutor of 9 October 1998 which repels the defender's first plea in law and quoad ultra we shall adhere to that interlocutor and refuse the reclaiming motion.

We would only add that, in light of the case which the defender is seeking to present, it seems to us that it would be preferable if he was legally represented at the proof before answer. He may also wish to consider seeking leave to add a general plea to the relevancy and a plea that the sum sued for is excessive as the existence of such pleas may enable the issues between the parties to be better focused.