Scottish Court of Session Decisions

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URL: http://www.bailii.org/scot/cases/ScotCS/2000/146.html
Cite as: 2000 SLT 829, [2000] ScotCS 146

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OUTER HOUSE, COURT OF SESSION

O/1129/5/94

OPINION OF LORD REED

in the cause

KATHLEEN DONALD SPENCE or URQUHART

Pursuer;

against

AYRSHIRE & ARRAN HEALTH BOARD

Defenders:

________________

Pursuer: Wylie, Q.C.; Balfour & Manson (for Breeze & Chapman, Solicitors, Glasgow)

Defenders: Fitzpatrick; R. F. Macdonald

2 June 2000

[1] This case concerns an action of damages which was settled by joint minute. By interlocutor of 11 May 1999 the Lord Ordinary interponed authority to the joint minute, found the defenders liable to the pursuer in expenses and remitted to the Auditor of the Court of Session for taxation.

[2] By letter dated 28 July 1999 the pursuer's agents intimated their account of expenses to the defenders' agents, advised that they would lodge it for taxation on 11 August 1999, and invited intimation of any proposed abatements to the account. By letter dated 17 August 1999, the defenders' agents replied, offering a figure in full and final settlement of the pursuer's account, and listing twelve items which were challenged. On 8 October 1999 the Auditor gave notice that the diet of taxation would take place on 2 November 1999. The notice stated:

"If the party from whom payment is sought wishes to object to any items in the Account that party is require to lodge a written note of the specific points of objection to it not later than THREE working days before date of taxation (Practice Note 3 of 1993, Para. 4.1) and is also required to attend, or be represented at, the diet to speak in support of the objections."

By letter dated 28 October 1999 the pursuer's agents' law accountant wrote to the defenders' agents in reply to the letter of 17 August. This letter responded to the various points which had been made, and offered to accept a figure of £19,000 (the figure brought out by the account being one of £20,398.25). By a further letter dated 1 November 1999 the pursuer's agents' law accountant invited intimation of any counter-proposals.

[3] The diet of taxation was held on 2 November 1999. On 4 November 1999 the Auditor issued his report, in which he taxed the expenses at the figure brought out in the pursuer's account. In other words, no abatements were made.

[4] The defenders thereafter lodged a note of objections to the Auditor's report. The note of objections does not take objection to any specific item, or specify any alteration sought, but makes a general criticism of the procedure followed by the Auditor at the diet of taxation. The relevant paragraphs in the note of objections are in the following terms:

"7. At the diet of taxation the Auditor queried whether there had been compliance with the provisions of paragraph 4.1 of the said Practice Note. He was given a copy of the said letter dated 17 August 1999 and it was argued on behalf of the defenders that there had been sufficient compliance. The Auditor's decision was to hold that there had been a failure to comply with the Practice Note. Moreover, he proceeded to tax the pursuer's account by allowing the same in full, without considering the abatements which the defenders' law accountant wished to propose as earlier intimated.

8. The defenders object to the Auditor's report of the taxation in respect that, by allowing the account in full, without consideration of any of the abatements which the defenders wished to propose, the Auditor has acted unreasonably. The provisions of the said Practice Note were not mandatory. They were not apt to supersede or supplant the provisions of the Act of Sederunt (Rules of the Court of Session) 1994 (S.I. 1994 No. 1443) anent the taxation of accounts. The court's power to regulate expenses by Act of Sederunt is contained within section 5(h) of the Court of Session Act 1988. There was no Rule of Court which required the defenders to give intimation of their specific objections both to the Auditor and to the pursuer three days before the diet of taxation. Had there been such a requirement within the provisions of a Rule of Court, failure to comply with the same could have been excused. Moreover the defenders complied at least in part with the requirements of the said Practice Note: reference is made to the said letter dated 17 August 1999. The defenders had a right to be heard at the diet of taxation and had an entitlement to state their objections to the account. Their said right and entitlement were not apt to be removed by a Practice Note. In excluding all consideration of the abatements which the defenders wished to raise, the Auditor failed properly to exercise his discretion at all or, in any event, exercised his discretion unreasonably."

[5] Thereafter a minute was lodged by the Auditor of Court in answer to the note of objections. The minute contained the following explanation:

"2. Before the taxation the account was carefully checked to confirm it was correctly summated, was correctly charged in accordance with the Table of Fees and was properly vouched.

3. At the taxation the pursuer was represented by James Flett of Messrs Alex Quinn & Partners, Law Accountants, on behalf of Messrs Balfour & Manson, and the defenders by Mr Graham Temple, Law Accountant. No note of objections was lodged with the Auditor and no such note had been intimated to Messrs Balfour & Manson. The defenders had faxed a copy of their letter of 17 August, addressed to Messrs Balfour & Manson, to the Auditor's Office on 1 November and it is timed at 11.03. There was no covering letter or explanation. Mr Flett submitted that the Auditor should sustain the account as lodged. It was fairly charged and there was no note of objections as required by the Practice Note. The letter of 17 August 1999 was not a proper note of objections.

4. Mr Temple explained he had been instructed on 29 October. At that late stage he did not deem it worthwhile lodging a note of objections. He explained the case had been overlooked: Mr Mann, the defenders' fee charger and IT manager's assistant had been dismissed in the week before the taxation. He was unable to explain why he was instructed so late. He had not been provided with a reasonable explanation for the defenders' failure to lodge a note of objections. He did not suggest that said letter of 17 August 1999 constituted a note of objections as required by the Practice Note. He conceded that the defenders had five weeks in which to adjust the account with the pursuer or, failing that, to lodge a note of objections. He did not ask for an adjournment. In the absence of any reasonable explanation for the defenders failure to comply with the said Practice Note, the Auditor was satisfied that the account should be taxed as lodged with fee fund dues in addition.

5. The Auditor is entitled to consider the terms of Practice Note No. 3 of 1993 with Rule of Court 42.2. He did not act unreasonably in taxing the account as lodged. The defenders are regularly sued in the Court of Session and attend at taxation as paying party and as a successful party seeking payment of their judicial expenses. They are well aware of the Rules of Court and Practice Note. They know that the Auditor, and his predecessor, enforce the terms of the Practice Note. They provided no reasonable explanation for their failure to lodge a note of objections. The letter of 17 August 1999 cannot be considered as a note of objections nor did Mr Temple suggest it should be. It is written in the vaguest terms; no proper reasons are given for the proposed abatements and no alternative charges are proposed. The pursuer is entitled to have his account taxed at the diet. The outcome of the taxation may affect the sum he may require to pay in an agent and client account. In this case, the defenders had five weeks in which to lodge a note of objections and no reasonable explanation was tendered. Mr Temple, an experience law accountant, was not instructed until 29 October with the taxation proceeding on 2 November. He did not seek an adjournment. The terms of the Practice Note are adhered to by the Auditor and by his predecessor. The court gives effect to Practice Notes in conjunction with the Rules of Court in other procedural matters. Reference is made to Rule of Court 22.4 and Practice Note No. 4 of 1997. In the Auditor's experience the court has regard to the terms of that Practice Note which modifies the Rules of Court. In this case the Auditor is acting reasonably in applying the terms of Practice Note No. 3 of 1993 to Rule of Court 42.2. The Auditor did not act unreasonably in his approach to this case and reference is made to paragraph 2 hereof. He acted within his reasonable discretion balancing the interests of both the pursuer and defenders."

A diet of hearing on the note of objections was then arranged and took place before me.

[6] On behalf of the defenders, Mr Fitzpatrick based his submissions primarily on alleged procedural unfairness. He acknowledged that the Rule of Court dealing with diets of taxation (Rule 42.2) did not specify the formal procedure to be followed. In these circumstances, the procedure was a matter to be determined by the Auditor, subject always to an overriding requirement that the procedure be fair. It was perfectly proper for the Auditor to give notice of the procedure he proposed to follow, in the form of a Practice Note. It was also unobjectionable for the Practice Note to require points of objection to an account to be intimated in advance of the diet, since that was conducive to the efficient and fair conduct of hearings. The problem however was that the present Auditor (unlike his predecessors) treated the Practice Note as imposing an absolute requirement that points of objection must be intimated in accordance with the specified time limits. He was not prepared to contemplate the exercise of any dispensing power. The consequence was that there had been no proper consideration of the account. It had been automatically rubber-stamped, because of the absence of objections which had been timeously intimated. There had therefore not been anything which could properly be described as a taxation. If there had been some consideration of the account, as the Auditor's minute suggested, then that consideration was fundamentally flawed by procedural unfairness, since the defenders had been deprived of their entitlement to be heard (in accordance with Rule of Court 42.2) through the application of an unreasonably rigid rule of the Auditor's own devising. Mr Fitzpatrick submitted that the flaws in the Auditor's approach were apparent from the terms of his own minute. Its overall tone tended to confirm that strict compliance with the Practice Note was required, regardless of extenuating circumstances. The reference to Rule of Court 22.4 was inept, that Rule being one which conferred a statutory power on the court to impose requirements on parties. The Auditor's apparent belief that a Practice Note could modify Rules of Court was plainly wrong. The Auditor's assertion that the letter of 17 August 1999 could not be considered as what the Auditor termed a "note" of objections was unreasonable: all that the Practice Note required of "points" of objection was that they set out the item objected to and state concisely the nature and ground of objection. The minute was potentially misleading in reporting Mr Temple as saying that "he did not deem it worthwhile lodging a note of objections". What Mr Temple had presumably meant was that there was insufficient time for him to prepare a note which would have served any useful purpose. The statement in the minute that Mr Temple did not suggest that the letter of 17 August 1999 constituted a note of objections was inconsistent with the statement in the defenders' note of objection that "it was argued on behalf of the defenders that there had been sufficient compliance". Insofar as the minute tended to suggest that the Auditor had been prepared to excuse compliance with the Practice Note in the event of a reasonable explanation being put forward, that had not in reality been the Auditor's position.

[7] It appears to me that a question arises in limine as to the competency of dealing with the matters now raised by the defenders by way of a note of objections. This point was raised by Mr Wylie on behalf of the pursuer, and appears to me to be well-founded.

[8] Rule 42.4 enables a party who has appeared or been represented at the diet of taxation to "state any objection to the report of the Auditor by lodging in process a note of objection". The party lodging the note of objection is required to apply by motion for an order ordaining the Auditor to state by minute the reasons for his decision "in relation to items to which objection is taken in the note". I observe at the outset that the matter complained of in the present case is not in reality an objection to the report, but rather a complaint about the procedure followed by the Auditor. There are no "items" to which objection is taken: the report as whole is challenged because of an alleged fundamental flaw underlying its preparation. Moreover, under the note of objections procedure, there is no provision for the Auditor to be represented at the hearing, although in the present case he is accused of a procedural impropriety. His position can only be placed before the court in the form of his minute; but the considerations which underlie the procedure set out in Practice Note No. 3 of 1993, and the way in which any discretion may be exercised, are not matters of a kind which the Rule envisages as being canvassed in the Auditor's minute. Nor is any provision made in Rule of Court 42.4 for the admission of evidence. Under the procedure set out in Rule of Court 42.4, it is difficult, if not impossible, for the court to resolve conflicts of fact of the kind which are apparent in the present case. A further difficulty arises in relation to the form of order which the court can grant. Rule of Court 42.4 provides:

"(4) At the hearing on the note of objection, the court may -

(a) sustain or repel any objection in the note or remit the account of expenses to the Auditor for further consideration; and

(b) find any party liable in the expenses of the procedure on the note.

(5) In the event of an objection being sustained, the court shall ordain the Auditor to amend his report to give effect to the decision of the court."

Mr Fitzpatrick initially invited me to sustain his objection, but accepted that it would not be appropriate for me to ordain the Auditor to amend his report (as Rule 42.4(5) would require). Ultimately, he did not invite me sustain his objection, but simply to remit the account of expenses to the Auditor for further consideration.

[9] It appears to me to be implicit in Rule of Court 42.4 that it is designed to deal with objections to specific items in the Auditor's report. The Rule does not envisage that there will be disputed questions of evidence. It does not envisage that the report as whole will be challenged because of some alleged fundamental irregularity. It does not envisage that the Auditor's active participation in the hearing will be necessary. It envisages that the outcome of a successful objection will be the amendment of the report. I was referred to numerous authorities concerned with notes of objection, and noted that none of them had concerned the type of challenge being made in the present case. In one of the more recent cases, Mowbray v Kirkcaldy District Council (Inner House, 10 December 1993, unreported), the court referred to a statement in MacPhail on Sheriff Court Practice, to the following effect:

"The note of objections should specify the charges or parts of charges the allowance or disallowance of which is objected to, and should in each case state concisely the nature and grounds of the objection and what the objector proposes should be substituted for the Auditor's finding."

The proposition is vouched by the case of Crossan v Caledonian Railway Co. (1902) 5f. 187, 190. That requirement cannot be complied with in a case of the present kind, and that appears to me to be a further indication that this kind of case is unsuitable to be dealt with by way of note of objections.

[10] In these circumstances, I have come to the conclusion that no matter is raised in the note of objections which I can competently deal with under that form of procedure. I shall accordingly repel the objection in the note. I shall say nothing further about the matters raised in the note, as they may come before the court again under another form of procedure.