Scottish Court of Session Decisions

[1] This action is raised by a firm of solicitors, and the three partners in the firm, against a former partner. In terms of the first crave of the initial writ, the pursuers ask the court "to ordain the defender to account to the pursuers in respect of any sums received by her by way of fees from The Scottish Legal Aid Board for work done whilst a partner in the firm of Messrs Lyons Laing & Company in order that the true balance due to the pursuers may be ascertained", together with orders to pay them the sum that may appear to be the true balance due, together with interest. The crave goes on to seek an order in the event of the defender failing to enter appearance or to produce such an account. The action is thus one of count, reckoning and payment. By interlocutor dated 18 October 1999, the Sheriff, of consent, repelled a plea taken by the pursuers, and three pleas taken by the defenders: we need not consider these. In addition, he sustained a plea for the defenders seeking dismissal of the second crave of the initial writ: that again is a matter which we need not consider. He also sustained the defender's first plea in law (except in regard to expenses) holding the pursuers' averments to be irrelevant and lacking in specification. The action was continued in relation to expenses, but otherwise was dismissed.

[2] The main issue in the appeal is set out in the pursuers and appellants' second ground of appeal, in the following terms:

The matter raised in the first ground of appeal does not bear directly upon this alleged error by the Sheriff, or the contention that he should have ordained the defender to account to the pursuers. It is in a sense a merely procedural matter; but it is of some significance in relation to the basis of the Sheriff's decision, and the form which submissions took in this court. It is therefore convenient to deal with that matter first.

[3] In the Note accompanying his interlocutor of 18 October 1999, the Sheriff says that he takes the view that the action falls to be dismissed. He goes on to say this:

It is not suggested on behalf of the defender and respondent that the procedure thus originally intended by the Sheriff would be incompetent, although it would, as he himself acknowledges, be exceptional. However, the Sheriff goes on to say this:

[4] The pursuers and appellants in their first ground of appeal submit that the Sheriff erred in that having come to a view on the pursuers' pleadings by reference to matters not discussed in the course of argument and having decided that the case should accordingly be put out for further discussion, he acceded to the intervention of the Sheriff Principal that the action be dismissed.

[5] The Sheriff does not specifically identify those matters not raised at debate which formed part of the basis upon which he reached the view that the action fell to be dismissed. But in their submissions to this court parties were agreed that it was clear from the Sheriff's Note that in concluding that dismissal was appropriate, he had taken into account a number of significant considerations which had not been discussed at debate. That being so, it was in our opinion plainly appropriate and indeed necessary that the Sheriff should afford to the parties an opportunity to make submissions to him in relation to the matters which he was minded to take into account. And having regard to the fact that counsel, solicitors and Sheriff were not locally based, and could not therefore be conveniently brought together for a hearing, the mechanism of issuing the proposed interlocutor and note in draft, giving parties an opportunity to apply for further submissions or for other purposes, appears to us not merely to have been competent, but to have been an eminently sensible first step in coping with the situation which had arisen.

[6] We are moreover satisfied that in dismissing the action at least partly upon the basis of significant matters which had not been raised at debate, the Sheriff deprived the parties of the opportunity to make submissions in relation to these matters - an opportunity which they should have been given in the circumstances.

[7] It is with some diffidence that we comment upon how this came about. The history of events as narrated by the Sheriff is a strange one, and we are conscious that in one or more ways there may have been some kind of misunderstanding. But we can see no good reason for the Sheriff Clerk's seeking advice as to what the Sheriff was doing, far less seeking advice from the Sheriff Principal at a stage when he was not judicially involved, in a case in which he might become judicially involved at appeal. It appears that the Sheriff's understanding of the Sheriff Principal's response came to him through the Sheriff Clerk. It may be that the Sheriff Clerk did not fully understand what the Sheriff Principal's position was. But the question of whether further procedure was appropriate was a matter for the Sheriff, and in no way a matter for the Sheriff Principal; and it would be inappropriate for a Sheriff Principal who might have to hear an appeal to advise a Sheriff, extra-judicially, that further procedure could be dealt with in the event of an appeal. Even more clearly, it would be entirely inappropriate for a Sheriff Principal, extra-judicially, to "direct" a Sheriff to issue an interlocutor in a matter in which the Sheriff Principal had no locus.

[8] In the result, the matter comes before us without the Sheriff's having heard submissions in relation to significant elements of the foundation for his decision. The submissions to this court accordingly proceeded upon a primary analysis of the pleadings, rather than a critique of the Sheriff's reasoning. In the circumstances, we have not felt it necessary to enquire further into the details of what was done by the Sheriff Clerk, or any intervention by the Sheriff Principal. Our attention was drawn to D.T.L. Gas Supplies Limited v. Protan Srl. 1999 S.L.T. 397, and in particular to the Lord President's observations at page 399F. In the present case, as in that case, what happened was clearly unfortunate: a Sheriff is responsible for what he does in the conduct of a case, and great care must be taken by others not to intrude upon his judicial function.

[9] We turn to the second ground of appeal. It is a matter of admission that the defender was in partnership with the pursuers, and resigned from the partnership on 20 December 1994. While she was a partner, the Scottish Legal Aid Board issued legal aid certificates in respect of clients of the firm, and accounts in respect of work done for such clients were submitted by the pursuers to the Board. The certificates identified a "nominated solicitor", that solicitor being the person initially entitled to payment on the relevant account. While the defender was a partner, some such certificates were issued with her as the nominated solicitor. The partners had signed an Authority addressed to the Board, authorising the Board to pay any fees due to an individual partner as the nominated solicitor to the firm account, and this arrangement remained in existence in respect of all partners during the period of the defender's partnership.

[10] When the defender resigned, she told the Board that she was commencing practice on her own account, and the pre-existing arrangement was changed. Thereafter, in cases where she had been the nominated solicitor, but the client was remaining with the firm, she signed a mandate to the Board, authorising the payment of the relevant fees to the firm. But certain clients transferred their business to the defender and in respect of these, the defender authorised the Board to make payment to the firm of all fees due to the firm in respect of that client's business up to 20 December 1994, with the balance of any such account being payable to her. While these matters are not all formally agreed in the pleadings, they are not in dispute.

[11] In May 1995, the defender raised an action against the pursuers for count, reckoning and payment of any sums due to her in respect of her period as a partner in the firm. (There is no suggestion that such an action was inappropriate as the means of ascertaining and obtaining payment of amounts due by the firm to her). By a letter from the present defender's solicitors to the present pursuers' solicitors dated 4 June 1996, docquetted by the recipients, that action was settled on the terms stated in the letter. Clause 1 provided, inter alia, for a payment to the present defender of a stated sum, representing her agreed balance on capital account after deduction of an agreed total amount of "sums paid by the Legal Aid Board to our client in error". Clause 2(g) provided inter alia that "Our Client undertakes to account to your Clients for any sums received by her after 4 June 1996 by way of fees from Scottish Legal Aid Board for work done by her whilst a partner in Lyons Laing & Co. Our Client will make payment to your Clients within seven days of receipt of such sums". Clause 3 provided that "Our clients agrees (sic) that the foregoing terms and arrangements are in full and final settlement of all claims competent to them both against each other, being any claims of whatsoever kind, arising out of their partnership relationship" with certain exceptions. In relation to any sums received by the defender after 4 June 1996, by way of fees from the Board for work done by her while a partner in the firm, the undertaking in terms of clause 2(g) is thus part of the full and final settlement referred to in clause 3, and subsists.

[12] As we have indicated, in the present action the pursuers sought an order upon the defender to account to them in respect of any sums received by her by way of fees from the Board for work done whilst a partner in the firm. During the course of his submissions to this court, counsel for the pursuers, having regard to the words "after 4 June 1996" contained in clause 2(g) of the Agreement, sought leave to insert those same words in the crave, after the reference to "any sums received by her". We allowed that amendment. In consequence, no accounting is sought in relation to amounts received before that date (which are dealt with by clause 1 of the letter), and the accounting which is now sought is limited to the period after that date (which is dealt with by clause 2(g) of the letter).

[13] Counsel for the pursuers emphasised that this was an action of count, reckoning and payment. All that the pursuers required to aver in their pleadings was (i) a relationship between the parties of the kind which would give rise to an obligation upon the defender to account for receipts or intromissions, and (ii) the fact of some such receipt or intromission. It was unnecessary and indeed inappropriate for a pursuer in such an action to set out in the pleadings a list of the items which the pursuer thought should appear in the account which the defender was obliged to provide. It was the essence of such an action that it was for the defender to set out such matters in the account. That was the point from which one started, in seeking to discover the true balance due by the defender to the pursuers. And it was after that account was available that the pursuers would have the opportunity to respond with objections, making any alleged omissions or errors the subject of specific averment. Correspondingly, it would be at that stage that any recovery of documents might be sought. In the present case, the pleadings of the parties contained large tracts of averment which had no bearing at all upon the question of whether an accounting should be ordered. Some of this material might be relevant at the stage of the accounting and any objections to the account. Questions as to their relevancy and specification could arise at that stage. But they were wholly irrelevant to the present pleadings, and criticism of any lack of specification or clarity, in relation to these matters, was not in point. The only question, at this stage, was whether there was the appropriate basis for ordaining the defender to account.

[14] In Article 6 of Condescendence, the pursuers aver that they have requested the defender to account to them for any sums received by her, after 4 June 1996, by way of fees from the Board, for work done by her while a partner in the firm. They aver that they are aware that payments have been made to her by the Board in respect of such work; and in particular make averments of a payment in respect of one named client. They go on to say that they believe and aver that she has received further such payments from the Board but has failed to account to the pursuers therefor. While it appears that quite substantial amounts had been paid to the defender by the Board in error before 4 June 1996 (these being dealt with under clause (1) of the letter of that date), neither the pursuers' pleadings, nor their counsel in his submissions, identified any such erroneous payment individually after that date, other than the one which we have mentioned. But counsel submitted that the relationship gave rise to an obligation to account, and that this one example of an item which should appear in such an account justified the order sought.

[15] On behalf of the defender it was submitted that the pursuers had not established a relationship of the type which gave rise to a duty to account. In addition, he submitted that it had not been established that any payment had been received by the defender which would require such an accounting. The agreement constituted by the docquetted letter of 4 June 1996 lay at the heart of these submissions. Having regard to the terms of clause 3, any subsequent obligation incumbent upon the defender must be found in the provisions of clause 2(g). The obligation undertaken by the defender in terms of that sub-clause was indeed "to account to your clients for any sums received by her after 4 June...". But it was submitted that the succeeding provisions of the sub-clause showed that this was not an obligation to account, of the type enforceable by an action of count, reckoning and payment. Having regard to the succeeding provisions of the sub-clause, it was submitted that the undertaking to account was no more than an obligation to pay: the relationship would be one of creditor and debtor, and the obligation would be enforceable by an ordinary action of payment. Counsel accepted that in the absence of this agreement, there would have been an obligation to account (as opposed to an obligation merely to pay) between the defender and the firm. But it was submitted that the obligation to pay, contained in sub-clause 2(g), extinguished that previous obligation to account.

[16] We are not persuaded that these submissions for the defender are sound. The primary undertaking contained in sub-clause 2(g) is the undertaking to account for sums received after the date of the letter from the Board, by way of fees for work done by her while a partner. It is not disputed that the firm, rather than the defender, would be entitled to such sums. That she agrees to pay them within seven days, and consents to the Board providing details, is entirely consistent with the primary undertaking to account for such sums, if any come into her hands instead of going direct to the firm. And the final provision of the sub-clause, warranting that the defender has given full disclosure of similar sums already received, together with the way that such sums have been dealt with under clause 1, is both consistent with, and in our opinion indicative of, the type of relationship which already existed, in which the defender might find herself with funds to which the firm was entitled. While there are perhaps contexts in which an obligation to "account" may mean no more than an obligation to pay some contractual debt, we are satisfied that in the context of the pre-existing situation and the whole terms of the letter of 4 June 1996, clause 2(g) must be read not as extinguishing the previous obligation to account, or creating some new obligation of simple indebtedness, but as acknowledging and preserving, in relation to future receipts, the pre-existing relationship and obligation to account, which for past receipts had been dealt with by clause 1 and the warranty in clause 2(g). The fact that the obligation in question is expressed as a term of a contract does not, in our opinion, mean that the obligation is not one of accounting, or that it must be one of simple debt. We are satisfied that the relationship is such that there is an obligation to account - provided that there has been some receipt or intromission to which that obligation would apply.

[17] In submitting that the obligation was one of simple debt, counsel for the defender pointed out that when that is the situation, there may well be cases in which the pursuer may be in difficulty in quantifying the amount which the debtor owes him. Such uncertainty would not necessarily mean that the obligation was one of accounting. That is no doubt true. But in the context of a relationship which gives rise to an obligation to account for "any" sums of a given kind, received by the defender, it is clear that the duty of identifying and quantifying falls in the first place upon the defender, as the person who has received or intromitted with funds, and that the pursuers who are entitled to an accounting, and who may be very uncertain as to such receipts or intromissions, are not required to embark upon any attempted quantification, before the requisite account has been produced. It is extremely unfortunate that in the present action, both parties have seen fit to include in their pleadings material which is relevant, if at all, only to the issue of quantifying any actual balance due. Perhaps understandably, faced with such a mass of inappropriate averments, the Sheriff has tried to make sense of them, and to consider how, if at all, the apparent differences between the parties might be resolved. If the position were that proof was being sought upon these pleadings, it would no doubt be necessary to identify, and exclude from proof, those averments which are irrelevant or lacking in appropriate specification. But that is not the position, and we do not find it necessary to consider the Sheriff's discussion of these wider matters.

[18] Fees received by the defender from the Board for work done while she was a partner in the firm are effectively partnership monies, which should be made over to the firm. The short question is whether the defender has received any such partnership monies since 4 June 1996. The pursuers aver that in respect of work carried out for the one named client, an account for a quite small sum was submitted to the Board and paid to the defender in November 1996. This is said to "include" fees due to the pursuers in respect of work carried out during the period up to the defender's resignation on 20 December 1994. And the pursuers further aver that the defender was not and is not entitled to said funds, and having received them was and is under a duty to account to them for these funds, but has failed to do so. Even if one ignores the wider averments which we have already quoted, it was submitted on behalf of the pursuers that these averments are relevant, and sufficient, if established, to justify the orders sought. The defender in her answers acknowledges that this was indeed a client of the defender who transferred to her when she resigned - thus acknowledging that she had been a client before the resignation. She also avers that she carried out work for this client as nominated solicitor whilst in business on her own account. These averments appear to be consistent with the pursuers' averments that the payments made in November 1996 "include", rather than "are" fees due in respect of work prior to the defender's resignation.

[19] These averments were not analysed in detail by counsel for either party. However, counsel on both sides appeared to proceed upon the basis that the account related to work done both before and after resignation, so that the pursuers would be entitled to some unidentified part of what was paid to the defender (whether the matter was to be seen as a claim for a debt, or an item for which the defender would be obliged to account). We note that the Sheriff reads the pursuers' averment as a statement that only part of the full amount paid is claimed. He goes on to say

In our opinion, averment that the defender has received and kept a payment from the Board which is at least in part what we have called partnership monies is an averment of intromission. And having regard to what we have said as to the relationship and the interpretation of clause 2(g), we are satisfied that there is indeed a proper basis for ordering an accounting. While it is unnecessary to rely on other averments of the pursuers, we would add that against the background of erroneous payments to the defender during the period prior to 4 June 1996, this further payment made in the following November at least suggests that the history of error had not come to an end in June, and might justify the pursuers' general inference that the defender received further such payments from the Board which have not been accounted for. That, however, is an issue to be resolved when the defender submits her account and the pursuers have the opportunity to take issue with the content of the accounts and the balance, if any, which they state as due.

[20] In these circumstances, we hold that the defender should be ordained, in terms of the amended crave, to account to the pursuers in respect of any sums received by her after 4 June 1996 by way of fees from the Scottish Legal Aid Board for work done whilst a partner in the firm of Messrs Lyons Laing & Company in order that the true balance due to the pursuers may be ascertained. We will allow the appeal, recall the Sheriff's interlocutor, and remit the matter to the Sheriff to proceed as accords. The question of expenses remains to be disposed of.