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Free & Ors v. British Steel Plc & Anor [2003] ScotCS 205 (18 July 2003)

OUTER HOUSE, COURT OF SESSION

A498/01

OPINION OF LORD MACKAY

OF DRUMADOON

in the cause

MRS GEORGINA FREE or PROUDFOOT or FINLAYSON & OTHERS

Pursuers;

against

BRITISH STEEL PLC and MOTHERWELL BRIDGE ENGINEERING LIMITED

Defenders:

________________

Pursuers: Wade; Thompsons

First Defenders: Thomson; Biggart Baillie

Second Defenders: Wilson; Simpson & Marwick, W.S.

18 July 2003

[1] Rule of Court 42.1.(2)(a) provides that any party found entitled to an award of expenses shall lodge an account of expenses in process not later than 4 months after the final interlocutor in which a finding in respect of expenses is made in the action concerned. Rule of Court 42.1.(2)(aa) provides that "if (a party) has failed to comply with sub-paragraph (a), (he may) lodge such an account at any time with leave of the court but subject to such conditions (if any) as the court thinks fit to impose".

[2] This action of damages arose out of the death of Samuel Jordan Finlayson, who died on 21 February 1996 as a consequence of his suffering from mesothelioma. In the action, which was raised by the widow and sixteen other of the deceased's relatives, it was alleged that his mesothelioma had been caused by the deceased having been negligently exposed to asbestos, whilst he had been employed of the first and second defenders.

[3] The action was raised on 12 February 1999. The record first closed on 11 August 1999. The case was eventually set down for proof on 1 May 2001. On the morning of that proof the action settled, when offers in settlement were made in terms that were acceptable to the pursuers. The terms of the settlement have not been disclosed to the Court. All that the Court was informed on 1 May 2001 was that the action had "settled".

[4] Following that settlement a Joint Minute ought to have been lodged. There was a considerable delay in that occurring. Although it appears that a Joint Minute was drafted by August 2001, it was not lodged in process until 7 May 2002. That delay occurred as a result of a mistake on the part of the solicitors acting for the pursuers. On 3 September 2001 they intimated to the defenders' solicitors that they would lodge the Joint Minute in process on 5 September 2001. They did not do so. In the event the Joint Minute was not lodged in process until 7 May 2002. Authority was interponed thereto, by an interlocutor dated 9 May 2002.

[5] The interlocutor of 9 May 2002 included a finding of expenses in favour of the pursuers. It was the final interlocutor in the action. There meant that there had been two awards of expenses in favour of the pursuers, one dated 6 April 2001, arising from an opposed motion in connection with a Minute of Amendment lodged on behalf of the first defenders, and the second, dated 9 May 2002. Accordingly, the period of 4 months for the purposes of Rule of Court 42.1(2)(a) commenced on 9 May 2002.

[6] By letters dated 17 September 2001, 27 November 2001 and 12 April 2002 the solicitors acting for the second defenders invited the pursuers' solicitors to produce their account of expenses as soon as possible. In the third of those letters they also drew attention to the failure of the pursuers' solicitors to lodge the Joint Minute. On 2 September 2002, the solicitors acting for the first defenders also wrote to the pursuers' solicitors, requesting receipt of their account of expenses as soon as possible. Despite the various letters sent by the solicitors acting for the defenders to the solicitors acting for the pursuers, accounts of expenses on behalf of the pursuer were not lodged within the period of 4 months from 9 May 2002, as required by Rule of Court 42.1.(2).

[7] On 22 May 2003 a motion on behalf of the pursuers came before me. That motion sought to allow the two accounts of expenses to be received late "in respect that a programming defect in the pursuers' agents' computerised accounts department database failed to bring the four month limit for judicial accounts to the department's attention". The two accounts of expenses were one in respect of the award dated 6 May 2001, claiming expenses totalling slightly less than £500, and another in respect of the award dated 9 May 2002, claiming expenses slightly less than £12,000.

[8] When the motion first came before me, on 22 May 2003, counsel for the pursuer explained the reasons for the delay in lodging the accounts. Put shortly, they related to a failure by a member of staff in the Glasgow office of the pursuers' solicitors to input the date of the interlocutor of 9 May 2002 into the firm's computer database. The failure was related to the delay in the lodging of the Joint Minute, which had been occasioned by oversight on the part of a member of staff in the Edinburgh office of the pursuer's solicitors. Once the interlocutor of 9 May 2002 had been pronounced, the Edinburgh office had also not communicated, to the firm's Glasgow office, the date when the final award of expenses had been made. Because the date of the final interlocutor had not been entered into the firm's computer, the lists generated by the computer had not advised and reminded the accounts department, which was responsible for preparing judicial accounts, of the date when the 4 month time limit in this action would expire. Counsel for the pursuers argued that, whilst the failure to meet the 4 month deadline had arisen on account of human errors, such errors were excusable. The Court should exercise its discretion and grant the motion. Counsel for the pursuers acknowledged that the pursuers would require to meet the expenses occasioned by the motion.

[9] The motion had been marked as opposed on behalf of both sets of defenders. In each instance, the reason for opposition was stated to be that the defenders were prejudiced by the late lodging of the account. At the hearing of the motion, both defenders were separately represented. Their counsel argued that I should exercise my discretion by refusing to allow the accounts to be received late. It was argued that the defenders would be prejudiced if the pursuers were allowed to lodge their accounts late. Such prejudice would arise because both the first defenders, who were self insured, and the second defenders' insurers had settled the damages they had agreed to pay, had paid their own legal expenses and had closed their files. If the motion were to be granted, those files would require to be opened. In the alternative, they argued that if I was minded to allow the accounts to be lodged late, any such order should be subject to a condition in the form of a financial penalty. That particular argument also gave rise to some discussion as to whether it would be competent for me to restrict the pursuers' entitlement under the two accounts to a fraction or percentage of the sums taxed by the Auditor. As this argument, in the alternative, appeared to raise issues of some importance, of which the pursuers' counsel had been given no notice, I continued the motion until 29 May 2003.

[10] At the hearing on 29 May 2003 I was addressed further by all three counsel. Counsel for the pursuer referred me to U.C.B. Bank Plc v Dundas & Wilson, C.S. 1990 1 SLT 90 as authority for the proposition that it would not be competent for me to restrict the pursuers' entitlement to a fraction or percentage of the sums brought out as being payable in terms of the accounts, after they had been taxed by the Auditor. That submission was accepted by counsel for both defenders.

[11] Counsel for both defenders insisted, however, on their submission that it would be competent for the Court to impose a financial penalty, by making the lodging of the accounts subject to the pursuers paying sums of money to each of the defenders. It was suggested that some content had to be given to that part of the terms of Rule of Court 42.1.(2)(aa) which provides "but subject to such conditions (if any) as the court thinks fit to impose". It was submitted that those provisions had been drafted in broad terms. They gave the Court a wide discretion. They allowed the Court considerable flexibility as to the time when the accounts could be allowed to be lodged. Any refusal on the part of the Court to allow an account of expenses to lodged, following the expiry of the 4 month period, would amount to the imposition of a financial sanction upon the party in whose favour an award of expenses had previously been made. In such circumstances, it was clear from the terms of the Rule that the Court has decided that the Rules of Court should permit a Judge to impose a financial sanction or penalty on a party when the Judge was minded to allow the party to lodge an account of expenses after the 4 months period had expired.

[12] Counsel for both defenders indicated that they were unaware of any other Rule of Court that allowed the Court to impose such a financial penalty in respect of the failure of a party to meet a deadline laid down by the Rules of Court. They argued, however, that the terms of Rule of Court 42.1.(2)(aa) gave the Court a broad discretion, which it should exercise having regard to factors such as the prejudice one party would suffer if another party was allowed to lodge an account of expenses outwith the 4 month period, any steps the party opposing the late lodging of an account of expenses had taken to remind or encourage the other party to meet the 4 month limit and the balance of prejudice between the parties, were such a motion was to be granted. It was submitted that the factors that should be taken into account in the present case included the considerable delay there had been on the part of the pursuers' solicitors in lodging the Joint Minute and the accounts of expenses, despite the letters that had been dispatched by the defenders' solicitors. On the other hand, it was acknowledged, by counsel for both defenders, that interest does not run on an award of expenses until the account has been taxed by the Auditor and decree awarded in terms of the sum set out in the Auditor's Report. Counsel for the defenders accordingly renewed their submission that if I was minded to allow the accounts of expenses to be lodged late, I should make the lodging of those accounts subject to a condition that the pursuers pay a sum of money to each of the defenders. The amount of the sums was left to my discretion.

[13] In response to those submissions, counsel for the pursuer drew attention to the provisions of Rule of Court 2.1. That Rule of Court regulates the exercise of the Court's "dispensing power", the power the Court has to relieve a party from the consequences of a failure to comply with a provision of the Rules. Rule of Court 2.1.(1) contains the provisions "on such conditions, if any, as the court thinks fit", which are identical to the provisions found in Rule of Court 42.1.(2)(aa). Counsel for the pursuers indicated that the Court had never imposed financial sanctions or penalties on a party, when allowing that party relief from the consequences of a failure to comply with the provisions of the Rules. It was submitted that whilst a party seeking such relief is frequently found liable to pay expenses to another party, or other parties, any such finding of expenses is related to reimbursing abortive or unnecessary expenditure, rather than imposing a financial sanction or penalty.

[14] Having heard the parties' submissions on 29 May 2003, I made avizandum. Later that day, my Clerk was approached by counsel for the defenders. In the presence of counsel for the pursuers, he was advised by counsel for the defenders that the defenders no longer wished to insist in their submission that any allowance of the late lodging of the pursuers' accounts of expenses should be made subject to a condition requiring the pursuers to pay a financial penalty to each of the defenders. It was explained that change of heart had come about because counsel had been referred to the case of Taylor v Marshalls Food Group Ltd (No 2) 1998 SC 841.

[15] In Taylor v Marshalls Food Group Ltd (No 2), the First Division, presided over by Lord President Rodger, held that section 5 of the Court of Session Act 1998 had not authorised the Court to enact a Rule of Court that entitled a pursuer, who had lodged and beaten a "pursuer's offer", to payment of a sum equal to the taxed amount of the expenses of process. The Rule of Court was accordingly ultra vires of the Court. My Clerk was informed that having had their attention drawn to the report of Taylor v Marshalls Food Group Ltd (No 2), counsel for the defenders accepted that it would not be competent for me to order that the lodging of the accounts of expenses, after the expiry of the four month period, should be made subject to payments of the nature that they had sought.

[16] It is obvious from a consideration of the report of Taylor v Marshalls Food Group Ltd (No 2), why the defenders have departed from the position they adopted during the hearing of the motion. I am quite satisfied that it would have been incompetent for me to have allowed the late lodging of the accounts of expenses, but make that subject to a condition that financial payments be made by the pursuers to each the defenders. Such payments were sought as the imposition of financial sanctions or penalties on the pursuers, of sums left to the discretion of the Court. It was submitted that such payments could properly be viewed as marking the Court's disapproval of the pursuers' failure to meet the 4 month time limit, as well as compensating the defenders for the inconvenience, as opposed to the additional legal expenses, they had suffered.

[17] In my opinion, as was the position in Taylor, the payments that were sought in the present case could not properly be described as "expenses". Indeed, unlike the position in Taylor, there was no suggestion that the payments sought should have been calculated by reference to the whole, or any part, of the expenses of process, whether those incurred by the pursuers or by the defenders. In my opinion, they could only have been categorised as "penalties".

[18] Rule of Court 42.1.2(aa) was enacted by the Court in Act of Sederunt (Rules of the Court of Session Amendment)(Miscellaneous) 1998 (SI 1998/890), which was made under and by virtue of the powers conferred on the Court by section 5 of the Court of Session Act 1998. It was held in Taylor v Marshalls Food Group Ltd (No 2) that the Court did not have power, under the provisions of section 5 of the 1998 Act, to make a Rule of Court that allowed individual Judges to impose a "penalty" on a defender who had failed to beat the pursuer's "offer", as to the figure at which he would settle his action. It follows that the Court would not have had power to make Rule of Court 42.1.(2)(aa) if that Rule falls to be construed as giving the power to impose a financial penalty upon a party who has sought leave to lodge an account of expenses after the expiry of the 4 month period. In these circumstances, the change of heart on the part of the defenders in the present case was a prudent one. If I were to be minded to allow the accounts of expenses to be lodged, it would not be competent for me to have imposed conditions of the nature that both the defenders sought.

[19] It is very regrettable, and reflects no great credit on the pursuers' solicitors, that they appear to have ignored the terms of the various letters that they received from the firms of solicitors acting for the defenders. Nevertheless I have been given a full account of the reasons why the accounts were not lodged timeously. The failure to do so arose out of human errors, principally that which led to the correct data not being entered into the firm's computer. Comparing the prejudice the pursuers would suffer, were the motion to be refused, with that which the defenders will face, if the motion is granted, I am satisfied that I should exercise my discretion in favour of the pursuers and grant the motion. I shall pronounce an interlocutor to that effect. I shall also find the pursuers liable to the defenders for the expenses occasioned by the motion.