Scottish Court of Session Decisions

Frost & Anor v. Alexander Stone Company [2003] ScotCS 57 (14 February 2003)

OUTER HOUSE, COURT OF SESSION

A3288/02

OPINION OF LORD BRACADALE in the cause MARTIN FROST AND ANDREW MACNAMARA

Pursuers;

against ALEXANDER STONE & COMPANY

Defenders:

________________
Party Pursuers Defenders: Connall, Q.C.; McGrigor Donald

14 February 2003

1. The present action is for reduction of a decree granted at Glasgow Sheriff Court in favour of the defenders against Arakin Limited. The Sheriff Court action related to a claim for payment of professional fees. In the present action the pursuers rely for their title to sue on a document headed "Assignation of Claim". That document is inter alia in the following terms:

"We Arakin Limited…in consideration of the sum of £100 instantly paid to us jointly and severally by Andrew McNamara…and Martin Frost…as the price of the claim hereinafter assigned of which sum we hereby acknowledge receipt and have sold and do hereby assign to the said Andrew McNamara and Martin Frost their executors and assignees whomsoever absolutely and irredeemably All and Whole our outstanding claims (past, current and future) against (a) the law firms and partners of…Alexander Stone responsible in whole or in part for advice; professional service; or intromission and/or supervision into simple and complex business dealings of the above parties either singularly or synergistically in respect of Arakin Limited (with or without having rendered an account to Arakin Limited) which claims to include damages and whatever the amount may be and all interest thereon past and future...".

2. On 30 December 2002, in terms of Rule 4.2(5), Lord Macfadyen granted leave to proceed without the signature of a duly authorised person. In addition, he granted interim orders suspending the purported charge dated 19 December 2002 in respect of the purported sheriff court decree and interim interdict against the defenders from attempting to procure enforcement of the decree or charge.
3. The motion which came before me on 31 January 2003 was enrolled by the defenders for recall of the interim orders. The motion was opposed by the pursuers. When the motion called before me the defenders were represented by Mr Connall, Q.C. Each of the pursuers appeared on his own behalf.
4. At the outset the pursuers asked me to continue the hearing of the motion for seven days. I understood from what Mr Frost told me that the position was that the summons had been served but had not yet called. Mr Frost explained that it had been the pursuers' intention that the summons should have called prior to 31 January 2003 but that due to certain difficulties that had not proved possible. It was the pursuers' current intention to lodge the summons for calling at the beginning of the following week. Thereafter, it was his intention to seek leave to amend and to provide further specification in the summons. Secondly, he stated that he had received an inventory of documents from the defenders only that morning and wished to examine these and, thirdly, he required time to prepare a legal argument in the light of the defenders' authorities. Mr Connall opposed any continuation. He explained that the documents were not essential for the purposes of the motion but gave some of the background to the procedure in the sheriff court case. He pointed out that the pursuers would be aware of the contents of most, if not all, of these documents. I decided that I should refuse the motion for continuation in hoc statu, and hear arguments on the motion.
5. Mr Connall explained that for the purposes of the motion for recall of interim orders the question of title to sue was not central to his submission. He did, however, raise a question as to whether the pursuers could have title at their instances to reduce a decree granted against Arakin Limited. While not conceding the validity of the "Assignation of Claim" for the purposes of this action, Mr Connall did not seek to press the issue of title to sue at this stage and the debate on the motion therefore proceeded on the hypothesis that the pursuers did have title to sue.
6. Mr Connall submitted that the test for setting aside a decree obtained in foro is a very high one and requires highly exceptional circumstances. He submitted that there was no prima facie case set out in the pursuers' pleadings to justify the continuation of interim orders once both parties had been heard. He submitted that setting aside a decree is a matter of significance and not lightly to be entered into.
7. Under reference to Article 2 of condescendence Mr Connall stated that it was admitted that on 19 December 2002 the defenders served a charge for payment on Arakin Limited for the sum of £79,358.26. Decree for payment was extracted on 5 December 2002. The decree related to taxed professional fees and interest thereon allegedly due by Arakin Limited to the defenders in respect of legal fees in actions in Glasgow Sheriff Court between Arakin Limited and McLaughlin Brown, Accountants. Under reference to draft defences prepared on behalf of the defenders, Mr Connall explained that the defenders raised proceedings against Arakin Limited for fees in respect of professional services relating to the action between Arakin Limited and McLaughlin Brown. The defenders' action was sisted and by agreement the defenders' account was taxed. On 13 December 1999 the Auditor of Court reported on the taxation of the said account. After debate, the Sheriff granted decree in favour of the defenders on 17 July 2001. By a subsequent interlocutor of 6 August 2001 the sheriff dealt with the question of interest and expenses. Mr Connall went on to explain that an appeal was marked by Arakin Limited to the Sheriff Principal but on 2 May 2002 the appeal was refused for want of insistence. The present pursuers thereafter sought to mark an appeal against that decision to the Court of Session. By interlocutor of 11 October 2002, Lord Menzies, to whom the purported appeal had been referred in terms of Rule 40.12(4), refused the appeal on the ground that it was incompetent.
8. Against the background of that sequence of events, Mr Connall submitted that Arakin Limited were active participants in the proceedings and had sought to exercise, but failed to insist upon, their right of appeal to the Sheriff Principal. Thereafter, Arakin Limited had not appealed to the Court of Session but the pursuers had sought to do so incompetently. Mr Cannel said that there had thus been procedure all the way to the Inner House. He explained that documents 1 – 5 in his bundle were relevant to the history outlined.
9. Mr Connall submitted that it was difficult to find any averments in the summons from which a prima facie case in support of the action could be identified. As to the averments relating to the issue of duplication of fees and the suggestion that there was new material in that regard, Mr Connall submitted that this was a matter which had been considered by the Auditor, who rejected any suggestion that counsels' fees should not have been included in the defenders' account. He referred to the Auditor's Report which was No.1 in the bundle. In any event, he submitted that there was nothing in the statement of discovery of an overpayment of the fees of counsel that gave a basis for reducing the decree.
10. Mr Connall referred me to Bain v Hugh L S McConnell Limited 1991 S.L.T. 691 and in particular to a passage in the Opinion of the Court delivered by Lord Justice Clerk Ross on page 695 at letter F - G. After referring to the speech of Viscount Dunedin in Adair v Colville & Sons 1926 S.C. (H.L.) 51, the Lord Justice Clerk continued:

"Indeed in his speech Viscount Dunedin was at pains to point out that it was not possible to define categorically the cases in which reduction was competent. He also stressed the importance of there being a miscarriage of justice if reduction was to be justified: 'but of this I am certain that unless a miscarriage of justice is affirmatively and clearly shown there is no room for reduction' (p.593)."

At 695J, the Lord Justice Clerk continued:

"It is in our opinion well established that a decree may be reduced in exceptional circumstances if reduction is necessary to produce substantial justice."

11. Mr Connall then referred me to Johnstone & Clark v Lockhart 1995 S.L.T. 440. He drew attention to a passage in the judgment of Lord Osborne in the Outer House at p.444, beginning at the bottom of the second column:

"In my opinion the approach which has to be taken in relation to a claim for reduction of decree such as this has been authoritatively explained in Bain v Hugh L S McConnell Limited. In that case it was held that while, in general, where other means of review were provided and those means had either been utilised, or the parties had failed to take advantage of them, reduction of a decree was incompetent, there were exceptions to this rule, and while it was not possible to define categorically the cases in which reduction was competent, a decree might be reduced in exceptional circumstances where it was necessary to do so in order to produce substantial justice, or where there had been a miscarriage of justice such as to render the whole proceedings fundamentally null. Further, in that case the court made clear that, as was recognised in Adair v Colville & Sons, it is not possible to define categorically the cases in which reduction may be competent."

Later, at 445D:

"What does emerge from such cases, in my view, is that the court is normally reluctant that a decree pronounced against a defender should be treated as unassailable in circumstances where there existed a substantial defence to the claim concerned, which had never been heard."

12. In support of his submission that the interests of public policy dictate that reduction should not be entered into lightly, Mr Connall referred me to the case of Ali v Ali 2001 S.C. 618 and in particular to the passage in para.11 of the Opinion of the Court delivered by Lord Hamilton at page 622.
13. Mr Connall submitted that there was quite simply nothing in the pursuers' pleadings which would justify the exceptional course of reduction and accordingly there was no prima facie case.
14. As to the question of the balance of convenience, Mr Connall submitted that it did not come significantly into play unless the pursuers crossed the hurdle of producing a prima facie case. Even if a colourable case could be made, the strength of that case was a factor in assessing the balance of convenience. Further, he submitted that it was important to note that the balance of convenience here was in the context of issues arising in relation to a judgment granted by a competent court, as opposed to a private issue between parties. Mr Connall did accept that it would be said against him that the financial disadvantage to the defenders by not getting the money for a period would not be so very great.
15. Mr Frost, whose submissions I understood to be adopted by Mr MacNamara, accepted the general factual history set out by Mr Connall. He did not dispute Mr Connall's submissions on the applicable law.
16. Mr Frost then entered into a wide-ranging and lengthy account of the history of the cases involving Arakin Limited and McLaughlin Brown. He explained that originally Arakin Limited had instructed Tods Murray, Solicitors. There had come a stage where Arakin Limited had instructed the defenders to engage in a watching brief on Tods Murray because Arakin Limited were concerned that Tods Murray were overcharging. In due course the defenders were instructed to take over from Tods Murray as agents in the case. There followed a dispute in relation to Tods Murray's fees and Mr Frost explained that there is currently proceeding in the Court of Session an action at the hands of Tods Murray for recovery of fees. Mr Frost went into considerable detail in relation to the history of the various actions. However, it seemed to me that the only material that could be of any possible relevance to the present action would be whether the pursuers could demonstrate that some new matter had arisen. In this regard, Mr Frost explained that following a specification of documents in the Tods Murray case in November 2001, that is to say after the decree in the defenders' case against the pursuers had been granted, Faculty Services Limited produced itemised billing accounts for counsels' fees for senior and junior counsel instructed on behalf of Arakin Limited. All that is said in the pleadings about this matter is in Article 2 of condescendence:

"Subsequent to a specification of documents motions in the Tods Murray action heard in November 2001, Faculty Services Limited eventually provided to Arakin Limited in July 2002 copy invoices in respect of fees charged by Mr Emslie, Q.C. An analysis of these fee notes shows that Mr Emslie, Q.C. and Faculty Services Limited appear to have charged both Tods Murray and thereafter Alexander Stone for the same work done. Arakin Limited paid both duplicate sets of invoices in full, first to Tods Murray and thereafter to Alexander Stone. Said duplicate fee notes amount to some £175,000 in respect of fees charged during the years 93, 94 and 95."

In the course of his submissions Mr Frost indicated that he was indeed suggesting that counsel had charged twice for their fees for the same work done. He did not know whether in fact the defenders and Tods Murray had both paid counsel for the same work but he claimed that Arakin Limited had paid twice for the work done. He stated that these matters were still live in the present Tods Murray action.

17. Mr MacNamara explained that he was the majority shareholder in Arakin Limited. He adopted the submissions of Mr Frost in relation to the Faculty Services Limited invoices. Mr MacNamara was clearly very unhappy with the services provided by the various legal representatives of Arakin Limited and referred to a number of fees about which he had complaints to make. None of these are specified in the pleadings and did not appear to have any bearing on the present action.
18. In response to the points made by the pursuers, Mr Connall submitted that many of the points made related to matters that had already been before the Sheriff Court in the Auditor's Report. There was nothing in any of the material which was being advanced now that formed a ground for challenging the Auditor's report and the Sheriff's judgment.
19. At the end of the arguments, Mr Frost renewed his motion to continue for seven days in order that the summons could call and substantial further specification could be introduced by way of amendment.
20. I decided to continue the case for a period of fourteen days, which would allow the pursuers, if so advised, to take the steps that they indicated they intended to take.
21. In the event, the pursuers did not do what they said they were going to do. Instead, at 9.15 in the morning of the continued hearing on 14 February 2003 they faxed to the court a document which was in the form of a new summons. This document had not passed the signet and had no status before the court. In these circumstances I considered that I had to base my decision on the pleadings as they stood, together with the submissions made at the bar.
22. There is no dispute between the parties as to the applicable law. In the passage in Adair v Colville & Sons 1926 SC (HL) 51 quoted by the Lord Justice Clerk in Bain v Hugh L S McConnell Limited, Viscount Dunedin said:

"…generally speaking, it is certainly not competent when other means of review are prescribed, and these means have either been utilised or the parties have failed to take advantage of them."

23. It is clear from the decisions in Bain v Hugh L S McConnell Limited and Johnstone & Clark v Lockhart that even in such a case there may be exceptional circumstances that merit reduction of a decree in order to do substantial justice. What is also clear from the authorities is that the remedy is one to be used sparingly and only in exceptional circumstances. In this case Arakin Limited did actively take part in the proceedings in the Sheriff Court including the remit to the Auditor. The Company's appeal to the Sheriff Principal was refused for want of insistence. The Company did not appeal to the Court of Session and the present pursuers sought to bring an incompetent appeal.
24. Against that background the question arises as to whether the pursuers have averred a prima facie case pointing to the kind of exceptional circumstances that would require reduction of the decree in order to do substantial justice. The pursuers aver that as a result of a specification of documents in the Todds Murray case, in November 2001 information came to light that Senior Counsel appear to have charged both Todds Murray and the defenders for the same work. Accordingly, it is averred that Arakin Limited were not due to pay the defenders the sum for which the defenders were granted decree in the Sheriff Court.
25. It is plain from the Auditor's Report dated 13 December 1999 that the issue of Counsel's fees was a live one and that Arakan Limited took a number of objections in that regard, including an objection to the effect that certain fees charged by Counsel pre-dated the involvement of the defenders and related to the period when Todds Murray were instructed. It is not at all clear from the pleadings how the new material relates to the issues which were considered by the Auditor. There is little more than a bald statement to the effect that duplicate fee notes have been issued and paid.
26. Further, there is nothing in the pleadings, nor was any intelligible explanation offered in submissions, to explain why this information was not available to the pursuers in the course of the Sheriff Court action. Although I was not referred to any authorities on the question of res noviter by either of the parties, it seemed to me that in a case where the pursuers seek to rely on res noviter in an action of reduction, the passage in the speech of Lord Sumner in McCarroll v M'Kinstry 1926 S.C.(H.L.)1 at page 7 was applicable:

"There is abundant authority for saying that, where the pursuer relies on res noviter, he must not merely aver that something material has newly come to his knowledge, but he must aver it with such circumstantiality as will show that he could not by the exercise of reasonable diligence have known of it in time to have made use of it in the original action. He must give particulars of its discovery and of the circumstances which bear upon the possibility of his having acquired earlier knowledge of it."

27. I came to the conclusion that, taking the pleadings as they stood together with the submissions of the pursuers, the pursuers had failed to make out a prima facie case.
28. If I am right in that conclusion, the question of the balance of convenience would not arise. If I am wrong in my conclusion that there is no prima facie case made out, then the strength of that case would be a factor to be taken into account in assessing where the balance of convenience lies. In my opinion any case that the pursuers have pled is so weak that the balance would favour the defenders. Had I been satisfied that the pursuers had made out a strong prima facie case, I would have been inclined to the view that the balance of convenience would favour the pursuers.
29. Having come to the conclusion that the defenders' submissions were well founded, I granted the motion for recall of the interim orders.
30. Thereafter, at the bar, Mr Frost made a motion to allow amendment of the summons by incorporating into it the contents of the document which had been faxed to the court that morning. After hearing Mr Connall in reply, I decided that the nature and extent of the proposed amendment was such that it should properly be addressed by way of minute of amendment and answers and accordingly I refused the motion to amend made at the bar.