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OUTER HOUSE, COURT OF SESSION
[2006] CSOH 4
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OPINION OF R F
MACDONALD QC
(Sitting as a
Temporary Judge)
in the cause
IAN STUART as
Guardian to WILLIAM FINLAYSON
Pursuer
against
SCOTTISH RIG
REPAIRERS
Defenders
and
MacGREGOR
SERVICES LIMITED
Third Party
ннннннннннннннннн________________
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Defenders: Miss
Milligan; Simpson & Marwick WS
Third Party: McIlvride;
Ledingham Chalmers
22 December 2005
Introduction
[1] This is a motion by the defenders to allow their Account of
Expenses No 64 of Process to be lodged late in terms of Rule of Court (RC)
42.1(2)(aa). No reason is stated in the written
motion why the account should be allowed to be lodged late. In the written Form
of Opposition to the motion the third party submits that no basis has been put
forward for the court to relieve the defenders of their failure to lodge an
account within the 4 month time limit and that there is no basis upon which the
court should properly relieve them from the consequences of their failure to
follow RC 42.1(2)(a).
[2] RC 42.1, so far as relevant for the purposes of this
motion, provides as follows:
"(1) Where
expenses are found due to a party in any cause, the court shall -
(a) pronounce an
interlocutor finding that party entitled to expenses and .... remitting
to the Auditor for taxation; and
(b) ....... pronounce an interlocutor decerning against the party found liable in expenses as
taxed by the Auditor.
(2) Any party found entitled
to expenses shall -
(a) 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;
(aa) if he has failed
to comply with sub-paragraph (a), lodge such account at any time with leave of
the court but subject to such conditions (if any) as the court thinks fit to
impose."
[3] Paragraph 2(a) was amended and
paragraph 2(aa) was inserted into RC 42.1 on 21 April 1998 by SI 1998 No 890. In the
form in which the rule stood before that date there was therefore no paragraph
(aa), but paragraph 2(a) in
its previous form had added at the end the words "or within such further period
as the court may allow on special cause shown". Accordingly, the effect
of the amendment was to remove the requirement on a party found entitled
to expenses to show special cause for the allowance by the court of the late
lodging of his account of expenses. The rule in its present form gives no
guidance to the court on what factors are to be taken into account in deciding
whether to grant leave for the late lodging of the account.
The factual background
[4] So far as court procedure is concerned the factual background
is as follows. On 17 December 2004, having heard evidence over the previous
three days in a proof restricted to the question whether the third party was
liable to make a contribution to the defenders, who had settled the claim with
the pursuer, I found that the third party was liable to make a contribution to
the defenders in the sum of г125,000. I issued two interlocutors on that date.
In the first interlocutor I decerned against the
third party for payment to the defenders of that sum with interest at the rate
of 8% per annum from 17 December 2004 until payment, found the third party
liable to the extent of 50% of the defenders' expenses up to and including 16
November 2004, thereafter in 100% of the defenders' expenses and remitted the
account thereof to the Auditor of Court to tax.
In the second interlocutor
I decerned against the third party for
payment to the defenders of the expenses in the previous interlocutor as the
same shall be taxed by the Auditor of Court. On 7 January 2005 the third party enrolled a
motion for review of my interlocutor of 17 December 2004. On 26 May 2005 the third party enrolled a motion for
refusal of their reclaiming motion and for a finding of no expenses due to or
by the third party and defenders. That motion, which was intimated to the
defenders' solicitors on 24 May 2005, was not opposed and consequently on 31 May
2005 the Inner House pronounced an interlocutor dismissing the reclaiming
motion on the unopposed motion of the third party and finding no expenses due
to or by the third party and the defenders in respect of the reclaiming motion.
On 22 November 2005 the
Inner House issued an interlocutor ex proprio motu remitting the
case to the Outer House for any further procedure. Such an interlocutor was
necessary because on 18
November 2005 the defenders had enrolled a motion
for certification of certain witnesses as skilled witnesses. The written
grounds of opposition to that motion stated on behalf of the third party are
garbled and do not make sense, but when the motion called before me on 2
December 2005 the point taken by the third party was, put shortly, that it
would be premature to certify any of the defenders' witnesses as expert
witnesses when their account of expenses had not been lodged in time and the
court had not granted leave for it to be lodged late. I considered that there
was substance in that ground of opposition and therefore refused the defenders'
motion in hoc statu.
On 13 December 2005 the
defenders enrolled the present motion, of which intimation had been given to
the third party on 9
December 2005, for their account of expenses to be
received late. The motion called before me on 20 December 2005. It
would have called on 15
December 2005 but for the unavailability of Miss
Milligan, the defenders' counsel. It was agreed between parties in the course
of the hearing of the motion that the final interlocutor in which a finding of
expenses was made was the Inner House interlocutor of 31 May 2005 and that the
4 month period for the lodging of the defenders' account of expenses
therefore expired on 30 September 2005.
Submission for the defenders
[5] In moving the motion on behalf of
the defenders Miss Milligan advised me that the account was not lodged in time
due to a combination of errors by the defenders' solicitors and law accountants
in not picking up the deadline. A copy of the account of expenses had been
intimated to the third party's solicitors on 2 November 2005. On 4 November 2005 the defenders' solicitors sought to
lodge the account with the Auditor of Court but he refused to accept it as it
was out of time. The account was therefore just over one month late. The
background circumstances leading up to this were as follows.
[6] On 21 December 2004 the solicitor dealing with the case
within the firm acting for the defenders sent a memo to the internal fee
chargers in the firm to activate the preparation of the account. On 7 January 2005 the reclaiming motion
was intimated and everything was put on hold. The principal sum was paid by the
third party to the defenders in February 2005, but the question of the interest
due was not resolved until 24 May 2005.
The reclaiming motion was then abandoned by the third party on 31 May 2005. The law accountants,
Alex Quinn & Co, had been instructed to prepare an account sometime after 1 April 2005, when it was apparent
that the reclaiming motion would not be proceeding. As the accident which was
the subject of the action occurred as long ago as 1990, older files had to be
sent by letter to the law accountants. In July 2005 the law accountants sent a
memo requesting further papers as the case went back further than they had
thought. The account was not a straightforward one to prepare. In August two
inventories of productions were found and sent by the solicitors to the law
accountants. On 28 October 2005
an internal memo to the solicitor dealing with the case pointed out that an
account had not been lodged. The account was then intimated to the solicitors
for the third party on 2 November
2005. On 4 November 2005
the account was submitted to the Auditor, but, as Miss Milligan put it, it
"bounced". The 4 month period had expired without the solicitor dealing with
the case or those within the law accountants appreciating it. Once the
position had been ascertained, the solicitors did what they could. Their
immediate focus thereafter was on certifying the skilled witnesses, which
prolonged getting to the stage of the present motion.
[7] Two cases were referred to by Miss Milligan in support of the
motion. The first was Finlayson v British
Steel plc 2003 SLT 903, in which Lord Mackay of Drumadoon
allowed the late lodging of the pursuers' account, which was about 8 months
late due to human and excusable errors within the
solicitors' firm. At p.906, para 19 his
Lordship stated:
"It is very regrettable, and
reflects the 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, particularly
that which led to the correct data not being entered into the firm's computer.
Comparing the prejudice the pursers 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."
[8] The second case was King
v Global Marine Ltd, a decision of the Second Division dated 13 December
2002 confined to the interpretation of the words "the final interlocutor in
which a finding in respect of expenses is made" in RC 42.1(2)(a). The Lord
Ordinary in that case, Lord Drummond Young, had refused to exercise his
discretion to allow the pursuers' account to be lodged late having regard to
the history of the case and the correspondence between solicitors
summarised in paras 7 and 8 of the opinion of the
court. His exercise of discretion was not challenged in the Inner House.
[9] Miss
Milligan summarised her submission by stating that the account in this case was
just over a month late, that there would be no real prejudice to the third
party if I allowed it to be lodged late, but there would be a windfall benefit
of over г22,000 to the third party if I refused to allow it to be lodged late.
Submission for
the third party
[10] Mr McIlvride for the third party
invited me to refuse the defenders' motion to allow their account to be lodged
late. It was entirely within my discretion to decide whether to allow the account
to be lodged late. It was in reality about two and a half months late as the
defenders' solicitors became aware on 4 November 2005 that it was late. Any solicitor
applying his mind to the lodging of the account ought to have known to enrol a
motion immediately thereafter for the account to be allowed to be lodged late.
Instead the defenders' solicitors waited for weeks, during which they wrote to
the solicitors for the third party asking them to agree the account and also
enrolled a motion for the certification of skilled witnesses. The position of
the defenders' solicitors was not made any better by the fact that they
attempted to lodge the account on 4 November 2005. Compliance with the rules of court
should not be too readily excused. Reference was made to
Brogan v O'Rourke Ltd 2005 SLT
29, a decision of an Extra Division dealing with the general dispensing power
in RC 2.1. In that case the main point was one of the competency
of exercising the general dispensing power to allow a summons to call late, but
the decision of the temporary judge to refuse to exercise his discretion under
RC 2.1 in favour of the pursuer was also challenged in the Inner House. At p
37, para 33 Lord Reed, delivering the Opinion of the
Court, stated:
"We are unable to detect any error of approach by
the temporary judge. He did not suggest that the operation of rule 2.1 was
necessarily altogether excluded in cases of ignorance of a rule. He was, on the
other hand, entitled to treat such ignorance, on the part of a practitioner
before the court, as highly material to his exercise of his discretion,
particularly where the solicitor was aware that new rules had been brought into
force and had nevertheless not troubled to read them. In relation to counsel's
appeal to the interests of justice, we would observe that the rules of court
are designed to serve the interests of justice by ensuring, inter alia, that cases are dealt with
expeditiously, without undue expense and without undue demands on the resources
of the court. The interests of justice are not well served by an approach which
too readily excuses failures to comply with those rules."
[11] The position in the present case
was worse because the defenders' solicitors knew of the rule but did not comply
with it. Prejudice to the third party would arise from the defenders'
non-compliance with the peremptory terms of the rule.
[12] Fane v Murray 1996 SC 51 was a decision of an
Extra Division dealing with RC 42.1(2)(a) in its
previous form. The finding of expenses was made on 16 November 1994 and
in November 1995 the party against whom the finding was made moved the court to
allow the account to be lodged late. The explanation provided was that the
assistant dealing with the matter in the firm of solicitors had been absent
from the office for lengthy periods due to illness and family difficulties. The
Extra Division held, first, that the rule of court was in peremptory terms and
it could not be enough to warrant a finding of special cause that an assistant
to whom the responsibility for the account had been given had been absent from
work from time to time over a period of months, for if an assistant was so
absent it had to be the responsibility of his superiors to take steps to ensure
that the work allocated to him was properly carried out; and, secondly, that a
substantial period had elapsed since the expiry of the period laid down in the
rule of court, which was not an irrelevant consideration and correspondence
between the parties had shown that there had been nothing to stop the lodging
of an account at an earlier stage when the assistant had returned to work. In
the course of delivering the opinion of the court Lord McCluskey
cited the following passage in the opinion of the court in Smith v Smith,
unreported, 23
June 1995:
"Although the presence or absence of
prejudice attributed to the delay may be relevant in a particular case, the
rules are designed to regulate the general conduct of business, not just to
suit the convenience of the parties. Non-compliance with them is not
necessarily to be excused simply because no particular prejudice can be
identified."
[13] At p 54C-D Lord McCluskey himself stated:
"Many aspects of a solicitor's business are
affected by time limits and solicitors must be alert to such matters, not least
when considering how to deal with the problems created by the temporary absence
of a partner or assistant."
[14] The present case was not one involving illness or absence of
the solicitor dealing with the case. The
law accountants had been instructed before the Inner House interlocutor of 31 May 2005 and the defenders had therefore had more than four
months to prepare the account. There was then a further delay after the account
had been "bounced" by the Auditor.
[15] Mr McIlvride then went on to submit
that, if I were not prepared to accept his submission that leave should not be
granted for the late lodging of the account, I should impose conditions on the
late lodging of the account. He suggested as a condition that the account
should run only from 11
March 1997, the date on which the third party had been sisted as a party to the action. In the case of Finlayson it was recorded by Lord Mackay
of Drumadoon at p 904L, para
10 that all counsel were agreed, on the basis of the decision of the First Division
in UCB Bank plc v Dundas & Wilson CS 1990 SC 377, that
it would not be competent for him 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, but that concession had not
been properly made as UCB Bank plc had
been decided on an earlier version of the rule of court. On the basis of the
decision of the First Division in Taylor v Marshall Food Group Ltd 1998 SLT 904
holding to be ultra vires
the 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, Lord Mackay of Drumadoon had held in Finlayson at para
16 that it would have been incompetent for him to have allowed the late lodging
of the account subject to a condition that financial payments be made by the
pursuers to each of the defenders. If I were to restrict the entitlement of the
defenders in the present case to recovery of only a proportion of the taxed
expenses I would not be interfering with the Auditor's task. When expenses were
awarded and decerned for, it was subject to the
implied condition that the account be lodged within 4 months. It would be
illogical if the court could refuse in its entirety a motion for late lodging
of the account, with the consequence that the party in whose favour expenses
had been awarded obtained nothing by way of expenses, but could not in effect
refuse the motion in part by making it a condition of the grant of leave to
lodge the account late that only a fraction or proportion of the taxed expenses
be recoverable.
[16] In summary, the motion should be refused as no sufficient cause
had been shown for the failure to comply with the rule of court.
Response for the defenders
[17] In response Miss Milligan pointed out that the terms of the
rule of court under consideration in Fane
required special cause to be shown and that Brogan was concerned with the application of the general dispensing
power under RC 2.1. The terms of the
present rule of court had been brought in to help solicitors faced with the
unduly onerous terms of the previous rule of court. The present case was at
what Miss Milligan termed as "the more minimal end of the scale" of failure
to comply with RC 42.1(2)(a). A condition restricting
the amount recoverable to a proportion of the taxed account of expenses would
be tantamount to the imposition of a financial penalty and therefore
incompetent. It was accepted that the party seeking leave to lodge an account
late had to explain to some degree. It took longer than usual to prepare this
account. She was unable to explain why, once the account had been "bounced" by
the Auditor, a motion for the certification of skilled witnesses, and not the
present motion, had been enrolled. Mistakes were made, but if leave were not
granted for the defenders' account to be lodged late, this would be a very
expensive mistake for the defenders' solicitors. As in Finlayson, this was a case where the time limit had not been picked
up. In answer to a question from me, Miss Milligan accepted that, if I
were minded to grant the motion subject to conditions, it would be possible to
make it a condition that the defenders should pay the expenses of the taxation.
Discussion
[18] As I observed at the outset, RC 42.1(2)(aa) in its present form gives no guidance to the court on
what factors are to be taken into account in deciding whether to grant leave
for the late lodging of the account. There is no requirement upon the party
found entitled to expenses to show cause why leave to lodge the account late
should be granted, but I think that the court must be able to reach the
conclusion that it is appropriate in all the circumstances of the case that
leave to lodge the account late should be granted. It seems to me that the
court, in deciding whether to grant leave for the late lodging of the account,
is exercising a wide discretionary jurisdiction. The discretion which is
exercised must, of course, be a judicial discretion - in other words, a
discretion exercised on a sound rational basis. The exercise of a discretion involves the balancing of relevant factors,
among which is that of relative prejudice. In my view other relevant factors in
the present context are the reason for the failure to lodge the account in time
and the time which has passed since the deadline for lodging the account. Miss
Milligan accepted that some sort of explanation for the lateness had to be
forthcoming from the party seeking leave.
[19] I also observed at the outset that no reason was given in the
written motion why leave should be granted. I have to admit that, having heard
Miss Milligan's submission, it is not entirely clear to me what the reason was
for the defenders' account not having been lodged in time. Miss Milligan sought
to compare this case with that of Finlayson,
but I think the circumstances of Finlayson
are clearly different from the circumstances of the present case. The
written motion in Finlayson sought
leave for the late lodging of the account "in respect that a programming defect
in the pursuers' agents' computerised accounts department database failed to
bring the 4 month limit for judicial accounts to the department's notice"
(see para 7 of the opinion), but it appears that what
had happened was that one of the staff in the firm of solicitors concerned had
failed to input the date of the final interlocutor into the computer database.
That was therefore a case where there was within the solicitors' firm a system
in force for bringing to the attention of the accounts department the deadline
for the lodging of the account, but the system failed on account of a human
error. I consider that the information
provided to me by Miss Milligan in support of the present motion was both sparse
and vague. I was not told that the solicitors for the defenders had in force
any system, electronic or otherwise, for drawing their attention to the time
limit for lodging accounts. Nothing was said by Miss Milligan which indicated
that the solicitor dealing with the case was alert to the time limit at any
stage before the attempt was made to lodge the account on 4 November 2005.
Indeed, the fact that an attempt was made to lodge the account on that date,
over a month after the expiry of the time limit, suggests to me that the
solicitors for the defenders were unaware that the time limit for lodging the
account had passed, for if they had been they would have known that the account
could not be lodged without leave from the court and would have enrolled a
motion for leave before attempting to lodge the account. Miss Milligan could
provide no explanation for what I consider to be the bizarre course of action
taken by the defenders' solicitors thereafter. Instead of immediately enrolling
a motion for leave to lodge the account late, as they should have done, they
enrolled a motion for certification of skilled witnesses. The delay between the
expiry of the 4 month time limit and the enrolling of the motion for leave to
lodge the account late was about two and a half months, which is in my opinion
a material delay in the context of a 4 month time limit. It was said that it
took longer than usual to prepare this account because of the age of the case,
but it was never suggested that it was not possible for the account to have
been prepared within the 4 month period.
[20] So far as the question of prejudice is concerned, it is clear
that if leave to lodge the account late is refused the defenders will suffer
considerable prejudice in losing their entitlement to the award of expenses in
their favour, whereas the only prejudice which the third party will suffer is
the loss of the protection of the 4 month time limit in RC 42.1(2)(a). That will be the position in all cases with the
exception of those where some specific prejudice to the party against whom the
award of expenses has been made can be identified. If the inevitable prejudice
to the party found entitled to expenses were to be considered a proper basis
for granting leave, as it appears, at least in part, to have been in Finlayson (see para
19 of the opinion), the result would be
that the 4 month time limit in RC 42.1(2)(a) would in effect be nullified. Such
an approach seems to me to be at odds with what was said by Lord Reed at para 33 of Brogan. I
appreciate that those observations were made in the context of the general
dispensing power in RC 2.1, but I consider that they apply mutatis mutandis to RC 42.1(2)(aa), which contains a specific dispensing power, namely, a
power to relieve a party from the consequences of failure to comply with RC
42.1(2)(a), which is obviously intended to ensure expedition in the lodging and
taxation of accounts. The interests of justice would not be well served by an
approach which too readily excused failure to comply with the 4 month time
limit in that rule. In any event, even if there is no prejudice at all to the
third party in leave being granted, as the court pointed out in the case of Smith, non-compliance with the rules is
not necessarily to be excused simply because no prejudice can be identified.
[21] Accordingly, having considered the circumstances laid before me on behalf of the defenders, I do not consider
it appropriate in all the circumstances to grant leave to lodge their account
of expenses late. While the solicitors
were obviously keen to set in motion the steps for the preparation of the
account, they were, for no obvious reason, lax in observing the 4 month time
limit, assuming they were aware of it.
[22] For the sake of completeness I should record whether, had I
been minded to grant leave, I would have imposed any conditions. I reject Mr McIlvride's submission that it would be open to me to
impose a condition that the defenders should receive only a proportion of their
taxed expenses. I consider that it would be incompetent to impose such a
condition for two reasons. First, such a condition would amount to an
alteration of my interlocutors of 17 December 2004 finding the defenders entitled to the
expenses specified and decerning against the third
party for payment to the defenders of those expenses "as the same shall be
taxed by the Auditor of Court". Secondly, such a condition would amount in
substance to a financial penalty by depriving them of a proportion of the taxed
expenses to the whole of which they have a legal right. Had I granted leave I
would have imposed two conditions, namely (1) that the defenders pay the
expenses of the hearings of the present motion on 20 and 22 December 2005 on an
agent and client, client paying, basis; and (2) that the defenders pay the
expenses of the taxation.
Decision
[23] For the reasons given above I shall refuse the motion.
