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SECOND DIVISION, INNER HOUSE, COURT OF SESSION

Lord Justice Clerk

Lord Philip

Lord MacLean

[2007] CSIH 19

XA59/01

OPINION OF THE LORD JUSTICE CLERK

RECLAIMING MOTION

TODS MURRAY WS

Pursuers and Reclaimers;

against

ANDREW McNAMARA and MARTIN FROST

Defenders and Respondents:

_______

For Pursuers and Reclaimers: Cullen, QC; Simpson & Marwick

For Respondent McNamara: Party

For Respondent Frost: No appearance

21 March 2007

I Introduction

[1] This is an action by a firm of solicitors for payment of professional accounts incurred by a former client, Arakin Limited (Arakin). There is a counter-claim for damages for professional negligence.

[2 ] The pursuers have reclaimed against an interlocutor of Lord Mackay of Drumadoon dated 8 June 2006 by which he ruled on certain objections taken by the parties to the decision of the Auditor in each of three taxations of the pursuers' accounts.

[3 ] In 1986 Arakin, a building company, had a dispute with Glasgow District Council (GDC) that arose from their removal from GDC's list of approved tenderers. Arakin went to arbitration with GDC. It instructed the pursuers. The arbitration lasted for over 50 days. There were also two related litigations in this court.

[4 ] Later, Arakin was sued in Glasgow sheriff court by the accountancy firm of Maclachlan and Brown (MB), Glasgow, for professional fees. It counter claimed for damages for professional negligence. It instructed the pursuers. This was a prolonged litigation during which the pursuers withdrew from acting. It was eventually settled for an agreed sum. No order was made for expenses.

[5 ] The pursuers rendered three accounts to Arakin. The first (No 6 of Pro) was for their fees and outlays in the GDC arbitration and related proceedings. The second and third (Nos 12 and 36 of Pro) were for their fees and outlays in the MB litigations. Arakin refused to pay the accounts. In 1996 the pursuers raised this action. Thereafter all three accounts were remitted to the Auditor of the Court of Session for taxation.

[6 ] We are concerned in this case with objections to the Reports of the Auditors on the taxation of the GDC account and on the taxation of one of the MB accounts. This reclaiming motion challenges the Lord Ordinary's rulings on three of the objections.

[7 ] On 6 April 2000 Arakin granted two assignations to Mr Andrew McNamara, their principal shareholder, and Mr Martin Frost, an experienced party litigant and no stranger to this court. The first assigned to "[Mr McNamara and Mr Frost] their executors and assignees whomsoever absolutely and irredeemably all and whole our outstanding claims (past, current and future)" against several law firms and individuals, including the pursuers. The second assigned to "[Mr McNamara and Mr Frost] their heirs and assignees whomsoever absolutely and irredeemably all and whole our outstanding liability and obligations (past and current)" to two law firms, one of which was the pursuers.

[8 ] After sundry procedure, the Lord Ordinary, by interlocutor dated 29 May 2001, sisted Mr McNamara and Mr Frost as parties to the action and the counter-claim in room and place of Arakin. My understanding is that the instance of the action has not been formally amended in conformity with that interlocutor; but they are the defenders nonetheless.

[9 ] Since the reclaiming motion was marked certain differences have arisen between Mr McNamara and Mr Frost, as a result of which Mr Frost has taken no further part in the proceedings; but he has not formally withdrawn from the action nor assigned his interest to Mr McNamara.

[10 ] At the outset of the hearing, Mr McNamara insisted that he opposed the reclaiming motion on his own behalf only. A question arises as to his entitlement to oppose the reclaiming motion, which relates to a single interest that was assigned to both him and Mr Frost jointly. Mr McNamara was unable to help us on this point. The pursuers did not raise it in advance of the hearing. We understood counsel for the pursuers not to press the point in his final motion to the court. I express no view on it. In any event, on the conclusions that I have reached on the merits, the question does not matter.

II The function of the auditor

[11 ] The function of the Auditor is essentially that of a valuer. In the valuation of a solicitor's services in a question with his client, the Auditor's task is to exercise his professional skill in assessing what fees and charges are fair and reasonable in all the circumstances of the case. It is for him to decide what factors are relevant to that assessment and, in my view, to decide by what valuation method that assessment can most reliably be made, except to the extent that statutory provisions or decisions of the court may constrain his discretion in these respects. Both of the Auditors in this case were former litigation solicitors of long experience, which they brought to bear in making their assessments.

[12 ] The scope of the Auditor's discretion was considered by the Inner House in Davidson & Syme WS v Liquidator of Highland Engineering Ltd (1972 SC 1). The question in that case was whether, in the taxation of the petitioners' business account with their client, the Auditor was entitled to allow a responsibility fee, as he had done, or was bound to adhere to the Table of Fees approved by the Law Society of Scotland, which did not provide for such a fee. The court held that the contract between the parties was that the petitioners were to be remunerated at a rate that was reasonable in the circumstances for the work that they could show that they had done. The petitioners therefore were not limited to remuneration in terms of the Table of Fees. The court agreed with the approach of the Auditor to that question, which was to assess from his personal experience the value of the responsibility and other trouble that had been placed on the petitioners and to allow for it by adding a lump sum to the taxed total.

III Rules of the Court of Session and of the Sheriff Court

Court of Session

[13 ] In the Court of Session Rules of 1965 (SI No 321), Rule 350 placed no restrictions on the Auditor in the manner in which he taxed an account or reported on that taxation to the court.

[14 ] The Act of Sederunt (Rules of the Court of Session Amendment No 3) (Taxation of Accounts) 1992 (SI No 1433) amended Rule of Court 350 by imposing certain specific requirements on the Auditor in the taxation of an account between solicitor and client (para 2). The 1992 amendments are continued in the current version of the Rule, namely Rule of Court 42.7 (Act of Sederunt (Rules of the Court of Session 1994) 1994 (SI No 1443)).

[15 ] Rule of Court 42.7 provides inter alia as follows:

"42.7.-(1) Subject to section 61A(1) of the Solicitors (Scotland) Act 1980, the court may remit to the Auditor the account of a solicitor to his client-

(a) where the account is for work done in relation to a cause in the

Court of Session, on the motion of the solicitor or the client; or

(b) in an action in which the solicitor or his representative sues the

client for payment of the account ...

(6) In taxing an account remitted to him under paragraph (1), the Auditor-

(a) shall allow a sum in respect of such work and outlays as have

been reasonably incurred;

(b) shall allow, in respect of each item of work and outlay, such

sum as may be fair and reasonable having regard to all the circumstances of the case;

item of work is fair and reasonable, take into account any of the following factors:-

(i) the complexity of the cause and the number, difficulty

or novelty of the questions raised;

(ii) the skill, labour, and specialised knowledge and

responsibility required, of the solicitor;

(iii) the time spent on the item of work and on the cause as a

whole;

(iv) the number and importance of any documents prepared

or perused;

(v) the place and circumstances (including the degree of

expedition required) in which the work of the solicitor or any part of it has been done;

(vi) the importance of the cause or the subject-matter of it to

the client;

(vii) the amount or value of money or property involved in

the cause; and

(viii) any informal agreement relating to fees;

(d) shall presume (unless the contrary is demonstrated to his satisfaction) that-

(i) an item of work or outlay was reasonably incurred if it

was incurred with the express or implied approval of the client;

(ii) the fee charged in respect of an item of work or outlay

was reasonable if the amount of the fee or the outlay was expressly or impliedly approved by the client; and

(iii) an item of work or outlay was not reasonably incurred,

or that the fee charged in respect of an item of work or outlay was not reasonable if the item of work, outlay or fee charged, was unusual in the circumstances of the case, unless the solicitor informed the client before carrying out the item of work or incurring the outlay that it might not be allowed (or that the fee charged might not be allowed in full) in a taxation in a cause between party and party; and

(e) may disallow any item of work or outlay which is not vouched to his satisfaction ... "

[16 ] Taxation procedure in the Court of Session is regulated in part by the Consolidated Guidance Notes for Taxations of Accounts (Practice Note No 3 of 1993). These provide inter alia that -

"4.1 The paying party shall not later than three working days prior to the diet of taxation intimate to the Auditor, and the receiving party, specific points of objection, setting out the item objected to and stating concisely the nature and ground of objection in each case.

4.2.1 At the diet of taxation it will be expected that only those items so specified will be raised."

Sheriff Court

[17 ] Because the pursuers sued for their fees on the MB accounts in the Court of Session, the taxation had to be conducted by the Auditor of the Court of Session (RC 42.7(1)(b)); but the accounts related to a sheriff court litigation.

[18 ] The Act of Sederunt (Fees of Solicitors in the Sheriff Court) 1989 (SI No 434) (the General Regulations) set out the Table of Fees governing the taxation of sheriff court accounts and conferred on the sheriff certain powers to increase or modify such fees (para 2 and Schedule). The General Regulations provided inter alia as follows:

"1. The Table of Fees in this Schedule shall regulate the taxation of accounts between (a) solicitor and client, client paying, (b) solicitor and client, third party paying and (c) party and party; and shall be subject to the aftermentioned powers of the sheriff to increase or modify such fees ...

5. The sheriff shall have the following discretionary powers in relation to the Table of Fees:- ...

(b) In cases of importance or requiring special preparation, the sheriff may, upon a motion made not later than seven days after the date of any interlocutor disposing of expenses, pronounce a further interlocutor regarding these expenses allowing a percentage increase in a cause on the ordinary roll, not exceeding 50 per cent, and in a cause on the summary cause roll, not exceeding 100 per cent, of the fees authorised by this table to cover the responsibility undertaken by the solicitor in the conduct of the litigation. Where such an increase is allowed a similar increase may, if the sheriff so orders, be chargeable by each solicitor in the cause against his own client."

[19 ] With effect from 20 July 1992, the Act of Sederunt (Solicitor and Client Accounts in the Sheriff Court) 1992 (SI No 1434) removed the power of the sheriff under paragraph 5 of the General Regulations (supra) to award a percentage increase to the solicitor against his client (para 4(1), (2), (4)). It substituted the following provisions, which are similar, but not identical, to RC 42.7:

"2.-(1) Subject to section 61A(1) of the Solicitors (Scotland) Act 1980, the sheriff may remit the account of a solicitor to his client to the Auditor of Court for taxation ...

3.-(1) Where the Auditor taxes the account of a solicitor to his client in respect of the conduct of a litigation on behalf of the client, he-

(a) shall allow a sum in respect of such work and outlays as have been reasonably incurred;

(b) shall allow in respect of each item of work and outlay such sum as may be fair and reasonable having regard to all the circumstances of the case;

(i) the complexity of the litigation and the number, difficulty or novelty of the questions raised;

(ii) the skill, labour, specialised knowledge and responsibility involved;

(iii) the time spent on the item of work on the litigation as a whole;

(iv) the number and importance of any documents or other papers prepared or perused without regard to length;

(v) the place where and the circumstances (including the degree of expedition required) in which the solicitor's work or any part of it has been done;

(vi) the amount or value of any money or property involved in the litigation; and

(vii) the importance of the litigation or its subject matter to the client;

(d) shall presume (unless the contrary is demonstrated to his satisfaction) that-

(i) an item of work or outlay was reasonably incurred if it was incurred with the express or implied approval of the client;

(ii) the fee charged in respect of an item of work or outlay was reasonable if the amount of the fee or the outlay was expressly or impliedly approved by the client; and

(iii) an item of work or outlay was not reasonably incurred, or that the fee charged in respect of an item of work or outlay was not reasonable if the item of work, outlay or fee charged, was unusual in the circumstances of the case, unless the solicitor informed the client prior to carrying out the item of work or incurring the outlay that it might not be allowed (or that the fee charged might not be allowed in full) in a taxation in judicial proceedings between party and party; and

(e) may disallow any item of work or outlay which is not vouched to his satisfaction."

IV The GDC account

The taxation and Report

[20 ] The pursuers' account runs from October 1986 to April 1996. The pursuers were advised by law accountants to draw up an itemised account based on the rates set out in the applicable Table of Fees and to claim an increase for the element of special responsibility by means of a percentage uplift on the total of the itemised account.

[21 ] This taxation was conducted by the then Auditor, Mr J Haldane Tait, SSC. In advance of the taxation the Auditor held a series of meetings with the parties to identify the questions in issue. In these meetings and in correspondence he required Arakin to lodge detailed grounds of objection in advance of the hearing.

[22 ] Before the diet of taxation Arakin made no objection to the amount of counsel's fees, nor did it challenge the amount of them under the procedures of the Faculty of Advocates. Arakin's specific objections raised only one issue as to counsel's fees. That was a claim by Arakin that the fees of senior counsel claimed as an outlay in the account had been paid by Arakin direct. In a letter to the Auditor dated 29 May 1997, Arakin's then solicitors, Balfour & Manson, Edinburgh, specified that the relevant objection was to that effect. Arakin made the same objection in a letter of complaint against the pursuers to the Law Society dated 1 May 1997 and in a consolidated note of specific points of objection dated 8 May 1997 sent to the Auditor. Arakin repeated this objection in a letter to the Auditor dated 30 June 1997.

[23 ] The taxation began on 4 August 1997 and continued for six days. One of the partners of the pursuers represented them at the taxation. In his written submission he gave detailed reasons why a special responsibility element should be accepted by the Auditor. By way of illustrating the complexity of the case, he said that in the period to the end of 1993 the pursuers had devoted 1329.5 hours to it. He asked that the element of special responsibility should be reflected in a percentage uplift of the itemised total, as taxed, but with photocopying charges excluded. He left the amount of the proposed uplift to the Auditor's judgment.

[24 ] Arakin's written submissions to the Auditor did not include an objection to the amount of counsel's fees.

[25 ] Thereafter, by letter dated 10 September 1997, Arakin's law accountants submitted to the Auditor documentary proof of payment of the fee note of senior counsel that was referred to in the account. That item was duly taxed off.

[26 ] In February 1998 the Auditor submitted a schedule of queries to the pursuers arising from the diet of taxation. These queries were copied to Arakin. In a letter dated 2 March 1998, written on the eve of a further meeting appointed by the Auditor, Arakin's law accountant said inter alia -

"(3) Counsel's Fees

There has already been correspondence between us in respect of an 'erroneous' entry claiming an Outlay of £15,525.00 or thereby for Counsel's fees which it is accepted were paid direct by Arakin, and I assume that this will be taxed off. However, my Clients have been pressing for years for clarification of Counsel's fees. There is a fee of £29,000.oo or thereby paid at a later stage for which no explanation has been forthcoming. My Clients suspect that there may be an element of double-charging for work relating to the earlier period and would ask the Auditor to insist on full clarification of all of Counsel's fees - both in relation to what each fee covers and the rates charged. An entry in the copy draft account at 1/4/92 reveals that even at that stage my Clients were requesting clarification of the position, and I would ask the Auditor to check the file at that date to ascertain what steps Tods Murray took to provide my Client with answers to the questions raised. In my submission, if there has been an element of double-charging my Clients should have the benefit of a credit by way of Taxation, and the matter thereafter is for Tods Murray to rectify with Counsel."

[27 ] In his Report to the Court dated 27 March 1998 the Auditor sets out the detailed objections that Arakin pressed at the diet of taxation. These do not include any objection to the amount of counsel's fees. Mr McNamara, however, represented to us that during the hearing Arakin repeatedly raised this objection. We find this assertion hard to believe since there is no note of it in the Auditor's Report and since it is denied by counsel for the pursuers on instructions. But even if Mr McNamara's recollection is accurate, Arakin had no basis for such an objection in its written grounds; and, in view of his procedural directions, the Auditor was entitled to disregard the point.

[28 ] The Auditor taxed off a considerable sum from the itemised account, allowed the pursuers' fees at the rates set out in the itemised account, but did not allow the claim for an uplift.

The parties' objections

[29 ] Both parties objected to the Report. In their Objection 5 the pursuers submitted that the Auditor had failed to exhaust his remit in respect of his failure to rule on their claim for a percentage uplift. They pointed out that in his award of party and party expenses in the arbitration, the arbiter had granted Arakin an additional fee.

[30 ] In their Objection 3A Arakin alleged that the Auditor had misdirected himself in failing to investigate junior counsel's costs despite its representations on the point.

The Auditor's comments

[31 ] By Minute dated 13 July 1998 the Auditor commented upon the pursuers' Objection 5 as follows:

"4. Uplift of Fees

Each of the fees allowed by the Auditor was what he considered reasonable for the work performed having regard to the factors in Rule 42.7.(6) - (formerly Rule 350). An uplift or additional fee allowed in terms of Rule 42.14 (formerly Rule 347(d)) applies to a party and party Account of Expenses and is irrelevant to the taxation of a solicitor and client account - see Bradnock v Liston (No. 2) [1994 SLT 1195]."

[32 ] By Minute dated 5 May 1998 the Auditor commented on Arakin's Note of Objections. He referred the court to the Note annexed to his Report, which set out his approach to the taxation and the reasons for his various decisions. Since it appeared to him that the issues raised in the objections related to disputed matters of fact, he concluded that any further comments by him would be premature and that any further consideration should await the court's decisions on those matters.

The Lord Ordinary's decision and reasons

The pursuers' Objection 5

[33 ] The essence of the Lord Ordinary's decision on this point is as follows:

"[73] As the Auditor points out in para 4 of his Minute dated 13 July 1998, when he was taxing the pursuers' account of expenses what he allowed was what the provisions of Rule of Court 42.7.-(6)(b) required him to allow, namely " in respect of each item of work and outlay, such sum as may be fair and reasonable having regard to all the circumstances of the case." Rule 42.7 makes no provision for the Auditor to allow or award a further fee or percentage uplift for an item of work, which is to be additional to such sum as the Auditor has allowed to the solicitor for that item of work in terms of Rule of Court 42.7.-(6)(b). Furthermore Rule of Court 42.7.-(6)(b) explicitly refers to and requires the Auditor to have regard to "all the circumstances of the case." The provisions of Rule of Court 42.7-(6)(c) also require account to be taken of the various factors upon which the pursuers based their application for a percentage uplift of their fees The Auditor has made clear that in respect of the taxation of No 6 of Process those factors were taken into account in his fixing, for particular items of work, "such sum(s) as may be fair and reasonable." In respect of individual items of work, the sums he allowed were sums which he considered to be "fair and reasonable." Nor, in my opinion, can the provisions of any other parts of Rule of Court 42.7, in particular Rule of Court 42.7-(6)(a), be construed as permitting the award of a percentage uplift additional to the total fees allowed for individual items of work under Rule of Court 42.7-6(a). In such circumstances, I am not persuaded that the pursuers had the right to seek, in addition to the sums the Auditor allowed in respect of individual items of work, an additional fee or percentage uplift based on those same factors. In my opinion, it would have been incompetent for the Auditor to have granted such an uplift."

In reaching this decision the Lord Ordinary distinguished Davidson & Syme WS v Liquidator of Highland Engineering Ltd (supra) because the Auditor in this case had to apply Rule 42.7 which, in the view of the Lord Ordinary, did not permit the awarding of a percentage uplift.

Arakin's Objection 3A

[34 ] The Lord Ordinary considered that the letter dated 2 March 1998 from Arakin's law accountant to the Auditor made it clear that Arakin had challenged and were continuing to challenge the fees of counsel whom the pursuers had instructed. The Lord Ordinary interpreted this letter to mean that Arakin sought to have counsel's fees taxed off, or at least reduced, partly on the basis that Arakin had already settled some of those fees, partly because of double counting and partly because the pursuers had failed to provide full clarification of the work that the fees covered and the rates that had been charged (at para [92]). He considered that while there was a measure of uncertainty as to the extent to which the fees of counsel were challenged during the course of the taxation, the terms of the letter of 2 March 1998 satisfied him that the Auditor had failed to address matters that had been raised before him before issuing his Report on the taxation (at para [94]). The Lord Ordinary therefore sustained Objection 3A.

Conclusions

The pursuers' Objection 5

[35 ] In my opinion, the pursuers' Objection 5 is well-founded and should be sustained. Before 1992 the Auditor was entitled to allow for the element of special responsibility, and in my opinion he had a free hand as to the means by which he did so; for example, by awarding a percentage increase or by adjusting the rates of individual items.

[36 ] Counsel for the pursuers said that he had clear instructions that the practice of allowing a special responsibility element by way of a percentage uplift has been well established for a number of years. I have no detailed knowledge of that matter, but it is clear that the allowance of a percentage uplift in accounts as between agent and client is no novelty. Before 1992, the General Regulations of 1989 (supra) expressly provided that such an uplift could be granted by the sheriff.

[37 ] The starting point, in my view, is that the 1992 amendment to Rule 350, now continued in RC 47.2(6), did not abolish the power of the Auditor to allow a fee for special responsibility in appropriate circumstances. That is clear from RC 42.7(6)(b), which provides that the Auditor remains subject to the overriding duty to assess, in respect of each item of work and outlay, a sum that is "fair and reasonable having regard to all the circumstances of the case," and from RC 47.2(6)(c), which expressly mentions specialised knowledge and responsibility as one of the factors that he must take into account in making that assessment.

[38 ] The primary question, therefore, is whether, if the Auditor decides to allow for an element of special responsibility, RC 42.7(6) prevents him from doing so by means of a percentage uplift.

[39 ] RC 42.7(6) contemplates the taxing of an itemised account. There is nothing unusual in that. Itemised accounting is the traditional method by which solicitors claim fees in a question with their client. Since the overriding question is whether the fee rendered to the client is fair and reasonable in all the circumstances of the case, it is logical that the Auditor should have to consider the account item by item. He may tax off some items. He may abate others. Paragraph (6) does not expressly limit the Auditor's discretion as to the manner in which he makes an allowance for special responsibility and I can think of no obvious reason why it should limit that discretion, even by implication. The Auditor plainly has to determine what is fair and reasonable in relation to each item in the account; but within the context of an itemised account, he has complete discretion, in my opinion, as to how he allows for a special responsibility element.

[40 ] No doubt the Auditor can allow for it by up-rating all or some of the individual items. But in many cases, that may be needlessly complex. In some cases, it may be unrealistic; for example, where he has to consider the special responsibility element in a telephone call, a routine letter or the like. Up-rating of individual items would be a particularly laborious process in this case.

[41 ] I fail to see why the Auditor should not allow for special responsibility by taxing the account at the rates set out in the Table of Fees and then applying to the taxed total an overall percentage uplift. If he examines each item and satisfies himself that it is based on the rates in the Table of Fees, and if he considers that a fair and reasonable sum in respect of all or some items should be enhanced on account of special responsibility, the addition of a percentage uplift achieves exactly the result that would be achieved by applying the same uplift item by item.

[42 ] That interpretation, in my opinion, is in accordance with good sense. Whether the solicitor should be given the benefit of an allowance for special responsibility depends on a consideration of the nature and history of the whole case overall, and of the nature and extent of the work that he has done. In my opinion, the Auditor, having considered the details of the account, should stand back and take an overall view of the case before deciding whether there has been special responsibility and, if so, to what extent it should be reflected in his decision. If he considers that an allowance for special responsibility is deserved, it is entirely within his professional judgment, in my view, to make that allowance by way of a percentage uplift, the amount of which is a matter for his discretion. By proceeding in this way, the Auditor in effect awards what is fair and reasonable for each of the relevant items in the account and, in my opinion, complies with the requirements of paragraph (6).

[43] There is also a subsidiary question that is specific to the present case, namely whether the Auditor misdirected himself in his whole approach to the claim for a special responsibility element. In his Report of Taxation he does not deal with the pursuers' claim at all; but in his comments on the pursuers' Objection 5, he suggests that the itemised rates that he has allowed are what he considered to be "reasonable" for the work performed having regard to the factors in RC 42.7(6).

[44 ] In my view, the Auditor's reasoning is not entirely clear. Since he allowed only the basic rates claimed, it may be that he decided that no element of special responsibility was established. If so, that is a surprising decision. This was, on any view, a complex account relating to an arbitration of exceptional importance to the client. As Mr McNamara himself put it to us, restoration to the GDC list of approved tenderers was vital to Arakin. The account related to an extensive course of work carried out by the pursuers over a period of almost ten years. It is apparent from the entries in the account that the pursuers had to deal with a difficult and demanding client. In the arbitration to which it related, the arbiter himself had awarded an additional fee to Arakin against GDC, on similar criteria to those referred to in RC 42.7(6)(c), in his award of party and party expenses.

[45 ] In these circumstances, I think that if an allowance for special responsibility was to be denied to the pursuers, it was incumbent on the Auditor to give clear reasons why.

[46 ] I am further of the view that the Auditor misdirected himself in his observation that an uplift or additional fee allowed in terms of RC 42.14 applies to a party and party account and is irrelevant to the taxation of a solicitor and client account. I agree that RC 42.14 is irrelevant to this case; but the fact that an uplift can be given by way of an additional fee under RC 42.14 does not mean that it cannot be given in a taxation under RC 42.7. The Auditor cites Bradnock v Liston (2) (supra), but that is a case about an additional fee. The obiter dicta of the Lord Ordinary in that case on the subject of agent and client expenses do not assist us in the present question.

[47 ] The Auditor's comments on RC 42.14 suggest to me that he may have thought that it was not open to him to allow for special responsibility; or that he could not allow for it by way of an uplift. If he proceeded on either view, then for the reasons that I have given, I consider that he misdirected himself.

[48 ] The Lord Ordinary adopted the reasoning of the Auditor. He considered that the sums awarded were fair and reasonable and that in any event a special responsibility fee could not be awarded by way of a percentage uplift. For the reasons that I have given, I consider that the first conclusion is based on inadequate reasoning by the Auditor and that the second is erroneous in law. I accept that Davidson & Syme WS v Liquidator of Highland Engineering Ltd is distinguishable from the present case since it does not relate to RC 47.2; but the significance of that decision to the present case lies only in the general dicta of the Inner House on the respective provinces of the court and the Auditor.

[49 ] I conclude therefore that Objection 5 should have been sustained and that the question to which it relates should be considered de novo by the Auditor.

Defenders' Objection 3A

[50 ] In my opinion, the Lord Ordinary is wrong in suggesting that there was any uncertainty as to the extent to which counsel's fees were challenged (at para [94]). But for the letter of 2 March 1998, Objection 3A would have been unstatable. The only basis on which it could possibly be sustained is, as the Lord Ordinary has found, that the letter of 2 March 1998 constituted a valid objection to the amount of counsel's fees. In my opinion, the Lord Ordinary has misdirected himself on that point. The letter cannot be construed as a "specific objection" to the amount of counsel's fees. It seems to contain only a variation on the repeated theme that Arakin had paid counsel's fees direct.

[51 ] In any event, the objection to the amount of counsel's fees, if such it was, came far too late. Arakin had been given ample opportunity in the months before the diet of taxation to specify whatever objections it had to make. Arakin was given a full hearing on its objections and the diet of taxation was duly concluded. The Auditor was under no obligation to receive and determine any objections submitted thereafter and certainly not an objection submitted seven months after the diet, when his own decision was imminent.

[52 ] I conclude therefore that Arakin had no foundation for Objection 3A and that it should have been repelled.

V The MB account

The taxation and Report

[53 ] This taxation was conducted by Mr Neil J Crichton WS, Mr. Tait's successor as Auditor. We are concerned in these proceedings only with the taxation of the account No 36 of process which covers the period 4 August 1988 to 1 July 1993. On the advice of the pursuers' law accountants this account was drawn up at the rates set out in the sheriff court Table of Fees, and a percentage uplift was added for the period up to 20 July 1992 during which the General Regulations applied. The pursuers claimed an uplift of 75%. For the period after that date no uplift was claimed, apparently on the view that the increase in the Table of Fees which took effect from that date and, we were told, almost doubled the previous rates, was such that a percentage uplift was not appropriate.

[54 ] If this account had been taxed by the auditor of the sheriff court, the taxation would have been carried out under the General Regulations; but because the pursuers sued for these fees in the Court of Session the account was remitted to the Auditor of the Court of Session. Although the Auditor refers in his Minute to an Interlocutor of Lord Eassie in June 1997, it seems that the relevant interlocutor was pronounced by Lord Kingarth on 7 February 1997, on the motion of Arakin. Nothing turns on this. The important point is that the interlocutor required the Auditor to conduct the taxation under RC 42.7.

[55 ] The debate before the Lord Ordinary was conducted on the basis that, as the Auditor himself thought, the taxation was rightly conducted in terms of RC 42.7(6) (cf Lord Ordinary's Opinion at para [213]). I was concerned at first as to whether the taxation of the account relating to the period before 20 July 1992 should have been conducted under the General Regulations, but in the event neither side made anything of this point and it seems to be of no practical importance. Although conducted in terms of RC 42.7, it was in substance a sheriff court taxation in which sheriff court rates were claimed and awarded in the taxation of individual items (cf Auditor's Minute, para 2).

[56 ] The Auditor allowed the rates claimed in the relevant period of the account, to which he added an uplift which he restricted to 60%.

Arakin's objection

[57 ] In Objection 2 Arakin objected to the allowance of a percentage increase. It submitted that the charges were applied in the earlier half of the account in terms of the Table of Fees of solicitors in the Sheriff Court as regulated by Act of Sederunt. In terms of the Act of Sederunt applicable at the relevant date only a sheriff had the authority to allow an increase in the level of fee. If the account had been taxed in the sheriff court, the sheriff court auditor would have had no authority to allow an increase. The pursuers were not entitled to circumvent the Act of Sederunt by raising the proceedings in the Court of Session. The Auditor should have taxed the account in terms of the Act of Sederunt applicable to sheriff court proceedings. The entire additional fee should have been taxed off. Even if such a fee was competent, the pursuers' actings did not justify its being allowed. The Auditor had misdirected himself by relying on Rule of Court 42.7(6)(a). That rule did not allow the increase that was challenged.

The Auditor's comments

[58 ] By Minute dated 18 December 2001 the Auditor commented on this objection as follows:

"2. Quite properly the fees charged in the Account are in terms of the

Sheriff Court Table; that was the forum where the proceedings were conducted. The Defenders' motion of 12th June 1998 seeks a remit of the account to "the Auditor for Taxation'. That Auditor is the Auditor of the Court of Session. In obedience of the remit to him, the Auditor must be bound by the Court of Session Rules and in particular Rule of Court 42.7. 'Taxation of solicitors' own accounts.' Under sub-section (1) the Court has remitted this account of the solicitor to his client to the Auditor and under (1)(b) this is an account ' in an action in which the solicitor or his representative sues the client for payment of the account.' Having received the Account and fixed a taxation the Auditor is instructed under (b)(a) to 'allow a sum in respect of such work and outlays as have been reasonably incurred', (b) to 'allow, in respect of each item of work and outlay, such sum as may be fair and reasonable having regard to all the circumstances of the case' and (c) 'shall, in determining whether a sum charged in respect of an item of work is fair and reasonable, take into account ... '. There follow eight separate headings. Sub-section (d) sets out certain presumptions which the Auditor must bear in mind and under (e) he is empowered to 'disallow any item of work or outlay which is not vouched to his satisfaction.'

The Auditor is satisfied this account must be taxed by him. If 'only a Sheriff has the authority to allow an increase in the level of fee' then Lord Eassie should have been persuaded that the matter was only appropriate for the Sheriff Court Auditor. His Lordship's Interlocutor is quite clear and grants the Defenders' motion of 12 June 1998, which is again referred to for its terms. The Auditor makes no comment on the statement 'The pursuers are not entitled to circumvent the terms of an Act of Sederunt simply by choosing to raise proceedings in the Court of Session' other than to repeat what is written above.

As regards the percentage increase the Auditor is instructed by Rule of Court 42.7 6(a) to 'allow a sum in respect of such work and outlays as have been reasonably incurred.' A percentage increase of 75% was sought for the work done from the commencement of the account in August 1988 to 3rd July 1992. In preparing the account the proposed increase of 75% was not applied to each individual charge, but was added as a total and shown on Page 94 of the account. It is reasonable to frame the account in this way ... "

The Lord Ordinary's decision and reasons

[59 ] The Lord Ordinary considered that this objection raised the same issue as was raised by the pursuers' Objection 5 in the GDC taxation. He sustained Arakin's objection. He concluded that the Auditor had "erred in law in awarding a 75% (sic) percentage increase in the total of fees" (para [213]). He reached that conclusion for the reasons that he gave in repelling the pursuers' Objection 5. In short, he agreed with Mr Auditor Tait's approach to the construction of RC 42.7(6). If the Lord Ordinary were right, his decision would have the unfortunate effect that the special responsibility award that the Auditor found to be justified would be disallowed and the pursuers would be awarded a sum that was 371/2% less than the Auditor thought to be fair and reasonable.

Conclusions

[60] In reaching his decision on this objection, the Lord Ordinary has adopted his reasoning in relation to the pursuers' Objection 5. I consider that reasoning to be erroneous. In my view, the Auditor was entitled to allow for the special responsibility that he found to exist by way of a percentage allowance, the amount of which was entirely a matter for his discretion. I would repel this objection.

VI Disposal

[61 ] I propose to your Lordships that in relation to Mr McNamara we should allow the reclaiming motion, for the reasons that I have given, and recall the Lord Ordinary's interlocutor to the extent that it repels the pursuers' Objection 5 and sustains Arakin's Objection 3A to the Report of the Auditor on the GDC taxation (No 6 of process) and to the extent that it sustains Arakin's Objection 2 to the Report of the Auditor on the MB taxation (No 36 of process); that we should sustain the pursuers' Objection 5 and repel Arakin's Objection 3A in the former taxation and repel Arakin's Objection 2 in the latter, and that we should return the taxations to the Auditor, on these points only, to proceed as accords.

[62 ] I propose that in relation to Mr Frost we should pronounce an interlocutor in the same terms de plano in respect of his want of insistence.