Scottish Court of Session Decisions

 

OUTER HOUSE, COURT OF SESSION   [2007] CSOH 163
CA161/04	OPINION OF LORD DRUMMOND YOUNG   in the cause   R.A. LOGAN & CO, SOLICITORS, a firm and ROBERT ANDREW LOGAN and HENRY CUNNINGHAM COUCHLIN, the whole partners thereof   Pursuers;   against   STEPHEN BOWMAN MAXWELL   Defender:     ­­­­­­­­­­­­­­­­­________________

 

Pursuers: J A Brown; Balfour + Manson, LLP

Defenders: Howie, QC; MacRoberts

 

28 September 2007

 

[1] Prior to and during the year 2000 the firm of R.A. Logan & Co had four profit-sharing partners, namely the two individual pursuers, the defender and Carolyn Jayne Paton. The terms of the partnership were ultimately regulated by a partnership agreement dated 25 January 2000. By letter dated 7 December 2000 the defender offered to resign from the partnership, and the remaining partners accepted his resignation. In terms of the partnership agreement the defender's resignation did not terminate the parties' agreement or dissolve the firm, and the business of the firm was continued by the remaining partners.

[2] Clause 16(b) of the partnership agreement provides that, upon the retiral of any partner from the firm, a balance sheet is to be made up as at the date of retiral. It is a matter of agreement that such a balance sheet required to include up-to-date values for the heritable property owned by the firm and the work in progress of the firm. The firm's accountants were instructed to prepare accounts for the period to 8 December 2000, including a balance sheet as at that date. A draft set of accounts was prepared and exhibited to the partners, including the defender. The defender disputed the accuracy of the draft accounts on a number of grounds; these included a challenge to the figure included for work in progress, where the defender contended that it represented a significant underestimate of the true value of the firm's work in progress. The draft accounts indicated that the defender's capital account was in deficit to the extent of £95,484. In due course the pursuers raised the present action against the defender for payment of that sum.

[3] Defences were lodged in which it was contended that the work in progress included in the draft accounts was understated; if the work in progress were increased, it was averred that a share of it would be attributed to the defender's capital account, which would have the result of reducing the deficit. Initially other objections were taken by the defender to the draft accounts. After sundry procedure the parties agreed that the only area of dispute between them was as to the valuation of the work in progress of the firm as at 8 December 2000. They agreed to remit the valuation of the work in progress as at that date to a man of skill, and agreed the terms of a joint remit to an accountant selected by the parties. The court gave effect to that agreement by an interlocutor dated 25 February 2006. So far as material, the interlocutor was in the following terms:

"The Lord Ordinary...

...

2. in respect

(a) that the parties have confirmed that the only area of dispute between them is as to the valuation of the work in progress of the firm R.A. Logan & Co, solicitors, as at 8 December 2000;

(b) that the parties have agreed to dispense with proof of the value of the work in progress; and

(c) that the parties have agreed to remit the valuation of the work in progress as at 8 December 2000 to a man of skill and to be bound by the man of skill's valuation, save in the case of manifest error by the man of skill,

on joint motion, remits to Mr Robert Kerr, chartered accountant of Messrs French Duncan, 375 West George Street, Glasgow (i) to examine the books, records and bank statements of the pursuers and such other documents as the parties may submit to him ought to be so examined and (ii) to receive the submissions of the parties in such form as he shall consider appropriate, and thereafter to assess the value of the work in progress of the firm R.A. Logan & Co, solicitors as at 8 December 2000 and to report the said value to the parties and to the Court;

...".

[4] Thereafter Mr Kerr produced a report dated 6 September 2006. In his report he listed the books and records of the firm that he had been given. He noted that he had received a list of all files opened in the firm in the period from 1 May 2000 to 8 December 2000, which ran to 34 pages and included details of more than 1,400 files. He then dealt with the basis on which, according to accepted accounting principles, work in progress should be valued; this paragraph provided:

"In line with accepted accounting principles, all work in progress should be valued at the lower of cost or net realisable value. In valuing the WIP we would ordinarily look at the primary documentation (ie timesheets and files) in order to confirm the amount of time incurred on each particular job. This would then allow us to calculate the cost of the WIP at the relevant date. Thereafter, we would review the receipt of monies to confirm that the sums received relating to the WIP were not less than the cost at the relevant date".

Mr Kerr then reviewed the various categories of the partnership's work. In relation to criminal cases, he noted that all case files had been destroyed. Consequently it was impossible to refer to primary documentation for evidence of the WIP value. The only method of valuing the WIP would be to review sums received after 8 December 2000 and apportion those fees based on the work done. That would be possible for solemn criminal legal aid cases, but tracing numbered remittances to the day book to identify the file reference was impractical in view of the number of remittances involved and the fact that the day book was in chronological order. In relation to summary legal aid cases, a set fee was payable. The pursuers had argued that where a trial diet had taken place and a guilty plea was tendered a set fee of £500 had been taken; in other cases a fee of £250 had been taken. Mr Kerr considered that applying set fee valuations to calculate WIP is unsatisfactory because it takes no account of the work that may still be required to earn the fee. A proper apportionment of the set fee based on the work done by the relevant date was impossible, and it was accordingly not possible to value the WIP accurately for summary criminal cases. A similar point related to criminal legal advice and assistance cases.

[5] In relation to civil cases, civil legal aid cases were similar in nature to solemn criminal cases in that the fees paid were based on the work done. For solemn criminal cases computer records were available detailing the work done, but no such records existed for civil cases. Although the pursuers stated that "the vast majority" of files were available, not all files were available and it was therefore impossible, given the lack of records, to value civil legal aid cases accurately at the relevant date. Any valuation would be likely to be materially inaccurate given the inability to apportion any fees received accurately, in view of the lack of records. A similar point applied to civil legal advice and assistance, privately funded civil court work and conveyancing work; the records were unavailable and the accurate valuation of WIP was accordingly impossible. Similarly, given the information that was available, an accurate valuation of the WIP arising out of financial services would be impossible. In relation to civil cases, it was noted that a number of civil cases contained in the pursuers' work in progress analysis remained unpaid; these totalled £22,000, which represented 17% of the total balance of work in progress prepared by the pursuers.

[6] Mr Kerr further commented that, as had been noted, the records available were incomplete. While there was a record of all files opened in the period from 1 May 2000 to 8 December 2000, it could not be said with certainty which of those files were opened or closed as at 8 December 2000. Mr Kerr or his assistants had reviewed in detail approximately 20% of the Scottish Legal Aid Board remittances; that review had identified 50 cases with a combined WIP value as at 8 December 2000 of £10,900 which did not appear within the WIP analysis provided by the pursuers. Mr Kerr's conclusion was expressed as follows:

"Our remit was to provide a valuation of the work in progress of R A Logan & Co as at 8^th December 2000. Unfortunately, given the passage of time, certain of the relevant records either do not exist or are incomplete. While it may be possible to guess at the work in progress balance, we do not consider that any reasonable and prudent accountant could, given the information available, provide a valuation of work in progress which could be considered to be reasonably accurate.

 

We have informed the solicitors for both parties of our inability to value the work in progress. Levy & McRae, on behalf of the Pursuer, have contended that... I am compelled to provide a value to you, no matter how heavily caveated that value may be. However, I consider that, given the absence of material books and records relating to work in progress, any figure I provide would be likely to be so inaccurate as to be valueless. Reluctantly, I therefore conclude that as a result of the books and records being materially incomplete, I am unable to provide a valuation to the Court of the work in progress of R A Logan & Co as at 8^th December 2000".

[7] The pursuers lodged a note of objection to Mr Kerr's report. This challenged the report on the following grounds:

(a) The reporter had failed to fulfil his remit. It appeared from the terms of the report that the work in progress was capable of valuation, but the reporter declined to assess its value. The concern expressed in the report was that the valuation would be insufficiently precise, but the remit imposed no demands on the reporter as to the requisite standard of precision.

(b) The report gave no intelligible reasons for the conclusion reached on the valuation of summary legal aid fixed fee cases. The pursuers had submitted that incomplete fixed fee cases should be given a flat rate value of £250; that reflected the practice of the Scottish Legal Aid Board in cases where there is a transfer of the legal aid certificate prior to the conclusion of the case. That practice was used regardless of how much or how little work had been done prior to transfer. £250 should therefore be regarded as the net realizable value of each file. The pursuers had not kept records of time spent in respect of such cases since no such record was required for billing purposes; the fee generated was fixed regardless of the time spent.

(c) In respect of solemn criminal files, where detailed accounts had to be rendered to the Scottish Legal Aid Board, the reporter noted that it was possible to apportion each account precisely, but then rejected that approach because tracing numbered remittances to the day book to identify the file reference was impracticable given the number of remittances and the fact that the day book was in chronological order. The fact that this task was onerous or time-consuming did not make it impractical. It was essentially a straightforward clerical exercise.

(d) The report disclosed an error in respect of civil files. The reporter noted that "not all" files were available, but made no attempt to quantify what was missing. The reporter did not consider whether any difficulty caused by the missing files could be met by the use of an assumption or an estimate. Moreover, no mention was made of conveyancing or executry files.

(e) The reporter noted that civil cases valued at £22,000 had not in fact been paid five years later. Significance appeared to be attached to this fact, but no explanation was given of its impact. The obvious inference was that files that were assessed as having a work in progress value in December 2000 had in fact no value, since no funds had been received five years later. That could have been dealt with by substituting a work in progress figure of nil for each such file.

(f) The report recorded erroneously that the list running to 34 pages and 1400 files was an accurate record of all files opened by the firm in the accounting period to 8 December 2000. That list in fact included a large number of files which were complete and had been billed by that date. It was the result of a computer error. This had been explained to the reporter at a meeting held on 6 June 2006.

(g) The report mentioned an additional 50 files, with a value of £10,900, which did not feature in the pursuers' valuation. In fact an explanation had been given by the pursuers at the meeting held on 6 June 2006 to the effect that those files featured in the list of debtors prepared as at 8 December 2000. They were accordingly properly excluded.

(h) The reporter had failed to give consideration to the possibility that the parties might be able to agree any items where precise apportionment was difficult. In respect of financial services work, the pursuers would be prepared to adopt the valuation assumption most favourable to the defender, which was that the whole of each fee generated from business that was live as at the valuation date related to work done prior to that date.

(i) The report made no attempt to assess whether work in progress might be valued by considering what proportion of annual turnover would be carried as work in progress and thereafter applying such a percentage to the disclosed turnover of the firm.

(j) The report stated that work in progress fell to be valued at the lower of cost and net realizable value. Nevertheless, no attempt was made to consider whether cost was capable of being valued. Cost would consist of overhead and salary cost, and a notional cost for time spent by profit-sharing partners. Information on these matters was readily available from the firm's accounts, which dealt with the percentage profit generated by the firm and thus the overhead element.

[8] Following the lodging of the note of objection, by interlocutor dated 5 October 2006 the Court appointed that it be sent to the reporter for his further comments and observations, if so advised. The Court further allowed the defender to lodge answers to the note of objection following receipt of the reporter's further comments and observations. The reporter produced a supplementary report in response to that interlocutor. In it he made the following responses:

(b) Generally accepted accounting principles would require that a fixed fee should be apportioned on the basis of the work undertaken. While time records might not be kept, one would expect the file to provide details of how far the work had progressed by the accounting date, or at least allow the fee to be apportioned pro rata on the basis of when the work started and finished.

(c) In relation to solemn criminal cases, 'the shambolic nature of the Pursuers' records' made an accurate valuation almost impossible. This view had been concurred in by a law accountant introduced by the pursuers.

(d) Three issues were raised by this objection: whether the time and line legal aid accounts could be used to value work in progress; whether the impact of missing files could be mitigated by using an assumption or estimate; and the question of conveyancing or executry files. In relation to the first of these points, primary documentation was missing, and consequently the reporter had no way of knowing how many files had a work in progress value as at 8 December 2000. In relation to the second point, the reporter did not consider that any assumption could be used to negate the potential risk of the omission of files with a material work in progress value. In relation to the third point, the reporter conceded that in civil legal aid cases analyses of the work done were generally attached to the remittances, with the result that valuation of work in progress was possible. This did not, however, apply to privately funded work, including conveyancing and executry work; in these cases the absence of an unknown number of files made accurate valuation impossible.

(e) The reporter considered the fact that £22,000 of the pursuers' work in progress calculation remained unpaid was relevant because it suggested that the pursuers' valuation was at least 17% inaccurate. Consequently the reporter felt that little reliance could be placed on that valuation.

(f) The colleagues of the reporter who had represented him at the meeting of 6 June 2006 were clear that it had not been explained that the list running to 34 pages and 1400 files was inaccurate. Moreover, the mere existence of such a list served to highlight that the small volume of files provided could very well not represent the full population of files with a work in progress value as at 8 December 2000.

(g) The reporter's colleagues who had attended the meeting on 6 June 2006 were clear that an explanation of the £10,900 had not been provided at that meeting. Moreover, the pursuers' current explanation of the £10,900 was not provided in the original note of objection, but had been added subsequently.

(h) The note of objection was the first occasion when it had been suggested that the parties might agree items where precise apportionment was difficult. The reporter did not consider his role to involve mediation between the parties; it was rather to assess the value of work in progress.

(i) The reporter had been instructed as a man of skill to examine the books and record of the firm and to assess the value of work in progress. Given the records available, the reporter considered that it was not possible to do that in a way that would result in a reasonably accurate figure. To perform a calculation based on cost, in the manner suggested by the pursuers, would produce a figure; nevertheless, it would be impossible to say with any certainty whether that figure was even remotely accurate. Such a calculation would not require a "man of skill".

[9] Thereafter the defender lodged answers to the note of objection, and the Court appointed parties to be heard on the note of objection and answers. Counsel for the pursuers submitted that the Court should send the report back to the reporter for reconsideration of all the points raised in the note of objection. He submitted that such a course was competent where the reporter's remit had not been exhausted; where the remit had been exceeded; where objections disclosed a point or issue of principle on which the reporter might have gone wrong; and where there were no reasons or inadequate reasons for the reporter's conclusions. Reference was made to Williams v Cleveland and Highland Holdings Ltd, 1993 SLT 398, Rowat v Whitehead, 1826, 5 S 19, Edinburgh Northern Tramways Co v Mann, 1896, 23 R 1056, Johnston v Johnston, 20 January 1999, unreported, and Allied Dunbar Assurance PLC v Superglass Sections Ltd, 20 August 2004, unreported; and also to Maclaren on Court of Session Practice at pages 503 and 507-508, Maxwell on Court of Session Practice at page 314, and Court of Session Practice, edited by Lord Macfadyen, at paragraphs [273] and [2265]-[2270]. Thereafter counsel developed the points in the pursuers' note of objection; I will deal subsequently with the individual grounds of objection.

[10] Counsel for the defender invited me to refuse the pursuers' motion to send the report back to the reporter for reconsideration. If I refused the pursuers' motion, I should pronounce decree of absolvitor, because the report had followed an inquiry into the merits of the dispute between the parties. He submitted that the report had taken the place of proof, and the parties were bound by its terms unless it disclosed a manifest error of law on its face. Errors of fact were not open to challenge. Moreover, it was not a valid objection to the report that an alternative approach might have been taken by the reporter; the way in which an expert sets about his task is not open to challenge. In addition, the reporter was an office holder from the Court; in that capacity he was entitled to the presumption that he had acted regularly and had discharged his duty. Counsel referred to certain of the cases cited on behalf of the pursuers, and also to Hunter v Duke of Queensberry's Executors, 1827, 6 S. 89. On the facts of the present case, a joint remit had been made to Mr Kerr. That meant that the parties had agreed to accept his judgment as to the level of uncertainty that could be accepted in the task of valuing work in progress. The remit in the interlocutor of 20 February 2006 was to value work in progress; on that basis the reporter was not entitled to guess the value of work in progress, or to arrive at an approximate value or a value falling within a range. A person entrusted with making a judgment might form a view on his professional responsibility that the materials given to him did not allow him to form a proper judgment in honour and conscience. That was the reporter's position in the present case. The reporter had tried to perform the task entrusted to him, but had concluded that the records available to him were inadequate for that purpose. The adequacy of the records was a matter for Mr Kerr's judgment. There must always be an element of judgment in relation to the quantity and quality of evidence required to prove any given fact. When a remit was made to a reporter, his judgment had to be accepted as to the materiality and certainty of the figures that were made available, and the use to which those figures could properly be put. In the present case the report was not to inform the Court but was in place of evidence; consequently that judgment was binding. Counsel then dealt with the individual grounds of objection, which are considered below.

[11] The underlying issue is the basis on which parties can challenge an expert report. In my opinion the applicable principles are as follows. In the first place, an expert report can be challenged on any of the standard grounds of challenge to an arbiter's decision at common law. Thus a report can be challenged on the basis that the expert has failed to address his remit fully, or has exceeded or otherwise misunderstood his remit, or has been guilty of some breach of the principles of natural justice, or of corruption. It is also a ground of challenge that the report is ambiguous or uncertain, or that it is unreasonable in its reasoning or conclusions. In the second place, an expert report is also open to challenge if it appears on the face of the report that the expert has misdirected himself in law. This is different from the position of an arbiter. The difference can be explained by the different functions of an expert and an arbiter. An arbiter is normally charged with reaching a decision on both facts and law, and it is well established that his decision on both is immune from challenge at common law. A reporter, by contrast, is normally charged with making findings in fact, or in some cases merely providing the Court with information about the facts. Where there is a remit to a reporter, therefore, questions of law remain under the control of the Court, and the Court can interfere with the findings of the reporter if it appears that he has not applied the law properly. In Edinburgh Northern Tramways Co v Mann, supra, Lord McLaren indicated (at 23 R 1067-1068) that an expert report might be open to challenge if the expert has come to "wrong conclusions on some matter of principle". That case related to an English taxing master to whom the Court had remitted the accounts incurred in connection with the promotion of a private Act. After referring to wrong conclusions on a matter of principle, Lord McLaren gives the example of a finding by the taxing master that the engineer involved in the proceedings was not entitled to remuneration for time and trouble. That seems to indicate that what was envisaged was essentially an error of law, albeit an error which affected the reporter's approach to the facts. A similar point is made by Lord Penrose in Williams v Cleveland and Highland Holdings Ltd, supra, at 401J-K, where reference is made to "some issue of principle identifiable on the face of the report". In the third place, at least in some cases, an expert report can be challenged if the reporter "did not have, or at least did not express, adequate reasons" for his conclusions: Johnston v Johnston, 20 January 1999, at page 5 per Lord Macfadyen. This can perhaps be regarded as an application of the ground of challenge on the basis of an error of law. It may not apply in every case, because in some cases an expert may simply be charged with providing a figure, without reasons. In the normal case, however, adequate reasons will be expected.

[12] Apart from the foregoing grounds, the reporter's conclusions are normally final and immune from challenge. This point is made in Maclaren on Court of Session Practice, at 508:

"If the report has been made on a remit of consent, there can be no objections allowed to the facts found by the report, so far as they are within the terms of the remit".

The reason for this is clear: the purpose of such a remit to a reporter is to obtain a definitive finding on a disputed question of fact, and to do so without recourse to proof in the ordinary way; consequently the reporter's conclusions are binding on the parties. It is of course possible for a remit to provide that the reporter's conclusions should not be binding in the normal way, but such cases are exceptional; that is because the rationale of a remit is to obtain a definitive finding, equivalent to a decision following proof, by means of a procedure that is more informal, and hopefully cheaper, than proof. If objection is to be taken to a report, it is essential that it should proceed on the basis of articulate objections made to the report, on one or more of the grounds stated above. The law is set out in the opinion of Lord Penrose in Williams v Cleveland and Highland Holdings Ltd, supra. After reviewing the authorities, Lord Penrose states, at 401 J-K:

"In my opinion there is no support in any of [the] authorities for the position adopted by the [defenders]. On the contrary the emphasis is on the finality of the reporter's findings subject only to a remit for reconsideration on the basis of articulate objections made to the report provided, and on restricted grounds. Whether a further remit is made must, in my opinion, depend upon the cogency of the objections, considered in the light of the original remit, and on those objections relating to the performance by the reporter of his duty under the remit, or to some issue of principle identifiable on the face of the report".

[13] It is also clear in my opinion that normally the binding nature of a reporter's conclusions extends not only to the terms of the conclusions themselves but also to the method used to arrive at those conclusions, provided that it is within the parameters of the remit. In Williams Lord Penrose states, at 401E:

"In my opinion it is not legitimate for a party to include by way of note of objections contentions on the approach which the reporter might have adopted in carrying out the remit which are in substance innovations on the procedure provided for in the remit, nor to use the procedure by way of objection to present argument which might have preceded the decision, as distinct from criticisms of the decision arrived at by the reporter".

In my view this point can be extended more broadly: in many cases the decision of an expert will depend upon his judgment as to the proper method to be used, and the expert's exercise of that judgment will not normally be open to challenge after the event unless it is outwith the terms of the remit, or unreasonable in all the circumstances. In other words, the expert is responsible not only for reaching a decision but also for determining the precise method that is used in doing so. This point is of some importance in the present case.

[14] In Hunter v Duke of Queensberry's Executors, 1827, 6 S. 89, the Lord Ordinary (Cringletie) stated (at 90):

"If parties have it in their power to be heard, and are heard fully, and after such hearing a report is made,... the parties have no right to assume, as they do here, that the reporters do not judge on the whole of what is laid before them, and more particularly that they proceed on assumption of facts which do not exist".

The Court adhered to this opinion. That seems to me to be a clear application of the more general principle that an officer of the Court is entitled to the assumption that he has performed his duty correctly. That is a further point that is of some significance in this case.

[15] The remit in the present case, which was of consent, was to examine books and other documents as submitted by the parties, to receive the parties' submissions, "and thereafter to assess the value of the work in progress of the firm R.A. Logan & Co, solicitors as at 8 December 2000 and to report the said value to the parties and to the Court". Two important matters emerge in my opinion from this formulation. First, the reporter is intended to produce the "value" of the work in progress. This is something other than a guess or an approximation or a range of values. Secondly, the use of the verb "assess" indicates that the reporter is intended to produce a figure for the value of work in progress, but it also indicates in my opinion that the method that he employs in doing so is a matter for his own judgment; what is contemplated is not the mere mechanical determination of a figure but something more subtle and more complex. That is in any event in accordance with the basic notion of work in progress, which is a matter for the judgment of a trained accountant. On that basis I am of opinion that the remit to Mr Kerr involves an agreement by parties to accept his judgment as to the level of uncertainty that can be accepted in the task of valuing the work in progress.

[16] The reporter's conclusion was that no reasonable or prudent accountant could, given the information available, provide a valuation of work in progress which could be considered to be reasonably accurate: see paragraph [6] above. He accepted that a guess would be possible, but he clearly distinguished a guess from a valuation, and considered that his responsibility to the Court was to provide a valuation rather than a guess. The pursuers' first ground of challenge to this conclusion is the general ground that Mr Kerr had failed to fulfil his remit; his task was to assess the value of work in progress, but he had expressly declined to do so. In my opinion that criticism is misconceived. Determining a figure for work in progress involves important elements of judgment, but the figure that is so determined must be reasonably accurate. In the first place, as indicated in the last paragraph, a direction to "value" the work in progress indicates that something other than a guess or approximation is involved. In the second place, the work in progress figure forms an important component in the firm's accounts, and will be relied upon by the partners of the firm in determining their financial position inter se; it will also be relied upon in determining their tax liabilities, and in some circumstances might be relied upon by third parties such as banks in determining whether to extend credit to the partners. For these reasons it is important that the figure should be substantially accurate. Mr Kerr's view was that, because of the inadequacy of the firm's records, it was impossible to provide anything that could be considered reasonably accurate. In my opinion that is a view that he was entitled to take. So far as the terms of the remit are concerned, his duty was to provide a valuation, not a mere guess; if, therefore, the reporter thought that he could not provide a proper valuation it was his duty to say so. Moreover, the reporter's conclusion cannot in my view be criticized at a general level as unreasonable; he makes it clear that his inability to reach a definite opinion on the value of the work in progress was the result of the lack of records, and he describes what was missing in some detail. Counsel for the pursuers pointed out that the deficiencies were not total, he submitted that the gaps could be filled by making appropriate estimates. In my opinion it is clear from his report that Mr Kerr considered whether he could follow such a course and concluded that he could not. It seems to me that he was well entitled to reach that conclusion; the figure for work in progress is a global figure, and if any of the major components is incapable of sufficiently accurate valuation the global figure must collapse.

[17] The pursuers' second criticism of the report related to the lack of intelligible reasons for the conclusion reached on the valuation of summary legal aid fixed fee cases. In summary, the contention was that the reporter should have followed the practice of the Scottish Legal Aid Board and attributed a value of £250 to incomplete cases. The reporter's response was that generally accepted accounting principles require that a fixed fee should be apportioned on the basis of the work undertaken; this should be apparent from the file. In my opinion that reason is intelligible. Moreover, it appears to be founded on accounting practice. When the Court remits a matter involving professional practice to an expert reporter, one of the purposes is to permit the reporter to form a view on professional practice. In my opinion his view on what is proper practice cannot be challenged at this stage. In addition, the practice of the Legal Aid Board can scarcely be decisive in relation to the firm's accounts. The practice is followed, obviously as a matter of practical expediency, when a file is transferred from one firm to another; the present case, by contrast, involves the accounts of the firm on the defender's resignation. In that situation greater precision might be expected for two reasons: first, the purpose of the accounting exercise was to fix the partners' whole rights and obligations inter se, a much more far-reaching exercise; and secondly the number of files involved was clearly much greater, with the result that the effect of any inaccuracy might be multiplied. The result is that I cannot hold that the reporter was wrong in refusing to follow the practice of the Legal Aid Board.

[18] The pursuers' third criticism of the report related to solemn criminal cases; the reporter had failed to apportion each account because tracing numbered remittances to the day book to identify file references was impracticable. It was submitted that that might make the task onerous, but did not make it impractical. The reporter commented that the "shambolic nature" of the pursuers' records made an accurate valuation almost impossible, and mentioned that that view had been concurred in by the pursuers' law accountant. Apportioning the sums due in respect of solemn criminal cases obviously involves the reconstruction of certain of the firm's financial records. In that situation it is a question of judgment as to whether the time and cost involved is worth while. The reporter considered that issue and concluded that the effort involved was not justified. In my opinion the reporter was entitled to come to such a conclusion. This is essentially an aspect of the method that is used to fulfil the reporter's remit. As indicated above at paragraph [13], the reporter's judgment on the method that he adopts in fulfilling the remit will not normally be subject to challenge after the event. In my opinion that principle applies to the present case.

[19] The fourth criticism of the report related to civil files, where it had been noted that not all files were available but no attempt was made to quantify what was missing, nor to consider whether any difficulty caused by missing files could be dealt with by using an assumption or estimate; nor was reference made to conveyancing or executry files. The reporter provided a detailed response to this criticism, which is set out at paragraph [8] above. The essential point of that response is that primary documentation was missing; thus it was impossible to know how many files had a work in progress value as at 8 December 2000. In my opinion that answer is clearly correct; it is impossible to know what is missing unless one knows what was there in the first place, and the reporter's complaint is that the latter information was not available. The reporter was further of opinion that it was impossible to use an assumption to deal with this problem. Once again, that answer seems to be clearly correct, and was in any event one that the reporter was entitled to give. The critical point here seems to be that it is impossible to know the scale of the work contained in the missing files. In relation to conveyancing and executry work, the reporter considered that the absence of an unknown number of files made accurate valuation impossible. This involves essentially the same argument as the reporter's earlier answers: it is impossible to know what is missing, and therefore an accurate valuation is impossible.

[20] The fifth criticism of the report related to the reporter's reference to civil cases valued at £22,000 that had not been paid five years later. The reporter commented that that suggested that the pursuers' valuation of work in progress was materially inaccurate. In my opinion the reporter was well entitled to draw that conclusion; indeed, it seems obvious.

[21] The sixth criticism of the report related to Mr Kerr's assumption that a list of 1400 files was an accurate record of all files opened in the accounting period to 8 December 2000. The pursuers contended that the report was inaccurate, and that that had been explained to the reporter's representatives at a meeting held on 6 June 2006. The reporter stated that his colleagues who had been at the meeting were clear that no such explanation had been given. It is clear that in this case there is a difference of fact between the parties. The purpose of a remit, however, is to serve as a substitute for proof. In these circumstances it is not in my opinion appropriate to order that evidence be led on matters arising out of the remit. The reporter is an officer of the court, and is accordingly entitled to the presumption that he has performed the duties of his office properly. In any event, questions of fact are for the reporter, and cannot be reopened after he has reported. That is so even if he has made a mistake, unless on the face of the report the mistake can be considered one that no reasonable reporter, possessing the skills appropriate to his task, could have made. That cannot be said in the present case.

[22] The seventh criticism of the report related to Mr Kerr's mentioning an additional 50 files which did not feature in the pursuers' valuation. It was said that an explanation had been given by the pursuers at the meeting held on 6 June 2006; on that basis, the files had been properly excluded. In his response to the note of objection Mr Kerr stated that his colleagues who had attended the meeting on 6 June 2006 were clear that no explanation had been provided. Once again, therefore, a dispute of fact arises. The proper approach is in my opinion that stated in the last paragraph; it must be presumed that the reporter has performed his task correctly. I should add that, even if the reporter had been in error on this point, he had other reasons for forming the view that the pursuers' valuation of work in progress was not correct, and on his general approach that would have been sufficient to invalidate that valuation.

[23] The eighth criticism of the report was that the reporter had failed to consider the possibility that the parties might agree items where precise apportionment was difficult. In his response to the note of objection Mr Kerr stated that the note of objection was the first occasion when it had been suggested that the parties might reach agreement on such a basis. The reporter did not consider his role to involve mediation between the parties. In my opinion that is clearly correct; the reporter's duty was to reach a valuation of work in progress; it was not to act as a mediator.

[24] The ninth criticism was that the reporter had made no attempt to assess whether work in progress could be calculated by treating it as a proportion of annual turnover. The reporter did not respond to this criticism. Nevertheless, it seems to be covered by his general observation that, in view of the inadequacy of the records, it was impossible to come up with any accurate figure. In relation to percentages of turnover, it cannot be assumed that the percentage is constant throughout the year. Invoices are frequently issued and debts collected at particular times during the year, and these have a direct effect on the figures for work in progress, debtors and cash. Thus all those figures may tend to vary during the year. The exercise that had to be carried out by the reporter does not relate to a year end but to a time during the partnership's financial year. Thus the use of percentages would be essentially speculative.

[25] The tenth and final criticism of the report was that, although the reporter stated that work in progress should be valued at the lower of cost and net realizable value, no attempt had been made to consider whether cost was capable of being valued; cost would consist of overhead and salary costs and a notional cost for the time of profit-sharing partners. The reporter's response was that he had been instructed as a man of skill to examine the books and records of the firm and to assess the value of work in progress. The method suggested by the pursuers would produce a figure, but it would be impossible to say with certainty that that figure was even remotely accurate. In my opinion this is a clear example of the reporter's exercising his professional judgment in determining how to set about his task. His exercise of judgment cannot be criticized at this stage on the mere ground that it was exercised wrongly. In addition, the pursuers suggested in their note of objection that information might be derived from the accounts prepared for previous and subsequent years in order to discover overheads. That practice is subject to the difficulty referred to in the last paragraph, that the present case involves a valuation in the course of a financial year, when costs may for various reasons be at a misleading level. In addition, I am of opinion that this ground of objection faces a logical difficulty: if work in progress should be valued at the lower of cost and net realizable value, it is impossible to say which is lower without knowing both figures. Cost would be higher than net realizable value if the firm were trading at a loss. The reporter had found that it was impossible to estimate net realizable value, and consequently he could not complete the exercise on the basis suggested by the pursuers.

[26] On the foregoing basis I am of opinion that none of the grounds of objection stated by the pursuers has been established. The result is that Mr Kerr's report must stand. His conclusion in that report was that he was unable to value the work in progress of the firm has at 8 December 2000, owing to the deficiencies in the firm's records. The consequence of that is in my opinion that the parties are bound by the reporter's conclusion, in the same way as they would have been bound had the valuation of work in progress gone to proof and the court concluded after hearing expert evidence that valuation was impossible. The remit to the reporter was made in place of proof, and the result is the same. Consequently the pursuers have failed to prove that the firm's work in progress had any value as at 8 December 2000.

[27] The significance of that failure is in my opinion as follows. In the accounts put forward by the pursuers in support of their claim the work in progress is valued at £126,342. That figure has not been proved. That is not the same, however, as saying that the work in progress was worth nothing. It is not disputed that the firm had work in progress, but the value of that work in progress cannot be ascertained. As counsel for the defender expressed the matter, the value of the work in progress is "blank"; "blank" is not the same as "nil". The logic of this is that the pursuers have failed to prove the value of the assets of the firm as at 8 December 2000. That feeds through to the partners' capital accounts, which are necessarily dependent on the valuation of the firm's assets. That means that no figure can be ascertained as the sum standing at any partner's capital account. The pursuers contend that the defender's capital account disclosed a negative balance of £95,484, with the result that that sum is due by him to the continuing partners. That figure of £95,484 is unsupported, however, and no other figure has been proved in its place; the amount of the defender's capital account is simply unknown. The result of that is that the pursuers must fail in the present action. This is not obviously unfair; the pursuers' failure to prove their case results from the inadequate nature of the firm's accounting records, and that is a matter for which the pursuers must bear a large part of the responsibility.

[28] In view of the terms of Mr Kerr's report, the defender enrolled a motion for absolvitor from the conclusion of the summons. Following the decision that I have reached on the import of Mr Kerr's report, I am of opinion that the motion for absolvitor must be granted. The remit to the reporter was the equivalent of proof, and the report was in modo probationis. Consequently absolvitor rather than dismissal is the appropriate remedy. In view of that decision, I am of opinion that the defender is entitled to the expenses of process, and I will accordingly make such an award.