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Cite as: [2008] ScotCS CSOH_181, 2009 GWD 1-8, 2009 SLT 553, [2008] CSOH 181

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OUTER HOUSE, COURT OF SESSION

[2008] CSOH 181

CA91/04

OPINION OF LORD DRUMMOND YOUNG

in the cause

LUJO PROPERTIES LIMITED

Pursuers;

against

SCHUH LIMITED

Defenders:

________________

Pursuers: Reid, QC; McClure Naismith

Defenders: Sandison; Morton Fraser

23 December 2008

[1] The pursuers are the proprietors of a property situated in Sauchiehall Street, West Nile Street and East Bath Lane, in Glasgow. The property consists of a building that is let for use as shops and offices. The defenders are the tenants of premises situated on the ground, first, second and third floors of the property. Certain other parts of the property are let to the Royal Bank of Scotland PLC. The leases in favour of both of those tenants impose certain obligations relating to the maintenance and repair of the common parts of the property; in particular, the tenant is obliged to contribute towards the cost of any works on the common parts. From February 1999 onwards flooding occurred intermittently in the basement of the building. It was discovered that this was the result of cracking in the tanking that had been placed around the basement. As a result repair works were required. These were instructed by the pursuers, and were duly carried out. Thereafter the pursuers raised the present action against the defenders to recover a proportion of the cost of the works of repair and associated professional fees. The action was grounded on the terms of the lease between the parties. At the same time the pursuers raised a further action against the Royal Bank of Scotland to recover a proportion of the cost of the works of repair. That action was grounded on the terms of the lease between the pursuers and the Royal Bank. It was a matter of agreement that the two leases were in substantially similar terms apart, obviously, from the parties, the subjects and the amount of the rent and other sums due under the lease. Consequently the pleadings were almost identical in each case. It was accepted by the pursuers that they were bound to succeed or fail against both defenders, in respect of both merits and quantum.

[3] Thereafter the pursuers' account of expenses was remitted to taxation. In advance of the diet of taxation the defenders lodged points of objection with the Auditor of Court, in which they objected to numerous entries in the account which, they submitted, related to the action against the Royal Bank as well as the present action. The defenders objected to the failure of the pursuers to apportion those entries between the two actions, on the ground that the two actions had run in tandem and much of the work in respect of the actions was duplicated; the pursuers' account of expenses did not take account of the duplication. At the diet of taxation the pursuers advanced oral argument in response to the objection on the ground that the action against the Royal Bank had been settled extrajudicially on the ground that no expenses would be due to or by either party. As a result, they argued, there was no reason for reducing the award of expenses in the present action, which would confer a windfall benefit on the defenders.

[4] The Auditor in large measure sustained the defenders' objection. In particular, a significant number of the fees and their outlays included in the pursuers' account were reduced significantly, in some cases by 50%, and the total sum included in the account was reduced by more than 60%. Thereafter the pursuers lodged a note of objections to the Auditor's report in which they reiterated the arguments presented at the diet of taxation. The Auditor then lodged a minute in response to the note of objections. In his minute the Auditor stated that the matter for the court's determination is whether he was entitled, on the submissions at taxation, to apply abatements of 50% to entries in the account of expenses. After summarizing the history of the action, he stated that the pursuers' account of expenses was presented as if this action were the only action arising out of the same question. No explanation had been given of the terms a settlement between the pursuers and the Royal Bank. The Auditor continued:

"In the Auditor's considerable experience, where an action settles on a no expenses due to or by basis, it is most unusual for there to be no specific agreement to the level of expenses agreed in the overall terms of settlement. This is particularly the case here where three days of evidence were heard before the Commercial Court and it is inconceivable that the settlement with Royal Bank of Scotland did not include a payment of expenses. The position was never fully explained to the Auditor".

The Auditor also referred to the Faculty Services fee notes, where certain fees were said to be apportionable between the two actions, and to vouchers produced by an expert witness, which referred to work undertaken with regard to both actions.

[5] A hearing was fixed on the pursuers' note of objections to the Auditor's report, at which counsel for both parties presented arguments. Counsel for the pursuers accepted that the pursuers' solicitors should not be paid twice for the same work or reimbursed twice for the same outlays. Consequently any charge for work that involved mere duplication should be discounted. He further accepted, under reference to Rule of Court 42.10(1), that only such expenses as are reasonable for conducting the cause in a proper manner should be allowed. He nevertheless submitted that, where several actions are raised and the pursuer is successful against one defender with a finding that he is entitled to expenses from that defender, the pursuer is entitled to the whole of the reasonable expenses to which he has been put in having to proceed against that defender. That rule applied to the present case. The Auditor was not, in the exercise of his discretion, entitled to convert an agreed finding of liability for unrestricted expenses of process into a qualified finding of liability for half of the expenses of process. That, counsel submitted, is what happened in the present case. In support of his argument counsel referred to a number of cases; I discuss these below.

[6] Counsel for the defenders submitted under reference to Wood v Miller, 1960 SC 86, that the grounds on which the court can interfere with a decision of the Auditor are limited; they are confined to errors of law, or a lack of factual material to support a decision, or unreasonableness. Counsel then referred to two cases, Keith v Smart, 1833, 11 S 530 (a case cited by the pursuers) and Magistrates of Campbelton v Galbreath, 1845, 7 D 828, which he submitted were the only two cases directly in point in the present action. On the basis of those cases, he submitted that, when a pursuer raises a single action or concurrent actions against more than one defender, and those actions involve the same issue (that being crucial), and the pursuer incurs expenses in common in the preparation of his case against each defender, those expenses are not properly chargeable against one defender alone as expenses of the case against him.

[7] In my opinion the Auditor's approach was correct. The present action was one of two actions raised by the pursuers which involved substantially identical issues, although they were brought against two different defenders and the grounds of action were technically distinct in both fact and law. The two actions proceeded in tandem, and were appointed to the same diet of proof. The same counsel and the same expert witnesses were employed by the pursuers in both actions. In these circumstances it is clear that there would be a substantial duplication of effort. Against that background, the issue that arises is the meaning of the unqualified finding of liability in expenses of the cause that has been made against the defenders. In my opinion the principle that applies in a case such as the present is this: where expenses are incurred in proceedings against more than one defender that are based on substantially the same grounds of action, those expenses must normally be apportioned among the defenders, with a result that each defender is only liable for a proportionate part. That in my opinion is the meaning of an unqualified finding in expenses in such a case. The principle applies in the normal case, but exceptional cases may exist. For example, where one or more actions are raised against two defenders for a single debt and the debt is found to be the liability of one defender only, it may be appropriate to make that defender liable for the whole expenses of process (Stewart v Robertson, 1852, 15 D 94). Likewise, where one or more actions arise out of a single delict that is said to have been committed by more than one defender but only one defender is found liable, liability for the whole of the pursuer's expenses may be appropriate (Crawford v Adams, 1900, 3F. 296). Other exceptional cases may exist, turning on their individual facts. Nevertheless, the general rule is that expenses that are common to more than one action brought on the same grounds must normally be apportioned. Consequently, when there is an unqualified finding of expenses in one such action, that implies that the common expenses will be apportioned, and only the due proportion will be payable by the defender against whom the finding is made.

[8] The general rule is in my opinion established by two cases, Keith v Smart, supra, and Magistrates of Campbelton v Galbreath, supra. In Keith the pursuer raised three separate actions in connection with the sale of certain bank stock, in each case concluding for reduction of the sale by the particular defender. The question raised in each action was whether the sale had been induced by fraudulent misrepresentation or concealment on the part of the relevant defender as to the solvency of the bank. Two of the actions were compromised, with each party paying his own expenses. The third action went to jury trial, as a result of which judgment was given against the defender with expenses. When the account of expenses was laid before the auditor the defender objected that a large proportion of the charges for preparation of the action had reference equally to all three defenders and that they ought not to form a charge against the remaining defender alone. The pursuer contended that all of the business charged was truly necessary for the action against the remaining defender, and that that defender ought not to be relieved merely because the work might have been useful as against the other two defenders. The Auditor reserved the point for consideration of the court. The Second Division held that business common to all three parties ought not be charged as against one only, and remitted to the Auditor to tax and report on that principle. The facts of that case and the arguments advanced seem to me to be similar in all respects to the present case. In Magistrates of Campbelton v Galbreath, a single action was raised against a number of defenders. After some time certain of the defenders consented to decree, and the pursuer took no finding of expenses against them. The remaining defender continued to resist the action but was unsuccessful. In disposing of the pursuer's claim for expenses the court deducted one half as the sum of which the remaining defender would have been relieved by his co-defenders had the pursuer not passed from his claim for expenses against them. Once again, this case appears to me to vouch the principle stated above.

[9] Other cases were cited by the pursuers, but they are all in my opinion consistent with the general principle that I have followed; in each case special reasons existed for not following the principle. In Cowan v Campbell, 1833, 12 S 221; 1834, 12 S 359, the pursuer raised proceedings for wrongous apprehension and imprisonment against four defenders. The jury found in favour of three defenders but awarded damages of one shilling against the fourth. The pursuer was found entitled to expenses. The First Division, of consent, modified the pursuer's account of expenses against that defender to one half in respect that part of the record and proof adduced applied to the defenders who were assoilzied and not to the defender against whom the pursuer succeeded. The defenders who were assoilzied maintained distinct pleas, and at the trial additional proof was led against them. The case is thus distinguishable from the present, in that the grounds of action were quite distinct. Nevertheless, nothing said in the case casts any doubt on the principle stated above. In Stewat v Robertson, supra, the pursuers brought an action against two defenders, a father and son, as conjunctly and severally liable for a debt of £200. The Lord Ordinary assoilzied the son and found him entitled to his expenses but found the father liable for the debt. The Auditor remitted to the court the question as to whether the expenses down to the date of the Lord Ordinary's decision ought to be abated by one half as applicable to the successful defender. The Second Division was of opinion that no separate expense had been incurred in the procedure against the son and refused to make any deduction from the pursuers' account. The critical point in this case is in my opinion that a single debt was involved, the question being who was liable for that debt. The present case, by contrast, involves two district liabilities.
[10] In Elmsly v Duncan, 1857, 20 D 307, four actions of damages arising out of a single libel were raised against the same defender, and were conducted by the same agents. The First Division held that only one charge should be allowed in relation to attendances and the writing of letters, which covered exactly the same matters in all four cases. The applicable principle is clearly that a solicitor should not be paid more than once for the same item of work. In Macleod v Heritors of Morvern, 1870, 8 M 528, a parish minister raised proceedings for augmentation in the event of its being shown that there was free teind. He condescended on twelve subjects as unvalued, those subjects belonging to four heritors. Answers were lodged for each of the heritors. The Inner House held that all of the subjects except one had been valued. They found the pursuer entitled to his expenses, subject to modification, against the proprietor of the unvalued subjects, and liable in expenses to the three other heritors, whose subjects had already been valued. Lord Cowan, who delivered the opinion of the court, began his opinion by stating that it was not necessary to lay down any general rule, but that the case might be dealt with on its own circumstances. He continued:

"The minister was bound to bring the parties into the field who, as he thought, had free teind, and Mrs Campbell Paterson [the unsuccessful defender] has been found wrong in her pleadings with him. I see no reason, therefore, why the minister should not get the full expenses of which Mrs. Paterson has been the sole cause".

The court did, however, modify the expenses, reducing them by approximately 20%. I do think that any general principle can be drawn from this case; it turned on its own facts and on the specialties of teind procedure. In particular, Lord Cowan notes that the minister was obliged to bring into the proceedings those whom he thought to have free teind.

[11] In Crawford v Adams, supra, the pursuer raised two actions against separate defenders in respect of certain letters that were alleged to be defamatory; one defender, Adams, was the individual who had instructed the letters and the other, Dunlop, was Adams' law agent, who had written the letters on his instructions. The pursuer alleged that those letters contained expressions which showed that Dunlop had adopted the statements as his own. The two cases were heard together in a single jury trial, at which the two defenders were represented by the same counsel and agents; the jury found for the pursuer against Adams but against the pursuer in the action against Dunlop. It was held by the Second Division that the pursuer was entitled to the whole expenses incurred by him, including his own expenses at the trial, against Adams, as these were expenses to which the pursuer was put by having to proceed against Adams and nothing more. Dunlop was awarded his full expenses down to the trial and one half of the defenders' expenses at the trial; that represented the outlays to which Dunlop had been put in the action. The distinctive feature of the case, however, was the fact that it involved a single delict which had been instigated by Adams; both actions arose out of precisely the same letters, which had been written on Adams' instructions. The difference between the two defenders was that the pursuer required to establish malice to succeed against Dunlop (see the earlier report of the case at 2 F 987). In the circumstances it is entirely understandable that Adams was held responsible for the whole expenses of the trial, since it was necessitated by his actions. In the present case, by contrast, the grounds of action against the two defenders, the present defenders and the Royal Bank, are factually and legally distinct. I am accordingly of opinion that Crawford is readily distinguishable from the present case.

[12] Counsel for the pursuers further relied on the proposition that the Auditor was not entitled to convert an agreed finding of liability for unrestricted expenses into a qualified finding of liability for half of the expenses of process. In support, he cited the decision of Lord Guthrie in O'Reilly v Turnbull, 1908, 16 SLT 519. So far as it goes, I am of opinion that that proposition is quite correct. Nevertheless, the critical question in the present case is the meaning of the expression "expenses of the cause" as used in the interlocutor awarding expenses to the pursuers. In the circumstances of the present case I am of opinion that that expression bears the meaning set out at paragraph [7] above.

[13] Finally, I should mention a further point made by counsel for the pursuers. He submitted that, if the defenders were not found liable for the whole expenses of process, that would amount to a windfall benefit to them. I do not agree. If the defenders had been the only party sued they would clearly had been liable for the whole of the pursuers' expenses. That was not what happened, however; an action was raised against another defender, and many of the expenses were common to the two actions. The Auditor's decision does no more than take account of that fact. The reason that the pursuers will not recover the whole of their expenses is that in the settlement reached with the Royal Bank they did not stipulate for a finding of expenses. That was their decision, and they must live with its consequences. By contrast, the present defenders were not a party to that settlement and cannot be held in any way responsible for its terms. In the circumstances it seems to me that it would be unfair to make them liable for the whole of the expenses that were common to both actions.

[14] For the foregoing reasons I am of opinion that the Auditor was correct in the approach that he took. I will accordingly repel the note of objections. It was agreed by counsel that the expenses of the present hearing should follow success. I will accordingly award those expenses to the defenders.