Scottish Court of Session Decisions

Pursuer: Miss Hamilton; Maclay Murray & Spens LLP

Defender: Upton; Balfour + Manson LLP

24 June 2009

[1] In this action the pursuer, who is the Receiver of Bluepool AG, a company established under the laws of Germany, sues for a decree ordaining the defender to execute and deliver a standard security over property at Cragganard, Abriachan, Inverness-shire, pursuant on an alleged undertaking by the defender contained in a letter dated 5 January 2003. The pursuer also sues for payment of the sum of €2, 913, 382.97 as the sum said to be due by the defender under a contract for the construction of a building on the land owned by the defender at Cragganard.

[2] The defender took a plea of no jurisdiction. Following a preliminary proof I repelled that plea for the reasons that are set out in my Opinion dated 16 October 2008.

[3] The action came before me again on 9 June 2009 for consideration of three motions on behalf of the pursuer: (1) to recall the sist pronounced on 29 January 2009 to allow the defender to apply for legal aid; (2) to certify Dr Andreas Hacke as a skilled witness and to certify that it was reasonable for the pursuer to employ Dr Hacke to make investigations and to report; and (3) to award the expenses of the preliminary proof on jurisdiction in favour of the pursuer. Only the third of these three motions was marked as opposed by the defender, it being her position that the pursuer's motion for expenses ought to be reserved. The pursuer was represented by Miss Hamilton, advocate. Miss Hamilton had appeared at the preliminary proof. The defender had not been represented at the preliminary proof but, having been granted legal aid, she was now represented by Mr Upton, advocate.

[4] Mr Upton began by accepting that it was both competent and usual for the question of expenses to be addressed at the end of each part of process during the course of the case (the modern practice is described in Macfadyen (ed.) Court of Session Practice at paragraph L[3]). However, he reminded me that until the enactment of the Court of Session Act 1988 reservation of expenses until the end of all proceedings in a case was the rule: Maclaren Expenses at p. 35.

[5] While he offered no opposition to the certification of Dr Hacke as a skilled witness in terms of Rule of Court 42.1.3(3), Mr Upton submitted that there were circumstances relating to the preliminary proof which made it appropriate to depart from what was now the usual rule and to reserve expenses until the conclusion of the proceedings. First, while the defender was now an assisted person she had not been an assisted person at the time of the preliminary proof. According to her she had specifically asked her former solicitors whether she was eligible for legal aid. They had not explained to her that a grant of legal aid was an option. This was despite the fact that, as Mr Upton understood it, it was always the duty of a solicitor to advise his client of this option. The defender's position is that she would have applied for legal aid prior to the preliminary proof. Had she done so her own judicial expenses would have been met and there would have been the possibility of modification of her liability to the pursuer. The importance of this was that the defender intended to make a claim for damages against her former solicitors in respect of their professional negligence. Advice had been sought from a suitable expert with a view to supporting such a claim (but, as I understood Mr Upton, not yet obtained). If there was liability on the part of the former solicitors, they were entitled to require the defender to mitigate her damages. The defender therefore had an interest in allowing them the opportunity to put forward any argument that might be made to the effect that the defender should not be found liable to the pursuer in the expenses of the preliminary proof. The defender was not, however, in a position to invite her former solicitors to make such comment until her claim was formulated in the light of the expert's report.

[6] Mr Upton emphasised that determination of the point on jurisdiction by no means marked the end of procedure in the case. On the basis of the information available to him there appeared to be a substantial basis for a defence and for a counterclaim. In short summary, the building contract only provided for payment on completion if interim payment had been agreed. The pursuer had made no averments about the completion of the contract and indeed it was quite clear that Bluepool had not completed the contract, and there was no averment about agreement of interim payments. Accordingly, unless German law was different from Scots law on this point, the defender was entitled to retain any payment otherwise due against her claim for damages. Moreover, there appeared to be a point of prescription or limitation available under German law which parties were agreed was the proper law of the contract. Thus, on any view the liability of the defender to make payment was an open question and there was the additional question of what might arise from the pursuer, who was an officer of the court in the German insolvency proceedings, having raised an action which was clearly time-barred.

[7] Mr Upton developed the points he had made about the availability of a defence to the action into a submission that there was at least a question mark over the propriety of the pursuer, whom he emphasised was an officer of the court, bringing the action at all. He drew my attention to paragraph 4 of a Minute of Amendment which he tendered on behalf of the defender. In that paragraph there were a number of statements attributed to the pursuer and made either when reporting to creditors of Bluepool or when giving information to the Stuttgart Prosecutor's Office in relation to the conduct of the affairs of Bluepool. With reference to the claim against the defender, it was said by or on behalf of the pursuer that:

"The claim will be hard to collect; hence it is not of any value. This is even more likely as the client has claimed extensive defects;"

"[The claim] obviously is not recoverable. Examination showed that the contract does indeed include invoicing based on hours worked, but Bluepool has not issued any activity documentation. Without any lawful documentation and auditable final invoice is impossible to compile retrospectively;"

"We have had the situation examined by an expert for construction and building. He assessed that the claim cannot be enforced lawfully... as far as I know Wittke claims defects. Whether these claims are eligible I cannot say... there is no lawful final invoicing; hence we cannot take any further action...;" and "the invoice was assigned to the banking pool."

Mr Upton accepted that the accuracy and provenance of these alleged statements would have to be established and that consideration would then have to be given to their effect. But, if proved, they might provide a basis upon which it could be said that the pursuer had brought proceedings in respect of a claim to which she knew she was not entitled. That might at least allow it to be argued that despite the success she had enjoyed in the preliminary proof, she should not be awarded expenses. In all the circumstances it was appropriate to reserve any determination of expenses at this stage.

[8] In a succinct response, Miss Hamilton emphasised that expenses usually were dealt with after a discrete step in procedure had been completed. Any claim that the defender may have against her former solicitors could be pursued irrespective as to when the award of expenses was made. Despite what Mr Upton had said, no defence of prescription or limitation had yet been pled, either in the defender's current pleadings or in terms of the Minute of Amendment. The provenance of the statements attributed to the pursuer had not been established. This was not a case of divided success. The pursuer had been completely successful in the preliminary proof. She was entitled to an award of expenses.

[9] Miss Hamilton was indisputably correct when she said that the pursuer had achieved complete success at the preliminary proof. There is no issue about the certification of Dr Hacke. It would be in terms of the usual practice since the coming into force of the Court of Session 1988 Act to make an award of the expenses associated with that proof in favour of the pursuer at this stage in the proceedings. Nevertheless, albeit with some hesitation, I have been persuaded to reserve expenses. I do so because it is possible that as the action proceeds and a better appreciation of parties' respective positions can be made, the view might become arguable that it would not be appropriate to award all or any of the expenses of the preliminary proof to the pursuer. I express no view on the matter but I am persuaded that a possibility is enough to justify deferring consideration of the question of the expenses of the preliminary proof. At the request of Miss Hamilton, I shall reserve the question of expenses "in hoc statu". Whether the addition of these words has any real effect must be questionable but I would wish to emphasise that my decision is to reserve the consideration of the question of expenses to a later date, it being open to the pursuer to renew her motion at such stage in the proceedings as she considers appropriate. I do not intend to imply that the time for consideration of the liability for expenses in relation to the preliminary proof should necessarily be deferred until the end of the proceedings.

[10] Rule of Court 42.1.3(3) provides that the court may certify a witness as a skilled witness on granting a motion for that purpose "before or at the time at which it awarded expenses or on a motion enrolled at any time thereafter". Accordingly that I have reserved consideration of the expenses of the preliminary proof at which Dr Hacke was a witness does not prevent him being certified at this stage as a skilled witness whom it was reasonable to employ to investigate and report. I shall so certify him.