Pursuers and Reclaimers: SC Smith; MacRoberts

Defenders & Respondents: Howie QC, GJ Walker; Wallace Construction Law

First Third Parties : Howie QC, GJ Walker; Simpson & Marwick

Third Parties to the First Third Parties : Howie QC, GJ Walker; Semple Fraser

28 April 2010

[1] The only outstanding issue in this reclaiming motion against the commercial judge's interlocutor of 8 October 2009 relates to the award of the expenses of the proof made in favour of the first third parties and their third parties against the pursuers.

[2] The pursuers raised the action against the defenders, claiming some two million pounds in damages in respect of the defective design and construction of the roof over their new potato processing and packing plant in Airdrie. The defenders had been contracted by the pursuers to design and construct the plant, including the roof. In its finished state, the roof leaked. The pursuers' contention was that it required to be entirely over-cladded and not simply repaired. The defenders' response to the summons was to introduce two third parties into the action; the first third parties (Atlas Ward) being the nominated sub-contractors for the design and construction of the roof. The first third parties in turn introduced their own third parties (Briggs Amasco), to whom they had sub-contracted the roofing works.

[3] Although the defenders disputed quantum of damage in general, it was Briggs Amasco who made a positive case that the roof could be adequately repaired by using a particular coating system bearing the trade name Kemperol. The defenders and Atlas Ward adopted Briggs Amasco's averments about the utility of the Kemperol system.

[4] By interlocutor dated 6 October 2008, the commercial judge allowed the parties a proof before answer. At a procedural hearing on 17 November 2008, the pursuers' first plea-in-law, relating to the defenders' liability to pay damages for breach of contract, was sustained of consent. The only issue therefore between the pursuers and the defenders was quantum of damage. Since the pursuers did not direct any case against any of the third parties, that remained the only issue involving the pursuers.

[5] In an interlocutor following upon a motion roll of 13 January 2009, it was recorded that: "... it has been intimated to the court that contributions as between the defenders, Atlas Ward ... and Briggs Amasco ... has been agreed ...". Thereafter these parties were all represented by the same counsel, although they each continued to have separate agents. In a communication recorded in the Interlocutor Sheet and dated 27 January 2009 it was noted that: "... parties have intimated to the Court that the issue of liability as between the defenders and the various third parties ... has been agreed ...". This related to the residual case involving the second third parties. By this time, the proof diet had been re-scheduled to commence on 9 February 2009. The second third parties were assoilzied, in terms of a Joint Minute between the defenders and the three third parties, by interlocutor dated 19 February 2009; by which time the proof, which lasted some nine days, appears to have been completed and the commercial judge had made avizandum.

[6] Although the interlocutor of 13 January 2009 had recorded that there was an agreement between the defenders, Atlas Ward and Briggs Amasco, which settled all their differences, this does not appear to have been expressed in any joint minute. Nor was any agreement followed by a formal interlocutor recording the consequence of the resolution of their dispute. Despite the absence of any conflict between these three parties and the absence of any case directed by the pursuers against any of the third parties, both Atlas Ward and Briggs Amasco remained in the process. At the proof, the same counsel expressly represented each of the defenders, Atlas Ward and Briggs Amasco, although, as before, they continued to have separate agents.

[7] During the proof, the pursuers called seven witnesses, including Iain Fergusson, a chartered architect, and John Gallagher, a chartered surveyor, each of whom favoured the over-cladding solution. The commercial judge recorded in his Opinion that it was both the defenders and third parties who called Keith Roberts, a chartered civil and structural engineer, and Thomas Blois-Brooke, a consulting engineer. Both of these witnesses had originally been instructed for Briggs Amasco. The defenders' own expert, Jack McKinney, was not called. The Court was informed that the two experts called had both been paid by the third parties.

[8] On 8 October 2009, the commercial judge determined that the appropriate measure of damages was by reference to the Kemperol system and that over-cladding would be an unreasonable measure of loss. He preferred the evidence of Mr Roberts and Mr Blois-Brooke to that of Mr Fergusson and Mr Gallagher. On the question of the expenses of the proof, which were treated as a discrete element in the cause, the commercial judge pronounced the following (part) interlocutor:

"2. finds the pursuers liable to the defenders and to each of the first third party (Atlas Ward...) and the third party to the first third party (Briggs Amasco...) in the expenses of the proof...

3. certifies Mr...Blois-Brooke, Mr... Roberts and Mr... McKinney as skilled witnesses for the defenders and each of the first third party (Atlas Ward...) and the third party to the first third party (Briggs Amasco...)...".

[9] There had been no opposition to finding the pursuers liable to the defenders in the expenses of the proof. There was also no complaint about the manner of the certification of the skilled witnesses. Exception was taken, however, to making the pursuers liable to the two third parties, against whom they had presented no case. The commercial judge explains his decision as follows:

"Senior counsel for the defenders and third parties indicated that representation for the defenders and third parties was conjoined. ... I was told that both Mr Roberts and Mr Blois-Brooke had been instructed on behalf of the third parties and not on behalf of the defenders, but the interests of the defenders and the third parties in this respect were identical. He submitted that it would be unfair if the expenses occasioned by the leading of these witnesses were not to be recoverable simply because they had been instructed on behalf of the third parties and not by the defenders themselves.

... I found the evidence of Mr Roberts and Mr Blois-Brooke to be of considerable assistance. It did not seem ... to be equitable that the pursuers might escape liability for the expense of leading these witnesses merely because they had prepared reports on the instructions of the third parties and not the defenders. It was for this reason that I made the finding I did in paragraph 2 of the interlocutor dated 8 October 2009. As representation on behalf of the defenders, the first third party and the third party to the first third party was conjoined at the proof, it was not my intention to increase the pursuers' liability in expenses. Rather it was my intention to find the pursuers liable in the expenses of the proof arising from the instruction of senior and junior counsel, the attendance of an agent from one firm of solicitors, and the costs of instructing the two expert witnesses".

[10] The pursuers submitted that the commercial judge had erred in his approach. First, since the pursuers had not adopted the defenders' case against the third parties, there was no basis in principle for making the pursuers liable for the expenses of those third parties. Secondly, there had been no need for the third parties to have participated in the proof at all, although they were entitled to do so. Whereas it was appropriate for the Court to grant expenses in favour of a successful party brought into an action by an unsuccessful party, the question of what was recoverable was a matter for the Auditor. An award of expenses should not be a device to ensure that certain items were recoverable upon taxation. That was to confuse the roles of the Court and the Auditor. In any event, the interlocutor had gone further than had been necessary to achieve the commercial judge's stated intention. Where there were two or more defenders, there could be apportionment of the defenders' expenses by the Auditor where the defenders had joint representation and the pursuer had succeeded only against some of the defenders (see generally Maclaren : Expenses pp 501 - 502; Robertson v Steuart (1875) 2 R 970).

[11] The defenders and third parties reminded the Court that appeals restricted to expenses were generally discouraged (MacFadyen: Court of Session Practice, Part L para [5] et seq per Lord Carloway), although they would be entertained where the amount of expense was high relative to the subject matter of the cause or where a matter of principle was involved. It was accepted that the interests of the defenders and the third parties at the proof had been indistinguishable. But it was not accepted that the pursuers had not been responsible for the third parties remaining in the process. The defenders had perceived a problem arising from Delanay v Finlay Park, unreported, 27 September 2002, where the Temporary Judge (Coutts QC) had declined to certify, as a skilled witness for the pursuer, a vascular surgeon instructed by the defenders. The purpose of the application had been to secure payment of the agent's fee for perusing the expert's report, which had been disclosed by the defenders in that case. The problem in the present case had been a practical one, which the commercial judge had resolved as a matter of substantial justice. He had attempted to secure that the pursuers paid no more and no less than if they had been litigating against a single defender.

[12] The general rule in relation to expenses is that the cost of litigation falls on the person who has caused it. Thus, in a case such as the present, if the pursuer loses his case, or a material part of it, then he must pay the relative expenses of the other party, since he has caused that other party the expense of vindicating his position. But it follows from the nature of the general rule that the unsuccessful party's liability is limited to paying the expenses of the party against whom he has directed his cause. He cannot be liable, at least in ordinary course and in the absence of some unreasonable behaviour, for the expenses of a party whom he has not introduced into the process and against whom he has directed no case. That is because he has not caused that person to litigate at all. For this reason alone this reclaiming motion must succeed. The expenses of third parties are generally only recoverable against the party who has directed a case against them. There are situations where certain rights of relief exist, but that is not a matter raised in this case.

[13] The problem which has occurred appears to stem from the continued presence in the process of the third parties after all issues involving them had been resolved. At that stage, there was no apparent purpose in their remaining in the process. What ought to have occurred was the lodging of a formal joint minute removing them, in one way or another, from the action. Had that been done, there could have been no question of the pursuers being found liable in their expenses at the subsequent proof. The reason why the third parties remained in the action was not adequately explained. Of course, had they been concerned about their interests not being properly represented, in a situation where they had accepted a proportion of liability with the defenders or fellow third parties, they could have remained separately represented by both counsel and agents. But in that event, there could have been no question of the third parties obtaining the expense of doing so against the pursuers. Alternatively, it may have been that, in effect, one of the third parties had accepted responsibility for the damage, however assessed. In that case, the third parties could have continued the litigation in practical terms themselves, but they would have had to do so in the defenders' name under the terms of whatever accommodation had been made with them.

[14] What did occur caused a procedural confusion. At the conclusion of the pursuers' case at the proof, the defenders had the opportunity to lead such witnesses as they desired. Technically, as matters were left to stand with the third parties not formally removed from the process, the third parties could have called further evidence at the conclusion of the defenders' proof. But witnesses cannot normally be called by two parties at the same time. The fact that two parties are represented by the same counsel or agents does not alter that. Since the commercial judge had been told, albeit not in the appropriate formal manner, that the defenders had no remaining issues to resolve with the third parties, it would not have been unreasonable to ask counsel upon what basis the third parties thereafter remained represented at all.

[15] Although the Court sympathises with the idea, expressed by the commercial judge, of achieving an equitable result, it does not consider that equity is served by finding a pursuer liable in the expenses of a party whom he has not caused to litigate. In addition, it is correct to say that the commercial judge's findings on expenses go beyond what he expresses as his desired intention. In the present case, it would have been a matter between the third parties and the defenders to reach an agreement in relation to their expenses inter se, or to ask the Court to determine that matter depending upon the substantive agreement reached between them. Presumably, some arrangement was made in that regard in this case. In particular, it would have been a matter between the defenders and the third parties to reach an arrangement on the fees of any witnesses to be cited and adduced on the defenders' behalf. Should the defenders have succeeded at the proof and obtained an award of expenses (as they did) it would become a matter for the Auditor, in the first instance, to determine whether the fees charged by these witnesses were recoverable by the defenders in terms of Rule of Court 42.13 and Chapter II of the Table of Fee (42.16). Whatever difficulties were perceived as a result of the interpretation of earlier forms of the rule governing skilled witnesses in Delanay v Finlay Park (supra), the commercial judge in this case has certified the relevant witnesses as skilled witnesses for, inter alios, the defenders and no issue is taken with that having been done.

[16] The Court will allow the reclaiming motion to the extent of: (a) deleting from paragraph 2 of the first interlocutor of 8 October 2009 the words from "and to each of the first third party..." to "... Briggs Amasco Limited)"; and (b) recalling the two interlocutors of 8 October 2009 decerning for payment by the pursuers to the first third party (Atlas Ward) and the third party to the first third party (Briggs Amasco).