EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Emslie Lady Dorrian	[2011] CSIH 37 A39/10 OPINION OF THE LORD JUSTICE CLERK in the Reclaiming Motion by MALCOLM COLE Pursuer and Reclaimer; against (FIRST) SILVERMILLS ESTATES AND LAND LIMITED First Defender and Respondent: and (SECOND) IAN HENDERSON Second Defender: _______

For the Pursuer and Reclaimer: Walker; Morton Fraser LLP

For the First Defender and Respondent: MacColl; Fyfe Ireland

Second Defender: Non participating party

14 June 2011

Introduction

[1] This is a reclaiming motion against an interlocutor of the Lord Ordinary dated 10 November 2010 by which he sustained the defender's plea to the relevancy and dismissed the action.

The history of the dispute

[2] The defender and the pursuer were respectively landlord and tenant of a restaurant at 7 Fleshmarket Close, Edinburgh. When the lease ended they had a dispute as to liability for repairs. That led to an action in the Court of Session. The action was sisted for arbitration.

[3] By Deed of Submission the pursuer and the defender referred the dispute to arbitration by Mr Ian Henderson MRICS (the arbiter). Mr Henderson was convened as a defender, but has not compeared.

[4] Clause 12 of the Deed provided as follows:

"12. The Arbiter shall also have the power, subject to any agreement between the Parties, to order in any award that all or part of the legal or other expenses incurred by a party in the course of the Arbitration shall be paid by the other party, such expenses to be taxed by the Auditor of the Court of Session. The Arbiter shall also have power to make an award of expenses from time to time in the course of proceedings."

The Deed also gave the arbiter power to make an interim or part award (cl 9).

[5] In its finalised pleadings in the arbitration the defender craved inter alia -

"An order for the expenses of the claimants (sc the defender) (as taxed by the Auditor of the Court of Session) to be paid by the respondent (sc the pursuer).

The pursuer counterclaimed. His crave for expenses in the counterclaim was in the same terms.

[6] On 22 August 2008 the arbiter issued his decision. He found for the defender in the claim and refused the counterclaim. He awarded expenses in the claim to the defender in the following terms:

"The respondent, Malcolm Cole, is held liable to the claimants, Silvermills Estates and Land Limited for the expenses incurred by the claimants in this Arbitration; all such expenses to be agreed or taxed by the Auditor of the Court of Session" (at para 5.1.2.3).

He awarded expenses in the counterclaim to the defender in the same terms (para 5.2.3).

[7] The arbiter issued his decision with a covering email in which he said inter alia:

"Please see attached my Final Decision in respect of this Arbitration. I now regard this Arbitration as concluded."

[8] Since the award was made by an arbiter, the remit to the Auditor of the Court of Session was a private remit subject to the Auditor's willingness to accept it. The Auditor in the event accepted the remit. On 5 November 2009 he held a diet of taxation. The pursuer objected to the competency of the taxation on the ground that the award did not specify the scale of taxation that the Auditor was to apply. The Auditor upheld the objection and declined the remit. He relied on a statement of the Extra Division in Apollo Engineering Ltd v James Scott Ltd (2009 SC 525) that when an arbiter remits an award of expenses to the Auditor of the Court of Session, he must specify on which scale expenses are to taxed, otherwise the Auditor cannot begin his task (ibid, at para [32]); and a statement to similar effect in Hastings, Expenses in the Supreme and Sheriff Courts of Scotland (at p 71).

[9] The defender thereupon submitted a motion to the arbiter seeking inter alia to have the expenses taxed on the Court of Session scale and to have an account remitted to the Auditor to tax and report. The pursuer opposed that motion on the grounds that the arbiter was functus officio. The arbiter disagreed. He indicated that in his opinion his remit was not exhausted until he decerned for expenses following receipt of a taxed account from the Auditor. He invited the parties to make further comments before he dealt with the defender's motion.

[10] The pursuer then raised this action. He seeks inter alia interdict against the arbiter from carrying out any further functions qua arbiter between the parties, and interdict against the defender from inviting or moving the arbiter to do so.

The decision of the Lord Ordinary

[11] The Lord Ordinary held that the arbiter had not exhausted his remit. In his view, the remit included the determination of the question of expenses in a manner that would enable the Auditor to tax the account. The arbiter's decision failed to do this. It was therefore still open to him to make a further order. The decision of 22 August was an interim or part award only. The Lord Ordinary therefore pronounced the interlocutor reclaimed against.

Submissions

[12] Counsel for the pursuer submitted that the arbiter's award was clearly final. Therefore he could not make any further judicial orders (Sim Group Ltd v Jack, 2002 SLT 847 at 852; Hunter, The Law of Arbitration in Scotland, p 253; Melville and Irons, Treatise on the Law of Arbitration in Scotland, pp 199-200). If an arbiter had failed to deal with part of his remit, he could not rectify his failure by issuing further orders. The whole decision in this case was a nullity. Any further order would be incompetent (Grampian RC v John G McGregor (Contractors) Ltd, 1994 SLT 133).

[13] Counsel for the defender submitted that an arbiter was functus only when he had issued a final award that dealt with all matters remitted to him. The remit expressly included the question of expenses. Therefore the arbiter's jurisdiction was not exhausted until there had been a taxation and he had decerned for payment of the taxed expenses in a specific sum. The arbiter was right to entertain the defender's motion. The Lord Ordinary was right in holding that the arbiter's decision was an interim or part award. The defender could now seek further orders from the arbiter (a) sanctioning the employment of counsel; (b) authorising the Auditor to grant a percentage uplift on the scale fees and (c) certifying certain witnesses as experts.

Conclusions

[14] Counsel for both sides presented their submissions on the basis that the only question in this case was whether the arbiter could now make good his failure to specify the scale on which the Auditor of the Court of Session was to tax the expenses: in short, whether the arbiter was functus. In my opinion, that approach is misconceived.

[15] The case turns, in my view, on the logically prior question whether the arbiter did fail to specify the scale on which expenses should be taxed.

[16] In presenting their submissions as they did, counsel were influenced by the following statement of the Extra Division in Apollo Engineering Ltd v James Scott Ltd (supra). It is the statement on which the Auditor relied.

"Where an arbiter does decide to make a finding in expenses, it is a matter for him to decide what the level of these expenses might be. He can fix a sum himself, or he can remit the assessment of the appropriate amount, at least in the first instance, to a man of skill, such as the Auditor of the Court of Session, to tax. But in doing that, he requires to advise the Auditor of the basis upon which he is to tax the expenses by reference to a particular scale. Without doing that, the Auditor could not begin his remitted task" (at para [32]).

[17] On the face of it, that statement would suggest that the omission of any reference to the scale of expenses in this case disables the Auditor from taxing the account of expenses at all. But the statement has to be read in its context. In that case the joint deed of appointment gave the arbiter power to award payment of any sums due and payable under a sub-contract and to award damages due in respect of any breach of the sub-contract; but it was silent on the question of expenses. The arbiter therefore awarded expenses in the exercise of his inherent power to do so (Robertson v Brown (1836) 15 S 199; Pollich v Heatley 1910 SC 469, at p 482).

[18] The present case can readily be distinguished. It began as a Court of Session action in which counsel were employed. The substantial sums at stake were obviously appropriate for an action in this forum. The counter-claim was well into six figures. The parties then thought it expedient, in view of the nature of the issues, that the dispute should be resolved by a man of skill. That was the context in which the remit to the arbiter empowered him to award expenses as taxed by the Auditor of the Court of Session. In their pleadings in the arbitration, both parties craved expenses in exactly the same terms.

[19] In these circumstances, in my opinion, the logical and reasonable interpretation of the arbiter's remit, and consequently of his award, is that the parties contemplated and agreed that the taxation would be on the Court of Session scale. The submission that was made to the Auditor on behalf of the pursuer was therefore unsound.

[20] On that view, the arbiter is functus. He has fulfilled his remit to the letter. His award of expenses exactly echoes the wording of the remit and of the parties' respective craves. No further orders of a judicial nature remain to be made by him.

[21] Counsel for the pursuer referred us to the approach taken by the Lord President in Grampian RC v John G McGregor (Contractors) Ltd (supra, at p 138G-I). In that case the arbiter was expressly empowered to deal with the question of expenses. He issued an award which disposed only of the merits of the dispute and expressly reserved the question of expenses. That reservation was held to be sufficient to show that it was truly a part award and to leave the matter of expenses open for further determination by the arbiter. The present case is materially distinguishable. Here, the arbiter issued what was explicitly a final award in terms of an express power to award expenses and without reservation of any further matters. It is therefore impossible to regard this as having been a part award.

[22] The parties are agreed that it is implicit in the remit and in the arbiter's award that the expenses are to be taxed as between party and party. In my opinion, the fact that the taxation is to be conducted on the Court of Session scale means that on a party and party basis the fees of counsel will be recoverable in any event; and that the auditor will be entitled to award a percentage uplift on the scale fees at his discretion (Tods Murray WS v McNamara, 2007 SC 435). However, on the view that the arbiter is functus, I consider that it is now too late for the defender to obtain certification of any witness as an expert since such certification could be made only by the arbiter.

Disposal

[23] I conclude therefore that the Lord Ordinary erred in holding that the arbitration remained live. His interlocutor must therefore be recalled.

[24] I propose to your Lordship and to your Ladyship that we should sustain the pursuer's second and third pleas-in-law, repel the defender's pleas-in-law and grant interdict in terms of the pursuer's first and second conclusions.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Emslie Lady Dorrian	[2011] CSIH 37 A39/10 OPINION OF LORD EMSLIE in the Reclaiming Motion by MALCOLM COLE Pursuer and Reclaimer; against (FIRST) SILVERMILLS ESTATES AND LAND LIMITED First Defender and Respondent: and (SECOND) IAN HENDERSON Second Defender: _______

For the Pursuer and Reclaimer: Walker; Morton Fraser LLP

For the First Defender and Respondent: MacColl; Fyfe Ireland

Second Defender: Non participating party

14 June 2011

[25] As your Lordship has explained, this is case in which problems arose at the end of an arbitration between the parties. The arbiter having purported to issue his Final Award on 22 August 2008, the defender sought further orders from him by motion dated 25 November 2009. The pursuer in response maintained that the arbiter was functus officio, and raised the present action to interdict the defender and arbiter from proceeding further along the lines proposed. On 26 January 2010 Lady Stacey pronounced an interim interdict in terms of the first and second conclusions of the summons. Her interlocutor was in the following terms:

"The Lord Ordinary having heard counsel, no caveat having been lodged, ad interim interdicts the first defender (a) from inviting or moving the second defender to carry out any further functions qua arbiter between the parties or to issue any further orders or interlocutors in respect of the arbitration that was entered into between the pursuer and the first defender in terms of the Deed of Submissions agreed between them dated 3 March 2006 and (b) from attempting to use or rely upon any such orders or interlocutors that might have been issued by the second defender since 22 August 2008 and decerns; ad interim interdicts the second defender purporting to carry out any further functions qua arbiter between the parties or to issue any further orders or interlocutors in respect of the arbitration that was entered into between the pursuer and first defender in terms of the Deed of Submissions agreed between them dated 3 March 2006 and decerns."

[26] For all of the reasons set out in your Lordship's opinion with which I am in full agreement, the arbiter's Award of 22 August 2008 was clearly final and he was thus disabled from taking any further steps in the arbitration. The pursuer's action of interdict, and the interim interdict pronounced by the Lord Ordinary on 26 January 2010, were accordingly justified. Conversely the later decision of 10 November 2010, dismissing the action on the view that the arbiter had not exhausted his remit and was not functus officio, was in my view erroneous and cannot stand.

[27] Contrary to the pursuer's submission, there is no reason to think that the arbiter's Award quoad expenses was in any way invalid, or that the Award as a whole is at risk of reduction. It is true that the Auditor of the Court of Session declined to tax the defender's account of expenses on the ground that the scale to be applied had not been expressly specified. However, again for the reasons set out in your Lordship's opinion, I am satisfied that the appropriate scale was a matter of plain implication in the parties' Deed of Submissions, and that this implication must be deemed to carry through into the arbiter's Award. The parties' dispute had begun in the Court of Session; counsel had been instructed throughout; the taxation of any award of expenses was, by agreement, to be remitted to the Auditor of the Court of Session; and in these circumstances it seems to me that, even without express provision, the parties clearly intended any award of expenses to be on a party and party basis and taxed on the Court of Session scale. As the defender put it in a letter to the arbiter dated 25 November 2009,

"... throughout it was tacitly understood ... that parties proceeded on the basis that expenses (if awarded) would be taxed on the Court of Session scale. Indeed, both parties employed Counsel in the arbitration."

[28] The practical result of all of this is that the defender holds a valid award of expenses from the arbiter which now falls to be taxed on the Court of Session scale. In such a taxation, sanction for junior counsel should not be a problem for the defender, and an uplift on the solicitors' fees may also be available at the Auditor's discretion. However, as your Lordship has held, the opportunity to have witnesses certified has now been lost, and in addition the defender has in my view also lost the opportunity to have the direct "costs" of the arbitration fixed and apportioned between the parties in terms of paragraph 11 of the Deed of Submissions.

[29] On the whole matter I share your Lordship's conclusion that the Lord Ordinary's interlocutor must be recalled, and concur in the measures proposed in the final paragraph of your Lordship's opinion.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Emslie Lady Dorrian	[2011] CSIH 37 A39/10 OPINION OF LADY DORRIAN in the Reclaiming Motion by MALCOLM COLE Pursuer and Reclaimer; against (FIRST) SILVERMILLS ESTATES AND LAND LIMITED First Defender and Respondent: and (SECOND) IAN HENDERSON Second Defender: _______

For the Pursuer and Reclaimer: Walker; Morton Fraser LLP

For the First Defender and Respondent: MacColl; Fyfe Ireland

Second Defender: Non participating party

14 June 2011

[30] I am in complete agreement with your Lordship in the chair that the logical and reasonable interpretation of the arbiter's remit, and of his award, is that the parties contemplated and agreed that the taxation would be on the Court of Session scale and that the arbiter is accordingly functus.

[31] As to disposal, although the pursuer and reclaimer was in error as to the reasoning, the arbiter was indeed functus. The respondent had asked the arbiter to act further in the cause, and the arbiter had indicated a willingness to do so. He was willing to entertain a motion not only in respect of the scale, a matter which this court has concluded had been decided, but also on other matters which cannot now be considered, such as certification of witnesses. The pursuer was therefore entitled to prevent him doing so. Accordingly I agree with your Lordship that the interlocutor of the Lord Ordinary should be recalled and an interlocutor pronounced in the terms proposed in paragraph 24 of your Lordship's opinion.