Scottish Court of Session Decisions

Pursuer: C. MacNeill QC; Shepherd & Wedderburn LLP

Defender: Macdonald Solicitor Advocate; Bell & Scott

Second Third Party: Beynon; Balfour + Manson LLP

31 May 2011

[1] The pursuer ("PHC") initially raised this action against the three former partners of a dissolved medical partnership seeking a declarator that they were jointly and severally liable for all of the obligations of the former partnership as tenants under a lease of heritable subjects in Broadford, Isle of Skye, known as the Broadford Medical Centre.

[2] This action followed an earlier action in which PHC sought a similar declarator against only Dr Ravangave and Dr Turville, who brought Dr Humphrey into the proceedings as a third party. In that action Lord Glennie pronounced decree of absolvitor in the circumstances which I set out in my first opinion in the current action ([2009] CSOH 46). In that opinion I upheld the pleas of res judicata advanced on behalf of Dr Ravangave and Dr Turville. Thereafter, on 27 May 2009 I awarded them the expenses of the action except in so far as already dealt with and remitted their accounts of expenses to the Auditor to tax.

[3] It soon became clear both that PHC, notwithstanding that reverse, intended to establish that one of the former partners remained responsible for all of the obligations of the dissolved partnership and that the former partners were not in agreement as to their liability inter se to contribute to discharge those obligations. In June 2009 PHC amended its pleadings to seek declarator against Dr Humphrey alone. Dr Turville was represented at the By Order hearings in June and August 2009 before she was formally brought back into the action as a third party as it was apparent that the sustaining of the plea of res judicata had not concluded the dispute between the former partners. In September 2009 Dr Humphrey brought Dr Ravangave and Dr Turville back into the action as third parties on the basis that if he were liable, as PHC asserted, for one hundred per cent of the tenant's obligations, he would be entitled to pro rata relief from them. After a debate, in an opinion dated 16 September 2010 ([2010] CSOH 129) I dismissed Dr Humphrey's claims against the third parties. I also allowed PHC to amend its pleadings to seek a declarator that Dr Humphrey was liable for only one-third of the tenant's pecuniary obligations under the lease. On 1 October 2010 I pronounced a declarator to that effect and, among other things, found PHC and Dr Humphrey jointly and severally liable to the third parties in the expenses of the cause with PHC liable for two-thirds and Dr Humphrey liable for one-third of those expenses inter se.

[4] In accordance with the interlocutor of 1 October 2010 Dr Turville has sought to have her account of expenses taxed. Her legal representatives intimated and lodged an account for expenses on 28 January 2011. PHC has objected to her doing so, arguing that she is barred by delay from seeking to recover her expenses awarded up to 27 May 2009.

[5] Rule of Court 42.1(2) provides that:

"Any party found entitled to expenses shall -

(a) lodge an account of expenses in process not later than 4 months after the final interlocutor in which a finding in respect of expenses is made;

(b) if he has failed to comply with sub-paragraph (a), lodge such account

at any time with leave of the court but subject to such conditions (if

any) as the court thinks fit to impose; and

(b) on lodging an account under sub paragraph (a) or (b), intimate a copy of it forthwith to the party found liable to pay those expenses."

[6] Mr MacNeill for PHC submitted that the upholding of the plea of res judicata, which Dr Ravangave and Dr Turville had proponed, constituted the completion of a separate cause in which a "final interlocutor" in respect of expenses was issued on 27 May 2009. The subsequent cause related to the extent of Dr Humphrey's liability to PHC for the tenant's obligations and to the question whether he had a right of relief against his former partners in respect of that liability. After the third parties were convened into the action in September 2009 PHC made no claim against them; their involvement resulted merely from a dispute between the former partners. That was, he submitted, a separate cause which led to the award of expenses on 1 October 2010. He referred to the decision of the Second Division in King v Global Marine (UK) Ltd 2003 SC 269.

[7] Faced with this stance, Dr Turville has applied for the case to be brought out by order and has requested a ruling on Rule of Court 42.1(2). Mr MacNeill submitted that her motion for a ruling was incompetent. He submitted that the Rules of Court required the Auditor to prepare a report of the taxation of the account of expenses (Rule 42.3(1)). The Auditor would take account of any objections to the account intimated by the other party. Any party who had been represented at the diet of taxation could then state objections to the Auditor's report (Rule 42.4), and the court would thereafter make its decision on the objections at or after a hearing.

[8] Mr Beynon for Dr Turville submitted that the final interlocutor was that of 1 October 2010 which granted her the expenses of the cause against PHC and Dr Humphrey and apportioned liability between them. In that interlocutor the "cause" meant the whole process with the case reference CA21/08. The dispute between PHC and Dr Humphrey on the one hand and Dr Turville on the other was resolved only by the decision of 16 September 2010 and the final interlocutor in which a finding of expenses was made followed that decision.

Discussion

[9] I am satisfied that I do not need to consider PHC's argument of incompetency as Dr Turville has a fall back application under rule 42.1(2)(b) that she be allowed to intimate and lodge her account late. I have to decide whether that application is necessary before I consider its merits. To do so, I have to reach a view on which is the final interlocutor from which the four-month period runs. Thus I do not need to make the formal ruling which Mr Beynon requests but will set out my reasoning on his application to lodge an account late.

[10] It is necessary first to clarify the meaning of the interlocutor of 1 October 2010 as it appeared initially that parties were at odds as to its interpretation. In the interlocutor of 1 October 2010 I awarded the two third parties the expenses of the cause against PHC and Dr Humphrey and apportioned their liability inter se. In that interlocutor "the cause" was, as counsel for Dr Turville contended, the action as a whole. As a result of an oversight, the interlocutor did not specify that the award dealt with the expenses of the cause except in so far as already dealt with. Earlier awards had been made in favour of Dr Ravangave and Dr Turville against PHC alone on 23 April and 27 May 2009 and were not consistent with the award of 1 October 2010 if the latter award were literally construed. It is in my view implicit that that award did not supersede the earlier awards and I consider that the award of 1 October 2010 should be construed as governing the expenses of the cause except in so far as already dealt with. As the discussion developed, it became clear that on further reflection parties did not dispute that interpretation of the interlocutor.

[11] Secondly, there is an issue about the form of Dr Turville's account. It quotes only the interlocutor of 1 October 2010 and makes no reference to the earlier interlocutors of 23 April and 27 May 2010. Under the latter interlocutors PHC alone was responsible for the expenses incurred up to 27 May 2009. The interlocutor of 1 October 2010, which made PHC and Dr Humphrey jointly and severally liable, covered only expenses incurred after 27 May 2009.

[12] It is the practice of the Auditor of the Court of Session to require separate accounts if a person is seeking the taxation of expenses awarded against different parties. Thus if in one action A has an award of expenses against B and a separate award of expenses against B and C, the Auditor would require A to lodge separate accounts. It is also his practice that the account should set out at its start the interlocutor or interlocutors of the court awarding the expenses. Thus to be in proper form Dr Turville should lodge two separate accounts, one for the period to 27 May 2010, headed by the relevant interlocutors, and the other for the period from that date, or from the date when the third parties were re-convened into the action, headed by the interlocutor of 1 October 2010.

[13] I am satisfied that PHC's substantive challenge is without merit and that the interlocutor of 27 May 2010 was not a "final interlocutor" in terms of Rule 42.1(2). This case contrasts with the circumstances in King v Global Marine (UK) Ltd, in which the action by several pursuers proceeded after the claim of one pursuer was settled and he played no further part in the proceedings. The final interlocutor for the pursuer whose claim had been settled was that which gave effect to the settlement by awarding him damages and expenses.

[14] By contrast, Dr Turville maintained her legal representation in the action even during the brief period when she was not formally a party to the action, because she knew that the decree of absolvitor had not brought to an end her involvement in the proceedings. She faced essentially the same financial claim after I sustained her plea of res judicata as she did before. The only difference was that initially PHC sought to establish her liability directly as a defender and, shortly after that claim failed, PHC amended its case to seek to recover one hundred per cent of the former partnership's liabilities from Dr Humphrey on the basis that he could obtain relief from his former partners. That claim caused him to reconvene Dr Turville into the action as a third party. It was because PHC pursued its claim against Dr Humphrey on that basis that I awarded Dr Turville her expenses against both PHC and Dr Humphrey. In my view in the context of this action the final interlocutor in which a finding of expenses was made was that of 1 October 2010.

[15] The Second Division in King stated (in paragraph [15]) that the purpose of the four-month time limit in Rule of Court 42.1(2) was

"to ensure that when a decree for expenses is granted, the party liable for the expenses should receive an account of them promptly, so that he can know the extent of his liability without undue delay."

Where a pursuer's claim is settled and he takes no further part in the action or where a defender is absolved of liability and she takes no further part in the action, the party liable for the expenses clearly has an interest in obtaining finality within a reasonable time. PHC cannot claim such an interest in this case. It was PHC's attempt to resurrect its claim in respect of the obligations of the former partnership after Dr Turville's plea of res judicata had been upheld that gave rise to her continued involvement in the action and, ultimately, the interlocutor of 1 October 2010.

[16] I therefore conclude that the account lodged on 28 January 2011 was lodged on time but was not in the correct form. I cannot give effect to Dr Turville's motion under Rule 42.1(2)(b) as she has not produced accounts in the correct form. I therefore refuse her motion in hoc statu and reserve all questions of expenses arising out of the application.

[17] In order to progress matters Dr Turville will have to replace the account which she has lodged with two separate accounts, each headed by the relevant interlocutor or interlocutors, and apply to the court under Rule 42.1(2)(b) for leave to lodge them late. While I will consider such an application on its merits when it is made, I will have regard among other things to the fact that the content of the accounts was intimated in a timely manner to each of the parties against whom the expenses were awarded, albeit that the account was in an incorrect form.