Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH 35
PD1461/10	OPINION OF J BECKETT QC (Sitting as a Temporary Judge) in the cause LINDSAY GORDON Pursuer; against THERESA CLARK Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Milligan, Q.C.; Digby Brown

Defender: Watson, Solicitor-Advocate; Simpson & Marwick

1 March 2012

Introduction

[1] In this hearing on a note of objection to a report of the Auditor, Mr Milligan appeared for the pursuer and Mr Watson, Solicitor-Advocate for the defender. The pursuer lodged a note of objection to the report of the Auditor, in terms of paragraph 42.4(1) of the Rules of the Court of Session (RCS), SI 1994/1443, following taxation in this action for reparation which was settled by a joint minute which was given effect to in an interlocutor on 19 May 2011. The action arose out of a road traffic accident on 9 April 2009 in which the defender caused the pursuer, who was riding a bicycle, to collide with the motor car which she was driving causing the pursuer certain injuries.

[2] The action was raised in the Court of Session in June 2010. On 24 August 2010 the defender lodged a tender in the sum of £6500, the same amount as had been offered extra-judicially in advance of the litigation, on 26 March 2010. The tender was not accepted at that time as the pursuer was continuing to suffer problems with his knee and his agents were awaiting up to date medical evidence. Before a medical report became available, the problem in the pursuer's knee resolved and he instructed his agents to settle the case on the best terms possible. The defender was not willing to increase her offer, but her agents were willing to "refresh the tender". The pursuer understood this to mean that the defender's agents would meet expenses to the date of settlement. The defender made no attempt to seek any modification of expenses prior to the pronouncement of an interlocutor on 19 May 2011.

[3] The only minute of tender to be found in the process was lodged on 24 August 2010. There is no minute of acceptance of tender. In the report of the Auditor, he narrates in paragraph 2 that:

"on 10 February 2011, Melanie Todd of Digby Brown e-mailed a letter (dated 9 February 2011) to the Defender's solicitor, Douglas Russell of Simpson and Marwick, in which he referred to their telephone conversation the previous week, advised that the Pursuer 'does not wish matters to proceed any further and wishes simply to accept your refreshed tender with Court of Session expenses' and asked Mr Russell to confirm that he was content for matters to settle on that basis. Mr Russell confirmed by e-mail on the same date stating 'I think that should be ok and I have asked for a cheque to be prepared.'"

The interlocutor of 19 May 2011 is in these terms:

'The Lord Ordinary, on the unopposed motion of the pursuer, and in terms and in respect of the Joint Minute for parties, no. 14 of process, Certifies Angus McLean, Consultant Orthopaedic Surgeon as a skilled witness who prepared reports for the pursuer; Finds the Defender liable to the pursuer in the expenses of process; Remits the account of expenses, when lodged, to the Auditor of Court to tax and quoad ultra assoilzies the Defender from the conclusions of the summons".

A second, associated interlocutor of the same date is in these terms:

'The Lord Ordinary Decerns against the Defender for payment to the pursuer of the expenses referred to in the foregoing interlocutor as the same shall be taxed by the Auditor of Court.'

The joint minute narrates that the case has been settled extra-judicially and goes on to crave the court:

"1. To interpone authority to this Joint Minute.

2. To find the defenders liable to the pursuer in expenses and to remit the account thereof to the Auditor to tax.

3. To certify...

4. Quoad ultra to assoilzie the defenders from the conclusions of the summons."

The motion sheet records that there was an unopposed motion enrolled on 19 May 2011 asking the court to "Interpone authority to Joint Minute".

[4] At a diet of taxation, the Auditor disallowed in full all entries in the pursuer's account after 26 March 2010, the date of the pre-litigation offer, with the exception of the "Pre-Litigation Fee" which was allowed in part in respect of work carried out prior to 26 March 2010.

[5] The reasons for the decisions of the Auditor were set out in a note appended to his Report on Taxation dated 27 October 2011, which he reproduces as his minute in response to the note of objections. Paragraphs 6 and 7 are in the following terms:

"6. The Auditor would firstly like to clarify that, in his view, modification of expenses is a matter solely for the Court. If a paying party wishes to submit that an award of expenses should be modified (eg to a Sheriff Court scale or to the Voluntary Pre-Action Protocol scale, or by a percentage) he must do so by means of a motion in terms of Rule of Court 42.5.(1). The Auditor is not persuaded that sub-paragraph (2) is intended to allow a paying party a second opportunity to seek a modification which could and should have been sought from the Court in terms of sub-paragraph (1).

7. The Auditor is, however, still required, whether at the invitation of a paying party or not, to consider whether to disallow any expenses in terms of sub-paragraph (2). In this connection, the principal sum which the Pursuer agreed to accept in February 2011 was the same principal sum which had been offered in March 2010 prior to the commencement of proceedings. Mr Gibson explained that the reason for that was that the Pursuer's condition improved at the end of 2010. As pointed out by Mr Russell, however, there was no impending time bar issue and the Pursuer's own medical expert, Mr Steedman, had advised on page 10 of his report dated 28 January 2010 as follows -

' I am unable to provide a prognosis however, given Mr Gordon's career intention it would be advisable to have him reviewed in 6-12 months by an Orthopaedic Surgeon with an interest in hip injury...

A prognosis with regard to Mr Gordon's future career prospects could be provided following appropriate specialist review in 6-12 months.'

The Pursuer could accordingly have deferred the commencement of proceedings until he had been reviewed by an Orthopaedic Surgeon or until, as happened, his condition stabilised. In these circumstances, it appears to the Auditor not only that the Pursuer was unsuccessful in his Court action in the sense that the outcome was no better that it would have been if he had accepted the pre-litigation offer, but also that the Pursuer incurred expenses though his own fault by commencing proceedings unnecessarily and prematurely".

Submissions for the pursuer

[6] Mr Milligan referred me to the terms of paragraph 42.5 of RCS:

"42.5.- Modification or disallowance of expenses

(1) In any cause where the court finds a party entitled to expenses, the court may direct that expenses shall be subject to such modification as the court thinks fit.

(2) Where it appears to the Auditor that a party found entitled to expenses-

(a) was unsuccessful, or

(b) incurred expenses through his own fault,

in respect of a matter which would otherwise be included in those expenses, the Auditor may disallow the expenses in respect of that matter in whole or in part."

[7] He submitted that there was a clear division of function set out in the rule. It was for the court to decide on any question of modification. Thereafter, the Auditor was involved in an auditing exercise or valuation in which he could disallow expenses in relation to a particular matter where the party found entitled to expenses was either unsuccessful or had incurred expenses through his own fault.

[8] Despite having counselled himself against doing so, in paragraph 6 of his note, the Auditor had proceeded, in effect, to make modification of a degree which was only open to the court. Had the defender sought to argue that expenses should have been modified to nil, he ought to have enrolled a motion for modification of expenses, a question properly for the court and not the Auditor. It should be borne in mind that the only purpose in "refreshing the tender" in February 2011 could have been to entitle the pursuer to expenses up to that date.

[9] Examples of the court modifying a pursuer's expenses could be found in Morrison v British Broadcasting Corporation 2007 Rep LR 2, an Opinion of Lord Emslie, and McIlvaney v A Gordon & Co Limited, [2010] CSOH 118, an Opinion of Lord Tyre in a case where he had modified the expenses of the pursuer to nil. The terms of those opinions very much endorsed the proposition that it was for the court to decide upon questions of modification where there was an issue as to whether an action should have been raised at all, or whether it had been raised prematurely.

[10] The respective roles of the Court and Auditor, were set out in MacLaren, "Expenses in the Supreme and Sheriff Courts of Scotland", 1912, at page 425.

"It is the duty of the Auditor not only to tax off items as excessive or unnecessary, but also to make additions to the account should he see fit. It is also his duty to see that the expenses of litigation are kept within proper and reasonable limits, and that only such expenses shall be allowed in taxing accounts as between party and party as are absolutely necessary for conducting it in a proper manner with due regard to economy, ex gra: if a party shall think proper to employ an unnecessary number of counsel, or to pay higher fees than are warranted by ordinary practice, the extra expense thereby occasioned shall not be allowed against the opposite party. The Auditor has no right, however, to disallow expenses for proceedings which are incompetent. It is for the Court to do so. Nor has he a right to consider and question whether the mode of proceeding before the Lord Ordinary and the Court is a right or wrong mode of proceeding. It is for the auditor in such cases to give effect to all the procedure which has taken place and only to audit the charges".

[11] For authority for the last two sentences, MacLaren refers in a footnote to Stott v McWilliam [1856] 18 D 716. Mr Milligan founded on the opinion of Lord Ivory in that case. In Stott, one of the issues was whether the pursuer, to whom expenses were awarded after a successful Court of Session action for payment under a contract, was entitled to receive the expense of two Records: that relating to his own action, and that relating to a claim by the defender which founded on a different but related ground, and whether the actions should have been conjoined earlier than they were. The Lord President, Lord Ivory and Lord Curriehill were of the view that expenses relating to the two Records should be allowed. Lord Deas disagreed, but he agreed that it was a matter for the court and not the Auditor. In expressing his agreement with the Lord President, Lord Ivory stated in his opinion:

"We are here in a case of auditing; and I am not prepared to give to the Auditor the power of considering whether the mode of proceeding before the Lord Ordinary and the Court is a right or a wrong mode of proceeding. He is to audit the charges; he must take it in that way, otherwise there would be given to him a power of review which is out of the question. There is no general principle raised in this question of audit. The Auditor is bound to give effect to all the procedure which has taken place, and only to audit the charges".

[12] Mr Milligan founded on the opinion of the Lord President, with which Lords Kinnear and Lord Ardwall concurred, in Lauderdale v Wedderburn 1911 SC 4. This was an action for declarator. The circumstances so far as relevant are set out in the Lord President's opinion:

"In this note of objections the defender, Mr Scrymgeour Wedderburn, takes exception, in the first place, to the disallowance by the Auditor of certain expenses connected with his, the defender's, preliminary pleas of res judicata, incompetency, and no jurisdiction, which formed the subject of discussion at the first Procedure-roll debate, and in which he, the defender, was unsuccessful. I do not think there is any difficulty in the matter. The question depends on article 5 of the General Regulations as to the Taxation of Judicial Accounts appended to the Act of Sederunt of 15th July 1876. That article reads thus:

'Notwithstanding that a party shall be found entitled to expenses generally, yet if, on the taxation of the account, it shall appear that there is any particular part or branch of the litigation in which such party has proved unsuccessful, or that any part of the expense has been occasioned through his own fault, he shall not be allowed the expense of such parts or branches of the proceedings'.

That is a regulation with which we are familiar, and which in practice we have always followed, but it is news to me that each separate plea constitutes a different branch of the case. So to hold would be quite inconsistent with the ordinary practice of the Court. Now, here the finding of the House of Lords as to costs is equivalent to a general finding of expenses in favour of the defender, and that being so we have no discretion in the matter. Their Lordships' order in the defender's favour carries the expenses incurred by him in fighting the case even though he may have, in the course of that defence, put forward certain pleas in which he was not successful. This objection, therefore, must, I think, be sustained".

[13] The terms of General Regulation 5, the broad equivalent to contemporary rule 42.5 (2), were quoted by the Lord President. Mr Milligan submitted that the scope given to the Auditor in General Regulation 5, was wider than that contained in the current rule.

[14] Mr Milligan referred to the opinion of the Sheriff Substitute in Nairn Brothers v Robertson 1954 SLT (Sh Ct) 44. This was a sheriff court decision applying a rule of court, General Regulation 11, which was different again to General Regulation 5 (with no reference to "or branch") and the current rule, but he suggested that it nevertheless provided a useful illustration of the principles which apply. Mr Milligan submitted that the judgment of fault on such a fundamental question as to whether the litigation should have been brought at all, was within the province of the court. The defender having accepted that expenses should be awarded, it was not for the Auditor to effect an almost complete modification.

[15] Mr Milligan concluded by submitting that the court should sustain the note of objection. This was not a situation where the court would be interfering with the legitimate exercise of the Auditor's discretion, which counsel acknowledged would not generally be permitted. The Auditor had exceeded his powers by exercising a power of modification which lay only with the court.

Submissions for the defender

[16] Mr Watson began his reply by referring to Wood v Miller 1960 SC 86, where, in two conjoined actions, the defender lodged tenders on the Wednesday before proof. A pre-arranged consultation took place on the day before the proof diet and instructions were given to accept the tenders. At taxation of the parties' accounts of expenses the Auditor refused to allow the pursuers the expense of instructing counsel for the trial, and the witnesses' fees, and allowed the corresponding charges to the defender in each case on the basis that efforts could have been made to obtain instructions more promptly. The Lord Ordinary upheld a note of objections, which decision was reclaimed. Lord Justice-Clerk Thomson, with whom Lords Patrick and Mackintosh concurred, upheld the reclaiming motion on the basis that the Lord Ordinary had not been justified in saying that the Auditor had misdirected himself in principle. Mr Watson founded on the following passage in the opinion of the Lord Justice-Clerk:

"The Auditor's view was that the tenders could with reasonable expedition have been considered by Saturday. Whether it was within the scope of his discretion so to hold is the question at issue. The Lord Ordinary has in effect altered the Auditor's decision. It is important to see that the Auditor is not said to have applied some wrong principle or misdirected himself in his legal approach. It is his use of the materials put before him which is attacked. The Lord Ordinary thought that the Auditor took too tough a view, and that he had been led to do so, not by ignoring the relevant factors, but by failing to give proper effect to them. This, with all respect to the Lord Ordinary with whose sympathetic approach to the problem I also sympathise, is not a good ground for upsetting the Auditor on a technical matter which was peculiarly within his province. The Lord Ordinary is simply saying that, if he had had the same materials before him, he would have reached a different decision on them. It is not the function of a Judge reviewing an exercise of a discretion to substitute his own view of the material under consideration. The decision of the Auditor stands in a not dissimilar position to the verdict of a jury. If the Auditor had no material to go on, his exercise will fall, but if he had material, then, so long as the decision he reached on it was not unreasonable, it cannot readily be upset. There is, however, this difference between a Judge exercising a discretion and a jury, that a Judge is usually expected to give and does give reasons. If, on a scrutiny of these reasons, it clearly appears that he has misstated or mistaken or misunderstood the material put before him there may well be grounds for interfering. But if as appears to be the case here, the Lord Ordinary's criticism on analysis comes only to a disapproval of the relative weight attached by the Auditor to the various elements involved, the Lord Ordinary is simply substituting his own view of the relevant factors".

[17] Mr Watson sought to draw certain principles from that case. First that the Auditor enjoyed a discretion in taxation. Secondly, that his decision could be overturned if he made a decision in circumstances where he had no material to go on; if he had misunderstood the material before him; or if he had exercised his discretion unreasonably. In response to a question from the bench, Mr Watson accepted that a decision of the Auditor would be open to challenge if he had exercised a power which was not available to him, but that, he maintained, was not the position in this case. The Auditor had properly exercised his discretion.

[18] Mr Watson suggested that Wood provided an illustration of the breadth of the powers which could be exercised by the Auditor, in a case where expenses to the date of the tender had been awarded to the pursuers.

[19] Mr Milligan's argument had rather implied that the Auditor had only a limited accounting role, but consideration of case law demonstrated that his powers were much wider than that. Mr Watson founded on Aitken v Claasen 1928 SC 628, McElroy & Sons v The Tharsis Sulphur and Copper Company 1879 6 R 1179 and Arthur v Lindsay 1895 22 R 904. Whilst those cases had all related to the application of General Regulation 5, the court should find them highly persuasive.

[20] Mr Watson submitted that those cases demonstrated a clear and consistent application of the principle that whether or not expenses were modified by the court, the Auditor was entitled to disallow expenses or a part of them where a party had been unsuccessful or where he had incurred expenses through his own fault.

[21] In this case the Auditor had reached the conclusion which he set out at paragraph 7 of his report. He had given effect to that conclusion by deleting items of work from the account from the instruction fee onwards, allowing part of the fee for work done prior to the commencement of the action. He had not modified the account. He was dealing with each item on the basis of whether it was incurred through the fault of the pursuer. That is what RCS 42.5(2) enjoined him to do.

[22] In the present case the pursuer had incurred expenses through his own fault and the Auditor had acted within the legitimate scope of his discretion. Accordingly the court should repel the objection to the account.

Discussion

[23] I accept that the cases founded on by Mr Watson to which I have referred at paragraph [19] above illustrate application of General Regulation 5 whereby the expenses of unsuccessful parts of litigation could be disallowed by the Auditor notwithstanding the court having ordered modification of expenses. In each of those cases, the court was concerned with interlocutors which provided for modification of expenses as taxed. The respective courts construed interlocutors in such terms as requiring that the Auditor would tax in accordance with General Regulation 5, and the modification proposed by the court would take effect thereafter. In none of those cases did the Auditor determine that the action should not have been brought and disallow all expenses incurred after the raising of the action accordingly.

[24] However, in Arthur v Lindsay, when considering General Regulation 5, a clear division of function was recognised by the court. The Lord Justice-Clerk, Lord Ormidale and Lord Gifford all specifically indicated that they affirmed the Auditor's report in that case. The Auditor had explained, inter alia:

"Under a general finding of expenses, without any qualification whatsoever, it is the duty of the Auditor to disallow all expenses of unsuccessful litigation.....The Auditor cannot see any reason for disregarding this instruction where expenses are found due subject to modification. It cannot be doubted that where this qualification is attached to the finding it is intended by the Court to give the party entitled to expenses less than under a general finding. The duty of the Auditor (subject to the correction of the Court) is to ascertain and report the amount of expenses properly incurred, exclusive of those connected with unsuccessful litigation. It is for the Court alone to deal with the question of modification..." (my emphasis)

[25] None of the cases cited offers a clear answer to the point in dispute. It appears to me that the language of the current rule, referring to "a matter which would otherwise be included in those expenses" may give the Auditor a broader scope than the reference to "any particular part or branch of the litigation" in General Regulation 5. Nevertheless, it appears to me that the "matter" referred to in RCS 42.5(2) is intended to relate to something less than the whole action.

[26] Due regard must be paid not only to the terms of RCS 42.5 (2) but also to the terms of RCS 42.5 (1). The division of function between the court and the Auditor remains in the current Rules of the Court of Session, albeit the Auditor's entitlement to disallow charges is expressed in different terms to those of General Regulation 5.

[27] Even though this case was settled by joint minute, rather than acceptance of a tender, a principle noted by the court in Mackenzie v HD Fraser & Sons 1990 SC 311 is of some relevance. In that case, it was affirmed that in order to be valid a tender must offer to meet "the expenses of process" which leaves the court with a discretion on the question of expenses. However, in giving the opinion of the court, the Lord President stated at page 321:

"We know of no rule of law or practice which disables parties from reaching such agreement about expenses as they wish, and if they are agreed about the scale to be employed or any detail the court will give effect to it".

In this case there was nothing to stop parties reaching a particular agreement about expenses to reflect what had happened in advance of the litigation. All that was agreed, however, was the joint minute which was reflected in the interlocutor of 19 May 2011 which was granted on an unopposed motion. The background, as explained by the Auditor, was that the defender had agreed to "refresh the tender" in February 2011.

[28] If the defender wished to argue that the action was raised unnecessarily, or prematurely, and on that account to seek modification of expenses, that was a question properly to be resolved by the court. The court having granted expenses to the pursuer in terms of the joint minute, and without modification, it appears to me that it was not within the province of the Auditor to determine that the action should not have been raised and to disallow a substantial part of the expenses on that basis.

Decision

[29] For these reasons, I shall sustain the note of objection.

[30] Whilst Mr Milligan suggested that in the event that he succeeded I should remit the matter to the Auditor "to deal with the matter properly", RCS 42.4(4) allows the court other options. The court can sustain or repel any objection in the note or remit the account of expenses to the Auditor for further consideration. It does not seem necessary in the circumstances to remit to the Auditor for reconsideration and I will simply sustain the objection in the note of objection. The items disallowed from the account of expenses should be deemed to be restored and the account should be paid accordingly.

[31] Parties were agreed that the expenses should follow success and, in the light of my decision on the note of objection, I award the expenses of the procedure on the note to the pursuer.