Scottish Court of Session Decisions

Petitioners: Broome; Simpson & Marwick

First Respondent: No appearance

12 February 2013

[1] The petitioners entered into two franchise agreements dated 10 November 2010 and 7 March 2011 with companies with which the first respondent is connected. The first respondent guaranteed the obligations of the franchisee companies under those agreements. During the summer of 2012 the petitioners brought proceedings in the Commercial Court for inter alia an order that the first respondent should make available various financial records relevant to the agreements. Subsequently, on 13 November 2012, the petitioners terminated both agreements pursuant to a contractual power. Immediately thereafter they presented this petition, brought under section 1 of the Administration of Justice (Scotland) Act, in which they ask for orders to recover a range of documents relative to the franchise agreements. On 15 November 2012 and subsequent dates I granted three such orders, each for the appointment of a commissioner to secure the recovery of the relevant documents. Commissions took place thereafter, and a substantial number of documents were recovered. I should record that at the commissions at least one of the potential havers appeared to act in a highly obstructive manner, and proceedings for contempt of court are presently pending.

[2] On 1 February 2013 I granted an unopposed motion by the petitioners for the expenses of process to date on an agent and client, client paying, basis. The petitioners have now enrolled a motion that the court should order payment by the first respondent of the sum of £50,000 by way of expenses ad interim consequent upon the granting of the order pronounced on 1 February. The motion also seeks immediate extract of the order pending agreement or taxation of the account of expenses.

[3] In support of the motion, the petitioners' counsel stated that in the previous process (in the Commercial Court) an award of expenses was pronounced against the first respondent. This had not been met to any extent, and attempts were being made to have a diet of taxation allocated. The petitioners understood that the first respondent was heritable proprietor of a number of properties. Counsel submitted that, because the interlocutors relating to expenses, whether in the present petition or in the commercial action, did not decern for a particular sum, it was not possible to obtain inhibition on the dependence. There was accordingly a material risk that the first respondent might dispose of her interest in one or more of those properties prior to taxation of the account of expenses and the obtaining of an extract decree for a specific sum. In that event recovery of the expenses would be prejudiced. The petitioners further stated that the fees and outlays incurred by them to date in the present petition are estimated to amount to £75,000. They seek an order for immediate payment of two thirds of that sum, to allow some margin of error.

[4] The petitioners are correct that they cannot do diligence on the dependence of an action or petition where there is no conclusion for payment of a sum other than by way of expenses; that was the common law rule, and it is now expressly stated in section 15A(2)(a) of the Debtors (Scotland) Act 1987, as amended by section 169 of the Bankruptcy and Diligence etc (Scotland) Act 2007. In the event that the first respondent were to dispose of her properties, the petitioners would of course obtain some protection through the law on gratuitous alienations, whether at common law or under section 34 of the Bankruptcy (Scotland) Act 1985. If the alienation rendered the first respondent insolvent, it could be reduced and the property restored to the first respondent's estate. Nevertheless, counsel for the petitioners referred to the risk that the proceeds of sale might be dissipated in such a way that they could not be recovered. There is in any event the risk that the property will be transferred to a person who gives full value and takes in good faith, in which case of course the transferee's rights would have to be respected. For these reasons I am satisfied that the petitioners are correct in submitting that an order for interim payment of part of their expenses, followed by diligence, is by far the most effective means of protecting their position.

[5] I am further satisfied that an order for interim payment of part of the expenses is competent. Such orders are dealt with in MacLaren on Expenses, in two passages. First, at page 43, it is stated:

"(4) Interim Award. It is within the discretion of the judge to give an interim award of expenses upon a point distinct and separate from the rest of the cause ... If ... the interim award is unqualified, it is simply regarded as a payment to account".

Authority for the latter proposition is found in Cameron and Waterston v Muir & Son, 1861, 23 D 535. The second reference to interim expenses in MacLaren is found at pages 302-303, where in relation to consistorial cases it is stated that if a wife had no separate estate she was entitled to an interim award for the purpose of defending an action of divorce brought against her; the final authority cited for this proposition is Jaffray v Jaffray, 1909 SC 577 . That is obviously based on a state of the law of matrimonial property that has long since gone, but the important point for present purposes is that the court was in the habit of making interim awards of expenses as a case proceeded. Thus the competency of such an award is clear.

[6] I was also referred to the case of Mars UK Ltd v Teknowledge Ltd, [1999] 2 Costs LR 44, a decision of Jacob J. in the English High Court. In England the Rules of the Supreme Court make express provision for payment of costs on account; thus there was no issue as to the competency of such an order. Jacob J. nevertheless required to consider whether he should make an order. He stated (at pages 46-47):

"There is no guidance in the Practice Direction. So I approach the matter as a question of principle. Where a party has won and has got an order for costs the only reason that he does not get the money straightaway is because of the need for detailed assessment. Nobody knows how much it should be. If a detailed assessment were carried out instantly he would get the order instantly. So the successful party is entitled to the money. In principle he ought to get it as soon as possible. It does not seem to me to be a good reason for keeping him out of some of his costs that you need time to work out the total amount. A payment of some lesser amount which he will almost certainly collect is a closer approximation to justice. So I hold that where party is successful the court should on a rough and ready basis also normally order an amount to be paid on account, the amount being a lesser sum then the likely full amount".

What is said there appears to me to be equally applicable in Scotland, except that here there is no normal practice of making such orders. In general, in Scotland it will be necessary to show special reasons for making an interim award. Nevertheless, I am of opinion that such an award is appropriate in the present case in order to protect the petitioners' right to expenses. There is evidence, narrated above, that the first respondent is at least reluctant to make payment of expenses, and perhaps lacks the liquidity to do so. If diligence had been competent on the dependence of the petition I have no doubt that it would be justified, and the interim award of expenses is intended to permit the petitioners to do diligence.

[7] As to the amount of the award, I was referred to a letter from the law accountant who is acting in respect of the petitioners' account of expenses. This described how an award of expenses on an agent and client basis is taxed, and indicated that the taxation of such an account is usually more straightforward than other cases. Moreover, such an award (if it is, as here, agent and client, client paying) will invariably result in total recovery of expenses at taxation. In the present case, the account was for a sum slightly in excess of £78,000; the law accountant thought that the Auditor of Court was unlikely to challenge any of the fees or expenses, and he would not expect the taxed account to be less than £50,000. I accordingly consider it appropriate to make an interim award of expenses for that amount. Finally, I should record that the petitioners undertook that, in the event that the Auditor of Court assessed their account at less than the sum recovered by way of interim payment, they would repay the excess with interest at the judicial rate from the date when any payment is received by them. Such an obligation would almost certainly be implied, or would arise under the law of unjustified enrichment; nevertheless, the undertaking has been recorded in the minute of proceedings.