Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2016] CSOH 85

A491/13

OPINION OF LORD BANNATYNE

In the cause

AIRD GEOMATICS LIMITED & OTHERS

Pursuers;

against

RICHARD STEVENSON & ANOTHER

Defenders:

Pursuer:  Burr: Reid Cooper Solicitors

Defender:  McConnell; Drummond Miller LLP

21 June 2016

Introduction
[1]        A motion on behalf of the first defender in the following terms came before me seeking:

• Expenses except insofar as already awarded on an agent and client basis against the pursuers.
• An additional fee.
• Certification of Mr Peter Davies as an expert.

[2]      I also heard a motion on behalf of the pursuers for modification of any award of expenses made in favour of the first defender.

Background
[3]        The pursuers raised an action seeking interdict, interim interdict and damages against the first defender who they claimed was a former employee of what they described as the Aird Group.  In addition the action sought interdict and damages from the second defenders who were the employers of the first defender when the action was raised.  The pursuers are three limited companies and an individual and are referred to in the pleadings collectively as the Aird Group.  The underlying dispute, as averred on behalf of the pursuers, related to an alleged breach of contract by the first defender following his leaving the employment of the Aird Group.  He was alleged to be in breach of a confidentiality clause and a non‑solicitation clause in his contract of employment.  The first defender in response to the action lodged defences denying the allegations and resisting the proceedings on various grounds.  He in addition lodged a counterclaim in which he sought damages on the ground that the interim interdict had been wrongfully obtained.

Procedural history
[4]        The procedural history insofar as relevant to the issues before the court was this:

• The proceedings were raised on 3 September 2013 and an interim interdict was obtained.
• On 25 April 2014 the first defender’s motion for recall was heard.
• On 2 May 2014 the interim interdict was recalled.
• A proof on both the action and the counterclaim was set down to take place on 29 April 2015.
• On 8 April 2015 the action was abandoned against the second defenders.
• On 22 April 2015 the action was abandoned against the first defender.
• On 29 April 2015 following argument being heard a summary decree was granted in favour of the first named defender in terms of his counterclaim.The Lord Ordinary held that the recall of interim interdict raised a conclusive presumption that the interim interdict had been wrongfully obtained.
• The Lord Ordinary then fixed a proof with respect to the issue of the first defender’s damages claim.
• On 3 November 2015 the court heard evidence with respect to the issue of damages and awarded damages to the first named defender.

Submissions on behalf of the first named defender
Expenses on an agent and client basis

[5]        The law regarding the awarding of expenses on an agent and client basis is well settled and is conveniently summarised by Lord Hodge in McKie v Scottish Ministers [2006] SC 528 at 530 in five propositions:

“First, the court has discretion as to the scale of expenses which should be awarded.  Secondly, in the normal case expenses are awarded on a party and party scale; that scale applies in the absence of any specification to the contrary.  But, thirdly, where one of the parties has conducted the litigation incompetently or unreasonably, and thereby caused the other party unnecessary expense, the court can impose, as a sanction against such conduct, an award of expenses on the solicitor and client scale.  Fourthly, in its consideration of the reasonableness of a party’s conduct of an action, the court can take into account all relevant circumstances.  Those circumstances include the party’s behaviour before the action commenced, the adequacy of a party’s preparation for the action, the strengths or otherwise of a party’s position on the substantive merits of the action, the use of a court action for an improper purpose, and the way in which a party has used court procedure, for example to progress or delay the resolution of the dispute.  Fifthly, where the court has awarded expenses at an earlier stage in the proceedings without reserving for later determination the scale of such expenses, any award of expenses on the solicitor and client scale may cover only those matters not already covered by the earlier awards.”

[6]        Mr McConnell made the following submissions:

[7]        He relied on the pursuers’ behaviour in repeatedly contacting the Scottish Legal Aid Board to have the first defender’s legal aid withdrawn on the basis that he was acting unreasonably in continuing with his counterclaim.  He submitted that the converse was true as was shown by the granting of the summary decree.

[8]        With respect to the preparation of the case by the pursuers Mr McConnell directed my attention to this averment made in support of the pursuers’ case seeking damages:

“A forensic assessment will be produced”. (See:  page 39C of the record).

[9]        No such forensic assessment was produced and no forensic accountant appeared on any list of witnesses.  He submitted that in these circumstances there was never any evidential basis for the claim for damages.  However, a claim was persisted in until one week prior to the proof date.

[10]      A second point with respect to the pursuers’ preparation was that the documents lodged in support of the claim for damages 6/21 to 6/24 of process were not in a form that could be spoken to by a forensic accountant.

[11]      Turning to the strength of the pursuers’ position Mr McConnell submitted that the case was very weak and throughout the pursuers had made wrong decisions in law.

(a)  It was clear from the outset that there were legal personality difficulties with respect to the second to the fourth pursuers in that they had no contractual relationship with the first defender. 

(b)  There were no averments to support a breach of the confidentiality clause.  There were no averments of disclosure.  Moreover there were no averments of any belief that there had been disclosure.  There were no allegations that the first defender had improperly taken confidential information.  There was no proper basis in the evidence for the critical allegations. 

(c)  Beyond the above there were no averments to support a case of breach of the non‑solicitation clause.

(d) The pursuers had abandoned the principal action.

(e)  Their opposition to the summary decree motion was made in the face of a binding Inner House authority, namely: Mirza v Salim 2014 SLT 875, the decision in which ran entirely counter to the pursuers’ position.  The pursuers did not seek to reclaim the summary decree decision. 

(f)  The pursuers even after the loss of the summary decree motion neither made an offer of any sum of damages to the first named defender nor did they tender.  He submitted that this was a wholly unreasonable approach.

(g)  The averments anent breaching of the chain of causation which formed part of the defence to the first defender’s damages claim made no sense and were wrong in law.

[12]      He submitted that the action had been used for an improper purpose and referred to what he described as highly improper surveillance by private investigators instructed by the pursuers with respect to the first defender.  This was particularly improper in that there was no forensic accountant’s report. 

[13]      Lastly regarding the way the pursuers had used court proceedings he submitted that it was wholly inappropriate to abandon this case only the week before the proof.

Reply on behalf of the pursuers
[14]      Counsel’s position was that it was reasonable to oppose the summary decree motion as the Inner House decision was a split one.  He believed it was wrongly decided.  The decision was not reclaimed because of the cost of such a motion.

[15]      He accepted that there was no forensic accountant’s report.  It was his position that it became clear while the case was sisted that the pursuers could not prove any losses and he accordingly advised that they should abandon their claim.  They accepted this advice.  In the circumstances their actings had been reasonable.  He accepted that he would not have gone to proof on the basis of the documents lodged which were referred to by Mr McConnell.

[16]      With respect to the strength of the merits he firstly turned to look at the issue of standing and said that there were circumstances where separate legal entities could be treated as a single entity and therefore it was not unreasonable to proceed on a group basis. 

[17]      As regards the breach of the confidentiality clause he said that in working at other sites the first defender must have used confidential information and thus had breached the confidentiality clause.  He accepted that this was an unusual basis for advancing an argument that a confidentiality clause had been breached.  He accepted that the Lord Ordinary who had granted the interim interdict had had some difficulty with this approach but nevertheless he had granted the interim interdict.

[18]      He submitted that the basis upon which the non‑solicitation clause was said to be breached related to the first named defender working for and being employed by the second named defenders who had been clients of the pursuer. 

[19]      As to the timing of the abandonment this had been done when he had received instructions and there was nothing unreasonable about the timing of that decision.

[20]      With respect to no offer or tender being lodged despite the summary decree he submitted that an offer for both parties to walk away, each meeting their own expenses had been made and that it would not have been appropriate to go beyond that.  That was a reasonable offer.  He submitted that simply because the first named defender had obtained summary decree it did not follow that he would obtain damages.

[21]      So far as the surveillance was concerned he admitted that this had been carried out.  However, it was his position that it was proper to instruct this as at one point it was put forward on behalf of the first defender that he was not working and the pursuers wished to check this. He accepted that there had been attempts to have the first defender’s legal aid withdrawn but said that was a perfectly reasonable course of action.  Overall his position was that the actings of the pursuers had been reasonable and that they had a reasonable case to put forward.  There was no basis for awarding expenses on an agent and client basis.

Discussion
[22]      I am persuaded that there is substantial merit in the arguments advanced before me by Mr McConnell.

[23]      Turning first to the adequacy of preparation:  the pursuers continued with their claim for damages from 3 September 2013 to 22 April 2015 when the case was abandoned on the basis of an averment that a forensic accountant’s report would be produced.  Such a report was not produced and nor was it even instructed.  The documents lodged in process, counsel for the pursuers accepted, could not be relied upon to prove loss.  There was thus no evidential basis for this claim for damages.  The case was sisted between 10 October 2013 and 11 February 2014.  According to counsel for the pursuers it was during this period that it became clear the loss claim could not be established.  Against that whole background it appears to me that this claim should not have been persisted in until 22 April 2015, a week before the proof.  The preparation on this critical issue was in my judgment clearly inadequate.  There appears never to have been any substance in the claim.  

[24]      Turning to the strength of the substantive merits of the case in my clear view this was an extremely weak case on the merits.  It verges in my view on not being arguable.  As regards the issue of standing the Aird Group did not exist as a legal personality.  The pursuers’ case was based on breach of contract.  The first defender was employed by the first pursuer.  Accordingly the second to fourth pursuers had no title and interest.  Nothing was put before me to suggest there was any such legal personality as the Aird Group.  Counsel for the pursuers referred to DHN v Tower Hamlets [1976] WLR 852 as supporting his contention that it was appropriate in this case to sue on the basis that the Aird Group existed.  This case has no relevance with respect to the instant case.  It related to whether a number of companies could be treated as a single economic entity for the purposes of compensation in terms of the Land Compensation Act 1961.  What is said therein could not be read over into the circumstances of this case.  The opinion of the court in The Harbro Group Limited v MHA Auchlochan [2014] CSIH 14 at paragraph 14 establishes that the pursuers approach regarding the issue of standing was misconceived.  Accordingly there was a fundamental flaw in the pursuers’ action relative to the standing of the second to fourth pursuers and with respect to the whole approach of the pursuers in seeking to proceed on the basis that there was such an entity as the Aird Group.

[25]      The pursuers in their action were first relying on a breach of a confidentiality clause,  the relevant part of which reads:

The employee “shall not disclose Confidential Information (as defined in the contract of employment) to any person”.

[26]      There were no averments on record that the first named defender had disclosed to any other person confidential information (see:  articles 4 and 5 of condescendence which deals with this aspect of the pursuers’ case).

[27]      The pursuers’ case seemed to be based on the contention that:  you can disclose information which you have to yourself.  In my view you cannot disclose information to yourself.  No other party is named to whom the first defender has disclosed confidential information.

[28]      Turning to the non-solicitation clause, on a proper reading thereof I cannot see how this clause prevented the first defender from taking employment with the second named defenders.  First I observe that the clause seeks to prevent solicitation of “any business similar to or in competition with the business of the Aird Group”.  There is no such legal personality as the Aird Group.  The first defender was not employed by them. 

[29]      Secondly the clause seeks to prevent the first named defender “from procuring orders from or (doing) business with” a company such as the second defenders who had been a customer of the pursuers at any time in the period of 18 months prior to the termination of the first defender’s employment.  The first named defender became an employee of the second named defenders, I am unable to see how that could be said to be procuring orders from them or doing business with them.  The wording of the clause on a fair reading seeks to prevent the first named defender from being a party to transactions with a company such as the second named defenders.  It, on a sound reading, stops the first defender from setting up his own business or being employed by a third party and then seeking to procure orders from or do business with a party such as the second named defenders.  It does not in my view, on a fair reading of it, stop him from being employed by a party such as the second named defenders. 

[30]      In my judgment there are no relevant averments supporting a breach of either of the two clauses of the contract relied upon by the pursuers.  The alleged breach of these clauses is the core of the pursuers’ case and accordingly in my view the core of the pursuers’ case had no real prospects of success. 

[31]      The opposing of the motion for summary decree I believe had no prospects of success given the binding Inner House authority and the acceptance by the pursuers that the instant case could not be distinguished from it.  The argument on behalf of the pursuers was bound to fail in the Outer House.  It would only have been reasonable to proceed to argue this matter in the Outer House if the pursuers had decided they would when, they inevitably lost, reclaim and argue that Mirza was wrongly decided.  They did not reclaim and do not appear to have been willing to reclaim because of the potential cost of such proceedings. 

[32]      With respect to the lack of tender or offer, it is perhaps surprising that the pursuers did not following upon the granting of the summary decree, seek to protect their position by the making of an offer in settlement (including the payment of some damages) or by the lodging of a tender.  However, I do not think it a factor which evidences a weakness in the pursuers’ case or unreasonableness on the part of the pursuer which would on its own justify the granting of expenses on an agent and client basis. 

[33]      Counsel for the pursuers’ submission that there was no causal connection between the wrongful obtaining of the interim interdict and the losses claimed by the first defender I deal with in my original opinion.  There was no substance in this argument. 

[34]      Overall, for the reasons given above, the pursuers’ case first did not appear to be adequately prepared and secondly the substantive merits of the action were very weak.  I am persuaded that having regard to all of the above factors the conduct of the litigation by the pursuers was unreasonable.  I am persuaded for these reasons that the first defender is entitled to expenses on an agent and client basis except insofar as already dealt with. 

[35]      So far as the use of the action for an improper purpose I believe in the circumstances I am not able to hold that the pursuers were acting improperly when they carried out surveillance.  It cannot be said to be improper to carry out surveillance in circumstances where the first defender appeared to be saying he was not working and it was believed he was working.

Additional Fee
[36]      As regards the motion for an additional fee in terms of Rule of Court 42.14 counsel relied on paragraphs (2)(a)(e) and (g). 

[37]      Under (a) he argued that this was the first reported case in terms of Scots Law which had considered the issue of quantum of damages where an interim interdict had been wrongfully obtained.  It accordingly raised novel questions of law. 

[38]      Under head (e) he argued that the importance of the litigation to the first named defender was obvious.  He had school age children, he was the main bread winner in his family and he could have been destroyed by the claim of damages made against him.

[39]      Under (g) he relied on a number of settlement proposals which had been made on behalf of the first defender and that the only reply to these proposals had been the offer of abandonment with no expenses due to or by which he said was entirely unreasonable.

Reply on behalf of the pursuers
[40]      Counsel submitted (a) the point raised in this case was not a unique one (b) all litigation was important to the client and this was no more important to this client than any other case and (c) he accepted there were settlement proposals however this did not justify an additional fee under this head.

Discussion
[41]      I grant an additional fee under heads (a) (e).  The issue of damages for the wrongful obtaining of an interim interdict was an unusual one.  No case was referred to by either side where this particular issue had been considered.  I believe the issue was sufficiently novel to justify an award under this head. 

[42]      The case I believe was well beyond ordinary importance to the first named defender.  The case was of critical importance to him in that it went to the core of his life;  it affected his employment and his ability to support his wife and young family.  Moreover, he would have been ruined if the damages claim had been successful against him. I accordingly believe an additional fee under this head is appropriate.

[43]      As regard settlement proposals I did not believe there was sufficient under this head to grant an additional fee.

Certification of witness as an expert
[44]      The appropriateness of instruction it was agreed was a matter which should be tested as at the date of instruction.  At the time of the instruction of Mr Peter Davies (an employment expert) the first named defender was working in terms of temporary contracts.  It was not clear whether the first named defender would be able to continue with these.  It was therefore thought appropriate to have Mr Davies consider the issue of what he could do if he were unable to continue to work on the basis of temporary contracts.  It was argued on that basis he should be certified.

Reply
[45]      Counsel submitted that it was not reasonable to instruct Mr Davies in that the claim for patrimonial loss was eventually abandoned.

Discussion
[46]      The patrimonial loss claim was ultimately abandoned, however, at the time of the instruction of Mr Davies given that the first defender was only carrying out temporary contracts and given the uncertainty arising therefrom it was I am persuaded appropriate to instruct Mr Davies to look at the question of alternatives.  I accordingly certify Mr Davies.

Modification of award of expenses
[47]      This motion was moved on behalf of the pursuers.  In short it was submitted that shortly before the proof the first defender had abandoned his patrimonial loss claim and therefore any award of expenses in his favour should be modified.

Reply
[48]      The submitted basis was not an appropriate ground for modification.  If the pursuers wished to protect themselves in relation to any part of the claim not being proceeded with or established they should have tendered.

Discussion
[49]      The first named defender was successful at proof in obtaining damages.  In my opinion the normal rule should apply and expenses should follow success.  I agree with Mr McConnell that if the pursuers wished to protect themselves, against such a result they should have tendered.  They did not do so.  This is not a case where any extra time was used at proof in seeking to prove a specific head of claim which at the end of the day was not proved.  It is not for the court to investigate, in circumstances such as this, what proportion of preparation was taken up, if any, looking at the abandoned part of the claim.  In the circumstances I refuse the motion for modification.