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Cite as: [2017] ScotCS CSOH_124, 2018 SC 221, 2018 SCLR 278, 2017 GWD 31-499, [2017] CSOH 124

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CA211/15

OUTER HOUSE, COURT OF SESSION

[2017] CSOH 124

OPINION OF LORD TYRE

In the cause

ROBERT KIDD

against

(FIRST) PAULL & WILLIAMSONS LLP

(SECOND) BURNESS PAULL LLP

Pursuer: A Smith QC, J Brown; Levy & McRae

Defenders: R W Dunlop QC, Paterson; BTO Solicitors LLP

Pursuer

Defenders

26 September 2017

Introduction

[1] In this action the pursuer, a former client of the first defender and its predecessor

firm Paull & Williamsons, seeks damages from the defenders for losses which he claims to

have sustained as a consequence of the sale in September 2009 of part of his interest in a

company called ITS Tubular Services (Holdings ) Limited. The sum sued for is

US$210 million. Further details of the factual background are set out in my opinion at

[2017] CSOH 16. Proof before answer has been allowed and is set to commence on 9 January 2018.

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[2] On 25 November 2016, I pronounced an interlocutor finding the defenders liable to

the pursuer for (i) the expenses of a minute of amendment; (ii) the expenses of the discharge

of a diet of proof; and (iii) one half of the expenses of the action to date except in so far as

otherwise dealt with. Each of those awards was on an agent and client, client paying basis.

I also found the pursuer entitled to an additional fee under various heads of Rule of

Court 42.14(3). In accordance with usual practice, the pursuer’s account of expenses was

remitted, when lodged, to the Auditor of Court for taxation, and the interlocutor included a

decerniture for payment of the expenses as taxed.

[3] No account of expenses has yet been lodged. The pursuer, however, enrolled a

motion for payment within 14 days of £2,000,000 as an interim payment of expenses, with

interest at the judicial rate from expiry of the 14-day period. The motion was opposed.

Arguments for the Parties

[4] On behalf of the pursuer it was submitted that the motion was competent and that

the making of such an interim award did not require special reasons but was a matter for the

discretion of the court. If special reasons were required, they consisted here of the conduct

of the defenders that had led to an award of expenses on an agent and client, client paying

basis, the size of the sum due, the complexity of the process of making up the pursuer’s

account, and the prejudice to him in having to continue to litigate without access to funds to

which he had been found entitled. As regards the sum sought, it was very unlikely that a

lower sum would be awarded after taxation.

[5] On behalf of the defenders it was not contended that the motion was incompetent,

but it was submitted that an interim award should only be made in special circumstances, of

which there were none here. In any event no award should be made at this time because if

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the defenders were ultimately successful in their defence to the action, there would be a very

large contra-award to set against the pursuer’s award. It was further contended that the

sum sought was excessive.

Review of Authorities

[6] I take as a starting point the following statement in Maclaren on Expenses (1912) at

page 43:

“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.”

Examination of the cases cited in support of this proposition (Waddel v Hope (1843) 6D 160

and Vaughan v Davidson (1854) 16D 922) discloses that they were concerned only with the

question whether it was competent for the court to make a finding of liability for the

expenses of a particular step of process, or whether expenses could only be awarded at the

end of the action. In modern practice, interim awards in this sense are routine. The cases

cited do not address the question whether an order for interim payment prior to taxation can

or should be made.

[7] The passage in Maclaren continues:

“Where the interim award is modified, the award is final, and no further expenses in

respect of the part modified can be obtained by the party receiving the interim award,

should he be ultimately successful in the cause. If, however, the interim award is

unqualified, it is simply regarded as a payment to account.”

The authority cited for the latter proposition is Cameron and Waterston v Muir & Sons (1861)

23D 535, reported more fully at 33 Scot Jur 272. The pursuers in that case sought suspension

of a charge, but this was refused because they had not offered caution, and a finding of

expenses was made against them. The pursuers reclaimed and sought leave to amend their

pleadings by offering caution. This was allowed conditionally upon payment of £8, 8s by

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way of expenses occasioned by their previous failure to offer caution. Lord Ivory described

the payment as “a payment to account”. Lord President McNeill observed:

“… When we merely appoint payment of a certain sum of expenses, without using

the word ‘modify’, that leaves open for further examination, whether the full

expenses of that litigation may not afterwards be given, under deduction of the

payment made.”

The decision is thus concerned with the particular situation of the court allowing an action

to proceed only on condition of payment of a sum by way of expenses incurred by the other

party. At the very least it confirms the competency of an order for interim payment of a

specified sum as opposed to a more general finding of entitlement to expenses as taxed (in

absence of agreement).

[8] Maclaren then deals with the question whether, as a general rule, payment of an

interim award was (as for example in Cameron and Waterston) a condition precedent of being

allowed to proceed after a party had lost a material point. In Byres’ Trs v Gemmell (1896)

4 SLT 21, the Lord Ordinary (Kincairney) reviewed the case law and observed:

“… From the opinions expressed in the later cases, it appears that no inflexible rule

on the point exists, but that it is a matter within the discretion of the Court, to be

determined with reference to the circumstances in each case. There is no strong

reason in the ordinary case for the enforcement of such a condition. The successful

party gets his decree, and he can extract and enforce it in the ordinary way, and there

is no reason why the Court should go out of its way in order to give him exceptional

assistance.”

Once again, therefore, the point was not whether an order for actual payment could or

should be made. It is, however, of some interest to note Lord Kincairney’s description of

obtaining a decree for extraction and enforcement as “the ordinary way”.

[9] Interim awards of expenses are also discussed by Maclaren at pages 302-3 in the

particular context of consistorial cases. Maclaren states:

“If [a wife defender] has no separate estate she is entitled to an interim award for the

purpose of defending the charge against her.”

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In Jaffray v Jaffray 1909 SC 577, a husband sought decree of divorce on the ground of his

wife’s adultery. The Lord Ordinary assoilzied the wife and found her entitled to expenses.

The husband reclaimed, and the wife sought payment of the amount of her account of

expenses or, alternatively, an order remitting the account for taxation and for payment of the

taxed amount. The court considered that she was entitled to sufficient funds to enable her to

maintain her defence, Lord President Dunedin observing (page 579):

“If a husband seeks to divorce his wife, and the wife is without means, she is entitled

to have paid to her such funds as shall from day to day be sufficient to allow her to

make good her defence. As to the amount to which she is from time to time entitled,

that can only be arrived at by a rough estimate. Of that principle I think there can be

no question. But if, during the progress of the case, the wife manages to carry on her

case by means of her own funds or of funds which she has succeeded in borrowing

for the purpose, the necessity for interim payments is over, and her ultimate right to

expenses will be left to be determined at the end of the day according to the ordinary

rules …”

It is apparent from this passage that the wife’s entitlement to be paid an interim sum did not

depend upon any prior finding of expenses in her favour, but rather derived from the legal

disabilities and financial disadvantages which applied at that time to married women.

Similarly, in Anderson v Anderson (1896) 4 SLT 36, also cited by Maclaren, a wife defender

moved for an award of interim expenses to enable her to lodge defences. It was held that it

was premature to move for expenses until defences had been lodged and proof allowed.

Once again, therefore, the wife’s entitlement to an interim payment did not depend upon

there having been a finding of expenses in her favour. I conclude that the consistorial cases

discussed in Maclaren are of no assistance in deciding the question before me, although I

note Lord President Dunedin’s reference in the passage quoted above to determination of a

right to expenses “according to the ordinary rules”.

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[10] In Martin & Co (UK) Ltd, Petrs [2013] CSOH 25, the petitioners in an application for

recovery of documents under section 1 of the Administration of Justice (Scotland) Act 1972

were awarded the expenses of process to date on an agent and client, client paying basis.

They moved for an interim payment of expenses in the sum of £50,000. At the hearing of the

motion there was no appearance for the respondent. The petitioners stated that an award of

expenses in other commercial court proceedings had not been met and that a diet of taxation

was being sought. The respondent was heritable proprietor of a number of properties and

the petitioners wished to have a means of doing diligence to protect, pending taxation, their

interest in recovering the expenses awarded, which were estimated to amount to £75,000.

Lord Drummond Young granted the motion. Under reference to Maclaren (loc cit), Cameron

and Waterston v Muir & Sons and Jaffray v Jaffray, he held that an order for interim payment

of part of a party’s expenses was competent. He cited the following passage from the

decision of Jacob J in the English High Court in Mars UK Ltd v Teknowledge Ltd [1999] 2 Costs

LR 44 (at para 8):

“There is no guidance given in the Rules other than that the court may order a

payment on account. 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 a detailed assessment. Nobody knows how much it should be. If the

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 a 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

than the likely full amount.”

Lord Drummond Young observed (para 6):

“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.”

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He considered that protection of the petitioners’ right to expenses rendered such an award

appropriate, as there was evidence of reluctance to make payment and possible lack of

liquidity on the part of the respondent. Since the award of expenses had been made on an

agent and client, client paying basis, an order for interim payment of just under two-thirds

of the sum which a law accountant considered was unlikely to be reduced by the Auditor of

Court was appropriate.

[11] Lord Drummond Young’s approach, ie that an order for interim payment may be

made if special reasons are present, was followed by Lord Woolman in Tods Murray WS v

Arakin Ltd [2013] CSOH 134. This too was a case in which expenses had been awarded on an

agent and client, client paying basis. Lord Woolman held that special reasons existed, in

respect that the defender’s previous conduct indicated that he would resist payment for as

long as possible, and there was at least a question over his ability to satisfy the award.

Having been provided with a statement by a law accountant that a sum of over £1,000,000

had been incurred on fees and outlays by the pursuers and their insurers, Lord Woolman

adopted a conservative approach and ordered an interim payment of £150,000.

Decision

[12] I have already noted that it was not in dispute that it was competent for the court to

order an interim payment of part of a party’s expenses before an account has been lodged

and, if necessary, taxed by the Auditor of Court. There is equally, in my view, no difficulty

with regard to the competency of ordering payment of a specified sum by way of interim

payment. The cases of Cameron & Waterston v Muir & Sons and Jaffray v Jaffray provide

examples of cases in which the court has, in particular circumstances of no current

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relevance, made orders for payment of specified sums by way of expenses. I see no reason

why the practice should not be regarded as competent more broadly. The question that

arises in the present case is whether, and if so in what circumstances, an order for interim

payment should be made where expenses have been awarded but where the account has not

yet been lodged and taxed.

[13] In Martin & Co (UK) Ltd, Lord Drummond Young identified a need to show “special

reasons” for making an interim award. I do not, for my part, read this observation as

meaning that an order will only be made in exceptional circumstances. It does no more than

acknowledge that the rules of court provide a mechanism whereby an award of expenses

may be made, quantified by the Auditor of Court in case of dispute, extracted and in due

course enforced. This is the “ordinary way” to which reference was made in Byres’ Trs v

Gemmell and Jaffray v Jaffray: the procedure normally regarded by the rules of court as

appropriate for recovery of expenses. But, as with other aspects of expenses, it is in my

opinion within the discretion of the court to depart from the “ordinary way”, provided the

court is satisfied that there is sufficient reason for so doing.

[14] In the present case, four features were relied upon by the pursuer as special reasons

for granting the motion for interim payment. The first was the defenders’ conduct which

had justified the award of expenses on an agent and client, client paying basis. I reject that

contention. The court has already expressed its disapproval of the defenders’ conduct by

making an award on that basis; there is no good reason to order interim payment as, in

effect, a further instalment of punishment. The other three features relied upon were:



the size of the sum likely to be found due: the greater the amount of money

which the receiving party is kept out of for an extended period, the greater

the injustice;

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

the scale, complexity and cost of the process of preparation and taxation of

the account: the solicitors’ correspondence file ran to 50 volumes, with

hundreds of thousands of pages of documents in electronic form. The

taxation would be complicated and lengthy;



the litigation was ongoing and cost continued to accrue: there was no good

reason for the pursuer to have to fund that cost while being kept out of the

sum owed to him by the defenders.

[15] In my opinion these three features together afford sufficient reason to grant the

pursuer’s motion for an interim payment. The present litigation is exceptional in respect of

the amount of documents that have been recovered and perused. If taxation of the pursuer’s

account is required, this is likely to result in a very substantial award and/or a very lengthy

process of taxation, depending on the extent to which the account is challenged. Having

regard also to the pursuer’s need to fund the continuing litigation, it is not in the interests of

justice that he should be deprived for an indefinite period of the whole of the expenses to

which he has been found entitled. I am not persuaded by the defenders’ argument that the

possibility of a substantial – and possibly equally large – contra-award were the pursuer’s

case ultimately to fail constitutes a good reason for refusing an interim award. The fact that

a litigation is continuing does not preclude a party from having an account of expenses

taxed in order to enable him to obtain an extract decree and enforce it, even though a future

contra-award remains a possibility.

Amount of the Interim Payment

[16] The sum sought in the present case by way of an interim payment of expenses

(£2,000,000) is very large indeed. Little detail of its composition was provided. In support of

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it, the pursuer founded upon (i) a letter from Ms Frances Delaney, the law accountant

instructed to prepare the pursuer’s account; and (ii) a report by Mr Alexander Quinn,

another experienced law accountant not otherwise involved in this litigation. Ms Delaney

and Mr Quinn were both of the opinion (a) that the rates charged by the agents for work in

respect of which expenses were awarded to the pursuer were reasonable; (b) that because

expenses had been awarded on the agent and client, client paying basis, it was unlikely that

there would be any significant taxing off of fees by the Auditor; (c) that an uplift of at least

150% was likely to be allowed in respect of the additional fee; and (d) that it was likely that

the outlays, consisting principally of counsel’s fees, would be taxed as recoverable in full.

The total according to Ms Delaney’s calculation (assuming that the figure of £479,307 at

page 2 of her letter represents one half of the total solicitors’ fees exclusive of VAT for the

period in question) was £1,998,120. The total according to Mr Quinn’s calculation was said

to be £1,909,301 but according to my arithmetic was £1,684,451, although this figure does not

appear to include fees charged by the pursuer’s previous agents. These totals were regarded

by the respective law accountants as underestimates of the sum likely to be awarded.

[17] I accept, on the basis of the views expressed by two experienced law accountants,

that fees and outlays are much less likely to be taxed off an account of expenses awarded on

an agent and client, client paying basis than on a party and party basis. I also accept that the

arithmetic effect of the additional fee uplift will be very significant. The Auditor will

nevertheless require to be satisfied both that any expense was reasonably incurred and that

the rate charged is reasonable. One may anticipate that an account of this magnitude will be

challenged and closely scrutinised. It is appropriate, especially in the absence of any

detailed exposition of the fees and outlays incurred, for the court when exercising its

discretion to adopt a conservative approach. In all of the circumstances I shall grant the

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motion to the extent of ordering the defenders to make an interim payment to the pursuer of

the sum of £1,000,000, with interest accruing thereon at the judicial rate after 14 days from

the date of my interlocutor.

[18] The pursuer offered a formal undertaking to the court that in the event that the

interim award turns out to exceed the taxed award, the excess will be repaid with interest at

the judicial rate from the date of the interim payment until the date of repayment of the

excess. As Lord Drummond Young observed in Martin & Co (UK) Ltd (para 7), such an

obligation is almost certainly to be implied, but I shall record the undertaking in the minute

of proceedings.