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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> CJC MEDIA (SCOTLAND) LTD AGAINST KENNETH SINCLAIR [2020] ScotCS CSOH_93 (20 November 2020)
URL: http://www.bailii.org/scot/cases/ScotCS/2020/2020_CSOH_93.html
Cite as: [2020] ScotCS CSOH_93, [2020] CSOH 93, 2020 GWD 39-500
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OUTER HOUSE, COURT OF SESSION
[2020] CSOH 93
CA100/17
OPINION OF LORD TYRE
in
NOTE OF OBJECTIONS
for the Defender
In the cause
CJC MEDIA (SCOTLAND) LIMITED
against
KENNETH SINCLAIR
Pursuer
Defender
Pursuer: Davies; TC Young LLP
Defender: Party
20 November 2020
[1] This was an action for count, reckoning and payment by the pursuer against the
defender, a former director, in relation to alleged breaches of fiduciary duty. A proof before
answer took place before Lord Doherty in 2018 on the issues of (i) whether the defender had
breached his fiduciary duties; if so (ii) whether he had an obligation to account to the
pursuer in respect of that breach; and, if so (iii) the period in respect of which the defender
ought to account. In his opinion dated 25 January 2019, Lord Doherty held that the defender
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2
had been in breach of fiduciary duty by appropriating a particular business opportunity for
the benefit of a company that he had formed after his resignation as a director of the
pursuer. Lord Doherty further held that the defender had an obligation to account to the
pursuer for the profits of the appropriated business opportunity for a period of 12 months.
By interlocutor dated 1 February 2019, he found the defender liable to the pursuer for the
expenses of process to date with a modification of 20% in terms of Rule of 42.5(1), and
remitted the account for taxation by the Auditor of Court.
[2] The action was then set down for proof before answer in relation to the accounting
for profits. Settlement terms were agreed shortly before the proof date, and on 7 June 2019
Lord Doherty pronounced a further interlocutor inter alia finding the defender liable to the
pursuer in the expenses of process insofar as not already dealt with.
[3] The pursuer lodged its account of expenses for taxation. After the diet of taxation,
both parties lodged notes of objections to the Auditor’s report. The Auditor produced
minutes in response to both notes of objections. Only the defender’s note of objections is
now insisted upon. A hearing on the note of objections was fixed for 2 September 2020, and
written notes of argument were lodged on behalf of both parties in advance of the hearing
date. However on 1 September the defender’s agents withdrew from acting and, having
heard counsel for the pursuer and the defender in person, I discharged the hearing and
pronounced an interlocutor ordaining the defender to intimate to the court whether he
wished to insist in his note of objection. The defender confirmed that he did, and in
subsequent email correspondence it was agreed between parties that I should decide the
matter on the basis of the written submissions already lodged, without the need for an oral
hearing.
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3
General principles
[4] Before addressing the objections taken by the defender to the Auditor’s report, it is
necessary to state two important principles that must be applied when addressing such
objections.
[5] The first concerns the division of responsibility between the court and the Auditor in
relation to the awarding or allowing of expenses. The decision as to whether to award
expenses to a party is one for the exercise of the discretion of the court. That discretion
includes the scale upon which expenses are to be awarded, and in particular whether there
should be a departure from the usual party and party scale, for example to award expenses
on an agent and client, client paying scale in order to express disapproval of the manner in
which a party has conducted his case. The question of modification of an award of expenses
is also within the discretion of the court, in terms of Rule of Court 42.5(1). If, therefore, one
party wishes an award of expenses to be modified to take account of conduct of the other
party which he or she considers to have been improper, those are matters which must be
canvassed before the judge when an application for expenses is made.
[6] The judge’s decision establishes the basis upon which the Auditor must then conduct
his taxation of the account of expenses. The Auditor has no power to reopen matters on
which the court’s discretion has been exercised (see eg Stott v McWilliam (1856) 18D 716).
When considering the detail of the account, however, the Auditor must have regard to what
was formerly Rule of Court 42.5(2) and is now Rule 2.2 of the Act of Sederunt (Taxation of
Judicial Expenses Rules) 2019 (SSI 2019 No 75), which states:
“(1) The Auditor is to allow only such expenses as are reasonable for conducting
the proceedings in a proper manner.
(2) The Auditor may in particular refuse to allow—
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(a) expenses that the Auditor considers to have been incurred as a result
of fault or error on the part of the entitled party or the entitled party’s
representative; and
(b) expenses relating to a part of the proceedings in which the Auditor
considers that the entitled party was unsuccessful.”
[7] The second general principle concerns the role of the court when dealing with
objections to the Auditor’s report. It is well settled that that role is a very restricted one. The
paragraph 25 as follows:
“In carrying out his task, the auditor is afforded a wide discretion. He sees a very
large number of accounts over a considerable range of cases (Jarvie v Greater Glasgow
Primary Care NHS Trust [2006] CSOH 42, Lord Carloway at paragraph 39). The court
Lord Brodie, delivering the opinion of the court, at paragraph 7). Accordingly, ‘[i]t 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’ (Wood v Miller 1960 SC 86, LJC
(Thomson) at page 98). The available grounds of objection are analogous with those
Lord Mackay at page 764). The court can only interfere if, for example, the auditor
has; ‘misdirected himself in law or has taken irrelevant circumstances into account
or has failed to take into account relevant considerations or has misunderstood the
factual material put before him. Where, as will very often be the case, his decision
depends on the exercise of discretion, it will only be susceptible to being overturned
where it is such that no reasonable decision-maker could come to that conclusion’
(Glasgow Caledonian University v Liu, supra, paragraph 6).”
(Lord Osborne, delivering the opinion of the court, at paragraph 6), approving Urquhart v
Ayrshire and Arran Health Board 2000 SLT 829 (Lord Reed at paragraph 9), that once the
Auditor has taxed the account, the objection procedure is limited to permitting objections to
specific items in the Auditor’s report, and is not for dealing with objections of a different
nature.
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5
Grounds of objection to the Auditor’s Report
[9] Following the lodging of the Auditor’s minute responding to the note of objections,
the defender withdrew a number of his objections. The following objections were, however,
insisted upon.
General objection
[10] The defender has a general objection to the Auditor’s report which arises from the
fact that in its pleadings the pursuer had sought count, reckoning and payment for alleged
breaches of fiduciary duty by the defender in relation to eight separate business
opportunities. That was the pursuer’s case which went to proof before answer. At the close
of the proof, however, the pursuer made submissions in respect of only one of the eight,
abandoning the others. Moreover, in respect of the one that was not abandoned, the pursuer
sought an accounting for profits for four years but Lord Doherty held that it was entitled to
an accounting for one year only.
[11] In these circumstances, the defender submitted that he had had substantial success.
The matters which were abandoned had caused the majority of the parties’ expenses.
Additionally, since the diet of taxation, documents lodged by the pursuer in separate legal
proceedings in Glasgow Sheriff Court indicated that certain averments made by the pursuer
in the present action had been false, and that some of the business opportunities that the
pursuer had accused the defender of diverting to himself had in fact been diverted by the
pursuer’s other director to a company controlled by him, all of which indicated that the
pursuer’s case had been presented dishonestly and in bad faith.
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[12] It was contended that although the Auditor had correctly determined that expenses
in respect of matters where the pursuer had been unsuccessful ought to be disallowed in
full, the Auditor had misdirected himself in relation to items in which a “minimum charge”
had been made for items of work which were referable to both the successful and the
unsuccessful claims. The Auditor had allowed such charges in full, whereas he ought to
have abated them by 7/8ths to reflect the degree to which the pursuer had been unsuccessful.
[13] In his minute in response to the note of objections, the Auditor explained his
approach as follows:
“The general approach taken by the Auditor pursuant to the determination recorded
in the Note issued by him on 22 August 2019 was to endeavour to tax the account as
though it only covered work which was reasonably undertaken in relation to the part
of the action in which the pursuers were successful. Thus:
(a) He abated in full any entries relating exclusively to the 7 (of 8) breach of duty
claims abandoned by the pursuers at the end of the proof;
(b) He also abated in full any entries relating exclusively to the claim that the
defender breached his duties by preparing a powerpoint presentation; and
(c) Rejecting the submission made on behalf of the defender that all entries
relating to what was described as ‘general expenditure’ should simply be
abated by 7/8ths, he sought to identify accurately how much of each
individual item of work was referable to the part of the action in which the
Pursuers were successful and to apportion each entry accordingly (other than
where a minimum charge was made for an item of work which was referable
both to the successful claim and the unsuccessful claims, in which case the
minimum charge was allowed in full).”
[14] As the observations assembled in the dictum above from Shanley v Stewart make
clear, the role of the court in reviewing decisions made by the Auditor in taxing an account
is limited to assessing whether the Auditor has misdirected himself in law, taken irrelevant
considerations into account, failed to have regard to material considerations, or
misunderstood the factual material before him. Beyond that, the court acknowledges and
respects the expertise and experience of the Auditor in reaching a view as to whether
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7
particular expenses are to be allowed. In my opinion the approach taken by the Auditor, as
described above, to the abatement of entries in the pursuer’s account fell clearly within the
scope of his discretion. He rejected the proposition that all entries should be abated by 7/8ths
and instead sought to identify entries relating exclusively to the claims abandoned by the
pursuer, which were disallowed in full. In relation to items for which a minimum charge
was made, he took the view that that charge should be allowed in full, presumably on the
basis that ex hypothesi that amount would have been charged regardless of whether it related
to one or to eight heads of claim, and that there was accordingly no basis for applying a
further discount. I can detect no error of law or misunderstanding of fact in the Auditor’s
approach, and accordingly there is no basis upon which the court ought to interfere with it.
[15] As regards the allegation now made that the pursuer conducted its case in bad faith,
even if the matters now complained of (if true) had come to light before the diet of taxation,
they would not in my view have fallen within the scope of the Auditor’s discretion. They
would have been relevant, if at all, to allowance or modification of an award of expenses,
which would have been matters for the court and not, for the reasons explained above,
matters for the Auditor to take into account when deciding which items in the pursuer’s
account to allow or abate.
Specific objections
[16] The defender insisted upon the following four specific objections to the Auditor’s
report.
1. Service of summons
[17] The defender objected to allowance of certain expenses connected with unsuccessful
service of the summons. In his minute, the Auditor explained that he had allowed expenses
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up until the time when the pursuer’s solicitors were advised of the identity of the defender’s
solicitors and arranged for them to accept service. In response, the defender states that the
pursuer itself had been aware of the identity of the defender’s solicitors. It is not for this
court to enter into matters of disputed fact as to who knew what and when in relation to a
matter such as this. The Auditor had access to the whole case papers and I see no reason to
disturb his allowance of these expenses.
2. Copying of documents
[18] The defender objected to allowance of the expense of copying documents produced
by the pursuer in response to an application for commission and diligence, on the ground
that it was the responsibility of the pursuer itself, not the agents. The Auditor allowed the
expense because the copying would have had to be carried out by someone. In my view this
is a matter for the Auditor’s discretion and there is no basis in law for the court to interfere.
3. Expenses of responding to specification of documents.
[19] Objection was taken on the ground that the expenses were incurred by the pursuer
as a haver and not as a party. The Auditor considered that the work was reasonably carried
out by the agents. Again there is no basis in law for the court to disturb the Auditor’s
judgment.
4. Pre-trial meeting
[20] Objection was taken to the allowance of expenses relating to the pre-trial meeting on
the ground that the pursuer had refused to engage in it responsibly and in good faith, and
refused to agree a minute of the meeting. The Auditor was satisfied that all of the work, to
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the extent allowed, was reasonably required for the proper conduct of the part of the
proceedings in which the pursuer was successful, and did not consider that the failure to
agree the terms of a joint minute of the meeting was attributable to anyone’s fault. Once
again these are matters falling entirely within the Auditor’s discretion.
Disposal
[21] For these reasons, I shall, in terms of Rule of Court 42.4(4), repel all of the objections
in the note of objections that were insisted upon. I shall defer pronouncing an interlocutor
to allow any motion to be made in relation to the expenses of the procedure on the note.