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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Justice Clerk
Lady Paton
Lord Marnoch
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[2008] CSIH 33
A1581/03
OPINION OF THE LORD
JUSTICE CLERK
in
RECLAIMING MOTION
in the cause
TRUNATURE LIMITED
Pursuers and Respondents;
against
(First) SCOTNET (1974)
LIMITED and (Second) SCOBIE & JUNOR (ESTD 1919) LIMITED
Defenders and Reclaimers:
_______
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For Pursuers and Respondents: E
W Robertson; McClure Naismith
For Defenders and Reclaimers: Clancy, QC, Higgins;
Burness LLP
10 June 2008
Introduction
[1] This
is an intellectual property action in which the pursuers were successful. On 1 February 2007 the Lord Ordinary found the
defenders liable to the pursuers in the expenses of the action on an agent and
client basis. He remitted the case to the auditor
to tax and to report and decerned in favour of the pursuers for the expenses as
taxed. In the same interlocutor he
allowed the pursuers an additional fee under Rule of Court 42.14(3).
[2] The
pursuers lodged an account of expenses in the sum of £221,806.15, of which
£92,468.81 was for their solicitors' fees and £129,337.34 was for outlays,
including the fees of counsel and experts.
By way of an additional fee, they applied for an uplift of 250%.
[3] The
auditor approved the claim for outlays in full.
He taxed off £2,447.81 from the solicitors' fees and allowed a lump-sum
additional fee of £133,500, which represented an uplift of nearly 150% on the
taxed amount of the solicitors' fees.
The defenders' objection
[4] The
defenders made the following objection to the auditor's report.
"At taxation, the auditor made provision for payment
of a significant additional fee in addition to payment of the expenses on an
agent and client basis. As a result, the
pursuer will recover an amount vastly in excess of the sum expended by it on
legal expenses. In so providing, the
auditor erred."
The proposition for the defenders
was that the taxed sum for solicitors' fees reflected the terms of engagement
agreed between the pursuers and their solicitors. By reason of the additional fee, the pursuers
would recover more than they had agreed to pay their solicitors. The award would
not merely indemnify them for the expenses that they had incurred. It would confer a windfall on them.
[5] In
his minute the auditor concluded with the following comment:
"It is correct that as a consequence of the award of
expenses, the receiving party will receive expenses greater than those for
which his client is liable. However, it
should be borne in mind that the expenses awarded arise from a preliminary
proof before answer and the action is unresolved."
[6] The
Lord Ordinary repelled the objection. He
was disinclined too readily to assume that in taxing the pursuers' account the
auditor had intended to award them more than the amount that they had paid or
would be required to pay to their solicitors.
Although the concluding comment of the auditor might suggest that that
was what he had done, those words, properly understood in the context of the
taxation, meant no such thing. The Lord
Ordinary considered that the factors relevant to the allowance of an additional
fee were also relevant to the taxation of the special responsibility element in
a solicitor's own account with his client under rule 42.7(6). The auditor had applied the percentage uplift
to the taxed account just as, the Lord Ordinary assumed, he would have done in
a contentious taxation under Rule 42.7.
The Lord Ordinary could think of no likely circumstances in which, in a
taxation between solicitor and client, the auditor would have come to a
different assessment of the percentage uplift that he had applied by way of an
additional fee. The auditor simply meant
that the pursuers would receive an amount by way of expenses in excess of the
amount shown in the itemised account lodged for taxation.
Submissions for the defenders
[7] Senior
counsel for the defenders told us that although the defenders did not know on
what terms the pursuers engaged their solicitors, they had reason to apprehend
that the surplus recovered on taxation, or some of it, would not go to the
pursuers' solicitors. The auditor had
seen the pursuers' solicitors' terms of business and seemed to have concluded from
that that the pursuers would receive more than they were liable to pay to their
solicitors. Although the Lord Ordinary
considered that the additional fee would go to the solicitors, that was not
necessarily the case if the pursuers and the solicitors had agreed
otherwise.
Conclusions
[8] The
parties are agreed on three points; namely, (1) that when an interlocutor
awards expenses on an agent and client basis, it is to be construed to mean
agent and client, client paying (Milligan
v Tinne's Trs, 1971 SLT (Notes) 64); (2) that it is competent for the court, when
awarding expenses on that basis, also to allow an additional fee under Rule
42.14; and (3) that where the court allows an additional fee, the auditor may
assess it by way of a percentage uplift on the solicitor's taxed account.
[9] In my
opinion, the parties are right on each point.
The first follows long-established practice. The second was assumed to be correct in two
recent Outer House cases (McKie v Scottish Ministers 2006 SC 528; Appa (UK) Ltd v The
Scottish Daily Record and Sunday Mail Ltd, 2007 CSOH 196). In my opinion it is correct, because a
taxation of an account of fees and outlays on an agent and client basis and an
assessment of an additional fee are two separate exercises carried out on
different principles. As to the third,
the method of assessing an additional fee is a matter for the auditor's
discretion (Gray v Babcock Power Ltd
1990 SLT 693; UCB Bank plc v Dundas and
Wilson CS 1991 SLT 90). In my view,
it is competent for him to assess it by way of a percentage uplift just as it
is competent for him to assess the special responsibility element by that
method in a question between solicitor and client under Rule 42.7 (cf Tods Murray WS v McNamara 2007 SC 435, Lord Justice Clerk Gill at paras [39]-[42]).
[10] On the face of
it, therefore, the auditor has acted correctly and has exercised his discretion
properly.
[11] The basis of
the reclaiming motion is the defenders' apprehension that by reason of the
additional fee the pursuers may recover a sum greater than they are obliged to
pay to their solicitors. In my opinion, that
apprehension is misconceived, both in fact and in law.
[12] The starting
point is that an award of expenses operates to indemnify, in whole or in part,
the party who is in right of it. Such a
party is not entitled to recover any more in expenses than he is liable to
pay. It seems to me improbable that in a
complex and important litigation such as this, the pursuers' solicitors would
have agreed to act on the basis that their entitlement to fees was to be
limited to any sum less than could be recovered on taxation. The pursuers' solicitors' terms of business
were among the documents considered by the auditor and, if they had given him
any reason to think that his determination would have the result that the
defenders apprehend, he would, I am certain, have reached a different decision.
[13] The defenders
do not suggest that in enrolling for expenses, the pursuers sought to recover
from the defenders any sum greater than their liability under their solicitors'
account of fees and outlays. The alleged
windfall is said to be the additional fee.
[14] From the
outset of any litigation both parties are to be held to know that if either
should be awarded expenses, it will be open to him to move for an additional
fee under Rule 42.14. When such a fee is
allowed by the court, it forms part of the expenses of the action. In the absence of firm evidence to the
contrary, in my opinion, we are entitled to assume that there is nothing in the
agreement between the pursuers and their solicitors that would disentitle the
pursuers from moving for such a fee. If
there were, the motion would be improper, and there is no suggestion of that in
this case.
[15] For these
reasons alone, I consider that the reclaiming motion is misconceived. But I think that there is a more fundamental
flaw in the defenders' objection. It
seems to rest on the fallacious assumption that when a party recovers a sum of
money under Rule 42.14, he can in any circumstances be entitled to retain any part
of it. In my view, that cannot be
so.
[16] The allowance
of an additional fee under Rule 42.14 is separate from the award of expenses on
the taxed account. It enables the
solicitor of the successful party, having satisfied one or more of the criteria
set out in Rule 47.14(3), to recover more than would otherwise be recoverable
on his account of fees. The additional
fee is moved for by the successful party, but the allowance of it confers on
the solicitor the right to whatever sum the auditor may fix.
[17] I conclude
therefore that in this case the pursuers' solicitors have a ius crediti for the amount at which the
auditor assessed the additional fee. There
can be no question of the pursuers' having the right to retain any of it.
[18] Senior counsel
for the defenders submitted that the special feature of this case was that the
auditor had made an express finding that the pursuers would recover more than
they were liable to pay to their solicitors.
I cannot accept that the auditor intended, or countenanced, that
result. His concluding comment (supra) could have been more clearly
expressed, but in my view he was saying no more than that, as a result of the
allowance of the additional fee, the pursuers' solicitors would receive a
greater sum than they would have recovered from the pursuers on their account
of fees and outlays. That is
self-evident; but it does not mean that the pursuers would recover under Rule
42.14 a sum that they could retain for their own benefit. For the reasons that I have given, that could
not be the case.
Disposal
[19] I propose to
your Ladyship and your Lordship that we should refuse the reclaiming motion.
|
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lady Paton
Lord Marnoch
|
[2008] CSIH 33
A1581/03
OPINION OF LADY PATON
in
RECLAIMING MOTION
in the cause
TRUNATURE LIMITED
Pursuers and Respondents;
against
(First) SCOTNET (1974)
LIMITED and (Second) SCOBIE & JUNOR (ESTD 1919) LIMITED
Defenders and Reclaimers:
_______
|
For Pursuers and Respondents: E
W Robertson; McClure Naismith
For Defenders and Reclaimers: Clancy, QC, Higgins;
Burness LLP
10 June 2008
[20] I agree with your Lordship in the chair, and have nothing to
add.
|
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lady Paton
Lord Marnoch
|
[2008] CSIH 33
A1581/03
OPINION OF LORD MARNOCH
in
RECLAIMING MOTION
in the cause
TRUNATURE LIMITED
Pursuers and Respondents;
against
(First) SCOTNET (1974)
LIMITED and (Second) SCOBIE & JUNOR (ESTD 1919) LIMITED
Defenders and Reclaimers:
_______
|
For Pursuers and Respondents: E
W Robertson; McClure Naismith
For Defenders and Reclaimers: Clancy, QC, Higgins;
Burness LLP
10 June 2008
[21] I agree with your Lordship in the Chair that this Reclaiming
Motion should be refused for the reasons which your Lordship has given.
[22] At one point in the debate and in common, I think, with the
Lord Ordinary I was attracted by the proposition that no more could be awarded
on a party-party taxation than would have been awarded or due to the receiving
solicitor on his own account with his client.
If, however, that were the position there could be no party-party
taxation in the event of success in an action undertaken on a purely
speculative basis with no entitlement to reward beyond such expenses as might
be recovered from the opposite side. I
conclude that the award of an additional fee under Rule of Court 42.14(3)
(which, incidentally, contains at least one provision additional to those of
Rule of Court 42.7(6)) has to be viewed independently in its own right.
[23] As the auditor remarked, this may result in the entitled
solicitor receiving expenses greater than those for which his client might
otherwise have been liable but, as your Lordship has explained, this does not
mean that he receives more than is properly due to him.
[24] There is nothing further I can usefully add.
