OUTER HOUSE, COURT OF SESSION [2008] CSOH 153
	OPINION OF LORD GLENNIE in the cause F M FINNIESTON LTD Pursuers; against KENNETH ROSS Defender: ________________

Pursuers: McKenzie, Solicitor Advocate; Pinsent Masons

Defender: McIlvride; Lindsays

5 November 2008

[1] At a continued preliminary hearing on 1 October 2008, on the defender's motion, I ordered the pursuers to find caution for expenses in the sum of £25,000 within 21 days of that date "in a form to be agreed between the parties, which failing the case to be brought back to court in order that said form be decided by the court".

[2] The pursuers argued that caution should be given by their placing the sum of £25,000 in a joint deposit account in the names of solicitors acting for both parties, the terms of which would provide for the sum on deposit to be released upon decree or settlement. The defender raised questions as to whether such an account would offer adequate security in the event of an arrestment at the hands of a creditor of the pursuers or in the event of the pursuers' insolvency. He contended that a bond of caution should be given, which failing the sum should be consigned into court in accordance with Rule of Court 33.4(1)(b).

[3] I was referred in the course of argument to Craiglaw Developments Ltd v R Gordon Wilson 1997 S.C.L.R. 1157 and in particular to the discussion in the penultimate paragraph. The critical question appears to be whether the pursuers, by giving caution by means of a joint account in the names of both solicitors, would have completely divested themselves of the funds and of the power or control over them. There is discussion in that case of the earlier decision in Allan's Executor v Union Bank of Scotland 1909 S.C. 206. In the event I did not have to decide that point since, in order to comply with the order, the pursuers arranged for payment into court on about 22 October 2008.

[4] Before the payment was made, parties had entered into discussions with the Accountant of Court as to whether she could arrange for the funds to be placed in an account earning a higher rate of interest that that normally available upon consignation. Solicitors for the pursuers had ascertained that they could obtain rate of interest of 4% from their bank. By contrast, I understand from the Accountant of Court that, under arrangements in place between her and the Royal Bank of Scotland, the money would be placed in a separate Special Deposit Account earning a rate of interest of 31/2% below bank rate. As at the date of this Opinion, the bank rate is 4.5%. The result is that funds consigned into court under the normal arrangements presently attract a rate of interest of only 1%. It is apparent that the arrangements in place between the Accountant of Court and the Royal Bank of Scotland do not presently provide a commercial rate of interest. I understand that the Accountant of Court recognises that this is a problem and has already taken steps to see what different arrangements can be made.

[5] In light of this, the court was asked to make an order directing the Accountant of Court to transfer the funds from the Special Deposit Account into which they had been placed into an account agreed by the parties earning a higher rate of interest. Subject to one point, to which I shall refer, the Accountant of Court indicated that she had no objection to such an order being made and would comply with it, though she would require the parties to liaise with her to identify the appropriate account and to agree all the necessary details.

[6] The Accountant of Court was very properly concerned to draw to the attention of the court the terms of the relevant Practice Note dated 30 May 1996 dealing with consignation. P.N. No.1 of 1996 states that all monies consigned under orders of court in the name of the Accountant of Court shall be placed on special deposit account to be held solely by the Royal Bank of Scotland, North Bridge branch, Edinburgh. This was to replace the then existing practice of lodging funds on consignation receipt. The Practice Note goes on to say that special deposit accounts will continue to afford to the court maximum flexibility in the partial release of funds but will attract a higher rate of interest than that previously earned by consignation receipt.

[7] The background to the Practice Note is explained at para.33.4.3 of vol.2 of the Parliament House Book. This explains that by the Practice Note

"... the former procedure for consignation receipts has been abolished. Such receipts were subject to criticism because of the low rate of interest and their use, as a consequence, was rare. The low rate of interest was justified by the banks on the ground that consignation receipts were difficult to administer. The new reform, a special deposit account, allows a higher rate of interest. Consignation receipts had an advantage over ordinary deposit receipts in that partial upliftment was possible. Partial upliftment will be possible from a special deposit account."

It is apparent from this that the purpose of the reform was to abolish the procedure for consignation receipts and move to a procedure by which sums consigned into court could earn a reasonable rate of interest. It is clear from the information given to me that, under the arrangements currently in place, the special deposit accounts with the Royal Bank of Scotland in which the Accountant of Court ordinarily places funds consigned into court do not presently achieve this. The Practice Note is a note of the practice to be followed in the ordinary case. It does not tie the hands of the court. I see no reason why, in any particular case, on a motion by one of the parties, the court should not order the Accountant of Court to place the funds consigned into court in a particular account earning a higher rate of interest once the details of that account have been agreed between solicitors for the parties in a form satisfactory to the Accountant of Court. Such a course seems to me to be consistent with the spirit of the Practice Note. In any event, that is the order I propose to make when the account details have been agreed.

[8] It is to be noted that the problem potentially extends beyond consignation as a means of providing caution for expenses. The amount of caution ordered to be provided in the present case is not large. In other cases consignation may be required for larger sums. Consignation may be used in lieu of diligence in security. Other procedures require sums to be consigned into court: see, for example, where a ship is sold by the court in an admiralty action (Rule of Court 46.5(10)); and the constitution by payment into court of a limitation fund to limit liability for oil pollution under s.158 of the Merchant Shipping Act 1995 (see s.170(3)(a) for its application to Scotland). Very large sums may be involved. It would be unsatisfactory were the court to have no power to make an order of the type which I propose to make in this case.

[9] It may be that representations should be made to the Lord President that the Practice Note should be amended. I would encourage and support any such representations.