Pursuer: J Wolfe QC; Anderson Strathern LLP

Defenders: Absent

12 July 2013

[1] On 12 July 2013 I heard Mr Wolfe QC, for the pursuer, on the pursuer's Note of Objections to the Report of the Auditor of Court abating certain items claimed by the pursuer. The defenders were not represented at the hearing. The Note of Objections was answered by a Minute setting out the Auditor's reasons for disallowing or refusing those items.

[2] During the course of argument, and in light of observations by the court, counsel indicated that he did not insist on the objections relating to paragraphs 8, 9 and 10 of the Auditor's Minute. However, I was persuaded to sustain the objections in so far as they related to paragraphs 7, 11 and 12 of the Minute.

[3] The matter was remitted to the Auditor of Court to give effect to my ruling. He has indicated that he has no difficulty in so doing. However, since the points which I decided may have some impact on his practice in other cases in the future, he has asked me to set out my reasons for my decision in a short Note.

[4] Each of the three points on which I sustained the pursuer's objections related to fees charged by junior or senior counsel. I shall set out my reasons by reference to the three matters taken in turn.

[5] Paragraph 7 of the Minute relates to Junior Counsel's fee of £500.00 plus VAT claimed in respect of a consultation held on 19 February 2007, prior to the commencement of proceedings by the pursuer. Its purpose was to enable Junior Counsel to advise on procedure and tactics. In respect of this fee, the Auditor noted that the defenders had taken objection to all entries in the pursuer's account "on the basis that they are agent and client". Having described what the fee was for, as set out above, the Auditor "agreed that Junior Counsel's fee and the other outlays claimed in respect of this Consultation were agent and client charges"; and "accordingly" he abated them in full.

[6] In the Note of Objections, it is said that to the extent that there was any taxing off on the ground that the charges were "agent and client charges", that was an error of law. It was submitted that, in so far as counsel's fees are concerned, no distinction exists between "agent and client" or "party and party" fees. The only question to be addressed by the Auditor was whether the particular fee was "reasonable". Reference was made to Rule of Court 42.10 and to the following observations of Lord Bonomy in Malpas v Fife Council 1999 SLT 499:

"It was accepted by both parties that different charges are made by different counsel for similar work, and that a range of charges for any given work might be reasonable. Similarly it is common experience that different agents might approach preparation for a case in different ways and with differing degrees of diligence, but the additional work done by one would not obviously in these circumstances be described as 'unreasonable'. So there may be a range of different ways of conducting a case that might all be described as 'reasonable'. It seems to me to follow that, in deciding whether to allow or disallow any particular item, the Auditor ... should only disallow an item if it can truly be said that to incur that expense was not reasonable, in the sense that a competent solicitor acting reasonably would not have incurred it."

Accordingly, if the work was carried out by counsel, it should be paid for unless it was "unreasonable".

[7] An explanation for the Auditor's approach is to be found in paragraph 6 of his Minute. Having referred to and quoted from a number of authorities, viz. City of Aberdeen Council v W A Fairhurst 2000 SCLR 392, Malpas (supra), Macnaughton v Macnaughton 1949 SC 42, Dingley v Chief Constable of Strathclyde Police 2002 SCLR 160 and Jarvie v Greater Glasgow Primary Care NHS Trust [2006] CSOH 42, he says this:

"In the opinion of the Auditor, the authorities referred to in the preceding paragraph clearly acknowledge (1) the potential for a difference between the fees which a particular Counsel may be entitled to receive from his client and what is reasonable to have charged as an outlay against an unsuccessful opposing party, and (2) the consequent requirement for the Auditor to abate not only charges which he considers to be agent and client in nature and therefore not recoverable at all on a party and party basis, but also charges which he considers, in all the circumstances (including the nature, complexity and importance of the proceedings), to be excessive or otherwise unreasonable."

The Auditor there appears to draw a distinction between two separate (but no doubt often overlapping) grounds for abatement: (a) charges which by their nature are "agent and client" charges and therefore not recoverable from the unsuccessful party on a party and party taxation; and (b) charges which are in all the circumstances excessive or unreasonable.

[8] In abating in full Junior Counsel's fee on the ground that the fee and other outlays claimed in respect of the pre-litigation consultation were "agent and client charges", the Auditor appears to be saying that a fee for a pre-litigation consultation to discuss procedure and tactics is within a category of "agent and client" charges which can never be recoverable from the unsuccessful party on a party and party taxation. In other words, the Auditor does not appear to be challenging the reasonableness of the amount charged for the consultation - his objection is an objection in principle to the unsuccessful party being required to pay for that consultation.

[9] If I have correctly understood the Auditor's reasoning, then it seems to me that he has erred in law in disallowing this item. Rule of Court 42.10(1) provides, with reference to taxation on a party and party basis, that "only such expenses as are reasonable for conducting the cause in a proper manner shall be allowed". The notes to that rule (at 42.10.1) state that the only relevant test in deciding what expenses should be allowed is that of reasonableness. The Auditor should only disallow an item if it can truly be said that it was unreasonable to incur the expense in the sense that a competent solicitor acting reasonably would not have incurred it. That latter remark is made under reference to Malpas, to which I have already referred. The note (at 42.10.2) goes on to make it clear that the reasonableness test applies to counsel's fees too. This explanation of the test for recovery on a party and party basis is to be compared with the test for recovery of expenses on an "agent and client" basis, where all the expenses incurred by the successful party are allowable on taxation, except for those unreasonably or extravagantly incurred, or unreasonable in amount, the benefit of the doubt in each case going to the successful party who is seeking to recover expenses on this basis. Like many such distinctions, the distinction between expenses on a party and party basis and expenses on an agent and client basis is perhaps easier to recognise than to define. The difference, as I understand it, essentially comes down to whether, as in taxation on a party and party basis, the onus is on the successful party to show that his expenses were reasonable and reasonably incurred; or whether, as in taxation on an agent and client basis, the onus is on the unsuccessful party to show that the expenses claimed against him were unreasonable or unreasonably incurred. Subject to this, there is no reason why an award of expenses on a party and party basis should not provide full recovery for a successful party who has acted reasonably in the litigation and whose expenses have been reasonably incurred and are reasonable in amount.

[10] Nonetheless, in applying that distinction it is difficult to understand any legitimate justification for drawing a line at the commencement of proceedings, and saying that all expenses incurred before that date are recoverable, if at all, only as agent and client expenses (i.e. when expenses are awarded on an agent and client basis) but in no circumstances as party and party expenses.

[11] In this context, I was referred to Rule of Court 42.10(3), which provides that a solicitor may charge an account either on the basis of Chapter I or on the basis of Chapter III of the Table of Fees, but not partly on one basis and partly on the other. Chapter III, both in relation to Part V (Defended Actions) and Part VA (Defended Personal Injuries Actions), allows recovery in respect of work done before the action commences, provided that the Auditor is satisfied that such work has reasonably been undertaken in contemplation of, or preparatory to, the commencement of proceedings. This provision was, it seems, introduced in 1998. There is no reason in principle why counsel's fees should be treated any differently. In my opinion, counsel's fees in respect of work done before the commencement of the litigation, in contemplation of it or preparatory thereto, are in principle recoverable from the unsuccessful party on a party and party taxation, subject, of course, in each case, to the question whether they were reasonable and reasonably incurred.

[12] It does not appear that the Auditor has disallowed this fee on the basis that it was unreasonable in amount or unreasonably incurred. He has disallowed it because he considered it was the type of fee which was not recoverable on a taxation on a party and party basis. Having concluded that in this respect he erred in law, I allowed the appeal on this point and, rather than simply refer it back to the Auditor for further consideration (as I would have done had he indicated that he was concerned about the reasonableness of the fee as opposed to its recovery in principle), I found that that sum ought to have been allowed and remitted the matter to him to give effect to that finding.

[13] Paragraph 11 of the Minute relates to Junior Counsel's fee of £150.00 plus VAT in respect of advice given to agents on the lodging of an expert report. This item was opposed on the basis that it was an "agent and client" expense. The Auditor remarks that the advice concerned further procedure and tactics. For that reason, he agreed that it was an "agent and client charge" and abated it in full.

[14] Much of what I have already said applies to this item also. It is, to my mind, perfectly proper to seek counsel's advice on procedure and tactics and specifically to advise upon the lodging of an expert report. Not only is it perfectly proper to do this, but there is no reason in principle why this category of advice should not be recoverable from the unsuccessful party on a party and party taxation. Insofar as the Auditor has taken the view that advice of this sort, on procedure and tactics, falls into a category which cannot legitimately be recovered on a party and party basis, I consider that he has fallen into error. The test, even on a party and party basis, is solely one of reasonableness; and while I accept that what is reasonable for a client to pay his agent or counsel may not be the same as what is reasonable for him to recover against the unsuccessful party on a party and party taxation, I can see no reason in principle for saying that this category of advice cannot be recoverable on a party and party taxation but can only be recovered when expenses are awarded on an agent and client basis.

[15] Once again, the Auditor does not appear to question the reasonableness of the amount. For that reason, in this case also I simply found that the sum ought to have been allowed and remitted the matter to the Auditor to give effect to that ruling.

[16] Paragraph 12 of the Minute relates to Senior Counsel's fee of £17,250.00 plus VAT claimed in respect of preparation for and attendance at the Jury Trial which took place on 24 and 25 of January 2012. This raises a different point. Objection was taken to this item by the unsuccessful party on the basis that "liability had been admitted and therefore it is submitted that Counsel's fee is excessive". The argument appears to be that counsel should charge at lower rates when only quantum remains in dispute. The Auditor notes that the Jury Trial was set down for four days but was concluded in two. Senior Counsel charged for two days preparation at £3,000.00 per day and three days attendance at £3,750.00 per day. The Auditor took no issue with the number of days claimed but considered that the daily rates were excessive. He considered that daily rates of £2,000.00 for preparation and £2,750.00 for attendance were reasonable on a party and party basis. He also thought it was reasonable to allow recovery of a further £300.00 in respect of preparation by Senior Counsel between the first and second days of the trial.

[17] The Court is always reluctant to interfere with any assessment by the Auditor of what fees or other charges are reasonable. Bearing in mind what Lord Bonomy said in Malpas, the Auditor will have to bear in mind that there will be a range of fees which can properly be charged for the same type of work, so that it is only if the fee charged is beyond the band of what is potentially reasonable that it will be abated. However, the Court is entitled to use its knowledge of the level of fees often charged, not to second-guess the Auditor, or to exercise its judgement in place of his, but to understand what the Auditor must have done. Having regard to the fact that the Auditor has quoted the submission from the Points of Objection by the unsuccessful party, it seems to me that the Auditor must have been persuaded by the submission that since liability had been admitted, and the trial was limited to issues of quantum, therefore Counsel ought to have charged a lower daily rate.

[18] Such an approach is wrong in law. It may well be that in a particular case it can be seen that the issues remaining in dispute between the parties are so restricted in their scope that the time claimed for preparation cannot be justified. It may be that in those circumstances the employment of senior counsel might not be justified. But that is not a necessary consequence of issues of liability being resolved. Issues of quantum may be just as complex as issues of liability, and may be no less important. In the present case the Auditor has not suggested that the remaining issues did not justify the employment of senior counsel. Nor has he taken any issue with the number of days claimed for preparation, nor the number of days claimed for attendance. The issue relates solely to his daily rate. Counsel is entitled to charge his going rate, and it is not to be expected that that rate will change simply because the issues remaining in the case focus on quantum rather than liability. His charge is for his time. If his going rate is a reasonable one, i.e. within the band of reasonable rates, it should be allowed on a party and party taxation, whether the dispute is about liability or about quantum. If it is not a reasonable one, it should be abated, regardless of the nature of the outstanding issues. There is no justification for abating the daily rate claimed simply because of the more restricted nature of the remaining issues. That is what the Auditor appears to have done.

[19] For this reason I allowed the appeal on this point and remitted the matter to the Auditor to give effect to that ruling.