EILEEN COLLIE AGAINST TESCO STORES LTD
OUTER HOUSE, COURT OF SESSION
[2016] CSOH 149
PD1895/12
OPINION OF LORD KINCLAVEN
In the cause
EILEEN COLLIE
Pursuer;
against
TESCO STORES LTD
Defender:
Pursuer: Allardice, Irvine; Thompsons
Defender: Milligan QC, Springham; Clyde & Co
19 October 2016
Introduction
[1] This case came before me for a hearing in terms of Rule of Court 42.4 which relates to “objections to report of the Auditor”. As is well known, the Auditor of the Court of Session is responsible for the taxation of accounts of expenses in any cause. Part I of Chapter 42 of the Rules of Court relates to the taxation of such accounts.
[2] The principal issue arising in this case is whether “it forms part of the Auditor’s duty, under the remit to him, not only to tax off and reduce articles which appeared to be improperly charged, but also to increase and insert charges for articles which he considered as under stated, not filled up, or altogether omitted” (Reeve v Dykes (1829) 7 S 632).
[3] In the present case, the pursuer seeks the insertion of certain fees, of her junior and senior counsel, which were omitted from the account of expenses in error, but which formed part of the attached vouching.
The taxation procedure
[4] This case involved a civil jury trial, which settled on the Friday before the Tuesday diet on 11 March 2014. The final interlocutor is dated 11 June 2014. Accordingly, an account of expenses was due to be lodged by the pursuer by 10 October 2014 in accordance with what is referred to as “the four month rule”( Rule of Court 42.1.(2)(a)). The pursuer’s account of expenses was duly prepared. It was intimated (with full vouching) on 6 October 2014 and lodged with the Court on 9 October 2014. The defenders apparently reduced their reserve by £30,000 on 13 October 2014 (see further below). A diet of taxation was fixed initially for 18 December 2014.
[5] During the course of correspondence, however, it was noted by the pursuer’s agents, on 25 November 2014, that certain entries had been omitted from the account. These “missing” entries formed part of junior and senior counsels’ fee notes that contained multiple fees. Those fee notes were, however, part of the vouching attached to the initial account that was lodged timeously and sent to the defenders’ agents. They were also vouched before the Auditor (voucher numbers 24 and 22).
[6] In particular, junior counsel’s fee note number 8 contained five separate entries on the face of the fee note. However, the fifth entry on page 5 had been omitted from the account of expenses and that related to a fee of £7,250 plus VAT. In addition, senior counsel’s fee note number 7 contained one entry and a narrative which gave a breakdown of the fee. The last element of that fee had been omitted from the account of expenses and that related to a fee of £10,875 plus VAT. The narrative in respect of both entries records that the fees related to preparation and commitment for the trial diet, and negotiation of settlement, calculated according to a specified daily rate.
[7] An amended account was prepared by the pursuer and the original diet of taxation was cancelled. A motion was enrolled on 2 December 2014 on behalf of the pursuer to allow the amended account to be lodged, although late. That motion was opposed by the defender. Ultimately, the motion was dropped on the following day. Counsel for the pursuer apparently took the view that the correct procedure for dealing with the matter would be to allow the Auditor to address the omission.
[8] A diet of taxation finally took place on 18 February 2015. The Report by the Auditor of Court is dated 23 June 2015 (No. 33 of Process). The Auditor did not allow the omitted entries to be included.
The Note of Objections and the Auditor’s Minute
[9] The pursuer contends that the refusal to allow the omitted entries to be included was an error on the part of the Auditor. The Note of Objections for the Pursuer (No. 34 of Process) states, inter alia, that:
“The Auditor has refused to allow fees which the Pursuer has incurred to Senior and Junior Counsel to be added to the Pursuer’s Account of Expenses; the entries in question had been omitted from the face of the Pursuer’s account however the invoices from Counsel had been vouched to both the Defenders on intimation of the account and to the Auditor. The Pursuer’s Agent made reference to Reeves v Dykes (1829) (Page C341 Parliament House Book).
It is submitted that it was reasonable for the Auditor to allow Counsels’ fees to be added to the Pursuer’s account because all vouching had been produced to both the Defenders and the Auditor. The Auditor has erred in refusing to allow both Senior and Junior Counsels’ fees.”
[10] In response to that Note, the Auditor lodged a Minute (No. 35 of Process) setting out the positions of parties, and the reasons for his decision, as follows:
“2. The written Points of Objection lodged and intimated on behalf of the Defenders in advance of the diet of taxation included the following:-
‘General Note/Submission
… It is our understanding that the Auditor will be invited to consider the further entries included in the amended Account rather than allow the amended Account late. We strongly object to this suggested process as it contravenes the 4 month rule. The receiving parties amended Account was intimated 2 months outwith the timescales provided within the rule and only 2 weeks before the Taxation was set down. … One of the reasons for the 4 month rule is so that the paying party may know the extent of their liability within a reasonable period and this period was exhausted as of 10 October 2014. Clearly if the further entries are allowed then this would not apply as our clients will be prejudiced given they have restricted their reserve by £30,000 based on the Pursuer’s principal Account produced and may be liable for a further £22,840 (including audit fee). Should the Auditor be minded to permit the receiving party to allow their further entries in the principal Account although late, conditions should be imposed to restrict the entitlement of the receiving party in the present cause to a recovery of only a proportion of the taxed expenses and/or such other condition as the Auditor considers fit in relation to the costs associated with this procedure and the expenses of the Taxation.’
At the outset of her submissions at the diet of taxation, Miss Houghton accepted on behalf of the Pursuer that the facts were “pretty much as stated”.
3. (In relation to the pursuer’s motion which was dropped on 3 December 2014) …Miss Houghton advised that…Counsel for the Pursuer considered that if the matter went before the Court, the Court was likely to conclude, based on the case of Reeve v Dykes (1829) 7 S. 632, that the correct procedure was not being followed. She therefore invited the Auditor to allow the two omitted entries to be added in to the original account.
4. In the case of Reeve v Dykes, the Court agreed with the Sheriff of Lanarkshire that ‘it formed part of the Auditor’s duty, under the remit to him, not only to tax off and reduce articles which appeared to be improperly charged, but also to increase and insert charges for articles which he considered as under stated, not filled up, or altogether omitted.’
5. As noted by the Defenders, Rule of Court 42.1(2)(a) provides that any party found entitled to expenses ‘shall…lodge an account of expenses in process not later than four months after the final interlocutor in which a finding respect of expenses is made’. Rule 42.1(2)(b) provides that if such a party has failed to comply with sub-paragraph (a), he ‘shall…lodge such an account at any time with leave of the court but subject to such conditions (if any) as the court thinks fit to impose.’ It is observed in the annotations at Rule 42.1.5 that ‘The reason for the four month rule is so that the paying party may know the amount of his liability within a reasonable period’. In the case of Fane v Murray 1996 SC 51 (IH), Lord McCluskey describes Rule 42.1(2)(a) as ‘in peremptory terms’.
6. The four month rule for judicial accounts was first introduced in September 1994 (SI 1994 No 1443). Until then and particularly in 1829 when the case of Reeves v Dykes was decided, no specific time limit applied. It therefore appeared to the Auditor that the passage in Reeves v Dykes relied on by the pursuer was of limited relevance to the determination of an issue arising in the context of Rule of Court 42.1(2) which, as noted by Lord McCluskey, is peremptory in its terms and is intended to ensure that the paying party knows the amount of his liability within a reasonable period. Further, Rule of Court 42.10(5) expressly allows the Auditor to ‘increase or reduce an inclusive fee in Chapter III in the Table of Fees in appropriate circumstances’, but nothing is said about inserting charges which have been altogether omitted.
7. It is by no means uncommon for accounts lodged for taxation to contain entries for outlays for which the exact charge is not known at the time of lodging. Such entries will often be followed by the words ‘to be confirmed’. The exact charge will then be intimated to the paying party and to the Auditor in advance of the diet of taxation and the Auditor will allow that charge to be inserted in the account. That was not, however, the situation in this case. While the composite fee notes from counsel which were attached to the back of the account as Vouchers 22 and 24 did include the two charges referred to in the Pursuer’s Note of Objections, no provision had been made for these charges in the account itself. The effect of what Miss Houghton invited the Auditor to do would have been to increase the sum claimed by way of expenses from £47,088.22 (plus fee fund dues) to £68,838.22 (plus fee fund dues) – an increase of just over 46%.
Instead, and given the peremptory terms of Rule of Court 42.1(2), the appropriate course of action for the Pursuer to take was, in the opinion of the Auditor, to lodge a substitute account including the two omitted entries and enrol a motion to allow that substitute account to be received late. That was, of course, precisely what the Pursuer did on 2 December 2014 before dropping that motion the following day. The Auditor does not agree with the advice apparently given by Counsel for the Pursuer to the effect that, if that motion had gone before the Court, the Court would have been likely to conclude, based on the case of Reeve v Dykes, that the correct procedure was not being followed; and even if that had been the outcome, that would not have precluded the Pursuer from then taking the alternative course of inviting the Auditor to allow the two omitted entries to be added in to the original account.
The Auditor therefore concluded that this matter should properly have been brought before the Court and that it was not open to him to grant the relief sought by the Pursuer.”
Submissions for the pursuer
[11] Mr Allardice, on behalf of the pursuer, submitted that the Auditor had erred by not allowing the omitted entries to be included and by taking the view that it was not open to him to grant the relief sought.
[12] In particular, it was submitted that the case of Reeve v Dykes (1829) 7 S 632 is still good law. If the law as set out in Reeves had been altered by changes in the Rules of the Court of Session, or by the case of Fane v Murray 1996 SC 51, then that change would have been mentioned, particularly in the Court of Session Practice Manual (which was updated to October 2015) and the Parliament House Book (which is regularly updated) – but there has been no such mention. In any event, Reeves being a decision of the First Division is binding on me. In essence, the pursuer submitted that the Auditor has a duty (or at the very least a power) to allow omissions to be included. In developing his submission Mr Allardice provided me with various references (as follows).
[13] The general note relating to Rule of Court 42.1 (Parliament House Book, page C341, para 42.1.1) provides:
“The Auditor’s power in taxing an account includes not only taxing off and reducing items which appear to have been improperly charged but also to increase items that he considers as understated, not filled up, or altogether omitted: Reeve v. Dykes (1829) 7 S.632.”
[14] In Reeve v Dykes (supra) the First Division held it to be the duty of the Auditor, in taxing an account between agent and client, not only to deduct from, but to add to the charges, so as to make them conformable to the established regulations. The sheriff had originally “approved of the principle on which the Auditor has taxed, and reported on said account, in respect that it formed part of the Auditor's duty, under the remit to him, not only to tax off and reduce articles which appeared to be improperly charged, but also to increase and insert charges for articles which he considered as under stated, not filled up, or altogether omitted.” Dykes having reclaimed, the Court was “unanimously of opinion that the judgment of the Sheriff was correct in approving of the principle upon which the Auditor had taxed the account; and that although the original one was not libelled on, yet as the action truly concluded for payment of the business performed, it was quite competent to decern for the balance ascertained by the Auditor”.
[15] In McLaren on Expenses, the learned author states (page 425) that:
“It is the duty of the Auditor not only to tax off items as excessive or unnecessary, but also to make additions to the account should he see fit.”
[16] In Hastings, Expenses in the Supreme and Sheriff Courts (1989), the learned author, who was formerly Principal Clerk to the Office of the Auditor of the Court of Session, also states (page 3) that:
“It is the duty of the Auditor not only to tax off items as excessive or unnecessary but to make additions should he see fit.”
[17] The loose-leaf manual on Court of Session Practice states at paragraph L [705], citing Hastings and Reeve v Dykes (supra), that:
“Conversely, if he considers that some expense has been omitted or undercharged, then he may remedy that matter also.”
[18] Reeve v Dykes (supra) did not appear to have been referred to anywhere else since.
[19] At the taxation, the defender had submitted, and the Auditor had seemed to accept, that the pursuer’s account had not been lodged timeously in terms of Rule of Court 42,1(2)(a), under reference to the case of Fane v Murray 1996 SC 51. Whilst the pursuer accepted that the rule was peremptory, the rule related to the lodging of the account within the 4 month period – and that had been in fact been done in the present case. The requirement for “special cause” to lodge an account outwith that period has since been removed from the rules. In Fane v Murray (supra), the period that had elapsed was over 8 months.
[20] At taxation, the defender had also made reference to the Parliament House Book at paragraph 42.1.5 (page 343), which states that:
“The reason for the four month rule is so that the paying party may know the amount of his liability within a reasonable period”.
However that had to be considered in light of the fact that there are provisions that would allow an account to be lodged late – so that “a reasonable period” can be longer than the four months (see, in particular, Rule of Court 42.1(2)(b)).
[21] In the present case, the omission of entries was picked up and intimated whilst the account was still being negotiated – within a period of about 6 weeks (after the expiry of the four month period). The defender had details of the omitted charges because they had been given copies of the fee notes. The defender ought to have been aware of the Auditor’s duty to include them subsequently. It should also have been obvious that counsel, particularly senior counsel, would wish to charge a fee for the jury trial.
[22] It could not be correct that the common law power of the Auditor had been superseded by Rule of Court 42.10(5). It was clear that the rule dealt specifically with an “inclusive fee”, that is a block fee covering an area of work. The rule meant that the Auditor could alter those fees. It could not be said to relate to items that are not part of an “inclusive fee”. If the rule had been framed to take away a common law power, then it would have said so. If the defender’s argument to the contrary were correct, then there would have to be similar provision elsewhere (see, eg, Rule of Court 42.10(1)) before it could be said to alter the common law in relation to other items. In any event, the rule only covered solicitors’ fees (not outlays or expenses). Counsel’s fees are regarded as outlays, not an “inclusive fee” (see, eg, Rule of Court 42.2(1)(b)).
[23] Accordingly, Mr Allardice submitted that the Auditor should have followed Reeve v Dykes (supra), and that case should be remitted back to the Auditor with a direction to include the omitted charges in the pursuer’s account and to consider the appropriateness of the level of fees.
Submissions for the defender
[24] Mr Milligan, on behalf of the defender, took no issues with the factual background but emphasised that the pursuer had failed to lodge an amended account and that the defender had, in fact, reduced its reserve on the basis of the account of expenses received from the pursuer (which omitted the items in question).
[25] The real issue was whether the case of Reeve v Dykes (supra) was still good law. The defender submitted that it was not. It had been superseded by the regime set out in the Rules of Court (Ch. 42). In particular, there was no 4 month rule at the time when Reeve was decided. In any event, Reeve is not authority for a duty or power as contended for by the pursuer.
[26] Nowadays, there was no regime but that set out in Chapter 42 of the Rules of Court. The regime was regulated by the court, which had the power to impose conditions. If the pursuer were correct, then the defender would be prejudiced by denial of the opportunities envisaged in the Rules of Court. If an amended account were to be proferred late, it would be for the court, and not the Auditor, to determine whether it should be received and, if so, on what conditions. It could not be right to say that the pursuer could add in as many items as she wished, and the Auditor would be under a duty to allow her to do so.
[27] In any event, if the defender were wrong, the case would have to be remitted back to the Auditor to determine the appropriate level of fee and any appropriate modification of the account.
Discussion
[28] The court should not lightly interfere with the exercise of the Auditor’s discretion. In general terms, a central question is whether the Auditor’s decision is reasonable in light of the information before him and whether, upon scrutiny of any reasons given, he has misdirected himself or adopted the wrong approach.
[29] Having considered the submissions of the pursuer, the submissions of the defender and the Minute by the Auditor (referred to above) my views are as outlined below.
[30] In the present case, strictly speaking, the court is not directly concerned with the application of “the four month rule”. The pursuer intimated and lodged an account of expenses timeously, that is by 10 October 2014, in terms of Rule of Court 42.1(2)(a). There having been no failure to comply with that rule, no issue arises in respect of the granting of leave in terms of Rule of Court 42.1(2)(b). That being so, the case of Fane v Murray 1996 SC 51, which concerned a failure to lodge an account timeously, and the application of the former requirement of “special cause” to lodge an account late, does not really assist.
[31] The pursuer’s motion for a substitute account to be allowed, although late, was in fact dropped. In the result, the only account under consideration is that lodged on 9 October 2014.
[32] In essence, this case concerns the scope of the Auditor’s powers to tax the account lodged. That account was lodged timeously. It was duly remitted for taxation and it is for the Auditor to proceed in accordance with that remit. Clearly, the Auditor enjoys a broad discretion to ascertain the sums properly due (see further below).
[33] On the central issue of whether the case of Reeve v Dykes (1829) 7 S 632 is still good law, I agree with the pursuer subject to the comments which follow.
[34] The case of Reeve v Dykes concerned the taxation of a law-agent’s account (see now RCS 42.7) but the principle enunciated by the Sheriff and unanimously approved by the First Division (at page 633) can be applied equally to the taxation of judicial accounts (as here). The various references highlighted by the pursuer (above) also support the conclusion that the principle set out in Reeve v Dykes (supra) continues to apply in modern practice. That being so, it follows that:
“it forms part of the Auditor’s duty, under the remit to him, not only to tax off and reduce articles which appeared to be improperly charged, but also to increase and insert charges for articles which he considered as under stated, not filled up, or altogether omitted”.
[35] In my view, the absence of a time limit applicable to the lodging of an account at the time when Reeve v Dykes (supra) was decided is not material. No issue of late lodging of the account arises in the present case.
[36] The existence of an express power to address the particular matter of the scope of taxation of “inclusive fees” in terms of Chapter III in the Table of Fees (RCS 42.10(5)) does not prejudice or restrict the Auditor’s wider discretionary powers.
[37] Whether the Auditor allows the insertion, at taxation, of sums omitted on the face of the account, the supporting vouchers, or both, is a matter for the Auditor’s discretion in the circumstances of the particular case concerned.
[38] The factors which the Auditor may take into account when considering whether or not to insert charges which have been omitted may be many and varied. They would include, for example, the various factors highlighted by the defender in this case, such as lack of notice, lapse of time, alternative remedies, limited or lost opportunities to object, and allegations of prejudice as a result of reducing their reserve. On the other hand, the Auditor is also entitled to take into account the factors highlighted by the pursuer, such as actual notice and details of fees being given in accompanying vouchers. See also RCS 42.2(7).
[39] Obviously, the Auditor’s discretion extends to disallowing charges in whole or in part and modifying the account. In doing so the Auditor may take into account amongst other things the parties’ conduct in the taxation process. Ultimately, however, the Auditor requires to determine the sums properly to be charged as against the paying party. That may include consideration of any prejudice arising to that party as a consequence of the taxation process itself.
[40] The amount of money involved is also a relevant consideration. The Auditor may be expected to exercise particular caution before allowing a significant increase to an account, particularly at a late stage in the taxation process, but the sums involved, by themselves, are not necessarily determinative of the exercise of his discretion. The sums at issue may be of a kind to be expected in an account and the Auditor will no doubt scrutinise with care the paying party’s contention to the contrary, and the entitled party’s explanation for the omission.
[41] It is also worth noting the Auditor’s observation (in paragraph 7 of his Minute) that:
“It is by no means uncommon for accounts lodged for taxation to contain entries for outlays for which the exact charge is not known at the time of lodging. Such entries will often be followed by the words ‘to be confirmed’. The exact charge will then be intimated to the paying party and to the Auditor in advance of the diet of taxation and the Auditor will allow that charge to be inserted in the account.”
The Auditor points out that was not the situation in the present case. However, in practical effect, it may be doubted whether the inclusion of an unquantified entry on the face of the pursuer’s account should make a critical difference if the items concerned are reasonably to be expected in an account and they are detailed and quantified and intimated in supporting vouchers attached to that account. As matters transpired, the defender in the present case was able to advance specific and detailed objections to the sums claimed prior to taxation.
[42] As to the merits of the pursuer’s claims, and their prospects of success, I express no view. Whether, and to what extent, the omitted charges are recoverable are matters for the Auditor with the benefit of his broad experience. Each case depends on its own particular facts and circumstances. The Auditor has a discretionary power but not an unqualified duty to remedy omissions of the sort involved in this case.
[43] The foregoing is sufficient to dispose of this Note of Objections.
[44] I should add, however, that I also considered whether the approval of the court ought to be sought before the exercise of the Auditor’s discretion to include omitted items. For aught yet seen, there may be situations where the Auditor may wish to have such guidance from the court. In the circumstances of this particular case, however, I take the view that prior approval of the court is not necessary. If I am wrong about that, and if it had been necessary to do so, I would have authorised the Auditor to consider the inclusion of omitted items and to proceed as he thought fit.
[45] In light of the above, my conclusions in overview are follows:
- Firstly, the pursuer goes too far when she suggests that the Auditor is bound (emphasis added) to allow the omitted fees to be included in the account.The Auditor has the power but he is not bound to exercise it in favour of the pursuer.
- Secondly, the defender goes too far in suggesting that the Auditor has no power to allow the inclusion of omitted items.The Auditor does have such a power but whether and to what extent he exercises that power is essentially a matter for the Auditor; and
- Thirdly, in the present case, the Auditor (perhaps through an abundance of caution) has simply underestimated the extent of his own powers.He does have power to grant relief and to provide a remedy to the pursuer if he thinks fit.
[46] In other words, the Auditor has erred in concluding that it was not open to him to grant the relief sought by the pursuer. To that extent I agree with the pursuer. The appropriate course is to remit back to the Auditor to proceed as accords. It will be for the Auditor to determine the appropriate level of any fee and any appropriate modification of the account.
Decision
[47] In the circumstances, I shall sustain the pursuer’s objection in the Note of Objections (No.34 of Process) and remit the matter to the Auditor for further consideration.
[48] I shall reserve to both parties the right to lodge further objections to any further report by the Auditor.
[49] I shall also reserve meantime the question of expenses of the procedure on the pursuer’s Note.