The City Of Aberdeen Council V. W. A. Fairhurst And Others
| Jurisdiction | Scotland |
| Judge | Lord Penrose |
| Date | 20 July 1999 |
| Court | Court of Session |
| Published date | 20 July 1999 |
| OUTER HOUSE, COURT OF SESSION
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| OPINION OF LORD PENROSE in the cause THE CITY OF ABERDEEN COUNCIL Pursuer; against W.A. FAIRHURST AND OTHERS Defender: ________________
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Pursuer: RWJ Anderson; Bennett & Robertson
Defender: DI Mackay, Q.C.; Bishop & Robertson Chalmers
20 July 1999
The summons in this action was signeted on 2 May, 1989. It arose out of complaints made by the pursuers about the professional services rendered by the first defenders as consulting engineers and about the performance of the second defenders as specialist earthworks contractors in connection with a sheltered housing project in Aberdeen. On 25 July, 1995, following a procedure roll debate, the Lord Ordinary excluded from probation certain of the pursuers' averments against the second defenders, and otherwise allowed proof before answer. On 21 February, 1996, a diet of proof was fixed for 14 January, 1997 and the following six weeks. The action settled on 24 December, 1996 when the defenders agreed to pay damages of £0.77M. On 26 February, 1997 the pursuers were found entitled to the taxed expenses of the action. The Auditor of Court in due course reported on the taxation. The present dispute relates to one aspect only of the pursuers' claim to recover expenses from the defenders, described as the "commitment fees" paid to counsel instructed for the proof.
Parties' solicitors entered into correspondence towards the end of 1996 in which they exchanged information about the rates of remuneration sought by counsel for the proof. On 18 November, the pursuers' solicitors wrote to each of the defenders' solicitors intimating that the clerk of senior counsel, Mr. J. G. Reid, Q.C., had written asking for payment of a commitment fee, and stating:
"We consider the commitment fee is a necessary expense in the action as if we do not agree to pay it Counsel will not accept the instructions. In the event of a settlement being reached we would intend that the commitment fee forms part of the party and party expenses.
Our understanding is that if the case settles prior to 25 November, no commitment fee will be payable. If the case settles between 25 November and 13 December, a commitment fee of £4,500 is payable. If the case settles between 14 December and 13 January, 1997 a commitment fee of £9,000 is payable. Thereafter a commitment fee of £13,500 is payable subject to the conditions detailed in the letter."
The conditions provided for rebate of the commitment fee by £2,250 for each complete four day week during which the proof continued. The defenders' solicitors did not respond. The pursuers' solicitors wrote to counsel's clerk on 28 November, 1996, agreeing to make payment of the commitment fee. When the case settled, the fee of £9,000 was paid to Mr Reid. A commitment fee of £4,800 was paid to junior counsel, Mr Clive. The commitment fees charged by and paid to counsel were in addition to the fees charged for preparation for the proof. Mr Reid was paid fees for thirteen and a quarter days of preparation, and Mr Clive for five days of preparation, in each case including pre-proof consultations.
Additional background information available to the auditor is set out in the pursuers' account of expenses and in his report dated 24 March, 1998. The pursuers' solicitors spoke to the first defenders' solicitors regarding proposals for settlement of the action on 15 November, 1996. They were informed that there would be a response. The pursuers' first pre-proof consultation was held that day. At that consultation it was arranged that counsel would keep their diaries free from competing instructions for the duration of the proof. No response was received to the proposals for settlement. On 22 November, a minute of amendment was lodged on behalf of the first defenders. A further pre-proof consultation was held on 2 December. Answers to the first defender' minute of amendment were prepared and revised. Preparations for the proof continued. On 16 December a first offer was made by Minute of Tender. Thereafter the case settled on Christmas Eve as already mentioned.
There was a full debate at the taxation before the auditor. He was referred to a number of authorities: Macnaughton v Macnaughton 1949 S.C. 42; Gorrie v Ciba Geigy Ltd. 25 June, 1996; Kenny v Lord Advocate 1993 S.L.T. 372; Caledonian Railway Co. v Greenock Corporation 1922 S.C. 299 and Ahmed's Trustee v Ahmed (No1) 1993 S.L.T. 390. He was referred to Rule of Court 42.10.(1) and Practice Note No 5 of 1996, which was issued in response to Gorrie v Ciba Geigy. His report, and a later minute in response to the defenders' note of objections, contain a comprehensive statement of the reasons for his decision in allowing the fees. It is appropriate at the outset to say a little about the court's approach to a challenge to the auditor's determination of the fees payable as between party and party. Counsel were in agreement that the auditor is the proper officer to decide whether expenditure has been incurred properly in the conduct of litigation: Caledonian Railway Co. v Greenock Corporation at page 311; Macnaughton v Macnaughton; Wood v Miller 1960 S.C. 86 at 97-8; and Ahmed's Trustee v Ahmed. The court will interfere in limited circumstances. For present purposes the issues were whether the auditor had taken into account irrelevant matters, had failed to take into account relevant matters, and whether he had mistaken or misunderstood the relevant test of allowable expenditure as between party and party.
The auditor's conclusion in his report was in these terms:
"The Auditor, having regard to the terms of the subsequent Practice Note which makes specific reference to the decision in Gorrie, and further having regard to Rule of Court 42.10 (1), considers that it was necessary for the Pursuers' solicitors in discharge of their professional responsibility to their clients, to instruct Counsel to conduct the Proof sufficiently in advance of the date of the Proof. It would be unreasonable to expect the commitment of a Counsel to a case which resulted in his or her inability to accept other competing instructions, or resulting in receiving no similar work for the "vacated period" to be a commitment at no cost to the client. Consequently the incurring of such an expense must reasonably be expected to be within the contemplation the unsuccessful party as an expense to which the successful party has been put for the conduct of the cause in a proper manner and of which the Defenders in this cause had been forewarned. No counsel can properly conduct a proof without receiving and accepting instructions in advance of the hearing (and sometimes substantially in advance of the hearing) and the acceptance of those instructions inevitably means that Counsel cannot make himself, or herself, available to any other party for court work during that period. However any fee for such engagement would reasonable require to be reduced to the extent that such Counsel could reasonably be expected to obtain alternative court work.
The Auditor understands that neither Counsel undertook any Court work in the period set down for the cause.
It is noted that no similar letter was sent by Faculty Services in respect of Junior Counsel but the Auditor considers that it is a reasonable inference that Junior Counsel expected to be treated in like manner as his Senior.
The Auditor, therefore, is of the opinion that the commitment fees are appropriate in this case, and that the fees proposed are reasonable."
For the Noters, Lord Mackay of Drumadoon argued that the auditor had applied the wrong test. He had dealt with the test of reasonableness on an agent and client basis. He had ignored the interests of the defenders. As between parties reasonableness had to be tested objectively. The public interest in the cost of litigation was not excluded. Necessity and economy might have been removed from the definition of the test, but they could still be relevant factors in deciding what was reasonable for the proper conduct of the litigation. Thus there might be a difference between the rates of counsel. It could not be reasonable as between parties simply to charge fees at the highest rate because the most expensive counsel had been instructed. The Practice Note of 1996 was unclear in its meaning. The Guide to Professional Conduct of Advocates could not add to, or amend, the Rule of Court. The Guide dealt with what an advocate was entitled to charge. It had no bearing on what counsel was entitled to have paid. The Guide, and in particular paragraph 5.12, applied to every case. On its terms it could mean that counsel could charge for the whole duration of a projected proof even if it were to settle on the first day, and could charge an additional commitment fee (though not referred to in the Guide) as well as for preparation. A commitment fee was a new and anomalous phenomenon. It was a payment for work not done, and, in that respect, was distinguished from the general class of fees. It was, even now, infrequently asked for and even less frequently agreed even as between client and agent. Solicitors who refused such a payment had no difficulty in instructing alternative counsel. For present purposes, the proper focus was as between party and party: Cooper & Wood v North British Railway Co. (1863) 2 M 346. An excessive fee could not be reasonable. Recoverable fees had to be assessed objectively, not by reference to what was paid, but to what would have been sufficient to engage competent counsel in a case of similar character: Caledonian Railway Co. v Greenock Corporation. Eminent counsel must not be allowed to throw an extra burden on unsuccessful parties: ibid. It was not in the public interest that particular counsel, or a particular clerk, should develop practices which had that effect. The auditor's role was to interpret practice of law agents generally, and objectively. Special arrangements would not be enforced as...
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