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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> McLean v Zonal Retal Data Systems Ltd [2009] ScotCS CSOH_12 (30 January 2009) URL: http://www.bailii.org/scot/cases/ScotCS/2009/2009CSOH12.html Cite as: [2009] ScotCS CSOH_12, [2009] CSOH 12, 2009 GWD 6-100, 2009 SCLR 763 |
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OUTER HOUSE, COURT OF
SESSION [2009] CSOH 12 |
|
P2633/06 |
OPINION OF LORD HODGE in the Petition ROBIN ANDREW
McLEAN Petitioner; for Orders relative to ZONAL RETAIL DATA SYSTEMS LIMITED Respondents: ннннннннннннннннн________________ |
Petitioner: MacColl, Advocate; McGrigor Donald
Respondents: Sandison, Advocate; Brodies LLP
[3] In
older case law it has been suggested that the court has jurisdiction where some
issue of principle is involved (Thoms v Thoms' Trustee 1907 SC 343, Lord Stormonth
Darling at 346). I understand that
formulation not to envisage a materially wider jurisdiction than that which I
have summarised in the preceding paragraph but to reflect the view that the
court may interpret the Rules of Court which give guidance to the Auditor in
accordance with their spirit and not as strictly as a statute: Mica Insulator Company Limited v Bruce Peebles & Company Limited 1907
SC 1293, the Lord President (Dunedin) at 1301. There is therefore scope for the court, or at
least the Inner House, to use the jurisdiction, which is otherwise akin to that
of judicial review, to give guidance in relation to questions of expenses.
[4] The
proceedings involved a petition under sections 459-461 of the Companies
Act 1985 in relation to Zonal Retail Data Systems Limited. The petitioner was a minority shareholder and
the respondents were shareholders in the company. On
[5] In the
Note of Objections the petitioner challenges the Auditor's report in relation
to two entries in the respondents' account of expenses, namely his allowance of
an entry dated 15 March 2007 for the perusal by solicitors of a draft
report prepared by KPMG and an entry dated 26 March 2007 relating to an
outlay to KPMG for the preparation and discussion of the draft expert report
dated 15 March 2007. The Auditor
accepted the first entry at the sum of г123.00 as stated in the account of
expenses. He taxed down the second
entry, which was for г11,842.47 and г2,072.43 of VAT, by approximately
twelve per cent, deducting г1,390.47 and г242.33 respectively. The petitioner challenges the recoverability
of these entries on the basis that they related to a draft report which was not
lodged in court but was used for discussion with clients and to inform the
later expert report for which KPMG billed separately. Mr MacColl, who appeared on behalf of
the petitioner, referred the court to a letter from KPMG dated
"I provided our
mutual clients with a draft report dated
[7] Mr MacColl
advanced three arguments in relation to the first and surviving ground of
challenge. The first submission was that
the court had awarded the respondents "the expenses of process" and that
charges relating to the preparation and discussion of the draft report which
was not the report eventually lodged in court were not expenses of process. I was not referred to any authority on the
meaning of the expenses of process. Such
expenses are the expenses of the judicial process as distinguished from extra-judicial
expenses (viz. Lord Thomson in Milligan v Tinne's Trustees 1971 SLT (Notes) 64) but that
observation does not advance the argument in this case.
[8] I am
satisfied that the first ground of challenge has not been made out. I do not accept the proposition that the costs
relating to a draft report can never form part of the expenses of process and
am aware of no authority to vouch that proposition. A person who is engaged to be an expert
witness may be instructed to consult with counsel on the scope and content of
his intended evidence. The expenses so
incurred are expenses in the process and are frequently recovered at least in
part. In complex cases the evidence of
an expert witness which is set out in a report may be revised over time and
thus several drafts of the report may fall to be considered by the party's
legal team. The extent of the
recoverability of the charges relating to that work will depend on the
judgement of the Auditor as to (a) whether the work was reasonably required and,
if it was, (b) what is a fair and reasonable charge for that work. In this case the petitioner has not
demonstrated that the draft report was in a category of services, the costs of
which are irrecoverable, or that otherwise the Auditor has erred in law. The former Auditor had seen both the draft
report and the final report. It is not
for this court but it is a matter within the Auditor's jurisdiction to decide
how far it is fair and reasonable to allow charges in relation to that report.
[9] Mr MacColl's
second submission, which may have arisen from a comment which I made during the
hearing, was that the former Auditor had erred in that he appeared to have
taxed the whole account on the agent and client, client paying scale and
therefore had not carried out the remit in the interlocutor of
"The Auditor
respectfully responds to the Note of Objections No. 17 of process as
follows:
Rule of Court 42.13.2
states: 'where it was reasonable in any
cause to employ a skilled person to make investigations or to report for any
purpose, any charges for such investigations and report and for any attendance
at any proof or jury trial shall be allowed in addition to the ordinary witness
fee of such a person at such rate as the Auditor shall determine is far and
reasonable'.
1. This instructs the Auditor to allow
fair and reasonable charges to a skilled witness for the investigation and
preparation of a report. The Petition
clearly sets out the Petitioner's concerns that the Respondents conducted the
affairs of the company, "in a manner which has caused and continues to cause
unfair prejudice to the interests of the Petitioner as shareholder." This is a claim which requires detailed
investigation by an expert witness so that a full report may be prepared to be
lodged with the court and on which the expert will give evidence. The Auditor has had the benefit of seeing the
reports in this matter and is satisfied that in the circumstances of this case
it is reasonable that [sic] the cost
of and work involved in the draft report is (a) reasonable and
(b) forms a proper recover[y] against the [petitioner].
2. MacLaren on Expenses at p 510
deals with the allowance of agent and client, client paying expenses states 'In
the taxation of an agent's account against his own client, therefore,
employment having been satisfactorily established or admitted, the only
question is whether the work was done.
This is settled before the Auditor, who has the process before him and
who will see whether the agent was entitled to make professional charges for
the items which are charged in his account.
As Lord President Inglis has said, (Hamilton v Brown, 1890,
17 R. 505; 27 S.L.R. 406)
"Every item charged as outlay must be duly vouched, and after it is proved to
the satisfaction of the Auditor that the work was done and the vouchers are
produced there is an end to the plea that the work was not done," and
Lord McLaren remarked in the same case, 'In the case of a law agent's
account against his client the fact that the work was done is to be
established, not by evidence adduced to the judge, but by vouching the account
before the Auditor. I would only add
that this is not a rule which lawyers have made for their own benefit, but that
it results from the nature of the contract of agency, in which the proof must
depend almost always upon documentary evidence.''
Essentially this indemnifies the
parties for costs incurred in the action.
The client signed terms of engagement which show clearly that his
agent's fees were to be charged on the basis of time expended. The Auditor had the opportunity of
considering the files, papers and time records and is satisfied that the work
charged for in the account was properly incurred. The Note of Objections appears to proceed on
the basis that this was an award on a party and party basis.
In reaching these conclusions the
Auditor acted reasonably and in accordance with the authorities and taxed the
account in terms of Rule of court 42.10.-(1)."
[11] There
is in my opinion some ambiguity in the wording and layout of the Note as the
former Auditor (a) did not specify that in his application of Rule of
Court 43.13(2) to the circumstances of this case, he taxed the account on
the party and party basis in relation to the challenged items and (b) did
not make it clear that his comments in the penultimate paragraph related only
to the second challenge referred to in paragraph 6 above. But I am persuaded, as Mr Sandison
submitted on behalf of the respondents, that, on a correct reading of the Note,
the quotation of the Rule of Court and the paragraph numbered (1) were the
former Auditor's answer to the first challenge in the Note of Objections (paragraph 5
above) while the paragraph numbered (2) and the penultimate paragraph
addressed only the second challenge which the petitioner has now withdrawn. I am supported in that view by a
consideration of the taxed account of expenses.
The law accountant who prepared
that account emphasised in bold type on page 4, after the entries relating
to the court hearing on
"The Auditor may
make no determination under paragraph (2) ... unless the court has,
on granting a motion made for the purpose, before or at time at which it
awarded expenses or on a motion enrolled at any time thereafter but before the
diet of taxation -
(a) certified that the witness was a skilled
witness;
(aa) certified that it was reasonable to employ
that person to make investigations or to report; and
(b) recorded the name of that witness in the
interlocutor pronounced by the court".
[13] Mr MacColl's
submission was a simple one. The Rule of
Court gave the Auditor jurisdiction in relation to the additional charges of a
skilled person only if the court had pronounced an interlocutor which contained
a certificate under each of the three heads of that Rule. Thus, unless the court certified that it was
reasonable to employ the person to make investigations or to report, the
Auditor could not consider a claim for an additional charge beyond his fee as a
witness. If that submission were
incorrect, he submitted that the person who had been certified under head
(a) but not head (aa) could claim a fee as a skilled witness but not
for his investigation or the preparation of a report. In this case the relevant interlocutor in
relation to the skilled person was that of Lord Menzies dated
[20] Lord Menzies's
interlocutor of