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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Finlayson v. Turnbull & Ors [2003] ScotCS 82 (21 March 2003)
URL: http://www.bailii.org/scot/cases/ScotCS/2003/82.html
Cite as: [2003] ScotCS 82

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Finlayson v. Turnbull & Ors [2003] ScotCS 82 (21 March 2003)

OUTER HOUSE, COURT OF SESSION

A2129/01

 

 

 

 

 

 

 

 

 

 

OPINION OF LORD EMSLIE

in the cause

ARCHIBALD FRASER FINLAYSON AND OTHERS

Pursuers;

against

ROBERT WHITE TURNBULL AND OTHERS

Defenders:

(Schedule 28)

 

________________

 

 

Pursuers: Haddow, Q.C.; DLA

Defenders: Stewart, Q.C., Di Emidio; Lindsays, W.S.

 

21 March 2003

The Background to the Litigation

  • The individual parties to these proceedings are all solicitors. Prior to 28 August 1992, they were collectively the partners of a firm known as A.F. Finlayson & Co which carried on business from various offices in Glasgow. As at that date the first, second and third pursuers were equity partners, and the fourth pursuer and each of the three defenders were salaried partners. The offices from which the defenders worked were situated in the Parkhead and Dennistoun areas. Much of the work done from these offices was criminal legal aid work, but some civil work was also undertaken. The partnership was constituted at will. On 28 August 1992, without any prior warning to the pursuers, the defenders resigned from the partnership and effectively abandoned the Parkhead and Dennistoun offices, taking with them certain members of staff and a total of between 1,000 and 1,500 client files. Almost immediately they commenced business on their own account through the medium of a new partnership known as Turnbull McCarron. As a result of these events, the partnership of A.F. Finlayson & Co (hereinafter referred to as "the former firm") was dissolved.

  • Shortly thereafter, the pursuers raised the present action against the defenders, concluding inter alia:

    • (1) for declarator that, in acting as they did, the defenders were in breach of fiduciary duties owed to the pursuers as their co-partners in the former firm;

    ...

    (3) for count and reckoning for the defenders' intromissions with the estate of the former firm in respect of fees earned but not received by that firm prior to the date of its dissolution, and for payment by the defenders to the pursuers of the balance found due; and

    (4) for payment of substantial damages in respect of the loss and damage sustained by the pursuers as a result of the defenders' breach of contract.
  • In May and June 1995, a proof before answer took place before Lord Milligan on the pursuers' claims for declarator and damages. By Interlocutor dated 1 March 1996 his Lordship pronounced decree of declarator as first concluded for, and awarded damages to the pursuers in the sum of £78,000 together with interest thereon from the date of citation. By Interlocutor dated 28 May 1996, Lord Milligan altered this interlocutor on the question of interest. No appeal against the composite effect of these interlocutors was taken.

  • On 9 May 1995, at the commencement of that earlier proof, Lord Milligan pronounced an interlocutor whereby, in respect of the pursuers' third conclusion, and of consent, he ordained the defenders to produce accounts within 4 weeks; allowed the pursuers to state any objections within 4 weeks thereafter; and allowed the defenders to lodge answer to the same within a further period of 4 weeks. By Interlocutor of 8 July 1998, following the lodging of the defenders' account No. 50/1 of Process, Lord Milligan appointed the pursuers to lodge a Note of Objections thereto within 8 weeks; allowed the defenders to lodge Answers thereto within a further 6 weeks; and allowed a period of adjustment thereafter. It was not, however, until 5 December 2000 that the Court finally closed the Record and allowed parties a proof before answer on their respective averments in the original Record and in the relative Note of Objections and Answers. This proof was assigned to take place on 16 October 2001 and the ensuing 7 days.

  • When the proof called before me on 16 October, it was immediately apparent that there was no prospect of its being completed within the 8 days assigned. The defenders' revised Account of Charge and Discharge comprised some 40 numbered principal and subsidiary entries, each of which bore to reflect multiple receipts, claims, retentions or entitlements arranged in different categories. The pursuers' Note of Objection addressed each of these composite entries, and in addition sought to identify 16 further categories of receipts, claims, retentions or entitlements for which the defenders had allegedly failed to account. This Note was supplemented by incorporation of 41 numbered Schedules running to a total of 69 sheets. Some of these Schedules bore to relate to only a small number of the client files which had been appropriated by the defenders in August 1992, while others bore to relate to several hundred. The defenders' Answers were similarly supplemented by incorporation of extensive numbered Schedules. It was clear from a cursory examination of these various documents that the parties' dispute was wide-ranging and concerned inter alia the detail of fee accounts and other documents contained within individual client files. Not surprisingly, the productions lodged by the parties for the purposes of this proof were extremely voluminous.

    • Schedule 14

  • In these circumstances, the parties moved me, of consent, to allow a proof restricted to only one of the disputed Schedules, namely Schedule 14 which related to legal aid fees due or claimable in respect of pre-dissolution work undertaken for some 17 named clients. In the exercise of my discretion under Rule of Court 36.1, I granted that motion and appointed a proof on Schedule 14 alone to proceed separately from, and in advance of, any proof on any other Schedule. My Opinion at the conclusion of that proof was issued on 14 November 2001, and relevant interlocutors were pronounced on that date and on 21 November 2001.

    • Schedule 28: General

  • In the same interlocutor of 21 November 2001, a further restricted proof was, of consent, allowed on Schedule 28. In its final embodiment as No.92/1 of Process, that Schedule concerned legal aid and private fees and outlays alleged by the pursuers to be due or claimable in respect of work undertaken on more than 200 client files in the period prior to the dissolution of the former firm. The common feature of these files was that they were not reflected in any part of the accounting hitherto produced by the defenders. On 12 June 2002 and the ten succeeding days, I heard evidence bearing on these matters. Further evidence was led on 4 February 2003, and thereafter I heard parties' submissions over the remainder of that week. Put shortly, the pursuers sought to prove (i) that as at the date of dissolution, the files in question were live in the former firm's Dennistoun office, and were among those removed by the defenders at that time; and (ii) that the defenders were accordingly bound to account for the pre-dissolution value attributable to such files irrespective of the level of any recovery achieved by the defenders themselves. For their part, the defenders maintained that all aspects of the pursuers' claim under Schedule 28 were ill-founded, and that in any event the claim was significantly overstated and should not include VAT.

  • Fortunately, a measure of agreement was achieved between the parties which materially reduced the scope of the dispute. In particular, the defenders conceded that more than 60 files, which came to be known as the "produced files", had in fact been in their possession following the dissolution, and accordingly required to be brought into the accounting. These files were listed in the defenders' production No.96 of Process. Subject to certain exceptions, the pursuers dropped their claim in respect of many "Caroline Thomson" files, discussed later in this Opinion, and also in respect of certain files for which they had already received payment. Moreover, agreed values, from £250 down to zero, were placed on many other files as the proof progressed. And at the conclusion of the proof, the parties agreed that the defenders' liability with reference to fees and outlays on the "produced files" should be stated at the aggregate sum of £4,000 exclusive of any VAT to which the pursuers might be held entitled.

  • The remaining dispute between the parties concerned the "non-produced files", that is, files which could not be traced and which the defenders denied having taken at the time of the dissolution. Those files were listed in the defenders' production No.97 of Process, under five broad groupings as follows:

    • I Miscellaneous cases which might have been funded under the Advice & Assistance Scheme administered by the Scottish Legal Aid Board;

    II Apparent Advice & Assistance ("AA") cases;

    III Apparent civil legal aid cases;

    IV Apparent criminal legal aid cases; and

    V Cases whose fee classification, whether legal aid or private, could not readily be ascertained.

    During the proof, much of the evidence was led by reference to these broad groupings, and the same was true of the parties' final submissions. I therefore propose to follow the same approach in framing this Opinion, although for convenience the groupings will be treated in a different order. By reference to the authority of Smith v Barclay 1962 S.C. 1, it was accepted that the onus lay on the pursuers to prove that "non-produced" files were live, and taken by the defenders, in August 1992. Thereafter, as pointed out by the Lord Justice Clerk in that case, every reasonable presumption should operate in the pursuers' favour.

  • Before discussing particular files, or particular groupings of files, it will be convenient if I record my findings and impressions regarding the general evidence led at the proof as to (i) what took place in the Dennistoun office at the date of dissolution; and (ii) the sources from which the status of files at that time might be inferred. In the first place, I accept the evidence led on the pursuers' behalf to the effect that essentially the whole contents of the Dennistoun filing cabinets were cleared out by the defenders when they left the former firm to set up on their own account at the end of August 1992. Both William Finlayson, the third pursuer, and his wife Mrs Joan Finlayson confirmed that, when they visited the premises on the following Monday, no files remained. I did not understand their evidence on this matter to be seriously challenged or contradicted, and indeed on Days 9 and 10 Kevin McCarron, the second defender, confirmed that, with the exception of files already rendered for payment, all live files in the filing cabinets and on the principal desks were removed. I therefore start from the premise that whatever files were in the relevant filing cabinets prior to 28 August 1992 were taken by the defenders at that time. Many hundreds of such files have been identified and physically retrieved, and now appear in this and other Schedules for the purposes of the present litigation. But the "non-produced files" in Schedule 28 are not available for examination, and the main issue between the parties was whether or not those files were proved to have been in existence, as live files, in the cabinets at the relevant date. Perhaps not surprisingly, there was no contemporaneous record of what the cabinets actually contained, so in seeking to make good their position on Schedule 28 the pursuers adduced evidence from a variety of (mainly documentary) sources which, it was said, demonstrated on the balance of probabilities that the files in question were live, and were taken by the defenders, at the time of the dissolution.

  • The principal source of evidence relied on by the pursuers in this respect was the former firm's computerised Legal Aid Register, maintained at the head office in Bath Street. For each individual account, this listed information under inter alia client name, office file number, nature of work, commencement date, and legal aid reference number. Printouts of the Register were available for 28 August 1992 (No.81/106 of Process) and for a later date, probably in 1997 (No.81/104 of Process), and it was the pursuers' contention that this Register went a long way towards demonstrating what files were extant at and after the dissolution date. As the third pursuer put it on Day 6, Schedule 28 was largely based on inferences to be drawn from entries in the Legal Aid Register. Both he and his wife accepted, however, that the Register was "not infallible" or "not 100% reliable", and in that context there was a considerable amount of evidence, principally from the defenders' witnesses, as to significant deficiencies in the administration and record-keeping of the Dennistoun office in the period prior to 28 August 1992. In addition, there was evidence from both parties' witnesses identifying errors, omissions and discrepancies in the Register with reference to particular files, and by comparison with other sources of information. By way of illustration, there were cases where no office file number, or no legal aid reference number, appeared on the Register opposite a client's name. There were legally aided clients whose files did not appear on the Register at all, or appeared in one printout but not the other. There were legal aid files, including many of those produced in this and other Schedules, which still appeared on the Register in August 1992, and may well also have been in the filing cabinets, when they were no longer live by that date. For example, the third pursuer gave evidence on Days 4-6 of a number of files in the Register where payment had already been received by the pursuers; on Day 11 the second defender gave evidence of a number of bad debt cases among the "produced files" still in dispute; and, of the 18 "produced files" whose value was agreed at zero during the course of the proof, 11 appeared in the Register.

  • This was all explicable on the basis that the inputting of data at Bath Street was inconsistently carried out by office juniors, but in addition it was revealing to note the disagreement between Mr and Mrs Finlayson as to the stage at which a case would be entered in the Register. Mr Finlayson began by asserting, with apparent conviction, that this step would only be taken when legal aid certificates were actually issued, but on being shown multiple entries without certificate numbers he altered his position to say that criminal and AA cases, but not civil, might be entered at the stage when the relevant application was made. Mrs Finlayson, on the other hand, maintained that only AA cases could be entered prior to a full certificate being received. The risk here was of course that cases, once entered on the Register, were liable to remain there even if the relevant application was subsequently refused. By contrast, entries delayed until full certificates were issued would give rise to the risk that the latter event might not lead to registration of a file that was already open in the office.

  • However, the most significant potential for errors and discrepancies in the Legal Aid Register arose, not at the initial entry stage, but at the stage where the pursuers' interest in a file came to an end, for example on payment of fees and outlays being sought or received, or on a file being transferred to other solicitors. Significantly, the problem at this stage did not relate to the Register alone. On the evidence before me, the former firm did not have any effective system in place in 1992 for ensuring the consistent treatment and/or recording of terminated files. If a Closed File Book was kept at the Dennistoun office, as Mr Finlayson believed, this was not available as a production at the proof. According to the second defender, the Closed File Book at Dennistoun was in fact discontinued several months before the dissolution date, and essentially no record was then kept of terminated files. Office juniors were supposed to remove closed files from the filing cabinets and place them in cupboards for storage and eventual disposal. However, this task was not performed consistently, and closed files would not infrequently remain in the filing cabinets long after they had ceased to be live. And whether removed to storage or left in the cabinets, there was no effective system for ensuring that closed files were appropriately removed from the Legal Aid Register. On Day 6, Mr Finlayson described efforts to try to clear the Register "every six months or so", and acknowledged that dead files might linger there for some time. Significantly, neither he nor his wife could speak to having conducted a search for relevant files within the storage cupboards at any time.

  • In summary, the former firm had no satisfactory system for keeping the Legal Aid Register fully accurate and up-to-date, either at the stage when new files were commenced, or at the stage when files were closed in consequence of payment or transfer. Steps were sometimes taken to note the rendering and payment of accounts on the Register, and in some cases (especially in the 1997 printout) the annotation "DELETE" might be added to an entry upon payment, leaving actual deletion to a later date. Mr Finlayson began by expressing his belief that such deletion would be automatically effected by the computer, but later agreed that examination of the printout disclosed a large number of cases where such automatic deletion had plainly not occurred. The eventual picture was thus one of fee payments triggering only preliminary moves towards the deletion of an entry. In these circumstances, I conclude that the Legal Aid Register was not a reliably accurate record of live files at any given date, and was on the contrary liable to contain misleading entries suggesting that a file had become live by attracting a grant of legal aid, or that a file remained live and uncompleted, when in fact the opposite was the case. Equally, the Register might omit any reference to files which were still live. In my view it is significant that of the 28 disputed files in this Schedule which were agreed during the proof at a zero valuation, more than half appeared on one or both of the printouts of the Register, and the same is true of more than 80% of the 86 files in No.92/1 of Process which the pursuers reduced to zero before the proof commenced. Against that background, I am not persuaded that I should hold any individual Dennistoun file to have been live at the date of dissolution by reason only of an unsupported entry in the Legal Aid Register. It is perhaps significant that the problem with "missing" files affecting the former firm's other office at Parkhead, where the administration was better and Jacqueline Johnston was employed as book-keeper, appears to have been much less serious.

  • The other main documentary sources of evidence relied on by the pursuers were (i) the Cash Room Printout of the former firm as at 28 August 1992, (ii) certain lists emanating from the pursuers' law accountants, Messrs Millers, into whose hands certain original and copy files were delivered following the commission ordered by the court on 30 December 1992, and (iii) the File Index Book kept for the Dennistoun office, No.34/5 of Process. Dealing with each of these in turn, the pursuers sought to infer from entries in the Cash Room Printout (No.81/108 of Process) that pre-dissolution outlays had been incurred on particular files but not yet recovered. As is evident from Productions 92/1 and 97, relatively few files fell into this category, and the issue between the parties in this context was whether such recorded outlays reliably showed that the files in question were live at the critical date. Much was made by the defenders of the absence, in almost all cases, of individual ledger cards which would have given greater detail as to the outlays concerned. In my view, however, the real question to be resolved is not what the outlays related to, but whether the relevant files were live as at 28 August 1992. Where recorded outlays were recently incurred, the inference that a file was still live might reasonably be open, but even there (as in the case of several of the files dropped by the pursuers during the proof) the existence of recorded outlays might be consistent with accounts having already been rendered or paid, or with the payment of outlays being irrecoverable or overlooked.

  • Turning to the Miller lists (No.81/2 of Process), the evidence was not altogether clear regarding their true significance. The second defender spoke of files being sent to the pursuers' Glasgow agents Messrs Bird Semple following the commission, but he was unwilling to comment on Millers' role. The third pursuer described in general terms how Millers had produced lists of original and copy files in their possession, and in cross-examination gave evidence, which was not subsequently challenged, to the effect that all copy files were at some stage returned to the defenders in a van. However, there was room for uncertainty regarding what materials must have been in Millers' hands relative to files listed under the heading "Original Files Required". More importantly, it was not entirely clear what work (if any) Millers did, or were intended to do, on the files which they received, nor was it entirely clear what happened to the files after they had been in Millers' possession. No representative of Millers was adduced as a witness; there was little or no correspondence to be examined in connection with their involvement; and in the end of the day I was essentially left with the unvouched evidence of the third pursuer and the second defender on these matters.

  • In the absence of reliable documentary or other support, I consider that the evidence of these witnesses on contentious issues must be approached with caution. So far as the third pursuer is concerned. I do not doubt for a moment that he was doing his best to give truthful evidence. However, apparent feelings of bitterness towards the defenders came through strongly on several occasions while he was in the witness box, and I formed the impression that this may have subconsciously coloured his recollection and attitude on various matters. For example, he was in my view unnecessarily reluctant to concede the pursuers' claims on certain files where there was virtually no supporting evidence available, and where it really could not be said with any confidence whether such files were live and/or taken by the defenders on 28 August 1992, or what they might now be worth. At times he seemed inclined to clutch at straws in seeking to bring home liability against the defenders, and in this context I formed the impression that his evidence as to the quality and reliability of the administration and record-keeping in the Dennistoun office prior to the dissolution date was over-optimistic and, in various respects, at odds with the evidence given by Mrs Finlayson, by Jacqueline Johnston and by the second defender.

  • In my view, the second defender's unvouched evidence on material issues must also be treated with caution. Again, I do not doubt that he was doing his best to give truthful evidence, but I gained the impression that he resented being forced to meet the pursuers' claims for accounting at this late stage, and was therefore subconsciously inclined to overemphasise certain aspects of the defenders' position, notably the extent of Caroline Thomson's improper involvement in AA cases in the period prior to 28 August 1992. In that context, for example, his claim that no one, including himself, could be confident of distinguishing his evolved signature from that of Caroline Thomson appeared somewhat surprising, and the apparent vagueness of his recollection regarding a box of "Caroline Thomson" files which had been kept separate from the other files and records in the defenders' possession also tended to undermine his reliability as a witness. More generally, I was struck by his repeated insistence that none of the disputed files under Schedule 28 had been removed in August 1992, or thereafter discarded, notwithstanding Millers' recorded possession of a number of such files after the commission. Obviously Millers' possession of listed files would be of no assistance in identifying what other files were removed by the defenders at the same time, nor could it conclusively prove the live status of any of the files so removed. Nonetheless, in my view, the lists constitute valuable independent confirmation of the defenders having intromitted with certain files, and it seems to me that where they coincide with relevant entries in the former firm's Legal Aid Register and/or Cash Room Printout, it is open to the court to conclude that live files were indeed removed by the defenders on 28 August 1992.

  • The pursuers also relied on Production 34/5, the File Index Book maintained by the former firm for the Dennistoun office, as support for the information in the Legal Aid Register regarding client names, file types, commencement dates and office file numbers. It has to be noted, however, that this production covered only the limited period from January 1991 to July 1992, and therefore contained no reference to many of the disputed files within Schedule 28. Moreover, on the evidence before me, there were some client files which did not appear in Production 34/5 at all, and in addition (as shown by Mrs Finlayson's hand-written exercise No.81/103 of Process), it was not altogether unusual for the same file number to be inadvertently allocated to different clients and cases at the same time.

  • As regards the other witnesses led at the proof, they were, in the main, speaking formally to the presence or absence of documentary records of files at different dates, and I had no reason to doubt their credibility in that connection. Mrs Finlayson confirmed the basis on which she had compiled the pursuers' Production 92/1, and gave evidence as to the sources of certain entries and the reasons why particular claims were or were not being maintained. She also spoke, in general terms, to the figures claimed as fees on some of the disputed files, to the administration and recording systems within the Dennistoun office in 1992, and to certain changes in the defenders' position on disputed files over the years. Jacqueline Johnston, the first witness led for the defenders, also gave evidence of the administration and recording systems within the Dennistoun office in 1992. Beyond that, she spoke to having carried out extensive but unsuccessful searches within the defenders' offices in and after 1995 for files of the former firm, and to having received a separate box of "Caroline Thomson" files from the second defender at about that time. She also confirmed having received information on disputed files from the Scottish Legal Aid Board, and described how accounts were rendered where files included pre-dissolution work in which the pursuers had an interest.

  • Philip Shearer, a senior representative of the Scottish Legal Aid Board, confirmed the Board's response to the defenders' enquiries regarding files in Schedule 28, indicating that the search undertaken at that stage was focused on whether accounts had been rendered or paid, rather than on whether certificates had been issued or applied for in the first place. He also indicated that at the conclusion of the Board's search, he had sent the defenders copies of the Board's microfiche records of all relevant accounts and correspondence. It is true that these documents were not produced by the defenders, but at the same time the pursuers took no steps to obtain and produce the relevant evidence either. Finally, Gordon Johnstone, C.A., gave theoretical evidence, based on certain assumptions, as to the calculation of work-in-progress within the Dennistoun office as at the dissolution date. The principal assumptions, if I understood his evidence correctly, were that the average life of a Dennistoun file was five months (as the second defender claimed to have calculated), and that the fee value of a file would accrue at a steady rate during its life (a matter on which no evidence was led). Mr Johnstone's calculations brought out figures for work-in-progress, and for the average fee value per file, which seemed low by comparison with other relevant indicators.

  • While I have no reason to doubt Jacqueline Johnston's credibility, there are several reasons why I decline to attach much weight to her evidence of an exhaustive search for missing files. In particular, the search was carried out several years after the dissolution of the former firm, by which time it is likely that many of the relevant files would have been terminated or transferred; the computer records which she searched related principally to the rendering and payment of accounts, and did not cover private work; the search would not have disclosed the second defender's box of "Caroline Thomson" files, or indeed any other files kept separate from the main files and records within the defenders' offices; and the search plainly failed to disclose many files which have subsequently been produced in court. Similarly, on account of the restricted scope of the exercise described in paragraph [21] above, I attach only limited significance to Mr Shearer's evidence of unsuccessful searches by SLAB for Schedule 28 files. Moreover, I am not persuaded that I should attach much weight to Mr Johnstone's work-in-progress calculations either. His two different approaches, based on (a) the annual turnover of the Dennistoun office and (b) the total paid value of AA files in Schedule A annexed to No.48 of Process, brought out average fee values per file of £73 and £43 respectively. Significantly, in my view, both of these figures fell far below the agreed average fee of £98 for AA cases alone in No.96 of Process. Even Mr Johnstone's higher figure produced a total for work-in-progress in the Dennistoun office at the date of dissolution which was far below the aggregate fee value of Dennistoun files contained in Schedules 2, 4 and 6 of the defenders' own accounting in No.72 of Process. In these circumstances, it appears to me that the validity of both of Mr Johnstone's principal assumptions must be seriously open to question. The first bears no relation to the average age of the files comprised within Schedule 28, and the second is in my view inherently unlikely, especially in AA cases.

    • The Nature and Scope of the Dispute

  • Against that background, the parties adopted diametrically opposed positions on the disputed files in Schedule 28. The pursuers maintained that all of these files were live as at 28 August 1992, and had thus been taken by the defenders. The defenders, on the other hand, maintained that they had taken none of these files, or alternatively that whatever files had been taken had been produced to the court or had otherwise passed out of their control. Mr Finlayson could not conceive of recorded traces of well over 120 files being in error, whereas Mr McCarron could not conceive of the defenders having "lost" that number of files subsequent to 28 August 1992, even accepting that many such files may have had no commercial value to the defenders and may not have been thought to have any importance for the purposes of any liability to account. While each man was in my opinion justified in rejecting the other's extreme contentions, I do not think that either was willing or able to acknowledge the true extent to which his own position was, on the evidence, extreme and untenable. Significantly, at the conclusion of the proof, counsel for both parties sought to leave open a variety of less extreme alternatives for consideration by the court.

    • The Produced Files

  • As previously noted in paragraph [8], the parties reached a global agreement relative to this category of files at the conclusion of the proof. This agreement comprised fees of £3,850 and outlays of £150, and I therefore formally find that the defenders' Account requires to be corrected by inserting a new Item 28 commencing with these figures in the sum at charge.

  • Before leaving the "produced files", which comprise those listed in No.96 of Process along with the file for Mary Brodie transferred from Section II of Production 97, it is relevant to note that during the course of the proof (i) actual figures were agreed between the parties in relation to 30 out of a total of 66 files; (ii) the value of a further 18 files was agreed at zero; and (iii) the proper treatment of the remaining 18 files was unresolved. On my calculations, the approximate average fee value agreed for the first sub-group was £89, rising (as mentioned in paragraph [22] above) to £98 for the 23 AA cases which comprised the majority. The approximate average fee claimed in the third sub-group was, on my calculations, £103, whereas the notional average settlement figure for these cases (assuming that no value was attributed in that context to the files previously agreed at zero) appeared to be around £69. Allowing for total overheads of £90 in the first sub-group, the overall average settlement value of the 48 "non-zero" cases was approximately £81. Interestingly, the "produced files" were generally of fairly recent origin, with 62% having been commenced within the calendar year 1992 and 79% being less than one year old at the date of dissolution.

    • Non-Produced Files: Section III: Civil

  • Of the eleven files listed in this Section, counsel for the pursuer intimated at the close of the proof that one (Amelia Connel DP536) was dropped on the ground that the fee had in fact been paid prior to the date of dissolution. The other ten files remained in dispute, with the pursuers claiming fees of £699.11 in each case along with outlays of £188.38 in the case of Daniel King DN598. In response, the defenders contended that none of these files had been shown to have any value to be brought into account. With the exception of Daniel King, more fully discussed in paragraph [28] below, these were cases whose existence as live files as at 28 August 1992 was asserted by the pursuers on the evidence of the Legal Aid Register alone. None appeared in the Miller lists; none had any outlays recorded in the Cash Room Printout No.81/108 of Process; and there was admittedly no evidence of diaried activity in 1992 on any of these files or of client pressure for progress. Parties were in agreement that any civil legal aid certificate would lapse if no proceedings were instituted within twelve months, and furthermore that the institution of proceedings would inevitably require outlays. Since no outlays were identified in any of these cases, the second defender contended on Day 10 that it was impossible for any of them to have a fee value of £699.11. Over and above that, all of the files had commencement dates between February and June 1991; in six instances the pursuers could not identify their own office file number; and of those with file numbers, Archibald Birrell DN414 was reported by SLAB to have been paid in February 1993 to A Leggat of Messrs Cochrane Sayers (and probably rendered months earlier); and in the case of Elizabeth Stephen DN54, SLAB advised that the nominated solicitor was A Mackay of Messrs Carr & Co. The circumstances in which these third parties became involved were not satisfactorily explained, and there was no evidence to establish that the relevant transfers post-dated the dissolution of the former firm. In my view it is the pursuers who must bear the responsibility for that state of affairs, having apparently taken no steps to recover the relevant information from SLAB or from the solicitors concerned. In addition, neither the defenders nor SLAB could find any trace of these files in their records.

  • In the foregoing circumstances, I conclude that there is no sufficient reliable evidence to substantiate the live status of any of these files as at 28 August 1992, well over one year after their respective commencement dates. Indeed, on the balance of probabilities, the available evidence seems to me to confirm positively that these files can have no present value to the pursuers, either on the footing that the relevant civil certificates would have lapsed for lack of timeous proceedings, or (in the two cases mentioned) on the basis that the agency had been transferred to third party solicitors at some time. Against that background, it is not surprising that neither Mr nor Mrs Finlayson claimed to be able to vouch, from their own personal knowledge and recollection, the live status of these files at any given date. Even if they had purported to do so, more than ten years on, I would have been inclined to question the reliability of such evidence.

  • The one case in this Section where the pursuers appear to me to be on slightly stronger ground is that of Daniel King DN598. In addition to entries in the Legal Aid Register as at both 1992 and 1997, this case appeared in the Miller lists No.81/2 of Process. In addition, an outlay of £188.38 on 7 May 1992 was shown on the Cash Room Printout No.81/108 of Process, although without an individual ledger card the details of this outlay could not be ascertained. Accordingly, notwithstanding a commencement date in May 1991, the available documentary evidence not only confirmed subsequent activity on this file, but also showed that the file must have been among those taken by the defenders from the Dennistoun office at the date of dissolution. The defenders' position was (i) that in the absence of evidence to the contrary, the civil certificate would have expired well before that date; (ii) moreover, that in the absence of any individual ledger card it was not clear which certificate the outlay noted on the Cash Room Printout related to; and (iii) that while inclusion in the Miller lists might confirm the defenders' possession of the file at some stage, it went no further than that. In particular, it did not explain the circumstances in which the defenders' possession of the file arose, nor did it confirm the status or value of the file at any relevant date. Indeed, it created a problem for the pursuers, in respect that the file appeared to have gone missing after being transmitted to the pursuers or their agents for evaluation purposes. For all of these reasons, it was submitted, the pursuers' claim on this file also was unsound and should be rejected along with the others.

  • Having carefully weighed up the parties' competing contentions, I have reached the conclusion that the pursuers' claim relative to Daniel King's file should in principle be upheld. On the balance of probabilities, it seems to me that the evidence regarding outlays, when taken together with the entry in the Legal Aid Register, is just sufficient to entitle me to hold that the civil certificate in this case was current and unlapsed by the date of dissolution of the former firm. Moreover, the inclusion of this file in the Miller lists indicates that it must have been removed by the defenders from the Dennistoun filing cabinets as at 28 August 1992. And while it is true that the subsequent disappearance of the file remains unexplained, I consider that in all the circumstances it is the defenders who must bear responsibility for that state of affairs. It was, after all, the defenders who took the file in the first place, and exposed it to the risks associated with transmission to and from third parties in connection with the present litigation. If a copy went to Millers following the commission, then responsibility for the disappearance of the principal file must remain with the defenders, and of course the third pursuer maintained that all copy files were returned to the defenders once Millers had seen them. Alternatively, if the principal file was sent to Millers uncopied, and disappeared after that, then in the absence of proof of culpability on the part of the pursuers or of anyone acting on their behalf, I consider that responsibility for the disappearance of the file must again fall on the defenders rather than the pursuers.

  • So far as valuation of Daniel King's file is concerned, there is only a limited amount of evidence available. The pursuers' claim of £699.11 was based on the SLAB average for civil cases in No. 83/1 of Process, but it was clearly established that that figure (a) covered completed cases of all types, and (b) included outlays as well as fees. Deduction of notional outlays of (say) £188.38 - the figure in Daniel King's case - would reduce the completed fee value to just over £510, but further discounting is required to reflect the partially completed status of the file as at 28 August 1992. In my opinion a discounted fee value here may be fairly stated at £250. This figure errs on the side of caution because the pursuers led no evidence throwing light on the nature and extent of the work that must have been involved. They did not, for example, seek to recover any documentation from SLAB in this connection, and it appears to me that copies of applications, certificates, correspondence and accounts from that source could hardly have failed to advance matters. In settling on the figure of £250, however, I have taken account of the 15-month life of this file prior to the dissolution date, the extent of the outlay incurred in May 1992, and the fact that the agreed fee value for the three much younger civil files in the "produced" category fell within the range £60 - £100.

  • For these reasons, I hold that the defenders' account requires to be corrected by adding an entry referable to this Section of No.97 of Process. Arising solely from Daniel King's file as discussed above, this entry will comprise fees of £250 and outlays of £188.38.

    • Non-Produced Files: Section V: Type Unknown

  • At the end of the proof, counsel for the pursuers intimated that two files had now been clearly identified as AA cases, and therefor required to be relocated. One of these (Eileen Wright DP1206) was now to be included among the "Caroline Thomson" cases in Section II, and the other (Robert Best DN883) was to be added to the "non-Caroline Thomson" files in the same Section. As regards the other files in Section V, the pursuers' claim was being dropped altogether. Accordingly, the whole of this Section ceases to be of interest for present purposes, and I need say no more about it.

    • Non-Produced Files: Section IV: Criminal

  • At the conclusion of the proof, counsel for the pursuers advised me that two out of the five listed cases (David McCormack D? and Andrew Morrison DN?) were being dropped altogether as having been completed by reason of actual or notional payment prior to the date of dissolution of the former firm. This left three cases in dispute, namely Robert Eadie DN232, David McHardie (File Number unknown) and James McIntosh (File Number unknown). These files had commencement dates in April 1991, May 1990 and May 1990 respectively. None of them were located during the searches carried out by Jacqueline Johnston on behalf of the defenders, and SLAB could find no trace of any of them either. None of them appeared in the Miller lists. In addition, there was no evidence of diaried activity or client communication in any instance. Accordingly, the only evidence of their existence as at 28 August 1992 took the form of entries in the former firm's Legal Aid Register and (in the case of Robert Eadie) outlays of £345.15 recorded in the Cash Room Printout. The defenders maintained that there was no satisfactory evidence that any of these files was live as at the date of dissolution, and that the absence of positive indicators should be held fatal to the pursuers' claim for fees of £753.31 in each case.

  • In my opinion, the claims in respect of McHardie and McIntosh are not established by sufficient reliable evidence and must be rejected. I agree with counsel for the defenders that it is highly unlikely that these claims were still live in 1992 in the absence of outlays or other indicators of activity. Moreover, on Day 7, Mrs Finlayson explained that in originally valuing McHardie's file at £500 she had possibly regarded it as supplementary work after another file had been paid. It would seem that the pursuers had no clear information in this connection.

  • So far as Robert Eadie is concerned, the pursuers' position appears to me to be slightly stronger, in that the Cash Room Printout bears to record outlays of £345.15 incurred in November 1991. However, I do not regard the quality of the evidence on such outlays as good enough to entitle me to hold, even on the balance of probabilities, that the criminal certificate in this case was still live and uncompleted by the date of dissolution. The nature of the relevant outlays was unknown; they were incurred prior to 1992; and it is apparent from the terms of the pursuers' Production 92/1, and from Mrs Finlayson's evidence on Day 7, that it was only recently that the pursuers bore to recognise this as a criminal case at all. Any fee valuation here would have had to be conservative due to the lack of relevant information, and in my view an appropriate figure would not have exceeded £250.

  • For these reasons, I conclude that all of the pursuers' disputed claims under this Section must be rejected. No alteration of the defenders' Account is therefore called for in this connection.

    • Non-Produced Files: Section I: ? AA/Miscellaneous

  • Of the twelve files originally listed in this category, the pursuers withdrew their claim in respect of Mrs Rafferty (File Number unknown) and David Thomson DM536. In addition, they transferred three further cases (Eileen McAlaney DP519, Andrew McGuire DR105 and Archibald Birrell DN414) into Section II (non-Caroline Thomson) on the basis that their AA status was now clear. For their part, the defenders conceded the fees and outlays claimed by the pursuers in respect of Alexander Thomson DP969. This left six files in dispute between the parties. Five of these (Joseph Todd DP1330, Margaret Glass DP931, Ken McLean DP1220, John and Linda O'Neill DP765 and Chris Sanderson DP678) did not appear in the former firm's Legal Aid Register at all. However, all had allocated office file numbers indicative of commencement dates between January and July 1992. The remaining file (Wallace McCracken DP1123) appeared in the Legal Aid Register with a commencement date of 20 May 1992, but with no legal aid reference number, and on Day 7 Mrs Finlayson acknowledged that there was "a good possibility" that legal aid had in fact been refused by the date of dissolution. Three cases (Glass, O'Neill and Sanderson) had entries in the Cash Room Printout indicative of outlays, but in the absence of individual ledger cards there was no evidence as to the nature of such expenditure. Only one file (McLean) appeared in the Miller lists. In all cases, SLAB's response to the defenders' enquiries was negative, and according to Jacqueline Johnston none of these files could be found in the course of her searches within the defenders' offices. For his part, the second defender denied taking any of the files listed in this Section.

  • In light of Mrs Finlayson's candid admission, I have reached the conclusion that Wallace McCracken DP1123 has not been established as a live file as at the date of dissolution of the former firm. Equally, I am not prepared to hold that Joseph Todd DP1330 was proved to have been a live file at that date either. The problem here was not merely the lack of positive evidence, but also the fact that Todd's office file number may be found in Schedule 4 against a different client name and certificate, and his name in Schedules 1 and 3 as a client of the Parkhead office. I accept that Mrs Finlayson spoke to having a general recollection of Joseph Todd as a client prior to August 1992, but in my view that evidence is insufficient to displace the negative indications to which I have referred.

  • By contrast, I am satisfied on the basis of its appearance in the Miller lists that the file of Ken McLean DP1220 was taken by the defenders on 28 August 1992, notwithstanding that file number having apparently been duplicated elsewhere. Moreover, taking account of the relatively recent commencement date in about June 1992, I hold that there is just enough evidence to prove, on the balance of probabilities, that this file was live as at the date of dissolution. And for the reasons given in paragraph [29] above relative to the non-produced civil files, I consider that the defenders, rather than the pursuers, must be held responsible for the unexplained disappearance of this file after it passed through Millers' hands.

  • As regards the cases of Glass, O'Neill and Sanderson, all had office file numbers consistent with commencement dates between January and April 1992, and all had recorded outlays within that period. In addition, on Day 7, Mrs Finlayson gave evidence to the effect that, in the Glass case, she must have seen relevant correspondence at an earlier date in order to identify a legal aid number for No.92/1 of Process. In my opinion, such evidence is just sufficient, in the absence of any material contradiction, to found a probable inference that these files were live as at 28 August 1992 and would thus have been among those cleared out by the defenders from the filing cabinets in the Dennistoun office. On the evidence before me, which I accept, the fact that these files did not appear in the Legal Aid Register might be consistent with their having involved private client work or, more probably, with the Legal Aid Register simply not having been marked up to include them.

  • For these reasons, I consider that the pursuers' claims in the cases of McLean, Glass, O'Neill and Sanderson must in principle be upheld. So far as fee valuation is concerned, I am unable to hold that the pursuers have put forward any satisfactory justification for the figure of £250 which is claimed in each case. There was essentially no evidence to show what type of file was in issue, and if they were AA claims the third pursuer conceded that no check had been made with SLAB as to whether any increase in fees beyond the initial limit of £80 had been authorised. I therefore restrict the fee value of these claims to the lowest relevant average, namely the SLAB average of £73.79 applicable to AA cases. That average must, of course, cover higher-value as well as lower-value cases, and the reason for pitching individual claims at more than three times the average figure is simply not understood.

  • I am of course conscious that, as the third pursuer accepted on Day 5 of the proof, the SLAB average for AA cases in No.83/1 of Process covered both fees and outlays, but at the same time (as indicated in paragraph [25] above) the average fee value, excluding outlays, agreed by the parties in respect of 23 "produced" AA files in No.96 of Process was approximately £98. In addition, the average value of the AA cases listed by SLAB in Schedule A annexed to No. 48 of Process was around £86 including VAT, and the third pursuer gave evidence that the average value of thirteen files which he personally had fee'd was £100. Taking these comparisons into account, I think that justice would be done by an award of £73.79 representing fees in each case, to which must be added the recorded outlays of £69.31, £68.30 and £78 for Glass, O'Neill and Sanderson respectively. I therefore hold that the defenders' Account requires to be corrected by the addition of relevant fees and outlays totalling respectively £295.16 and £215.61, and bringing out an average for the four cases concerned of just under £128.

    • Non-Produced Files: Section II: AA Cases

  • I come now to what is by far the largest, and in some ways the most difficult, of all the categories of files comprised in Schedule 28. This is principally because, by comparison with the "produced files" listed in Production 96, and with the files in other Sections of Production 97, there was rather less in the way of detailed evidence regarding individual files in Section II. As originally listed in Production 97, this Section included eighteen files alleged by the defenders to be "Caroline Thomson" cases, and 85 other files with which Caroline Thomson was not alleged to have had any involvement. The distinction was important, because for a lengthy period prior to 28 August 1992 Caroline Thomson ("CT") had held herself out as a qualified Scottish solicitor when she was not, and when SLAB discovered this they refused to pay out on her cases and sought reimbursement of fees already paid in that connection.

  • In the course of the proof, so far as the "CT" sub-group was concerned, the pursuers transferred Mary Brodie DP858 to the "produced files" list in Production 96; the file for Andrew Downie DP663 was deleted because it already appeared in that production; Atlaf Hussein DP337 was also dropped by the pursuers as a duplication of the claim in the "non-CT" sub-group; the pursuers also dropped two of the entries for Anne Ayre (DR91 and DR92) and all three entries for Ian Kerr; and (as previously noted in paragraph [32] above), Eileen Wright DP1206 was added to this sub-group from Section V where her file originally appeared. As regards the "non-CT" sub-group, the pursuers dropped their claims in respect of Amelia Connel DP536, David McGlone DR21, Frank Loder DN183 and DN184, and Alice Mushet DN346. These deletions were, however, counterbalanced by the addition of Eileen McAlaney DP519, Andrew McGuire DR105 and Archibald Birrell DN414 from Section I, and Robert Best DN883 from Section V. As a result of these changes, the parties remained in dispute with regard to eleven "CT" cases, and 84 cases in which she was not alleged to have been involved.

  • Starting with the "CT" sub-group, the general issue was as usual whether listed files were live and had a value to the pursuers. However, the special question arising here was whether the alleged involvement of CT was established, in which case I understood the pursuers to accept that (subject to limited exceptions such as private recovery) the affected files were indeed deprived of value. According to the printout of the Legal Aid Register No.81/106 of Process, nine out of the eleven disputed files had commencement dates in 1992 and, of these, seven were less than three months old as at the date of dissolution. The remaining two (Alice Mushet DP121 and Kathleen Sherry DP462 - a duplicated file number) had commencement dates in August and November 1991 respectively. One file (Alice Mushet) had recorded outlays of £127.50 incurred in February 1992. In addition, Eileen Wright DP1206, Kathleen Greig DR3/4 and Alice Mushet appeared in the Miller lists No.81/2 of Process. With only two exceptions discussed below, it seems to me that the uncompleted status of these files may reasonably be inferred from the foregoing evidence notwithstanding the second defender's assertion on Day 11 that the work involved in cases such as Brian Murray DR1 and Eileen Wright DP1206 would have been relatively short-lived. And in my view, that inference is materially strengthened by the fact that all but one of the files (Alice Mushet) appeared in Schedule C annexed to SLAB's letter of 6 June 1995 (No.48 of Process). This was the letter which confirmed SLAB's dim view of CT's involvement in a large number of listed AA cases when she was not a qualified solicitor in Scotland, and made it clear to the defenders that sums already paid out on such cases would require to be repaid, and that further accounts either could no longer be submitted or, if submitted, would not be paid.

  • Significantly, two out of the eleven files in this sub-group (Jean Docherty DP1256 and Heather Magennis DP1398) were removed by the pursuers from the Legal Aid Register in the period between 1992 and 1997. In my judgment this raises a clear inference that these files were no longer considered by the pursuers to be live, or to have a value to them, and ties in with the second defender's evidence on Day 11 (by reference to Production 91/10) that Heather Magennis was mandated back to the pursuers at some stage. In the absence of compelling evidence to the contrary, I consider that the pursuers' claim in relation to these two files must therefore be rejected.

  • As became clear during the proof on Schedule 14 in October 2001, and as the defenders acknowledged in the present context, SLAB's purported identification of "CT" files in Production 48 was not altogether accurate, CT having had no involvement in a number of the listed cases. One possible reason for this was that according to the second defender (the only other person who might realistically have signed the relevant applications) his signature had evolved into a squiggle resembling CT's, and it was hard for anyone, including himself, to tell the difference with any confidence.

  • On the evidence before me, I accept that all of the cases in this sub-group were commenced within the period when CT was practising on an unauthorised basis. On Day 6, Mr Finlayson suggested that Alice Mushet, commencing in August 1991, came too early for that, but on the basis of the second defender's evidence on Day 11, identifying court attendance notes in the case of Robert Best DN659, I am satisfied that by August 1991 CT had already begun to hold herself out as a qualified solicitor in Scotland. However, the real questions to be resolved are (i) whether the relevant files were truly CT files, as alleged by SLAB, and (ii) if so, whether there was any reason to treat them as still having a value to the pursuers. Owing to the files being unavailable, of course, these questions are not susceptible of a direct answer, but there was clearly no positive proof that any of the files in question were in fact CT cases, and furthermore the disappearance of the files made it impossible for the pursuers to establish the contrary. Accordingly, drawing all reasonable inferences against the defenders as the party responsible for removing the files in the first place, I consider that they have not only failed to account for the files in this sub-group, but also failed to discharge the onus which they admittedly undertook in seeking to exclude them from valuation altogether by alleging that, as CT files, they were worthless. My decision on this aspect of the matter proceeds along the same lines as paragraphs 25 to 28 of my ruling on disputed CT files within Schedule 14 in November 1991.

  • In light of the foregoing decision, it is not strictly necessary for me to consider the remaining question whether, had the files been CT cases, they should nevertheless be treated as having some value to the pursuers. I can, however, indicate that on the limited evidence adduced at the proof, I would not have been inclined to answer this question in the pursuers' favour. It would, I think, have been for them to show special circumstances (such as private recovery) to overcome the ordinary consequences of CT's unauthorised involvement, and in my judgment they did not do so.

  • Turning to the matter of valuation, I am conscious that (as with other categories of files) the court is in no position to make a direct assessment of the nature and quantity of pre-dissolution work for which the pursuers might reasonably have claimed payment. By 28 August 1992, the files in this sub-group were generally of recent origin, and in all the circumstances I am not persuaded that there is any evidential justification for according them a fee value in excess of the SLAB average figure of £73.79 applicable to AA cases. For the reasons given in paragraphs [41] and [42] above, which for the sake of brevity I will not repeat, it seems to me that this figure may appropriately be used here notwithstanding the inclusion of outlays when it was calculated. I therefore hold that the nine files remaining in this sub-group fall to be accounted for by the defenders under Schedule 28 at a fee value of £73.79 in each case. Additionally, in the case of Alice Mushet DP121, outlays of £127.50 fall to be added to that figure. The defenders' Account must accordingly be corrected by the addition of fees and outlays referable to this sub-group totalling £664.11 and £127.50 respectively. This brings out an average for the nine cases concerned of just under £88.

  • Moving on to the "non-CT" sub-group, this comprised 84 cases whose commencement dates spanned an extended period from 17 May 1988 (Isabel Callum DK194) to 18 August 1992 (Andrew McGuire DR105). Almost a quarter of these cases were commenced in or before 1990, and only thirteen were commenced in 1992. Apart from confirmation, early in the proof, that every file in the sub-group appeared in the former firm's Legal Aid Register, relatively little evidence was led on either side as to whether these files were live (and removed by the defenders) on 28 August 1992, or as to whether they had any value to the pursuers in respect of pre-dissolution work. On Day 6, the third pursuer was cross-examined on 5 cases (Thomas Kelly DN214, George Martin DP1335, Isobel McGlone DN938/958, Catherine Mitchell DP300 and George Murphy DP373). On Days 6 and 7 Mrs Finlayson made observations on Alexander Birrell DN414, William Baird DP1207, Thomas Kelly DN214 and Robert Best DN883. Thereafter, Jacqueline Johnston described how the defenders and SLAB could find no trace of the files in this sub-group, dividing them for ease of reference into (i) cases where a legal aid reference number was known; (ii) cases where the legal aid reference number was unknown and there was little information to go on; and (iii) cases which did not readily fit into either category. And finally, on Day 11, the second defender gave evidence regarding eight of the most recent cases in the sub-group, and otherwise made specific reference to only four more.

  • Given the relative paucity of evidence regarding files in this sub-group, the court must make a broad assessment of the situation with a view to doing justice between the parties. At one extreme, there are two files (David Ross DP1139 and Daniel King DN598) whose live status and removal by the defenders are in my view sufficiently supported by entries in the Legal Aid Register and by inclusion in the Miller lists. At the other end of the spectrum, there are ten files which the pursuers removed from the Legal Aid Register at some time between 1992 and 1997, and whose live status and continuing value to the pursuers were not vouched from any other source. These were Robert Aitken DP1168, William Baird DP1207, James Breen DP629, Robert Brown DP1029, Daniel Burke DP951, George Martin DP1335, William Thomson DP154, Mary Walker DN539, Thomas Kelly DN214 and Jean Welch DP7. It is perhaps significant that in relation to six of these files no legal aid reference number ever appeared in the Register. It is true that in the case of Thomas Kelly the pursuers' claim was also based on outlays appearing in the Cash Room Printout No.81/108 of Process, but in my view the deletion of the file from the Register affects outlays just as must as fees, and there is no sound reason for treating Thomas Kelly differently from the other nine files in this category. This was, moreover, a file commenced in 1990, and I note SLAB's advice that certain payments were made to third party solicitors in the first half of 1993. As in other similar cases, there was no evidence to establish that any relevant transfer post-dated the dissolution of the former firm.

  • In between these extremes are the remaining 72 files which admittedly appeared in the printouts of the Register for 1992 and 1997, but the status and value of which were not otherwise clearly indicated by oral or documentary evidence. On Day 8, Jacqueline Johnston identified two of these files (Catherine Mitchell DP1019 and Samantha Rowan DP1294) for which no legal aid reference number could be found in the Register, and five more (Josephine Kucwalski DN136, Waldemar Kucwalski DN224, Edward Kummins DM726, William McCartney D? and James McGinn DM706) where SLAB had later indicated that the quoted legal aid reference numbers were wrong. In addition, Anne Ayre DP1321 and George Murphy DP373 were cases in which the later printout of the Register, No. 81/104 of Process, showed accounts rendered by the pursuers themselves in 1993 and 1994. According to SLAB, George Murphy was also at some stage "paid at Nil" to third party solicitors. In my view these negative indications in the evidence are sufficient, as a matter of probability, to displace any inference in the pursuers' favour, and I therefore exclude the nine affected files from further consideration along with the ten "deleted" files discussed in paragraph [52] above. This leaves 63 files which appeared in the pursuers' Legal Aid Register, but in respect of whose status and value there were no particular evidential indications one way or the other.

  • Of these 63 cases, I calculate that 45 (approximately 71% of the total) were more than one year old by 28 August 1992. Of these, 31 had commencement dates in 1991, with 14 commencing in 1990 or earlier. Only three out of 63 cases were commenced in 1992. These files were therefore generally much older than, for example, the "produced files" of which only 21% were in excess of one year old by the date of dissolution of the former firm. In my opinion, looking at the matter broadly, the relative age of these cases materially reduces the likelihood of their having been live and uncompleted by 28 August 1992. However, I am not prepared to hold, on the balance of probabilities, that all of the relevant entries in the Legal Aid Register were incorrect so as to absolve the defenders of liability altogether. By the same token, I am not prepared to hold it proved, effectively on the basis of such entries alone, that the relevant files were all live and removed by the defenders as at 28 August 1992. On a broad assessment of the situation, I consider that the probable explanation for the apparent disappearance of the majority of these files is that they were wrongly entered in the Register in the first place, or (perhaps even more likely) terminated and removed to storage before 28 August 1992 without any written record of that step being made. On the other hand, again with reference to the inherent probabilities of the situation, I am satisfied that some of the files in question must have been removed by the defenders at a stage when they were still live and had a value to the pursuers. The fact that, until fairly recently, the defenders appear to have thought that their liability to account was limited to payments which they had actually received provides a ready explanation of how they may have failed to keep track of files having no apparent value to themselves. In addition, as it seems to me, the evidence of the second defender having come forward, some years ago, with a box containing a substantial number of "CT" files which would not otherwise have been traced by Jacqueline Johnston during her searches within the defenders' offices, and the fact that a substantial number of other files appear to have been produced in court at a later stage, are powerful indicators of how easily other files may have disappeared from mainstream consideration after being removed by the defenders in August 1992. Contrary to the submission of counsel for the defenders, I do not consider that this conclusion depends on proof of dishonesty or bad faith on the defenders' part.

  • In the whole circumstances, I think that a fair apportionment would involve holding 16 of these files (that is, approximately one-quarter) to have been live and removed by the defenders on 28 August 1992. In my view this figure may be justified on two counts. In the first place, it leaves the pursuers to bear substantial responsibility for the absence of reliable oral and documentary evidence in relation to the 63 cases outstanding. And in the second place, the figure of 16 corresponds numerically with around 90% of the number of files (18) which were less than one year old by the date of dissolution of the former firm. By comparison, in the "produced files" category, the number which appear to have been valued in the parties' settlement (48) bears a similar numerical relation to the number of "produced files" (52) which were also less than one year old by the relevant date.

  • For these reasons, the total number of files in this sub-group for which I consider that the defenders must now account is 18, comprising the two files favourably treated in paragraph [52] above, together with the 16 files referred to in paragraph [55]. So far as valuation is concerned, I am not persuaded that there is any evidential justification for awarding a fee value in excess of the SLAB average of £73.79 in any of these cases. For the reasons already discussed elsewhere, I regard that as a fair figure in all the circumstances. Accordingly, the total fee value for this sub-group comes to £1,328.22. To this figure must be added the sum of £48.52, being the appropriate proportion (one-quarter) of the total outlays of £194.10 claimed in respect of the residual 63 cases, and the foregoing sums of £1,328.22 and £48.52 must be entered in the new Item 28 of the defenders' Account.

    • VAT

  • As already mentioned in paragraph [7] above, the defenders contended at the conclusion of the proof that no VAT should be added to any fees allowed under Schedule 28. The argument, if I understood it correctly, was that VAT would only be due on the occasion of a "chargeable supply of services", and that the payment of un-invoiced sums on an accounting did not fall into that category unless the defenders themselves had already charged and received the relevant VAT in a question with SLAB or with any private clients. Here the pursuers were merely claiming compensation for certain lost opportunities; they had rendered no chargeable services to the defenders; the defenders had recovered no VAT on Schedule 28 fees; and there was no relevant link between professional services rendered by the former firm and any compensation now payable. Reference was made in this connection to paragraph 12.13 of a textbook entitled "Tax for Litigation Lawyers", which stated in general terms that compensation for damage and loss, not being consideration for a supply of services, fell outwith the scope of VAT. In the same general context, reference was also made to Glasgow City Council v Commissioners of Customs and Excise 1988 V & DR 407, and to Apple & Pear Development Corporation v Commissioners of Customs and Excise 1988 STC 221.

  • In reply, counsel for the pursuer maintained that in the absence of fair notice the defenders should not be permitted to introduce a new and complex line of defence to the prejudice of the pursuers. This highly technical contention was not foreshadowed on Record, and indeed the applicability of VAT appeared to be conceded at several points in the defenders' pleadings. More importantly, perhaps, the nature of the contention had not been specifically raised during the proof with the third pursuer, nor with the second defender, nor even with the defenders' tax specialist Mr Johnstone, although it is fair to say that after the lodging of their Production 95/1 on Day 4 the defenders repeatedly made reference to fees and outlays "together with any VAT due". If the nature of this new point had been fairly disclosed at an earlier stage, the proof might well have been conducted on a different basis. For example, the defenders' proposed agreements relative to particular "produced files" would have been the subject of proper investigation to see whether the defenders had rendered or received VAT from SLAB or from clients direct. In addition, relevant expert evidence might have been required. In the circumstances, however, such measures had not been possible, and the pursuers had suffered real prejudice from the defenders' failure to focus their argument on VAT at an appropriate time.

  • If I was against him on that submission, counsel contended (on the basis of what he described as "a very cursory examination of a very difficult area of law") that the defenders' argument was not in any event well-founded. The question was not whether the pursuers had in some way made a taxable supply to the defenders. They had not done so. Equally, there was no question of a compensation claim here. As stated in Article 2 of the pursuers' Objections to the defenders' Account, and as apparently conceded in the defenders' responses, the former firm had rendered taxable supplies to clients, and the defenders' liability was to account for the notional value of the various fee accounts to which the pursuers were now truly entitled. VAT was simply part of the measure of that value, being otherwise payable by clients or by SLAB, and at the same time reflecting the liability of the former firm to pay VAT on fee receipts. The authorities cited by the defenders were distinguishable on their facts, involving statutory rights to recover payments, and in any event did not determine the issue in the defenders' favour.

  • In my opinion, the defenders' attempt to exclude VAT from any liability to account under Schedule 28 came far too late in the day and must now be rejected as illegitimate. The pursuers had no fair notice of matters which were likely to have altered their approach to the proof, and it was only in the course of the defenders' final submissions that the grounds of their new line of defence were revealed. In these circumstances, it seems to me that the pursuers' claim to have suffered material prejudice is well-founded, and I therefore decline, on considerations of fairness, to entertain the defenders' contentions on this matter. For completeness, however, I should indicate that, had I required to consider the VAT issue on its merits, I would have been inclined to prefer the pursuers' submissions and reject the defenders' argument as unsound.

    • Conclusion

  • In the whole circumstances, I consider that the defenders' Account requires to be corrected by inserting a new Item 28, including the following figures in the sum at charge:

    • From paragraph [24]

     

    Fees

    Outlays

    VAT

    Produced Files

    £3,850

    £150

    £673.75

    From paragraph [31]

    Non-Produced Files: Section III: Civil

    £250

    £188.38

    £43.75

    From paragraph [42]

    Non-Produced Files: Section I: ?AA/Miscellaneous

    £295.16

    £215.61

    £51.65

    From paragraph [50]

    Non-Produced Files: Section II: AA Cases (CT)

    £664.11

    £127.50

    £116.22

    From paragraph [56]

    Non-Produced Files: Section II: AA Cases (non-CT)

    £1,328.22

    £48.52

    £232.44

    £6,387.49

    £730.01

    £1,117.81

    The aggregate total of the figures brought out in the above table is £8,235.31.

  • In these respects, therefore, I sustain the pursuers' Objections to the defenders' Account, and find that the said Account requires to be corrected by insertion of a new Item 28 bringing out a total sum at charge of £8,235.31. In implement of what I understand to be the parties' agreement, all questions of interest and expenses will be reserved. Quoad ultra the pursuers' Objections with reference to Schedule 28 will be repelled. The case will be put out By Order to enable parties to be heard as to the precise form of the interlocutor to be pronounced at the present time.

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