EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Eassie Lord Mackay of Drumadoon Lord Bonomy	[2012] CSIH 72 XA79/11 OPINION OF THE COURT delivered by LORD BONOMY in APPEAL by the Respondent in causa THOMAS McENTEGART Pursuer; against MARK HARRIS FISHMAN Respondent: _______

Pursuer & Respondent: McIlvride; TLT Scotland Ltd

Respondent & Appellant: Winter; Harper Macleod LLP

14 September 2012

Background

[1] The power to regulate the fees of messengers at arms and sheriff officers has rested for many years with the Court of Session and been exercised by the Act of Sederunt. In 1913 the Codifying Act of Sederunt referred to the "recognised fees" of a messenger at arms. A scale of fees had been in use since at least 1840. Subsequent Acts of Sederunt have, with the concurrence of the Lord Lyon King of Arms, amended these fees. The principal Act of Sederunt now regulating the fees of messengers at arms is the Act of Sederunt (Fees of Messengers at Arms) (No.2) 2002 made by virtue of the powers conferred upon the Court of Session by section 6 of the Execution of Diligence (Scotland) Act 1926 and section 5 of the Court of Session Act 1988. In the case of sheriff officers, a scale of fees for diligence was prescribed by Act of Sederunt in 1908, following the enactment of the Sheriff Courts (Scotland) Act 1907. That scale was repeated in the Codifying Act of Sederunt of 1913. The fees have subsequently been increased on a number of occasions. The principal Act of Sederunt currently regulating the fees of sheriff officers is the Act of Sederunt (Fees of Sheriff Officers) (No.2) 2002 made under and by virtue of section 40 of the Sheriff Courts (Scotland) Act 1907 and section 6 of the Execution of Diligence (Scotland) Act 1926. This appeal relates to the interpretation of that Act of Sederunt.

[2] During the late nineteenth century and early twentieth century various special provisions were in place for recovery of certain categories of taxation, including income tax, and recovery of local authority rates, the predecessor of the council tax. A uniform system for recovery of rates was then introduced by section 247 of the Local Government (Scotland) Act 1947; local authorities could apply to the sheriff for a summary warrant for recovery of the outstanding rates with the addition in each case of 10% of the sum due and unpaid. The work of recovery was and is the province of the sheriff officer. It appears that sheriff officers were largely remunerated for this work from the 10% surcharge. This largely mirrored the longstanding system for the recovery of income tax. When the Debtors (Scotland) Act 1987 brought that system to an end in respect of central government taxation, in relation to council tax the arrangement remained as before and a 10% surcharge continues to be added to the sum due and unpaid.

[3] The 1980s also saw the introduction of the community charge with its attendant difficulties in collection, and the development of the practice of local authorities inviting sheriff officers to tender for the provision of services for the collection of the community charge. Although the matter was not discussed in any great detail before us, it does appear that the availability of funds from the surcharge has a bearing on the practice of some sheriff officers not to charge diligence costs where these costs are not recovered from the debtor. One other procedural point should be noted for completeness. Until the requirement to serve a charge for payment was introduced by section 209 of the Bankruptcy and Diligence Etc. (Scotland) Act 2007, the sheriff officer acting under a summary warrant could proceed directly to poinding and arrestment.

[4] Prior to 1990 the Act of Sederunt in force at any given time was in very brief terms to the effect that, "The fees in civil business executable by Sheriff Officers shall be those prescribed in the Schedule hereto." The Act of Sederunt went on to repeal any superseded Act of Sederunt and set out the fees in the Schedule. In 1990 and subsequently in 1994 and 2002 (the Act of Sederunt now in force) more detailed provisions were made; the Act of Sederunt gave effect to a Schedule of Regulations extending to several paragraphs, followed by a Table prescribing the fees. Why such a change was introduced in 1990 remains unclear.

[5] This appeal first came before us on the Summar Roll on 10 January 2012. Having heard counsel at some length, the Court was of the view that there would be merit in making further enquiry into the circumstances in which the change took place in 1990. The Court and parties thereafter undertook further enquiry, including in the archive of the Lord President. Little of assistance has emerged. The hearing was therefore resumed and concluded on 15 June 2012.

The Facts and the Issues

[6] The appellant was censured for misconduct by the Sheriff Principal of Glasgow and Strathkelvin for breaching the Regulations in the Schedule to the 2002 Act of Sederunt relating to the fees of sheriff officers, ("the Regulations"), and in particular Regulations 1 and 7. The specified breach was his failure to charge the City of Glasgow Council diligence fees in around 700 cases. These related to recovery of outstanding council tax.

[7] The appellant challenges the decision to censure him on two grounds. Firstly, he maintains that his failure to charge the local authority was in the circumstances authorised by the Regulations and did not amount to a breach thereof. Secondly, he maintains that, since what he did was follow a practice commonly followed by a significant proportion of the profession, it could not amount to misconduct having regard to the test for professional misconduct in Sharp v The Law Society of Scotland 1984 SC 129 at 134-135.

[8] The Sheriff Principal's findings were made in the context of a complaint of misconduct made by the respondent following his appointment by the Sheriff Principal's predecessor to investigate a complaint against the appellant made by another sheriff officer. As presented to the Sheriff Principal, the complaint was founded upon the terms of the appellant's own letter to the respondent dated 25 March 2010 explaining his position. He said that some of the instructions received from Glasgow City Council were executed in accordance with the "convention". He explained the convention as follows:

"It is also an aspect of the operation of these contracts that the sheriff officer will endeavour to recover the diligence fee from the debtor and will not render an invoice to the local authority for any diligence which has been unsuccessful."

The Sheriff Principal accepted evidence from the appellant and another sheriff officer that the practice comprised in the convention was widespread. The Sheriff Principal also accepted that the final decision not to charge was taken after the work had been undertaken without bearing fruit. The testimony of the appellant was that he did not charge due to his knowledge of the convention and because he felt that it would have been unfair and unreasonable to charge in those circumstances.

The Material Provisions of the Act of Sederunt

[9] The 2002 Act of Sederunt provides in paragraph 2 as follows:

"2. Schedule 1 to this Act of Sederunt shall have effect in respect in respect of work carried out by a sheriff officer in relation to causes in, or work authorised by the sheriff court, and the fees specified are the fees payable to a sheriff officer in respect of that work."

The relevant Regulations in Schedule 1 are these:

"1. Subject to the following paragraphs, the fees payable to a sheriff officer in relation to an ordinary cause or a summary cause, as the case may be, shall be calculated in accordance with the Table of Fees in this Schedule and shall be payable in respect of (a) all forms of service or intimation of a document, citation of a person or execution of diligence and all other works authorised by the court and (b) recovery of rates, charges of taxes by summary warrant, any of which is executed by a sheriff officer during the normal business hours of 9.00am and 5.00pm.

......

6. Every fee rendered by a sheriff officer shall be so detailed that the fess charged by him may easily checked against the Table of Fees; and any fees agreed under paragraph 4 above and any allowable outlays shall be clearly narrated as such. The fee note shall be reviewed by the sheriff officer to ensure that it is fair and reasonable in the circumstances and shall be adjusted by him is necessary.

7. Discounting of fees is permitted only between sheriff officers.

8. Any restriction or modification made by a sheriff officer of fees recoverable from a person shall be passed on to that person only."

Submissions on Interpretation of the Regulations

[10] The case for the respondent is that the terms of the Act of Sederunt are mandatory and that a sheriff officer must charge the fees, and indeed the outlays, provided for therein, subject only to the power to adjust the charges in terms of Regulations 6 and 8. That was essentially the view of Sheriff Principal Taylor in Crane v Miller, unreported, 21 February 2007. His attention had been drawn to letters of advice from the late Sheriff Principal McInnes to the Society of Messengers at Arms and Sheriff Officers dated 12 and 20 June 2002 on the subject of competitive tendering which had featured as an aspect of the work of the profession since the mid‑1980s. In the letter of 12 June 2002 Sheriff Principal McInnes wrote:

"If a sheriff officer believes that he or she will be able to carry out a large amount of work for a single person, such as a local authority and be fairly remunerated at less than the full prescribed fee, I do not believe that the Regulations forbid tendering on that basis."

Sheriff Principal Taylor suspected that Sheriff Principal McInnes might have come to a different decision had his attention been drawn to the terms of Regulation 7. In contrast to the present case, Crane involved a pre-contract determination not to charge for fruitless diligence. The submission of Mr McIlvride, counsel for the respondent, was that in neither the situation in Crane nor that of the present case was a decision not to charge a fee permitted by the Regulations.

[11] The case for the appellant is that the Act of Sederunt prescribed the upper limit for charges and that the effect of Regulations 6 and 8 was that any charges could be adjusted at the discretion of the sheriff officer. In the submission of Mr Winter, counsel for the appellant, his decision not to charge was an application of these Regulations.

Discussion

[12] While there are throughout the Regulations a number of expressions which in isolation may be regarded as mandatory, the concentration of the Sheriff Principal was on Regulations 1 and 7. In Regulation 1 it is stated that fees "shall be calculated" in accordance with the Table in the Schedule. However, the operative provision in Regulation 1 is that the fees so calculated "shall be payable". Giving the language of Regulation 1 its ordinary meaning, in our opinion it does not amount to a statement that the amount brought out by strict application of the terms of the Table must be charged by the sheriff officer. The expression "shall be payable" does not constitute a peremptory requirement, but signifies what must be paid if charged. In our opinion Regulation 1 prescribes the maximum figure which may be charged and which, if charged, should be paid. We do not read in that Regulation an obligation to charge the figure in the Table or even to start the assessment of the charge to be made with that figure. As counsel for the respondent appeared to acknowledge, the contention that a sheriff officer is obliged in all cases to charge the prescribed fee would imply both that he could not provide services on a charitable basis and that he would be obliged to pursue recovery in all cases. In our view very clear and express language in the legislation would be necessary to bring about such a result.

[13] Apart from the view he formed about the peremptory terms of Regulation 1, the Sheriff Principal found the main support for his view that the decision of the appellant not to charge fees was not permitted in the combined effect of Regulations 6, 7 and 8, with particular emphasis on Regulation 7. In analysing them, in paragraph 18 of his note the Sheriff Principal said this:

"It is correct to point out that Regulations 6 and 8, for example, prima facie make reference to four separate actions or processes to be undertaken by a sheriff officer, viz. 'review' 'adjustment' 'restriction' and 'modification', all in respect of fees rendered. The use of such varied formulations is, arguably, less than helpful. However, it will be seen that each of Regulations 6, 7 and 8 are predicated upon the clear hypothesis that fees have been charged. That is not difficult to understand given that the absolute expectation of Regulation 1 is that a sheriff officer must charge for the work done in the context under consideration."

In our opinion the Sheriff Principal has misinterpreted the combined effect of these Regulations and the individual effect of each.

[14] In the first place neither Regulation 6 nor Regulation 8 appears on the face of it to require that a fee should be rendered. In Regulation 6 it is the fee note that "shall be reviewed" to ensure that it is fair and reasonable in the circumstances. It is clearly within the bounds of reasonable contemplation that in any individual case it may not be fair and reasonable to render a fee at all. Regulation 8 requires that any restriction or modification made by a sheriff officer of fees recoverable from a person shall be passed on to that person only. Again it does not follow that a fee must be, or must have been, charged. It is common in our courts for the liability in expenses of assisted persons to be "restricted" or "modified" to nil. In contrast, the expression "discounting of fees" used in Regulation 7 does appear to proceed on the basis that a fee is charged. Discounting is permitted only between sheriff officers. Our exploration with Mr McIlvride of the meaning of "discounting" in this context established that it relates to the practice of the sharing of fees between sheriff officers where the debtor resides in a sheriffdom remote from that in which the sheriff officer is instructed and he engages the services of a local officer to undertake the diligence. Thus a sheriff officer may not share his fee with, for example, the creditor's solicitor who instructs the diligence, for instance by paying a commission from the fee. The same would apply to any agent through whom a creditor's work is passed to the sheriff officer.

[15] Although Regulation 6 is not predicated upon the clear hypothesis that fees have been charged, it is no doubt the case that it will generally fall to be applied where fees are charged. In our opinion it is an entirely appropriate overarching provision in a scheme for the charging of professional fees that a fee note should be reviewed to ensure that it is "fair and reasonable in the circumstances" and that it should "be adjusted...if necessary". However, that such should be the generality does not alter the view we have expressed above that the terms of Regulation 6 do not require that fees must be charged.

[16] That the prescribed fees are not mandatory is probably best illustrated by Regulation 8 which apparently applies across the board to the Table of Fees and contemplates "restriction" or "modification". For reasons that we have already explained, not only does that provision clearly envisage fees less than the prescribed amount, but it also encompasses restriction or modification to nil. Regulation 8 is, in our opinion, predicated upon the sheriff officer being able to charge anywhere in the range from nil to the amount of the prescribed fee. It ensures that, where a charge made to a creditor is restricted or modified, the creditor passes on the restriction or modification to the debtor from whom the fee is recoverable and does not keep it or pay it as some form of commission to another. It thus backs up the prohibition on fee sharing other than with another sheriff officer of Regulation 7, and ensures that only what the sheriff officer has charged in terms of the Table will be charged to the debtor. We can see no reason why the restriction or modification of the charge to the creditor should not be to nil, in which case Regulation 8 would ensure that neither the creditor nor any other person should recover from the debtor any of the fees that would be chargeable under the Table.

[17] Mr McIlvride submitted that a reading of the Act of Sederunt revealed that it had three broad objectives. The first was to ensure that, where an oligopoly enjoyed the benefit of official appointment and authority to enforce court orders, the ultimate payer, i.e. the debtor, unsuccessful litigant or client, was not exploited. The second was to avoid excessive rigidity where in any individual case the prescribed fee would not be fair and reasonable unless it was adjusted. The third was to prohibit any practice whereby business was sought and obtained by offering to waive or discount properly chargeable fees, thus resulting in a sheriff officer having a personal interest in the outcome of any case. While the first two are readily discernible in the Regulations to which we have referred in detail above and have already been identified in this opinion, we are not persuaded that the third can be divined from construction of any particular provisions of the Schedule of the Act of Sederunt or from the instrument as a whole.

[18] Our interpretation of the Regulations is entirely consistent with the first two objectives identified by Mr McIlvride. In support of the third Mr McIlvride pointed to the need to ensure that sheriff officers with authority to wield considerable power might otherwise be tempted to abuse that power where their remuneration depended upon the successful execution of diligence. In our opinion that point of view is no more tenable as the basis for a policy of obligatory charges than the general widespread public policy of encouraging commercial competition that prevailed in1990 would be for concluding that the objective of securing contractual freedom lay behind the Table. As we have already indicated, enquiries by the Court and parties did not cast sufficient light on the circumstances in which the 1990 Act of Sederunt came to be drafted to enable us to reach any further conclusion about the objective or purpose or formulating the new Regulations.

Misconduct

[19] In light of our interpretation of the Regulations, no question of sanction arises. However, we consider it appropriate to observe that the Sheriff Principal's rejection of the test in Sharp v The Law Society of Scotland as inapplicable is not adequately explained in his judgment. The fact that a significant proportion of a profession follow a particular practice is plainly a relevant consideration in determining whether following that practice amounts to misconduct in the course of undertaking that profession. The Sheriff Principal is no doubt correct when he says that conduct does not necessarily fall short of misconduct "merely" because a significant proportion of the profession take the same approach. However, that statement cannot on its own amount to justification for a finding that the conduct did amount to "misconduct" in terms of section 80 of the Debtors (Scotland) Act 1987.

Decision

[20] In the circumstances we shall allow the appeal, recall the interlocutor of the Sheriff Principal of 31 May 2011, sustain the plea in law for the appellant and dismiss the complaint in the summary application.