Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH 165
P253/12	OPINION OF LORD DRUMMOND YOUNG in the Petition of McCRINDLE GROUP LIMITED Petitioner; for Judicial review of a decision of the Law Society of Scotland dated 6 May 2011 ________________

Act: McNeill, QC; Ross; MacRoberts

Alt (Law Society of Scotland): Duncan; Patterson; Simpson & Marwick

12 October 2012

[1] The petitioners seek judicial review of a decision of the Law Society of Scotland dated 6 May 2011. The Law Society appear as respondents to the petition. On 11 September 2008 the petitioners submitted a complaint to the respondents alleging professional misconduct by a firm of solicitors in 2002; in this opinion I refer to them as "X". X had represented the petitioners in a long-running arbitration, but on 20 May 2002 the petitioners withdrew instructions from them and instructed MacRoberts to represent them thereafter. The complaint contained two allegations: first, that X were aware of a failure to secure retrospective interest for the petitioners in the arbitration and deliberately concealed certain facts relating to that failure from the petitioners; and secondly, that X attempted to mislead the petitioners' new solicitors when asked questions by them relative to the question of interest. The petitioners have now abandoned the first ground of complaint, and consequently it is only the second ground that is directly relevant to the present proceedings. On that matter, the material events are said to have taken place between 23 May and 21 June 2001. The respondents initially decided that the complaint was time-barred. In March 2010 the petitioners raised judicial review proceedings in respect of that decision, and the respondents agreed to reconsider the question of time bar. The earlier proceedings were disposed of by an interlocutor dated 10 November 2010. Thereafter further documentation was submitted to the respondents and the question of time bar was reconsidered. On 6 May 2011 the respondents again decided to reject the complaint on the ground of time bar, and it is that decision that is the subject of the present proceedings for judicial review.

[2] The respondents' policy on time bar in relation to complaints of professional misconduct was set out in the letter intimating the decision to the petitioners' solicitors. It was in the following terms:

"When your client's complaint was received originally on 12 September 2008 the Society's policy was to investigate complaints that were brought to us either within two years of the service being completed, within two years of the matter a complainer wished to complain about having been brought to his attention, or within two years of the point that the complainer could reasonably have become aware of the matter from which the complaint arises.

Where the matter took place more than two years ago we had to be satisfied that a complainer could not have reasonably found out about it at an earlier stage. Our time limit would normally only have been relaxed in exceptional circumstances".

I should record at this point that the petitioners do not challenge the existence of that policy. The petition rather attacks the manner in which the policy was applied to the petitioners' complaint.

Factual background to the petition

[3] The history of events that gave rise to the complaint is as follows. In 1991 the petitioners were in dispute with Haden Young Ltd over a claim to payment arising out of work performed under a sub-contract for the supply and fabrication of certain goods and the carrying out of services in connection with the construction of a new jetty. In September 1991 they instructed X to act for them in that dispute. On 27 February 1992 formal notice of the dispute was given to Haden Young, and an arbitration ensued. In the arbitration, X sought payment of interest from 4 January 1988. At common law, prior to the Arbitration (Scotland) Act 2010, it was incompetent for an arbiter to award retrospective interest (that is, interest prior to the date of his award) unless there was an express clause to that effect in the submission to arbitration or appointment of the arbiter. This was recognized as a trap; arbitrations frequently started without the negotiation of a formal deed of submission, and if an attempt was made to negotiate a formal deed at a later stage the respondents obviously had no interest in agreeing to a clause authorizing the award of retrospective interest. Consequently the practice had arisen of raising parallel proceedings in court for the specific purpose of claiming retrospective interest (and also doing diligence). In that way it was unnecessary to have a provision for interest in the submission to arbitration. In the arbitration between the petitioners and Haden Young no agreement was ever reached, either before or after the start of the arbitration, to enter into a joint deed of submission. Interest was nevertheless claimed in the arbitration from 4 January 1988, but it was accepted in the proceedings for judicial review that such a claim was ineffectual without an express provision in the deed of appointment or deed of submission. On that basis, the petitioners aver that a protective court action ought to have been raised by 4 January 1993, five years after the right to interest was said to have arisen; this obviously assumed that that date was the correct date for the running of interest. It is a matter of agreement that no such action was raised.

[4] The arbitration proceeded slowly, regrettably a common feature of arbitrations before the recent statutory reforms. In 1998 a proof before answer was allowed. By letter dated 25 August 2000, the petitioners' managing director, Mr Bill McCrindle, wrote to named individuals at X asking them "to establish how my interest due on the claim was protected and advise if this is adequate". The letter went on to state that interest was very important in a case of such duration. In response to that letter, X carried out research into the power of an arbiter to award interest. The trainee who was responsible for the research prepared a memorandum for the associate, later a partner, who at that time was responsible for the arbitration; I will refer to the associate/partner as A. That memorandum, dated 28 August 2000, set out the relevant law. It indicated that at common law an arbiter does not have power to award interest unless expressly granted by the parties, either in a deed of appointment or a deed of submission. No such document appeared to exist in the present arbitration. Furthermore, the memorandum indicated, interest was only due when the principal sum had been wrongfully withheld. In the present arbitration, damages were claimed for prolongation and delay but the liability to make such payment was disputed by Haden Young, and on that basis there was not yet any legal obligation to pay any sum. Consequently there was no wrongful withholding of monies and interest would not be due, subject to an exception for a small sum which had been certified but had not yet been paid. A responded to Mr McCrindle on 22 September, stating that further time was required to double-check her assistant's findings. She did not in fact ever reply to Mr McCrindle's letter of 25 August 2000.

[5] The petitioners aver that in August 2000 X were aware that no deed of submission had been agreed by Haden Young, and that there was no power conferred on the arbiter by agreement to award retrospective interest on the sums claimed in the arbitration. It is further averred that X knew that no protective court action had been raised within the prescriptive period to preserve the petitioners' claim to retrospective interest on the sums claimed in the arbitration, and that X did not tell the petitioners that their interest claim was not protected. On 10 November 2001 A sent an e-mail to another trainee, asking her to make certain inquiries about interest. The e-mail referred to discussions that had taken place about a joint deed of submission and continued:

"On Monday could you please telephone [counsel] and say we are being pestered about this. I think we ought to make as little a fuss about it as we can. We are never going to get a Joint Deed if the other side don't want one and pressing for one is only going to alert them to the fact that there is something we want that we haven't got i.e. the power to award interest. Therefore, I would propose to respond to the Arbiter's Clerk and say that the claimants have nothing to add to what has previously been said in relation to having a Joint Deed.

Could you check with [counsel] that he's happy with that?"

The trainee spoke to counsel on 12 November, telling him about the content of A's e-mail; counsel agreed that there was no point in pressing the matter as the other side could not be compelled to enter into a joint deed. Thereafter the trainee reported back to A in a memorandum dated 12 November 2001.

[6] On 20 May 2002 the petitioners withdrew instructions from X for reasons unconnected to the present complaint. They instructed MacRoberts in their place. MacRoberts sought information from X in relation to the award of retrospective interest. The present complaint relates to the terms of the resulting correspondence, and it is accordingly necessary for me to set it out in some detail. First, on 23 May 2002 MacRoberts wrote to X in relation to a hearing in the arbitration that had taken place before the arbiter on the previous day; at that hearing the arbiter had discharged a proof before answer and ordered a preliminary proof as to the documents that constituted the sub-contract. The writer then stated:

"The issue of interest has been troubling the writer since his first meeting with Mr McCrindle.... At this juncture the writer does not see any legal basis for [the arbiter's] being empowered to award interest. In the event that the writer's understanding of the position is correct then this is obviously going to impact on any settlement offer that might be made either within the short term or indeed thereafter. Can you please confirm if it is your belief that the Arbiter has no power to award interest and if that is indeed the case how the Claimants are to secure payment of interest. In particular as we understand the position, no court action was raised during the early 1990's and thereafter sisted in the usual way. We would be most grateful if you could clarify this matter prior to the preliminary Proof commencing on Tuesday morning".

Two questions are asked in that letter: first, whether X believed that the arbiter had no power to award interest; and secondly, if so, how the claimants could obtain payment of interest in view of the fact that no court action had been raised in order to obtain a right to interest.

[7] A sent a reply the following day. In relation to interest, her letter stated:

"The contract between the parties does not to our knowledge provide for interest to be payable on outstanding sums.

The basis for Mr McCrindle's claim for interest is set out in Statement 12 in the Closed Record. It is a crave for interest as damages for wrongful withholding of payment.

As regards court proceedings, our file records that when this firm resumed acting for Mr McCrindle at the end of 1994, proceedings were raised in the Court of Session. Our files record that the claim related to damages for breach of contract and the sum sued for was stated at £81,200. This figure was apparently derived from a letter from Mr McCrindle to us dated 18 November 1994 (a copy of which we cannot locate at present). The court proceedings were subsequently sisted. Mr McCrindle will have a copy of all of the relevant documents.

In summary, Mr McCrindle does have a claim for interest, as set out in Statement 12 of the Closed Record. He is well aware of the basis for his claim as the issue was certainly discussed at consultations with Counsel that Mr McCrindle and the writer attended in November 2000 and August 2001".

A number of comments on this letter are pertinent. First, the writer does not actually answer the first of MacRoberts' questions. Nothing is said about the arbiter's power to award interest; instead, X's letter states that the contract between the parties did not provide for interest to be payable. Although it is not entirely clear, it seems likely that this must have referred to the construction contract rather than the contract to go to arbitration, since the parties had not actually concluded any deed of submission in relation to the arbitration. Nevertheless, the letter does contain an indication that there is no right to obtain interest. Secondly, reference is made to statement 12 of the closed record in the arbitration, in which damages were claimed for wrongful withholding of payment. This is a technique that was used on occasion at that time, largely in response to the high rates of commercial interest that were then the norm; these had become seriously out of step with judicial interest rates, and of course commercial interest is invariably compounded, whereas judicial interest generally is not. Nevertheless, as counsel accepted at the hearing before me, there was some considerable doubt as to whether a claim for damages for wrongful withholding of payment was a competent remedy, and I understand that it is now generally accepted that it is not. Thirdly, the general tone of the letter can be described as evasive. MacRobert's specific questions are not answered.

[8] MacRoberts wrote again to X on 17 June 2002. The writer, Mr Richard Barrie, had had a discussion with Haden Young's solicitor after the preliminary proof. He reported that

"The Respondents' position is that the Arbiter has no power to award interest prior to the date of any Decree Arbitral. This would appear to reflect the common law position and at this juncture on the basis of the information available we would consider that the Respondents' position is correct".

Mr Barrie then discussed the action raised in 1984 for payment of £81,200. He indicated that it appeared from discussions with Mr McCrindle that the decision to raise that action was taken with the prescriptive period in mind. There was no court action, however, for the remainder of the claim (which was for a very much larger sum). He stated that Haden Young's position appeared to be that any action raised in court subsequent to a decree arbitral would be met with a plea of prescription. It was arguable that the commencement of the arbitration process would interrupt prescription even in respect of interest, and he thought the counsel must have considered the matter. Nevertheless, he was particularly anxious to clarify matters at that juncture. Haden Young might well make an offer in settlement, and any entitlement to interest would be important in evaluating such an offer. He concluded by asking

"Are you able to clarify what your firm's understanding of the position is relative to retrospective interest being awarded? In particular why was no action raised and sisted in respect of interest on the remainder of the claim?"

[9] A replied to that letter on 21 June 2002. She referred once again to statement 12 of the closed record in the arbitration, which she said

"is not a claim for interest as such. Rather, it is a claim for damages, the measure of which is interest at the Judicial Rate.... Accordingly, as this is a claim for damages, whether the Arbiter does or does not have power to award interest is irrelevant".

The letter went on to assert that a claim on the basis that was more valuable than a simple claim for judicial interest would have been, since the earliest date of breach of contract relied upon was 4 January 1988. It was then suggested that, even if the arbiter did not have power to award damages, he would at least be able to make a finding of liability. Agreement was expressed with the view that the arbitration process interrupted the prescriptive period, and if the arbiter had no power to award damages but made a finding of liability in respect of the claim for damages in statement 12, the petitioners should be in a position to proceed to court within the balance of the prescriptive period to recover any sums that flowed from that finding. There followed a discussion of certain procedural matters that had arisen during the arbitration, following which statement 12 had been adjusted. The letter concluded

"In summary, it is our view that [Haden Young's solicitors'] assertion that the Arbiter has no power to award interest is irrelevant. Mr McCrindle has a relevant claim for damages for breach of contract. The measure of his loss is interest at the judicial rate from the date stated above (or such later date as the Arbiter decides). Of course, there is no guarantee that Mr McCrindle will be successful in any of his claims in this Arbitration. Nevertheless, at this stage the claim under Statement 12 is valid and should certainly be used to the fullest extent for the purposes of negotiation".

This letter also calls for comment. First, the two questions asked at the end of MacRoberts' letter of 17 June were not answered. X's letter does not state their position in respect of retrospective interest, but rather asserts that there was a claim for damages in lieu of interest. The suggestion that those damages would come to the same thing as interest at the judicial rate is slightly strange, since the reason for advancing the argument that damages for wrongful withholding of monies could be claimed was usually to avoid the restrictions on the calculation of judicial interest. Nevertheless, the discussion in the letter clearly relates to that claim for damages, and not to any entitlement to interest as such. Secondly, X's basic position is stated in the last paragraph that has been quoted. The writer states that the possibility that the arbiter has no power to award interest is irrelevant, as there is a claim for damages for breach of contract as a result of the wrongful withholding of monies due to the present petitioners.

[10] Following the petitioners' withdrawal of instructions from X in May 2002, they did not have all of the documentation relating to their claim against Haden Young, and some documents were recovered subsequently. The documents that are most relevant to the petitioners' present claim are the e-mail and memorandum of 10 and 12 November 2001 referred to in paragraph [5] above, which were recovered in December 2006. The petitioners only obtained full access to X's files in December 2007. On the question of time bar, their fundamental contention was that it was only when the e-mail and memorandum of 10 and 12 November 2001 became available that they had sufficient factual material to make their present complaint of professional misconduct. That occurred in December 2006, less than two years before the complaint was made.

The respondents' treatment of the petitioners' complaint

[11] The petitioners made a complaint of professional misconduct to the respondents on 11 September 2008. As I have already mentioned, in its final form the complaint alleged professional misconduct in two respects: first, the concealment of facts from the petitioners as to the failure to secure retrospective interest in the arbitration; and secondly, an attempt to mislead MacRoberts when asked questions by them about retrospective interest. It is only the latter part of the complaint that is now in issue. In that respect, the questions asked by MacRoberts and the answers that are said to be misleading are contained in the correspondence set out in paragraphs [6]-[9] above. On 6 May 2011 the respondents decided that the complaint was time barred in its entirety on the basis that the petitioners were aware of all the material facts that were required for their two complaints of professional misconduct by September 2005, which was more than two years before the complaint was made to the respondents in September 2008. The terms of their decision letter are of some importance, and I propose now to summarize its terms, quoting the most important passages in full. The letter began by referring to the procedural history of the complaint, including the earlier judicial review and the respondents' review of their earlier decision, and set out the test applied to time bar, which is quoted at paragraph [2] above. It then reviewed the documentation that had no been made available to the respondents, and continued by referring to advice that has been given in relation to a professional negligence claim on 11 February 2003. On that claim, an opinion had been instructed from Mr Michael Simpson of Tods Murray in October 2005. MacRoberts' letter of instruction to Mr Simpson had asked "whether, having concerns or suspicions that the interest claim was not protected, [X] were under a duty to communicate those concerns or suspicions to Mr McCrindle". Mr Simpson's initial response had stated that at any point at which a conflict of interest is detected that should be communicated to the client, and had referred specifically to the Code of Conduct for Scottish Solicitors. Mr Simpson's final opinion also referred to solicitors who acted in conflict-of-interest situations.

[12] The responders' decision letter continued by acknowledging that Mr Simpson in his initial response had stated that he would require to give consideration to the contents of X's files, and that those did not become available until later. The letter also acknowledged that Mr Simpson had only been instructed to provide an opinion in relation to a professional negligence claim. It continued

"However, I consider it is clear that the question of the solicitors' conduct had, as a matter of fact, been raised by October 2005, at latest, and at that point the relevant section of the Code of Conduct is brought to your client's express attention.

"It is clear that a professional negligence claim has different requirements from that of a complaint of professional misconduct. I do not consider, however, that it can be said that a complaint of professional misconduct was not reasonably to have been considered by the complainer and its agents at the time their expert drew their particular attention to the question of a potential breach of the Code of Conduct in 2005. The Code of Conduct for Scottish Solicitors related specifically and expressly to the professional duties of a solicitor, and I would suggest that Mr Simpson's express reference thereto at the very least shows that Mr Simpson considered there were issues of potential breaches of same on the part of the solicitors at Messrs [X], quite separately from any consideration of the question of professional negligence, which could or should be regarded by your client as improper".

The important matter that arises from this part of the respondents' decision letter is that reliance was placed on the advice given by Mr Simpson in 2005 and 2006. I return to this matter below at paragraph [22].

[13] The letter then deals with the suggestion that no complaint of professional misconduct had been raised in 2005 because neither MacRoberts nor the petitioners felt that there was sufficient evidence to support such an allegation. The response to that is that the respondents' complaints process does not require comprehensive evidence to support such allegations at the time when the complaint is raised; to do so could place a barrier on complaints and ultimately result in an ineffective regulatory regime. Complaints were routinely admitted where it could be demonstrated that there were prima facie grounds for a complaint of professional misconduct. Further evidence was not required at the outset, and in most cases evidence came to light upon examination of the solicitors' files during the complaints investigation; the respondents had power to compel the delivery of such files. The point made here is that the respondents' procedures are essentially inquisitorial, and relatively little is needed to trigger them; all that is required is a prima facie ground for complaint.

[14] Further reference was then made to the correspondence with Mr Simpson in October 2005, where conflict of interest was referred to. The respondents' letter then considered two documents prepared by Mr McCrindle: a report dated 5 September 2005 entitled "Report by W R McCrindle on the correspondence that proves [X] were aware of their failure to protect my interest"; and an executive summary prepared by Mr McCrindle on the issue of interest; this had been supplied in duplicate, and the copies bore the dates 1 September 2005 and 14 March 2006 respectively. A number of passages from these documents were cited in support of the proposition that Mr McCrindle was aware of the full circumstances by September 2005. These appear to me to be of some importance, and I will accordingly quote the most important passages. First, in the report dated 5 September 2005, the respondents' letter states:

"This document notes, variously, in your client's own words:-

...

·    at paragraph at paragraph 6.0 'I am now convinced that at this point [13 May 1999] both [a named individual] and [A] must have known I had been let down and my interest claim was deeply flawed at best or time barred at worst. Yet they decided not to advise me.'

...

·    at paragraph 14.0 'Everyone at the Hearing [on 8 October 2001] -other than the Arbiter, myself [and two other named individuals] - knew the Interest was dead and buried. Yet we continued with the black farce, they all knew but I did not.'

·    At paragraph 15.0 'Can anyone doubt that by this time [2 November 2001] [A] knew the game was up but continued to let the black farce be played out. The question is, did she tell her superiors and did they also elect to stay silent? The reason I believe [A] must have told her partners was the damage was done before she took over.'

...

·    at paragraph 32.0 'By this time Interest must have become a nasty word to be avoided at all costs. Their deception, my costs."

In relation to the executive summary dated 1 September 2005 and 14 March 2006, the respondents' letter states:

"This also acts to demonstrate that Mr McCrindle was aware of the circumstances from which his complaint stems in excess of two years prior to raising his complaint with the Society. Again, using your client's own words:-

·    at the preamble, (c) 'Their failure to explain the law... was, with hindsight, clearly intentional to keep their client ignorant as to his potential claim against them'.

·    At paragraph 95, 'I am now entirely satisfied that on or around this time [22 September 2000] [A] was aware of the situation relative to the interest issue, assuming of course that she was not previously aware of the position'.

·    At paragraph 120, 'In retrospect it is clear that [A] was [in March 2002] removing all reference to the issue as she was well aware of the rationale behind [Haden Young's solicitors'] refusal to agree and sign-up a Deed of Submission'."

The last reference is to an allegation that A had requested Mr McCrindle to remove correspondence relating to a deed of submission from certain files.

[15] The respondents' decision letter continued

"Each of these assertions by Mr McCrindle clearly exhibit that he, as Managing Director of the company, was aware of the circumstances about which the company wishes to complain, at the latest, at the date of the report, namely 5 September 2005, standing that the Executive Summary is referred to in the report....

"I would respectfully suggest that the language employed by Mr McCrindle in the Executive Summary dated 1 September 2005 and the Report of 5 September 2005 exhibits not only an awareness that there was a question of whether the solicitors had been negligent in terms of the inclusion or otherwise of the claim for interest, but also a clear awareness on his part that the solicitors had potentially been acting in a position of conflict as between their own interests (on the basis that your client perceived that the solicitors must have recognized that they had omitted the interest claim) and those of your client, contrary to their duty in terms of the Code of Conduct, and indeed the Solicitors (Scotland) Practice Rules 1986. Your client himself uses terms such as 'black farce' and 'deception' to describe the solicitors' actions, the significance of which, in terms of solicitors' professional conduct, could not be clearer".

The letter continued by stating that the evidence discovered following the release of files in December 2006, in particular the e-mail and memorandum referred to in paragraph [5] above, did not impact in any way upon the point at which the petitioners became aware that there was a question as to whether X had acted in a position of conflict of interest. The issue regarding such conflict had been known in advance of those disclosures.

[16] The last point is concerned with the first ground of complaint raised by the petitioners, the failure to alert them to the existence of a conflict of interest. The letter then made specific reference to the second ground of complaint, the allegation of an attempt to mislead MacRoberts in the correspondence referred to in paragraphs [6]-[9] above. On this, the letter stated

"For the avoidance of any possible doubt, I consider that any potential conduct complaint which your client might have in respect of the allegation raised at point 2 of your letter of 23 February 2011 is also time barred from admission to the Society's investigation process. From the correspondence which has been provided, I note your firm queried [X's] position in relation to interest from the date of your first instructions, including your firm's faxes of 23 May 2002 and 17 June 2002. I note you also instructed senior counsel to provide an opinion on this matter and the opinion ... is dated 16 January 2003. Following the provision of this opinion it is clear that your client was in a position to assess the responses which had previously been provided by the solicitors. If your client was of the opinion that it had been misled by X in the context of those responses then this complaint should have been brought to the Society's attention within time".

The opening words of this paragraph seem to indicate that the discussion that preceded it was regarded as relevant to the second ground of complaint as well as the first. The specific point made in the paragraph is that the question of whether there was a valid claim for retrospective interest had been raised as soon as MacRoberts were instructed, in particular in the faxes of 23 May and 17 June 2002; those are the documents considered at paragraphs [6] and [8] above. Those faxes asked specific questions about the right to retrospective interest. Nevertheless, the fact that both the petitioners and MacRoberts were aware that there was a problem regarding retrospective interest does not appear to be sufficient to found a complaint of professional misconduct on the second ground; that ground is based on an attempt to mislead MacRoberts, and that requires knowledge on the part of the writer of the faxes. I now propose to turn to the analysis of the second ground of complaint.

The petitioners' second ground of complaint

[17] The second ground of complaint is, in summary, that X attempted to mislead MacRoberts when asked questions about retrospective interest. The basis for both grounds of complaint is set out at some length in a letter written by MacRoberts to the respondents' Regulation Department on 23 February 2011. Before dealing with the second ground, the letter makes the point (at page 4) that professional negligence and professional misconduct are two quite distinct matters. Evidence of professional negligence had been available at an early stage, but that had no bearing on professional misconduct. In relation to the position in early 2003, it was stated, quoting from a letter written to Mr McCrindle in 2008:

"At that juncture however there was not a shred of evidence to suggest that the problems that flowed from [the petitioners'] interest position not being protected did so from anything other than either ignorance or an erroneous understanding of the law on the part of [X]. It was only on 21^st December 2006 when the [e-mail and memorandum dated 10 and 12 November 2001 referred to in paragraph [5]] were produced that it became apparent for the first time that X fully understood the law at least as far back as the autumn of 2000. The memo also revealed that not only did they fail to provide you with the correct advice (despite being asked), but moreover they continued to act on your behalf notwithstanding a clear conflict of interest. Prior to receipt of the... memo whilst we were both alive to the possibility that [X] did in fact know the law it would have potentially been defamatory for you to accuse them of anything beyond straightforward professional negligence".

[18] In the same letter the second ground of complaint was set out at some length (at pages 5-6). Reference was made to the faxes that passed in May and June 2002. The letter continued:

"On a charitable interpretation, as of June 2002, the [X] fax/letter demonstrated a misunderstanding of the applicable law, however, that interpretation cannot be given to the [X] fax/letter when one considers certain further materials which first came into McCrindle's possession in November 2007"

Reference was then made to the e-mail of 10 November 2001, and in particular the reference to the lack of a power to award retrospective interest. The letter then stated:

"The question posed in our fax of 23^rd of May 2002 was not answered by [X]. It is clear from their own internal communications that the answer to the question posed by this firm on the arbiter's power to award retrospective interest was well known to them, at least 6 months before the question was asked.

...

The materials above strongly suggest that [X] attempted to mislead McCrindles new solicitors when asked questions by them relative to the question of interest. They appear to have deliberately avoided answering a question on two occasions, a question which was of crucial importance to attempts to resolve an ongoing arbitration.

No doubt the Society will ask [X] for an explanation. What is clear is that McCrindles could not have known about the facts which support the second complaint until they received the [X] files in November 2007".

It is accordingly clear that the fundamental contention made on the petitioners' behalf is that the e-mail and memorandum of 10 and 12 November 2001 were critical to the complaint of professional misconduct on the second ground.

[19] The second ground of complaint is distinct from the first. The first ground was essentially based on conflict of interest: X were aware of facts that suggested a professional failure on their part and attempted to conceal those facts from their clients. The second ground, by contrast, is not based on conflict of interest per se, but rather on a failure to give a full answer to specific questions when the full answer was known. That amounts to saying that there was a deliberate failure to give a full answer, or at least a failure to state the full facts known to the writer of the crucial letters of 23 May and 17 June 2002. The evidence for the deliberate or knowing element of the failure to give a full answer was said to lie in the e-mail and memorandum of 10 and 12 November 2001. Nevertheless, the two grounds of complaint do have one important element in common: an allegation X's actings were deliberate.

The petitioners' challenge to the respondents' decision on the second ground

[20] The petitioners challenge the respondents' handling of the second ground of complaint on three distinct bases, although the first and second of these proceed to some extent in parallel. First, it is said that the respondents' decision was ultra vires and wrong in law. The respondents, it is said, failed to have regard to all of the information that had been placed before them and to consider that information adequately. In particular, they failed to have regard to the importance of the e-mail of 10 November 2001; that was the document that allowed the petitioners to allege a deliberate attempt to mislead MacRoberts rather than mere ignorance of the law. The respondents had relied on the correspondence with MacRoberts in May and June 2002 and on the instruction of senior counsel for an opinion in 2003, but that was concerned with concealment, the first head of complaint, rather than a deliberate attempt to mislead.

[21] The petitioners also aver that the respondents acted irrationally in deciding that the second head of complaint was time-barred. The irrationality is said to have consisted of, first, the respondents' disregarding the information provided to them by the petitioners and, secondly, the respondents' assessing the petitioners' first and second heads of complaint in the same way for the purposes of time bar. Finally, it is averred that the respondents failed to follow proper procedures, in that they did not consider the petitioners' second head of complaint separately but rather treated it as a subset of the first head of complaint. That was said to amount to an error, especially as the reasons provided in relation to the second head was substantially the same as those provided in relation to the first head. At this point I should make it clear that in the discussion that follows I take the petitioners' averments pro veritate; moreover, I am considering only the question of time bar. Nothing that I say should be taken as an opinion on the merits of the case or on any question of professional negligence that may arise.

Adequacy of the respondents' reasoning

[22] Before I consider the respondents' detailed reasoning, I should draw attention to two important features of the present case. In the first place, because the proceedings are for judicial review, the question that must be addressed is not whether the respondents' complaints investigator was correct in the decision that she reached on time bar but whether that decision was one that was properly open to her. If there is an error of law, including a failure to take account of a material consideration, then review is clearly competent. Likewise, a decision is open to review if it is irrational or unreasonable in the sense that no reasonable person in the position of the decision maker could have reached it. So far as the facts are concerned, however, the court's function is confined to ensuring that there is a proper factual basis on which the decision maker could arrive at the conclusion that is challenged. In the second place, it appears to me that there is not a hard and fast dividing line between the petitioners' first and second grounds of complaint. Counsel for the respondents suggested that the two complaints covered a "spectrum" of issues, ranging from a failure to state candidly the position relating to interest to deliberate steps to mislead the petitioners or MacRoberts; the first of these elided into the second. In my opinion this analysis is correct. It has the result that there is no clear dividing line between the evidence that is relevant to the two complaints; the lack of candour and concealment referred to in the first head of complaint are plainly of importance in considering the attempt to mislead that is referred to in the second head of complaint. In this connection it is significant that the first head of complaint relates to deliberate concealment. That in itself contains an important element of intention to mislead. Consequently the second head of complaint differs from the first only in so far as it is said that misleading statements were made; the state of mind of the person making the statements does not differ greatly in respect of the two separate complaints.

[23] In the light of these considerations, I am of opinion that the challenge to the respondents' decision must fail. The decision maker, the respondents' complaints investigator, took account of all the relevant considerations that were put before her, including evidence about A's state of knowledge in 2002 and the petitioners' understanding of that evidence in 2005. The material that she relied on is set out in the decision letter: in particular she refers to Mr McCrindle's executive summary and report prepared in September 2005 and the communications with Mr Simpson in October 2005. On the basis of that material, I am of opinion that she was entitled to reach the decision that the second complaint was time-barred. Furthermore, I am of opinion that the complaints investigator's treatment of the second head of complaint was entirely proper. Her review of the evidence was relevant to both heads, but that reflected the close connection between them. The material to which she refers in the decision letter was sufficient for her to hold that time bar operated in respect of the second head of complaint as well as the first. Moreover, for reasons for rejecting the second head are stated with sufficient clarity. Finally, I consider that there is no basis for any challenge founded on irrationality.

[24] The passages in the respondents' letter that set out their grounds for rejecting the complaint are summarized in paragraphs [11]-[16] above. In the initial passage (paragraphs [11] and [12]) detailed reference is made to the instructions sent to Mr Simpson and his response. Although these are not set out in full, the detailed terms, of both the instructions and the advice received, appear to me to be important. The instruction letter, dated 13 October 2005, stated:

"Mr McCrindle and Richard Barrie have always been keen to make averments as to [X's] state of knowledge as it has been felt that without this allegation of deliberate concealment, significant wasted costs may not be recoverable as they will be viewed as being too remote".

That statement indicates very clearly that both Mr McCrindle and his solicitors had the possibility of deliberate concealment clearly in mind in October 2005. The instructions to Mr Simpson, contained in the following paragraph of the letter, are quoted in the respondents' decision letter, and related particularly to "whether, having concerns or suspicions that the interest claim was not protected, [X] were under a duty to communicate those concerns or suspicions to Mr McCrindle". This request was concerned primarily with the question of professional negligence, and indeed the letter made reference to an amended draft summons in an action for professional negligence, but in his initial response, sent on 19 October 2005 Mr Simpson referred also to the question of professional misconduct. On this, he stated:

"The question then arises as to whether [X]... can all say that they never had any 'concerns or suspicions' about the matter and all proceeded in blissful ignorance of the true position until highlighted by Mr Barrie.

We move into the realms of supposition here but again looking at the history of events, I have difficulty seeing how that could be the case and I shall not be surprised if [counsel] did not pick up on the point hence the somewhat convoluted attempts to bring the question of interest back into the Arbitration.

The answer to that question will not be found until proper consideration could be given to [X's] files".

[25] Notwithstanding the reference to obtaining files, it is quite clear from these passages that Mr Simpson considered that it was very likely that X did have concerns or suspicions about the true position in relation to interest. He reiterated this point in his final opinion, dated 1 September 2006, and indicated that in that event the matter should have been investigated and, if the concern or suspicion still lingered, should have been reported to Mr McCrindle. That advice related to the question of conflict of interest, but it is apparent from both MacRoberts' instruction letter and Mr Simpson's response, in particular his initial response, that the possibility of deliberate concealment was under active consideration. If concealment was deliberate, that is plainly relevant to the second ground of complaint.

[26] The respondents letter then considered the adequacy of the evidence of professional misconduct that existed in 2005 (paragraph [13] above). It is stated that the respondents' complaints procedure did not require comprehensive evidence to support allegations; it was sufficient that prima facie grounds for a complaint existed. That matter is clearly relevant to both of the petitioners' grounds of complaint. Nevertheless, by itself it does not amount to consideration of the second ground, but is rather a factor that may properly be taken into consideration in examining the adequacy of the evidence relative to that ground. This is of obvious relevance to the issue of deliberate concealment, raised in the instructions to Mr Simpson and his response. The letter then made reference to the two documents prepared by Mr McCrindle in September 2005 and March 2006 (paragraph [14] above). These are important, and are relied on by the respondents as indicating that by that time Mr McCrindle had considered A's state of knowledge in May and June 2002 and had concluded that she must have known that the petitioners had no claim to retrospective interest.

[27] In my opinion the respondents were clearly entitled to rely on those documents as demonstrating that by September 2005 Mr McCrindle was well aware that he was in a position to make a complaint of professional misconduct on the ground of an attempt to mislead. The report by Mr McCrindle dated 5 September 2005 specifically indicated that he believed that A knew, as early as 1999 and on two different dates in 2001, that the petitioners had no claim for interest. If that is so, by the time that A composed the two letters of 24 May 2002 and 21 June 2002 she must have known that there was no claim for interest, and thus it was possible that she intended to mislead MacRoberts. Likewise, the executive summary dated 1 September 2005 and 14 March 2006 contains clear statements to similar effect. The respondents' letter refers to paragraph (c) of the preamble, where it is stated that the failure of A to explain the law was, with hindsight, clearly intentional to keep the client ignorant as to his potential claim against X. The letter also refers to paragraphs 95 and 120. In the first of these paragraphs, Mr McCrindle states that he was now "entirely satisfied" that by September 2000 A was aware of the situation relative to interest. In paragraph 120 reference is made to a request to remove correspondence relating to the deed of submission from two files. Here again, it is stated that A was "well aware" of why the solicitors for Haden Young were refusing to agree a deed of submission. The latter point is developed further in paragraphs 121, 128, 130 and 132 of the executive summary. Paragraphs 130 and 132 make specific reference to X's fax of 24 May 2002. Although these paragraphs are not quoted in the respondents' letter, they were part of the material placed before the respondents. The effect of these paragraphs is in my opinion to provide a strong factual basis for the conclusion that by September 2005 at the latest Mr McCrindle believed that there had been deliberate deception on the part of X, and A in particular. At paragraph 132 Mr McCrindle writes that in A's letter to MacRoberts dated 24 May 2002 she neglected to state that she and others "should have been, or were aware our right was time-barred due to their collective incompetence". Later in the same paragraph, Mr McCrindle states that A "confirms that I do have a claim for Interest but even when she knows the game is up she still tries to prevaricate".

[28] If Mr McCrindle's analysis is correct, the answers given in the two letters of 24 May and 21 June must have been written by A in full knowledge that there was no valid claim for retrospective interest. In that event, the failure to give a full answer in those two letters was either deliberate or involved a failure to state the full facts known to A. That is the critical element in the petitioners' second ground of complaint. It follows that, by September 2005, the petitioners were aware of everything that they required to make the complaint. Furthermore, the clear views expressed by Mr McCrindle in the executive summary and report of 2005 are supported by the terms of the letter written to Mr Simpson on 13 October 2005 and his response to that letter.

[29] If that is so, the first ground of challenge advanced by the petitioners must in my opinion fail. The petitioners contend that the respondents' decision was ultra vires and wrong in law because the complaints investigator failed to have regard to all of the information placed before her, in particular the e-mail of 10 November 2001, and to understand the significance of that information. The critical importance of that e-mail is said to be that it indicated that A, in particular, was well aware prior to the correspondence of May and June 2002 that the petitioners did not have a valid claim for retrospective interest, but deliberately disregarded that knowledge in an attempt to mislead MacRoberts. The documents discussed above at paragraph [25] indicate, however, that Mr McCrindle thought by September 2005 that A had such knowledge. That means that the recovery of the e-mail of 10 November 2001 was not in any way critical to the second ground of complaint. Perhaps the strongest point made for the petitioners in this connection is that, until the e-mail of 10 November 2001 was available, it would not have been proper for them to allege an attempt to mislead; indeed, any such suggestion was potentially defamatory. This argument is put forward in MacRoberts' letter to the respondents dated 23 November 2011, in the passage quoted at paragraph [17] above. The difficulty with this argument is that it is apparent from Mr McCrindle's report and executive summary produced in September 2005 that he believed that A, in particular, had been trying to mislead him. It was, in addition, plain from A's letters of 24 May and 21 June 2002 that she was being evasive, failing to answer the questions put to her. This would be quite obvious to any competent lawyer with knowledge of building arbitrations. Against that background I do not think that there would have been any difficulty in framing a complaint along the lines of the second ground of complaint that was ultimately made to the respondents. That could be done by producing the letters of May and June 2002 and the background documentation and stating the inferences that Mr McCrindle was prepared to draw about A's state of knowledge; these could easily be framed using a formula such as "In these circumstances the inference may be drawn that...". That would not be defamatory, and even if it were it would plainly attract the defence of qualified privilege. I am accordingly of opinion that the respondents were quite entitled to conclude that a complaint based on the second ground could have been made as early as 2005, outwith the two year time limit.

[30] The second ground on which the petitioners challenge the respondents' decision is irrationality. Two separate arguments are advanced in this connection. First, it is said that the respondents disregarded information provided to them, in particular as to the significance of the e-mail of 10 November 2001. This argument must in my opinion be rejected, for essentially the same reasons as the challenge based on error of law. In my opinion the respondents took proper account of the information before them, and were entitled to conclude that by September 2005 at the latest Mr McCrindle had a basis for making a complaint on the basis of a deliberate attempt to mislead. Secondly, it is said that the respondents acted irrationally in assessing the two complaints in the same way. The latter point is further advanced in the petitioners' third ground of challenge to the respondents' decision. This is that the respondents failed to consider the second head of complaint separately, but rather treated it as a subset of the first head, whereas it was distinct and required to be addressed as such. The respondents were thereby in error, and they had in addition failed to provide adequate reasons for their conclusion that the second head was time-barred.

[31] The fundamental contention for the petitioners on these matters is that the second head of complaint was not treated separately from the first, and was therefore not properly considered. In my opinion this ground of challenge must fail. In the first place, as I have already indicated, the two heads of complaint were not distinct, but rather related to different positions on a spectrum running from deliberate concealment to giving deliberately misleading answers. In these circumstances, I think it clear that the evidence narrated in the respondents' decision letter was for the most part relevant to both grounds of complaint. The question of conflict of interest was itself important in relation to the second ground of complaint, because it provided a motive for any attempt to mislead. Moreover, the essence of the first ground of complaint was the deliberate concealment from the petitioners of the lack of any legal basis for a claim for retrospective interest. The essence of the second ground of complaint was the deliberate making of evasive and potentially misleading statements in response to questions about the legal basis for a claim for retrospective interest. The connection between the two is thus very clear, and it must be expected that much of the evidence relating to the first ground is also relevant to the second ground. The critical difference between the two lies in two factors: the making of specific statements in response to MacRoberts' letters and knowledge that these statements were misleading, or at least recklessness as to whether they might mislead. As to the first of these, the letters of 23 May and 17 June 2002 were both available, and were referred to by the respondents in their decision letter, in the passage set out in paragraph [16] above. As to A's state of knowledge when she drafted those letters, Mr McCrindle was able to express a view in his executive summary and report of September 2005, and in the instructions to Mr Simpson and his response broadly similar views were expressed in October 2005. All of these documents were before the respondents' complaints investigator, and all are referred to in their decision letter. In particular, significant passages from Mr McCrindle's report and executive summary are quoted in the letter. These are followed by the passage quoted at paragraph [15] above, where reference is made to Mr McCrindle's use of the word "deception" to describe A's actions and it is stated that the significance of such an expression, in terms of a solicitor's professional conduct, could not be clearer. That material was plainly relevant to the second ground of complaint as well as the first; the first ground relates to deliberate concealment and the second to the deliberate giving of misleading answers. It was on the basis of that material that the complaints investigator concluded that Mr McCrindle was aware in 2005 of the necessary mental element on A's part in relation to both heads of complaint. As I have indicated, in my opinion she was entitled to do so.

[32] The respondents' decision letter made express reference to the second ground of complaint in the paragraph that is quoted above at paragraph [16]. As I have already indicated, the opening sentence of the paragraph appears to assume that the preceding discussion was relevant to the second ground of complaint. That is clearly borne out by the passages referring to Mr McCrindle's executive summary and report of September 2005, and also the instructions to Mr Simpson in October 2005 and his response. Reference is made to the correspondence that gave rise to the second ground of complaint. It is then noted that senior counsel was instructed to provide an opinion on the question of retrospective interest and that an opinion was obtained dated 16 January 2003. Following that, the respondents' decision letter notes, it was clear that the petitioners were in a position to assess the responses which had previously been provided by X. That must be correct; it is clear that the petitioners' right to retrospective interest was considered in detail at this time. Following that, of course, there remained the question of whether A, in particular, was aware that there was no right to retrospective interest when she wrote the letters of 23 May and 17 June 2002. It is not clear from the decision letter whether Mr McCrindle or those advising him had reached a conclusion on this matter in 2002. In September 2005, however, Mr McCrindle prepared documents which stated in clear terms that he had been deceived by A and that by September 2000 (paragraph 95 of the executive summary) A was aware of the interest situation. Those were referred to expressly earlier in the decision letter. In the light of that material, as I have indicated, I am of opinion that the respondents' complaints investigator was entitled to conclude that the second ground of complaint was also subject to time bar.

[33] Counsel for the respondents accepted that the paragraph quoted at paragraph [16] was not well drafted, but he submitted that its meaning was clear, and certainly sufficiently clear to indicate to the petitioners and their advisers why the decision had been reached. On this matter reference was made to a number of decided cases: South Bucks District Council v Porter (No 2), [2004] 1 WLR 1953; Uprichard v Scottish Ministers, 2012 SC 172; and, in relation to disciplinary proceedings, Kelly v Shetland Health Board 2009 SC 248; and Murnin v Scottish Legal Complaints Commission, [2012] CSIH 34. The basic rule that emerges from these cases is that the reasons for a decision must be intelligible and adequate, and must enable a reader to understand why the matter was decided as it was and the conclusions reached on the principal issues in controversy. In my opinion that test is satisfied in the present case. I agree that the paragraph in question was not well drafted, but the conclusion seems sufficiently clear. The second ground of complaint was rejected because, more than two years before it was made, the petitioner indicated that he thought that A had been aware in May and June 2002 that the petitioners had no right to retrospective interest and that she had accordingly been guilty of deception in the letters of 23 May and 17 June. The documents on which that conclusion was based are discussed earlier in the decision letter. Those documents are relevant to whether both grounds of complaint were time barred, and in my opinion they provide sufficient material for the respondents to conclude as they did.

Conclusion

[34] For the foregoing reasons I am of opinion that the petitioners' challenge to the respondents' decision on the question of time bar must fail. I will accordingly refuse the prayer of the petition. In conclusion, I must thank counsel on both sides for their careful submissions in a matter that is clearly of great concern to all of those involved.