EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2014] CSIH 50
Lord Eassie Lady Paton Lord Bracadale	PD1620/10   OPINION OF THE COURT   delivered by LORD EASSIE   in the reclaiming motion   in the cause   ANTHONY PHEE Pursuer and respondent;   against   (1) JAMES GORDON; and (2) NIDDRY CASTLE GOLF CLUB Defenders and reclaimers:   _______________

 

Pursuer and respondent:  Heaney;  Lawford Kidd

Defenders and reclaimers:  Murphy QC;  BLM Solicitors;  Simpson & Marwick WS

 

3 June 2014

 

[1]        Following the hearing of a proof before answer in this action of reparation for personal injury, the Lord Ordinary advised the case on 4 November 2011[1].  He found both of the defenders liable to the pursuer and apportioned the liability of the defenders inter se in the proportions of 70% to the first defender and 30% to the second defenders.  On 16 November 2011 he pronounced an interlocutor which inter alia decerned against the defenders jointly and severally for payment to the pursuer of an agreed sum of damages and which found the defenders liable to contribute to the principal sum interest and expenses in the proportions which we have just mentioned.  He also pronounced two interlocutors decerning against the respective defenders for payment to the pursuer of the expenses as taxed by the Auditor of Court.

[2]        Both defenders reclaimed.  Put briefly, both challenged the Lord Ordinary’s findings that there had been negligence on their respective parts and that there had been no contributory negligence on the part of the pursuer; and the first defender challenged the apportionment of responsibility among the defenders inter se.  In the event, the Extra Division which heard the reclaiming motion refused the reclaiming motion in so far as challenging the defenders’ joint and several liability to the pursuer and the absence of a finding of contributory negligence on the pursuer’s part.  But the Division upheld[2] the first defender’s challenge to the apportionment of liability among the defenders to the extent that it reduced the liability of the first defender to 20% of the joint and several liability to the pursuer and increased that of the second defender to 80%.  The interlocutor pronounced on 14 March 2013 by the Division reads:

“The Lords, having resumed consideration of the defenders’ respective motions for review of the Lord Ordinary’s interlocutor of 16 November 2011…allow the first defender’s reclaiming motion to the extent of apportioning the agreed damages in the proportions of 20% on the first defender and 80% on the second defenders, and quoad ultra, refuse the reclaiming motions, adhere to the said interlocutor and continue the cause on the question of expenses.”

 

[3]        Thereafter, and without any motion having been made in the Inner House for the expenses of the reclaiming motion, the second defenders initiated appeal proceedings in the Supreme Court of the United Kingdom which, we were told, were abandoned by the second defenders on 7 June 2013. 

[4]        Following that abandonment, motions for expenses were enrolled by the pursuer and the first defender.  The pursuer sought expenses (seemingly against both defenders) in the Inner House only “in respect that expenses in relation to the Outer House Hearing (sic) were dealt with in [the Lord Ordinary’s] interlocutor of 16 December 2011 (sic)”. The motion enrolled by the pursuer then continued by asking the court “to award interest at the judicial rate on expenses from 16 November 2011 until payment.”  Thereafter the motion sought judicial sanction for an additional fee to the pursuer’s solicitors in terms of Rule of Court 42.14.  The first defender also enrolled a motion seeking expenses from the second defenders in relation to the proceedings both before the Outer House and the Inner House subsequent to the date of a judicial tender, lodged on 23 September 2011, respecting the defenders’ liabilities inter se as respects any award of damages and expenses which might be made to the pursuer.

[5]        Those motions were opposed only to the extent that both defenders opposed the allowance of an additional fee under Rule 42.14;  and, importantly for present purposes, the pursuer’s motion “insofar as it seeks an award of interest at the judicial rate on expenses from 16 November 2011 until payment”.

[6]        The motions were considered by the court on 20 November 2013 when the court dealt with, and granted, (a) the motions for expenses so far as not opposed and (b) the opposed motion for an additional fee.  However, because of the need to proceed with the substantive business set down for the summar roll on that date, the disputed branch of the pursuer’s motion seeking interest on expenses required to be deferred to a later date.  On 20 November 2013 the court decerned against the first and second defenders jointly and severally for payment to the pursuers of the expenses for which the defenders had been found liable by the interlocutor of even date as the same shall be taxed by the Auditor of Court.  

[7]        We have now heard the discussion on the remaining branch of the pursuer’s motion for expenses, namely that concerned with the pursuer’s claim to interest on the taxed expenses.  Counsel for the pursuer tendered a written note of submissions in which he refined the terms of that limb of the motion as enrolled as now being a motion for:

“(1) an order for payment by the Defenders to the Pursuer of the expenses incurred in the Inner House with interest at 8% per annum from March 18, 2013. 

 

(2) an order for payment by the Defenders to the Pursuer of the expenses incurred in the Outer House together with interest at 8% per annum from November 4, 2011.”

 

It may be noted that, as we have just set out, expenses as such have already been dealt with.  The Lord Ordinary awarded the Outer House expenses to the pursuer in his interlocutor of 16 November 2011 and the Division which heard the reclaiming motion affirmed that aspect of the interlocutor.  The Inner House expenses were awarded on 20 November 2013.  (We also understand the principal sums of expenses recently to have been agreed and paid to the pursuer).  So we treat the refinement as confined solely to the question of the claim for interest, particularly the dates from which the interest sought should run.

[8]        Two comments may be made respecting those dates.  First, in both branches interest is sought for a period before the court, at either first instance or appellate level, had made any finding as to expenses, or any decerniture for payment.  Secondly, in the case of the Inner House expenses, the date of 18 March 2013 was explained by counsel for the pursuer as being the earliest date on which those acting for the pursuer could reasonably have enrolled a motion for expenses following the advising of the case in the Inner House on 14 March 2013.  However, it may be observed that those acting for the pursuer did not do so.

[9]        With that introduction, we turn to the merits of the claim for interest on the expenses in question. Subject to a qualification to which we shall revert, it is the settled practice of this court, and also the sheriff courts, that interest is not allowed on awards of expenses prior to decerniture for their payment.  This, in our view, is consistent with the common law on liability for interest.  The locus classicus of that law is to be found in Carmichael v Caledonian Railway (1870) 8 M (HL) 119 per Lord Westbury at page 131, namely that, apart from contract, a party will only be liable to pay interest on money if the principal sum has been wrongfully withheld and not paid on the day when it ought to have been paid.  The continuing governance of that rule or principle of common law was affirmed by the House of Lords in Wisely v John Fulton (Plumbers) Limited 2000 SC (HL) 95 – see in particular the speech of Lord Hope of Craighead at page 98.

[10]      The common law rule that – apart from contract – it is necessary that the debt be wrongfully withheld embraces the important principle that, in the case of an illiquid or unascertained claim, such as a claim for damages (and thus also expenses of litigation), the party responsible for meeting the claim is entitled to have it ascertained and fixed by a judicial process.  Only when the liability has thus been reduced to a precise figure, and decree for its payment pronounced, can payment be said to be wrongfully withheld.  Accordingly at common law interest on such a claim runs only from the date of decree for payment of the ascertained liability.  The decision in Dalmahoy & Wood v Magistrates of Brechin (1859) 21 D 210, to which we were referred, is consistent with, and illustrative of, that approach. 

[11]      Those common law rules have the consequence that no interest is recoverable on losses, such as past loss of earnings, sustained in the period between the accrual of the cause of action and the ascertainment of the principal amount of those losses and the granting of decree for payment of the damages.  Those consequences led to the intervention by the legislature in the form of the Interest on Damages (Scotland) Act 1958, subsequently amended by the Interest on Damages (Scotland) Act 1971.  However, it is in our view clear that the legislature’s intervention on the common law is confined to giving the court a power to include in its interlocutor awarding damages a sum representing interest in respect of losses, for which damages are being awarded, suffered prior to decree.  The intervention in the rules of the common law does not extend to giving statutory power to award interest on expenses incurred pendent lite. 

[12]      In these circumstances the first branch of the reformulated motion seeking interest on the Inner House expenses prior to the date of decerniture is not consonant with the applicable common law rules on liability for the payment of interest.  We would add that until 1983, the practice of the court in awarding expenses was to remit the account of expenses, when lodged, to the Auditor of Court “to tax and report”.  On receipt of the report the court then decerned for payment of the taxed amount, with interest on that amount from that date.  Since 1983, the requirement of a report from the Auditor no longer applies and the court simply decerns for payment of the expenses as taxed[3].  We understand the practice of the Extractor, once expenses have been taxed, is to grant extract decree for the taxed amount with interest from the date of the Auditor's report.

[13]      Adverting to the second branch of the revised motion which seeks interest on the Outer House expenses from 4 November 2011, it follows that at least as respects the very brief interval between 4 November 2011, when the case was advised by the Lord Ordinary, and the decerniture for expenses by the Lord Ordinary on 16 November 2011, what we have just said also applies.  In practical terms that interval is no doubt de minimis.  However, in our view, this branch of the motion encounters another obstacle in the common law rules respecting wrongful withholding. 

[14]      Again consonantly with the underlying principle that an unascertained liability requires to be judicially ascertained before settlement of that liability may be said to have been wrongfully withheld, the common law rules also hold that such ascertainment is postponed until the final interlocutor in the case.  The right of a party to appeal removes the concept of the withholding being wrongful.  That view of the law, expressed by the Lord President (Dunedin) in Roger v J & P Cochrane & Co 1910 SC 1, was affirmed by the House of Lords in McGovern v James Nimmo & Co Limited 1938 SC (HL) 18 per Lord Atkin at page 29:

“It seems to me perfectly clear, from the judgment of Lord President Dunedin in the case of Roger v J&P Cochrane & Co, which has been cited to us, that it is not the practice of the Court of Session, although they affirm the interlocutor, to award interest on the damages from the time at which the interlocutor was originally pronounced;  and the reasons given are that the unsuccessful party has a right to appeal, and that the delay is what may be called a lawful delay and not one which would normally induce the Court to make the appellant, who objected to the judgment, the interest during the period of delay.  That is what happens in the ordinary case, and for my part I see no reason why this House should not adopt the same the procedure in an ordinary case, nor why it should make a difference when there is a further appeal to the House of Lords…”

 

Consequently, while, as respects their joint and several liability to the pursuer, the defenders’ exercise of their rights of appeal may have been unsuccessful, that does not render failure to pay the Outer House expenses for which payment was decreed by the Lord Ordinary on 16 November 2011 to be a wrongful withholding of payment of those expenses which gives rise to any liability to pay interest on those sums for the interval prior to the final interlocutor of the appellate court. 

[15]      Accordingly, we do not consider that the pursuer’s motion for interest on expenses can be seen as an entitlement to interest allowed by the common law relating to the payment of interest on principal sums.

[16]      Whether in recognition of that position or not, the opening submission of counsel for the pursuer was to the effect that it had been recognised by the court that in exceptional circumstances it might award interest on expenses.  We were referred to the passage at page 505 in Maclaren on Expenses in the Supreme and Sheriff Courts of Scotland (1912).  In that passage the author states that “it is now a settled rule of law that in ordinary circumstances interest can only be charged upon the expenses awarded in the case from the date of the final decree.”  However, Maclaren goes on to note that “in exceptional circumstances interest has been allowed to run upon expenses prior to decree.”  The decisions which Maclaren proceeds to mention largely date from the early 19^th century.  The basis of the early decisions is sometimes obscure.  And the author observes that “in a more recent case”, namely Barclay v Barclay (1850) 22 Jur 354, a distinction began to be drawn between outlays and professional fees.  Those decisions in large measure predate the House of Lords formulation or distillation of the rules on liability for interest expressed in Carmichael v Caledonian Railway Company Limited in terms of wrongful withholding.  That said, Maclaren summarised matters at page 507 of his work as being:

“The foregoing review of the cases shows that the present rule of law is that interest on an account of judicial expenses will only be allowed from the date of decree therefor, except in very special circumstances, and that the latter will only be taken into consideration in dealing with charges for outlay and not with charges for professional work.”

 

Endorsement of that statement was indicated in the Outer House in Philips v Upper Clyde Shipbuilders 1990 SLT 887 but the Lord Ordinary in that case rejected an attempt to innovate on the settled rules of the common law and the practice of the court. 

[17]      The basis upon which the pursuer seeks to bring his motion for interest within the scope of the exception envisaged in Maclaren’s conclusion is set out in paragraph 20 of the written note of submissions which counsel helpfully tendered to the court.  The factors listed are these:

“(1)      It [the present litigation] was one of the few cases that is not settled and runs to proof. 

 

(2)        There are relatively large sums involved in terms of expenses.

 

(3)        That the expectation in terms of paying interest has changed in the wake of the Damages (Scotland) Act 1958.

 

(4)        That the agent funded the litigation, effectively making a loan to the client. 

 

(5)        The long period of time over which the litigation has continued. 

 

(6)        That time was extended by a reclaiming motion of a kind that generally has poor prospects of success.

 

(7)        That the time was also extended by an appeal to the Supreme Court that was later abandoned.”

 

[18]      In our opinion those factors do not come anywhere near the nature of exceptional circumstances of the kind illustrated by the cases to which Maclaren refers.  The first factor is in our view plainly irrelevant.  While the amount of the expenses is no doubt substantial, it cannot be described as extraordinary or unusual.  Nor was it suggested that there was any unusual and substantial outlay which the pursuer required to fund. Indeed, notwithstanding Maclaren’s conclusion that the very special circumstances were focussed on an outlay or outlays, the pursuer does not direct the claim to interest to any particular outlay, let alone an outlay attended with particular, exceptional circumstances.  The third factor is not relevant for the reasons which we have already explained.  As respects the remaining factors we make the following comments.

[19]      First, while the reclaiming motion – in so far as directed to the defenders’ liability to the pursuer – was not successful, it cannot be described as frivolous or vexatious.  Indeed, it was not suggested by counsel for the pursuer that it could be so described.  Essentially, he contended that the reclaiming motion was “not attended by great prospects of success”.  That is arguably an over pessimistic expression of those prospects.  As Mr Murphy, who appeared on behalf of both defending parties, pointed out, in paragraph 43 in fine of its opinion the Division which heard the reclaiming motion observed:

“As we have said, we are of the view that the Lord Ordinary was entitled to find fault on [the first defender’s] part.  But we consider that some might judge his behaviour as not amounting to negligence when the players were at a distance at which most could be expected to respond appropriately and in a timely manner to a warning shout.”

 

Correspondingly, we do not consider that it could be said to be frivolous or vexatious to have initiated an appeal to the Supreme Court of the United Kingdom.  But in any event, the lesser criterion of being in a class in which prospects of success on appeal are “generally poor”, plainly does not constitute an exceptional circumstance.

[20]      Secondly, the motion seeks payment of interest to the pursuer, which postulates that the pursuer himself has been out of pocket in the total amount of the respective expenses since the respective dates from which the interest is sought.  But, since we were told that the pursuer’s solicitors accepted instructions on a speculative, or “no win no fee”, basis which included the solicitors’ funding outlays, the pursuer is not out of pocket.  We were not told whether counsel for the pursuer also acted on a speculative basis but in any event it is not said that the fees to counsel were paid as and when they were incurred.  It is therefore not, in our view, correct to say that the solicitors made a loan to the client resulting in his incurring liability for interest.  There was no contract of loan.  Those acting for the pursuer chose to act speculatively on the basis that, if the pursuer were successful, they would obtain such expenses as were normally recoverable from the defending party.  The decision of the pursuer’s solicitors to act on that basis cannot, in our view, constitute an exceptional circumstance justifying the imposition of an exceptional, additional liability on the defending party. But even if the pursuer had himself funded the action, in the absence of some highly exceptional circumstances respecting an outlay, for which a limited recovery of interest might be granted, he would yet be unable to recover interest.

[21]      For all these reasons, we consider that the motion seeking interest on the expenses prior to the date of the decerniture for their payment must be refused.

[22]      By way of a coda we would observe that, as the court noted at paragraph [25] of its opinion in Farstad Supply AS v Enviroco [2013] CSIH 9; 2013 SC 302,  comprehensive proposals for the reform of the law on payment of interest were  put forward comparatively recently by the Scottish Law Commission.  They were the subject of a subsequent consultative bill. But, in the event, the Scottish Government resolved to take the reform proposals no further.  The courts must continue to apply the existing law.