Scottish Court of Session Decisions

SECOND DIVISION, INNER HOUSE, COURT OF SESSION

[2014] CSIH 92

P1801/05

 

Lord Justice Clerk

Lord Menzies

Lord Brodie

OPINION OF THE COURT

delivered by LORD CARLOWAY, the LORD JUSTICE CLERK

in the reclaiming motion

in the petition of

THE SCOTTISH MINISTERS

Petitioners and Respondents;

against

RUSSELL STIRTON

First Respondent and Reclaimer;

and

ALEXANDER ANDERSON’S EXECUTOR

Third Respondent and Reclaimer:

for a Recovery Order in terms of Section 266 of the Proceeds of Crime Act 2002

 

Act:  Crawford QC, Heaney; the Crown Agent (Civil Recovery Unit) (Petitioners and Respondents)

Alt:  Weir QC, CC Wilson; The Glasgow Law Practice (First Respondent and Reclaimer)

Alt: MacNeill QC, SM McCall; Ian Moir & Co (Third Respondent and Reclaimer)

7 October 2014

Introduction
[1]        These proceedings concern the civil recovery of the proceeds of unlawful conduct, notably money laundering, extortion and mortgage fraud, in terms of section 266 of the Proceeds of Crime Act 2002.  On 14 February 2012, a recovery order was granted against the reclaimers.  This included a property owned by the first reclaimer at 3 Kelvin Road, Milngavie.  The order was granted following 130 days of proof, between 2009 and 2011, and an Opinion of the Lord Ordinary extending to some 300 pages ([2012] CSOH 15).  The Lord Ordinary dealt with expenses in a separate Opinion ([2012] CSOH 166).

[2]        The reclaiming motion was heard in two tranches.  At a Summar Roll hearing on 2 July 2013, the reclaimers made submissions restricted to those grounds of appeal (grounds 1 to 5, 6(v) and 14 for the first reclaimer; grounds 1 to 6 for the third reclaimer) that could be advanced without recourse to any transcription of the evidence.  The court having rejected those grounds ([2013] CSIH 81), the remaining grounds arose for consideration (ibid, para 35). 

[3]        At a By Order hearing on 23 September 2014, the reclaimers abandoned certain of the remaining grounds (grounds 6(i) – (iv), 7 to 11 and 13 for the first reclaimer; grounds 7 to 15 for the third reclaimer).  Accordingly, only ground 12 and “further” grounds 1 and 2 for the first reclaimer (now argued as “consolidated” grounds 1 to 3), and ground 16 for the third reclaimer, remained to be addressed.  These were debated at a Summar Roll hearing which took place on 7 October 2014.

[4]        The first reclaimer’s substantive ground (ground 12) was that there had been insufficient evidence to justify the conclusion that the property at 3 Kelvin Road had been acquired by unlawful conduct (consolidated ground 1).  The remaining grounds concerned expenses.  Both reclaimers contended that the award of expenses in favour of the respondents ought not to have been made on the agent and client, client paying, scale (consolidated ground 2 for the first reclaimer; ground 16 for the third reclaimer).  The first reclaimer argued, in addition, that his liability ought to have been modified to nil, standing his status as an assisted person (consolidated ground 3).

 

Proceedings before the Lord Ordinary
3 Kelvin Road
[5]        The recovery order was sought on the basis that the reclaimers had incurred expenditure, and acquired cash and assets, which could not be attributed to legitimate sources of income.  The respondents averred that the first reclaimer’s property at 3 Kelvin Road, had been bought for £40,000 in December 1993.  The first reclaimer had obtained a loan of £36,000 from the Bradford & Bingley Building Society.  The source of the balance of £4,000 was unknown.  In his loan application, the first reclaimer had declared a gross income of £14,000 from employment as an auto electrician.  This was inconsistent with other accounts of the first reclaimer’s income and employment in 1993.  The first reclaimer had no legitimate source of income at the relevant time.  He had obtained the loan, and hence the property, by fraud.  The first reclaimer answered that he had been employed by West Coast Auto Electrics.  He denied the fraud. 

[6]        The Lord Ordinary heard evidence from a forensic accountant, Neill Thomson, who had analysed the reclaimers’ bank accounts and some of their business books.  Mr Thomson spoke to his report, which contained an analysis of the source of funding of assets identified as recoverable.  The narrative contained in Mr Thomson’s report in respect of 3 Kelvin Road was not disputed.  Mr Thomson had had sight of the Bradford & Bingley mortgage file.  The first reclaimer had claimed to be employed as an auto electrician with West of Scotland (cf West Coast, supra) Auto Electrics, Paisley, earning £14,000 per annum.  However, there was no evidence that that business had existed.  If it had, Mr Thomson would have expected to find annual tax returns.  There was no record of the first reclaimer’s employment amongst his personal tax records. 

[7]        Mr Thomson identified two further, and differing, accounts of the first reclaimer’s income and employment in 1993.  First, there was an application for a Pearl Assurance endowment policy, which declared that he was a mechanic earning £16,000 per year.  There was no vouching for this or any identification of the garage where he might have worked.  Secondly, there was a Nationwide Building Society loan application in respect of another property, in Strathblane, which said that he was a self-employed builder earning an annual net profit of £51,479.  However, in 2002, the first reclaimer had informed HM Revenue and Customs that he had not begun trading until 1996, and that he had not worked or claimed benefits previously.  Mr Thomson concluded that the first reclaimer’s statement of earnings as a self-employed builder was likely to have been fabricated. 

[8]        The first reclaimer gave evidence that he had indeed been employed by West of Scotland Auto Electrics in 1993.  His salary had been about £10,000 per annum at first, increasing to £14,000 plus overtime.  The tax records were simply wrong.  A Mr Giffin was adduced in support of the first reclaimer’s position.  He said that he had worked with the first reclaimer at West of Scotland Auto Electrics in 1993.  Mr Giffin had been a part-time bookkeeper.  Workers were paid a basic £10,000 plus overtime.  By the time he had left, in February 1994, the basic wage had increased to about £14,000 per year. 

[9]        Mr Robert Thomson gave evidence.  He had also worked with the first reclaimer in 1993.  Mr Thomson’s net weekly wage, as an engineer, was usually between £230 and £250, including overtime.  The first reclaimer might have been paid more.

[10]      In 2002, Mr Macfie, an inspector of taxes, had dealt with a request, from the reclaimers’ accountant, to accept late tax returns on behalf of the first reclaimer.  The accountant, namely a Mr Yousaf, did not give evidence.  Mr Macfie received tax returns on behalf of the first reclaimer on a “lifestyle” basis for the periods 1996/7 and 2000/01.  He had been prepared to agree that tax and penalties in the order of £100,000 would be paid.  However, no information had been produced to vouch the income and employment declared in the first reclaimer’s loan applications. 

[11]      The third reclaimer gave evidence that the first reclaimer had worked as a mechanic in a garage in the west end of Glasgow.  He had provided information to HMRC on his behalf, but the figures had been estimates and he could not explain them. 

[12]      The Lord Ordinary did not accept that the first reclaimer had been employed as an auto electrician at a salary of £14,000 per annum.  She accepted that he had done some work for West of Scotland Auto Electrics, but she was not prepared to find that he had been employed at that or any other salary.  She said that she had heard no credible evidence about the source of the £4,000 balance.  Accordingly, she concluded that the property had been acquired with funds obtained by unlawful conduct. 

[13]      The Lord Ordinary’s conclusions were based on her acceptance of the reasoning contained in the report of Mr Thomson (supra).  The first reclaimer had not suggested that any parts of Mr Thomson’s report were wrong, or that the report had omitted matters that ought to have been included.  In any event, there were no positive averments of any alternative employment history.  The Lord Ordinary noted the inconsistencies between the first reclaimer’s declared income and employment in his loan applications for 3 Kelvin Road and the Strathblane property.  As he had not given notice of any legitimate alternative source of income, she found that the £4,000 deposit was unaccounted for. 

[14]      Because of the lack of any evidence of payments of income tax and national insurance, and his own varied claims as to his earnings, the Lord Ordinary found that the first reclaimer had made fraudulent claims to the lenders and obtained the loans by declaring income which he could not vouch.  In addition to the fraud in respect of 3 Kelvin Road, the Lord Ordinary found that the loans for the Strathblane property and another property in Milngavie had also been obtained by fraud.  These findings were not ultimately challenged.

 

Expenses
[15]      The respondents had sought an award of expenses on the agent and client, client paying, scale on the basis of the conduct of the proof.  When the motion was finally heard, following a two day adjournment because of lack of preparedness, the first reclaimer’s counsel said that “he was not able to make adequate or substantive replies to the submissions made [on behalf of the respondents].  He had not had time to prepare.”  He moved to have the first reclaimer’s expenses modified (Legal Aid (Scotland) Act 1986, s 18(2)) on the basis that the first reclaimer had no assets, relied on members of his family for support, and did not claim any benefits.  “Counsel had nothing further to say”.  The third reclaimer accepted that expenses should follow success, but submitted that liability should be restricted to the first seven weeks of the proof, being the original estimate of time given by the respondents.

[16]      The Lord Ordinary granted the respondents’ motion on the basis that “the conduct of the defence…was incompetent and unreasonable and that [the reclaimers] thereby caused [the respondents] unnecessary expense”.  She refused the first reclaimer’s motion for modification “standing the findings about unlawful conduct involving [the first reclaimer] … and the view [she] took of the conduct of the proof”.

 

Submissions
The reclaimers

3 Kelvin Road
[17]      The first reclaimer submitted that the Lord Ordinary had erred in rejecting the evidence of the first reclaimer’s earnings.  She had erred in concluding that his declared income had been false.  This had not been a case in which there was no evidence underpinning the income declared in the loan application (cf Olupitan v The Assets Recovery Agency [2008] Lloyd’s Rep FC 253, Carnwath LJ at para 29).  There had been evidence of the first reclaimer’s “connection” with West of Scotland Auto Electrics, and his probable earnings, in 1993.  The two former employees, Mr Giffin and Mr Robert Thomson, had given evidence that “he was there”.  The Lord Ordinary had not rejected their evidence.  She had accepted that the first reclaimer had a connection with West of Scotland Auto Electrics, albeit in a capacity that remained uncertain.  It was clear that the connection would have given rise to earnings.  It was reasonable to infer that he had earned a modest level of income.  There had been no evidence of the precise amount earned by the first reclaimer in 1993, but it went too far to require the first reclaimer to prove that the precise amount of his earnings had been £14,000.  In doing so, the Lord Ordinary had effectively reversed the burden of proof. 

[18]      The evidence of Mr Neill Thomson had suggested that the figure declared in 1993 had been legitimate.  Had the first reclaimer truly earned the larger sums declared elsewhere, which Mr Thomson had reasoned to have been a fabrication, there would have been no reason for him to declare a lower income in 1993.  The Lord Ordinary had had a very uncertain foundation upon which to conclude that the loan secured over 3 Kelvin Road had been obtained by fraud.  That conclusion had been “plainly wrong”. 

[19]      The Lord Ordinary had also erred in concluding that the £4,000 deposit had been derived from unlawful conduct.  There had been no evidence of unlawful conduct until 1997, when the reclaimers were linked with the importation of controlled drugs and a handgun.  The evidence, in connection with that conduct, had not provided an adequate basis for the Lord Ordinary to infer the earlier occurrence of further unlawful conduct.  To a large extent, the proof had related to the reclaimers’ subsequent involvement with Spring Radio Cars, and allegations of extortion, from 2001.  There had been no causal connection between that conduct and the £4,000 deposit (cf Scottish Ministers v Doig 2007 SLT 313, Lord Drummond Young at para 42; Olupitan v The Assets Recovery Agency (supra), Carnwath LJ at para 30).

[20]      The third reclaimer had given evidence that he had thought the deposit was derived from the first reclaimer’s savings.  In light of this, and the evidence of the first reclaimer’s earnings in 1993, the Lord Ordinary had not been entitled to infer that the source of the deposit had been unlawful.  She had, once again, reversed the burden of proof. 

 

Expenses: scale
[21]      The first reclaimer did not attempt to reconstruct the detail of the proceedings before the Lord Ordinary.  The diet of proof had initially been fixed for 7 weeks.  The respondents’ case had lasted for a further 11 weeks, and that of the first reclaimer for another 16 days.  The first reclaimer had pursued some lines of cross-examination that had been unproductive.  Additional days had been taken up with other matters.  However, it had not been appropriate to attribute the duration of the proof wholly to the reclaimers.  This had been the effect of the award of expenses on the agent and client, client paying, scale. 

[22]      The reclaimers had denied the allegations of extortion, in respect of which a significant body of evidence had been led.  The reclaimers had not failed to appreciate the significance of the evidence against them.  It had been their position that extortion could not be made out, in the absence of averments of specific threats.  It had been entirely proper for them to put the respondents to their proof. 

[23]      It was not possible to quantify the concerns expressed by the Lord Ordinary in justification of the scale of the award.  On any view, the proof had been long and complicated.  It was relevant to take account of the fact that the first reclaimer had answered a lengthy notice to admit and had entered into two joint minutes, one of which extended to some 22 pages.  The award of party and party expenses, with the additional fee which was afforded to the respondents, would have been sufficient.

[24]      The third reclaimer added that it had been unreasonable for the Lord Ordinary to award expenses on the agent and client, client paying scale, in respect of the whole process, or even the whole of the proof (McKie v Scottish Ministers 2006 SC 528, para 3).  A precise calculation had not been undertaken, but the conduct of the reclaimers had not caused all of the delays at proof.  Delays had been caused by ill health, bereavement, and the severe weather of December 2010.  In any event, the Lord Ordinary had relied on matters that had not taken up significant court time, had related to the third reclaimer’s legitimate defence, or had amounted to criticisms of the first reclaimer’s counsel.  The Lord Ordinary had erred in failing to attach significance to two matters: first, the respondents’ use of a public interest immunity certificate; and secondly, the third reclaimer’s status as a party litigant.  The Lord Ordinary had failed to discriminate between the reclaimers, notwithstanding that she had identified distinct conduct in relation to each of them in support of the general award. 

[25]      The third reclaimer had been afforded no credit for dealing with the case as a party litigant.  He had entered a joint minute, comprising 119 paragraphs of agreed facts over some 22 pages.  He made at least 298 admissions in response to a notice to admit.  These had been significant factors in restricting the length of the proof, which contradicted any suggestion that he had taken an unreasonable approach to the litigation. 

[26]      The Lord Ordinary had not attached any comparative value to the delays caused by the third reclaimer and those incurred overall.  Where much of the delay had been attributable to other factors, the third reclaimer had effectively been held liable for expenses on an indemnity basis.

 

EXPENSES: MODIFICATON
 [27]     The first reclaimer added that the Lord Ordinary had observed correctly that an award against an assisted person should not exceed the amount that he could reasonably be required to pay (Legal Aid (Scotland) Act 1986, s 18(2)).  She had recognised that the parties’ means were relevant.  However, she had failed to consider the first reclaimer’s ability to meet the award.  Instead, her decision had been based on her view of the merits of the case and the first reclaimer’s conduct of it (cf Bell v Inkersall Investments (No.2) 2007 SC 823, LJC (Gill) at 831).  Whilst conduct was relevant to the balance to be struck, the parties’ resources remained relevant (Armstrong v Armstrong 1970 SC 161 at 166).  There had been no basis on which to conclude that the first reclaimer would be able to meet the award.  The first reclaimer had had to satisfy the court as to his means, but there was no indication that the Lord Ordinary had taken his submissions into account.  In the circumstances, the court was bound to remit the matter to the Lord Ordinary for reconsideration (Cullen v Cullen 2000 SC 396, LJC (Cullen) at paras 6 – 8).

 

The respondents

3 KELVIN ROAD
[28]      The Lord Ordinary had adopted the correct approach to the evidence.  She had been entitled to make the findings in fact that she did.  She had been entitled to draw common sense inferences from the circumstantial evidence.  Her conclusions, based on such inferences, were as valid as those based on direct evidence. 

[29]      It would not have been appropriate to have “atomised” the evidence by applying a probabilistic test to each aspect of it.  The evidence had to be taken as a whole in order to weigh the probabilities in the balance (Karanakaran v Secretary of State for the Home Department [2000] 3 All ER 449 at 477; Toremar v CGU Bonus [2009] CSOH 78, Lord Brodie at para 85).  It could not be said that the Lord Ordinary’s conclusions were “plainly wrong”, in the sense that no reasonable Lord Ordinary could have reached them (Thomas v Thomas 1947 SC (HL) 45; Henderson v Foxworth Investments 2014 SLT 775, Lord Reed at para 58). 

[30]      The Lord Ordinary had had the benefit of assessing the credibility and reliability of the first reclaimer.  She had found him incredible.  She had been discriminating and subtle in her analysis.  She had been prepared to accept that the first reclaimer had worked in some capacity for West of Scotland Auto Electrics.  She had done so notwithstanding that there had been no satisfactory evidence of the first reclaimer’s employment record.  In particular, HMRC’s records had contained no reference to his employment in the relevant period.  The first reclaimer had tabled no averments as to the source of the £4,000 deposit.  Thus, an objection had been sustained when the third reclaimer had sought to elicit positive evidence from him in this regard.   

[31]      The respondents had pointed to a number of inconsistencies in the nature of the first reclaimer’s earnings which had required explanation.  In other words, the “tactical” burden of proof had shifted.  The evidential burden had remained on the respondents to prove that 3 Kelvin Road had been acquired through unlawful conduct.  However, the “tactical” burden could shift from time to time.  The Lord Ordinary had been entitled to draw inferences adverse to the first reclaimer (Olupitan v The Assets Recovery Agency (supra), Carnwath LJ at para 30; Scottish Ministers v Doig (supra), Lord Drummond Young at para 42).  The first reclaimer had been unable to provide any credible explanation for his activities or earnings in 1993.  Thus, the Lord Ordinary did not accept that he had earned a legitimate income.  That being so, she had been entitled to infer that 3 Kelvin Road had been acquired through unlawful conduct; the lion’s share of which had been the mortgage fraud of £36,000.

[32]      In the context of the evidence as a whole, and in particular her finding of fraud in 1993, the Lord Ordinary had been entitled to infer that the £4,000 deposit had been derived from unlawful conduct.  The Lord Ordinary had not relied on a single episode of unlawful conduct, in 1997, as the basis for her inference.  There had been evidence to suggest that the first reclaimer had been involved in a life of crime, including concern in the supply of drugs and money laundering.  In the absence of any record of the source of the £4,000 deposit, the Lord Ordinary had been entitled to infer that the deposit had come from unlawful conduct.

 

EXPENSES: SCALE
[33]      The court should be slow to interfere with a Lord Ordinary’s discretionary decision on expenses.  The Lord Ordinary had had the benefit of hearing the proof.  She had been “immersed in the atmosphere and nuances” of the case, which the appeal court could not begin to replicate or understand (Biogen v Medeva [1997] RPC 1, Lord Hoffman at 45). 

[34]      The Lord Ordinary had founded on around 21 factors which she considered demonstrated conduct leading to unnecessary expense.  It would have been impossible for her to embark upon a detailed apportionment of discrete expenses.  The Lord Ordinary had, however, discriminated between the reclaimers.  She had provided a comprehensive explanation of her findings in respect of the conduct of each reclaimer. Clearly she had been aware that the third reclaimer had represented himself.  He had given no indication that he had been ill equipped to defend himself, however, until a late motion for an adjournment to apply for legal aid.

[35]      In the absence of any failure to follow established principles, or of manifest injustice, the Lord Ordinary’s decision regarding the appropriate scale of expenses could not be criticised.  She had properly directed herself on the relevant law (McKie v Scottish Ministers 2006 SC 528).  She had taken account of all relevant factors and not taken account of any irrelevant factors.  Her decision had been reasonable and there was nothing to suggest that the court should interfere with it.

 

EXPENSES: MODIFICATION

[36]      No credible or reliable information had been forthcoming in support of the first reclaimer’s motion for modification.  Whilst he had claimed to have no assets, and to rely on the support of his family, the Lord Ordinary had found that both reclaimers had an ownership interest in Thomson’s Bar, Springburn. 

[37]      It was relevant to consider the nature of the dispute.  The respondents had sought to recover the first reclaimer’s “ill-gotten gains”.  The proof had demonstrated the first reclaimer’s history of declaring his income and its sources as it suited him from time to time.  In the absence of a credible or vouched explanation of his means and resources, the public ought not to have to absorb the costs of him doing so.

[38]      The Lord Ordinary had directed herself correctly on the critical parts of the motion (Bell v Inkersall Investments (No. 2) 2007 SC 823).  She had taken account of the whole circumstances of the case, including the findings of unlawful conduct and the conduct of the proof.  The first reclaimer’s applications for living expenses, initially to the extent of £6,960 per month ([2010] CSOH 71), had shown that he and his family had lived well.  In the event that the Lord Ordinary had erred, however, the court was not bound to remit the matter for reconsideration (cf Cullen v Cullen 2000 SC 396, LJC (Cullen) at para 5). 

 

Decision

3 Kelvin Road
 [39]     In the first tranche of this reclaiming motion, the first reclaimer argued (unsuccessfully) that the Lord Ordinary had not applied the appropriate standard of proof to the respondents’ allegations of unlawful conduct ([2013] CSIH 81, paras 48 - 50).  On that basis, it was submitted that her findings of extortion and fraud had been unwarranted.  In the present (second) tranche, the first reclaimer objected to the Lord Ordinary’s approach to the evidence of fraud in two further respects.  First, she rejected certain evidence of his income, in 1993, as an auto electrician.  Secondly, she inferred, in the absence of evidence to the contrary, that the deposit of £4,000 had been derived from unlawful conduct. 

[40]      The court is satisfied that there was no credible and reliable evidence before the Lord Ordinary of the first reclaimer’s earned income in 1993.  The first reclaimer relied on his own testimony and the evidence of Mr Robert Thomson and Mr Giffin as former employees of West of Scotland Auto Electrics.  Whilst he had claimed to have had an annual income of £14,000, he was not able to produce any documentation in support of his position.  Mr Thomson did not know how much the first reclaimer had earned.  Neither Mr Thomson nor Mr Giffin was able to confirm the first reclaimer’s income at the material time.  Whilst it may be correct to observe that their evidence was not expressly challenged, that was probably because it was not of significant value.  All it amounted to was that the first reclaimer did work for West of Scotland Auto Electrics in some capacity in about 1993.

[41]      The first reclaimer’s unsubstantiated position was undermined by adminicles of evidence spoken to by other witnesses.  Most significant was the evidence of Mr Neill Thomson regarding the inconsistent declarations of the first reclaimer’s income in his loan and endowment policy applications.  The first reclaimer’s interaction with the tax authorities, too, which was spoken to principally by Mr Thomson, Mr Macfie and the third reclaimer, did not support the source or amount of earnings contended for.  It is notable that even the name of the alleged employers, referred to variously as “West Coast Auto Electrics”, “West of Scotland Auto Electrics” and “West of Scotland Autos”, was a matter of some doubt.

[42]      In the circumstances, the Lord Ordinary’s acceptance of Mr Neill Thomson’s evidence, and her rejection of the vague and varying accounts of the position from the remaining witnesses, including the first reclaimer himself, cannot be faulted.  Her finding, that the first reclaimer had falsely declared his income in applying for a loan in respect of 3 Kelvin Road, naturally followed.

[43]      There was no credible and reliable evidence before the Lord Ordinary of any legitimate source for the deposit of £4,000.  The Lord Ordinary was unable to make any positive findings in respect of the first reclaimer’s income.  No other explanation was forthcoming.  The question is then whether the Lord Ordinary was entitled to infer, as a consequence, that the deposit was derived from unlawful conduct.  Where funds may have been derived from one or more of various forms of unlawful conduct, there is no requirement to identify a direct link with particular unlawful conduct (Proceeds of Crime Act 2002, section 242(2)(b)).  That is not to say that, had there been no evidence of unlawful conduct whatsoever, the Lord Ordinary would have been entitled to draw the inference that she did.  As the respondents submitted, if somewhat tangentially, the burden was on them to prove that the funds were obtained by, or in return for, unlawful conduct.  Where, however, the respondents had led circumstantial evidence raising an inference of unlawful conduct, the onus shifted to the first reclaimer to show that the obvious adverse inference ought not to be drawn (Lewis: Manual of the Law of Evidence (1925) p 242, para (e)).  Thus, it may be said that the burden shifted in the limited sense that the first reclaimer required to dispel any such inference (Walkers: Evidence (3^rd edn), para 2.1.2; on terminology in Scotland, however, see also Macphail: Evidence (1987), para 22.01). 

[44]      The circumstances of the purchase of 3 Kelvin Road must be looked at as a whole.  The source of the deposit of £4,000 was unexplained in the context of £36,000 (of the £40,000 purchase price) having been obtained by fraud.  Against the totality of evidence in respect of the frauds perpetrated by the first reclaimer in respect of various properties, including 3 Kelvin Road, the Lord Ordinary was entitled to conclude that the deposit of £4,000 called for an explanation as to its source.  Against the proved background of unlawful conduct on the part of the first reclaimer generally, and in the absence of an explanation, the only reasonable inference was that the deposit had been derived from unlawful conduct of a similar nature. 

[45]      For these reasons, the first reclaimer’s criticisms of the Lord Ordinary’s substantive findings in this ground of appeal must be rejected.

 

Expenses: Scale
[46]      The general award of the expenses of process in favour of the respondents is not challenged.  It is not a ground of appeal that any particular aspect of the proceedings should have been excluded from the general award.  That much was reflected in the submissions of the reclaimers, which did not seek to analyse in any great detail the chronology of events that unfolded before the Lord Ordinary.  This court is thus concerned only with the scale, and not the scope, of the general award.  The question is simply whether the Lord Ordinary was entitled to conclude that the threshold justifying an award of expenses on the agent and client, client paying, scale was met.  It is agreed that the Lord Ordinary identified the correct test (McKie v Scottish Ministers 2006 SC 528).  The point is simply whether unreasonable or incompetent conduct on the part of the reclaimers had caused unnecessary expense, such that the sanction of expenses on the agent and client, client paying, scale became appropriate (see Baker Hughes v CGC Contracting International 2005 1 SC 65, Lady Smith at para 18).

[47]      Whilst the court might not have reached the same conclusion as the Lord Ordinary, the decision on the appropriate scale of expenses was one for the exercise of her discretion.  She had a unique view of the proceedings, and particularly the proof.  She formed the view that the way in which both reclaimers had conducted their defences had caused unnecessary expense.  Various examples of objectionable conduct were mentioned.  The Lord Ordinary highlighted the “unusual and unsatisfactory” instruction of counsel, close to the diet of proof and without adequate funds for preparation; a state of affairs that was maintained throughout the proof.  She cited the fundamental failure of the reclaimers to engage with the questions before the court.  She pointed to their insistence on pursuing irrelevant matters throughout the proceedings.  She noted that, in putting the respondents to their proof, the reclaimers had failed to provide explanations, or to lead detailed evidence, where properly required.  Instead, they had led vague and irrelevant evidence.  They had failed to grasp the significance of the evidence led by the respondents.  Notably, they advanced allegations of a lack of independence on the part of the interim administrator, the civil recovery unit and the court; moving for the Lord Ordinary to decline jurisdiction on many occasions.  There were numerous examples of avoidable adjournments of the proof, which had also wasted court time, caused by the conduct of the reclaimers or one or other of them. 

[48]      The court is satisfied that the Lord Ordinary was entitled to reach the decision to award expenses on the agent and client, client paying, scale for the reasons which she has given.  The themes identified, underlying the whole of the proceedings, provided ample foundation for the conclusion that unnecessary expense had been created by the reclaimers’ incompetent and unreasonable conduct.  The reclaimers’ persistent undermining of the efficiency of proceedings was amply demonstrated.  There being no basis upon which to interfere with the Lord Ordinary’s discretion, this ground of appeal is rejected.

 

Expenses: modification
[49]      It is not disputed that the Lord Ordinary identified the correct test in considering whether to modify the first reclaimer’s liability in expenses (Legal Aid (Scotland) Act 1986, s 18(2)).  The Lord Ordinary had to consider whether the award was reasonable and one which the first reclaimer should be required to pay (Bell v Inkersall Investments (No.2) 2007 SC 823).  It was relevant to take account of all the circumstances, including not only the parties’ means but also their conduct in connection with the dispute.  Thus, the Lord Ordinary was entitled to take account, as she did, of both her substantive findings of unlawful conduct and her earlier assessment of the conduct of the proof (supra) in her subsequent assessment of the appropriateness of modification. 

[50]      It was for the first reclaimer to satisfy the court that modification of his liability was appropriate in all the circumstances.  It is evident, from the terms of her decision, that the Lord Ordinary took account of all the information that was presented to her.  In particular, she had regard to the first reclaimer’s assertion, and it was no more than that, that he had no assets.  That assertion was of little consequence standing the Lord Ordinary’s contrary findings in respect of his interest in Thomson’s Bar, Springburn.  In the absence of credible and reliable information regarding the first reclaimer’s means, there is nothing to suggest that a general unmodified award was unreasonable.  The Lord Ordinary’s decision is also readily understandable in the context of her significant findings of unlawful conduct on the part of the first reclaimer.  In the face of such findings, and the respondents’ consequent and substantial success, there was no apparent basis upon which to hold that it would have been reasonable for the public to fund the whole proceedings.

[51]      There being no grounds advanced by the first reclaimer that would justify interfering with the Lord Ordinary’s discretion on this point, this ground of appeal is also rejected.

 

Expenses: reclaiming motion
[52]      The respondents sought the expenses of the reclaiming motion.  This was not opposed.  The first reclaimer sought modification of the award, yet his position remained as it had been described before the Lord Ordinary (supra).  The respondents opposed the motion, principally on the basis of his interest in Thomson’s Bar.  In view of the nature of the action, and the quality of information presented in respect of the first reclaimer’s assets, the court is not satisfied that any modification of expenses should be made.  For the avoidance of doubt, the award of expenses in respect of the third reclaimer is limited to the extent of the executry estate.