Interim awards of expenses in litigation within the Scottish courts: case comment

The most recent decision in the case of Kidd v (1) Paull & Williamsons LLP and (2) Burness Paull LLP has considered the procedural requirements for making an interim award of expenses.

The case itself is an action for payment of $210 million said to arise out of various breaches of duty by the first defenders to their former client. In February 2017, Lord Tyre (amongst other things) granted summary decree to the extent that the first defender was in breach of its fiduciary duties to the pursuer, and allowed parties a proof.

The most recent decision relates to the pursuer’s motion for an interim payment of expenses. In November 2016, Lord Tyre found the defenders liable to the pursuer for:

(i) the expenses of a minute of amendment;
(ii) the expenses of the discharge of a diet of proof; and
(iii) one half of the expenses of the action to that point except insofar as otherwise dealt with.

The awards were made on an agent and client, client paying basis, and Lord Tyre also allowed an additional fee under “various heads”, although no information is given within the decision as to how many or which heads were applicable.

The interlocutor discerning for payment of expenses followed the usual form: an account to be lodged and remitted to the Auditor of Court for taxation.

No account of expenses was lodged, but the pursuer moved the court to grant decree for payment within fourteen days of £2 million as an interim payment of expenses. The question for the court was whether an order for interim payment where expenses had been awarded but no account had been lodged and taxed should be made. If so, then the second question was in what circumstances may the motion be granted?

Granting the Motion

Lord Tyre found that the requirement for “special reasons” when determining whether to grant a motion for interim payment did not require “exceptional circumstances”. Rather, the hurdle for the party making the motion to overcome is that the court requires to be satisfied that there is sufficient reason to justify the order.

In granting the motion, Lord Tyre accepted three of the reasons submitted by the pursuer as justification for the grant. They were:

1. the level of the likely expenses was so large that it justified the grant, on the basis that “the greater the amount of money which the receiving party is kept out of for an extended period, the greater the injustice”;
2. the proposed taxation was likely to be of a huge scale standing the volume of papers for consideration and particularly lengthy; and
3. the costs were continuing to increase as the litigation progressed. Lord Tyre found that, “Having regard also to the pursuer’s need to fund the continuing litigation, it is not in the interests of justice that he should be deprived for an indefinite period of the whole of the expenses to which he has been found entitled”.

Lord Tyre also rejected the notion that the mere fact that expenses had been awarded on an agent and client, client paying basis was justification for making an interim award as a form of further “punishment”. He also rejected the defenders’ submission that the possibility of a similar contra-award if the action failed as being good reason to refuse it.

Interim payment

Having reached that conclusion, the next question for the court was how to value expenses when there was no account, let alone a taxed account.

The answer was expert evidence. The pursuer founded on a letter by a law accountant and a report from a second law accountant, which were consistent in their terns. In short, they approximated that a taxed account would be conservatively valued at about £2million.

Lord Tyre accepted the reasons given by the law accountants in reaching their views, but preferred to adopt an even more conservative approach when deciding what the award should be without any breakdown of fees or outlays to work from. On that basis, he ordered that the defenders make an interim payment of expenses in the sum of £1 million.

Lessons from this decision

In brief, there are some headline points to take from this decision:

1. it is not necessary to submit an account or proceed through taxation to obtain an interim payment of expenses;
2. however, the reasons for skipping the “ordinary way” must be sufficient to justify the court making such an order;
3. this decision arises out of a peculiar set of circumstances, which will be rare in Scottish litigation; and
4. the court’s approach to interim payments will be very conservative in comparison to what the likely value of an account would be. Accordingly, to maximise recovery, an account would be preferable.

Full text of the decision is available here.