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CAPITAL CLAIM: Court of Session ruling on Heather Capital writ paves way for legal confrontation between liquidators & law firm involved in £280m hedge fund collapse

Court of Session rules Law firm should face £28m writ proof. A RULING by Court of Session judge Lord Doherty has paved the way for a proof hearing of a multi million pound damages claim against Glasgow based law firm Levy & McRae – for their role in connection with a £280m collapsed hedge fund.

Current and former partners of law firm Levy & McRae who were named in the writ – including among them suspended judge Peter Black Watson (62) – now face a potential claim of up to £28million from Paul Duffy of Ernst & Young – the liquidators of collapsed hedge fund Heather Capital.

Allegations against numerous individuals were made before Lord Doherty in the Court of Session during a case which ran for several weeks.

This week, the Sunday Mail newspaper reported that “Pursuers including liquidator Paul Duffy say £19 million was paid from the firm’s client account to Panama-registered Niblick Investments SA – owned and controlled by jailed fraudster Nicholas “Beano” Levene. They claim the money had been sent from Heather Capital’s bank account to Levy & McRae on January 4, 2007, and transferred to Niblick five days later.

A second payment of £9.412 million was sent from Heather Capital to the firm’s client account before being transferred on to a firm of Gibraltar-based solicitors.

The liquidators’ case alleges King “created the false impression” that these companies had themselves entered into loan agreements against property with other Gibraltar firms.

The pursuers go on to state: “In fact, the money was never paid to them. It was instead paid out to third parties, undocumented and without security, out of various solicitors’ client accounts in which it had been deposited.

“Mr King and Santo Volpe (a co-director of Heather Capital) were co-conspirators in the fraudulent diversion of HC’s funds to third parties such as Nicholas Levene or companies owned and controlled by him or by Mr King, in contravention of the strategy and principles set out in Heather Capital’s investment particulars.”

Lord Doherty’s opinion ruled liquidators should not be time barred in bringing a case.

Finding for the liquidators, Lord Doherty said “The pursuer’s averments are suitable for inquiry.  A preliminary proof on prescription appears to me to be the appropriate way forward.”

SUSPENDED JUDGE NAMED IN £28M HEATHER CAPITAL WRIT:

The list of current & former Levy & Mcrae partners named in the multi million pound claim also include the solicitor & suspended sheriff – Peter Black Watson – who was suspended from the judicial bench by Scotland’s top judge Lord Gill.

Lord Gill suspended Sheriff Peter Black Watson in February 2015 – after demanding sight of a multi million pound writ against Glasgow law firm Levy & McRae – where Watson was formerly a partner.

It was reported Watson offered to step aside temporarily – while the litigation concluded – however a Judicial Office spokesperson set the records straight in a statement from the Judicial Office for Scotland which read: “Sheriff Peter Watson was suspended from the office of part-time sheriff on 16 February 2015, in terms of section 34 of the Judiciary and Courts (Scotland) Act 2008.”

“On Friday 13 February the Judicial Office was made aware of the existence of a summons containing certain allegations against a number of individuals including part-time sheriff Peter Watson.”

“The Lord President’s Private Office immediately contacted Mr Watson and he offered not to sit as a part-time sheriff on a voluntary basis, pending the outcome of those proceedings. “

“Mr Watson e-mailed a copy of the summons to the Lord President’s Private Office on Saturday 14 February. On Monday 16 February the Lord President considered the matter.”

“Having been shown the summons, the Lord President concluded that in the circumstances a voluntary de-rostering was not appropriate and that suspension was necessary in order to maintain public confidence in the judiciary. Mr Watson was therefore duly suspended from office on Monday 16 February 2015.”

This week, the Sunday Mail also revealed the Crown Office & Procurator Fiscal Service (COPFS) – now led by Lord Advocate James Wolffe QC – is yet to act after a three year probe initiated by Wolffe’s predecessor – Frank Mulholland QC following the police probe into Heather Capital and Mathon Finance.

Marbella based Gregory King, lawyer Andrew Sobolewski, 57, of Bridge of Weir, Renfrewshire, accountant Andrew Millar, 63, of Cambuslang, near Glasgow, and property expert Scott Carmichael, 44, of Thorntonhall, near Glasgow, were named in the police report on Mathon sent to the Crown Office in April 2013.

Wolffe’s predecessor – Frank Mulholland – who stepped down from post of Lord Advocate without making a decision on the Heather Capital case – was recently appointed as a judge at the Court of Session – by current Lord President Lord Carloway (real name – Colin Sutherland).

The Crown Office have so far declined to say whether any action would follow against any of the four.

Full opinion of Lord Doherty: OUTER HOUSE, COURT OF SESSION [2016] CSOH 107 CA207/14

OPINION OF LORD DOHERTY In the cause

HEATHER CAPITAL LIMITED (in liquidation) and PAUL DUFFY as liquidator thereof (Pursuer)
against :
(FIRST) LEVY & McRAE; (SECOND) WILLIAM MACREATH; (THIRD) ANDREW SLEIGH; (FOURTH) ANGELA MCCRACKEN; (FIFTH) DAVID MCKIE; (SIXTH) ALASDAIR GILLIES; (SEVENTH) GARY BOOTH; (EIGHTH) PETER WATSON; and (NINTH) ALASTAIR GOODMAN (Defenders)

Pursuer:  Lord Davidson of Glen Clova QC, Tariq;  Shepherd & Wedderburn LLP
Defenders:  Duncan QC, Brown;  Clyde & Co
22 July 2016

Introduction
[1]        The pursuer is a company (“HC”) in liquidation and its liquidator.  The liquidator was appointed on 7 July 2010 by order of the High Court of Justice of the Isle of Man (HC was incorporated in the Isle of Man).  The defenders are a firm of Scottish solicitors and the partners or former partners of the firm.  In this commercial action the pursuer seeks redress from the defenders on a variety of grounds.  The matter came before me for a debate.  The principal issue debated was whether the court could determine without further inquiry that each of the obligations upon which the pursuer founds has been extinguished by prescription.  The defenders also maintain that certain of the pursuer’s averments are irrelevant.

[2]        The debate took up two and a half of the three days which had been allocated for it.  Notes of argument had been prepared in advance.  These were supplemented with oral submissions, and there was reference during the course of the debate to productions which had been lodged in a joint bundle.  However, there was no joint minute relating to the productions and no agreement renouncing probation in respect of them.

The pleadings
[3]        The following is a summary of the pursuer’s averments.  Some of them are disputed.  Since they include allegations of impropriety against several people it is important to emphasise that they are averments and not established facts.  Thus, for example, Mr King has not been the subject of any criminal proceedings.  However, for the purposes of the debate the pursuer’s averments require to be taken pro veritate.

[4]        HC and its investors were defrauded by the diversion of invested funds exceeding £90 million (including £28.412 million which HC had entrusted to the defenders) under the guise of fictitious loans to various shelf companies incorporated in Gibraltar.  The mechanism of the fraud was essentially the same in each case.  A number of companies, owned and/or controlled by a director of HC, Gregory King, were incorporated in Gibraltar.  HC then entered into credit facility agreements with those companies (the “first-level special purpose vehicles” (“first-level SPVs”)), each agreement being secured by a debenture granted by the first‑level SPV.  Mr King created the false impression that the first‑level SPVs had themselves entered into loan agreements with other special purpose Gibraltar companies (the “second-level SPVs”) and that the loans to the second-level SPVs had been secured against heritable property.  On the information available to it, HC recorded loans to the first-level SPVs in its books of account.  In fact, the money was never paid to them.  It was instead paid out to third parties, undocumented and without security, out of various solicitors’ client accounts in which it had been deposited.  Mr King and Santo Volpe (a co-director of HC) were co-conspirators in the fraudulent diversion of HC’s funds to third parties such as Nicholas Levene or companies owned and controlled by him or by Mr King, in contravention of the strategy and principles set out in HC’s investment particulars.

[5]        On 4 January 2007 £19 million was transferred from HC’s bank account to the defenders’ client account.  On 24 January 2007 a further £9.412 million was transferred from HC’s bank account to the defenders’ client account.  The pursuer avers that HC was the defenders’ client; and that esto HC was not their client the defenders nevertheless received and held the payments on its behalf.  So far as HC was concerned each of the two payments was to be loaned to a first-level SPV, Westernbrook Properties Limited (“WBP”), once loan and security documentation had been executed; and WBP was to on‑lend it to a second-level SPV once a loan agreement had been executed and security over heritable property obtained.  In fact the monies were never paid to WBP.  On 9 January 2007 the defenders paid the £19 million to Niblick Investments SA (“Niblick”), a Panamanian company owned and controlled by Mr Levene.  On 29 March 2007 the defenders transferred the £9.412 million to a firm of Gibraltar solicitors, Hassans, under the reference Rosecliff Limited (a company controlled by Mr King).  In each case at the time of transfer the transfers were “undocumented, without security, and contrary to the strategy and principles set out in HC’s investment procedures”.

[6]        Early in 2007 HC’s auditors (KPMG Audit LLC (“KPMG”), the Isle of Man member firm of KPMG International Co-operative) raised questions about the propriety and recoverability of loans by HC to the first‑level SPVs.  In a memorandum dated 17 March 2007 KPMG identified concerns relating to the documentation provided in respect of loans by the first-level SPVs to second‑level SPVs.  KPMG suggested that further work should be undertaken and that additional information was required.

[7]        After KPMG had flagged up concerns Mr King and Mr Volpe compounded the fraud by taking steps, from March 2007 onwards, to conceal the true use of the funds, and to create the false impression that the fictitious loans had been repaid to HC between April and June 2007 by the first-level SPVs.  Between April and June 2007 Mr King instructed additional funds to be transferred from HC to Mathon Limited (“Mathon”) and Bathon Limited (“Bathon”).  Fictitious loans were created by Mathon and Bathon to give the appearance that those funds had been advanced to legitimate borrowers.  In fact the funds were transferred to Cannons Law LLP (‘Cannons’).  Cannons were instructed by Mr King to send payments to HC for amounts equivalent to the purported outstanding loans to (all but two of) the first‑level SPVs.  Cannons later stated to HC’s board of directors and KPMG that they had acted on behalf of the first‑level SPVs when making the repayments.  This gave the false impression that the loans to the first‑level SPVs had been repaid whereas in fact the “loans” (including the “loans” to WBP) were “repaid” by using HC’s own funds.

[8]        The board of directors of HC investigated the concerns raised by KPMG.  A board meeting was held on 6 September 2007.  Mr King and two non‑executive directors (John Bourbon and Robin James) were present and the company secretary, Andrew Ashworth, and David McGarry of KPMG were in attendance.  Mr King advised that Mr Volpe had executed loans to SPV companies where non-standard procedures had been followed, inadequate security had been given for some loans, and relevant accounting records had not been obtainable from Cannons.  Mr King stated that the loans to the SPVs had been repaid in full in May 2007.  Mr Bourbon sought to meet Mr Volpe to investigate matters but Mr Volpe refused to co-operate.  Later the same month Mr Bourbon met with Joseph Triay of Triay & Triay, Solicitors, Gibraltar to try and obtain information about the loans made by HC to the first-level SPVs.  Triay & Triay refused to provide access to the books or records of the first‑level SPVs without Mr Volpe’s consent.  Following a resolution at a board meeting of HC on 1 October 2007 Mr Bourbon, Andrew Beeman (another non‑executive director), and Mr Ashworth attended a meeting with the Isle of Man Financial Services Commission (the “FSC”) to discuss “the issues”.  On 8 October 2007, Mr Bourbon emailed Mr Triay asking whether he had contacted Mr Volpe to obtain authority to release the documents which he had requested at the meeting in Gibraltar.  On 10 October 2007 Mr Beeman made a disclosure of suspicious activity to the Isle of Man Financial Crime Unit (“FCU”).  The subject of the disclosure was Mr Volpe, and it narrated the efforts made by the non-executive directors to seek further information about the SPVs and the obstacles they faced from Mr Volpe and Cannons.  The FCU acknowledged the disclosure on 12 October 2007 and indicated that it would carry out its own enquiries.  This process did not disclose the fact that HC’s funds had been diverted to Mr Levene, Niblick, Rosecliff Limited or Mr King and that HC had accordingly suffered a loss.  On 18 October 2007, the FSC wrote to the directors of HC and asked to be kept informed of the situation.  On 26 November 2007, Mr King wrote to HC’s board of directors admitting that “an element of fraud” had been introduced into HC’s investment strategy.  Mr King blamed the fraud on Mr Volpe (who had by that time resigned as a director of HC) and Cannons.  Mr King falsely represented that the fictitious loans had been repaid.

[9]        KPMG qualified their audit opinion in the reports and financial statements for the 16 month period to 31 December 2006 and the 9 month period to 30 September 2007, both signed by KPMG on 17 December 2007.  KPMG recorded the additional steps taken to address their concerns in a file note in connection with the audits for the periods ending 31 December 2006 and 30 September 2007 (the “Completion Note”), which stated:

“The above matters had the following impact on the audit:

Fraud Risk

The risk of fraud increased to high as a result of the documentation issues surrounding the SPVs, where some form of fraud appeared to have been attempted.

This was addressed in our work by increasing audit procedures in the following areas:

• Full scope audit to 30 September 2007 to gain greater assurance over receipt of monies in relation to the SPV loans and their subsequent reinvestment

• Full audit of Mathon and Bathon accounts to 30 September 2007.  (All monies were invested in these companies as at 30 September 2007).  This audit was undertaken by their auditors, Gerber Landa & Gee, in accordance with ‘group’ audit instructions from us. As part of this work, they were instructed to perform a 100% circularisation and credit review of all significant loans.

… It was also decided by DKM, MJF and ND to undertake an audit of the nine month figures to 30 September 2007, in order to audit the receipt of monies in relation to the SPV loans and their subsequent reinvestment to assist with signing the 31 December 2006 accounts.

Audit report opinion

We have been unable to verify where funds advanced to the SPVs were invested. In addition, we were supplied with false documentation in relation to the SPVs, which appears to have been a deliberate attempt to mislead us. We consider therefore that sufficient appropriate audit evidence has not been obtained in relation to the loans advanced to the SPVs in 2006 and 2007. Given these loans were repaid in the period, we consider that the effect of this is not so material and pervasive that we are unable to form an opinion on the financial statements – instead we have issued an ‘except for’ qualified opinion.”

The qualification to the 31 December 2006 audit opinion stated:

“…[T]he evidence available to us was limited with regard to loans amounting to £38,950,000 advanced to a number of Gibraltar-incorporated special purpose companies (the ‘SPCs’). As further explained in note 5, there is uncertainty regarding the purposes to which these loans were applied. Loan and security documentation was provided to us, which purported to show that these monies had been on-lent to a number of further Gibraltar-incorporated special purpose companies. We could not validate this documentation.”

Note 5 to the December 2006 accounts noted the following:

“During the accounting period to 31 December 2006 £38,950,000 was advanced to 6 Gibraltar based special purpose companies (“the SPCs”); £41,269,250 was outstanding as at 31 December 2006, including amortised discount. The lending to the SPCs was effected using standard documentation between the Company and the SPC borrower. The SPCs have related party shareholders and directors – see note 10.

There is uncertainty as to where the monies lent to the SPCs were then subsequently invested. Loan and security documentation was produced in support of this onward investment by a firm of lawyers. This documentation purported to show that the monies had been on-lent to a number of further Gibraltar incorporated special purpose companies, owned by the underlying borrowers, and secured on property. This documentation could not be validated by the auditors.

Amounts equivalent to the outstanding balances on the loans to the SPCs (including accrued interest) were received in full during the period between April and June 2007. With the exception of an amount received from the Promoter (see below), the Directors have been unable to ascertain the source of these repayments which were made via a lawyer’s client account. The funds received included an amount of US$5,333,100 from Sargon Capital Limited, the Promoter – see note 10 regarding related party transactions. The Directors are satisfied, having taken legal advice that the funds that have been received have been properly applied in repaying the SPC loan balances and are free of any encumbrance.

Investigations continue to determine what party (or parties) were involved in and were accountable for these events and whether any action should be taken against them….”

KPMG’s audit report opinion in the 30 September 2007 accounts contained substantially the same qualification.  On 6 June 2008, KPMG signed their audit report opinion on HC’s accounts for the period ended 31 December 2007.  The audit report opinion repeated the qualifications concerning the SPV loans with reference to the comparative 2006 figures.  On 5 September 2008, KPMG signed their interim review report on HC’s interim accounts for the 6 month period ended 30 June 2008.  On 12 May 2009, KPMG signed their audit report opinion on HC’s accounts for the 12 month period ended 31 December 2008.  Neither of those reports contained an audit qualification.

[10]      In 2009 the Serious Fraud Office in England and Wales opened an inquiry into Mr Levene’s business affairs, as a result of which he was charged with, and pled guilty to, fourteen counts of fraud, false accounting and obtaining money by deception.  On 5 November 2012 he was sentenced to thirteen years’ imprisonment.

[11]      Following his appointment on 7 July 2010 the liquidator (assisted by staff from the Fraud Investigations and Dispute Service at Ernst & Young LLP) sought to reconstruct HC’s affairs and account for the losses HC and its investors sustained.  The process of identifying the destination of the funds commenced in February 2011.  It included a detailed review of electronic documentation recovered from various sources.  In around June 2012, the liquidator’s team identified documents which indicated that the payments of £19 million and £9.412 million had not been lent on to  second level SPVs but had instead been paid to Niblick and Hassans.  This was confirmed on 31 August 2012, when the defenders produced copies of their client ledger to the liquidator as part of a response to a request for information made by the liquidator under section 236 of the Insolvency Act 1986.

[12]      The pursuer’s case against the defenders is presented on a number of alternative bases.  The primary remedy sought is for an accounting by the defenders to it of the whole of their intromissions from 1 January 2007 to 30 June 2007 with HC’s funds received by them into their client account, and for payment of any balance found to be due.  The pursuer avers that the defenders held those funds in trust for it, and that they paid away £19 million to Niblick and £9.412 million to Hassans in breach of trust (conclusion 1, Cond. 25‑28, and the pursuer’s fourth plea‑in‑law).  Failing an accounting by the defenders the pursuer seeks payment of £28.412 million (conclusion 2, Cond. 28, and the pursuer’s fifth plea‑in‑law).  Alternatively it seeks payment of £28.412 million by way of restoration of the value of trust property in respect that the payments were wrongly paid away in breach of trust (conclusion 3, Cond. 25‑27 and 29, and the pursuer’s sixth plea‑in‑law).  Alternatively the pursuer seeks damages of £28.412 million on grounds of the defenders’ breach of trust et separatim breach of fiduciary duties et separatim breach of contract et separatim fault and negligence et separatim dishonest assistance.

[13]      The defenders maintain that all of the obligations upon which the pursuer founds have been extinguished by the short negative prescription.  The pursuer maintains that the obligation of accounting for trust funds et separatim the obligation to restore the value of the trust property paid away are not obligations to which the short negative prescription applies:  that while they are both prescriptible obligations they are subject only to the 20 year prescription.  In relation to the obligations which are subject to the short negative prescription, the pursuer maintains that they have not been extinguished.  It avers that it was not aware of having sustained loss until after the appointment of the liquidator, and that it could not with reasonable diligence have been aware that it had suffered a loss until less than five years before the action was raised (Prescription and Limitation (Scotland) Act 1973 (“the 1973 Act”), section 11(3)).  It also avers that a period when it was in error induced by the conduct of the defenders should not be reckoned as part of the prescriptive period (1973 Act, section 6(4)(a)(ii)).  I shall examine these averments more closely later.

The parties’ submissions:  Prescription

[14]      As one would expect, there was much common ground in relation to the law.  It was accepted that the pursuer’s claims for damages for breach of trust, breach of contract, fault and negligence, breach of fiduciary duties, and dishonest assistance were founded upon obligations to which the short negative prescription applied;  and that prima facie those obligations had been extinguished by prescription unless the running of the prescriptive period had been postponed by virtue of section 11(3), or a period was not to be reckoned as part of the prescriptive period because of the operation of section 6(4)(a)(ii).

[15]      Parties were at odds whether the obligations underlying the pursuer’s claims (i) for an accounting for trust funds and (ii) for restoration of the value of trust property paid away were obligations to which section 6 applied.

[16]      In relation to these two obligations Mr Duncan submitted that the defenders’ plea of prescription should be sustained and the action should be dismissed.  Cases such as Barns v Barns’ Trs (1857) 19 D. 626 demonstrated that prior to the 1973 Act obligations of a trustee to account for trust funds and to answer for transactions carried out as a trustee prescribed under the old long negative prescription.  In the present case the defenders had produced accounts ‑ the client account ledger showing the payments in and out.  While as a matter of averment the pursuer sought an accounting for trust funds in reality the claim was truly one for reparation for breach of trust.  Obligations to make reparation for breach of trust were obligations which were subject to the short negative prescription:  1973 Act, Schedule 1, paragraph l(d), and Clark’s Judicial Factor v.  Clark’s Executors [2015] CSOH 53 per Lord Burns at paragraph 132.  So far as the claim for restoration of the value of trust property was concerned Mr Duncan submitted, without developing the submission, that Hobday v Kirkpatrick’s Trustees 1985 SLT 197 was a doubtful decision which should not be followed.  In any case, Hobday was distinguishable on two grounds.  Any trust here would have been a trust which was incidental to a commercial transaction the terms of which were governed by contract, as distinct from a traditional trust.  Further, if the obligation here was not one to make reparation it was one to which paragraph 1(g) of Schedule 1 applied.  Moreover, even if section 6 did not apply to an obligation to restore the value of trust property the reality here was that the claim was really one for reparation for breach of trust.  The transactions in question had long ago been completed, any trust which may have existed was no longer in existence, and there was now no entitlement to have the trust fund reconstituted.  In such circumstances there was no right to restoration of the value of trust property, only a right to damages for breach of trust.  The observations of Lord Reed in AlB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at paragraphs [91] et seq. were relied upon by way of analogy in support of that proposition.

[17]      Lord Davidson submitted that on a proper construction of sections 6 and 7 and Schedules 1, 2 and 3 neither of these obligations were obligations governed by section 6.  They were both obligations to which the long‑stop 20 year prescriptive period (section 7) applied.  In relation to a trustee’s liability to account for trust funds reference was made to Cockburn v Clark 1885 12 R 707, Moir v Robertson 1924 SLT 435, Collins v EIS Financial Services Ltd 1995 S.C.L.R. 628;  and Barns v Barns’ Trs, supra.  Obligations of accounting for trust funds were specifically excluded from the obligations of accounting to which section 6 applied (Schedule 1, paragraph 1(f)).  The obligation of a trustee to produce accounts was an imprescriptible obligation (Schedule 3, paragraph (e)(i));  and the obligation of accounting for trust funds and a trustee’s obligation to restore to the trust the value of trust property wrongly paid away were obligations which were subject only to the long negative prescription (Johnston, Prescription and Limitation (2nd ed), paragraphs 3.23 to 3.29, and 6.31).  The trust purposes here had been to pay the money to WBP (cf. The Mortgage Corporation v Mitchells Roberton 1997 SLT 1305).  The money had been paid away to others in breach of trust.  The obligation of a trustee to restore to the trust the value of property wrongly paid away was not an obligation to make reparation to which s. 6 applied: Hobday v Kirkpatrick’s Trustees, supra;  Johnston, supra, paragraph 6.26.

[18]      Turning to section 11(3), it was common ground that the onus lay upon the pursuer to obtain the benefit of the subsection.  The parties differed as to the date when the pursuer actually became aware that it had suffered loss.  The pursuer avers that it did not become so aware until August 2012.  Mr Duncan submitted that averment could not be taken at face value in light of other averments which the pursuer made.  Standing what it had been told by KPMG and by Mr King the pursuer was aware by January 2008 that it had suffered loss.  The fact that it was told and understood that the loss had been repaid and made good was neither here nor there.  It knew that, until the supposed repayment, losses had been incurred.  It was irrelevant that the losses might have been reversed thereafter:  Jackson v Clydesdale Bank plc 2003 SLT 854.  In response Lord Davidson submitted that while the pursuer’s averments demonstrated knowledge by January 2008 that there had been an element of fraud down‑stream affecting purported loans between first‑level SPVs (including WBP) and second‑level SPVs, there had been no knowledge that the loans by HC to first‑level SPVs such as WBP were affected.  It had not been apparent then that HC had sustained any loss.

[19]      In relation to constructive awareness the pursuer avers that it could not with reasonable diligence have become aware that loss, injury or damage had occurred until February 2011 at the earliest.  Mr Duncan maintained that, once again, it was difficult to reconcile the pursuer’s averment about the earliest date for constructive knowledge with its averments about the earlier knowledge which the non-executive directors had obtained from KPMG and Mr King.  In some respects the pursuer’s pleadings were uncandid.  In particular, the pursuer did not admit the terms of the letter of 4 January 2008 from KPMG or provide any explanation of the steps, if any, taken in response to its contents.  That letter had made it very clear how serious the need for further investigation was, and that the further investigation required to be put in train by the pursuer.  The pursuer’s averments of reasonable diligence by it were vague.  For the period after 4 January 2008 there was no adequate explanation of precisely what was done and when it was done.  This was not the type of case where the sort of bald averments which the pursuer made could ever be sufficient (Beverage & Kellas WS v Abercromby 1997 SC 88; Heather Capital Limited v Burness Paul LLP [2015] CSOH 150;  Paragon Finance plc v DB Thackerer [1999] 1 All ER 400).  In response Lord Davidson submitted that in Cond. 5 and Cond. 19 the pursuer had set out a relevant case for inquiry that February 2001 was the earliest date for constructive awareness.  In Heather Capital Limited v Burness Paul LLP, supra, Lord Tyre had gone too far too fast in dismissing the pursuer’s case.  It could not be said at this stage that the pursuer had not done what an ordinary person would have done in all the circumstances: Glasper v Rodger 1996 SLT 44;  Adams v Thorntons WS 2005 1 SC 30.  While on record the pursuer’s response to the defenders’ averments concerning the despatch and terms of the KPMG letter of 4 January 2008 were met with a general denial, Lord Davidson accepted that the letter had indeed been received by the pursuer shortly after it was sent.  The lack of any appropriate response to the defenders’ averments about the letter had been an oversight.  He suggested that was regrettable but not of major importance, because all of the matters raised in the letter had in fact been addressed by the pursuer elsewhere in its pleadings.  The information which the pursuer had from KPMG had not pointed to the need for the pursuer to carry out further inquiries of its own.

[20]      The pursuer’s averments invoking reliance upon section 6(4) are contained in Cond. 39.  Mr Duncan submitted that they were irrelevant.  First, there was no relevant averment of error.  The pursuer appeared to rely upon the existence of a duty on the part of the defenders to advise the pursuer about a possible claim against them, but there was no such duty (Heather Capital Limited v Burness Paull & Williamson LLP, supra, per Lord Tyre at paragraphs 33-35).  Nor were there relevant averments that the error was induced by “conduct” of the defenders.  That word should be given its ordinary meaning, which was positive actings.  A pure omission was not “conduct” within the meaning of that term in section 6(4)(a)(ii):  Johnston at paragraph 6.126, Trustees of Rex Proctor & Partners Retirement Benefits Scheme [2015] CSOH 83, at paragraph 207, and Heather Capital Limited v Burness Paull & Williamson LLP, supra, per Lord Tyre at paragraph 34.  No assistance was to be gained from looking at particular statutory definitions of conduct applying to very different contexts from the present one.  The onus in relation to the proviso lay on the pursuer, just as it did in relation to all the other requirements of section 6(4).  Section 6(4) was an exception to the general rule set out in section 6(1) and it was for the pursuer to bring itself within the exception.  Properly read, Lord Penrose’s observations at paragraphs 33 and 66 of Adams v Thorntons WS were authority to that effect.  Those observations formed part of the ratio of the decision and were binding on the Outer House whether or not the court took the view that they conflicted with the observations of Lord Millett at paragraph 110 of BP Exploration Operating Co ltd v Chevron Transport (Scotland) 2002 SC (HL) 19.  In any case, the issue of onus was immaterial in the present case.  The pursuer’s averments as to reasonable diligence were irrelevant to instruct a case under section 11(3) for postponing the running of the prescriptive period, and the same averments were equally irrelevant to instruct a case that the proviso was satisfied.

[21]      Lord Davidson submitted that the pursuer’s averments were sufficient to satisfy the requirements of section 6(4)(a)(ii).  An error had been identified.  If I understood him correctly, there was error as to whom the funds in the defenders’ client account were remitted by them and error as to whether the pursuer had a possible right of action against the defenders.  The ordinary meaning of the word “conduct” was sufficiently wide to include an omission to act where, as here, the debtor owed the creditor a duty to act.  Construing “conduct” as being limited to positive acts was an unduly restrictive interpretation.  The tentative views to the contrary expressed in Johnston at paragraph 6.126, in Trustees of Rex Proctor & Partners Retirement Benefits Scheme, supra, at paragraph 207 (by me), and by Lord Tyre in Heather Capital Limited v Burness Paull & Williamson LLP, supra, at paragraph 34 should not be followed.  It was worth noting that in other statutory contexts “conduct” had not been restricted to positive acts (see e.g. Companies Act 2006, section 239(5);  Financial Services (Banking Reform) Act 2013, section 68(4);  Counter‑Terrorism and Security Act 2015, section 14);  and that in R v Rai (Thomas) [2001] 1 Cr. App. R 242 the expression “words or conduct” had been held to include circumstances where a person failed to inform a building authority that building works no longer needed to be carried out.  A broad view was to be taken when considering what the subsection required (BP Exploration Co Ltd v Chevron, supra, per Lord Hope at paragraph 31, Lord Clyde at paragraphs 66-67, Lord Millet at paragraph 97).  The subsection was not to be construed restrictively (Dryburgh v Scotts Media Tax Ltd 2014 SC 651, per the Opinion of the Court delivered by Lord Drummond Young at paragraph 20).  The onus of satisfying the requirements of section 6(4)(a)(ii) rested upon the pursuer; but that was not so in relation to the proviso to section 6(4).  It was for the defenders to invoke the proviso and it was for them to demonstrate that time should not be included in the period of error (BP Exploration Operating Co ltd v Chevron Transport (Scotland), supra, per Lord Millet at paragraph 110;  United Central Bakeries v Spooner Industries Limited [2013] CSOH 150, per Lord Hodge at paragraph 117;  Johnston, supra, at paragraphs 6.109 and 6.107).  Read in context, Lord Penrose’s observations at paragraphs 33 and 66 of Adams v Thorntons WS, supra, ought not to be read as saying anything different.  If Lord Penrose was to be read as stating that the onus in relation to the proviso lay on the creditor that was contrary to BP Exploration Operating Co ltd v Chevron Transport (Scotland), supra.  If that was indeed what Lord Penrose said it did not form part of the ratio of the decision, and it should not be followed.  In any event, if, contrary to the pursuer’s submission, the onus in relation to the proviso was on the pursuer, the averments of reasonable diligence made by it anent section 11(3) were also sufficient to make out a case under the proviso which was suitable for inquiry.

[22]      Finally, Mr Duncan submitted that the court should look at the averments which the pursuer had made in Heather Capital Limited v Burness Paull & Williamson LLP, supra.  In that case it had averred that Burness had had actual knowledge of instructions given to them to transmit funds to Mr Levene but did not report it to the pursuer.  Mr Duncan submitted that the knowledge that Burness had should be imputed to the pursuer in the present action because Burness had been HC’s agent (Chapelcroft Limited v Invergordon Egg Producers Limited 1973 SLT (Notes) 37;  Adams v Thorntons WS, supra;  Blackburn Low & Co. v Vigors (1887) 12 App Cas 531;  Muir’s Executors v Craig’s Trustees 1913 SC 349;  Johnston, supra, at paragraph 6.89).  If that was correct it would fix the pursuer with knowledge alerting it to the alleged fraud more than five years before the present action was raised, and there could be no question of either section 6(4) or section 11(3) saving the claim from prescription.  In reply Lord Davidson resisted the contention that Burness’ knowledge fell to be imputed to the pursuer in the present case.  Burness had been used by Mr King in the perpetration by him of the fraud.  It would be ludicrous and unconscionable in those circumstances to impute Burness’ knowledge to the pursuer for the purposes of the present action.

Decision:  Prescription

Introduction

[23]      If the defenders’ plea of prescription is to be sustained without inquiry into the facts the court needs to be satisfied that even if the pursuer establishes all the facts which it avers the obligations it founds upon have prescribed.

Pre-1973 Act law

[24]      Counsel made reference to the pre‑1973 Act law concerning the prescription of obligations of trustees.  I did not understand it to be disputed that prior to the 1973 Act obligations of trustees to account for trust property, or to restore the value of trust property disposed of in breach of trust, prescribed under the long negative prescription (see eg Barns v Barns’ Trs, supra, and the cases there discussed;  and the Scottish Law Commission Report no 15, Reform of the Law Relating to Prescription and Limitation of Actions, Part III, paragraphs 23-27, for a brief general summary of the previous law).  The issues of prescription which arise before me are governed by the 1973 Act.  While the excursus to the former law was not without interest, ultimately it has not assisted me in reaching the conclusions which I have reached.

Accounting for trust funds

[25]      The law relating to accounting for trust funds appears to me to be clear.  The short negative prescription applies to ordinary obligations of accounting, but it does not apply to obligations of accounting for trust funds (1973 Act, Schedule 1, paragraph 1(f)).  The obligation of a trustee to produce trust accounts is an imprescriptible obligation (Schedule 3, paragraph (e)(i)).  The liability is enforceable by means of an action of count, reckoning and payment (Johnston, supra, paragraph 3.28).  On the other hand, the liability to make payment of the sum due in an accounting for trust funds is neither imprescriptible nor is it subject to the short negative prescription.  It is governed only by the long negative prescription (1973 Act, section 7(2);  Johnston, supra, paragraphs 3.23 to 3.29, 6.31; Russell, Prescription and Limitation of Actions (7th ed), pages  73-74, 115).

[26]      On its averments the pursuer’s primary case is for an accounting for trust funds.  The defenders dispute that they held the relevant funds as trustee, but that is a matter which cannot be resolved on the pleadings.  Given that they deny the existence of a trust and of a liability to account for trust funds, it is difficult to see that they can maintain that they have produced trust accounts: and that is certainly not the position on the pursuer’s averments.  The obligation founded upon in the primary case does not bear to be an obligation to make reparation for breach of trust (Schedule 1, paragraph 1(d)) or an obligation arising from, or by reason of any breach of, a contract or promise (Schedule 1, paragraph 1(g)):  and I am not persuaded that at a debate ‑ where the pursuer’s averments require to be taken pro veritate – the court can or should re-characterise the obligation upon which the pursuer founds and treat it instead as if it were an obligation of a different nature.

[27]      In my opinion the pursuer’s averments as to the existence of a trust and of an obligation to account for trust funds are sufficient to entitle it to inquiry.  It cannot be said that the pursuer is bound to fail (or that the defenders’ prescription plea is bound to succeed) even if the pursuer establishes all it avers.

Breach of trust

[28]      As an alternative to an accounting for trust funds the pursuer seeks restoration of the value of trust property paid away in breach of trust.  The third conclusion and the sixth plea‑in‑law somewhat confusingly refer to “recompense”, but it is clear from the pursuer’s averments in Cond. 29 and 39 that restoration to the trust is what is sought.

[29]      In my opinion a trustee’s obligation to restore the value of trust property to the trust is not an obligation to which the short negative prescription applies.  I am not persuaded that Hobday v Kirkpatrick’s Trustees, supra, was wrongly decided.  I agree with Lord Cowie (1985 SLT 197, at page 199) that an obligation of that nature is not an obligation arising from liability to make reparation within the meaning of paragraph 1(d) of Schedule 1 (see also Johnston, supra, paragraph 6.26).  Rather, it is an obligation to which only the long negative prescription applies (section 7(2)).

[30]      I am not persuaded that it is possible to distinguish the present case from Hobday without any inquiry into the facts.  Mr Duncan’s first suggested ground of difference was that here the court could and should treat the obligation to restore the value of trust property to the trust as if it were a mere contractual obligation or an obligation arising by reason of breach of contract.  However, that is not the nature of the obligation upon which, on averment, the pursuer founds; and without establishing the facts I see no proper basis for proceeding as if it was.  Even if Lord Reed’s observations in AlB Group (UK) plc v Mark Redler & Co Solicitors, supra, had tended to support Mr Duncan’s suggested approach I would have been very hesitant indeed to treat observations on the English law of equitable compensation as being transferable to the Scots law of trusts: but in my opinion the observations do not assist Mr Duncan.  On the contrary, Lord Reed was at pains to distinguish claims for damages from claims for equitable compensation (see e.g. paragraphs 134, 137).  The second suggested ground of difference was that if the obligation here was not an obligation to make reparation it was an obligation arising from, or by reason of a breach of, a contract or promise and that it fell within Schedule 1, paragraph 1(g).  But prima facie the obligation to restore the value of trust property to the trust upon which the pursuer founds is an obligation of a different character from the obligations described in Schedule 1, paragraph 1(g) (cf. AlB Group (UK) plc v Mark Redler & Co Solicitors, per Lord Reed at paragraph 137).

[31]      Once again, in my opinion the pursuer’s averments of trust and of an obligation to restore the value of trust property are suitable for inquiry.  It cannot be said that the pursuer is bound to fail (or that the defenders’ prescription plea is bound to succeed) even if the pursuer establishes all it avers.

Cases to which the short negative prescription does apply

[32]      At the debate the pursuer proceeded on the basis that each of the remaining alternative cases advanced by it (viz claims for damages for breach of trust, breach of contract, fault and negligence, breach of fiduciary duties, and dishonest assistance) was subject to the short negative prescription.  I understood the pursuer to accept that these claims for damages will have been extinguished unless (in terms of section 6(4)) a period of time is not to be reckoned as part of the prescriptive period, or the commencement of the prescriptive period was postponed (by virtue of section 11(3)).

Section 11(3)

[33]      I am not persuaded that I can determine on the pleadings that the pursuer had actual awareness that it had suffered loss more than five years before the action was raised.  It avers it was not aware that it had suffered loss until a date later than five years before the action was raised.  I require to take that averment pro veritate unless other averments made by the pursuer are plainly inconsistent with it and clearly show actual awareness at an earlier date.  I am not satisfied that there are any such averments.  As a result of the events of 2007 the pursuer became aware (i) that substantial sums lent by it to first‑level SPVs, including the £19 million and the £9.412 million, had not been on‑lent by first level SPVs to second‑level SPVs;  (ii) that instead it had been transferred to other unknown recipients for unknown purposes;  (iii) that there had been no valid security granted to first‑level SPVs in relation to the transfers to such recipients;  (iv) that the loan and security documentation relating to the purported transactions with second‑level SPVs was invalid;  (v) fraud had been involved;  (vi) Mr King had alleged to the non-executive directors of the pursuer that Mr Volpe and Cannons had been responsible for the fraud;  (vii) that the pursuer had received via Cannons sums tendered as repayment of each of the loans to SPVs including the two purported loans to WBP.  In my opinion none of those matters are clearly indicative of awareness that loss had been sustained.  The pursuer’s position is that until 2012 it believed that each loan made by it had been duly advanced to the intended first‑level SPV and that the debenture granted by the first‑level SPV when the credit facility agreement with it was concluded would secure the loan; that each of its loans to SPVs had been repaid in about May 2007;  and that the irregularities which had been discovered had all been “downstream” in relation to on‑lending by the first‑level SPVs.

[34]      On the other hand I am persuaded that the pursuer’s averments do not adequately explain why it could not with reasonable diligence have discovered that it had suffered loss more than five years before the action was raised.

[35]      The letter of 4 January 2008 from KPMG made it very clear how serious the need for further investigation was, and that that further investigation required to be put in train by the pursuer.  I do not accept Lord Davidson’s contention that all of the matters raised in that letter had in fact been addressed by the pursuer elsewhere in its pleadings.  Nowhere does the pursuer acknowledge (i) that it was advised by KPMG that it was its obligation to take the actions needed to remedy the weaknesses which had been identified;  (ii) that it was advised that KPMG’s routine audit work was designed to enable it to form an audit opinion on the accounts of the companies and that that work should not be relied upon to disclose all irregularities that may exist;  (iii) that as at 4 January 2008 KPMG recommended that the Board of HC continue their investigation into the fraudulent loan and security documentation and formally document their decision as to whether or not to inform the criminal justice authorities;  (iv) that KPMG recommended that the Board of HC continue their investigation into the misapplication of funds for an unknown purpose and minute their actions and conclusions.  The report makes it crystal clear that further investigations were required and were recommended in relation to those matters.

[36]      It is plain from the averments in Cond. 5 that the audit opinions in the accounts for the 16 month period ending on 31 December 2006 and the 9 month period ending on 30 September 2007 contained very serious qualifications by KPMG; and that the audit opinion in the accounts for the year ending on 31 December 2007 (signed by KPMG on 6 June 2008) repeated the qualifications concerning the SPV loans with reference to the comparative 2006 figures.  The pursuer goes on to aver that on 5 September 2008 KPMG signed their interim review report on HC’s interim accounts for the six‑month period ending 30 June 2008 and that their “review opinion was unqualified”;  and that on 12 May 2009 KPMG signed their audit report for the 12 month period ending on 31 December 2008 and that the audit report was again unqualified.  The pursuer does not aver whether either of those reports referred back to 2006 or 2007 figures (and neither report was produced).  Apart from these averments the only other material averments were as follows (the emphasis is mine):

“Cond. 5 … Thereafter all avenues of enquiry were considered to have been pursued by HC’s board of directors, including discussing matters with the FSC and making a disclosure to the FCU; meeting with KPMG to discuss how the issue could be further investigated; obtaining legal advice; and seeking to obtain further information from inter alia Gregory King, Santo Volpe and Triay & Triay. These enquiries amounted to reasonable diligence in the circumstances of this case. HC’s board of directors, Abacus and KPMG believed that whilst there had been irregularities with the securities granted by the Second Level SPVs and as explained in the letter from Gregory King to the board of directors of HC dated 26 November 2007 that “some form of fraud had been deliberately introduced with invalid land registry details”, the funds advanced had been repaid in full, with interest, and HC had not suffered a loss. HC’s board of directors’ understanding was supported by KPMG’s investigations. KPMG verified HC’s accounts as reflecting a true and fair view of the HC’s financial conditions. This remained KPMG’s position in subsequent reports. In these circumstances, the board of directors of HC were not, and could not with reasonable diligence, have been aware that HC had suffered a loss until after the appointment of the Liquidator. The true destination of these funds was confirmed on 31 August 2012. From the date of his appointment the Liquidator (assisted by staff from the Fraud Investigations and Dispute Service at Ernst & Young LLP) sought to reconstruct HC’s affairs and so account for the losses HC and its investors sustained. This process of identifying the destination of the funds commenced in February 2011. This included a detailed review of electronic documentation recovered from various sources. In around June 2012, the Liquidator’s team identified documents which indicated that the payments to WBP had not been on lent to the Second Level SPVs but had instead been paid to Niblick and Hassans. This was only confirmed on 31 August 2012, when the First Defender produced copies of its client ledger to the Liquidator as part of a response to a request for information made by the Liquidator under section 236 of the Insolvency Act 1986. The ledger produced showed that the funds paid to the defenders by HC had been paid to Niblick and to Hassans.

Cond. 39. … Separatim, and in any event, neither the relevant board of directors of HC nor the Liquidator upon his appointment were aware, nor could they with reasonable diligence have been aware or discovered, at any point prior to the Liquidator’s appointment, that HC suffered loss, injury or damage as condescended above. Neither the relevant board of directors of HC nor the Liquidator could have, with reasonable diligence, have discovered prior to the Liquidator’s appointment that a loss of the sum of £28.412 million had been suffered by HC as previously condescended upon. Reference is made to the averments in Article 5 of Condescendence, dealing with the inquiries raised by KPMG in 2007 and the way in which those were dealt. KPMG verified HC’s accounts as reflecting a true and fair view of the HC’s financial conditions. This remained KPMG’s position in subsequent audit reports. Accordingly, the auditors had informed the relevant board of directors of HC that no loss had occurred and confirmed that position in subsequent years. Further as the witness statement dated 26 February 2010 (which is produced) by Mr Ashworth, then one of HC directors, shows, HC made an application to the High Court of Justice in the Isle of Man for the appointment of a liquidator due to cash flow (rather than asset insufficiency) reasons. This was in order that the liquidator appointed by the court could start as soon as possible with the process of realising the loans (and the real property collateral for those loans) transferred to HC by Mathon. At that point, the loans in question were HC’s main asset. Mathon, who had previously managed the loan portfolio, had been put into administration on 17 February 2010, and was therefore no longer available to perform the same service for HC. It was only following Liquidator’s investigations into the affairs of HC that the current loss, injury and damages was discovered. Accordingly, on that alternative basis, the prescriptive period had not started until some time after the Liquidator’s appointment, and at the earliest in or about February 2011. The pursuer was not aware, and it could not have with reasonable diligence been aware, that it had suffered loss of funds transferred to a third party in an undocumented and unsecured way, contrary to the HC’s investment approach and in breach of HC’s instructions. A person of ordinary prudence, exercising reasonable diligence, could not have become aware of the loss prior to February 2011. Further and in any event, in all the circumstances of the case, the pursuer had no reason either in 2007, when the transfers in question were made or at any point after that and prior to the Liquidator’s investigations to suspect the existence of a loss as previously condescended upon had occurred. Reference is made to section 11(3) of the Prescription and Limitation (Scotland) Act 1973.”

[37]      There are a number of problems with the pursuer’s approach. First, the averments in Cond. 5 that KPMG “verified HC’s accounts as reflecting a true and fair view of the HC’s financial conditions.”, and that “… KPMG believed that … the funds advanced had been repaid in full, with interest, and HC had not suffered a loss.”, and the averment in Cond. 39 that “Accordingly, the auditors had informed the relevant board of directors of HC that no loss had occurred and confirmed that position in subsequent years.” at best place a very favourable gloss on the facts given the qualifications in the accounts to 31 December 2006 and 30 September 2007 (which qualifications were referred to in the accounts for the year to 31 December 2007 signed on 6 June 2008) and the very serious concerns expressed in the letter of 4 January 2008.  Second, the question is whether the pursuer could not with reasonable diligence have become aware that it had suffered any material loss (not necessarily the full extent of the loss actually suffered).  Third, and critically, the pursuer’s averments setting out what it did in the exercise of reasonable diligence appear to me to be vague and unspecific.  The averments do not explain precisely what the pursuer did and when it did it. In my opinion in the circumstances of the present case that simply will not do.  In light of the issues raised in the defenders’ averments it was incumbent upon the pursuer to specify in detail each of the steps which it took after receipt of the letter of 4 January 2008.  It ought to have explained what, if anything, it did to comply with the recommendations in that letter; and if it did not comply with the recommendations it ought to have explained why it did not.  The pursuer has conspicuously failed to do any of those things.  All that it proffers are vague general averments which provide no real detail as to what was done and when it was done.  In my opinion the pursuer has not discharged the onus upon it of making relevant and specific averments setting out a basis for establishing that it could not with reasonable diligence have been aware that it had suffered loss more than five years before the raising of the action.  It has not made relevant and specific averments which if established would show that it took the steps that a person of ordinary prudence would have taken if he found himself in the circumstances which the pursuer did.

[38]      Accordingly, since in order to obtain the benefit of section 11(3) the pursuer requires to demonstrate both that it was not aware and that it could not with reasonable diligence have been aware that relevant loss, injury and damage had occurred, its averments that the running of the prescriptive period was postponed in terms of section 11(3) are irrelevant.

Section 6(4):

[39]      It is well established that it is for the creditor in an obligation to invoke section 6(4).  Where the creditor relies on an error it is for him to specify what the error was, when the error commenced, and when it ceased.  The pursuer’s averments invoking section 6(4) are contained in Cond. 39:

“…The Liquidator was appointed on 7 July 2010. The defenders never advised either the relevant HC or the Liquidator about a possible claim against them (before or after that date), an obligation that was incumbent upon them as an aspect of the overall duties they owed to HC. Accordingly, any period prior to the raising of this action should not be reckoned as part of the prescriptive period in this case, due to the error induced by the conduct of the defender, which induced the pursuer to refrain from making a claim. The error was induced, in particular, by the following: (i) sending the HC funds, which constituted the first payment (as described above) to a third party, undocumented and unsecured, (ii) sending funds which constituted the second payment (as described above) to a law firm in Gibraltar, under the personal reference of Gregory King and for the purposes still unknown, (iii) not advising the relevant board of directors of HC, Abacus, or the Liquidator at any point of the true sequence of events which led to the loss of the HC funds deposited in the defenders’ client account. Reference is made to section 6(4) of the Prescription and Limitation (Scotland) Act 1973.”

[40]      The averments do not specify with the clarity one would expect the error upon which the pursuer founds.  The formulation used is not commendable.  More precise pleading could have avoided the complaint of obscurity.  However, on a benign reading I think it is tolerably clear that error having two strands is identified ‑ error as to whom the funds in the defenders’ account were remitted by them and error as to whether the pursuer had a possible right of action against the defenders.

[41]      While no date of commencement of the error is specified, it may reasonably be inferred that the pursuer’s case is that the error arose shortly after each of the £19m and £9.412m payments were remitted by the defenders to the recipients.  The pursuer does aver an end date for the error (the date of raising of the action (23 October 2014)), but that is obviously not correct as it also avers (Cond. 5) that the true recipients of the payments were confirmed on 31 August 2012.  However, in my opinion that relatively immaterial inconsistency is not a good ground for not proceeding to inquiry.

[42]      Are the failures to advise as to whom the payments were remitted and as to the existence of a possible right of action “conduct” within the meaning of section 6(4)(a)(ii)?  That depends on whether a failure to act may be “conduct”.

[43]      I agree with Lord Davidson that the view expressed in Johnston at paragraph 6.126 is tentative:

“One case in which section 11(3) may be the only way forward is where what has induced the pursuer to refrain from making a relevant claim is a negligent omission by the defender.254 Since the only error which is covered by section 6(4) is error induced by ‘words or conduct’, it is not clear that the running of prescription would be suspended by an omission rather than a positive act;  certainly, this would not be an ordinary construction of the word ‘conduct’.255

For this reason, and owing to the relief available under section 11(3), it may be better to assume that omissions inducing error may not suspend the running of prescription but that they will be capable of supporting an argument for postponing its starting date.

254 For example, where the negligent failure of solicitors to notify the appointed executor of the existence or contents of the will prevented him from raising any proceedings until he was belatedly informed of those facts: Hawkins v Clayton (1988) 164 C.L.R. 539 at 590, per Deane J.

255 Although what was at issue in ANM Group Ltd, 2008 S.L.T. 835 appears to have amounted to omissions, there is no discussion of the point there.”

As noted in Johnston, in ANM Group Ltd v Gilcomston North Ltd Lord Emslie (paragraphs 75 ‑ 77) appears to have proceeded on the basis that omissions could be conduct.  It is also interesting to note that the Lord Ordinary (Lord Macfadyen) in Adams v Thorntons WS, unreported, 19 August 2003, observed at paragraph 67:

“…It does not seem to me that to fail to convey to another person information which one does not in fact possess can be said to constitute words or conduct within the meaning of section 6(4). The position might well be different if a person did not pass on information which he had, i.e. if there was active concealment. If, for example, a solicitor withheld from his client information of which he (the solicitor) was aware and which would have alerted the client to the possibility of a claim against the solicitor, that might well be held to constitute conduct within the meaning of section 6(4)(a)(ii). Since the point does not arise in the present case, however, I prefer to reserve my opinion on it …”

The Inner House (2005 1 SC 30) was critical of the approach taken by the Lord Ordinary in the first sentence quoted.  However, there was no criticism of the views expressed in the remainder of the passage, and the Inner House’s own approach appears to have been consistent with them.  Lord Penrose opined at paragraph 66:

“[66] In my opinion, the Lord Ordinary can be said to have misdirected himself in applying to the question whether Thorntons induced error in Mr Adams criteria that depended on personal knowledge of individual partners of the facts and circumstances from which the error arose rather than the knowledge of the firm of which he was client. As I have already commented, he was not assisted in this matter by argument. Counsel for the reclaimer’s submissions to the Lord Ordinary did not cover this ground. But the point could have been of materiality if the evidence had been available for the court to consider. Mr Adams’ complaint is against Thorntons, and is that at March 1995 and in and after 1997, he was left in ignorance of the possibility that he might have a claim against the firm by silence on the part of the firm associated with positive advice that he had a remedy against his former associate, and by the firm subsequently acting for him in pursuing that action….”

Lord Penrose went on to hold that on the facts found by the Lord Ordinary the obligation founded upon had prescribed.  While in the circumstances of that case silence was said to have been associated with positive advice and actings, it is not clear that was critical to Lord Penrose’s view that the matter might have been of some materiality.

[44]      I turn to the more recent decisions.  In Trustees of Rex Proctor & Partners Retirement Benefits Scheme, supra, I agreed (at paragraph 207) with the view expressed in Johnston that on an ordinary construction “conduct” requires a positive act.  In Heather Capital Limited v Burness Paull & Williamson LLP, supra, (at paragraph 34) Lord Tyre concurred with the views expressed in Johnston and by me in Rex Proctor.  In neither case does there appear to have been extensive submissions in relation to the matter.

[45]      On a fair reading of the pursuer’s averments in Cond. 39 it maintains that the defenders had an obligation to advise it of the true sequence of events which led to the loss of the funds and that there was a possible claim against them (cf. Rex Proctor, paragraph 207).  On the pleadings I am not satisfied that the pursuer is bound to fail to establish the grounds of action he puts forward, or that those grounds could not provide a basis for the obligation to advise it which the pursuer avers the defenders had (see eg Dryburgh v Scotts Media Tax Ltd, supra, per Opinion of the Court at paragraph 26).  In the present case, unlike Heather Capital Limited v Burness Paull & Williamson LLP (paragraph 35), my understanding is that the duty to advise is said to have arisen on several of the bases of action on which the pursuer relies.  (I also note in passing that I was unconvinced by Mr Duncan’s argument (which Lord Tyre accepted) that the existence of a continuing duty to advise would prevent prescription from ever occurring.  The operation of the proviso would be likely to prevent any such scenario).

[46]      Having heard fuller argument on the issue than I did in Rex Proctor, and having reflected further upon it, I think there is a tenable argument that to construe “conduct” as including only positive acts may be too restrictive an interpretation.  The Oxford English Dictionary (2nd ed.) defines “conduct” as:

“Manner of conducting oneself or one’s life; behaviour; usually with more or less reference to its moral quality (good or bad). (Now the leading sense)”.

In my opinion, on a proper construction of section 6(4) the word “conduct” has its ordinary meaning of behaviour.  The expression is wide enough to include an omission to act in breach of an obligation or duty.  It is very difficult to see why it should be given a more restrictive meaning, particularly since it is clear that a broad view is to be taken to the construction of section 6(4) (BP Exploration Co Ltd v Chevron, per Lord Hope at paragraph 31, Lord Clyde at paragraphs 66‑67, Lord Millet at paragraph 97;  Dryburgh v Scotts Media Tax Ltd, supra, Opinion of the Court at paragraphs 18 ‑ 20).  Resort to the mischief rule points in the same direction.  The mischief the error provision was intended to address is broad enough to encompass error induced by a failure of the debtor to act in breach of an obligation or duty.  A construction of “conduct” which confined it to positive acts would fail to address part of the mischief.  It would be very odd indeed if innocent action inducing error fell within the purview of the provision but reprehensible inaction in breach of duty did not.  The equitable case for the latter circumstance being included within the scope of the mischief, and within the meaning of “conduct”, is as strong as the case for reprehensible action being included and stronger than the case for innocent action being included.

[47]      I turn then to the proviso.  The defenders invoke it in Answer 39:

“Esto either HC or the liquidator were in error to any extent as to whether loss had been suffered (which is denied) they could with reasonable diligence have learned the truth by, at the very latest early 2008. Reference is made to the foregoing averments anent section 11(3).”

While strictly speaking the pursuer does not respond specifically to that averment other than by way of a general denial, both parties proceeded upon the basis that the pursuer’s averments anent section 11(3) were also the matters which it founded upon in response to the defenders’ reliance upon the proviso to section 6(4).

[48]      It is a well‑established principle of statutory construction that a party seeking to avail himself of a proviso must raise and prove it, as it is in substance an exception (see Bennion on Statutory Interpretation (6th ed.), section 242 and the authorities referred to in footnote 71).  Exceptionally, a provision may be in the form of a proviso but may in fact be an independent substantive provision (ie not a “true” proviso).  I am satisfied that that is not the case here.  I am also clear that, on a proper construction of section 6, subsection (4)(a) is an exception to the general rule in subsection (1) but that the proviso is an exception to that exception.

[49]      In BP Exploration Operating Co ltd v Chevron Transport (Scotland), supra, Lord Millet opined at paragraph 110 (emphasis added):

“[110] If the matter stopped there, any obligation on the part of Transport [the creditor in the obligation] to make reparation was not extinguished by the time it was served with the present proceedings. But Transport may still succeed in showing that its obligation was extinguished before 28 September 1995 by invoking the proviso to curtail the duration of the period to be excluded from the calculation of the primary period. If it can establish that the pursuers could with reasonable diligence have discovered the error at some time before 18 August 1995, then the excluded period will end at that earlier time.”

[50]      While none of the other members of the appellate committee addressed the issue of the operation of the proviso, none expressed any reservations as to what Lord Millet said in paragraph 110 (and at paragraph 33 of his speech Lord Hope made specific reference to, and agreed with, another aspect of Lord Millet’s speech).  Moreover, in my opinion when the pleadings and the decision are examined it is clear that the committee must indeed have proceeded upon the basis which Lord Millett described.

[51]      A vessel had caused damage to loading arms at a jetty at the pursuers’ terminal.  The pursuers raised an action against Chevron Shipping (“Shipping”) averring that that company were owners of the vessel.  The pursuers averred that more than five years after the incident Shipping indicated that the owners were Chevron Tankers (“Tankers”).  The pursuers raised a second action against Tankers.  In their defences Tankers admitted ownership but averred that the vessel had been the subject of a bareboat charter and that the charterers were Chevron Transport (”Transport”).  In both the Transport action and Tankers action the defenders pled that the obligation (to make reparation) relied upon had prescribed.  In both of those actions the pursuers averred that error as to ownership had been induced by the words and conduct of Shipping acting on the defenders’ behalf.  In both cases the defenders invoked the proviso to section 6(4)(a).  The defenders averred that the pursuers could with reasonable diligence have discovered the error within five years of the incident.  They set out steps they averred ought to have been taken by the pursuers.  They averred that letters of protest written to the pursuers after the incident by the master of the vessel alerted them to the true identity of the owners.  In each case the pursuers denied that they could with reasonable diligence have discovered the error more than five years before the action was raised.  In the Tankers case the pursuers averred that they had no reason to disbelieve what Shipping had told them as to ownership; that in the circumstances reasonable diligence did not require seeking verification;  and that no indication of the true identity of the owners had been given in any of the letters of protest.  In the Transport case the pursuers did not positively aver that they could not with reasonable diligence have discovered the error within five years of the incident:  but in response to the defenders’ averments they averred that they had had no reason to disbelieve Shipping; and that even if they had doubted what Shipping said they could not have ascertained by reference to any public register that Transport were bareboat charterers.  The Lord Ordinary allowed a proof before answer in relation to all three actions.  The First Division sustained the plea of prescription in the action against Transport and allowed a proof before answer in the other two actions.  The House of Lords recalled that interlocutor and allowed a proof before answer in all three cases.  In my opinion, since in the Transport case the pursuers did not positively aver that they could not with reasonable diligence have become aware of their error within five years of the incident, their Lordships must have proceeded on the basis that it was not incumbent upon the pursuers to do so.

[52]      In United Central Bakeries v Spooner Industries Limited [2013] CSOH 150 Lord Hodge followed the same approach as Lord Millett:

“117.… The burden of showing, for the purpose of the proviso to section 6(4), when UCB could with reasonable diligence have discovered the error rested on Spooner  [the debtor in the obligation]…”

The views expressed in Johnston at paragraphs 6.109 and 6.107 accord with those of Lord Millett and Lord Hodge.

[53]      In Adams v Thorntons WS, supra, the pursuer raised an action for damages for professional negligence against his former solicitors more than 10 years after the transactions in which they had acted for him and in consequence of which he averred that he had sustained loss.  A plea of prescription was taken.  In order to defeat the prescription plea the pursuer required to establish both that the date the obligation became enforceable was postponed by virtue of section 11(3), and that he had been induced to refrain from making a relevant claim against the defenders by reason of error induced by words and conduct of certain partners of the defenders (section 6(4)(a)(ii)).  The defenders invoked the proviso to section 6(4)(a), and the pursuer made certain averments in reply.  The Lord Ordinary allowed a preliminary proof before answer on the issue of prescription.  After proof he sustained the plea.  He concluded that the pursuer had failed to establish the facts required to enable him to benefit from section 11(3) up to a point sufficiently late to avoid prescription (Adams v Thorntons WS, unreported, 19 August 2003, paragraphs 45 ‑ 46, 55 ‑ 58, 59).  In addition he was not satisfied that the pursuer had proved (i) that an erroneous belief that he had no claim against the defenders had been induced in him by any words or conduct of the defenders’ partners;  and (ii) that his reason for not pursuing a claim against the defenders between 1995 and 2000 was such induced error (paragraph 69).  So far as is apparent from the Lord Ordinary’s Opinion the issue of the proviso does not appear to have featured in submissions, and he does not seem to have made any findings in respect of it in the section of his Opinion dealing with section 6(4).  An Extra Division of the Inner House refused the pursuer’s reclaiming motion.  It decided that the Lord Ordinary reached the correct conclusion in relation to the application of section 11(3);  and that having regard to findings in fact made in connection with section 11(3) (viz that the pursuer could with reasonable diligence have been aware of the facts relevant to his claim in December 1990) the period after 17 December 1990 was not to be included in the period of error upon which the pursuer could rely for the purposes of section 6(4)(a)(ii).  Lord Penrose delivered the principal Opinion.  He observed at paragraphs 36 and 66:

“36. For sec 6(4) to provide protection the creditor must establish that he was in error, that the error was induced in one or other of the ways identified, and that he has not become disabled from relying on the error by the operation of the proviso …

66. … The first issue is whether Mr Adams has established as a fact that he was in error as to the scope of his remedies and because of that error refrained from pursuing a claim against Thorntons. If he was in error, he must then establish that the error was induced by Thorntons. And finally he must show that the error could not have been discovered with reasonable diligence until a point in time after which the discovery was irrelevant to the running of prescription against him.”

Lord Marnoch and Sir David Edward concurred that the reclaiming motion should be refused.  Each reserved his opinion in relation to the more difficult points of construction of section 6(4) and section 11(3) which had been argued but did not require to be decided (paragraphs 1 ‑ 3, 76).

[54]      In these circumstances I have considerable doubt whether it is correct to say that Lord Penrose ruled on where the onus lay in relation to the proviso.  In my opinion Mr Duncan seeks to read too much into paragraphs 36 and 66 of Lord Penrose’s Opinion.  The context was a reclaiming motion following a preliminary proof where the Lord Ordinary had made findings in fact.  In view of the facts found the question of onus in relation to the proviso was immaterial.  Onus in relation to the proviso was not a matter the Inner House needed to consider, and there is no indication that it had the benefit of submissions on the point.  Had Lord Penrose really intended to express a view at odds with Lord Millet’s I would have expected him to acknowledge that and to explain his reasons for disagreeing.  He did none of that.  In fact, while he referred to several passages in BP Exploration v Chevron he made no reference to paragraph 110.

[55]      If, contrary to my view, Lord Penrose falls to be read as holding that the onus in relation to the proviso is on the creditor, I do not accept Mr Duncan’s submission that I am bound to follow Lord Penrose on that point.  In my opinion if that was indeed what Lord Penrose said it does not form part of the ratio of the decision.  I consider that I am free to follow BP Exploration v Chevron Transport (Scotland) and Lord Hodge in United Central Bakeries v Spooner Industries Limited, and I am satisfied that I should do so.

[56]      Accordingly, in my view it is for the defenders to establish that the proviso applies so as to exclude a period from the period of error founded upon by the pursuer.  This is important because, even though I am of the view that the pursuer’s averments in relation to its reliance on section 11(3) are not adequate to set forth a case that it could not with reasonable diligence have been aware that relevant loss, injury or damage had occurred more than five years before the action was raised, it does not necessarily follow that the defenders will succeed in discharging the onus upon them of establishing that the pursuer could with reasonable diligence have discovered the error upon which it founds at a date earlier than the pursuer in fact discovered it.

[57]      In my opinion the pursuers’ averments in relation to section 6(4) are suitable for inquiry.

Pragmatism?

[58]      Since inquiry is necessary in relation to the pursuer’s averments concerning section 6(4), and since the issues relating to reasonable diligence in connection with section 6(4) and section 11(3) would be likely to cover similar ground, I have considered whether I should simply allow inquiry in relation to both of those issues.  In my opinion it would not be right to be swayed by that consideration.  The pursuer has failed to discharge the onus upon it of pleading a relevant section 11(3) case.  It would be wrong to ignore that and to allow the pursuer to elide the consequences of that failure.

Imputed knowledge

[59]      The short answer to Mr Duncan’s “imputed knowledge” submission is that the hearing before me was to debate the relevancy of the pursuer’s pleadings in this action.  Nowhere in those pleadings does the pursuer aver knowledge on the part of Burness of the matters upon which Mr Duncan seeks to rely.  That is sufficient to deal with the submission.  At a preliminary proof on prescription it will be a matter for proof whether Burness had the relevant knowledge;  and, if they did, it will be a question of law having regard to the whole circumstances established at the preliminary proof whether that knowledge falls to be imputed to the pursuer;  and, if so, for what purposes.

Decision:  other matters

[60]      Mr Duncan attacked the relevancy of the pursuer’s pleadings in a number of respects.  Ultimately he accepted that some points were not capable of being determined at debate:  it is unnecessary to mention them.  So far as the remainder are concerned, while the criticisms had been set out at length in the defenders’ note of argument Mr Duncan acknowledged that the principal issue for debate was whether the defenders’ plea of prescription could be sustained at this stage or whether a preliminary proof on prescription was required.  Since that was so he dealt briefly with the additional submissions.  In short these were (i) that the pursuer did not have relevant averments of a solicitor-client relationship between it and the defenders in relation to the payments of £19 million and £9.418 million, nor were there relevant averments as to the scope of the retainer;  (ii) that the pursuer’s averments that it had sustained a loss were irrelevant;  (iii) that on the hypothesis that the pursuer was not the defenders’ client the averments (a) that the payments had been held by the defenders in trust for the pursuer were irrelevant, (b) that the defenders owed the pursuer fiduciary duties were irrelevant;  (iv) that the pursuer’s averments that the defenders owed the pursuer a delictual duty of care were irrelevant;  and (v) that certain of the pursuer’s averments involved collateral matters and were irrelevant.

[61]      I too consider it possible to deal briefly with these submissions.  So far as matters (i) to (iv) are concerned I am not persuaded that the pursuer’s averments are insufficient to entitle it to inquiry.  I am not satisfied that the pursuer is bound to fail to establish that the defenders acted as its solicitors when it received the payments, and that they breached the duties they owed to it, even if it succeeds in proving all its averments relating to those matters (Jamieson v Jamieson 1952 SC (HL) 44).  Similarly, I am not satisfied that if the pursuer proves its averments it will fail to prove that it has suffered a loss; or that it is bound to fail to establish that the defenders owed it the fiduciary duties condescended upon;  or that it is bound to fail to establish that the defenders owed it a delictual duty of care.

[62]      The averments said to be collateral are averments of links between the eighth defender and companies controlled by Mr King;  and averments that in December 2008 an unexplained payment of £200,000 was made to the eighth defender from the same Rosecliff Limited client account at Hassans into which the £9.412 million had been paid by the defenders.  Mr Duncan submits that since none of this pre-dates either of the dates when the pursuer’s loss was sustained (in January and March 2007) it can have no possible bearing upon any of the pursuer’s grounds of action, and that it is simply “mud‑slinging”.

[63]      The averments complained of serve to give notice to the defenders of the pursuer’s intention to explore these matters at proof.  The defenders offer no explanation as to why the £200,000 payment was made, nor do they clarify whether or not its source was the £9.412 million.  If its source was the £9.412 million then part of a sum which the pursuer avers was paid away in breach of trust was in fact returned to the eighth defender.  Moreover, the acceptance of the £200,000 payment and the eighth defender’s roles or involvement with Mr King and his companies in a period soon after the two payments might be relevant to the question what, if anything, the defenders ought to have advised the pursuer between the date of the payments and the pursuer discovering where they had gone.  The matters said to be collateral might raise issues of judgement or probity which, arguably, could be relevant to the credibility and reliability of the eighth defender.  Having regard to the whole circumstances which the pursuer avers on record I am not satisfied that I can conclude at this stage that the averments complained of are necessarily collateral and irrelevant.

Conclusions

[64]      With the exception of its section 11(3) case, the pursuer’s averments are suitable for inquiry.  A preliminary proof on prescription appears to me to be the appropriate way forward.  However at counsel’s request I shall put the case out by order to discuss the terms of an appropriate interlocutor to give effect to my decision, and to discuss further procedure.

[65]      I recognise that a number of my conclusions do not coincide with Lord Tyre’s conclusions in the case of Heather Capital Limited v Burness Paull & Williamson.  We have reached the same result on the pursuer’s section 11(3) case (even though the pursuer’s averments in that regard in the present case were somewhat fuller than those considered by Lord Tyre).  Some of the matters which I have had to decide are issues which Lord Tyre does not appear to have been asked to consider.  In Burness Paull it seems that the pursuer did not argue that the obligation of accounting for trust funds and the obligation to restore the value of trust property to the trust were obligations to which the short negative prescription did not apply.  In relation to other matters – in particular section 6(4) ‑ I may have had the advantage of hearing arguments which were either additional to, or more fully developed than, the submissions made to Lord Tyre.  Be that as it may, ultimately there is no escaping the fact that we have reached different conclusions on at least three material matters, viz (i) whether there are relevant averments of error;  (ii) whether there are relevant averments of conduct by the defenders inducing the error;  and (iii) whether the onus of averment and proof in relation to the proviso rests with the creditor or debtor in the relevant obligation.

 

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NO MONEY NO JUSTICE: Slow, costly courts, £220K a year judges on junkets & justice staff on the take prompt Scottish Government proposal for 25% hike in court fees

Scotland’s courts to become 25% more rip-off than before. EVERYONE knows the Scottish Courts and Tribunals Service (SCTS) and our powerhouse Sheriff Courts & the fabled Court of Session teeter on the brink of consternation, calamity, comedy and collapse at the end of each working legal week.

Every time a member of the judiciary takes time off their busy schedule of frequently flying £5K international holidays on the taxpayer – to perform the actual £200,000 a year job of being a judge and sit and listen to the daily farce and often dodgy evidence presented by Crown Office prosecutors before the Criminal Courts – you would honestly think from their faces – the end of the world had arrived.

Judges are so rich poorly paid these days, they have to conceal their vast wealth with the threat of constitutional calamity if it were revealed – or flog their multi million pound Victorian villas, properties in the country, undeclared holiday homes in Dubai or wherever – to members of their own family – for millions of pounds and avoiding those awful taxes which apply to the rest of us.

Let’s not even talk about the others … week long holidays in Qatar, North America, the far east, or jetting off to New Zealand for a week, then retiring a few days later, the gold Rolexes, collections of valuable items, taxpayer funded security fit for Royalty, extra ermine gowns & hanging around the works of Leonardo Da Vinci in the hope of life eternal.

How about the well paid poorly paid overworked court staff you say? Well, not really.

‘Hospitality’, undeclared deals on the side with law firms and other less talked about financial arrangements for increasing numbers of court staff compensate for the daily struggle of putting pen to paper and reminding the elderly sheriff the one before him ‘is a bad yin’.

So, where does all the money come from to pay for your access to justice and the privilege of appearing before someone festooned in 18th Century fancy dress and surrounded by wood panelling and enormously expensive digital recording equipment – conveniently unplugged so as not to record the daily courtroom farce or your expert witness disagreeing with Lord know-it-all.

The Scottish Government gave the Scottish Court Service a whopping £88.9million of your cash in the 2016-2017 budget. Plenty there to go around.

The judiciary on it’s own receive a staggering £40million of public cash, to groan, grizzle, gloat & giggle as they listen to counsel after counsel, litigant after litigant – while dreaming of appearances & junkets to warmer, wealthier climes.

The Legal Aid budget – once standing at over £160million a year and now allegedly a very very very dodgy £136.9million in the 2016-2017 budget – your cash going on lawyers, criminals and some of the most laughable, inept court hearings in existence.

The Crown Office & Procurator Fiscal Service (COPFS) – widely regarded by all sides as the pre-eminently most corrupt institution in the entire Scottish justice system – received a staggering £112.5million of your cash. To do what? to cover up it’s own staff and prosecutors leaking case files and evidence to criminals, or snorting cocaine and beating up Police Officers.

And, let’s not forget the £58 million of public cash spent by the Scottish Court & Tribunal Service on new doorknobs, a lick of paint and new scones for the Court of Session ‘powerhouse’ – which must rank as Europe’s slowest, most distorted, most expensive & interest ridden seat of justice, ever.

All this must be paid for, somehow. Loads-a-money. Your money. Certainly not theirs, for they are all public servants paid for by you.

So we come to the Scottish Government’s proposal to go for ‘full cost recovery’, buried in the now familiar loaded consultation papers issued by the Justice Directorate of the Scottish Government.

And, instead of blaming the fee rises on our slow, difficult and inaccessible courts, the Scottish Government instead has chosen to blame budgetary cuts imposed by Westminster.

The Scottish Government Consultation on Court Fees 2016 sets out proposals for fees in the Court of Session, the High Court of the Justiciary, the Sheriff Appeal Court, the sheriff court, the Sheriff Personal Injury Court, and the justice of the peace court. Court fees are a major source of income for the Scottish Courts and Tribunals Service and it has become necessary to increase fees in order to achieve full cost recovery. It seeks views on two options each of which is aimed at providing full cost recovery.

Fee hikes across the board of almost 25% for civil actions in Scotland and alternative targeted rises are being proposed by Scottish ministers – as part of a consultation on Scottish court fees which runs until October.

Court fees have generally been reviewed every three years, with the last round being implemented in 2015, however this time around “the Scottish Government has decided to accelerate the move towards full cost recovery“.

The Consultation on Court Fees – open until 12 October 2016 – sets out proposals for fees in the Court of Session, the High Court of the Justiciary, the Sheriff Appeal Court, the sheriff court, the Sheriff Personal Injury Court, and the justice of the peace court. Court fees are a major source of income for the Scottish Courts and Tribunals Service and it has become necessary to increase fees in order to achieve full cost recovery. It seeks views on two options each of which is aimed at providing full cost recovery.

The Scottish Government states “It is necessary to raise fees so that the Scottish Court and Tribunals Service is able to achieve full cost recovery from its courts. We are consulting on two options seeking the views of stakeholders on the best way to achieve this. Stakeholders will be able to provide their opinions on which option is better from the point of view of their own court actions and, if they are an organisation, of their clients. This will help the Scottish Government’s decision on which option should be incorporated into the necessary Scottish Statutory Instruments.”

“A review is justified both by the need to end the cost to the public purse of subsidising the civil justice system, and by the introduction of the new simple procedure which replaces the current small claims and summary cause procedures.”

Simple procedure will be phased in from 28 November for actions worth not more than £5,000. It is planned to retain existing fee levels for summary cause and small claims actions, so that at present levels lodging a claim for up to £200 under simple procedure would mean a fee of £18, and £78 for a claim above that level and up to £5,000.

If a flat rise is the option chosen, all Court of Session and sheriff court fees will rise by 24%, the amount needed to fund a deficit of £5.4m on gross fee income of £22.2m in 2014-15. That would mean lodging fees of £22 or £97 for simple procedure cases, £119 (from £96) for summary applications and ordinary sheriff court actions, £187 (from £150) for non-simple divorces, and £266 (from £214) for Court of Session or Sheriff Personal Injury Court actions. Hearing fees would jump from £227 to £282 in the sheriff court, and from £96 to £119 per half hour (single judge), or from £239 to £297 per half hour (bench of three) in the Court of Session.

Suggested targeted fee rises, the other option, would raise more money overall. The £18 simple procedure lodging fee would remain unchanged, as would the £150 divorce lodging fee and the £227 sheriff court hearing fees, as well as fees in the recently introduced Sheriff Appeal Court. However there would be a £100 lodging fee for a simple procedure claim for more than £200, £120 for summary applications and ordinary causes, and £300 for a Court of Session action. In that court the cost of lodging a record would almost double from £107 to £200, and hearing fees more than double to £200 for every half hour before a single judge, and £500 per half hour before a bench of three.

The alternative scheme would also see the introduction of graded fees in commissary court proceedings for authorising executors to handle a deceased person’s estate. Whereas at present for all estates worth more than £10,000 there is a flat fee of £225, it is proposed to exempt estates worth less than £50,000 but to charge £250 for estates between £50,000 and £250,000, and £500 for larger estates.

The consultation paper states on Page 8: “We are aware that there will be a tipping point where fee increases may deter people from raising actions”, the paper observes. “We do not believe that the level of rises in either option 1 or 2 as proposed will have a deterrent effect as individual fees will still be relatively low, particularly when viewed against the total costs of taking legal action including the cost of legal advice.”

Be sure to enter your thoughts in the Scottish Government’s consultation. Go here to do so: Consultation on Court Fees You have until 12 October 2016.

 

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JUSTICE DENIED: Solicitor accuses Law Society of Scotland of “abuse of power” – as legal aid decision by solicitors regulator leaves disabled clients denied access to justice

Solicitor Daniel Donaldson campaigns for reinstatement of legal aid certification. THE Law Society of Scotland has been accused of “abuse of power” and terminating access to justice for disabled & vulnerable clients – after a law centre was forced to pull out of legal aid work due to what appear to be internal politics at the professional body for Scottish solicitors.

The claims are made by a disabled solicitor – Daniel Donaldson – who founded Legal Spark – a Glasgow based law centre – with the aim of helping disabled people and other clients excluded from Scotland’s legal system.

Last year, the Law Society of Scotland granted permission to law centre Legal Spark to take on legal aid cases – allowing the law practice to take on cases from disabled people who had been unable to secure legal representation for their discrimination cases.

However, after the Law Society approved the law practice to engage in legal aid work, certification for Legal Spark to take on new legal aid cases has since been withdrawn – with unconvincing explanations from the Edinburgh based regulator – resulting in clients facing an uncertain future in terms of their access to the legal system.

Daniel Donaldson – who qualified as a solicitor six years ago – spent a year discussing Legal Spark with the Law Society of Scotland – which originally described the disabled solicitor’s proposals to create a facility to provide disabled clients with access to justice as “refreshing” and “innovative”.

However, the solicitor has now accused the Law Society of abandoning disabled clients and has set up a public petition calling for help in restoring his law centre’s legal aid certification

Readers can view more details of the petition here: Law Society of Scotland: Allow Legal Spark Legal Practice to continue Legal Aid Work

Speaking to a DOI journalist earlier today, solicitor Daniel Donaldson said the Law Society’s decision would deprive disabled people of access to justice.

Mr Donaldson said: “It’s completely unacceptable for any public authority to ignore disabled service users.  We set us Legal Spark because of a problem with access to justice.” 

“We volunteered to do legal aid work to help unrepresented disabled people.  Now the LSS has forced us to stop.  What’s changed in six months? Nothing.  They’ve made this decision for other reasons and not ,”public protection” as claimed.”

“The LSS believes they can do what they like with no scrutiny or accountability. Individuals are free to abuse their position. I call upon the Scottish Parliament and Scottish Government to strip them off all their regulatory functions and being an end to their abuse of power”

Out of concern for clients welfare after the Law Society’s decision to revoke legal aid certification – Legal Spark contacted 134 lawyers from a list provided by the Law Society of Scotland of law firms who take on civil legal aid cases and specialise in discrimination law.

However, not one law firm has taken any of Legal Spark’s clients – a move which is generating suspicion among some legal observers that the Law Society is unfairly controlling and restricting certain law firms and their clients access to legal aid.

The Disability News Service reported on the story, quoting  a Law Society Scotland spokeswoman who said: her organisation had made “a mistake” in originally granting Legal Spark permission to carry out civil legal aid work, before realising that it was “not entitled to provide this type of advice under the society’s civil legal assistance quality assurance scheme”.

The Law Society spokeswoman said: “The committee made a final decision on 16 June that a waiver could not be granted for public protection reasons and as the compliance certificate for Legal Spark had been issued in error, it could no longer provide advice funded by legal aid.

“The committee agreed that given the circumstances, Legal Spark could continue working with its legal aid clients until 30 June, to allow sufficient time to make alternative arrangements for clients.”

She said law centres have to be “underpinned by a solicitor practice unit [which she said Legal Spark was not]in order to be able to be on the civil legal aid quality assurance scheme register and provide legal aid funded advice”.

She added: “While it is rare for something to go wrong, clients have to be able to seek redress and as it currently stands, Legal Spark is not in a position to meet those requirements.”

The Disability News Service further reported:  By noon yesterday (28 July), the Law Society Scotland had failed to explain why it has refused to enter into mediation, although it claims that it was “still in communication with Legal Spark”.

The website of Legal Spark describes the legal services provider as  an innovative legal practice. Legal spark is a law centre, not a firm of solicitors.

Legal Spark state: “All lawyers will provide legal services,  but our practice is unique. Our practice is driven to maximise social impact, rather than to maximise profits for shareholders. Our business is ethical, and our legal practice promotes social responsibility.”

The law centre also pledges to reinvest their profits of commercial legal work to help people by:

* organising and taking part in outreach events in communities

* providing legal advice and representation for disabled people

* maintaining a commitment to legal aid work

Legal Spark are located at 22 Montrose Street, Merchant City, Glasgow G1 1RE email: contact@legalspark.co.uk

Petition : Law Society of Scotland: Allow Legal Spark Legal Practice to continue Legal Aid Work

Campaign created by: Daniel Donaldson

Campaign website: http://www.legalspark.co.uk/

Campaign facebook: http://www.facebook.com/legalspark

To: The Law Society of Scotland, the Scottish Legal Aid Board and others

The Law Society and Legal Aid Board informed Legal Spark Legal Practice that they had to stop all legal aid work on 30th June. As a result, “A”, “B’ plus many other disabled clients are forced to forego representation. They have the power to reverse their decision, together we can make that happen.

Why is this important?

Legal Spark was formed as a result of the crisis in legal aid. People were going without representation because they could not afford a lawyer. This is particularly the case for disabled people.

No one else would do this type of work, as it was deemed too expensive, not financially viable and also too complex.

Daniel Donaldson, a disabled Solicitor, set up Legal Spark with the Support of the Scottish Institute for Enterprise under their Young Innovators Challenge 2015 programme.

Daniel wanted to develop creative solutions to help people access justice and to fix the exclusion that disabled people face from the legal system.

Daniel spent one year talking to the Law Society about this issue, highlighting that it was important that everyone could access a lawyer.

Legal Spark consulted with the Chief Executive (Lorna Jack), the Head of Professional Practice, the Registrar and the Deputy Registrar (James Ness) and the Secretary to the Civil Legal Aid Quality Assurance Committee (Hannah Sayers) amongst others.

A document was prepared that explained what Legal Spark was planning to do. The Law Society accepted this document and did not object. The Law Society encouraged Legal Spark and found their approach “refreshing” and “innovative”.

Legal Spark was granted permission to do Legal Aid work in November 2015, and a compliance certificate was issued in December 2015. Legal Spark began helping the many disabled people that needed their help and began to have success.

In April 2016, the Law Society decided that they had made an “error” and instructed Legal Spark to stop all Legal Aid work by Thursday 30 June 2016. By this stage, Legal Spark had a number of clients, with active and complex cases, some of which were about to go to Court.

“A” is one such client. They had experienced awful disability discrimination from a University. They were not given adequate support to help them during a course, and had to leave. Additionally, Legal Spark uncovered evidence that the University’s staff had used “unprofessional language” in their approach to “A”. This case has now been lodged in Court.

“B” is another client adversely affected by this decision. B is also disabled and is housebound. They had tried to find a lawyer for sometime but because of their rural location in the Highlands there were no Solicitors available to help. Legal Spark took on this case and was successful (in part) in achieving a resolution for B. However, because B had been adversely affected by a decision of Highland Council, and had lost out financially, the case may need to go to Court. B is unable to find anyone else to help them.

These are only two examples of where Legal Spark is making a difference, there are others too.

Since establishing Legal Spark, Daniel Donaldson has not drawn a salary and has used some of his own money to sustain the Legal Practice while it develops and is able to stand on its own feet.

Legal Spark has also grown to enable it to employ staff and provide much need paid employment to some disabled people and unemployed law graduates.

The Legal Aid certificate meant that Legal Spark could help people who could not access help elsewhere. Now “A”, “B” and other will have to go without representation because of the Law Society of Scotland’s failures.

The Law Society’s Chief Executive (Lorna Jack)says that they have to act in the public interest. The Director of Regulation (Philip Yelland) shares this view.

1. Where is the public interest in denying disabled people representation?
2. Also, where is the public interest is giving permission to do Legal Aid work only to revoke that permission 6 months later?

The Law Society say that there are other Solicitors who can help, however this is not true.

Legal Spark contacted 134 Civil Legal Aid lawyers with advertised specialism in discrimination law. Even the biggest Legal Aid firm in Scotland could not help.

The Law Society has said that this will cause Legal Spark’s disabled client’s “inconvenience”. This is an offensive comment; they have never met any client, they have ignored client’s opinions, and also refused to acknowledge that they will suffer substantial prejudice in their cases because of the Law Society’s decision.

This petition is addressed to the Law Society and the Scottish Legal Aid Board.

It is important that you fulfil your roles correctly.

Overturn your decision to stop Legal Spark doing legal aid work, remedy the mistake you have made and apologise. This is the only way you can restore public trust and continue to say you act in the public interest.

Allow Legal Spark, and their clients the opportunity to continue to work together for the public interest and tackle the horrors faced by disabled people on a daily basis.
How it will be delivered

Signatures to this petition will be emailed, delivered in person, or a press conference will be arranged.

 

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LORDING IT MORE OPENLY: Scotland’s obsessively secretive judiciary reveal overseas junkets – after media spotlight on judges’ international air travel circuit increases judicial transparency

Media interest results in judges revealing overseas trips. THE MOST powerful & unaccountable figures in Scotland’s justice system – The Judiciary –  will now regularly publish details of their frequent use of taxpayer funded overseas travel junkets.

The transparency victory comes after a three year Freedom of Information & media spotlight on judicial overseas travel junkets forced the Judiciary of Scotland to come clean on judges’ opulent use of public cash to fly around the globe to lavish locations and events officially described as ‘law conferences’.

Of the thirty one overseas travel junkets taken by Scottish judges in the latest year of figures covering from April 2015 to March 2016 – members of the judiciary racked up a further £22,605.92 worth of international trips funded by public cash – including £2,052.97 of expenses claimed by the travelling judges.

Overseas travel records now released by the Judicial Office for Scotland reveal Court of Session judge Lord Brailsford – enjoyed a £4,898.94 eight day taxpayer funded junket to Sydney Australia from 11 – 19 November 2015 – making Lord Brailsford the top overseas judicial junket claimant of the past twelve months.

Lord Brailsford – who regularly appears in judicial overseas junkets lists – was recently outed in published documents obtained from the Scottish Government – as the listed owner of the Laigh Hall – which forms part of Court of Session buildings located at Parliament House, Edinburgh.

The Laigh Hall was effectively swiped from public ownership by the Faculty of Advocates in the Parliament House titles scandal – which saw the City of Edinburgh Council lose public ownership of Scotland’s top court buildings to the Faculty of Advocates and the body which runs the courts – the Scottish Courts and Tribunals Service (SCTS).

The overseas travel data also reveals Scotland’s former top judge – Lord Brian Gill and current Lord President Lord Carloway – as the two judges filing the largest expenses claims on top of the costs of overseas travel in the past year.

Lord Gill enjoyed a two day trip during the twilight days of his short, if stormy three year term as Scotland’s top judge – to the Forum of Chief Justice of British Isles – held in the tax haven of Jersey.

Figures reveal Lord Gill claimed £302.09 expenses on top of the £231.60  cost of travel to Jersey – taking the cost of his last ‘confirmed’ judicial overseas junket as top judge – to £533.69.

Known for previous overseas judicial trips taken at taxpayers expense – Lord Brian Gill travelled to Qatar in 2014 on a five day £2,800 taxpayer funded state visit – while dodging invitations to attend the Scottish Parliament to face scrutiny on his opposition to increased transparency of the judiciary.

And earlier this year, Lord Gill billed the Scottish Parliament a further £267.75 worth of expenses claims – after the former top judge travelled 1st class to Edinburgh in November 2015 – demanding MSPs drop a three year probe on proposals to create a register of judicial interests as called for in Petition PE1458: Register of Interests for members of Scotland’s judiciary.

Meanwhile Lord Carloway (real name Colin Sutherland) – who ascended to the top judicial post carrying the title of Lord President in January 2016 – claimed £352.51 expenses on top of the £650.47 cost of a judicial junket to the European Court of Human Rights in Strasbourg during 24-26 January 2016 – bringing the total cost of Carloway’s latest taxpayer funded trip to £1,002.98.

Carloway – also well known on the judicial air miles junket set – previously took a £5,820.16 seven day trip costing taxpayers £5,820.16 to a law conference in Vancouver, Canada during 21 – 27 June 2014.

And, a two day group judges trip to the European Court of Human Rights in Strasbourg in late January – comprising Lord Carloway, Lord Braccadale, Lord Bannatyne, Lady Stacy, Lady Smith and Lady Paton – cost taxpayers a whopping £4413.23.

Full details of public cash funded overseas travel junkets by Scottish judges have previously been published by Diary of Injustice here: Overseas travel of Scottish judges in 2014-2015, Overseas Travel of Scotland’s Judges 2013-2014 & Overseas Travel of Scotland’s Judges 2010-2013.

The latest transparency move by Scotland’s judiciary to reveal the secretive world of judges junkets and expenses claims comes after an earlier Freedom of Information campaign by DOI during 2009 –2010 resulted in the then Lord President – Lord Arthur Hamilton agreeing to publish regular disclosures on judicial expenses, featured in an article in 2010 here: Scots judges emerge from ‘Victorian veil’ as judiciary’s expenses claims set to be published online from November 2010 .

In response to a Freedom of Information request for information on the latest judicial overseas trips, the Judicial Office for Scotland confirmed the new policy of publication.

R. Gare, Policy Manager for the Judicial Office for Scotland said: “The Judicial Office for Scotland now publishes information on overseas travel. Information relating to your request can be found on the Scottish Judiciary website. Further, I can confirm that no SCTS staff travelled with any of the members of the judiciary in relation to the trips contained within the table.”

Overseas travel of Scotland’s judiciary 2015-2016: Information released by the Judicial Office for Scotland to DOI, and now published on the Judiciary of Scotland’s website reveals the extent of overseas travel undertaken by Scotland’s judges in the past year:

9 -10 April 2015 Lord Tyre ENCJ Project Group meeting in Lisbon £540.31

16 – 17 April 2015 Sheriff G Liddle ENCJ – RECJ meeting of the Project team “Development of minimum judicial Standards” in Brussels £566.57

29 -31 May 2015 Lord Gill Forum of Chief Justice of British Isles in Jersey £533.69

2 – 6 June 2015 Sheriff G Liddle ENCJ AGM meeting in The Hague £408.68

3 – 5 June 2015 Lord Tyre ENCJ General Assembly meeting in The Hague £443.36

9 – 14 June 2015 Lord Brodie FBIJCC meeting in Paris £663.48

10 – 13 June 2015 Sheriff McGowan FBIJCC meeting in Paris £562.82

10 – 14 June 2015 Sheriff Welsh FBIJCC meeting in Paris £719.72

10 – 14 June 2015 Sheriff M Neilson FBIJCC meeting in Paris £710.75

11 – 14 June 2015 Lord Eassie FBIJCC meeting in Paris £646.55

11 – 14 June 2015 Sheriff L Drummond FBIJCC meeting in Paris £970.92

18 – 20 June 2015 Lord Tyre ERA meeting in Luxembourg £375.24

June 2015 ENCJ Reimbursement -£975.10 -£975.10 August 2015 ERA Reimbursement -£364.77 -£364.77

13 – 18 September 2015 Sheriff R Dickson CMJA Conference in NZ – Wellington £1,161.26

12 – 19 September 2015 Sheriff Fletcher CMJA Conference in NZ – Wellington £1,545.28

24 – 25 September 2015 Sheriff G Liddle ENCJ Project meeting in Paris £660.97

24 – 25 September 2015 Lord Tyre ENCJ Project meeting in Paris £983.10

27 – 29 September 2015 Lord Matthews ECJ meeting in Luxembourg £522.25

3 – 5 October 2015 Lord Doherty Opening of Legal Year in Dublin £584.90

4- 5 October 2015 Lady Stacey Opening of Legal Year in Dublin £281.37

11 – 19 November 2015 Lord Brailsford International Hague Network of Judges in Hong Kong and Commonwealth and Common Law International Family Justice Conference in Sydney £4,898.94

30 November – 1 Dec 2015 Sheriff Liddle ENCJ meeting project on Funding of the Judiciary in Brussels £557.90

3 – 4 December 2015 Lord Tyre ENCJ Project Meeting – Independence and Accountability in Brussels £508.36

24 – 26 January 2016 Lord Carloway European Court of Human Rights in Strasbourg £1,002.98

24 – 26 January 2016 Lady Paton European Court of Human Rights in Strasbourg £650.47

24 – 26 January 2016 Lady Smith European Court of Human Rights in Strasbourg £690.52

24 – 26 January 2016 Lord Bracadale European Court of Human Rights in Strasbourg £729.89

24 – 26 January2016 Lord Bannatyne European Court of Human Rights in Strasbourg £650.47 

24 – 26 January 2016 Lady Stacey  European Court of Human Rights in Strasbourg £688.90

18 – 19 February 2016 Lord President  Bilateral Meeting in Dublin £110.51

28 February – 1 March 2016 Sheriff Liddle  ENCJ Colloque meeting – Dublin £253.00

7 March 2016 Lord Tyre ENCJ Project Group – Independence and Accountability in Brussels £322.63

Total: £20,552.95 £2,052.97 £22,605.92

Abbreviations: ENCJ – European Network of Councils for Judiciary, CMJA – Commonwealth Magistrates and Judges Association, ECJ – European Court of Justice ERA – Academy of European law, FBIJCC – Franco -British – Irish Judicial Cooperation Committee Colloque

The decision in 2016  by the Judicial Office to publish judges overseas travel information and costs comes after several media investigations into the judiciary’s use of public cash to fund overseas trips.

In 2014, the Scottish Sun on Sunday newspaper investigated judicial overseas travel junkets, reporting:

 LORDING IT ALL OVER THE WORLD

Beaks Trips on Taxpayer

Exclusive : By Russell Findlay 17 August 2014 Scottish Sun

JET-SETTING judges spent £26,000 of taxpayers’ cash on overseas trips last year, a Scottish Sun on Sunday investigation can reveal.

Top beaks flew out to destinations including Russia, Israel, Switzerland, Germany, France, Bulgaria, Lithuania and Qatar.

The most expensive was a £5,800 trip to Canada by Scotland’s second most senior judge, Lord Carloway. Lord Gill – who is the Lord President – also spent five days on a £2,800 trip to Doha, Qatar, where he gave speech on judicial ethics.

Our probe found he jetted to the desert state — criticised for its human rights abuses – after twice snubbing calls to appear in front of the Scottish Parliament’s public petitions committee just 800 yards from his office.

Committee member John Wilson MSP said: “During his speech in Qatar he said that he had much to learn from that country’s judicial system. But Qatar has a poor record on human rights, as identified by Amnesty International.”

Legal campaigner Peter Cherbi added: “Judges are supposed to sit in courts, not in jets.

“It’s hard to believe that Scotland and our judiciary can learn anything from Qatar, a country accused of funding war. mass murder and chaos throughout the Middle East.”

In the past year the Judicial Office for Scotland has paid for Lord Carloway — who earns £208.000 a year – to take part in law events in Vancouver. Canada, and Dijon. France.

It also forked out public money for Lord Armstrong, Lord Boyd and Lady Dorrian to meet other Euro pean judges on a three-day trip to Luxembourg.

Lord Eassie travelled to legal events in St Gallen, Switzerland, and Yalta, Ukraine.

And Lady Clark spent four days at an Anglo-Israeli conference in Tel Aviv, Israel, while Lord Hodge went to Paris.

Meanwhile four sheriffs — Wendy Anne Sheenan, Frank Crowe. Nikola Stewart and Thomas McCartney — attended a four day family law event in Ireland.

It took place at luxury Carton House hotel and spa in Co Kildare where the itinerary included a lack tie gala dinner and optional round of golf on the hotel’s course.

Last year Lord Gill — whose salary is £216,307 – also travelled to Jersey, while in the previous three years he went to Ireland, South Africa, Slovenia and Canada.

Last week he announced a clampdown on overseas travel by judges, sheriffs and JPs.

He will only allow judges to travel if they give a good reason to do so and they will also have to write a report about their trips.

The SNP’s Mr Wilson added: “Given the pressures on our courts, it’s welcome that Lord Gill is seeking to curtail future judicial travel and will hopefully lead by example.”

The Judicial Office for Scotland was asked to give details of Lord Gill’s itinerary for the rest of his Qatar trip and whether he regretted going after snubbing Holyrood.

A spokesman said they couldn’t help as the Lord President is on holiday.

The Sunday Mail newspaper also investigated judicial overseas junkets in 2015 – revealing three sheriffs spent £15,000 on an overseas junket to Zambia in Africa JUDGE JET: Sheriffs’ £15K tour of Africa adds to air miles racket of Scots judiciary – as top judges’ clampdown on judicial jet set junkets takes flight.

And a report in the Sunday Mail on June 2 2013 revealed Scottish judges spent over £83,000 on overseas travel junkets in three years – while top judge Lord Gill refused calls to appear before the Scottish Parliament to answer questions on the judiciary’s secretive financial interests & links to big business, banks & the professions.

Previous articles on the judiciary’s use of public cash to fund judicial overseas junkets can be found here: Overseas travel of Scottish judges.

 

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ROGUES REIMAGINED: Scottish Legal Complaints Commission calls on Scottish Government to reform “complex and legalistic” solicitors’ self regulation & complaints system

Pro-lawyer regulator calls for solicitor complaints reform. THE ‘independent’ regulator of Scottish solicitors – the Scottish Legal Complaints Commission (SLCC) is calling on the Scottish Government to consult on reforms to the “complex and legalistic” system for handling complaints against solicitors and other legal practitioners in Scotland.

The ‘independent’ SLCC – controlled by the Law Society of Scotland and funded by legal fees from clients – has presented a paper titled Reimagine Regulation to Scottish Ministers – setting out six key priority areas the SLCC believes the Government, which has committed to consultation on a review of legal regulation, should focus on.

Explaining that the present system requires different processes depending on the level of seriousness attached to the complaint – inadequate professional service, unsatisfactory conduct or professional misconduct, with complaints sometimes having to restart under a different process – the SLCC wants to “reduce the whole process to three core stages”, namely:

1. A single investigation – ensuring there are a range of flexible options to filter out vexatious and similar complaints and allowing processes proportionate to different levels; £200 or £20,000

2. Determination – by the same organisation in relation to lower level issues, or by prosecution at the professional tribunal for conduct which may lead to removal from the profession;

3. Appeal – to ensure accountability and meet the requirements of natural justice there should be a single opportunity to appeal at the conclusion of the process.

However, any limit of compensation is widely seen as a cave-in to the legal profession, given the fact accumulative financial losses suffered by clients of rogue solicitors can well exceed the £20,000 limit.

Reimagine Regulation – How pro-lawyer regulator views regulation.

The Law Society backed SLCC – is also calling for consultation on whether it is time for a single independent body to handle all aspects of complaints against the legal profession. The single investigatory body was the previous model when the Law Society of Scotland handled all complaints against it’s own member solicitors.

To achieve faster, more efficient, and more targeted complaints handling, paper claims the government must focus on a simplified customer journey, not institutions and legislative detail. A consultation should focus on the key questions:

a)  Is it time for a single independent body to handle all aspects of complaints?

b)  If not, how could stages and hand-overs be dramatically reduced – for example, a single investigation covering service and conduct, even if conduct is still prosecuted at an Independent tribunal?

c)  How many chances of appeal should there be, and is it time to consider the Sheriff Appeal Court as a more proportionate forum than the Court of Session for consumer disputes

The SLCC contends other areas should also be explored such as:

* Whether complaints bodies should have more discretion, with appropriate safeguards, and less prescriptive legislation;

* How to ensure that compensation awarded is paid to the consumer;

* How issues of unfair fees should best be addressed;

* Whether it is time to move from “one size fits all” regulation to a focus on the areas of greatest consumer risk, engaging experts on how to tackle high risk areas;

* The appropriate balance between professional regulation and market regulation;

* And whether the SLCC should have the power to issue rules on how lawyers should handle complaints at first tier, and the power to impose “strict liability” offences where they do not have, or follow, their own internal process.

Reimagine Regulation – Appendices & further research:Following on from claims put forward in the SLCC’s call for a consultation, the regulator contends a framework Act allowing “proportionate and targeted” regulation would resolve complaints faster, benefiting consumers and lawyers; resolve complaints more cost efficiently, reducing the SLCC’s operating costs paid for by the profession; increase the effectiveness of redress, a key public protection; reduce risk to consumers; and increase market confidence.

Commenting on the SLCC’s call for what some dubbed a window dressing exercise, former Law Society Director and now SLCC Chief executive Neil Stevenson said: “This is not about criticising current institutions or approaches – all organisations involved work hard to make the system work as best it can, and Scotland has an internationally well respected legal sector. However, after years of minor reforms we believe it’s time to engage the Scottish public and legal community on what results we are trying to achieve with regulation and complaints handling, and the simplest and most efficient way to do that. We hope this paper provokes broad discussion, and that the fantastic opportunity of a review of current arrangements looks at big issues and not just adjusting technical detail with the current model.”

SLCC chair Bill Brackenridge said: “There is much to be proud of, but we are frustrated at a system which is more complex and legalistic than it needs to be. Based on feedback from lawyers and consumers, and drawing on expert evidence, we believe any consultation should aspire to improve the current system.”

Brackenridge continued: “Last year we helped hundreds of consumers reach an early settlement, and some areas of our work, like mediation, get hugely positive feedback from lawyers and consumers alike. We awarded over £400,000 of redress, but we also dismissed cases which were clearly unmerited, providing independent assurance and confirmation that a lawyer has actually provided an acceptable service.”

Despite claims of high compensation payments, neither Mr Brackenridge or the SLCC has published figures revealing actual financial losses suffered by clients, compared to settlements and compensation awarded by the SLCC to victims of rogue solicitors.

Reimagine Regulation

The current arrangements for legal complaints, and how complaint outcomes are used to improve standards in the legal sector, are too complex, involve too many stages, and pass through too many organisations.  Faster, more efficient, and better targeted regulation can be delivered, to the benefit of consumers and the sector, by significant legislative reform.

The SLCC’s paper Reimagine Regulation – SLCC priorities for a consultation on legal services regulation sets out six key priority areas we believe the government should consult on when they deliver on their commitment to launch a ‘consultation to review legal regulation’.  The changes would benefit both consumers and lawyers, by:

1. Unravelling the current complex complaints maze

2. Reducing statutory detail that focuses on processes, not outcomes for people

3. Ensuring that when redress is awarded the client receives it

4. Targeting risk, and not seeing all legal services as the same

5. Embedding the consumer principles

6. Learning from complaints and data to improve future outcomes

The Scottish Legal Complaints Commission claims their aim in this mainly public relations driven exercise – is to ensure that if there is a government consultation or review around the regulation of legal services then the key issues we set out are opened up for debate by consumers, the public and lawyers.  Final decisions on these issues are for the government and for parliament.

Scottish Ministers have so far not commented on whether they will launch any loaded consultation on the SLCC’s published paper.

Get involved

The SLCC has issued a call for consumers and the legal profession to become involved in the debate:

If you are interested in this area and wish to assist the debate then you can:

* publish an article discussing our ideas

* invite us to come to speak to you, or ask to visit us, or for us to send further information

* Contact your MSP or your professional body

* blog or tweet – copy us in @slcccomplaints and use the hashtag #ReimagineRegulation

* share views with the SLCC by email to consult@scottishlegalcomplaints.org.uk

Previous media investigations, reports and coverage of issues relating to the SLCC can be found here: Scottish Legal Complaints Commission – A history of pro-lawyer regulation.

 

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FROM ROGUES TO RICHES: Scottish Legal Complaints Commission refuse to identify corrupt solicitors in case findings – as derisory payments to executry fraud & legal malpractice victims revealed

‘Independent’ lawyer’s self regulator continues to look after profession. SCOTLAND’S ‘independent’ self regulator of solicitors – the Scottish Legal Complaints Commission (SLCC) has refused to publish the identities of tens of high profile law firms and solicitors across the country involved in serious malpractice resulting in upheld complaints & compensation payments to clients.

The ‘independent’ SLCC – controlled by the Law Society of Scotland and funded by clients legal fees to solicitors – also revealed brief details of case summaries where small payments with a range from a miserly £1 to £299 and up – have been paid out to the bereaved families of deceased loved ones.

The paltry compensation sums were paid out after lawyers look advantage of a regular scam by ripping off the wills & executry estates of dead clients.

Even in cases where tens of thousands of pounds were plundered from bank accounts and assets relating to wills handled by solicitors – a mere few hundred pounds were paid out to families & loved ones who were intended to inherit the possessions of their relatives.

The SLCC has refused to publish figures quoting actual payments or any figures identifying the extent of the actual losses suffered by victims after lawyers fleeced client assets and executry estates.

Instead, the lawyer backed self regulator has set out a vague structure of figures, which allow the lawyer backed regulator to make spurious claims of protecting consumers while in actual fact failing to deliver back to victims what is estimated to be tens of millions of pounds a year defrauded out of the executry estates of deceased Scots and their families – by the legal services industry.

Mired in accusations of pro-lawyer bias and corruption – the SLCC has also announced its latest 4 year strategy to:

* Increasing public awareness of the right to make a complaint about a lawyer and increasing the SLCC’s visibility

* Working to understand the public’s and the legal profession’s expectations of professional standards, including highlighting complaints processes

* Developing a culture of learning, so that  complaints made to the SLCC can be used to improve levels of service, as well as national professional standards and regulation

* Further developing the SLCC as a high performing organisation

* Making sure that compensation or fee refunds awarded by the SLCC are always received by consumers (in a tiny minority of cases this doesn’t happen at present)

Commenting on the strategy announcement, SLCC Chair Bill Brackenridge said: “We’ve finalised our strategy at a time when consumer rights have been climbing the public agenda”

He continued: “And we’re now planning for the years ahead.  We’ll have been running for ten years in 2018 and we now have a path, for then and after, to a more effective and efficient system for legal complaints.  Working in partnership will be crucial to its success and I’d like to thank our stakeholders for an open and challenging debate around the consultation.”

However, a recent media investigation into the Scottish Legal Complaints Commission recently revealed most of the SLCC’s key staff and investigators are in-fact families, friends & business associates of solicitors, reported here: ‘Independent’ Scots legal watchdog consists of solicitors’ husbands, wives, sons, daughters, cousins, friends, & employers.

Previous media investigations, reports and coverage of issues relating to the SLCC can be found here: Scottish Legal Complaints Commission – A history of pro-lawyer regulation.

SOUNDS FAMILIAR? Read on – Your solicitor could be among the guilty:

Determination Decisions

The Scottish Legal Complaints Commission now publishes anonymised Determination decisions – which give a brief description of complaints decided upon by the SLCC.

However, the heavily redacted case summaries crucially exclude the identify of law firms and solicitors involved in the complaints – meaning any consumer could unknowingly be using the same law firm or talking to the same solicitor – who has just been found guilty of dodging complaints investigations and ripping off other clients.

The SLCC claims it believes the information is useful information for both potential complainers and practitioners and “that this demonstrates better transparency of our process”

However, the SLCC goes on to state “We need to balance that transparency with our duty to protect confidentiality. Because of that, we publish anonymous complaint information and have, as far as possible, removed any identifying features.”

The SLCC further stated “It is also important to bear in mind that information given about a complaint is only a brief summary of the Determination Committee’s findings. In making decisions, consideration will have been given to specific facts and circumstances which, again for reasons of confidentiality, cannot be provided here. We hope, however, that the published information is sufficient to benefit both potential complainers and also those who provide legal services.”

Where a complaint has been upheld, the total amount the SLCC can award is capped at £20,000 – a cap set by the Scottish Government & Scottish Parliament after the legal profession lobbied against higher amounts of compensation during the passage of the Legal Profession & Legal Aid (Scotland) Act 2008.

Compensation for actual loss (quantifiable): Level 1 : £1-£299, Level 2:  £300-£649, Level 3: £650-£999, Level 4:  £1,000-£4,999, Level 5: £5,000-£9,999, Level 6: £10,000-£14,999, Level 7: £15,000-£20,000

Compensation for inconvenience, distress and loss of opportunity:Band A £1-£150, Band B: £151-£750, Band C: £751-£1,500, Band D £1,501-£5,000

Determination Decisions: January – March 2016

Upheld and part-upheld decisions

16/1 Residential conveyancing: The complainer complained that the named solicitor had (a) failed to obtain instructions from the complainer’s partner until a week before completion of the sale, and (b) failed to ensure that there was a provision in a Minute of Agreement for the sale proceeds to be held on deposit, rather than distributed on completion of the sale.

The Determination Committee was satisfied that the solicitor had acted correctly in distributing the funds, but that there was lack of effective communication with the complainer prior to the sale about distribution.  The Committee agreed that the solicitor had failed to act in the best interests of the complainer by failing to clearly explain what would happen in the event of implementation of a Minute of Agreement agreeing to equal division of the sale proceeds.

The Committee decided that both issues amounted to inadequate professional service.  The Committee decided that the firm should pay to the complainer compensation of Band C for distress and  inconvenience on several occasions.  The Committee directed the firm to pay a Complaints Levy of £500.

16/2 Executry: The complainer complained that the opposing named solicitor had failed to respond to a significant amount of correspondence sent by their own legal advisor over a significant period of time.

The Determination Committee decided that there was sufficient evidence to support the complaint that the firm had failed to reply to 12 items of correspondence over a period of approx. 20 months.  The Committee agreed that the failure had resulted in an inadequate professional service having been provided to the firm’s own client and having reached that conclusion, the Committee was satisfied that there was a direct adverse effect on the complainer.

The Committee decided to uphold the complaint and  ordered the firm to pay to the complainer compensation of Band B for inconvenience and distress and level 1 for actual loss. The Committee directed the firm to pay a Complaints Levy of £150.

16/3 Executry: The complainer complained that the opposing named solicitor had failed to respond to a significant amount of correspondence sent by their own legal advisor over a significant period of time.

The Determination Committee decided that there was sufficient evidence to support the complaint that the firm had failed to reply to 12 items of correspondence over a period of approx. 20 months.  The Committee agreed that the failure had resulted in an inadequate professional service having been provided to the firm’s own client and having reached that conclusion, the Committee was satisfied that there was a direct adverse effect on the complainer.

The Committee decided to uphold the complaint and  ordered the firm to pay to the complainer compensation of Band B for inconvenience and distress and level 1 for actual loss. The Committee directed the firm to pay a Complaints Levy of £150.

16/4 Executry: The complainer complained that the opposing named solicitor had failed to respond to a significant amount of correspondence sent by their own legal advisor over a significant period of time.

The Determination Committee decided that there was sufficient evidence to support the complaint that the firm had failed to reply to 12 items of correspondence over a period of approx. 20 months.  The Committee agreed that the failure had resulted in an inadequate professional service having been provided to the firm’s own client and having reached that conclusion, the Committee was satisfied that there was a direct adverse effect on the complainer.

The Committee decided to uphold the complaint and  ordered the firm to pay to the complainer compensation of Band B for inconvenience and distress and level 1 for actual loss. The Committee directed the firm to pay a Complaints Levy of £150.

16/5 Executry: The complainer complained that the opposing named solicitor had failed to respond to a significant amount of correspondence sent by their own legal advisor over a significant period of time.

The Determination Committee decided that there was sufficient evidence to support the complaint that the firm had failed to reply to 12 items of correspondence over a period of approx. 20 months.  The Committee agreed that the failure had resulted in an inadequate professional service having been provided to the firm’s own client and having reached that conclusion, the Committee was satisfied that there was a direct adverse effect on the complainer.

The Committee decided to uphold the complaint and  ordered the firm to pay to the complainer compensation of Band B for inconvenience and distress and level 1 for actual loss. The Committee directed the firm to pay a Complaints Levy of £150.

16/6 Family: The complainer complained that the named solicitor had (a) advised the complainer at the initial meeting that the information relating to the source of the deposit was not required, but later advised that this information was vital and incorrectly alleged that the complainer had failed to provide this information at the initial meeting, (b) failed to communicate effectively by failing to respond to basic questions, (c) failed to proceed with division of assets and sale proceeds when instructed, and (d) failed to deal adequately with the complaint.

The Determination Committee decided that there was sufficient evidence to uphold issues (a) and (c) as inadequate professional service.

Regarding (a), the Committee agreed that the solicitor had failed to identify the client’s objectives at the outset, and thus advised the complainer to pursue an un-necessary course of action.

The Committee decided in respect of (b) that the client had been kept informed during the case.  The fact that the solicitor had not been able to answer very specific questions about matters extraneous to the case had also been explained, and as such, there was no breach of the Service Standards.

In respect of (c), the Committee was satisfied that the solicitor had delayed raising the action for several weeks.

Regarding (d), the Committee agreed that the evidence showed that the solicitor had attempted to address the complainer’s concerns, and that the suggestion to the client to seek alternative representation was unreasonable or unusual where dissatisfaction had been raised.

The Committee decided to uphold the complaint and  ordered the firm to reduce its fees by one third and to pay to the complainer compensation of Band A for inconvenience and distress.  The Committee directed the firm to pay a Complaints Levy of £700.

16/7 Residential conveyancing: The complainer complained that the named solicitors and the firm had (a) unduly delayed registering the disposition, and (b) delayed informing the complainer of the mistake.

The Determination Committee decided that there was sufficient evidence to uphold a finding of inadequate professional service against the firm.

The Committee decided, (a) the solicitor had failed to prepare and register the disposition following settlement and had delayed registration by approx. a year and a half.

In respect of (b), the Committee agreed that the solicitor had failed to inform the client that the disposition had not been registered timeously, and only after a number of months, once the defect had been rectified.

The Committee ordered the firm to refund part of the fees (£100) and outlays (£30), and to pay to the complainer compensation of Band B for inconvenience and distress.  The Committee directed the firm to pay a Complaints Levy of £500.

16/8 Family: The complainer complained that the named solicitor and the firm had (a) delayed/failed to obtain all of the husband’s financial information, failed to set up meetings and failed to follow instructions to communicate with the opposing solicitor, (b) failed to provide consistent advice, (c) included incorrect information in the offer of settlement, (d) failed to thoroughly examine the proposals for settlement, (e) failed to submit cravings on the complainer’s behalf, (f) failed to respond to requests for an interim account and failed to keep updated regarding escalating costs, and (g) delayed settlement negotiations.

The Determination Committee was of the view that there was no evidence to support the complaint, save as for issues (e) and (f) regarding the failure to submit cravings in the Defence, as required by the Ordinary Cause Rules, and the failure to issue an interim account as per the complainer’s request, or communicate adequately with the complainer about the increasing fees.  The Committee was satisfied that these issues could amount to inadequate professional service, as there had clearly been a breach of the Service Standards for diligence and communication.

The Committee ordered the firm to pay compensation to the complainer of Band B for the inconvenience and distress caused by the inadequate professional service.  The Committee directed the firm to pay a Complaints Levy of £500.

16/9 Litigation: The complainer complained that the named solicitor and the firm had (a) raised an action incorrectly naming the complainer individually, rather than in the name of the business, (b) failed to lodge the application timeously, (c) failed to lodge a properly framed application and delayed amending the application.

The Determination Committee decided that (a) there was insufficient evidence to reach any conclusion that the court action had been raised in the name of an incorrect party.  However, the Committee was satisfied that (b) the firm had failed to exercise the normal care and diligence expected of a competent solicitor by delaying the lodging of the application, and (c) failing to properly frame and amend the application.

The Committee decided to uphold the complaint and  ordered the firm to pay compensation of Band D for inconvenience and distress.  The Committee directed that no fees or outlays should be charged to the complainer.  The Committee directed the firm to pay a Complaints Levy of £800.

16/10 Litigation: The complainer complained that the opposing named solicitor and the firm had failed to act in the best interests of his client by unduly delaying the conclusion of the dispute for over 2 years.

The Determination Committee was satisfied that the cumulative effect of the identified delays adversely impacted on the service provided by the firm to its own client. Consequently, the complainer suffered as a direct effect of the deficiencies in the service to the client.

The Committee ordered the firm to pay compensation to the complainer of Level 4 for actual loss and Band B for inconvenience and distress.  The Committee directed the firm to pay a Complaints Levy of £300.

16/11 Residential conveyancing: The complainers complained that the named solicitor had (a) failed to ensure that a Completion/Habitation Certificate was available at conclusion of the purchase, (b) failed to advise of the consequences of completing without the Certificate, (c) failed to take instructions/obtain informed consent before agreeing a retention sum with the builder’s solicitors, and (d) failed to advise prior to completion that the property had not been passed as fit for habitation.

The Determination Committee was satisfied that the firm (a) did not take all reasonable steps to ensure that their clients’ interests were protected at settlement, and (b) & (d) failed to clearly and fully explain the significance of settling without the relevant Completion and Habitation certificates. The Committee accepted that the firm had not investigated why the Certificate had not been issued or asked about any underlying issues.

Regarding (c), although the Committee was satisfied that the firm had sought instructions about the retention of £10,000, there appeared to be no evidence to show that the consequences of proceeding in the way suggested by the developers was explained to the complainers, and that they were not advised about what a Completion Certificate was or the implications of proceeding without one.

The Committee ordered the firm to pay to each the complainers compensation of Band D for inconvenience and distress.  The Committee directed that fees in the sum of £660 (plus VAT) should be refunded to the complainers.  The Committee directed the firm to pay a Complaints Levy of £3,000.

16/12 Family: The complainer complained that the named solicitor and the firm had prepared an initial writ which contained a number of serious errors, including incorrect details of the children’s address and what was in the children’s best interests.     The Determination Committee was satisfied that the evidence showed that the firm had failed to ensure that the writ contained the necessary averments and fundamental flaws, which resulted in the action having to be dismissed and resurrected by newly instructed agents.

The Committee ordered the firm to pay to the complainer compensation of Band B for inconvenience and distress.  The Committee directed that there should be a full refund of fees (£700) and no further fees charged to the complainer.  The Committee directed the firm to pay a Complaints Levy of £400.

16/13 Family: The complainer complained that the named solicitor had (a) failed to deal with a Motion to recall the Sist and request a Proof, contrary to numerous requests, (b) failed to submit the Motion to Court and charged inappropriately for doing so, (c) unduly delayed sending the Motion to the opposing solicitors, despite confirming that this would be carried out the following week, (d) unduly delayed updating on the position regarding the failed submission of the Motion, despite having given an undertaking to do so, (e) unduly delayed reminding the opposing solicitors that a response was still outstanding, despite two reminders to do so, (f) unduly delayed forwarding correspondence from the opposing solicitors, despite being reminded and advised of the urgency of the matter, (g) failed to raise various financial issues with the opposing solicitors, despite numerous requests to do so, (h) failed to confirm advice provided in writing, despite having agreed to do so, (i) failed to challenge a report, despite having accepted instructions to do so, (j) declined to provide further advice until the outstanding account had been settled, despite this being contrary to the terms of business, and (k) failed to deal adequately with the complaint, by ignoring concerns.

The Determination Committee was satisfied that (a) & (b) the solicitor had failed to enrol a Motion, despite having undertaken to do so and charged the complainer for having done so.

Regarding (c), although the Committee was content that the complainer had been advised of a timescale, there was only a 4 day delay.  The Committee was not satisfied that this short delay amounted to an inadequate professional service.

In respect of (d), the Committee noted that there had been a 4 week period between the date when the solicitor intended to enrol the Motion and the failure to do so being advised to the complainer.  The Committee’s view was that the solicitor should know the client’s business at all times, regardless of when he actually remembered the oversight.  The Committee’s view was that the delay was a breach of the standards of both diligence and communication and amounted to inadequate professional service.

Regarding (e), the Committee was satisfied that there had been a 5 week delay, despite 5 prompts by the complainer.

As regards (f), the Committee was satisfied that there had been a 4 week delay in the information being provided to the complainer, despite the solicitor being aware of the urgency.

In respect of (g), the Committee agreed that the solicitor had failed to follow instructions in this regard on at least 4 occasions.

Regarding (h), the Committee was satisfied that the evidence showed that the complainer had requested the information on a number of occasions, and that this had not been provided.  The solicitor had the opportunity of clarifying the information sought after the meeting, as subsequent requests were made.

In respect of (i), the Committee agreed that the evidence did not support the complaint that the solicitor had been asked to challenge the content of the report, other than in relation to fees.  Accordingly, this issue was not upheld.

Regarding (j), the Committee agreed that the solicitor had acted unreasonably by refusing to continue to provide advice to the complainer prior to the expiry of 30 days for settlement of the account, as allowed for in the terms of business letter.

Finally, in respect of (k), the Committee noted that there was no evidence to support the solicitor’s indication that the complainer had been invited to discuss the complaint, as per the terms of business letter.  The Committee was satisfied that without written confirmation and the complainer having denied having received any such invitation, that there had been a failure to comply with the terms of business and that this failure amounted to an inadequate professional service.

The Committee decided to uphold the complaint in part and ordered the firm to pay compensation to the complainer of Band C for inconvenience and distress.  The Committee directed the firm to pay a Complaints Levy of £700.

16/14 Residential conveyancing: The complainer complained that the named solicitors and the firm had (a) failed to advise that a more in depth survey report should be obtained, (b) failed to obtain/discuss the terms of a timber report, (c) failed to follow up the issue of guarantees for damp treatment and woodworm, and (d) failed to advise of notification of timber infestation requiring full chemical works being undertaken.

The Determination Committee agreed that the firm had failed to provide the complainer with documents relating to previous investigations of damp and timber defects and failed to advise the complainer that further investigations should be carried out given the terms of those documents.  The Committee also agreed that one of the named solicitors had failed to obtain a copy of the report instructed by the complainer and did not advise about its terms prior to the conclusion of the missives.  The Committee was satisfied that one of the named solicitors had failed to follow up the issues of guarantees and that the firm had failed to advise of the terms of a letter from the sellers advising that there was an infestation of woodworm and that full chemical works should be carried out.

The Committee ordered the firm to pay compensation to the complainer of Band C for the distress and inconvenience caused by the inadequate professional service.  The Committee also decided that the firm’s fees should be reduced by 35% (approx. £250 plus VAT) and refunded to the complainer.  The Committee directed the firm to pay a Complaints Levy of £1,000.

16/15 Residential conveyancing: The complainer complained that the opposing named solicitor and/or the firm had failed to register the sale of the ground or have the title deeds updated in relation to the part of the complainer’s garden that the firm’s client had purchased.

The Determination Committee agreed that the solicitor had failed to record the title deed in favour of the firm’s own client (the complainer’s neighbour), resulting in an inadequate professional service to their own client and which had a direct adverse impact on the complainer.

The Committee ordered the firm to pay to the complainer compensation of Band A for the inconvenience and distress and level 2 for actual loss, due to the need for a new deed plan to be prepared.  The Committee directed the firm to pay a Complaints Levy of £200.

16/16 Family law; failing to respond: The complainer complained about the named solicitor and/or the firm had (a) failed to include information required in a Pensions Sharing Order and failed to ensure that the Schedule was attached to the Minute of Agreement, (b) failed to ensure that the Minute of Agreement was sufficiently robust regarding the pension entitlement and net proceeds of sale, (c) failed to intimate the Agreement and Decree to the pension trustees within the appropriate statutory timescale, (d) failed to distribute the proceeds of sale in accordance with the Minute of Agreement and unduly delayed discharging the bank loan, (e) inappropriately and without authority, deducted the fee note from the proceeds of sale without having issued a fee note, (f) erroneously withheld the balance of the proceeds of sale, (g) failed to raise a court action, despite having been instructed to do so, (h) failed to respond to the letter of complaint and failed to provide a breakdown of fees, and (i) failed to implement a mandate.

The Determination Committee was satisfied that the evidence showed that the firm had (a) failed to ensure that the pension plan details were contained in the document sent to the pension trustees, (d) failed to distribute funds timeously, and (e) deducted fees from retained funds without the knowledge of the complainer. The Committee was not satisfied that the evidence supported the remaining issues of complaint or that there was lack of evidence to prove these issues on the balance of probabilities.

The Committee ordered the firm to pay compensation to the complainer of Band B for inconvenience and distress, and that fees charged should be reduced by £100.  The Committee directed the firm to pay a Complaints Levy of £400.

16/17 Residential conveyancing: The complainer complained that the named solicitor and the firm had (a) failed to obtain a Letter of Comfort from the Council and/or failed to determine the exact amount of the liabilities owed by the sellers in respect of outstanding Statutory  Notices, and (b) failed to negotiate an appropriate retention amount in the missives.

The Determination Committee decided that (a) there was evidence that the firm failed to take adequate steps to determine the liabilities of the sellers, and (b) that the firm failed to negotiate an appropriate retention.  The Committee decided that the complaint should be upheld to this extent.

The Committee ordered the firm to pay to the complainer compensation of Band C for distress and inconvenience and Level 4 for actual loss.  The Committee directed the firm to pay a Complaints Levy of £800.

16/18 Litigation: The complainers complained that the named solicitor and/or the firm had (a) systematically lied regarding the action being taken in connection with the claim, and (b) falsely charged the complainers for costs in relation to water and planning applications.

The Determination Committee decided that (a) there was sufficient evidence to support the complainers’ contention that the solicitor had incorrectly advised them that various steps had taken place to progress the action, and (b) the solicitor falsely advised the complainers that the sellers would pay for the costs of the work, despite having obtained no undertaking that they would do so.

The Committee ordered the firm to pay to each of the complainers compensation of Band D for distress and inconvenience, and that no fee note should be rendered.  The Committee directed the firm to pay a Complaints Levy of £1,000.

16/19 Residential conveyancing: The complainer complained that the named solicitor and/or the firm had failed to advise about the Capital Gains Tax liability on the transfer of title.

The Determination Committee upheld the complaint on the basis that the options available to the complainer should have been explored, and the complainer had not been advised of the tax liability and/or was not advised to seek tax advice from another source.  The Committee’s view was that the complainer had suffered a loss of opportunity to consider all available options and was not fully informed as a result of the inadequate professional service.

The Committee ordered the firm to pay compensation to the complainer of Band D for worry and distress. The Committee directed the firm to pay a Complaints Levy of £850.

16/20 Litigation: The complainer complained that the named solicitor and/or the firm had (a) failed to advise him at any time about the strength of his claim, (b) failed to advise him of the potential for a costs order being made if the case was lost, and (c) failed to keep the complainer updated or advised about what SLAB required for the funding application.

The Determination Committee decided in respect of (a) that the firm had failed to give appropriate advice, either in writing or otherwise, about the strength of the claim. Such advice should have been provided in writing before court proceedings were raised.  In respect of (b), the Committee was satisfied that the evidence indicated that the firm had failed to provide appropriate advice regarding potential liability for expenses if the action was unsuccessful, or the potential magnitude of that liability.  The Committee agreed that the evidence did not support (c), that the firm had advised the complainer of the date of the hearing, that the firm had passed on any requests received from SLAB, or that SLAB had been in touch with the complainer directly.

The Committee ordered the firm to pay to the complainer compensation of Level 5 for actual loss and Band C for inconvenience and distress resulting from the inadequate professional service.  Additionally, the Committee decided that the firm should not be entitled to charge any fees or outlays for the service provided.  The Committee directed the firm to pay a Complaints Levy of £1,500.

16/21 Executry: The complainer complained that the named solicitor and/or the firm had failed to ensure prompt and transparent fee arrangements, having issued a final fee note in June 2014, for work carried out between 2008 and 2013, without any prior warning or discussion.

The Determination Committee decided that there was evidence of a failure to set out the basis upon which fees would be charged from the outset and the delay issuing the fee note at the conclusion of the instruction amounted to inadequate professional service.

The Committee ordered the firm to pay compensation to the complainer of Band A for inconvenience and distress caused by the inadequate professional service.  The Committee directed the firm to pay a Complaints Levy of £50.

16/22 Executry: The complainer complained that the named solicitor and/or the firm had (a) failed/delayed to respond to telephone calls and keep the complainer updated, (b) failed to explain the increase in fees, despite numerous requests, and (c) failed to provide adequate advice regarding an insurance policy claim.

The Determination Committee decided regarding (b) that the failure by the firm to keep the complainer updated regarding increasing costs and that the fees had exceeded the original amount quoted amounted to an inadequate professional service.  The Committee noted that the firm had failed to provided the complainer with a copy of the Law Accountants fee note, despite there having been a fee rendered for the service and that the letter of engagement was unclear and difficult to understand.

The Committee decided that the evidence showed that the firm had (a) been in regular communication with the complainer who had been kept up to date.  The Committee could find no evidence to support complaint (c).

The Committee ordered the firm to pay to the complainer compensation of Band B for distress and inconvenience and to refund excess fees (approx. £5000).  The Committee directed the firm to pay a Complaints Levy of £250.

16/23 Residential conveyancing: The complainer complained that the named solicitors and/or the firm had (a) failed to adequately advise of the position regarding the alterations to the attic space, (b) failed to check/advise the complainer to ensure that the attic alterations were in line with building regulations, and (c) failed to fully advise of the risks proceeding with the purchase without verifying the position regarding the alterations.

The Determination Committee decided to uphold all 3 issues as inadequate professional service, as the evidence supported the complaint that the firm had failed to address all 3 matters adequately.  The Committee was satisfied that the firm had failed to fully advise the complainer about the potential issues regarding the building control documentation for the alterations, there was a failure to communicate throughout the transaction, despite requests for clarification, and that the firm had not alerted the complainer to the potential risks or consequences of proceeding without the adequate documentation.

The Committee ordered the firm to pay compensation to the complainer of Level 2 for actual loss and Band D for distress and inconvenience.  The Committee also ordered a full fee refund (approx. £600 plus VAT).  The Committee directed the firm to pay a Complaints Levy of £2,000.

16/24 Family: The complainer complained that the opposing solicitor and/or the firm had failed to obtemper an Interlocutor (which ordered the firm to notify the complainer of a court hearing date), by sending the notice to an address where the complainer had not lived for a number of years.

The Determination Committee decided that the firm had failed to fulfil the commitment to the Court, to the client and to the complainer, to prepare the case diligently and to communicate effectively.  The Committee accepted that the firm had served papers at an incorrect address, which did not match the address on the Court Record for the action.  As a result, the Committee was satisfied that the firm had provided their own client with an inadequate professional service, as a client would expect the firm to properly designate the parties and the failure to do so, could have led to additional time and cost to the client for the rectification of any errors. The Committee agreed that there had been a direct adverse impact on the complainer and on that basis, the complaint was upheld.

The Committee ordered the firm to pay compensation to the complainer of Band B for the inconvenience and distress caused by the inadequate professional service.  The Committee directed the firm to pay a Complaints Levy of £200.

Not upheld decisions:

16/25 Litigation: The complainer complained that the named solicitor and the firm had (a) failed to conduct the court case adequately by ignoring expert opinions, reports, evidence and failing to call specific witnesses and had quoted an incorrect name in the court documents, (b) failed to provide adequate advice about the settlement, by failing to advise that the opponent was obliged to issue a VAT receipt, despite instructions that the offer was to be inclusive of VAT, and (c) acted in an aggressive manner and threatened to cease acting on multiple occasions.

The Determination Committee was satisfied that the solicitor had exercised professional judgement and there was no evidence to show that this was unreasonable.  The Committee agreed that the solicitor followed clear instructions and there was no evidence that the solicitor failed to advise adequately about the terms of the settlement.  The Committee agreed that the evidence showed effective and clear communication by the solicitor and there was no evidence to support the complaint that the solicitor had acted in an aggressive manner.

The Committee decided not to uphold the complaint.

16/26 Family: The complainer complained that the named solicitors had (a) failed to provide adequate information about fees, (b) failed to keep the bank informed of a significant overspend, despite being aware of the limitations in funding, (c) failed to follow instructions by allowing 3 staff members to attend at court, thus incurring unnecessary costs, (d) failed to pay Counsel’s fees before taking the firm’s fees, and (e) failed to advise Counsel to withdraw from acting.

The Determination Committee decided that (a) sufficient information about fees had been provided before the offer was rejected, (b) the bank had been kept up to date and advised of the reasons for the increases in funding, (c) the firm did not accept the instruction to only have 1 person at the court hearing.  The firm did not, therefore, fail to fulfil a commitment to the complainer and fees were not unnecessarily incurred, as the need for additional staff was explained and professional judgement in this regard was exercised reasonably.

Regarding (d), the Committee could find no evidence to support the complaint that an instruction had been given or accepted that Counsel should be paid in the first instance.

In respect of (e), again the Committee could find no evidence to support the complaint about the withdrawal of Senior Counsel from the case.

The Committee decided not to uphold the complaint.

16/27 Family: The complainer complained that the named solicitor and/or the firm had provided inadequate and inconsistent advice about the availability of Legal Aid within the firm.

The Determination Committee was satisfied that the evidence showed that the advice provided was clear, consistent and in accordance with the firm’s policy on Legal Aid.  The Committee did not consider that there was any contradictory information provided, or that the quality of communication from the solicitor and/or the firm was inadequate.

The Committee decided not to uphold the complaint.

16/28 Residential conveyancing: The complainer complained that the named solicitor of the firm had failed to advise the complainer to take steps to confirm the validity of a Letter of Comfort or advise the complainer to insist on a Certificate of Completion from the sellers.

The Determination Committee was satisfied that the evidence showed that the firm had adequately advised the complainer of the available options and how to protect the position.  The Committee agreed that there was no requirement for the firm to insist on a Completion Certificate.

The Committee decided not to uphold the complaint.

 

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WOLFFE HALL: Papers reveal Council’s legal action ‘abandoned’, £320K Faculty refurbishment of Laigh Hall & new Lord Advocate refused to give expectations on move to recover public ownership of Parliament House

New Lord Advocate’s role in Parliament House titles fiasco. DOCUMENTS obtained from the Scottish Government reveal Scotland’s new Lord Advocate – James Wolffe QC – refused to give expectations of any success on efforts by the City of Edinburgh Council to recover public ownership of titles to Parliament House and the Laigh Hall.

Emails from James Wolffe to the Scottish Government also claim the Faculty of Advocates spent £320K on legal costs and work refurbishing the Laigh Hall – which Edinburgh City Council contend was wrongly taken from public ownership.

The series of exchanges between the former Dean of the Faculty of Advocates and Scottish Ministers in relation to the loss of public ownership of Scotland’s top court buildings – came to light in papers released by the Scottish Government in response to a Freedom of Information request.

In one letter dated 2 April 2015 to Alex Neil MSP  – the then Cabinet Secretary for Social Justice – James Wolffe told the Minister he did not object to a meeting between representatives of the City of Edinburgh Council and the Faculty of Advocates.

However, Wolffe added to the same letter “At the same time I would not wish to give any expectation to you or the council as to the outcome of any discussion.”

The long time lawyer & QC – recently selected by First Minister Nicola Sturgeon as Scotland’s latest Lord Advocate –  also felt confident enough to pass along details of the financial costs of ‘refurbishing’ the Laigh Hall – which the City of Edinburgh Council maintained were part of the common good & therefore owned by the council.

In a separate email to a senior Scottish Government civil servant – James Wolffe added: “I am advised that the of refurbishing the Laigh Hall following the grant of title to the Faculty was £242,270 plus VAT, with professional fees of £33,537 plus VAT.”

Responding to Wolffe’s claim the Faculty of Advocates paid out over £320K on refurbishing parts of buildings formerly in public ownership – an individual at the Scottish Government whose identity has been censored in the released documents – made light of further coverage of the Parliament House fiasco in the Scottish media.

In a further email, Wolffe alerted the secretive Scottish Government contact to additional coverage, pointing to an article written by Martin Hannan in The National, titled “Edinburgh asks: Can we have Parliament House back, please?

Meanwhile, unredacted sections of legal advice given by the Scottish Government’s own lawyers to Scottish Ministers revealed in the documents state the following:

• The Scottish Court Service (SCS) is the current proprietor and occupier of Parliament House.

Consequently it is that independent body (and not the Scottish Ministers) that would have to agree to a voluntary transfer of its title to the local authority. We don’t know what view the Lord President would be likely to take on that matter and whether he would agree to the transfer in circumstances where the public body has a valid title. He may, for example, be influenced by the fact that the SCS has recently undertake a major refurbishment of the building complex at a cost of around £58 million.

• The finance position is complex. SCS holds a valid title and will have accounted for bot the property and the recent refurbishment works in its accounts: Whilst a transfer to the council would retain the property in public ownership, there are tricky issues around accounting and public finance rules t at would require further investigation.

• Although neither a legal nor financial impediment, the title position is very complex. Parliament House is not one building but rather a number that are stitched together, built down the centuries. it is not clear whether the entire property was, and remained, part of the Common Good Fund when Scottish Ministers registered a title. This may be relevant when considering whether or not it would be appropriate to transfer the entire property. My understanding is that it would be an expensive exercise to undertake any further examination of the title and it is unlikely that it would in any event achieve any greater clarity.

• The Faculty of Advocates holds a registered title to the Laigh Hall. It mayor may not agree to a voluntary transfer, and if they were inclined to do so, we don’t know upon’ what basis.

As ministers sought to arrange meetings and seek views on the subject, Lord Brian Gill – then Lord President – wrote to Alex Neil MSP, asserting “this matter is best dealt with at official level”

Gill said he would ask Eric McQueen – Chief Executive of Scottish Courts and Tribunals Service, to meet with officials of the Council.

However, after a year of fruitless negotiations between council officials, the Scottish Government, and other parties, the City of Edinburgh Council served writs on Scottish Ministers, the Keeper of the Registers and the Scottish Courts & Tribunals Service on 25 November 2015.

The action by the council – seeking declarator that the City of Edinburgh Council is the owner of Parliament House, High Street, home of the Court of Session – has since been abandoned.

In response to media enquiries, the Scottish Courts and Tribunals Service confirmed the council’s legal action had ceased, and said : “SCTS holds legal title to Parliament House.”

PARLIAMENT HOUSE TITLE SWINDLE

Last year Diary of Injustice reported on the City of Edinburgh Council’s efforts to recover the titles to Parliament House after land reform campaigner Andy Wightman – now an MSP – revealed land titles to the buildings of Scotland’s top courts were ‘gifted’ by Scottish Ministers to the Faculty of Advocates.

A disclosure of eighty eight pages of documents released to DOI under Freedom of Information legislation – revealed at the time the Scottish Government had no plans to act over their handing over of the Parliament Hall land titles to the Faculty of Advocates.

And, throughout the documents – which contain communications between civil servants, briefings to Ministers, land reports and letters from Edinburgh City Council asking for meetings, it was clear Scottish Ministers favour leaving the titles to the nation’s top courts with the vested interests of the legal profession.

During an earlier check on the titles to the Laigh Hall – Parliament House – Queen Street – ownership stood in the name of “SIDNEY NEIL BRAILSFORD Queen’s Counsel, Treasurer of HONOURABLE THE FACULTY OF ADVOCATES Edinburgh, as Trustee and in Trust for said Faculty”.

Sidney Brailsford is High Court Judge Lord Brailsford.

Scottish Government files reveal how court titles were handed over to advocates After a series of briefings with Ministers – involving everyone from the Lord Advocate & Solicitor General to the Cabinet Secretary for Justice, Minister for Legal Affairs and others, a position was adopted by Scottish Ministers “That we confirm to Council officials that it is the Scottish Government’s position that title to Parliament Hall was taken by Scottish Ministers in good faith and with the full knowledge and consent of the Council. The Scottish Court Service and Faculty of Advocates therefore have good title to the property and Ministers propose no further action.”

Lawyers for the Scottish Government also sought to distance themselves from the huge £58 million taxpayer funded spend on the Scottish Court buildings – long after titles were handed over to the advocates.

One lawyer stated in an email: “Was the PH [Parliament Hall] refurb about £60m? It went over in the SCS [Scottish Court Service] budgets I think but from my recollection of briefing on their budget it is not easily identifiable within their budget lines. So SCS [Scottish Court Service] spent the money not SG [Scottish Government]?”

In another memo, it is revealed Edinburgh City Council may be compelled to take legal action to recover the titles and details an example of how Common Good land disputes have affected legislation in the past.

As previously reported, Scotland’s First Minister Nicola Sturgeon has already given her blessing to the multi million pound title handover freebie to the Faculty of Advocates. The First Minister claimed there was “no easy solution to the issue of restoring title to the City of Edinburgh Council”. The First Minister’s response to a question from Green Party MSP Alison Johnstone during First Minister’s Questions, follows:

Parliament House handed over to Faculty of Advocates FMQ’s Nicola Sturgeon 19 February 2015

Official Report of debate: Alison Johnstone (Lothian) (Green): It transpired this week that the 17th century old Parliament hall in Edinburgh was transferred from the collective ownership of my constituents to Scottish ministers without knowledge or recompense to the common good fund.

The City of Edinburgh Council failed in its role as steward of the fund, but is now seeking to resolve the situation. Can the First Minister assure my constituents that any requests from the council to restore ownership of that common good asset to the council will be considered seriously and favourably?

The First Minister – Nicola Sturgeon: I will briefly state the background to this issue, of which I am sure that Alison Johnstone is aware.

The Scottish Government’s position is that title to Parliament hall was taken by Scottish ministers in good faith, and that that was done with the full knowledge and consent of the council. The Scottish Courts Service and the Faculty of Advocates, therefore, have now got good title to that property.

Of course, I am more than happy to ask the relevant minister, Marco Biagi, to; meet and discuss the matter with the City of Edinburgh Council, but as far as I can see there is no fault here on the part of the Scottish Government.

Further, of course, title has since been passed on, so it may very well be that there is no easy solution to the issue of restoring title to the City of Edinburgh Council. I think that any questions on how the situation has arisen probably have to be directed to the council.

 

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