THE COURT

(Lord Minginish, Mr J A Smith)

ROYAL DORNOCH GOLF CLUB v CROFTERS HAVING RIGHTS IN HILTON OF EMBO COMMON GRAZINGS

(Application SLC 68/14 – Order of 7 June 2016)

CROFTING – RESUMPTION FROM COMMON GRAZINGS – ABANDONMENT OF APPLICATION – EXPENSES – MOTION FOR AWARD ON AGENT AND CLIENT BASIS - WHETHER LITIGATION CONDUCTED UNREASONABLY

The applicants applied to the Court for an order authorising resumption of an area of land which was part of common grazings but was owned and used by them as part of a golf course. Three out of the five shareholders in the grazings lodged answers. Three weeks before the date fixed for proof, the applicants sought leave to withdraw the application on payment of expenses taxed on the Sheriff Court scale and accepted that the Court should sanction the employment of senior counsel and certification of two expert witnesses. One respondent argued that the applicants had acted unreasonably and inappropriately in their conduct of the proceedings and moved for expenses to be awarded on an agent client, client paying, basis.

HELD, applying McKie v Scottish Ministers, that there was no unreasonableness in the applicants’ conduct of the case and that they had acted responsibly in seeking to abandon the application when it became clear that the gulf between what they could afford to pay as the crofters’ share in value under Sec 21 of the Crofters (Scotland) Act 1993 and what the respondent sought could not be bridged by negotiation.

The Note appended to the Court’s order is as follows:

[1] This is an application by the Royal Dornoch Golf Club for resumption of some 37.708 ha of land forming part of their golf course from the Hilton of Embo Links Common Grazing. Five shareholders in the common grazing were listed in the schedule to the application, Mr Alisdair MacLean, Mr Kenneth Hassall, Mr Gordon Davidson, Mr William Sutherland and a Mrs Munro. By later amendment Mr William Grieve was introduced in place of Mrs Munro and Mrs Margaret Fielder in place of Mr William Sutherland.

[2] Mr Hassall, represented by Murchison Law, solicitors, Mr MacLean, represented by Macleod & MacCallum, solicitors, and Mr Grieve, also represented by Macleod & MacCallum, lodged answers. Mr MacLean has since died but his executors have come in in his place. Mr Davidson expressed his interest by email, claiming a share of any compensation or development value found to be payable by the applicants, but did not lodge formal answers. A telephone enquiry was received from agents acting on behalf of Mrs Fielder but nothing further has been heard from her or them.

[3] After sundry procedure, by its order of 9 March 2016 a proof was fixed for four days starting on 14 June. On 13 May the applicants’ agents moved to discharge that hearing and sist the case for negotiation. That motion was opposed on behalf of Mr Hassall and by its order and note of 23 May the court refused it, for the reasons then given. On the same date the original motion was replaced by one seeking leave to withdraw the application upon payment of taxed expenses on the Sheriff Court scale to the respondents who had entered the process. Mr Hassall’s agents have opposed that motion to the extent of arguing that leave to withdraw should be subject to the applicants being found liable in expenses on an agent and client, client paying, basis and that the award of expenses should include sanction for the employment of senior counsel by Mr Hassall and certification of two surveyors as skilled witnesses. The agents for the other two respondents do not oppose the applicants’ motion. The applicants’ agents do not oppose sanction for senior counsel nor certification of the skilled witnesses but they do resist the motion that their clients be found liable to Mr Hassall in expenses on an agent and client basis. Accordingly that is the only matter we require to resolve.

[4] Rule 5(2) of the Scottish Land Court Rules 2014 provides that “[w]here an application is abandoned or withdrawn the court may impose such conditions as to expenses or otherwise as it thinks fit”. Rule 88 provides that “[t]he court may award such expenses in a case, or in any part of a case, as it thinks fit”. Rule 99(1) provides that the fees allowed to solicitors at taxation are to accord with those payable in ordinary actions in the sheriff court except in so far as the court may, as regards a particular case, order otherwise. Regulation 5(c) of the Act of Sederunt (Fees of Solicitors in the Sheriff Court) (Amendment and Further Provisions) 1993 provides that “[w]here a party or his solicitor abandons, fails to attend or is not prepared to proceed with any diet of proof, debate appeal or meeting ordered by the court, the court shall have power to decern against that party for payment of such expenses as it considers reasonable”.

[5] In support of his motion Mr Murchison, on behalf of Mr Hassall, argues, generally, that the applicants have acted unreasonably and inappropriately in their conduct of the proceedings. Under that umbrella he invites us to have regard to the following factors in particular:-

(a) The wide terms of rules 5 and 88 and the discretion afforded the court by regulation 5(c).

(b) The absence of an explanation to justify the applicants’ conduct.

(c) The stage at which the application was abandoned.

(d) The relative status and financial positions of the parties.

(e) The conduct of the applicants before the application was lodged; in particular (i) their failure, despite repeated attempts by Mr Hassall to get them to do so, to address the question whether part of the golf course was a common grazing, necessitating the bringing of an application to determine the status of the land in question [SLC/192/11] and (ii) the fact that they persisted in their opposition to that application until a proof was imminent.

(f) The assurance subsequently given to Mr Hassall that the applicants would regularise their use of the land in question and, more particularly, the fact that said assurance was being departed from by the withdrawal of the present application.

(g) That Mr Hassall has refrained from exercising his grazing rights over the land in question in reliance on the foregoing assurance.

(h) That it is reprehensible that the applicants now intend to continue (if permitted to do so) the undisputed benefits accruing from the non-exercise of grazing rights without being prepared to pay for their resumption.

(i) Alternatively, that it is suspected that the applicants’ intention may be to await the retiral, later this year, of Mr Hassall’s valuation expert, Mr Hamilton (who has produced a valuation far in excess of the applicants’), and then submit a fresh resumption application.

[6] Mr Murchison has an esto position, if we are against him as to the totality of his client’s expenses, to the effect that we should in any event find the applicants’ liable on an agent and client basis from the date of intimation of Mr Hamilton’s valuation report (5 December 2014) on the basis that, if it is that valuation which has persuaded the applicants to seek withdrawal of their application, they should have done so earlier.

[7] Mr Murchison’s motion is opposed essentially on the ground that the applicants “have acted reasonably in the whole circumstances where the parties are so far apart in valuation terms and the applicants could not reasonably afford a resumption payment on the scale proposed by Mr Hassall”. Reference is made to the factors identified by Lord Hodge in McKie v The Scottish Ministers 2006 SC 528 as relevant considerations when a court is considering a motion of this kind.

[8] In support of his opposition to the motion, Mr Gunn, for the applicants, makes the following points:-

(a) That the other two respondents who have lodged answers, Mr Grieve and the executors of Mr MacLean, proposed settlement terms which the applicants were prepared to accept and would have accepted had Mr Hassall concurred.

(b) That the applicants could not afford to pay anything approaching Mr Hamilton’s valuation of £1,974,962.50, their own valuation being £32,965.

(c) That the applicants are a small club in the north of Scotland which should not be compared with wealthy clubs in or near large English conurbations whilst Mr Hassall is a man of substantial means: in other words that the assertion of “inequality of arms” is unfounded or, at least, exaggerated.

The law

[9] Lord Hodge’s analysis in McKie is, these days, the starting point for decisions of this kind. The relevant part of what he said (at para [3] of his judgement) is as follows:

“First, the court has discretion as to the scale of expenses which should be awarded. Secondly, in the normal case expenses are awarded on a party and party scale … But, thirdly, where one of the parties has conducted the litigation incompetently or unreasonably, and thereby caused the other party unnecessary expense, the court can impose, as a sanction against such conduct, an award of expenses on the solicitor and client scale. Fourthly, in its consideration of the reasonableness of a party’s conduct of an action, the court can take into account all relevant circumstances. Those circumstances include the party’s behaviour before the action commenced, the adequacy of a party’s preparation for the action, the strengths or otherwise of a party’s position on the substantive merits of the action, the use of a court action for an improper purpose, and the way in which a party has used court procedure, for example to progress or delay the resolution of the dispute. [The fifth factor is not relevant.]”

[10] In this case Mr Murchison tentatively suggests that the breadth of the discretion which this court has in terms of the aforementioned rules and regulation may afford the court scope to apply a more general test than the one of unreasonable or reprehensible conduct which emerges from McKie. That is said particularly of regulation 5 of the Sheriff Court Act of Sederunt.

[11] In our opinion regulation 5 has no application here. It is concerned with the sort of award a sheriff can make and not with the fees payable to solicitors, which is the only respect in which rule 99(1) of our rules imports Sheriff Court rules into ours. It covers what can happen if a party abandons or fails to proceed with a proof, debate, appeal or meeting ordered by the court. This court has its own rule regarding abandonment (or withdrawal) of an application. It is, as we have seen, that we may impose “such conditions as to expenses or otherwise as [the court] thinks fit” (rule 5(2). That rule is certainly stated in very wide terms, as is rule 88, to which reference has already been made. But we do not take them as conferring on this court a power any wider than enjoyed in other Scottish courts. The rules were written in the knowledge of the general parameters within which expenses are dealt with in Scotland and are intended only to give the court maximum room for manoeuvre within these parameters. In any case it is difficult to imagine where going beyond those parameters would take us. Is it being said that an award on an agent and client basis can be made even although the party who is found liable has not behaved unreasonably; that some lesser failure can justify an award? In our view that would be quite unwarrantable. Reasonableness is, patently, the only fair touchstone by which a party’s conduct can be judged and a sanction in expenses imposed.

[12] So, have the applicants here behaved unreasonably? In assessing that, we consider that the previous action between them and Mr Hassall sheds no useful light on the subject. They were no doubt dilatory in responding to Mr Hassall, thereby necessitating the application, and they left it late to concede the status of the land as common grazings. The expenses of that case have already been dealt with, in terms of parties’ agreement, which did not involve an award on an agent and client basis.Mr Murchison’s point is that history is repeating itself in this application; that we are seeing the same pattern of delay followed by capitulation. But we think this case should primarily be analysed on its own facts.

[13] When that is done, we find no unreasonableness in the applicants’ conduct. At worst they miscalculated. They applied for resumption thinking they could afford it. That was reasonable: they had valuation evidence to support that view. They were met with a claim vastly in excess of anything they had imagined. They therefore had to take stock. They decided that they could not responsibly, no doubt bearing in mind their obligations to their members, take the risk of being found liable in anything approaching the sum claimed by Mr Hassall. They therefore tried to negotiate. They were prepared to meet the terms of settlement put to them on behalf of Mr Grieve and the executors of Mr MacLean. But the gulf between them and Mr Hassall was unbridgeable. They therefore decided to pull the plug. Far from being an unreasonable decision, that was a responsible one.

[14] Mr Murchison cites two cases in support of his motion. These are the Outer House case of SL Petitioner [2014] CSOH 168 and the Sheriff Court case of Akram v Ahmad, a decision of Sheriff Thomas Welsh QC sitting at Edinburgh, dated 9 February 2015 and reported at 2015 WL 640777.

[15] The parallel Mr Murchison draws with the first of these is that it demonstrates “something approaching a cynical attitude” being taken towards the court process, something he says is also true of the present case. However, when one identifies Lady Scott’s reasons for awarding agent and client expenses in that case (or at least for the very limited part of the process in respect of which such an award remained competent) one sees how different they were from anything in the present case. These reasons are to be found at para 31 of her judgement:-

“… I am not persuaded on the respondent’s submissions that the petitioner’s conduct here was fraudulent. But I am persuaded that it was unreasonable. I am satisfied that the petition was raised in order to gain time and obtain temporary relief from the charge [it was a petition for suspension of a charge for payment] without any intention to take matters further. In so doing the petitioner made claims regarding the respondent’s conduct which the petitioner knew were without any real substance and throughout the petitioner was aware she was due to make the payment sought. In these circumstances I am satisfied that I should make the order sought and award expenses on the solicitor and client scale.”

[16] There is nothing like that in the present case. The present case was raised in order to regularise the position of the golf course vis a vis the common grazings. It was not raised as any kind of prevaricating or delaying tactic. It was raised in good faith and proceeded with until the applicants were met with a claim the size of which they had, for good reasons (their own professional valuation), not foreseen, and abandoned only when it became clear that successful negotiation with Mr Hassall was going to be impossible. SL Petitioner therefore affords no support to the present motion.

[17] The position is the same with Akram, though for different reasons. Akram involved a catalogue of repeated procedural failings by the defender. He failed to enter appearance or failed to attend a diet (it is not clear which) resulting in decree passing against him. That decree was then reponed. Beyond that at least three diets of proof required to be discharged for reasons involving fault on the part of the defender, a situation described by the learned sheriff at para 21 of his judgement as “a total waste of court time and resources, all caused by the Defender” before going on to conclude, at para 23:

“In my judgment the additional callings in this case were entirely unnecessary and have put the Pursuers to additional avoidable expense. The Defender should not be allowed to get away with that, without some responsibility attaching to him, financially, as a sanction. His behaviour was both unreasonable and egregious.”

[18] Mr Murchison fairly acknowledges that in this present case there has not been a series of repeated failures relating to individual hearings but he argues that it is nevertheless open to the court to conclude that the applicants have from the start failed to instruct their agents properly, or, if not from the start, certainly from the date on which Mr Hamilton’s report was produced. He says that if the applicants were not prepared to go ahead with the case with the risk that compensation would be assessed under reference to that report it was incumbent on them to have applied for leave to abandon or withdraw the application at that stage.

[19] In our opinion there is no merit in that point. The applicants were entitled to pursue the possibility of negotiating settlement even in the face of Mr Hamilton’s valuation. That this was reasonable is demonstrated by the fact that they reached acceptable terms with Mr Grieve and with Mr MacLean’s executors, both of whom adopted Mr Hamilton’s valuation in their own pleadings. This case is therefore at a considerable remove from Akram.

[20] With regard to the other reasons advanced by Mr Murchison, we consider items (d), (g), (h) and (i) to be irrelevant. The test is the reasonableness or otherwise of the applicants’ conduct of the litigation and matters leading up to it. As to point (i) we cannot speculate on what the applicants’ intentions are. We can only deal with matters as they appear at the moment.

[21] In all the circumstances, therefore, we are satisfied that we should refuse to attach an award of expenses on an agent and client basis to the grant of leave to withdraw and we have not done so. The other matters sought being agreed, we have granted them.