Personal injury litigation in Scotland: an evolving landscape
Scottish legal practice continues to change. With the dust not yet settled on the new compulsory pre-action protocol (as introduced in July 2016), the next round of proposed reforms are already in the pipeline.
The Scottish Civil Litigation (Expenses and Group Proceedings) Bill (the Bill) was introduced on 1 June 2017 – bringing forward the policy aim of improving access to justice. The Justice Committee’s call for evidence on any aspect of the Bill closed on 18 August 2017. The Bill is intended to implement the recommendations made by Sheriff Principal Taylor in his review of expenses and funding of civil litigation in Scotland. In his 2013 report, he concluded that there was an access to justice issue for the Scottish court system.
Despite industry concerns about some of his the conclusions, the Taylor report proposed a variety of changes to ensure better access to justice for pursuers (claimants) and make the cost of litigation more predictable.
The court system has changed considerably since Taylor’s report. In our view, the new proposed reforms are likely to shift the balance too far in favour of the pursuer and their agents at a cost to defenders (defendants). We hope to be proved wrong.
The Bill provides for a number of new features. However, from a personal injury perspective, our focus is on two key changes:
- Damages based agreements (DBAs) - solicitors will be able to obtain a fee calculated as a percentage of the clients’ damages – a success fee. There will be caps introduced on these success fee arrangements.
- Qualified one-way costs shifting (QOCS) - defenders will rarely be able to get an award of expenses against the pursuer, so long as the pursuer “acts appropriately”.
The allowance of success fees is an interesting point. Market intelligence tells us that claims management companies (CMCs) are already recovering percentages of damages in Scotland that are often disproportionate to the damages received.
The Taylor Report attached weight to proper and efficient regulation. It recited a range of views about introducing regulation of CMCs – from no interference at all on the basis of allowing market forces to operate, through to objections based on lack of sanctions when failing to act in the best interests of clients. A number of regulatory tasks and ideas as to a suitable framework were advanced, and Taylor concluded there ought to be a regulator of CMCs. Indeed, he went further and confirmed his belief the time had arrived to debate whether it would be preferable to have a single regulator policing all the players in the application and use of DBAs – as opposed to a number of different regulators operating in the same market (as in England and Wales).
Despite Taylor’s call to action, the Bill makes no specific attempt to regulate CMCs. If claimant solicitors are now able to recover success fees - even if these are capped - the practice will continue. However, it is to be hoped that this formal recognition of the practice might result in a reduction of the current block fee figures.
Currently, the potential of a costs award against the pursuer (by virtue of the tender system, which is equivalent to a Part 36 offer) is an important weapon in the defendant’s armoury to seek the swift and commercial resolution of a claim. The operation of QOCS would change this and mean that there is less incentive for a pursuer to resolve a case early in the process and – as already seen in England and Wales – reduce the defendant’s ability to assume a vetting role to screen out unmeritorious claims.
Whilst there was no mention of a timescale in the Justice Committee meeting that took place on 5 September, Stage 1 of the Bill is to be completed by 27 November 2017. This suggests the Bill is likely to be passed by the Scottish parliament around March or April 2018, before its legal competency is reviewed (including by the Advocate General for Scotland). If the Bill is not referred for judicial review, it then goes forward for Royal Assent. October 2018 is, therefore, likely to be the earliest point when the new legislation could commence.
How the court will eventually apply the new legislation is going to be critical. In the past, the courts have been at best, reticent and at worst, unwilling to look too closely at pre-litigation behaviour. That is rightly changing. The new compulsory pre-action protocol will allow the courts to consider and sanction bad behaviour. The Bill provides that QOCS can be varied if the court concludes that there has been fundamental dishonesty or fraud. There are very few decisions in Scotland where the court has been willing to find that fraud has been established.
We remain hopeful that the Scottish courts will follow suit with England and Wales and begin to take a more robust approach towards stamping out disingenuous behaviour – taking a more forensic approach towards the conduct of both sides during litigation. This will mean that defendants will need to be prepared to challenge appropriate cases, certainly in the short-term.
Ultimately, we remain hopeful that, as the details of the Bill are scrutinised, a sensible discussion will ensue to ensure a balanced and fair landscape. We will be continuing to monitor progress of the Bill and seeking to influence that discussion. Others in the defendant community have an equally important role to play in that process.