03/06/2021

QOCS is coming to a Scottish court near you

QOCS will be in force in Scotland from 30 June 2021 and it will change the way that personal injury cases are litigated in Scotland. Time will tell the true extent of this change and the impact on fraud in Scotland. Will the new rules leave the door open to questionable cases or will the exceptions shine a light on the pursuer’s conduct and potentially act as a deterrent?

Legislation introducing the well-known concept of qualified one-way cost shifting (QOCS) to Scotland was laid before Scottish Parliament on 1 June 2021 and the rules have now been published. The legislation received Royal Assent in 2018 and should have been introduced in Spring last year. Like many things, the timetable for bringing QOCS to Scotland was impacted by COVID-19.

The objective of QOCS in Scotland is to level out the playing field between pursuers and insurers/ larger entities. As the case law develops, the impact will become clear.

QOCS will apply to all litigation commenced on or after 30 June 2021. In order to recover costs, defenders/ “applicants” will have the onus of showing that the pursuer or the pursuer’s representative:

  • Has made a fraudulent representation or has otherwise acted fraudulently in connection with the claim or proceedings.
  • Has behaved in a manner which is manifestly unreasonable in connection with the claim or proceedings, or
  • Conducted the proceedings in a manner that the court considers amounts to an abuse of process.

As discussed in previous blogs, there is no statutory definition to assist with what constitutes a “fraudulent representation”, “acted fraudulently” or “manifestly unreasonable” conduct. Will the fact that there are listed exceptions, however, act as a deterrent to fraudulent claims? The more cautious pursuer firms are likely to see it that way, but the absence of “fundamental dishonesty” as a specific exception will undoubtedly dilute the usefulness of English authorities on QOCS exceptions. Add to that the general reluctance of the Scottish judiciary to accept that a claim is fraudulent, and it seems more likely to go the other way with an increase in questionable claims being litigated with minimum risk to pursuers and their solicitors.

The new rules will also affect the defender’s key weapon in his armoury, the cost implications of lodging a tender (equivalent of a part 36 offer). Currently a tender must be accepted within a reasonable period of time and if it is not; or the pursuer fails to beat the offer at proof (trial) the pursuer is responsible for the defender’s costs from the date the tender was lodged and intimated. This will no longer be the case. Costs will be awarded to the defender, but capped at 75% of the pursuer’s damages. Where there is more than one defender, they will be apportioned by agreement or by the court. While it is pleasing to see that tenders will still be a useful tool, the rules will undoubtedly have an impact. For example consider a claim raised for £100,000 and settled at £5,000 as a result of substantial investigations into causation. Costs awarded at a maximum of £3,750 are unlikely to recoup much of that investigation outlay.

Interestingly, where a pursuer abandons an action, the question of costs is entirely within the court’s discretion and it remains to be seen whether the spirit of QOCS will dissuade courts finding against pursuers in these circumstances.

It is anticipated that the volume of litigation will increase on and after 30 June 2021, with many pursuer firms (where possible) waiting for the change in rules before litigating. With the cost of litigation and the risks faced by pursuers decreasing, we expect to see an increase in suspicious/ borderline cases on the horizon. Thus, with the clock ticking towards 30 June 2021, insurers will be required to consider Scottish fraud indicators and quickly take heed of the Scottish exceptions to devise clear strategies.  

Louise Houliston, Senior Associate, Edinburgh will discuss the relationship between QOCS and fraud north and south of the border during the forthcoming webinar on 15 July 2021.