How the Expenses Act 2018 will shape the future of personal injury in Scotland

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act has been a long time coming, and finally received Royal Assent on 5 June 2018. As a result some fairly radical changes to Scottish litigation are just around the corner.

Background – access to justice

The Act is based upon the recommendations made by Sheriff Principal Taylor in his 2013 Review of Expenses and Funding of Civil Litigation in Scotland, and his concerns that many potential claimants felt unable to pursue genuine claims. The evidence behind the apparent access to justice issue is however open to question. Indeed, the last empirical study was carried out in 1999, long before “no win no fee” became a part of Scottish culture. More likely causes of an overall drop in litigated claims are the introduction of, and subsequent improvements made to, the pre-action protocol, alongside a number of court decisions penalising pursuer firms for litigating prematurely.

The Act

The Act deals with two key issues that those south of the border will be all too familiar with. The first is concerned with what a claimant pays in relation to their own legal fees, the second looking at the defendant’s costs should they win. Whilst the Act is certainly to be welcomed, there has been a question mark over whether it goes too far in seeking to address an imbalance which appears not to exist. Fortunately, during Stage 2 of the Bill’s progress, extensive lobbying led to a softening of some of the more controversial provisions. It is also pleasing to see that the Scottish Government is committed to post-legislative scrutiny every five years.

Key elements of the Act Detail
QOCS

Qualified One-Way Costs Shifting will make its way into Scottish personal injury litigation for the first time. It will apply unless a pursuer:

  • Makes a fraudulent representation;
  • Behaves in a manner which the court considers falls below the standards reasonably expected of a party in civil proceedings; or
  • Otherwise conducts the proceedings in a manner that the court considers amounts to an abuse of process.
Success fees and Damages Based Agreements Although these have been in Scotland for some time, with “no win no fee”, the Act now confirms that such agreements are contractual and enforceable. In addition, there is no intention to make any uplift recoverable from the compensator, and Scottish Ministers will be given the power to cap success fees.
Auditors of court Costs in Scottish Courts are decided by an auditor of court. The Act provides that all auditors will become salaried employees of the Scottish Courts and Tribunal Service to drive accountability and consistency, and is to be welcomed.
Group proceedings

Scotland has never had a formal procedure for dealing with group proceedings, or so called “class actions”. The Act rectifies that, providing specific powers to the court to decide how to handle groups of cases involving the same, or similar, issues of fact or law.

Decision on this will be passed to the Court of Session to incorporate the relevant rules. Whilst clarity and simplicity may have been preferable, this allows the court to consider which approach is appropriate

Comment

A welcomed addition to the Act is the suggestion that the court will be made aware of any funding arrangement when considering whether to award an uplift on the pursuer’s costs. It is certainly the government’s intention that the identity of third party funders are revealed, and that they can be held liable for costs if, for example, a QOCS exception were to apply.

It is pleasing to note that a concern about the provisions of the initial Bill have been addressed, namely the ring-fencing of future losses from the calculation of success fees. Worried about leaving a shortfall for pursuers requiring long term care, the Scottish Government has prohibited the inclusion of lump sum future losses over £1 million in the calculation of a success fee, unless the pursuer was not advised to take a periodical payment. In respect of the latter, the lump sum must either be awarded by the court or certified by an independent actuary to be in the pursuer’s best interests.

Future regulations are likely to cap future loss success fees, and 2.5% has been discussed. Also it is clear that the Scottish Government wants to champion PPOs which are due to be formalised in Scotland with the Damages (Investment Returns and Periodical Payments) (Scotland) Bill that was announced on 14 June in Parliament.

CMCs are not yet regulated in Scotland, and so it is agreeable to see that the FCA looks set to regulate them from 1 April 2019. That regulation will depend on the awaited Financial Guidance and Claims Bill, and so there is an opportunity for the less scrupulous CMCs to make hay in the meantime. In addition there remains the risk that CMCs will find unregulated avenues to operate out of, such as credit hire organisations or medical rehabilitation organisations.

QOCS is of course the real story, as it will affect such a wide range of claims on a daily basis. English practitioners will notice the absence of a “fundamental dishonesty” QOCS exception, which would have been a welcomed addition enabling Scottish Courts to make use of a growing body of English authorities. Without this addition, the provisions may lead to an increase in fraudulent claims, as the test for fraud is a strict one. Claimants therefore seemingly have less to lose, and we might see them taking a risk on poor referrals that can be dropped without penalty.

Whilst the absence of a fundamental dishonesty exception is a disappointment, perhaps in practice, it may make minimal difference to what is classified as a fraudulent representation. In England and Wales the definition that is generally relied upon is the Gosling v Halio & Screwfix [2015] which held that fundamental dishonesty revolves around a dishonesty going to the heart of the claim, or a substantial part of it. These are certainly arguments that we will be putting to the courts, and time will tell whether the approach will go some way towards addressing what seems to be something of a missed opportunity to learn from experience elsewhere in the UK.

Related items:

Read other items in the Personal Injury Brief - July 2018

Read other items in the Motor Brief - August 2018