Substantial changes to civil litigation system passed by Scottish Parliament with phased implementation expected.

The Scottish Parliament has recently passed the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act. The Act is expected to have a phased implementation from this summer.

The fundamental aim of the Act is to ensure that litigants in Scotland will have a clearer understanding about the costs of raising a claim in court. The intention behind the new legislation is to ensure greater access to justice for litigants. The changes brought about by the Act will significantly change the landscape of civil litigation in Scotland.

We have previously set out updates to the draft Act brought about by the Justice Committee review and the subsequent response from the Scottish Government.

The Act will introduce the following key changes to the civil litigation system in Scotland:

The introduction of success fees

  • The level of the success fee, as recommended by Sheriff Principal Taylor, be capped.Draft regulations have yet to be released on this issue;
  • The Act also allows that Ministers may, by way of regulations, make further provisions regarding success fee agreements including their form and content, along with issues in respect of the potential for more than one success fee being payable (i.e. to a solicitor and a CMC);
  • Where there are damages for future losses, the Act confirms that any success fee should be calculated including the award of future damages where the future element is less than £1 million. If the future element exceeds £1 million and is to be made by way of periodical payments then this will be excluded;
  • If the payment for future losses exceeds £1 million and is to be made by way of lump sum, then where the damages are awarded by a court, then the court must state it is satisfied a lump sum is appropriate. If damages for future loss are agreed between the parties, then an independent actuary must certify the lump sum is more appropriate. However separate legislation allowing the court power to order disposal by way of a Periodical Payment Order is not expected to be passed through the parliamentary consultation process until later this year at the earliest.

Qualified one-way costs shifting

  • Part 2 of the Act will introduce qualified one-way costs shifting, or QOCS, for personal injury cases. The Government and Committee had both agreed that should be introduced, along with safeguards to prevent a rise in fraudulent and unmeritorious claims;
  • Sections 8(4)(a) to (c) set out the circumstances in which a pursuer will lose the protection of QOCS, including whether a pursuer (or their legal representative) has made fraudulent representations, behaves in a manner manifestly unreasonable, or conduct the proceedings in a manner amounting to an abuse of process;
  • Section 11 sets out that where the legal representative has committed a serious breach of their duties to the Court, then an award of expenses may be made against the legal representative;
  • The Act is entirely absent on how a defender's tender (part 36 offer), once lodged into Court, might impact on the award of QOCS to the Pursuer. Sheriff Taylor had recommended that in the event a Pursuer fails to beat a tender, QOCS would still apply but any award of expenses to the Pursuer would be restricted to a maximum of 75% of the amount of damages awarded. The Government has indicated that the Civil Justice Committee will be responsible for the provision of further court rules to consider how the impact of a tendered offer is not entirely lost, once the Act has been granted Royal Assent and QOCS takes hold. However there is a concern that there may be an undefined period of time, until such time as the Court Rules covering tenders come into play, resulting in offers by way of a formal tender will cease to afford a defender any cost protection.

Class actions

  • Part 4 of the Act sets out the introduction of group proceedings into the Court of Session, albeit the rules regarding these proceedings are to be set out by Act of Sederunt;

Regulation of CMCs

  • The Justice Committee had previously expressed concern that the Act should not be brought into force until such time as the Financial Guidance and Claims Act was passed to ensure that the tighter regulations on CMCs are in place;
  • There was concern that the Financial Guidance and Claims Act could have been delayed for a significant period yet it received royal assent last week, transferring regulation of CMCs to the Financial Conduct Authority, and effectively banning unsolicited cold calling from CMCs.

What next?

  • The provisions of the Act are expected to have a phased introduction;
  • The level of success fees will be capped by way of regulations; the Minister for Community Safety and Legal Affairs stated that these will be introduced for parliamentary scrutiny under the affirmative procedure;
  • The Act allows for post-legislative scrutiny to take place in five years’ time, similar to that to be undertaken following the introduction of the Legal Aid, Sentencing and Punishment Act in England and Wales;
  • We will provide a further update once we learn more about the Civil Justice Committee's plans to provide court rules to deal with the issue surrounding tendered offers and how such offers impact on the application of QOCS.