Procedurei The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018
The 2018 Act establishes the overarching framework for group proceedings in Scotland. Section 21 of the 2018 Act then confers power on the Court of Session to make more detailed provision about group proceedings by way of what is called an Act of Sederunt. These more detailed procedural rules, intended to supplement the 2018 Act, are currently being drafted by the Scottish Civil Justice Council (SCJC), the rule-drafting body to the Court of Session. While the SCJC has a degree of discretion over the final form that the rules will take, they must fall within the parameters set down by the 2018 Act. Nevertheless, it is only possible to provide an outline of the procedure at this early stage.
The 2018 Act provides that group proceedings will only be available in the Court of Session. The Court of Session is Scotland's supreme civil court, and it will not be competent to initiate group proceedings in any lower court, such as local sheriff courts. The sheriff court has exclusive jurisdiction over claims in Scotland worth £100,000 or less. The 2018 Act provides powers for the Court of Session to make rules regarding the disapplication of this rule in relation to group proceedings. Until a draft of the rules governing group proceedings is available, it remains unclear whether any monetary limit will apply to group proceedings, or whether their aggregate value might have to be £100,000 or more to qualify as competent group proceedings. Given the Court of Session has exclusive jurisdiction to hear group proceedings, the current thinking is that no monetary limit will apply, making them an even more unique species of Scottish civil court procedure, post the 2014 Act reforms.
Group proceedings in Scotland will be initiated by a person known as a 'representative party', who will bring the proceedings on behalf of the wider class, described in the legislation as a 'group'. There may only be one representative party to the proceedings. A group, for these purposes, comprises two or more legal individuals who each have a separate claim in the subject matter of the group proceedings. The representative party will often be a member of the defined class on whose behalf the proceedings have been brought, although not necessarily so. If the representative party is not a member of the class, they can only advance the claim with the Court's authorisation. The 2018 Act does not contain any indication as to whether the Court has an unfettered discretion in granting this consent, or whether there are guiding principles to be followed in the making of such a decision.
Permission must be granted by the Court before group proceedings can be progressed. The 2018 Act provides that permission is only to be granted if the Court considers that all of the claims raise issues, whether of fact or law, which are the same, similar or related to each other; and if the Court is satisfied that the representative party has made all reasonable efforts to identify and notify all potential members of the group about the proceedings. These are cumulative requirements. Further, the Court will only be permitted to give permission in accordance with the procedural rules to be developed by the SCJC.
The 2018 Act leaves the question of whether an opt-in, opt-out or hybrid regime will be established open to the Court of Session, and therefore to the SCJC. At present, the SCJC has given no indication which route is likely to be taken. For the purposes of the legislation, 'opt-in proceedings' are defined as group proceedings that are brought with the express consent of each member of the group on whose behalf they are brought. Conversely, 'opt-out proceedings' are defined as group proceedings that are brought on behalf of a group, each member of which has a claim that is of a description specified by the Court as being eligible to be brought in the proceedings, and either (1) is domiciled in Scotland and has not given notice that they do not consent to the claim being brought in the proceedings; or (2) is not domiciled in Scotland and has given express consent to the claim being brought in the proceedings. In short, non-Scots domiciliaries will not be able to participate in the opt-out process; they must opt in to the class irrespective of whether those particular proceedings are running on an opt-out basis for Scots domiciliaries.
At first blush, the definitions of opt-in and opt-out group proceedings, and the class requirements, in the 2018 Act are markedly similar to those in the Competition Act 1998 (CA), as amended by Schedule 8 to the Consumer Rights Act 2015. Section 47B CA provides that opt-in proceedings for the purposes of competition law are collective proceedings brought on behalf of each class member who 'opts in by notifying the representative . . . that the claim should be included in the collective proceedings'. Opt-out proceedings, under the CA, are defined as those brought on behalf of each class member except: (i) any member who opts out by notifying the representative; or (2) any class member who is not domiciled in the UK and does not opt in to the proceedings. In other words, the 2018 Act follows the CA's approach in defining opt-out class actions. Both instruments proceed on the basis that, unless they explicitly opt out, the class for the purposes of the proceedings will encompass every possible member of the class, unless that member is domiciled outside Scotland or the UK or specifically opts out. Those with a foreign domicile can only take part in the proceedings by opting in, reflecting the UK's far more conservative approach to class action procedure in contrast to jurisdictions such as the US. So far as class definition is concerned, the Competition Appeal Tribunal (CAT) must determine whether the claims raise 'the same, similar, or related issues of fact or law'.
Until a fully fledged body of case law emerges in Scotland, it remains to be seen how the judiciary will interpret the provisions of the 2018 Act on class definition. The 2018 Act is not a UK statute, and so there is not the same need as arises in interpreting such a statute to take a consistent approach across the UK. This said, it is possible, given the similar definitions of class in both sets of legislation, that the Scottish courts, in deciding whether permission should be granted for group proceedings, will have one eye on decisions of the CAT, which sits primarily in London. Further, given that the CA's territorial scope extends to Scotland in competition law matters, there may nevertheless be a desire to take a consistent approach to applications under the 2018 Act as would be taken to applications to the CAT deriving from Scotland.ii The funding of litigation
The reforms introduced by the 2018 Act do not stop at the introduction of group proceedings. The 2018 Act brings about significant procedural changes that complement class actions, including radical change to the funding of litigation in Scotland.
On 3 June 2014, Sheriff Principal Taylor published the Taylor Review of Expenses and Funding of Civil Litigation in Scotland (the Taylor Review). The Taylor Review recommended the introduction of various changes to the expenses and funding regime in Scotland, including more detailed provisions about success fee arrangements, the introduction of qualified one-way costs shifting (QOCS), and the notification of third-party funding.
Until 30 January 2019, solicitors in Scotland were not competent to enter into damages-based agreements (DBAs). DBAs are a subset of success fee arrangements, whereby the solicitor's legal fees are calculated as a percentage of the sum awarded upon successful litigation. Traditionally, such arrangements were deemed an agreement for a share of the litigation proceeds (pactum de quota litis) in Scotland, and consequently unenforceable. The reasoning was that lawyers take on a professional role for their clients in relation to a claim, and that they were therefore debarred from combining that function with a pecuniary interest of their own in the amount received.
Section 2 of the 2018 Act reverses this position, providing that a success fee arrangement is not unenforceable by reason only that it is an agreement for a share of the litigation. One of the primary drivers for the introduction of group proceedings is a desire to reduce legal expenses incurred per capita and improve access to justice for consumers. DBAs are arguably being introduced into Scottish litigation for similar reasons. DBAs often proceed on a 'no win, no fee' basis, and similarly provide claimants with the opportunity to litigate without being restricted by the financial barriers associated with pursuing court proceedings. It is possible that the two will operate together to bring about a more favourable environment for, and therefore an increase in, class actions in the Scottish courts. Claimants may be more willing to pursue group proceedings if they do not have to fund their own fees unless they are successful; and solicitors may well see the attraction of acting on a damages-based arrangement for multiple clients in group proceedings.
The 2018 Act's implementation of OQCS may bring about a similar effect, at least in the context of mass personal injuries claims. The general rule on legal expenses in Scotland is that 'expenses follow success'. In other words, a successful litigant, whether pursuing or defending, will be entitled to recover expenses from the unsuccessful litigant, who bears both his or her own expenses and the opponent's. The risk of a party potentially incurring liability for their opponent's expenses, should the litigation prove unsuccessful, may be seen as constraining that party's access to justice.
QOCS 'shifts' this burden from the unsuccessful litigant. Section 8 of the 2018 Act prohibits the Court from making an award of expenses against an unsuccessful pursuer, essentially removing this hurdle. The new QOCS regime is restricted to personal injuries actions and contains its own procedural safeguards to ensure that vexatious litigants are not afforded such protection. Section 8(1)(b) of the 2018 Act provides that QOCS only applies where the pursuer conducts the proceedings in an appropriate manner, which they are considered to have done unless their lawyer makes fraudulent representations, acts fraudulently, behaves in a manner that is manifestly unreasonable or otherwise conducts the proceedings in a manner that the Court considers amounts to an abuse of process. Evidently, the 2018 Act imposes a high threshold before the protection under the QOCS regime can be taken away from a pursuer. In all other circumstances, pursuers will be taken as having conducted the proceedings appropriately and will therefore be entitled to the exemption under Section 8(1)(b). Again, that is likely to make the environment more favourable for class actions in personal injuries matters, including clinical negligence claims, subject to the pursuers being able to establish a class at the permission stage.
Finally, the 2018 Act requires parties receiving financial assistance in respect of proceedings from another third party to notify that fact to the Court. The litigant must disclose both the identity of the third party and the nature of the assistance provided. Typical examples of third-party funding of litigation include insurance cover and legal aid. However, litigation funding increasingly takes the form of an investment, whereby commercial funders assist litigants by covering their legal expenses, and take a return in the event the litigants succeed.
Unlike in England and Wales, Scotland has never imposed a restriction on third-party funding. However, the English restriction on third-party funding arrangements has gradually been eroded, resulting in England becoming one of the premier jurisdictions for third-party funding, along with Australia and the US. By contrast, the Scottish market for third-party funding has never quite found fertile ground. However, as has already been mentioned, certain aspects of the 2018 Act may make Scotland a more attractive jurisdiction for third-party funders, most notably its introduction of the possibility of opt-out class actions.
It will ultimately be up to the SCJC to decide which types of claim may be the subject of opt-out proceedings, and for the Court of Session then to exercise its discretion in any given case. However, should opt-out proceedings become a reality, Scotland will become the only jurisdiction in the UK where, aside from in competition matters, they are available to litigants. The financial rewards that might be available from a successful opt-out litigation are bound to attract the interest of litigation funders, not least when Scotland is generally a less expensive jurisdiction in which to litigate than its neighbouring jurisdictions.