After much discussion and anticipation, there is now a bill setting out the Scottish Government’s proposals for the expenses (costs) regime in civil litigation.

In brief the bill provides for the following:

  • Success fee agreements
  • Restriction on pursuer’s liability for expenses in personal injury cases (ie QOCS)
  • Payment of expenses to charity in pro bono cases
  • Third party funding of civil litigation
  • Awards of expenses against legal representatives committing “serious breach” of duties to the court
  • Auditors of court being brought within Scottish Court & Tribunals Service
  • Group proceedings (ie class actions)

Success fee agreements

This would remove the current ban on solicitors receiving a percentage of their client’s damages. It is also proposed that the Scottish Government has the power to impose a cap on the amount subtracted.

At present it seems that the cap would take the form of a maximum percentage and would perhaps be on a sliding scale, decreasing as the damages increase.

During consultation respondents representing defenders and insurers proposed that damages for future losses should not be taken into account when calculating success fees.

That suggestion was rejected because it was thought that such ring fencing would create an incentive for the pursuers’ solicitors to delay settlement in order that more loss was attributed to the past.

Complications creep in where a periodical payment order (PPO) is a possibility. There would be no success fee payable on sums received as periodical payments.

A solicitor advising his client about the merits or de-merits of a PPO arrangement could therefore find himself in conflict. It is proposed that where a pursuer is awarded more than £1,000,000 the court must confirm its satisfaction that the pursuer’s best interests are better served by a lump sum than a PPO.

In situations where the action settles before proof (trial), an independent actuary must consult with the pursuer and certify that a lump sum rather than a PPO is in the pursuer’s best interests.

At present such arrangements are very rare in Scotland. However given the new discount rate and anticipated changes to the framework for any future rate changes, PPOs may well become more prevalent.

Restriction on pursuer’s liability for expenses in personal injury cases (ie QOCS)

The bill proposes the introduction of qualified one-way costs shifting. This would be a break from the current approach in Scotland where expenses generally follow success.

The aim is to improve access to justice and to allow pursuers to litigate without fear of being found liable for the defender’s expenses.

It is proposed that a pursuer will not be found liable to the defender in expenses where the litigation has been conducted in an appropriate manner.

The bill states that the litigation will not have been conducted appropriately if the pursuer has made a fraudulent misrepresentation, has committed an abuse of process or has behaved in a way which otherwise falls below the standard of behaviour expected of a party to litigation.

That proposed provision has the potential for a significant amount of argument in the future.

During consultation it was noted that only 0.1% of actions involve a situation whereby defenders will seek payment of expenses from the pursuer.

The effect of QOCS on defenders and their insurers will not be great however, it is not clear whether or not this statistic takes into account the occasions on which a defender’s liability in expenses is reduced by awards of expenses made against the pursuer during the course of the action.

It has been noted that the cost of after the event (ATE) insurance is high in Scotland and is generally at least 30% of the cover sought. Therefore, it was concluded that insurance was not the best and often not even a viable option.

Third party funding of civil litigation

The bill suggests that where a pursuer has received legal representation free of charge, any expenses paid by the defender should be donated to a suitable charity; for example Citizens Advice.

It would also be mandatory for a pursuer who is in receipt of third party funding to disclose that fact and to identify the third party funder.

Group proceedings

It is proposed that, for the first time, pursuers with similar complaints can bring one action as a group rather than raising several individual actions which concern the same issues.

There is no upper limit on the number of people in the group. Group actions would only be brought in the Court of Session with the permission of the court and jury trials would not be allowed.

Overall there is nothing surprising in the bill and it seems inevitable that much of what is proposed will ultimately become law.

The bill does not include provision in relation to the regulation of the claims management industry or referral fees, both of which are instead to be considered in the recently announced review of legal services.

Ultimately the extent to which QOCS affects litigation behaviour cannot be known until the new system comes into force.

Defenders might well experience an increase in spurious claims which will be more difficult to defend. However, there is likely to be a significant amount of argument around whether or not a pursuer has conducted an action appropriately.

That argument may provide a welcome focus on fraudulent claims and, given the availability of a specified sanction; the courts may be moved to take a more robust approach.