We all know 2020 made an impact – and as we look at the year ahead, there are a few repercussions of the incredible strain placed on businesses that are likely to come into the limelight as a result. While there are some global trends in litigation – like litigation funding and class actions - some Scotland specific trends are also worth highlighting. With that in mind, here are the five key things for litigators to watch in the year ahead:
1) Frustration and leases in Scots law
Inevitably a lot of the work done by litigators over the last year has been in relation to frustration of contracts. Frustration is, by and large, the same north and south of the border and over time the rules in each jurisdiction have gradually become more aligned. The most striking example of that is in relation to leases. In England, it used to be the case that leases were considered to be a special category of contract due to the property rights created by them. In Scotland, despite property rights also being created, that was never the case. Leases were just another contract capable of being frustrated. The English courts have, for some time now, accepted that leases can be frustrated but there are no examples of them putting that into action. In Scotland, successful frustration arguments are few and far between. In the year ahead, we can expect more arguments being made that leases ought to be brought to an end. Whether these arguments will be successful is quite another thing.
2) Insolvencies once government support for business ends
We have been warned about a flood of insolvencies for some time now and, no doubt, the failure of major businesses can have a trickle-down impact on a multitude of smaller business partners. However, the government protections in this area remain strong with the protections against winding up petitions and statutory demands being continued until March 2021 and with the extended moratorium and the restructuring plans firmly in place. Much in this area may depend on how the government deals with repayment of loans or the end of furlough. Much will also, of course, depend on how fast restrictions are eased and how quickly sectors of the economy recover. The statistics indicate that insolvencies were down 43 per cent in 2020 on where they were in 2019. That suggests that the measures in place have propped up both companies failing as a consequence of the pandemic and companies which were failing anyway. It is perhaps the latter which will be first to go to the wall when the protections end.
3) Success Fees in Scotland
One of the key changes to Scots law in 2020 has been the introduction of success fee agreements allowing solicitors to share in the spoils of the litigation rather than charging a fee in the usual way. Success fees, in the form of damages based agreements or conditional fee agreements have traditionally been regarded in Scotland as pacta de quota litis (which is similar to the concept of champerty in England) and accordingly unlawful. Scots lawyers are yet to take full advantage of their ability to charge in this way and the benefits to business are very significant. Small and medium sized businesses already write off millions of pounds of bad debt every year because of a reluctance to incur the legal costs involved in pursuing that debt. The pandemic may leave many businesses with legitimate claims and little money to pursue these claims, so 2021 may well be the year that success fee agreements come into their own.
4) Prescription of Claims
At the moment, one of the most difficult technical issues in Scots law is prescription of claims due to the passage of time. The Supreme Court has, in recent years, done its best to clarify matters but largely without success. There is now a slightly unsatisfactory position where we have conflicting judicial decisions on the issues arising out of the interpretation of section 11(3) of the Prescription & Limitation (Scotland) Act 1973 relating to awareness of loss. It is fair to say that all Scots lawyers are praying for some more clarity in this area. Some of the existing problems foreshadowed by these cases may be cured by the introduction of the Prescription (Scotland) Act 2018 – but perhaps not all.
5) The UK’s Judicial Review and its constitutional implications
Some Scots law trends are reflected across the whole UK. As we exit the European Union, we reflect on the constitutional implications of the process itself and the supervisory powers of our courts. The rule of law has its limits but what these should be will be a major topic for discussion in 2021. In July 2020, the UK government launched an independent review of administrative law looking at questions such as - whether the terms of judicial review should be written into law; what grounds and remedies should be available against the government and, most importantly, whether certain decisions by the executive should be decided on at all by judges. The last of these questions will not be easily decided and the constitutional implications for Scotland and the UK will be significant no matter what decision is reached.
First published in The Lawyer Monthly