Published in September 2013, the report of the Review of Expenses and Funding of Civil Litigation in Scotland by Sheriff Principal James Taylor makes important recommendations that will have significant implications for the conduct of civil litigation in Scotland. As such, it will be essential reading for all court practitioners.
The report of the Scottish Civil Courts Review (‘SCCR’) was published in 2009, shortly before Lord Justice Jackson’s final report on civil litigation costs in England and Wales. Anticipating that the Jackson Report might have consequences for litigation in Scotland, the SCCR did not address issues of expenses and funding in detail, recommending instead that these be the subject of further review. The Taylor Review implements that recommendation.
Both reviews were underpinned by the following principles:
- The civil justice system should be fair in its procedures and working practices.
- It should be accessible to all and sensitive to the needs of those who use it.
- It should encourage early resolution of disputes and deal with cases as quickly and with as much economy as is consistent with justice.
- It should ensure that justice is secured in the outcome of dispute resolution.
- It should make effective and efficient use of its resources by allocating them to cases proportionately to the importance and value of the issues at stake.
- It should have regard to the effective and efficient application of the resources of others.
Central to the Taylor Report is its recognition that the Scottish civil litigation landscape differs markedly from that in England and Wales. A major concern of Lord Jackson was the escalation of disproportionate costs driven mainly by recoverable success fees and ‘after the event’ (‘ATE’) insurance premiums. These have never been recoverable in Scotland. The popular perception of a growing ‘compensation culture’ is not borne out north of the border: the number of claims per head of population is significantly lower in Scotland than in England and Wales, and indeed the number of civil cases initiated in Scotland has fallen in recent years. Finally, whereas in England and Wales legal aid has been withdrawn from a large majority of civil cases, in Scotland it remains available (albeit that the Scottish Legal Aid Board is likely to become ‘the funder of last resort’). Consequently, while the Taylor Report inevitably draws on Lord Jackson’s work and in some instances makes similar recommendations, the starting-point – and hence, often, the reasoning – is very different. The Taylor Report also anticipates changes to the Scottish litigation landscape, particularly the SCCR reforms and the introduction of Alternative Business Structures.
The Taylor Report runs to over 300 pages, with 85 recommendations. Practitioners should consult the report itself for the details; the following is intended as a brief summary of the key points. Reference should also be made to the SCCR to put these recommendations in their proper context.
The report’s main recommendations are as follows:
Qualified one-way costs shifting (‘QOCS’) in personal injury actions. Arguably this is the report’s most innovative proposal. Under QOCS the pursuer will recover expenses if the action succeeds, but each side will bear their own expenses if the action fails. The pursuer will lose the benefit of QOCS if he or she acts fraudulently or in abuse of process, or conducts the litigation unreasonably (in the Wednesbury sense), or if the action is disposed of summarily. Only limited protection from expenses will be afforded the pursuer who fails to beat a tender. The Taylor Report’s rationale for QOCS focusses on the reported difficulties pursuers experience in obtaining reasonably priced ATE insurance cover: this impedes access to justice, since those with legitimate claims may be deterred from litigating them by fear of paying expenses.
Judicial expenses. Recommendations include: in cases subject to active judicial case management motions for an additional fee should be dealt with at the outset of proceedings (in cases subject to case-flow management the motion will continue to be made at the end of proceedings); the block Tables of Fees should be revised to incentivise efficiency; the court should have power to award interest (at the judicial rate) on judicial expenses.
Commercial actions. The report identifies that the gap between legal fees incurred and expenses recovered needs to be narrowed. It recommends that the block Table of Fees be revised to reflect commercial procedure and incentivise efficiency, with the alternative of recovering expenses based on the hourly rate charged by the successful party’s solicitor. Revised criteria for seeking an additional fee are identified. Two pilot schemes are proposed: expenses management (by which recovery of expenses is determined by a pre-agreed budget approved by the court), and summary assessment of expenses by the judge at the conclusion of a hearing. The report also recommends introducing a model along the lines of the Patents County Court (which offers expedited procedures with capped costs for lower value claims) in the Court of Session.
Outlays. To achieve greater certainty as to potential expenses, the report recommends that in cases subject to active judicial case management motions for sanction for counsel or certification of expert witnesses should be dealt with much earlier than at present. Sanction for counsel should generally be sought at the outset of proceedings. The review was not persuaded that there should be automatic sanction in sheriff court personal injury actions: the decision remains within the sheriff’s discretion. Certification of experts should be sought prior to their instruction or, where this is impossible, as soon as reasonably practicable after proceedings begin. The amount of counsel’s or expert’s fees recoverable should be stipulated at the time of certification.
Fixed expenses. The SCCR recommended replacing the summary cause and small claims procedures with a new simplified procedure. The Taylor Report recommends that, except for personal injury actions, the amount of expenses recoverable under the new procedure should be fixed.
Referral fees. The Taylor Review found that an outright prohibition (as has been introduced in England and Wales) would be unworkable in practice and could adversely affect access to legal services. The report therefore opts instead for regulation, and recommends that only regulated bodies should be entitled to charge referral fees. It goes on to recommend that there should be a regulator for claims management companies.
Damages based agreements. Currently neither solicitors nor advocates can enter into enforceable agreements by which their fee is calculated as a proportion of damages recovered. The report recommends that such agreements should be permitted. This is intended to correct an anomaly whereby claims management companies can charge contingency fees but lawyers cannot. The report recommends that the maximum percentage that can be deducted from damages should be capped, the cap depending on the type of action and the amount awarded. In addition, the solicitor will be entitled to retain the judicial expenses recovered from the defender.
Speculative fee agreements. In line with the recommendations for damages based agreements, the report recommends that the maximum success fee chargeable under a speculative fee agreement should be capped. It also makes clear that the solicitor should meet all unrecovered outlays (other than an ATE premium, if applicable) from the success fee payable for a personal injury action.
Clinical negligence. The Taylor Review was told that prospective pursuers face particular difficulty in obtaining funding to investigate alleged clinical negligence. To meet this need, the report recommends that the Scottish Government establish the viability of a ‘Contingent Legal Aid Fund’ (‘CLAF’) to provide funding for clinical negligence outlays. This is a type of self-financing, commercially-run scheme, under which the successful pursuer would require to reimburse the fund for the outlays met and contribute a percentage of the damages recovered.
Disclosure of funding. The report recommends that all parties should be obliged to disclose to the court and their opponents the means by which the litigation is being funded (for example, by a trade union or under a damages based agreement). Currently an obligation of disclosure applies only to legally aided parties.
More information for clients. The report recommends that solicitors should be obliged to explore with clients all potential funding options, including the possibility that the client is covered by an existing ‘before the event’ legal expenses insurance policy. A reasoned recommendation of the funding option best suited to the client’s position should be provided in writing. Where clients are referred to a solicitor by a third party (such as an insurer), the solicitor should be obliged to advise clients in writing of the basis on which the referral was made; the third party should have an attendant obligation to provide solicitors with the necessary information.
Cold-calling. The report recommends that claims management companies should not be permitted to cold-call prospective clients; solicitors who obtain clients from these companies should be obliged to satisfy themselves that the company does not cold-call.
Lisa Gillespie, Advocate.