Proposed reforms will make costs of Scottish civil litigation "more predictable", says government

Out-Law News | 04 Jun 2014 | 3:44 pm | 3 min. read

Proposed reforms to the way in which civil litigation in Scotland is funded will "improve access to justice" by making the costs of court action more predictable, the Scottish government has said.

It will act on a number of the recommendations for reform proposed by Sheriff Principal Taylor in his review of civil litigation expenses and funding, it has announced. Among the measures that it plans to adopt is the introduction of damages-based agreements (DBAs) and qualified one-way costs shifting (QOCS), as well as new rules for speculative fee agreements.

"Having considered Sheriff Principal Taylor's recommendations, I am convinced that they will go a long way to making the Scottish civil litigation system much more accessible to the people of Scotland," said Kenny MacAskill, the Scottish justice secretary. "The current situation where the unpredictability of costs represents a barrier to justice is not acceptable."

"These improvements are part of a much wider series of reforms to our justice system to make it more effective and efficient for all parties involved, and ensure that disputes are resolved fairly and swiftly," he said.

Litigation expert Craig Connal QC of Pinsent Masons, the law firm behind Out-Law.com, said that although the proposals could be seen as "good news for lawyers" as they seem to have been designed to increase litigation; they were "not such good news for the commercial world for precisely the same reason".

"It is perhaps unfortunate that none of the Scottish government's headline messages attack what some call a 'litigation culture'," he said.

"There is undoubtedly a risk that there proposals could result in a step towards a US-style system, where many believe cases are run by lawyers for lawyers. Care will be needed not to import the worst features of that jurisdiction. Likewise, a system which benefits from being relatively straightforward with a focus on the merits not the rules, and the dispute not the costs, will not want to lurch in the opposite direction," he said.

The Taylor Review was commissioned in March 2011, following a similar exercise conducted in England and Wales by Lord Justice Jackson. Sheriff Principal Taylor's final report was published in September, and included 85 recommendations for radical and substantial changes to the current system.

In response, the Scottish government said that although it accepted all of the recommendations "in principle", they should be taken forward "incrementally" as part of its programme of justice reform. In particular the Courts Reform (Scotland) Bill, which is currently before the Scottish parliament, would give the sheriff courts exclusive jurisdiction over claims below £150,000 in value, amongst other reforms aimed at increasing the "effectiveness and efficiency" of the Scottish civil courts.

Many of the proposed changes in relation to funding and expenses will have to be taken forward by the Scottish Civil Justice Council (SCJC) through changes to court rules. However, the Scottish government intends to legislate to ensure that the SCJC has sufficient powers to do so and to "work with other partners to support the wider delivery of the reforms". In particular it has accepted the need for enforceable DBAs between solicitors and their clients, through which fees would be calculated as a percentage of the damages recovered. This percentage would be capped depending on the type of case and the value of the damages awarded. DBAs would be permitted in monetary actions other than family cases.

The same caps would apply to new rules governing speculative fee agreements, another type of 'no win no fee' arrangement which has been enforceable in Scotland since the 1990s. Under a speculative fee agreement a client is only required to pay legal fees if the litigation is successful, with an enhanced fee usually charged in the event of success. However, neither speculative fee agreements nor DBAs provide automatic protection against liability for the winning party's expenses.

Unlike in England and Wales, in Scotland the government does not intend to prevent solicitors from retaining judicial expenses in addition to the agreed success fee when a DBA or speculative fee agreement is used. This would "encourage solicitors to offer damages based agreements in lower value cases", it said in its response. It would also build a number of as yet unspecified "protections for the public" into the new system as well as the caps, following further discussions with the legal profession and consumer groups, it said.

The Scottish government has also accepted the need for the introduction of some form of QOCS in personal injury cases, meaning that the party bringing a personal injury claim would not generally run the risk of having to pay the other side's legal expenses if the court action fails. It will consider its response to the recommendations on before the event (BTE) insurance separately and liaise with the UK government if change is appropriate, as insurance is a reserved matter, according to the response.

In line with Sheriff Principal Taylor's recommendation, the Scottish government does not intend to ban referral fees, as happens now in England and Wales. Instead it will introduce "safeguards to address concerns about legal work being sold to the highest bidder with no reference to quality and unacceptable advertising" following further discussions with the legal profession. It is also giving "separate consideration" to new rules for claims management companies, according to its response. Referral fees are fees payable by solicitors to insurers, case management companies and others in return for cases being passed to them.