A new mechanism for group proceedings came into effect in Scotland on 31 July 2020 (see the rules here). We have already commented on the certification stage of the new regime (see here). In this short article we explore some of the issues that arise beyond certification.
The new procedure has a number of similarities to the English Group Litigation Order (“GLO”) regime. Most significantly, both are “opt-in” procedures which require potential claimants to take positive steps to join the group before their claim becomes part of the proceedings.
There are some differences between the two regimes that may initially appear nuanced but could have significant practical impact, depending on how the Scottish courts interpret the new rules. For example, both regimes provide that rulings on common issues are binding on members of the group. Indeed, this is one of the foundational principles for any group proceedings mechanism.
Although they start from this common principle, the Scottish and English procedures then potentially diverge in their approach. The GLO regime provides that where “a judgment or order is given or made in a claim on the group register in relation to one or more GLO issues” such judgment or order is binding on all parties that are on the group register unless the court orders otherwise. The court can order that rulings on common issues also bind persons that subsequently join the group. The analogous Scottish rule is different. It provides that interlocutors (i.e., court orders) are binding on both on group members, and, if the court orders, persons who subsequently join the group. But the binding effect of Scottish rulings only applies to orders, whereas the binding effect under the GLO regime applies both to orders and judgments. On the face of the rules, there is therefore scope to argue that rulings on common issues under the Scottish regime have a narrower impact than those under the GLO regime.
Joining the group
To join the group, a potential member must send the Representative a specified form which is set out in a Schedule to the procedural rules. Mandated information includes the name, address, date of birth, and contact details for each potential group member. Most significantly a “full and detailed summary” of their claim and “evidence in support of [the] claim” must also be supplied. The requirements for full and detailed information and evidence could prove relatively burdensome. The cost of collecting, collating and presenting this information for each and every group member initially falls on the claimant law firm, likely supported by a litigation funder. For any given group procedure, the more burdensome the joining requirements, the more participation rates will be depressed; particularly in circumstances where individualised losses are fairly low and there is already a limited incentive to join a group.
There are ambiguities in the rules concerning the deadline for joining a group. When certification is granted, the Court will make an order specifying, amongst other things, “the period of time in which claims may be brought by persons in the group proceedings”. Thus, and similar to the GLO regime, it appears that the court will fix a “cut-off” date. A cut-off date assists claimant law firms because it encourages potential group members to make a decision on joining the group without having to wait (potentially a lot longer) for the risk of time-bar (limitation) to have the same impact. However, the rules also suggest that potential group members are entitled to join the group by right at any point prior to the court setting the date for proof (trial on the evidence). As with English litigation, the trial date will normally be set after pleadings are closed and in the context of broader directions. The mandated entitlement to join the group at any stage prior to trial being set appears to circumscribe the court’s ability to set a cut-off date. The rules also provide that persons can also potentially join the group after a date for proof has been set, but only with the permission of the court and “on cause”.
The Group Register
The group register identifies all member of the group. It is filed with the court, and the group representative must maintain it by recording when new members join the group and also when existing members leave.
The solicitor signing the group register must certify that each group member’s claim is “brought within the statutory limitation period” and that the Court of Session “is the appropriate forum” for each claim. Naturally, the claimant’s solicitor should consider those issues in any event, but the rules-based requirement to inquire and certify these points will add costs and complexity to building a group of claimants particularly as the time-bar and jurisdiction position could vary depending on the personal circumstances of each group member.
Withdrawal from the group
When the court certifies a claim it will “specify the procedure which must be followed by a group member to withdraw their claim from the group proceedings.” Absent any bespoke additional requirements that the court may specify, the procedure for withdrawal is for a group member to send the mandated form to the group representative albeit withdrawal only takes effect when the group register at court is updated.
The rules provide that a group member can withdraw without the permission of the court, provided that withdrawal is made “either (or both)”: (a) before trial on the evidence has commenced; (b) where withdrawal would not reduce the group composition below two members. Although the relevant rule’s use of the term “either (or both)” is somewhat unclear, the court mandated form suggests that the court’s permission is needed if either criteria (a) or (b) apply.
The claimant law firm and representative should have arrangements in place for the impact on cost sharing and adverse costs insurance where group members leave and thereby reduce the aggregate value of the claim.
Commencement of the group proceedings and time bar (limitation)
Under Scots law, time bar (limitation) is interrupted when litigation is “commenced”. In standard cases, this is when a summons (claim) is served on a defendant.
By contrast, group proceedings are not commenced by service of the summons, but by service of the group register on the defendant. The rules anticipate that the group register will be filed and served in advance of certification being approved. For persons joining the group later, “commencement” takes place when the updated group register detailing their inclusion is filed at court. Thus, a different time-bar analysis will be applied to members who join after the register is served for the first time.
Case Management of the Litigation
Once a group claim has been certified and served, the procedure for ongoing management of the case is broadly similar to that for other commercial litigation. Written defences will be filed, following which an initial preliminary hearing will take place at which the judge will have the power to make a wide range of orders in relation to development of written pleadings and preparation and filing of documents, affidavits and expert evidence. Later in the process, parties will submit further items such as their proposals for disposal of the case and summaries of any legal arguments they wish to take.
One potentially significant ambiguity in the rules relates to the timeline for onward progress of the claim. As noted above, time-bar is interrupted for group members either when the group register is served or when subsequent persons join the register. Next steps in the progress of a claim are typically triggered by the summons being “signeted” (i.e., approved by the court office). Depending on how the rules are interpreted, a representative can defer progress of the action for either one year or up to five years.
Ordinarily the claimant law firm and litigation funder are incentivised to progress a claim expeditiously in order to be paid under their fee arrangements. But a somewhat different dynamic may arise under the new regime. The rules suggest, albeit they are not entirely clear, that in the case of competing applications only one representative will be authorised. If only a single representative is authorised, then they will have effectively secured a monopoly for pursuing that action. This would have a number of consequences. First, competitive pressure between claimant law firms would be alleviated, at least in the period post authorisation. Arguably this is contrary to the interests of potential group members, who may be offered less competitive fee arrangements owing to lack of competition. This dynamic is reduced under the GLO regime, which caters both for appointment of joint claimant solicitors and also for a committee of claimant solicitors, all of whom can continue to book-build in competition with one another. Second, claimant law firms may apply for authorisation very early, whilst the commercial viability of the potential group is not yet certain, in order to try and obtain a monopoly. If they are then granted exclusivity, they may choose to delay progress of the claim – potentially for between one and five years – whilst they focus on book-building in order to confirm the commercial viability of the group.
Settlement of Claims
The rules require the representative to “consult with the group members on the terms of any proposed settlement before any damages in connection with the proceedings may be distributed.” This is an interesting provision in that an obligation to “consult” does not grant any particular group member or members veto rights over a proposed settlement. Relatedly, the literal wording of the rule merely requires consultation prior to distribution rather than prior to agreeing terms of settlement with the defendant. In light of these points, it is questionable whether the obligation to consult will have any meaningful impact. Leaving aside the requirements set out in the rules, a robustly constituted group should have contractual obligations as between group members and the representative which govern agreement on settlement and other key decisions on the conduct of the litigation.
As the new group procedure is likely to encourage high value claims, parties to these disputes will seek to exploit ambiguities in the rules including those that we have identified. With the prospect of further appeals, it could take a number of years to iron out important procedural issues as solicitors, counsel and the judiciary grapple with the new mechanism.
The Scottish Civil Justice Council has stated that it will consider expanding the regime to operate on an opt-out basis, as countenanced by the enabling regime, the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018.
Civil Procedure Rules, Rule 19.12(1).
The group register is served either when the proposed representative files an application for authorisation with the court under RCS 26A.5(5) or for permission under RCS 26A.9(4) - see our earlier alert here for an explanation of the distinction between authorisation and permission).