End of the “loser pays” rule in Scottish personal injury claims

Scotland

Commercial organisations and their insurers should be aware that the “loser pays” rule, which generally determines how awards of expenses (costs) are dealt with in Scottish litigation, is soon to be replaced in personal injury claims brought in the Scottish courts. In particular, it has been announced that qualified one-way costs shifting (QOCS) will be introduced to Scottish personal injury proceedings from 30 June 2021.

It has long been the default position in Scotland that “expenses follow success” in almost all types of civil litigation. From the outset of proceedings, both parties therefore had an incentive not to litigate over trivial claims or disputes of dubious merit. However, since as far back as Lord Gill’s Scottish Civil Courts Review in 2009 and Sheriff Principal Taylor’s Review of the Expenses and Funding of Civil Litigation in Scotland in 2013, a need for reforms within the Scottish civil justice system has been recognised, and those have included reforms to introduce greater equality in the funding relationship between pursuers and defenders in personal injury actions, where the defender is frequently an insurance company or commercial business.

With this policy objective in mind, the Civil Litigation (Expenses and Group Proceedings)(Scotland) Act 2018 (the 2018 Act) was passed in May 2018, but the vast scope of the reforms it offered, and the secondary legislation and the rules of court required to support those, meant the 2018 Act has been implemented on a staged basis. We have already seen the introduction of a number of reforms to make civil litigation more affordable. For example, since April 2020 the litigation funding options available to pursuers have been broadened with their ability to enter into previously-outlawed damages-based agreements with Scottish solicitors (DBAs - a new form of success fee agreement), and by the increased regulation of claims management companies (see our previous Law-Now here).

The introduction of QOCS in relation to personal injury claims will further advance the 2018 Act’s policy objective, by changing the way liability for the cost of personal injury litigation is generally borne. Although the rules of court required to underpin the introduction of QOCS have not yet been finalised or published, it is already clear from the provisions of Section 8 of the 2018 Act and from the commencement order that,

  • QOCS will apply to restrict a pursuer’s liability for expenses in personal injury proceedings (including appeals).

  • The effect is that the court will not make an award of expenses (costs) against an unsuccessful pursuer, so long as the case has been conducted “in an appropriate manner”: the protection of QOCS will be lost if the pursuer or their legal representative behave fraudulently, or in a manifestly unreasonable manner, or conduct the proceedings in a manner considered an abuse of process.

  • The protection of QOCS does not extend to expenses relating to another type of claim brought alongside a personal injury claim in the same proceedings. 

  • Provision is made for the rules to specify exceptions to the default application of QOCS, and it will be interesting to see what the rules may say in this regard.

  • QOCS will only apply to claims or proceedings commenced on or after 30 June 2021. Where proceedings are brought on or after that date, QOCS will not apply to any work undertaken on the claim in advance of proceedings being commenced.

Whilst the advent of QOCS in the Scottish courts has been on the agenda for some time and should not therefore come as a surprise, this development will be of interest to insurers and commercial businesses since it will remove a factor which may currently act as a disincentive to some pursuers to commence proceedings of questionable merit.  Whether or not, however, we see a flood of personal injury claims at the end of June, or a sustained increase in the volume of personal injury litigation thereafter as some have predicted, remains to be seen.