Provision was made for the introduction of qualified one-way costs shifting (QOCS) to Scottish personal injury proceedings in the Civil Litigation (Expenses and Group Proceedings)(Scotland) Act 2018 (the 2018 Act). The rules required to bring the QOCS regime into force have been under discussion for a considerable period of time, however, it was only in March 2021 that it was announced these would come into force on 30 June 2021. We reported on that announcement in our previous Law-Now, which you can revisit here. However, at that stage we were only able to provide a general outline of the QOCS regime, based on the terms of section 8 of the 2018 Act and its commencement order. The more detailed court rules were still to be agreed and published.
Those court rules have been published this week, in the Act of Sederunt (Rules of the Court of Session 1994, Sheriff Appeal Court Rules and Sheriff Court Rules Amendment)(Qualified One-Way Costs Shifting) 2021 (SSI 2021/226) (the Act of Sederunt). We are now able to provide more clarity on the procedures being introduced for handling applications under the QOCS regime, and the basis upon which those applications will be considered.
The new principle
The long-standing default position for costs in almost all types of civil litigation in Scotland has been that “expenses follow success”. However, the new default position – the new QOCS principle - for first instance personal injury and death claims commenced in the Scottish civil courts on or after 30 June 2021 (and any appeals arising from such proceedings) will be 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” (s.8(2) of the 2018 Act). This is in line with the policy objectives of the 2018 Act, which included reforms to introduce greater quality in the funding relationship between pursuers and defenders in personal injury actions, where the defender is frequently an insurance company or commercial enterprise.
However, notwithstanding the new QOCS principle, there are exceptions to that principle on which another party to a personal injury action may rely in order to argue that an unsuccessful pursuer should be found liable for expenses on cause shown. The purpose of the new rules is essentially to regulate the procedure for such applications, and the basis upon which such applications will be determined. Importantly, the new court rules have been designed to align QOCS procedures across all of the Scottish civil courts – the Court of Session, the Sheriff Appeal Court, and the sheriff courts (ordinary cause and summary cause) – wherever possible, for the benefit of court users.
Notwithstanding the general rule in s.8(2) of the 2018 Act, the court has discretion to make an award of expenses against an unsuccessful pursuer where:
The pursuer does not conduct the proceedings in an appropriate manner;
The pursuer fails to obtain an award of damages greater than the sum offered by way of a tender lodged in process;
There is unreasonable delay on the part of the pursuer in accepting a sum offered by way of a tender lodged in process;
The action or the appeal is abandoned by the pursuer.
Another exception applying to proceedings raised under the sheriff court ordinary cause procedure, is where summary decree (judgment on a summary basis) has been granted against the pursuer.
What is “inappropriate conduct”?
In terms of s.8(4) of the 2018 Act a person will be deemed to have conducted civil proceedings in an appropriate manner, unless they or their legal representative:
makes a fraudulent representation or otherwise acts fraudulently in connection with the claim or proceedings;
behaves in a manner which is manifestly unreasonable in connection with the claim or proceedings; or
otherwise conducts the proceedings in a manner that the court considers amounts to an abuse of process (s. 8(4)).
Where the applicant alleges that the inappropriate conduct amounts to fraudulent misrepresentation, the civil standard of proof will apply, namely, the balance of probabilities.
The Act of Sederunt amends the Rules of the Court of Session, the Sheriff Appeal Court Rules, the Ordinary Cause Rules and the Summary Cause Rules, by adding a new chapter to each and establishing a consistent procedure for assessing whether exceptions to the general QOCS principle apply.
In practice, a party to a personal injury claim who wishes to seek an award of expenses against an unsuccessful pursuer must make a written application to the court, stating which of the exceptions they rely on. Such applications will require to be made before the court makes its final expenses (costs) order in the case (whether at first instance or on appeal).
Determination of such applications will be at the discretion of the court. It is to be expected that a body of case law will develop over the next several years which will provide further guidance on how that discretion will be exercised and identify the types of behaviour that will be viewed as, for example, ‘manifestly unreasonable’ or ‘an abuse of process’.
The new court rules also make provision for a pursuer’s liability in certain circumstances to be capped, and apportionment of awards of expenses amongst multiple applicants.
The commencement of the long-expected QOCS regime in Scotland is likely to be watched with interest by insurers and businesses in particular. The “loser pays” principle has been a cornerstone of Scottish civil litigation for years. It has acted as an incentive to both parties not to litigate over trivial claims or disputes of dubious merit. At the same time, there is no doubt that there has been an inequality of arms between the parties typically involved in personal injury claims, who, in a great many cases, are private individuals on the one hand and corporate defenders with access to far greater means on the other. That inequality needed to be addressed. However, the concern for insurers and businesses alike will be whether the introduction of the QOCS regime in Scotland will herald a rise in personal injury claims of more questionable merit, and therefore an overall increase in the legal spend and management time associated with unmeritorious claims. There is an alternative view: that the introduction of QOCS into Scottish personal injury procedures will change more for pursuers and their agents than for defenders. The rationale for such a view is that many personal injury claims proceed by way of ‘no win, no fee’ agreements backed by ATE insurance. Such an arrangement already affords pursuers a form of protection from the risk of being liable for expenses if their claim fails, and accordingly QOCS may simply result in a change to present funding arrangements for pursuers without a change in the volume of claims brought.
What is clear is that insurers will see a change, either through a drop in demand for ATE insurance from pursuers (and a consequent drop in revenue), or because of an increase in claims being brought against their insured customers, or both.