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Scottish Costs Reforms: Fundamental Changes in Costs of Scottish Litigation (Update From North of the Border) - David Stihler, Brodies LLP

23/10/15. One of the recommendations in Lord Gill’s review of the Scottish Civil Courts, as commented upon in the last update from North of the Border, was for a review of the costs of litigation in Scotland to be undertaken. Sheriff Principal Taylor completed that review, producing a report making 85 recommendations concerning costs management in the Scottish Jurisdiction.

Inevitably there are comparisons with the Jackson reforms although Sheriff Principal Taylor has highlighted that there is a different culture of litigation in Scotland where there are, proportionately, far fewer injury claims than in England. On that basis he has adopted a somewhat different approach.

Following the Taylor review, Scottish Ministers are currently consulting on plans to create “a more accessible, affordable and equitable civil justice system for Scotland”. They are developing proposals aimed at increasing access to justice by: making the costs of court actions more predictable; increasing the funding options for claimants in civil actions; and introducing a greater level of equality to the funding relationship between claimants and defenders in personal injury actions.

It is anticipated that key changes in the funding of civil litigation in Scotland will include:

  • Referral fees – It is anticipated that the ban on referral fees in Scotland will be reversed.

  • Referral fee regulation - Providing that referral fees are allowed, all bodies entitled to charge for referrals will be regulated. Solicitors will be under an obligation to their clients to explain the referral process and the financial arrangements involved.

  • Damages based agreements - For the first time in Scotland solicitors would be able to enter into damages based agreements where they receive a percentage of the damages received on a sliding scale; with the percentage of the fee reducing as the award increases.

  • Qualified one way cost shifting (QOCS) – QOCS are expected to be introduced in personal injury cases. Subject to limited exceptions, including the reasonableness of a claimant's behaviour, claimants would not have to meet a defender's expenses even if the claim is unsuccessful.

  • Expenses management - A system of expenses management operated by the court, including a summary assessment of expenses of the action from the outset, is expected to be implemented in commercial actions. The aim is to "...enable a commercial litigant to assess the benefits of proceeding with litigation in the full knowledge of what the expenses might be should the litigation be won or lost".

  • Alternative sources of funding - Provisions are expected to encourage alternative sources of funding such as third party funding and the establishment of a Contingent Legal Aid Fund to fund outlays in cases of clinical negligence. Additionally, the Taylor review proposes greater transparency of the funding of litigated claims, suggesting that all parties to any action should be entitled to know how the litigation is being funded.

We are at the formative stages of the Scottish costs reform and the proposals are not without controversy. QOCS is a particularly divisive issue. Some practitioners are arguing that QOCS should be implemented in any action where there is an asymmetric relationship between the claimant and the defender while others claim that alternative funding arrangements would sufficiently address any imbalance and that QOCS will encourage claimants to pursue highly speculative claims.

There is no doubt that voices will be raised both for and against the costs reforms and over the short term their extent will be in flux. However, significant changes to the expenses regime in Scotland is on its way, with increased judicial involvement, greater transparency, more closely regulated fee agreements and referrals.

David Stihler
Associate Brodies LLP

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