Since the introduction of qualified one-way costs shifting (QOCS) for personal injury actions in England and Wales in April 2013, defendants have generally had to pay the costs of successful claimants, and, except in certain circumstances, have not been able to recover their own costs – even when they successfully defend the claim.

In Scotland, however, expenses have been awarded at the discretion of the Court with the normal expectation that the award favoured the successful party.  That approach has now changed and the Court will not order the pursuer to pay expenses anymore. The rules only apply to actions involving personal injury or death brought after 30 June 2021.

Costs protection applies to any appeal, as well as to the initial claim, but will not be granted in the following circumstances:

• If the pursuer/legal representative acts fraudulently regarding the action
• If the pursuer/legal representative behaves unreasonably
• If the pursuer/legal representative commits an abuse of process
• If the pursuer fails to beat a tender lodged in process
• Where there has been an unreasonable delay by the pursuer in accepting a sum offered by a tender
• Where the pursuer abandons the action

In those scenarios, the expenses awarded against the pursuer remains at the Court’s discretion, unless the pursuer fails to beat a tender, or there is an unreasonable delay in accepting it.  In those circumstances the Court is directed to cap the award at no more than 75% of the damages awarded for expenses incurred from the date the tender was lodged.  The award is applied in the aggregate where there are more than one defender, something that could have a great impact on the likes of long tail claims, for example.

The 2018 Act has already introduced a Statutory Framework for Success Fee arrangements, commonly known as damage based agreements, with the Scottish Ministers having the power to cap the success fee.

How will the change impact the volume of claims progressing through to litigation in Scotland?

Awards of expenses against the pursuer are rare in Scotland, often because of unrealistic valuations by pursuers, fraud and abandonment. Of the total number of personal injury claims pursued, only a small percentage litigate, and out of those that are settled pre-litigation, the fixed costs regime still applies.

Although pursuers’ solicitors will feel more confident to act on marginal cases with the change in legislation, we’re not anticipating that they will litigate claims that clearly lack merit. With the introduction of insurer-funded success fees, there will be pressure from funders to only litigate cases with sound prospects.

Of those that do litigate, the appropriate tactics will remain to carefully assess risk and lodge a competitive tender at the earliest opportunity. If the pursuer fails to beat it, defenders are entitled to their expenses from the date it was lodged.  Aside from the introduction of the cap of 75%, this is unlikely to have a huge effect on claims.

When there is a borderline liability dispute on a point of law, we expect that an honest pursuer should be protected in that scenario from an award of expenses. Defenders have to assess the risks, but it’s likely that the sensible action will be to seek settlement behind the protection of a tender.

We anticipate that QOCS will be a material consideration in higher value cases where, due to substantial dispute between the parties relative to liability, tenders are lodged at a level that reflects compromise.  In those cases, the difference in position relative to damages is likely to justify accepting increased risk in terms of bearing expenses.  Pursuers will be more likely to compromise when faced with the risk of receiving no damages award if unsuccessful at Proof.

Changes we expect to see in court

Whilst there has been speculation about the impact of QOCS in Scotland, we’re optimistic that it will not greatly affect the way claims are processed in court. Some increase in litigation is to be expected, but the approach for dealing with it will remain in the protection of tenders for the majority of cases.

Where QOCS does feature and a dispute arises regarding the benefit of costs protection being lost, we’re likely to see similar behaviours that were adopted when this was introduced in England and Wales in 2013, with the potential for increased satellite litigation.

On an unusual note, stakeholders could have the opportunity to petition amendments to the Act and with two years to prepare, insurers may want think about keeping data relative to its impact if they wish to petition.

For more information & details around the legislation change, please get in touch with Keith Donnelly, Casualty Technical Director or Gary Wilson, Senior Associate.