Litigation Bill proposes personal injury changes

Despite laudable aims, it may have unintended consequences, finds Kate Donachie

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill is currently before the Scottish Government’s justice committee.

It proposes significant changes to the way that personal injury litigation is funded and managed in Scotland with the aim of increasing access to justice, providing equality of arms between claimant and defender in litigation and protecting the vulnerable. In reality, despite its laudable aims, it may have unintended consequences that have quite the opposite effect.

In relation to expenses the Bill proposes two main changes. The first is that solicitors can enter into an agreement with their client whereby the solicitor receives a percentage of the damages received; a damages based agreement (DBA). The second is that a claimant will not be found liable for the defender’s expenses, even where the case fails; qualified one way costs shifting (QOCS). Those proposals may not be troublesome in principle, but the practical implications of their introduction merit some scrutiny.

The rationale for allowing solicitors to enter into DBAS is to bring transparency, predictability and accountability to the funding of litigation. However DBAS are not new in Scotland. At the moment claims management companies (CMCS) can enter into them with potential claimants. The Bill proposes no change to this status quo; nor any regulation of CMCS. CMCS have been linked to cold calling, pressure selling, other unethical behaviour.

In England CMCS have been regulated since 2006 and, as a result, CMC activity in England declined steeply since. It is likely that the less scrupulous organisations, forced out of business by the English regime, are looking for alternative markets, and that the lack of any regulation in Scotland, coupled with the other proposals, make Scotland an attractive prospect.

There are also potential difficulties with the proposed structure of DBAS. In the highest value claims the future losses are very often the cost of necessary care. Damages will be carefully calculated to allow the claimant to secure the care they need for the rest of their life. If the claimant has a DBA, approximately 25 per cent of that money will be given to the solicitor or CMC. This may make it impossible for the claimant to obtain the care they need.

Deduction from future losses was justified on the basis that otherwise claimants’ solicitors would not be properly remunerated. However claimants can, and do, apply to court for a percentage uplift to the court expenses paid by the defender. The uplift is unlimited and is decided with reference to the particular circumstances of the case. Most significantly, it is not met by the claimant but by the defender or their insurer. Accordingly, as the Bill stands, claimants are likely to suffer substantial and unnecessary deductions from their damages. At present, an unsuccessful claimant will normally have to pay the defender’s expenses and some potential claimants are prevented from raising valid claims because they cannot afford to lose. QOCS is seen as way to remove that barrier and to increase access to justice.

This lack of sanction in unsuccessful claims is also likely to entice CMCS north of the Border. The risk to them in raising claims would be vastly reduced by QOCS and they can operate in Scotland without regulation or sanction. Given the questionable business practices of some of these organisations, an increase in their activity here is likely to have negative consequences for claimants and society more generally.

In summary, the Bill’s worthy and sensible aims may well be undermined by a failure to anticipate the practical implications of its proposals.

Kate Donachie is an Associate in the insurance and risk team at Brodies LLP