A hurdle to litigation – expenses

There is a lot of mystery and uncertainty around expenses (costs) of litigations in Scotland. Most people think (perhaps understandably) that they will recover all their costs if they win their case.

The reality is quite different. A Sheriff (Sheriff Court) or Judge (Court of Session) have discretion to award judicial expenses to either party at any stage of the litigation process, albeit generally expenses follow success and so the winning party will normally be granted the expenses of the litigation. Those expenses depend on the court in which a case is brought and there is secondary legislation (Taxation of judicial expenses rules | Scottish Courts and Tribunals Service) regulating the relevant expenses in different courts and procedures within those courts.

Generally speaking, the tables attribute “units” (each “unit” represents six minutes) to a particular tranche of work, e.g., drafting an initial writ (the initiating document in the Sheriff Court) might be 18 units, and you multiply those units by the “unit charge” (currently £18, or £180 per hour).

By comparison, it is not uncommon for most commercial law firms to charge at least £300 (excl. VAT) per hour.

While an overly simplistic view, it generally stands the test of time for one to say that even a successful party will only recover around 50% of the costs they incur in a litigation given the disparity between the hourly rate used when calculating judicial expenses and the hourly rate charged by commercial law firms.

Unfortunately, there is almost always an irrecoverable cost of litigation. In my experience, a hotly contested litigation that runs to any substantive hearing will cost clients at least £20,000 plus VAT and outlays. A party might recover around 50% of those costs.

That inevitably should factor into a prospective litigant’s considerations and, in my view, is a big reason why early, sensible discussions about a commercial solution are encouraged.

It is also worth considering, whether you are a business or an individual, what other funding options might be available to you, e.g., Conditional Fee Agreement (CFA), After The Event (ATE) insurance, legal expenses insurance (sometimes available as part of house insurance), and professional indemnity/liability insurance.

The overarching point is that prospective litigants should go into disputes with their eyes wide open to costs and engage with their solicitor early about costs and how that factors into their decision-making.

At BTO, we are conscious of the costs of litigating and resolving disputes. We are transparent and will work with you to explore funding options, including offering CFAs, and provide early advice on resolving disputes in a cost-efficient way.