13 June 2018

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill was passed by the Scottish Parliament on 1 May 2018 and has now received Royal Assent as of 5 June 2018. The Scottish Government has indicated that it intends to begin implementing the Bill towards the end of this calendar year although full implementation is expected to take a number of years.

The Bill sought to address a perceived "asymmetric relationship" between individuals and insurers by introducing measures to regulate the funding of personal injury claims, and restrict the costs payable by a pursuer if they are unsuccessful. These measures include introducing a cap on the amount that can be taken from an award of future damages by way of a solicitor's success fee and allowing solicitors to enter into damages based agreements with clients, something which was hitherto prohibited. The Bill also allows class action style ‘group proceedings’ where a number of litigants have the same or similar claims.

Perhaps the most significant change for insurers will be the provisions regulating costs. The Bill introduces Qualified One-Way Costs Shifting (QOCS) in favour of the party pursuing a claim. A pursuer generally will not be liable for a defender’s costs, even if they are unsuccessful in the claim, provided that they have conducted the litigation in an appropriate manner. This applies to all defenders, whether insured or not, and somewhat controversially, whether the Pursuer has the benefit of third party funding for the litigation or not. Exceptions to that general rule will apply where the pursuer:

• has made a fraudulent representation or has in some other way acted in a fraudulent manner; 
• has behaved in a manner which is manifestly unreasonable; 
• has conducted the litigation in a way which the court deems to be an abuse of process.

The circumstances in which the exceptions will be deemed by the court to apply have not been defined nor has any guidance been given. It is expected that this may give rise to a considerable amount of satellite litigation relating to QOCS until the scope of the exceptions become clear.

We will monitor the implementation of operation of the Act and keep you updated on further developments.

A link to the Bill as passed can be found here.

Contact the Insurance team at: insurance@bto.co.uk