Expenses (costs) awards against non-parties – a solution to QOCS?

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 is best known for bringing Qualified One Way Cost shifting into force in Scotland.

However, the Act also contained a number of other elements which have had an impact on insurance litigation including allowing for Success Fee arrangements directly between claimants and solicitors and Group Proceedings. Despite receiving royal assent on 5 June 2018 the provision regarding the liability of third party funders has not yet been brought into force.

Subject to exclusions for most family proceedings, where there is a success fee arrangement, or funding is provided by a trade union S.10(2) of the 2018 Act requires that where a party receives financial assistance for the proceedings they will be required to identify the funder and disclose the nature of the assistance being provided. S.10(3) obliges the party at the end of the case to disclose any financial interest the funder may have in the action and allows the Court to make an award of expenses (costs) against them.

This follows the recommendations of the Taylor report into the funding of civil litigation but represents a novation on the scenarios under the Common Law where an award can be made against a non-party. At present it must be established that the non-party was the dominus litis to the action. In short that would mean they would have the overall interest in the case and the power to control the action either by pushing it on or settling it. It has rarely been applied and often required a sperate action to be raised against the dominus adding delay and expense. It does not reflect the reality of modern litigation where multiple parties, be they insurers or credit hire companies, may have an interest in the action and is a more restrictive test than under the CPR.

S.10 therefore offers perhaps a glimmer of hope to a successful party to a case where the opposing pursuer or defender is impecunious and unable to satisfy any award of expenses. But this cannot be tested until the section is brought into force. The issue was raised in the Scottish Parliament just in March with the Minister for Victims and Community Safety clarifying that the reason the section was not in force was due to the lack of Court rules. Rules in this regard are drafted by the Scottish Civil Justice Council (SCJC). The last minutes of the relevant committee are from March 2023 so it is unclear how advanced the drafting of the Rules are.

What the minutes do disclose is that there is an intention for the rules to restrict the liability of any funder in expenses to the level of funding provided. That may dampen any glimmer from the bare terms of the Act but is in line with Taylor’s recommendations.

Therefore, whilst this change in the law may be useful, its ultimate impact, particularly in low value claims where the level of funding (if any) will also be low, may not be significant. That said, it is an area where the limits of the law will need to be tested in appropriate cases.