The cost of litigation has long been recognised as a major barrier to justice. Firstly, parties need to think about how to pay their own legal fees (which is becoming increasingly difficult for many due to an ever-diminishing legal aid budget). Secondly, and more significantly, they also need to think about what happens if they are unsuccessful and have to foot the bill for their opponent’s legal costs.
For pursuers in personal injury actions, the risk of being found liable for expenses they simply cannot afford is a huge concern. The same does not quite hold true for defenders who, generally speaking, will be backed by an insurance company. No wonder, then, that this has been described by Sheriff Principal Taylor as “a true David and Goliath relationship”.
Last week the First Minister announced the Scottish Government’s legislative programme for 2016/17. Among the proposed reforms is the “Expenses and Funding of Civil Litigation Bill”, which, according to the Scottish Government, aims to make the civil justice system “more accessible, affordable and equitable.” But what does this actually mean?
From a pursuer’s point of view, the most significant aims of the Bill are:
- “to introduce qualified one-way costs shifting (QOCS) for personal injury cases and appeals, including clinical negligence, and specify the circumstances when the benefit of QOCS would not apply”.
As it stands, the general rule is that the losing party has to foot the bill for the winner’s legal expenses. Success in litigation is never guaranteed, and the risk of losing the case is a real concern for individuals who are forced to seek redress through the courts. After-the-Event insurance policies are currently used to provide protection against such awards of expenses, but may not always (for various reasons) be available in every case.
The Bill aims to introduce a regime where the defender pays the pursuer’s legal expenses if they are successful – but, if the action is unsuccessful, the pursuer will not have to pay the defender’s expenses (save in exceptional circumstances). This is a huge step forward for pursuers which should ensure that they can have access to justice and to seek compensation through the courts without the fear of being bankrupted by an award of expenses made against them.
- “to allow damages-based agreements to be enforceable by solicitors”
A damages-based agreement is essentially one where, if you lose, you pay nothing. If you win, then your advisers take a certain percentage of your damages. The benefit of these agreements is that they are easy to understand.
At present, solicitors cannot deduct a certain percentage of your damages if you are successful. Claims management companies, on the other hand, can. The crucial difference between claims management companies and solicitors is that solicitors are heavily regulated, whereas claims management companies are not. This means that there is no cap on the percentage of damages that claims management companies can deduct. In reality, the distinction between the two is often blurred, with a number of law firms having set up their own claims management companies. Therefore, allowing solicitors to provide damages-based agreements will help provide greater transparency and certainty for pursuers.
The Bill will also introduce sliding caps for these agreements, regulating the maximum amount that can be deducted from a pursuer’s damages. The Taylor Review recommended a sliding scale of maximum percentages that should be deducted – 20% on the first £100,000 of damages, 10% on damages between £100,001 and £500,000, and 2.5% on any damages over £500,000.
As yet, we do not know when the Bill will be introduced and it remains to be seen how the proposals will work in practice. Overall, however, the Bill’s aims are a step forward for pursuers and will hopefully go a long way to improving access to justice. Watch this space!