Qualified One-Way Costs-Shifting in Personal Injury Claims

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill is one of the most significant bills to be introduced in the Scottish Parliament since The Courts Reform (Scotland) Act 2014 became law.

It follows on from comprehensive reviews of both the Scottish Civil Courts and the Expenses and Funding of Civil Litigation in Scotland. One of the most controversial changes proposed in the Bill is the introduction of Qualified One-Way Costs-Shifting (QOCS). The Bill provides that where a Pursuer in a personal injury claim conducts himself or herself in an appropriate manner, the court must not make an adverse award of expenses against them if their case is unsuccessful. However, this provision is qualified in that an award of expenses may be awarded against a Pursuer who has made fraudulent representations, who has behaved in a manner which falls below the standard reasonably expected of them in civil proceedings, or in a manner which constitutes an abuse of process.The theoretical implication of QOCS is that risk-averse Pursuers who would previously have refrained from engaging in litigation due to the prospect of being found liable to pay a Defender’s account of expenses in the event of unsuccessfully proving their case will now be more incentivised to litigate, thereby greater facilitating ‘access to justice’ in the Scottish Civil Courts.

The practical issue however is that firms specialising in Personal Injury Law often fund litigation themselves, albeit indirectly. This is implemented through the use of speculative fee agreements between clients and third-party companies interposed to receive success fees upon the successful settlement of a case, or award of damages in court, and conversely to pay any adverse expenses incurred through unsuccessful litigation.

In this regard, the Bill itself stipulates that third-party funders or intermediaries may have expenses awarded against them in the event that a Pursuer’s claim is indeed unsuccessful. While the Bill doesn’t specify whether firms of solicitors could fall within the definition of a third-party funder, it is likely that such arrangements between law firms and clients under existing practices or indeed the soon to be legalised damage based fee agreements directly between firms of solicitors and clients, will fall within these provisions in the legislation.

QOCS therefore is somewhat of a double-edged sword to personal injury solicitors. On one hand, a risk-free environment is created for self-funding litigants due to the shield QOCS provides against adverse legal expenses. Yet it is also likely that the current practices adopted by personal injury solicitors in funding litigation themselves – albeit indirectly – will not invoke the protection of QOCS due to the third-party funding provisions in the legislation.

Over the coming months it is likely that the Scottish Parliament will receive an influx of lobbying from the Insurance Industry arguing that solicitors fees should be lowered in tandem with this reform to account for an alleged asymmetry created by QOCS between Pursuers and Defenders.

With QOCS protection in place, self-funding may over time become an alternative litigation-funding option for Pursuers. In the event of this, personal injury solicitors may decide to review traditional fee-models and potentially depart from the conventional no-win-no-fee business-model so as to compensate for the risks involved in litigating cases in instances where no speculative fee agreement and no success fee is obtainable.

Ultimately, although it appears in theory that the legal landscape will change with the introduction of QOCS, the third-party funding provisions will arguably result in there being no practical difference. Indeed, it is arguable that the result of QOCS will be the creation of a new frontier of lobbying for the insurance industry and the opportunity for personal injury solicitors to re-assess conventional no-win-no-fee business models in cases where Pursuers wish to self-fund their cases and avail themselves of the protection provided by QOCS.