The traditional principle that the loser pays the winner's legal costs no longer always applies. The new rules provide that if the Claimant is not successful, they will not be responsible for the Defender's costs and the Defender will have to pay their own legal costs, even if they successfully defend the case. Whilst similar rules have been in place in England and Wales since 2013, there are fundamental differences in how the Scottish system will operate which will lead to differences in the approaches between our respective jurisdictions.
The aim of the new rules is to widen access to justice for those bringing personal injury claims as the one way costs shift provides protection for Claimants against an adverse award of expenses if their claim fails. QOCS is one of a package of reforms to Scottish civil procedure following recommendations made in Sheriff Principal Taylor's 2013 review of expenses and funding of civil litigation in Scotland. The rules were set out in Section 8 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 and implemented by Act of Sederunt (Rules of the Court of Session 1994, Sheriff Appeal Court Rules and Sheriff Court Rules Amendment) (Qualified One Way Cost Shifting) 2021.
The exceptions
The Court has discretion to disapply QOCS protection when proceedings are not conducted in an appropriate manner. Section 8(4) of the 2018 Act sets out three scenarios which the Court may consider in this context. They are where the Claimant or his legal representative:-
(a) makes a fraudulent representation or otherwise acts fraudulently in connection with the claim or proceedings;
(b) behaves in a manner which is manifestly unreasonable in connection with the claim or proceedings; or
(c) otherwise, conducts the proceedings in a manner that the Court considers amounts to an abuse of process.
"Fraudulently", "manifestly unreasonable" or "abuse of process" are not defined and so it is likely there will be litigation over the next few years to establish the parameters of these concepts.
The Act of Sederunt created three additional exceptions where QOCS protection can be lost:- (1) the Claimant fails to obtain an award of damages equal to or greater than the sum offered by way of a tender lodged process; (2) there is an unreasonable delay by the Claimant in accepting a tender; and (3) the Claimant abandons the action.
There is a further exception in Sheriff Court cases where the Defender has applied for summary decree against the Claimant and the court has granted Decree of Absolvitor or Dismissal.
Differences between Scotland and England & Wales
Despite the differences between the jurisdictions it is interesting for Scottish practitioners to look at what has happened in England and Wales to predict what may happen over the next few years. In terms of tenders, which are the Scottish equivalent to Part 36 offers, costs protection for the Defenders is maintained where a reasonable offer is made and refused or accepted late by the Claimant. In that situation the Claimant may have to pay the Defender's costs from the date the offer was made, however, these are capped at 75% of the damages awarded. The only limit which applies in England & Wales is the total damages and interest awarded to the Claimant.
In considering whether a Claimant has acted fraudulently, the test the courts apply is "fundamental dishonesty". This is an established concept in English law, albeit it has proven difficult for Defendants to prove a Claimant has met the test. Often examples of this provided in case law are extreme and show extensive deception is required before the court would make such a ruling, such as in Walkden v Drayton Manor Park Ltd [2021] EWHC 2056 (QB). For an effective QOCS regime in Scotland, Defenders would argue that there must be disincentives against poor litigation conduct and so decisions on the Scottish concepts of acting fraudulently, behaving in a manner which is manifestly unreasonable or conducting proceedings in a manner which amounts to an abuse of process will be interesting to see.
When QOCS was implemented in England and Wales, fixed recoverable costs were introduced for a range of moderate value injury claims but there are no similar proposals for Scotland. Also, the recoverability between parties of conditional fee agreements, success fees and ATE insurance premiums were removed, but these have never been recoverable in Scotland and so that has not changed with the introduction of QOCS.
Implications of the new rules
We expect there will be an initial increase in litigation as there are a number of issues requiring judicial determination. The concepts of what is deemed "appropriate behaviour" will no doubt be the subject of court action and we will be closely monitoring any decisions relating to this.
Whilst there has been speculation that QOCS will open the floodgates to high numbers of more speculative claims and those with more questionable merit, we consider this unlikely and understand there were similar unfounded concerns when QOCS were introduced in England. Whilst there may be an initial spike in litigation, this should settle down once the judiciary have clarified these uncertainties and provided guidance on appropriate behaviour.
QOCS addresses the inequality of arms between parties in these types of claims where a private individual is often raising an action against a corporate Defender, with far greater resources at its disposal. The new rules focus on the behaviour of the Claimant in the course of the litigation and it will be interesting to review any judgments on what is deemed inappropriate conduct, particularly when there is often no means to raise concerns in relation to unreasonable behaviour on the part of the Defender. In our view, the new rules bring about positive change and will result in greater access to justice given the lower risks of expenses for Claimants.
This article forms part of our annual Litigation in Scotland report. You can view the full report here.
