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RESPONSE by the FACULTY OF ADVOCATES to THE TAYLOR REVIEW OF EXPENSES AND FUNDING IN CIVIL LITIGATION IN SCOTLAND
1. The availability of the public courts for the resolution of civil disputes is a public good. Litigation is the principal means by which parties may, if they choose to do so, vindicate their rights according to the law. Further, in resolving disputes between parties and deciding cases brought to them by parties, the courts play a role in the development of the law and in vindicating the rule of law. It is accordingly a fundamental feature of a just society governed by the rule of law that parties should have access to the courts to resolve their disputes, if they choose to do so, according to the law, and that, before the courts they should have equality of arms.
2. The role of the independent professional advocate is central to achieving these values and the Faculty of Advocates is committed to them. The existence of an independent referral bar of expert pleaders, subject to the cab rank rule, makes a significant contribution to the just, efficient and cost-effective operation of the law throughout Scotland. All practising advocates are available for instruction on behalf of any client, whoever he or she may be, and wherever he or she may be located. A small solicitor’s firm in rural Scotland has the same access, on behalf of its clients, to the full range of expertise at the bar as the major commercial firm in Glasgow or Edinburgh. The bar is organised in a manner which enables advocates to provide a high quality service to clients in a flexible and cost effective manner. And the availability of a wide range of experience at the bar builds considerable flexibility into the system, since solicitors may instruct counsel of appropriate levels of experience or expertise (with different cost implications) for different elements of the work involved in a particular case. It would be impractical, not to say costly, for any solicitor’s firm to retain in-house the range of expertise which is available at the bar.
3. The Faculty agrees that inappropriate barriers should not be placed in the way of parties who wish to bring cases before the courts, and that the arrangements for dealing with the expenses of litigation should not create unnecessary and inappropriate disincentives or incentives. The Faculty accordingly welcomes the present review, as an opportunity to test existing practices against the demands of an open and effective justice system fit for purpose in a modern Scotland.
4. The present review is, however, only one element in securing an open and effective justice system. The question of expenses and funding cannot be considered in isolation from the operation and funding of the courts themselves. If the court system does not resolve disputes effectively and efficiently, within a reasonable timeframe, this will, in and of itself be a significant disincentive to litigation. Furthermore, inefficiencies in the court system have a direct impact on the level and predictability of the costs of litigating.
By way of example, it is very common in the sheriff courts for proofs to take place not at a single diet but to be continued, sometimes for one or two days of evidence at a time. The fragmentation of the proof not only delays (sometimes substantially) the resolution of the dispute, but increases costs (because solicitors and counsel have to prepare for the case several times) and inefficiencies. It follows that adequate funding and effective organisation of the courts themselves must be a key element in any programme which seeks to address the costs of litigation. In assessing the proposals in this Consultation Paper, the Faculty considers that care should be taken to ensure that any new procedures do not decrease the overall efficiency of the Court Service by diverting judicial time away from dealing with substantive matters to procedural matters relating to expenses. In so far as possible, the detailed and time consuming consideration of legal expense accounts should be dealt with by experienced officials rather than judges. Further, care must be taken to ensure that new procedures are not introduced which might encourage litigants to embark on early preemptive tactical challenges designed to hinder the other party's conduct of the litigation. Interlocutory orders which restrict in advance an opponent's ability to recover expenses for legal or expert advice could be misused to put pressure on an opponent to drop an otherwise meritorious claim.
CHAPTER 3: THE COST OF LITIGATION
1. Para. 3.1 of the Consultation Paper states that it has been suggested that “one of the main difficulties facing potential litigants who are considering whether to embark upon a litigation, is their ability to predict what the litigation is likely to cost, and, therefore whether they can afford to proceed”. The Faculty does not take issue with the proposition that this is one potential disincentive. But it is one among several disincentives, which include also the following:-
(i) The unpredictability of the timescale within which the case will be resolved, and the potential duration.
(ii) The unpredictability of the substantive outcome.
(iii) The limited proportion of the expenses which will be recoverable in the event of success.
2. For both pursuers and defenders, litigation is inherently uncertain, in relation to its duration, outcome and costs. However, the impact of different uncertainties varies from case to case, and from time to time over the course of a litigation. If a case is properly managed, the uncertainties can be minimised to the extent consistent with the nature of the case. For example, if good quality advice is taken and given at an early stage, the degree of uncertainty in the substantive outcome can be properly assessed and factored into the client’s thinking. Likewise, if good quality advice is taken and given at an early stage, steps can be taken to seek to close down areas of uncertainty in the factual and legal position. The system of recovery of expenses should not, accordingly, deter clients from taking good quality and experienced advice at an early stage (including in advance of the litigation).
3. Uncertainties in the cost of litigation can also be addressed and minimised, if the case is properly managed and the question of fees dealt with up front. At least so far as counsel are concerned, it is now common for solicitors to agree the fees of counsel in advance. And the range of possible feeing arrangements which may be entered into is not subject to any restriction. Counsel were traditionally instructed on the basis of a rate per day in court (so that preparation time was built into the daily rate), an approach which, since the duration of the case in court may be more predictable than the preparation involved, can enhance certainty for the client. Some clients now choose to instruct counsel on the basis of an hourly rate for preparation, on the basis that the time involved is auditable. It is open to solicitors instructing counsel to seek to instruct on the basis of such arrangements as they conceive to be in their clients’ interests.
4. Pursuers will not normally commence litigation unless they have been advised at least that there are reasonable prospects of success. For pursuers – particularly perhaps commercial pursuers - the level of irrecoverable expense likely to be incurred in vindicating what they conceive to be their rights may, at least in some cases, be a major disincentive to pursuing an otherwise well-founded claim. The general rule of the current system of allocation of expenses - that expenses should follow success – is based on an underlying principle that the party who has vindicated his rights or successfully defended a claim should not bear the expense of having done so. The Faculty regards that as a principle which is generally sound, at least in cases between private individuals which raise no general point of public interest (where, in the Faculty’s view there is, for reasons addressed in our response to the questions about PEOs, justification for the ordinary rule to be modified). In practice, however, there is usually a differential – and sometimes a significant differential - between the costs incurred by that party and the amount which they will ultimately be able to recover. This is an issue which the present review should address.
5. Against that background, the Faculty questions the reliance currently placed on tables of fees as a means of regulating the fees recoverable under an award of expenses. While it might be said that these can provide greater certainty to the paying party, tables of fees are a blunt instrument. The successful litigant may necessarily have incurred significantly greater costs in the pursuance of their claim or defence than those allowed by the table of fees. And the work involved in a litigation does not necessarily lend itself to standardisation or unitisation. In these circumstances, greater justice would be done for the successful litigant if they were able to recover all fees and outlays reasonably and necessarily incurred by them. The unsuccessful party’s ability to seek modification of the fees on the basis of reasonableness or necessity would reflect a much more nuanced position and strike a fairer balance between the parties. In a litigation which is conducted by regulated professionals operating in a competitive market, it would be reasonable to proceed on a rebuttable presumption: (a) that work done or instructed on the client’s behalf has been responsibly and properly done or instructed; and (b) that the rates which are charged to the client reflect reasonable market rates. The onus should be on the paying party to challenge particular items of work or rates charged as being unreasonable or unnecessary.
6. The Consultation Paper notes that submissions to the Civil Courts Review argued that increase in counsels’ fees, rather than solicitors’ fees, were responsible for the rising cost of litigation. The Faculty does not accept this. The costs of litigation in which counsel are involved have risen for a number of reasons, including the frontloading of certain procedures including appeals and commercial and personal injury proceedings and the complexity of certain sorts of cases. Solicitors, who act on behalf of their clients, may be expected to challenge or reject counsels’ fees which are excessive, and such fees may be taken to taxation. It may also be noted that solicitors’ fees as set out in the Table of Fees may be out of step with what solicitors charge on an agent/client basis and if so, that is a matter which requires review.
7. Access to justice would be reduced if litigants were limited in their choice of representation or in relation to the experts identified to assist their case. For example, it would be an extremely concerning development if corporate entities with large financial resources were effectively able to obstruct a private individual in relation to the instruction of experts and choice of representation.
Response to specific questions posed by the Review:
4. Is the test currently applied by the sheriff court in sanctioning the instruction of counsel appropriate? If the sanction of the Court of Session were to be required prior to the instruction of senior counsel, what test should be applied?
If it is considered appropriate to retain a system of sanction for counsel in the sheriff court, the Faculty would support the application of a general test of reasonableness. Such a test would allow the sheriff to take into account all of the circumstances. These might extend beyond the complexity of the case. For example, counsel may have been instructed as a result of the case involving a particular area of expertise outwith the experience of the solicitor whom the client wishes to instruct to deal with matters. It would be highly undesirable, having regard to the interest in securing access to justice across the whole of Scotland, if clients were to be discouraged from instructing their local solicitors (who may have less in-house expertise than a large city firm) because sanction for counsel was likely to be withheld.
The Faculty questions whether it is in the public interest at large to maintain the requirement of sanction for counsel. The illustration just given explains why the Faculty takes that view. The system of sanction is based on the fallacy that, where counsel is instructed, there is “double-manning” – that, in effect, the work is having to be done twice, increasing the cost of litigation. This is not the case. The work of preparation and presentation of the case will require to be done by someone. If the solicitor does not instruct counsel, he requires to do that work himself. If he instructs counsel, that work is done by counsel. In many cases, counsel can do that work more effectively (and, indeed, more cost-effectively) than the solicitor. Furthermore, it will often be in the interests of the client (and in the interests of the effective and just operation of the system as a whole) that a specialist pleader be instructed. If there has, indeed, been duplication in the work done, then that can and should be dealt with by taxation of the account. And if there is a concern that solicitors will instruct counsel in cases where this cannot be justified by reference to the proper conduct of the litigation and in the interests of the client (which would perhaps be surprising), then this could be dealt with by allowing the instruction of counsel to be challenged by the losing party.
The Faculty does not consider that prior sanction should be required in respect of the instruction of senior counsel in the Court of Session. In many cases, senior counsel is instructed without a junior. Senior may be instructed alone against a senior junior. An advocate may take silk in the course of dealing with a case. Importantly, senior counsel will also be involved with providing advice at a pre-litigation stage. The cost of such advice would not be recoverable if prior sanction were required. The early involvement of senior counsel may promote the effective, efficient and just resolution of the case. The question of whether it is reasonable for a successful party to recover the expenses charged by senior counsel can be raised before the auditor. There is accordingly no necessity for any application to be made to the court for advance certification. In the event that such prior sanction were to be required, a test of reasonableness would be appropriate.
5. What test should the court apply when considering a motion for certification of an expert witness – should it be necessity, reasonableness or some other test?
The Faculty considers that a test of reasonableness should also apply to the certification of expert witnesses.
It would not be appropriate for such certification to be required in advance of instruction. In an adversarial process, a litigant ought to be free to instruct whichever expert they consider appropriate. The other party ought not to be able to restrict or fetter that choice in advance of instruction.
In relation to the instruction of experts more generally, it is noted that it is not the practice of the Scottish courts to insist on the instruction of single joint experts although this is encouraged in certain areas (e.g. adoption/permanence orders). The Faculty would not support any general rule which would require the instruction of a single joint expert. To require this would, in effect, compel the parties to submit their dispute, insofar as it turns on expert evidence, to the determination of that expert, rather than the Court. Parties should be entitled to instruct their own expert with a view to scrutinizing and, if so advised, taking issue with propositions of an expert nature advanced against them. Nor would the Faculty support any tables of fees for experts. Experts may be instructed from different parts of the UK with widely differing rates. The setting of a maximum fee may inhibit litigants in selecting an appropriate expert for their case.
6. In the sheriff court, should counsel's fees be a competent outlay in a judicial account of expenses only from the date of an interlocutor certifying the case as suitable for the employment of counsel?
No. In some cases, counsel are involved prior to the commencement of litigation and may be involved in the initial drafting of the pleadings. If it is considered reasonable to have instructed counsel, then that employment ought to be sanctioned from the date of first involvement in the case. The certification could be granted for the cause as a whole, or for a discrete part of the cause. It is in the interests of justice, for the reasons we set out above, that there should be no disincentive to parties taking expert advice at an early stage (including in advance of litigation). This will often assist in the just, efficient and cost-effective resolution of the dispute.
Anecdotally, refusal of certification for counsel is rare. However, refusal of sanction for the employment of counsel ought to be in hoc statu so that it would be open to review at a later stage without appeal. This could occur, if at a later stage in the case, it becomes apparent that the employment of counsel ought to be sanctioned. In cases where there is an earlier refusal, backdating of a later award could be permitted.
7. In the Court of Session, should senior counsel's fees be a competent outlay in a judicial account of expenses only from the date of an interlocutor certifying the case as suitable for the employment of senior counsel?
No. If a system for certification of senior counsel were to be introduced (and the Faculty does not favour this), then, as with certification for the employment of counsel in the Sheriff Court, if it is considered reasonable that such certification is granted in a particular case, then that ought – subject to the test of reasonableness - to be from the date of senior’s first involvement in the case. In litigation conducted in the Court of Session, it is even more likely that senior’s involvement will have been from the outset of proceedings. And, as with certification more generally, the system of recoverability of expenses should not deter parties from taking advice at an appropriate level of expertise at an early date.
As with certification in the Sheriff Court, any refusal ought to be in hoc statu in order that the matter may be reviewed as the case progresses without the necessity of an appeal. In cases where there is an earlier refusal, backdating of a later award could be permitted.
8. Should the presiding judicial office holder assess what would be a reasonable fee for counsel in any account of expenses? If so, at what point in the proceedings should that assessment be made?
No. For the reasons expressed elsewhere in this response, the Faculty does not consider that counsels' fees should only be recoverable in a judicial account if sanctioned in advance by the presiding judicial office holder. If some form of sanctioning was to be introduced, it ought not to involve the presiding judicial office holder directing what an appropriate fee would be. At the initial stages of a litigation, the presiding judicial office holder will not know what involvement counsel will have in the future conduct of the particular litigation. It will not be possible to anticipate every item of work which counsel may be instructed to perform as the litigation evolves. If broad bands of fees for various items of work were set out by the presiding judicial office holder, this would not provide the degree of certainty which the Consultation Paper suggests might be aimed for. This proposal is also open to the objection that considerable judicial time will be spent dealing with the detail of future expense claims. At present, the auditor has the relevant expertise in assessing reasonable levels of fees in a whole range of cases. The auditor is aware of prevailing market rates of remuneration for counsel and he can provide a degree of objectivity and consistency in relation to the recoverability of all legal fees including counsel's fees. The Faculty considers that removing this task from the experienced and specialised auditor of court would be a retrograde step.
If the presiding judicial office holder were to assess the level of counsels' fees, then this could only be conclusively done at the conclusion of the case once a full account had been prepared. Although some interim assessments might be possible, there would have to scope for an overall review of the assessments at the conclusion of the litigation. Only at the conclusion of the litigation could a fully informed view be taken as to the reasonableness of the work carried out. Matters not anticipated by earlier assessments would inevitably have to be considered anew. The Faculty is also concerned that if counsel are to make submissions to the judicial office holder in relation to reasonable fee levels, then a conflict may arise between the role of counsel in presenting the case and making such submissions.
9. From when should the fees of an expert witness be a competent outlay in a judicial account of expenses?
These fees ought to be a competent outlay from the time of instruction.
10. Should the presiding judicial office holder assess what would be a reasonable fee for an expert witness in any account of expenses? If so, at what point in the proceedings should that assessment be made?
No. Judicial office holders do not currently assess a reasonable fee for an expert witness. Accordingly, they lack the relevant experience which would enable them to make this assessment. Given the range of experts involved in litigation, the variety of work undertaken by them and the differential in fees which may be charged by experts in different disciplines, within disciplines, and in different parts of the country, the assessment of a reasonable fee by a judge would be very problematic. If such an assessment were to be made, it could only be done at the end of the case once the work involved had been completed.
11. Is it reasonable for counsel to be entitled to charge a commitment fee and, if so, should that be prescribed or left to the discretion of the Auditor?
Counsel’s ability to charge a commitment fee has long been recognised and is enshrined in Practice Note No 5 of 1996 (Counsel’s Fees for Settled or Discharged Cases) in which reference is made to what is now para 9.11 of the current Guide to the Professional Conduct of Advocates (“the Code of Conduct”). Counsel’s work cannot be delegated to other persons and when instructed in a particular case, counsel has a duty in terms of para 6.5.1 of the Code of Conduct to arrange his affairs so as to avoid a foreseeable clash of commitments. This frequently means that counsel turns work away on the basis that he requires to be available for a matter in which he is already instructed. In the event that that matter does not proceed, it is unlikely that counsel will obtain alternative employment for the period reserved. In the same way in which other businesses charge a fee as a result of a cancelled reservation, counsel is entitled to charge a commitment fee to reflect this arrangement.
Counsel’s clerks are now frequently asked to enter into agreements in relation to the sums which will be charged in relation to cancellation should a case resolve at a certain time prior to commencement. Such graduated arrangements are regularly agreed. This provides greater transparency as to feeing arrangements and allows the client to control, insofar as possible, the amount of fees which are incurred.
As part of counsel’s duty to the client, he or she ought to ensure that, insofar as possible, if the case is resolved, that is done at a time which would minimise the client’s legal expenses. At paragraph 3.34 of the consultation paper, a suggestion is noted that the practice of charging a commitment fee provides an incentive to delay settling the action. The Faculty rejects this suggestion. There is no evidence of counsel deliberately delaying settlement in order to generate fees and indeed, such a matter would be contrary to the principles set out in the Code of Conduct, in particular the principle of independence referred to at para 2.1.1:
“The many duties to which an Advocate is subject require his absolute independence, free from all other influence, especially such as may arise from his personal interests or external pressure.” and the duty to protect the client’s interest set out at para 5.1.2 thereof:
“Subject to due observance of all rules of law and professional conduct, an Advocate must always act in what he perceives in his professional judgement to be the best interests of his client and must put those interests before his own interests or those of fellow Members of the legal profession.”
If alternative methods of feeing were considered, such as brief fees or time on line, these might well be greater than the fees charged on the current basis. A brief fee in particular is front loaded and may not always reflect the actual work done on the case. It is of course open to solicitors to instruct counsel on that basis, but as it is not done in Scotland, it may be assumed that such an approach is not considered by solicitors to be economic or in their clients’ best interests. The current basis for charging reflects recompense for actual work done or actual opportunity lost.
As noted above, the Faculty considers that any disputes as to the reasonableness of any fee charged by counsel should continue to be determined by the auditor.
12. Should the level of fees recoverable by the successful party in a commercial action be greater than in other types of action and, if so, what is the justification?
There is no justification for a differential between the level of fees recoverable as between various types of action. Other actions may demand the same level of skill, knowledge, experience, expertise and work as commercial actions.
13. Should a tariff-based system for assessing the level of recoverability of judicial expenses be introduced? If so, how might such a system be structured?
No. It is an artificial construct which would by its very nature make arbitrary distinctions between cases. Not all cases are about value and value itself is a crude and unreliable indicator of importance. A tariff based system would accordingly be inappropriate as a general rule.
14. Should any table of fees provide for a more experienced solicitor to recover at a higher rate than a newly qualified solicitor and/or for an accredited specialist to recover at a higher rate than a solicitor without accreditation?
It would make sense for there to be such a distinction if there is to be a table of fees. It may be possible to argue that it was not appropriate for a person of that seniority to carry out that work. A table of fees could be updated annually by the auditor to reflect market rates.
CHAPTER 4: FURTHER ENHANCING THE PREDICTABILITY OF THE COST OF LITIGATION
19. Should more cases in Scotland come under the scope of a fixed expenses regime? If so, what types of case should be included?
Whilst there is a superficial attraction in a fixed expenses regime as it would allow a party an award without recourse to the auditor, it is, by its nature a blunt instrument. Beyond the simplest types of litigation, a “one size fits all” approach is likely to work injustice in particular cases.
Operating in a fixed fee regime would impact on the service which a client could expect to receive. Limiting recoverability to that fee would mean that the cost of any service which could not economically be provided for within its confines would have to be met by the client themselves, which failing it could not be offered. This would impact on the economically weaker party who is effectively restricted to conducting the litigation within the limits of the expenses regime. The observations at para 4.8 are compelling.
If this type of approach were considered appropriate, it would seem preferable to adopt the slightly more adaptable summary assessment model.
20. Should each party to a litigation in Scotland bear their own expenses? If so, in what types of litigation? Should the rule be qualified and, if so, in what circumstances? In particular, is the general rule in family cases appropriate?
The Faculty considers that in ordinary litigation between private parties the general rule that expenses should follow success should remain. The underlying principle that a party should not bear the expense of having successfully vindicated his rights or defended a claim still holds good. Subject to challenge to the level of expenses sought on the basis of reasonableness or necessity, a successful litigant ought to be able to recover the full amount incurred in the vindication of his rights or defence of a claim. The Faculty takes the view that any exception to this rule requires to be justified – and, although such a justification exists for cases involving issues of public law of general importance (which are discussed below), the general rule holds good for ordinary litigation between private parties.
A rule of no expenses due to or by is no disincentive to litigate. It would significantly minimise the risk of litigation with the result that parties would be more, rather than less, likely to raise or defend actions in the knowledge that they will ultimately only be liable for their own expenses, even if they are ultimately unsuccessful. It will have the greatest impact on the economically weaker party who has to expend their resources in vindicating or defending a claim with no prospect of recovering that from the other party. Such a rule would also have an impact on the compromise of claims. In that context, and particularly as a result of the impact on the economically weaker party, meritorious claims may not be advanced and an unmeritorious defence may succeed. Such an outcome is not in the interests of justice.
Such a rule would also have an impact on the public funding of litigation. In cases in which a party is in receipt of legal aid, those representing that party will normally seek expenses if they would do so where that party was privately funding. In the Civil Legal Assistance Handbook, it is stated that “An assisted person should, wherever possible and assuming there are reasonable prospects of recovery, get an award of expenses so we can recoup the public funds spent on their behalf.”
The general rule in family cases referred to at paragraph 4.11 is mentioned in the context of actions involving children only. This does not reflect the position in family cases in general. In cases involving financial provision on divorce, the rule that expenses follow success is not applied with its full rigour, but is not irrelevant to such cases. However, in the vast majority of cases involving disputes in connection with children, the general rule that expenses follow success is not as readily applicable. Whilst it could be said that this is because success is usually divided, it is more correctly viewed as inappropriate on the basis that the paramount consideration for the court is the best interests of the child and the focus is not on the competing rights and claims of the parties. However, even in such cases, awards of expenses can be and are made. These tend to be in cases where the action is privately funded, there is a clear outcome and where one of the parties to the litigation has acted unreasonably. The practice of no awards being made in relation to expenses in child cases is better understood as such rather than as a rule. Each case falls to be considered on its own merits and in the context of the broad discretion which the court possesses in relation to questions of expenses in such actions. This practice in a specific area where the task in which the court is engaged is focused on the interests of a child cannot be extrapolated more generally.
The benefits of a rule that each party should bear their own expenses cited at para 4.12 are significantly outweighed by the disadvantages of such a scheme. There is no significant satellite litigation in Scotland in relation to the question of expenses. This may be indicative of the comparative levels of expenses in Scotland and would also suggest that the current regime is largely operating effectively.
21. Should a procedure for the summary assessment of expenses be introduced into the civil courts in Scotland?
No. It is currently possible to enforce awards of expenses in relation to interlocutory matters whilst a case is ongoing. These may either be dealt with by agreement or through taxation. The taxed account may be enforced. This may be rarely done, particularly where the litigant is the claimant who may ultimately succeed at the conclusion of the case or where the party holding the award considers that it would be disadvantageous for them to take enforcement measures which might include sequestration during the currency of the action, but that is a choice exercised by parties who hold such awards. In certain cases, interim awards of expenses, even although quantified, intimated and even taxed are usually dealt with at the conclusion of the case whether by compromise or by offsetting against the sums awarded.
Simply because a party is unsuccessful at an interim stage does not mean that the application or opposition was unreasonable or lacking in merit. The perceived benefits of such a scheme in acting as a deterrent to unreasonable litigants may also deter parties with well-founded claims, but who do not have the resources to meet interim awards. An economically weaker party may be unwilling to make or oppose applications as a result of the risk of the immediate expenses consequences. It is vital to ensure that parties with meritorious claims are not excluded from the courts by virtue of the expenses regime.
Whilst the judge is best placed to decide upon whom the burden of expenses should fall, the assessment of the extent of that burden is better carried out by an independent party with expertise in that area. Judges are not equipped by experience to make this informed assessment. Although it is noted at para 4.26 that judicial training would be required, this is unnecessary in the light of the experience and expertise available through the office of the Auditor. By its very nature, summary assessment of expenses would be “arbitrary, rushed and inconsistent” as noted in para 4.24(i). It would take a significant length of time to build up the experience necessary to effectively operate such a system.
There would be an additional burden on parties’ solicitors in advance of any hearing at which a summary assessment could be carried out. In addition to preparing for the hearing, statements of costs would have to be provided. This exercise in itself would be time consuming and expensive and for one of the parties, ultimately futile.
Insofar as there is a benefit of issues of costs being focused, that can be accommodated by the system currently in place – it is open to parties to seek awards of expenses in respect of interlocutory matters, and to enforce such awards immediately. The disadvantages of a summary assessment regime outweigh the perceived advantages.
22. If a procedure for summary assessment was introduced, in what circumstances should the summary assessment of expenses take place and should it be restricted to any particular types of action?
For the reasons set out above, the Faculty considers that a summary assessment regime should not be introduced.
23. Would there be any benefit in introducing a procedure of submitting schedules of expenditure similar to the pilot scheme operating in the Birmingham Mercantile Court and TCC?
No. Of particular concern is the ability of the parties to “comment upon and shape their opponents’ spending plans”. Litigants may wish to undertake certain investigations without disclosing them to their opponent. They ought to be free to do so whilst complying with the requirements of the court in relation to case management. This level of intervention and disclosure during the course of proceedings is inappropriate. Often the reasonableness of a particular course cannot be properly assessed until the conclusion of a case – or at least until it has been undertaken and reflected upon. What, at an early stage in the case, might, particularly to an opponent or third party, seem an unreasonable or unnecessary cost, may turn out to be eminently justifiable.
Whilst a client will be provided with guidance as to the likely costs of the litigation as it progresses, the preparation of schedules of expenses for submission to the court and intimation to the opponent will only serve to increase further the costs of litigation and may impede the running of the litigation in the best interests of the client.
24. Apart from imposing sanctions, what other powers, if any, should be made available to the courts to promote predictability and certainty of judicial expenses?
The Faculty questions how far it is reasonable to expect the court to seek to promote the predictability and certainty of judicial expenses. Increasing the efficiency of the court service would improve these matters – for example, if a party knows that a hearing is going to proceed on a particular date. Steps have been taken to improve efficiency and there is a greater emphasis on case management and the front-loading of litigation in order to ensure that court time is used as efficiently as possible and that unnecessary costs are not incurred in preparation for abortive hearings.
CHAPTER 5: PROTECTIVE EXPENSES ORDERS
25. Should the power to apply for a PEO in Scotland be limited to environmental cases or should PEOs be available in all public interest cases?
In the Faculty’s view, PEOs should not be limited to environmental cases.
(1) The underlying justification for the availability of such orders in environmental cases (and the underlying rationale of the relevant provisions of the PPD and the Aarhus Convention) is that the petitioner in an environmental case raising a serious issue of legality may, by bringing proceedings, advance not only his own interest but also an important public interest. This underlying rationale may apply also in non-environmental cases. As Lord Reed observed in the Supreme Court in Axa General Insurance Ltd 2011 SLT 1061, para. 169, there is “a public interest involved in judicial review proceedings, whether or not private rights may also be affected” – namely, securing the rule of law.
(2) R (Corner House Research) v. Secretary of State for Trade and Industry  1 WLR 2600 was not an environmental case. The potential value of PEOs in ensuring that serious issues arising in non-environmental cases are properly tried may be illustrated by reference to cases in which such orders have been granted in England and Wales: e.g. R (British Union for the Abolition of Vivisection) v. Home Secretary  EWHC 250; Weaver v. London Quadrant Housing Trust  EWCA Civ 235; R (Medical Justice) v. Home Secretary  EWHC 1425 (Admin); R (Public Interest Lawyers Ltd) v. Legal Services Commission  EWHC 3259 (Admin). McArthur v. Lord Advocate 2006 SLT 170, which first affirmed that a protective expenses order is competent in the Scottish courts (although no such order was made in that case), was not an environmental case. It would be consistent with the underlying purpose of judicial review, articulated by Lord Reed in Axa, for such orders to be competent in any case where the relevant criteria are satisfied.
(3) The Consultation Paper comments that if PEOs were to be granted outside the environmental field, this has the potential to impose a heavy burden on Government authorities (reference is made, for example, to NHS Boards): para. 5.15. The Courts should be relied upon to make PEOs only where the issues raised are of general public importance and the public interest requires that they be resolved. They may take into account the respective resources of the parties. There are cases in which the English courts have taken into account the potential impact of a protective costs order in depriving an NHS Trust of resources: Goodson v. HM Coroner for Bedfordshire and Luton  EWCA Civ 1172, para. 30; R (Compton) v. Wiltshire Primary Care Trust  EWHC 880 (Admin). Some protection may be afforded to public authority respondents by imposing, as a condition of a PEO, restrictions on the expenses which will be recoverable by the petitioner in the event of success: cp McGinty, Petr  CSOH 5; Road Sense v. Scottish Ministers 2011 SLT 889.
26. Should limits be set on the level at which a PEO is made or should this be a matter for judicial discretion?
As a general proposition, the Faculty considers that matters relating to expenses are best left to judicial discretion, in light of the circumstances of the individual case. However, it recognises that, in this particular context, the Commission has expressed the view that, in order to comply with the PPD, there should be a prescribed limit, capable of being lowered but not increased. Consistently with the Faculty’s general view that the underlying justification for PEOs is not unique to environmental cases, the Faculty considers that any rules which may be introduced should apply equally to all public interest cases.
CHAPTER 8 SPECULATIVE FEE AGREEMENTS
36. Are there any aspects of speculative fee agreements that require regulation?
Members of Faculty have, for many years, provided service to the public in terms of which they act for an individual, but are paid only in the event of success. A significant number of cases are now dealt with by counsel on a speculative basis. Legal aid for reparation actions is extremely restricted and this has contributed to a growth in the use of speculative fee agreements. These mean that lawyers take the professional view that they are willing to take the risk of not being paid in the event that the case fails. Several important litigations which would not otherwise have been able to come to court have been litigated on this basis. This tradition of providing access to justice is one to which the Faculty remains committed.
The arrangements in respect of such cases are generally dealt with only on the basis of a letter of instruction and counsel’s agreement to act. More detailed agreements are not usually entered into.
In such cases, any success fee can only be paid by the client from their damages and is not recoverable from the defender. Accordingly, it is unusual to see uplifts agreed in arrangements with counsel in the event of success.
A speculative arrangement which allows for payment to be made on the basis of judicial expenses recovered means that it is unlikely that counsel will be paid in full for all work undertaken in the case. Frequently, junior advocates are instructed to deal with motion roll or by order hearings as counsel principally instructed is not available. Unless expenses are secured for the pursuer at that hearing, the advocate will not be paid for the work undertaken. As that advocate is not instructed in the case, that loss is not offset by eventual recoveries in relation to other aspects of the case.
Otherwise, the Faculty is unaware of there being significant problems with speculative fee agreements. At para 8.3, the issue of potential conflicts of interest is raised. There is an inherent conflict in any fee agreement with a client, but this is countered by counsel’s professional obligations. As noted above in response to question 11, the Code of Conduct, at paras 2.1.1 and 5.1.2 underlines the principle of independence and the duty of counsel to act in the client’s best interests. Accordingly, there is no basis for additional regulation of speculative arrangements. Neither does the perceived conflict present any barrier to agreements in relation to uplift.
37. What should be the maximum uplift for success fees in Scotland?
As noted above, success fees in Scotland are not recoverable from the defender and as a result, counsel rarely enter into such arrangements.
The Faculty can see no reason to change the current arrangements in respect of such irrecoverable success fees, bearing in mind that these will be paid from the client’s damages.
38. Should there be a cap on success fees as a percentage of damages? If so, at what percentage and at what level and heads of damages?
Given the irrecoverability of success fees, there ought to be a cap on them as a percentage of damages in order to give the client greater protection. 25% seems reasonable, but may require to be reviewed over time.
The cap should not be restricted or applied only to certain heads of damage. Heads of damage are not specified in the context of a settlement. Accordingly, it would be impossible to restrict the cap to certain heads in that context. There would be no justification for a different approach to be taken in cases decided after proof in which the amounts awarded under certain heads would be specified.
39. Should success fees be recoverable in Scotland? If so, under what circumstances?
No. If success fees were recoverable, it is more likely that they would be charged. However, the amount which the defender would ultimately have to pay would vary dependent upon the type of agreement which had been entered into between the solicitor and the client – i.e. in one case, the agreement could be 100% uplift of the fee element charged, but in another it could be a percentage uplift based on an account prepared on an agent/client basis. This would run contrary to the general rule that an award of expenses is calculated on a party/party basis unless otherwise specified by the court. Such a change would impact on the way in which litigations are run.
As noted in para 8.14, the recoverability of success fees in England increased the costs burden on defendants and gave rise to satellite litigation. LJ Jackson recommended that success fees should no longer be recoverable. Accordingly, it would be unwise to introduce recoverability in Scotland in the face of the experience in England.
40. Should ATE insurance premiums be recoverable in Scotland? If so, under what circumstances?
No. Again, the English experience demonstrates that this change should not be made in Scotland.
41. If success fees and ATE insurance premiums remain irrecoverable in Scotland, is it reasonable to expect successful pursuers to contribute some of their damages towards payment of their legal fees and insurance premiums? If not, what are the alternatives?
It appears that there is little or no empirical evidence of how the system is working in terms of the level of success fees agreed and their impact on damages. It order to assess properly the reasonableness of the current arrangements, such information would be necessary. As noted above, uplifts are rarely agreed with counsel in speculative cases, primarily because of their irrecoverability. A formal cap on the amount which could be taken from the pursuer’s damages would assist in striking the balance between the interests of the pursuer and meeting the costs incurred on their behalf in pursuing a successful litigation which are not recoverable from the defender.
Reference is made to the one way costs shifting scheme in personal injury cases in England. The Faculty’s view is that one way costs shifting is likely to provide a greater incentive to litigate. There may also be implications for equality of arms as a result of the risk on expenses being borne by one party alone. In the event that one way costs shifting was to be considered, a clear definition of the types of case to which it would apply would have to be provided.
CHAPTER 9: DAMAGES BASED AGREEMENTS (‘CONTINGENCY FUNDING’)
42. Should the law be changed to allow solicitors and counsel to enter into DBAs?
Yes. The traditional objection to DBAs has been of an ethical nature – namely that for the lawyer to have a direct personal stake in the subject matter of the dispute runs the risk that he would put his own personal interests before his professional duties – principally his professional duties to the Court, since his interest in maximizing the recovery will coincide generally with the interests of the client. There has also been a concern that the negotiation of a contingency fee arrangement would put the interests of the lawyer at odds with the interests of his client. The Faculty takes the view that these concerns are not sufficiently well-founded to justify the current prohibition:-
(1) Theoretically, there may be a conflict of interest between client and solicitor in the negotiation of any fee arrangement. In practice, in a competitive market, the client may “shop around”. Further, counsel’s fees are negotiated on the client’s behalf by an informed solicitor whose duty is to act in his client’s interest.
(2) Once a DBA has been entered into, the client’s interest and the lawyer’s interest, in maximizing the recovery are at one. The risk that the lawyer’s interest in the outcome might conflict with his professional duties to the Court is dealt with by robust professional regulation, and, in a small jurisdiction such as Scotland, by the obvious effect which any such behaviour by a lawyer would have on the relationships of trust upon which the system is built.
The potential for the lawyer’s personal interest in the outcome to conflict with his professional duties exists in relation to speculative fees. Since these are permitted, there can be no principled objection to DBAs on this ground. Insofar as the availability of DBAs may enhance access to justice, the balance of interests favours permitting them subject to appropriate regulation.
The CCBE Code of Conduct for European Lawyers provides, in relation to such agreements:
“3.3.1. A lawyer shall not be entitled to make a pactum de quota litis.?
3.3.2. By “pactum de quota litis” is meant an agreement between a lawyer and the client entered into prior to final conclusion of a matter to which the client is a party, by virtue of which the client undertakes to pay the lawyer a share of the result regardless of whether this is represented by a sum of money or by any other benefit achieved by the client upon the conclusion of the matter.?
3.3.3. “Pactum de quota litis” does not include an agreement that fees be charged in proportion to the value of a matter handled by the lawyer if this is in accordance with an officially approved fee scale or under the control of the Competent Authority having jurisdiction over the lawyer.”
The commentary on the Article makes clear that what it is designed to prevent is unregulated contingency fee arrangements:
“These provisions reflect the common position in all Member States that an unregulated agreement for contingency fees (pactum de quota litis) is contrary to the proper administration of justice because it encourages speculative litigation and is liable to be abused. The provisions are not, however, intended to prevent the maintenance or introduction of arrangements under which lawyers are paid according to results or only if the action or matter is successful, provided that these arrangements are under sufficient regulation and control for the protection of the client and the proper administration of justice.”
Undoubtedly, the introduction of DBAs will raise complex regulatory and practical issues within the profession. However, as a matter of principle, it is the view of the Faculty that they should be permitted.
43. Should claims management companies continue to be entitled to enter into DBAs?
Yes, under regulation. There should be a level playing field within the market and the rules should be applied consistently.
44. If DBAs are permitted in Scotland:
(a) is it reasonable to expect successful pursuers to contribute some of their damages towards payment of their legal fees?
Yes. The same rationale applies to the recoverability of success fees. It would be unreasonable for the defender to have to pay an amount which is the subject of a private agreement between the pursuer and his legal advisers. That private agreement could then influence the course of the litigation as the risk for the defender would be far greater. Satellite litigation would ensue and the cost of litigation overall would increase. It would unduly increase the costs of litigation for defenders.
Expenses recovered should be offset against the amount due under the DBA.
(b) should there be a cap on the percentage of the damages that lawyers are entitled to charge?
It is difficult to ascertain what cap ought to be appropriate as the starting point. The concept of payment of a percentage of damages is more readily understood by potential litigants as opposed to success fees which work on the basis of an uplift on the expenses recovered. It is an area in which it may be appropriate to allow the market to decide. One ought to assume that a competitive market for legal services would drive percentages down. If experience shows that this would not work or the market does not operate as expected, then a cap may be required.
(c) should the percentage recoverable under a DBA be applicable to all heads of loss?
Yes. It would be unrealistic to subdivide a sum agreed into specific heads. It would not be fair or reasonable to have one rule applicable to cases decided by the court in which heads were specified and another applicable to cases resolved by agreement.
(d) should there be an increase in the level of damages awarded? If so, by what percentage and how is this to be achieved?
No. Levels of damages should continue to be awarded by the courts in Scotland on the same basis as at present. The court has to consider the appropriate level of damages in any given case on the facts of that case and in the light of the relevant law. Damages should not be increased on a percentage basis to allow for the fact that the pursuer may have entered into a DBA with their legal advisers.
DBAs should not be restricted to personal injury cases, but could encompass other types of litigation in which sums of money are sought whether by way of damages or otherwise. A percentage increase in damages does not sit well with other types of litigation either.
(e) what forms of protection may be required for clients entering into such an agreement?
It is not practical to expect independent legal advice to be taken in relation to each DBA. Accordingly, protection would have to be afforded by regulation. At the very least, a written explanation of the DBA would have to be sent to the client before signature. The types of consumer protection routinely deployed in other areas including written explanations and cooling off periods should be considered.
45. If the current prohibition on solicitors and counsel entering into DBAs is retained, should steps be taken to prevent its circumvention by the formation of a claims management company in which solicitors are directors or shareholders?
Yes. Logically, if there is a prohibition, then circumvention ought to be prevented. Otherwise, the prohibition becomes meaningless.
46. Should there be regulation of claims management companies operating in Scotland? If so, what are the mischiefs to be addressed and how should regulation be achieved?
Yes. The bar on DBAs being entered into by solicitors and counsel should be removed and regulation applied to all involved in the provision of legal services on this basis.
CHAPTER 11: ALTERNATIVE SOURCES OF FUNDING
50. Is a disproportionate amount of the civil legal aid budget allocated to family actions and, on any view, are there ways in which this might be reduced?
No. When consideration is given to the varied types of litigation and the methods of funding them, it is unsurprising that the majority of civil legal aid applications relate to family actions. Such actions can only be funded privately or with the assistance of legal aid. Litigation loans are rarely obtained as the cost is usually prohibitive. Where financial provision is sought, arrangements are frequently entered into in terms of which payment is deferred until the conclusion of the case. Speculative arrangements are rarely, if ever, entered into. Legal aid funding of legal representation in cases where parties cannot afford to fund the action privately is accordingly vital.
In cases involving financial provision on divorce or cessation of cohabitation, a party who recovers or preserves property will be liable to clawback. Accordingly, the Scottish Legal Aid Board does make recoveries in such cases. In contrast with reparation cases, the position in relation to expenses in family actions means that the Board obtains minimal income from that source. This has a significant impact on the relative proportion of the legal aid budget which is allocated to family cases. Contributions are also payable by assisted persons depending upon their level of income and capital and the amounts received by the Board in terms of that regime tend to be highest in family actions.
Whilst family actions constituted approximately 60% of all civil legal aid applications in 2010-2011, the statistics also show that the average cost of a contact action in the Sheriff Court is significantly less than the average cost of a reparation action in the same forum. Many cases are resolved prior to proof through the effective use of the child welfare hearing system in the Sheriff Court. Part of that process may involve the obtaining of a report as noted in para 11.4. Such reports are usually key to the early resolution of such disputes and provide the court with vital independently obtained information as to the arrangements for the child concerned.
Recently, there have been some notable examples of lengthy diets of proof in cases involving disputes about children. However, these are the exception rather than the rule. Furthermore, this issue is not confined to the area of contact/residence disputes.
Reference is made to the withdrawal of legal aid in England for certain types of actions, including family actions. This has proved controversial and did not form part of Jackson LJ’s recommendations. Indeed, he emphasised the necessity of making no further cutbacks in legal aid availability or eligibility. A withdrawal of legal aid funding in Scotland similar to that in England and Wales would cause similar controversy. It would significantly restrict access to justice and would have implications for the Article 6 rights of litigants.
55. What further steps, if any, should be taken to promote pro bono funding of litigation and by whom?
The Faculty has a long tradition of providing pro bono legal services. This is currently managed through the Faculty’s Free Legal Services Unit. Accordingly, the Faculty agrees that it is desirable that more lawyers become involved in the provision of free legal services in cases where there is no realistic funding alternative, with the result that access to justice would otherwise be denied.
56. Should the Scottish courts have the power to oblige an unsuccessful party in a civil litigation to pay judicial expenses where the successful party has been represented on a pro bono basis and, if so, to whom should such a payment be made?
The Faculty’s view is that the general rule that expenses follow success should also apply to cases in which litigants are represented pro bono. However, in the event that an award of expenses is made, that should not be made over to the advocate or solicitor involved, but rather to a charity set up to support the provision of pro bono legal services.
CHAPTER 12: SCOTLAND’S LITIGATION MARKET
57. What steps could be taken to make Scotland the forum of choice for litigation?
As already noted, the disincentives to litigate include the unpredictability of the timescale within which the case will be resolved and the potential duration, the unpredictability of the substantive outcome and the limited proportion of the expenses which will be recoverable in the event of success.
There have been significant improvements in the scheduling of business in the Court of Session and in the Inner House. The implementation of new rules for reclaiming motions and appeals in the Inner House has improved case management and placed greater emphasis on written arguments. This means that waiting times have reduced, hearings take less time and proceed on the date allocated. Scheduling has also improved within the commercial court. Changes within the commercial court have also included greater use of witness statements thereby reducing the amount of court time required for proofs. Improvements in efficiency should continue to be made as this will remove a significant disincentive to parties (particularly commercial parties) litigating in Scotland. Further, the very real improvements should be given appropriate publicity by the Scottish Court Service: clients (and indeed some lawyers) may have out-of-date expectations and experiences of litigation in Scotland which should be countered by the provision of up-to-date information.
Recoverability of expenses is also an issue which can be addressed. As already noted, the Faculty considers that the appropriate way to increase recoverability would be to allow a successful litigant to recover all fees and outlays reasonably and necessarily incurred by them. The unsuccessful party’s ability to seek modification of the fees on the basis of reasonableness or necessity would reflect the much more nuanced position and strike a fairer balance between the parties. In a litigation which is conducted by regulated professionals operating in a competitive market, it would be reasonable to proceed on a rebuttable presumption: (a) that work done or instructed on the client’s behalf has been responsibly and properly done or instructed; and (b) that