We would like to hear from you.
We are a niche practice in Scotland specialising in insurance litigation. We understand that our response will form part of the wider debate on the issues raised in this consultation. While we appreciate that the review is very wide ranging and extends to all aspects of civil justice, not only insurance litigation work, we consider it appropriate that we concentrate on areas within our knowledge and focus on expenses in personal injury and property damage cases across all value bands.
In this response we do not attempt to answer all of the questions in the consultation paper. What we aim to do is put forward a coherent model for the calculation of judicial expenses in the types of cases that we deal with, i.e. personal injury and property damages claims. In considering the consultation and formulating our response we have considered the existing system and procedure relating to costs in these cases. We also include some comment on the particular aspects of the system and finally, provide our views on funding in civil litigation.
Our response is based upon the following principles:-
1. Judicial expenses should be predictable and proportionate to the value of claim;
2. Judicial expenses should be based primarily, but not exclusively, on the number of hours spent by the solicitor doing the work;
3. Any system of judicial expenses should operate, insofar as it is possible to do so, in such a way that all parties to the litigation have access to justice;
4. The general rule should be that expenses should follow success; and
5. The successful party should be entitled to recover the majority of expenses necessarily and reasonably incurred in connection with the litigation.
Personal injury and property damages cases
Bearing in mind the principles stated above, we wish to put forward a model for the calculation of judicial expenses in personal injury and property damage cases. Where appropriate we have specified value bands for particular types of case.
Personal injury cases
The present position in personal injury cases is that the majority of these cases are fee’d on either the Sheriff Court or Court of Session block scales as set out in the relevant Acts of Sederunt. We have considered personal injury cases across all value bands (where “value” is determined under reference to the sum decerned for) and would propose the following:-
Cases with a Value Band up to £25,000
In the lower value cases up to £25,000 we have reviewed judicial accounts and considered how they relate to the approximate hours spent on the litigation (based on our considerable experience in dealing with these cases). We have also analysed our internal data captured via our Case Management System. On any view, this analysis has demonstrated that a very high hourly rate is arrived at when the amount of judicial expenses recovered is divided by the total number of hours spent by the solicitor working on the case.
Lord Gill, in his review, identified that, in general, expenses are disproportionate to the value of lower value claims. He suggested that expenses should be restricted and this seems to be a reasonable and sound proposition in the circumstances.
We are of the view that the key here is to enhance predictability and achieve a degree of proportionality. Accordingly, we propose that a fixed fee regime should be implemented in these cases. This would be consistent with the position in England & Wales. Consideration should be given to different scales of fixed fees for RTA cases as opposed to EL/PL and disease cases which generally involve more complex issues and accordingly more work.
As an alternative model to the fixed fee regime, consideration should also be given to staged payments. This would involve some financial modelling/analysis on the number of hours worked up to and including particular milestones/or stages in civil litigation (following, perhaps, stages in the court timetable). The financial analysis would require consideration of what would be a reasonable rate of remuneration up to and including each milestone.
Cases with a Value Band between £25,000 to £50,000
We would suggest that either a fixed fee or a staged payment regime be appropriate but that the rates should be higher reflecting the higher value of the claim. This proposal is made on the basis that, generally speaking, the higher the value of the claim the more work is required.
Cases with a Value Band between £50,001 to £250,000
The value of a claim should not be the sole factor when considering the appropriate level of expenses. However, generally, the higher the value of the claim the more complex factual and legal questions are likely to arise. It is usually the case (in our experience), that more work is required in such cases. In the circumstances, we do not consider a fixed fee or staged payment regime appropriate in these cases.
We have reviewed the existing block fees as set out in the Acts of Sederunt. Generally, we are of the view that the existing blocks reflect reasonable remuneration for work done in these cases. In addition, it is always open to a party to prepare their account of expenses on a time and line basis.
We appreciate that one of the issues raised in this consultation is the gap between a party-party account and a solicitor-client account, which means there may be a shortfall between what a party pays to its lawyers and what is recovered by way of judicial expenses. However, the current system allows for application for an additional fee which we discuss below.
As an alternative, consideration could be given to extending the fixed fee or staged payment regime to these cases on the basis that a higher level of fixed fee or staged payment is applied. This would require financial modelling/analysis as suggested above.
Cases with a Value Band in excess of £250,000
In our experience these claims can involve a great deal of work. A fixed fee or a staged payment regime in these cases may result in the solicitor failing to receive reasonable remuneration. Accordingly we would propose that judicial expenses in these higher value cases continue to be dealt with on the basis of the existing block fees or on the basis of a time and line account.
These cases very often involve an application for an additional fee. We are of the view that the current process for seeking an additional fee is arbitrary and unpredictable. We would propose that parties have the option of seeking an additional fee at the outset. Indeed, we would propose that consideration be given to a system similar to The Birmingham Costs Management Pilot whereby parties submit an estimate of costs at the outset of litigation. At that stage an application for an additional fee could be made. The decision maker (Judge or Court Official) should be given guidance as to an appropriate level of percentage uplift for the additional fee. This would ensure predictability and proportionality. This also ensures fairness and transparency in access to justice. There should be a consistent system in the Sheriff Court and the Court of Session to determine the level of an additional fee.
Property damage cases
In our experience, these cases should be treated separately from personal injury cases. These cases often raise difficult and complex legal issues. Indeed, relatively low value cases can be complex and require considerable work. For example issues concerning the law of contract, property and delict can arise in property damage cases which do not necessarily arise in personal injury case. In the circumstances, these cases are not necessarily suited to a fixed fee or staged payment regime.
We consider that the current block fees work well in these cases. If there are concerns about the issue of proportionality in these cases as well then we would suggest that this be dealt with by restructuring of the block fees.
Who should be responsible for setting and reviewing the level of fixed fees/staged payments or block fees as proposed above?
The Lord President’s Advisory Committee currently has responsibility for reviewing the rates set out in block fees. We would propose that a separate working party, drawing on representation from the judiciary, pursuer and defender agents, law accountants and other stakeholders, should be created as an appropriate body to set and review the level of fees.
Funding of litigation
We are not involved in Pursuers’ funding arrangements in litigation in Scotland. Our understanding of the present position is that the majority of claims are dealt with on a speculative basis and many of these are backed by insurance policies. However, we do wish to comment on the following matters:-
Our view is that solicitors conducting litigation should not be able to “buy” work. We do not consider that referral fees should be permitted. We consider that the system of referral fees, which has operated in England and Wales has led to significant abuse of the legal process. We are aware that there are proposals to ban referral fees in England and Wales. If referral fees were allowed in Scotland, there is a risk that we would experience the same problems that have been experienced south of the border.
Speculative Fee Agreements and Damages Based Agreements (DBA’s)
Our understanding is that the majority of personal injury claims are funded on a speculative fee basis as regulated by the Solicitors (Scotland) Act 1980, Section 61A. Potentially that creates a shortfall between the judicial expenses recoverable and the sum that the Pursuer is contractually bound to pay his solicitor. Our view is that it is reasonable for each party to a litigation to bear some of the risks of the cost of that litigation. By sharing the risk of having to pay for litigation parties will be discouraged from proceeding with litigation unreasonably or frivolously. Therefore we do not consider that there is any particular difficulty with the existing system of speculative agreements.
However we do not consider that solicitors should be entitled to enter into DBA’s. The fundamental difficulty with such agreements is that advice provided to claimants by their solicitor may not necessarily be in the best interests of the claimant. In this situation the advising solicitor has a vested financial interest in the level of damages recovered. This may result in solicitors advising their clients to take unreasonable approaches in litigation by rejecting early reasonable offers in the hope that a later higher offer is made. If a later higher offer is not made then the Pursuer may be found liable for judicial expenses due to their conduct by their failure to accept the earlier reasonable offer.
With regard to the current system which allows claims management companies, for example Quantum Claims Limited, to enter into DBA’s, we are of the view that such DBA’s should be subject to regulation. In addition there should be transparency where a litigant is funded by such agreements as well as security for the opposing party in the event that they are successful in the litigation and, therefore, entitled to recover expenses.
Before The Event Insurance (BTE)
In our view there is a lack of knowledge of the availability and scope of BTE cover. Research should be funded by the key stakeholders to consider the extent to which BTE could be made more widely available to potential litigants.
We agree that BTE Insurance is to be encouraged with a greater understanding of the existence of BTE policies and the opportunity for claimants to utilise their existing BTE policies to fund litigation. Consideration should be given to the extent and nature of the BTE policies available to litigants in Scotland and whether more could be provided by way of indemnity and cover to ensure that litigants have their likely litigation expenses met in the event of failure. BTE should be presented to prospective claimants as a viable and economic alternative to other funding arrangements available to litigants.
ATE Insurance Premiums
As indicated above, we understand that the majority of litigated claims that we defend are pursued with by way of speculative fee agreement, some of which are backed by ATE Insurance policies.
We are firmly of the view that ATE premiums should not be recoverable. The ATE premium has to be paid by the litigant and should be seen as part of the risk of the litigation process. Should Pursuers enter in to an agreement involving ATE Insurance, this is a private contractual matter. Although not directly involved with providers of ATE premiums, our understanding is that the premium for this type of policy is often only paid where the party is successful and payment is usually met out of the award of damages. If the party is not successful, the ATE premium is not recovered.
In addition, we only have to look to the experience in England to see the negative issues which have arisen. We would wish to avoid any risk of satellite litigation and excessive ATE premiums (in comparison to judicial expenses) arising in Scotland. This would fly in the face of the need for predictability and proportionality.
That said, if ATE premiums were to be recoverable in Scotland, financial modelling should be undertaken to consider whether a viable alternative might be to introduce a system of Qualified One-Way Cost Shifting. We would wish to make it clear that our primary position is that Qualified One-Way Cost Shifting should not be introduced in Scotland and neither should ATE premiums be recoverable.