Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

Overview

Civil actions are lawsuits that are brought about to protect the rights of and give compensation to a person or an organisation. These are not criminal proceedings. The most common would be a personal injury claim or a breach of contract.

The Bill aims to increase access to justice in civil actions by:

making the costs of civil court action more predictable - currently these range from under £100 up to £10,000
increasing funding options, such as Legal Aid, for raising civil actions
making sure funding is available to both parties involved in civil actions

You can find out more in the Explanatory Notes document that explains the Bill.

Why the Bill was created

The Bill comes out of a review into the expenses and funding of civil litigation in Scotland. This review was undertaken by Sheriff Principal James Taylor. The Bill seeks to implement the recommendations of that review.

There have been 3 ways to fund civil court cases in Scotland in the past.

private funding
legal aid
trade union funding

There's been more pressure on public funding for legal aid. Fewer people are becoming members of trade unions. This means there is less funding for civil cases.

There's been an increase of speculative funding by commercial investors, usually lawyers. They'll pursue a case for a claimant in return for an agreed share of any sum recovered. These cases are “no win, no fee”. There's a high risk of the costs going up. The funding is in the form of:

speculative fee agreements (a written agreement about how fees are calculated if a case is won)
damages based agreements (a fee calculated as a percentage of damages if a case is won)

The Bill is aimed at making more options available for people to fund their actions privately.

You can find out more in the Policy Memorandum document that explains the Bill.

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill became an Act on 05 June 2018

Bill is at Introduced stage.

Introduced (1 June 2017)

Bill is at Stage 1 stage.

Stage 1 (16 January 2018)

Bill is at Stage 2 stage.

Stage 2 (6 March 2018)

Bill is at Stage 3 stage.

Stage 3 (1 May 2018)

Bill is at Act stage.

Act

Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill as introduced

Related information from the Scottish Government on the Bill

Why the Bill is being proposed (Policy Memorandum)

Policy Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Policy Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

Explanation of the Bill (Explanatory Notes)

Explanatory Notes Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Explanatory Notes Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

How much the Bill is likely to cost (Financial Memorandum)

Financial Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Financial Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

Opinions on whether the Parliament has the power to make the law (Statements on Legislative Competence)

Statements on Legislative Competence Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Statements on Legislative Competence Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

Information on the powers the Bill gives the Scottish Government and others (Delegated Powers Memorandum)

Delegated Powers Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Delegated Powers Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

Scottish Parliament research on the Bill

Committees involved in this Bill

Lead committee: Justice Committee

Delegated Powers and Law Reform Committee

Who examined the Bill

Each Bill is examined by a 'lead committee'. This is the committee that has the subject of the Bill in its remit.

It looks at everything to do with the Bill.

Other committees may look at certain parts of the Bill if it covers subjects they deal with.

Who spoke to the lead committee about the Bill

First meeting transcript

The Convener

Agenda item 4 is an evidence-taking session with the Scottish Government bill team for the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I welcome Hamish Goodall, who is from the civil law and legal system division, and Greig Walker, who is a solicitor in the directorate for legal services.

I refer members to paper 2, which is a note by the clerk, and paper 3, which is a private paper, and I invite Hamish Goodall to make an opening statement.

Hamish Goodall (Scottish Government)

The bill will deliver a manifesto commitment and increase access to justice by creating a more accessible, affordable and equitable civil justice system for Scotland. It will make the cost of civil action more predictable, increase the funding options for pursuers of civil actions and introduce a greater level of equality to the funding relationship between pursuers and defenders in personal injury actions.

The bill provides the legal framework to implement a number of key recommendations in Sheriff Principal James Taylor’s 2013 “Review of Expenses and Funding of Civil Litigation in Scotland”. Sheriff Principal Taylor made 85 recommendations, at least half of which will be taken forward in rules of court to be made by the Lord President, on the recommendation of the Scottish Civil Justice Council.

Some of Sheriff Principal Taylor’s recommendations have already been implemented by the Courts Reform (Scotland) Act 2014, such as those on sanction for counsel. Some of his recommendations on claims management companies and referral fees will be considered by the review of the regulation of legal services, which is being led by Esther Roberton, the head of NHS 24.

Part 1 of the bill includes legislative measures that will introduce sliding caps for success fee agreements, which are more commonly known as no-win, no-fee agreements. There will be sliding caps for success fee agreements in personal injury and other civil actions in order to make the costs of civil litigation more predictable. Part 1 will also allow damages-based agreements to be enforceable by solicitors. Currently, damages-based agreements can be used only by claims management companies. Under the proposal, the solicitor’s fee will be allowed to be taken as a percentage of the damages awarded by the court or agreed between the parties.

Section 8 introduces qualified one-way cost shifting, otherwise known as QOCS. I had better explain what qualified one-way cost shifting is, because it is not an easy concept. It is proposed that the process will apply only in personal injury cases and associated appeals. The parties to a personal injury action are, usually, the pursuer, who is a private individual, and the defender, which is an insurance company. Sheriff Principal Taylor thought that there was an imbalance there—an inequality of arms between the pursuer and the defender. One of the problems is that, if the pursuer were to lose the action, they might become liable to pay the expenses of the defender. Sheriff Principal Taylor pointed out that, in England, only in 0.1 per cent of cases will a successful defender pursue the pursuer for their expenses. He has therefore recommended that qualified one-way cost shifting should be introduced, whereby, if the pursuer is unsuccessful, they will not become liable for the expenses of the defender, which is usually a large insurance company. We will no doubt return to the subject of qualified one-way cost shifting later.

Other parts of the bill make the auditor of the Court of Session, the auditor of the Sheriff Appeal Court and sheriff court auditors salaried posts within the Scottish Courts and Tribunals Service, under a new statutory governance framework.

Part 4 allows for the introduction—for the first time in Scotland—of a class action procedure, to be known as “group procedure”. That is otherwise known as a multiparty action.

10:15

In general, the bill is designed to balance the needs of pursuers and defenders in personal injury actions. The potential costs involved in civil court action can deter many people from pursuing legal action, even when they have a meritorious claim. The proposals in the bill for sliding caps on the amount that can be taken from an award of damages under success fee agreements will mean that the cost of what the client must pay his own lawyer is predictable. Success fee agreements, I should explain, include both speculative fee agreements and damages-based agreements.

The proposals on QOCS in personal injury cases will protect the pursuer from paying the defender’s expenses if the case is lost. As I said, defenders are almost invariably well-resourced insurance companies that rarely claim their expenses when they successfully defend actions. However, the benefit of QOCS will be lost to the pursuer if there is fraudulent or unreasonable behaviour, or any other behaviour that

“amounts to an abuse of process.”

We appreciate that this is not easy stuff and we are very happy to answer questions.

The Convener

Thank you very much. It is helpful to have had that brief introduction.

Two of the recommendations implemented in the bill come from the Gill review’s report, which was published in September 2009, and the rest come from the Taylor review’s report, which was published in September 2013. Is there not a danger that the bill and those recommendations are already out of date?

Hamish Goodall

The proposals on auditors of court and group proceedings were not included in the Courts Reform (Scotland) Bill because that was already huge. There have been proposals on group proceedings in Scotland for many years. The Scottish Law Commission looked at group proceedings 20 years ago, I think, so the provision for them that is now being made is long overdue. It has simply been a case of finding the correct legislative vehicle to include those matters.

Thank you for that.

Providing access to justice is the bill’s main objective. What does the Scottish Government think that the practical effects of the bill will be on lawyers and the court system, particularly in view of the criticism that has been expressed that it could lead to a compensation culture?

Hamish Goodall

As far as lawyers are concerned, the bill will permit solicitors to offer damages-based agreements, which will increase competition among solicitors. As far as the court system is concerned, the advent of group proceedings should have a beneficial effect, because it will mean that, instead of a large number of similar cases being dealt with separately, it will be possible for them to be dealt with in one action—one set of group proceedings—and there should be economies for the court system in that.

The thrust of the bill is to provide more access to justice for people who have a claim and are concerned about what it will cost them from the point of view both of what they will have to pay their own lawyer and of what they might have to pay the other side if the other side wins and they lose.

The Convener

Other members have more in-depth questions. Liam McArthur has a supplementary.

Liam McArthur

Thanks, convener. I want to follow up on your point about the time that has elapsed between Sheriff Principal Taylor’s report and recommendations and the introduction of the bill, as well as your point about a compensation culture.

As I understand it, in making his recommendations, Sheriff Principal Taylor drew on figures from the Department for Work and Pensions that suggested that, between 2008 and 2011, the number of personal injury claims in Scotland rose by about 7 per cent, whereas south of the border the increase was around 23 per cent. However, between 2011 and 2016, the rise in the number of personal injury claims in Scotland more than doubled to 16 per cent, while the figure south of the border reduced to around 4 per cent. That does not suggest to me that there is an issue with access to justice in relation to personal injury claims; it suggests that the introduction south of the border of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 might have had a bearing on the number of personal injury claims that are made there. What assessment has the Scottish Government carried out of the impact that that legislation is having south of the border?

Hamish Goodall

The English system is completely different. We are implementing Sheriff Principal Taylor’s recommendations.

Liam McArthur

But you are doing so based on data that seems to me to be rather out of date.

Hamish Goodall

Is there anything that you would like to add, Mr Goodall?

Hamish Goodall

We have also produced a business and regulatory impact assessment for the bill.

The Convener

Okay. Thank you for that.

Why does the bill not regulate claims management companies?

Hamish Goodall

That is simply because the review of the regulation of legal services, which was announced in April, will consider the regulation of claims management companies.

The Convener

This might again be more of a policy issue, but perhaps you could provide some information on that. There is a real fear that, in the interim, there might be a displacement of claims companies to Scotland from England and Wales, where stricter regulations have been in place since 2007. I suppose that that builds into the claim culture fears. Did you consider including the issue in the bill?

Hamish Goodall

As I understand it, the review will report a year from now, and it will be followed by legislation. Therefore, if there is a gap, I hope that it will not be a very long one.

We have heard that concern, because, as you say, some of the English claims management companies are moving to do business in Scotland because of the stricter financial regime south of the border. They will still be subject to United Kingdom regulation. There may be a gap before legislation is introduced, but I think that it will be a short one.

10:30

The Convener

I realise that that is as much as you can answer. The Government has had the opportunity for the 10 years since 2007 to move to a much more relaxed regime, but that is a policy matter.

My final question is on success fee agreements based on fee uplift. They are subject to general regulation under the bill’s provisions, when they appear to have been operating satisfactorily, according to the market, without regulation. Will you tell us the thinking behind that?

Hamish Goodall

Rona Mackay

I want to move on to compensation for future loss and the fact that care costs, lost earnings and so on are obviously speculative. Should such compensation be entirely excluded from the success fee calculation, given the importance of the award to the pursuers?

Hamish Goodall

The Convener

A number of members indicated that they had supplementaries. Liam McArthur is first, followed by Stewart Stevenson, then Liam Kerr.

Liam McArthur

I will follow up on John Finnie’s line of questioning and the safeguards that you have outlined, which return us to the point around the lack of regulations under the bill on claims management companies. However, I think that I heard Hamish Goodall suggest that he anticipates such regulations coming through from the review that is under way. To me, that rather suggests that there is recognition that that sort of regulation is needed, which begs the question why, given the time that has elapsed since Sheriff Principal Taylor’s report, steps were not taken to include the regulations in the bill. Provisions of that nature could have gone out for consultation, as appropriate, and could have been included in the bill. Is that not a reasonable conclusion to draw from what you have said?

Hamish Goodall

The starting point is that Sheriff Principal Taylor did not think at the time of his review that the claims management companies in Scotland caused a difficulty. However, the reason why regulations are not in the bill is that the matter is being considered. The range of regulation of legal services in Scotland is being considered in the review that is being taken forward by Esther Roberton. It seems more appropriate that they are considered in that context.

The Convener

I remind Liam McArthur that that matter is probably a policy decision for the minister.

Liam McArthur

You can put such questions to the representatives who come before you. None of the claims management companies—or funding companies, as they are sometimes described—works in exactly the same way. They are private business arrangements and the full details have not been given to us because they are commercially confidential, but you can ask such questions of the other witnesses.

Liam Kerr

That may be more appropriate, but it feels as though the bill ought to have taken account of that. The point was made that there could well be a rise in the number of unmeritorious claims, and I suggest that such a funding arrangement, which already exists, means that the reason that Mr Goodall gave for there being no increase in the number of unmeritorious claims might not be entirely valid.

11:00

Hamish Goodall

Professional ethics come into play here, quite apart from the economic arguments. Solicitors are bound by their professional rules—I do not know exactly what the professional rules would say about that.

Greig Walker

One possible impact of the bill is that firms that have a claims management company or funding company will feel that they no longer need it, because they can fold all those activities within the firm, which is under Law Society regulation. The Law Society can always promulgate new practice notes and guidelines, as no-win, no-fee agreements become more of a thing in Scotland.

Liam Kerr

Okay, but that suggests a need for more stuff after the event, as Mr Stevenson proposed.

I might have missed this in the papers. What estimates have been made or modelling done of the impact of the bill on the number of claims?

Hamish Goodall

It is impossible to estimate that. We simply do not know. Those who wish to offer their services under success fee agreements might have an estimate, but it is impossible to say.

Liam Kerr

You are saying that we do not know the impact of the bill on the number of claims. No modelling has been done.

Hamish Goodall

No. We cannot know how many claims there might be.

Greig Walker

The best estimates are in the financial memorandum.

Liam Kerr

Thank you.

Mary Fee (West Scotland) (Lab)

I want to ask about third-party funding. In England, a market is emerging in which investors with no direct interest fund claims in return for a share of the compensation. Sheriff Principal Taylor argued that that should be an additional option.

The auditor of the Court of Session was salaried until 1997 or 1998, when the arrangements were changed. The proposal in the bill is for the auditor of the Court of Session and all other auditors to become salaried members of staff of the Scottish Courts and Tribunals Service; the Gill review recommended that the auditors all become salaried officials, and that is basically what the bill will do.

The argument with regard to self-employment of the auditor of the Court of Session relates to his independence. We think that, even if in future the auditor of the Court of Session were to become a member of the SCTS staff, there is no question that he or she would be independent. First of all, following the Judiciary and Courts (Scotland) Act 2008, the SCTS is completely independent of the Scottish Government. As a result, the question of independence would arise only in relation to cases that involved the SCTS itself. We understand that it is involved in only one or two cases per annum, and of course, such cases need not necessarily have to go through the taxation of accounts process.

There is precedent for members of staff of bodies taking decisions that affect those bodies. For example, although planning reporters are employed by the Scottish Government, they take decisions all the time that affect the Government. There is also legal precedent with regard to independence.

Did you want to say something about that, Mr Walker?

Greig Walker

The other relevant precedent is that all the other officers of court—the clerks, the macers and so on—are employed by the SCTS at arm’s length from the Scottish Government. As employees, they are all subject to the freedom of information, ethical standards, data protection and complaints procedures that are standard for civil servants. The fact that they are also officers in the Scottish Administration brings in another layer of governance, including the requirement for funds to be paid into the consolidated fund, which is ultimately the Parliament’s money.

We begin to amplify our legal position on this matter in paragraphs 58 and 59 of the policy memorandum by making it clear that the aim

“is to increase transparency and consistency”—

indeed, Lord Gill identified some concerns in that respect that persist to this day—

“whilst preserving the fair and adversarial character and integrity of the ... process.”

There is therefore no intention to depart from the rules of natural justice that we have currently. We also recognise that

“Auditors ... perform important functions in resolving disputes about expenses in which considerable amounts of money may be at stake.”

From time to time, the amount of money involved in expenses is more than the sum in dispute.

We set out the key legal arguments towards the end of the policy memorandum in paragraphs 108 to 110, in which we recognise that not only common law and natural justice but article 6 of the European convention on human rights apply to auditing disputes where the principal dispute—say, about damages—engages that article. We have set out in those paragraphs the European and Scottish case law that makes us really quite confident that independence can continue to be secured—and be seen to be secured—under the bill’s arrangements.

Ultimately, it is a policy matter for the minister, but we think that abandoning all the reforms and leaving these people self-employed outside the Scottish Administration in order to address the tiny number of cases in which the SCTS is a party to a taxation would be a departure from the Gill recommendation.

Liam Kerr

Paragraph 70 of the policy memorandum says that

“transitional arrangements”

will enable current auditors

“to continue as self-employed until their retirement.”

It will be under regulations. One of the quirks of the existing system of auditors is that it does not have much of a statutory basis. Sheriff court auditors get commissions from the sheriffs principal, and those are relevant to only one sheriffdom. I am afraid that we cannot point you to any legislation for that arrangement, which is based on custom and practice. The aim in the bill is to produce a new, modern, future-proof and transparent regime.

In the particular case of the auditor of the Court of Session, under section 26 of the Administration of Justice (Scotland) Act 1933 he has the right to stay in office until he is 65. We propose to honour that, so the transitional arrangement for the auditor of the Court of Session is that he enjoys his current statutory rights and the new system will not come in unless or until he retires or resigns.

Ben Macpherson (Edinburgh Northern and Leith) (SNP)

I want to focus on part 4, which is on group proceedings. As you know, the bill does not give any detail about how group proceedings should operate and instead gives the Court of Session the power to make the rules covering the issue, and the Scottish Civil Justice Council will consult stakeholders on how to develop those rules. It is also notable that the bill requires people to opt into any proceedings. Given that some countries allow an opt-out procedure, will you explain why the Scottish Government excluded the possibility of developing an opt-out procedure in the bill?

Hamish Goodall

In the discussions that we have had with stakeholders since the beginning of this year, all of them have favoured the opt-in procedure, because it is thought to be much more straightforward. As this will be the first time that group proceedings have been permitted in Scotland, we thought that we should go for a more straightforward model.

The opt-out procedure would be much more complicated because the court would have to decide what the group was going to be and define its boundaries. Inevitably, that would mean that some people would be included in the group who actually had not taken any decision and who might be completely ignorant of the fact that they were part of group proceedings. It seems much fairer to require people to opt in. As I said, all the stakeholders we have spoken to this year agreed with that view.

Greig Walker

The Scottish Law Commission did detailed work on the issue in the 1990s, the culmination of which was a draft set of court rules that provided for an opt-in procedure.

Ben Macpherson

We now move into private session. Our next meeting will be on Tuesday 12 September 2017.

11:15 Meeting continued in private until 12:31.

5 September 2017

Second meeting transcript

The Convener (Margaret Mitchell)

Good morning and welcome to the Justice Committee’s 27th meeting in 2017. No apologies have been received.

Agenda item 1 is our second evidence session on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I refer members to paper 1, which is a note by the clerk, and paper 2, which is a Scottish Parliament information centre paper.

It is my pleasure to welcome to the committee Ronnie Conway, who is co-ordinator at the Association of Personal Injury Lawyers; Brian Castle, who is regional co-ordinator Scotland for the Motor Accident Solicitors Society; and Patrick McGuire, who is a partner with Thompsons Solicitors. I thank all the witnesses for their written submissions, which are extremely helpful. We will move straight to questions.

John Finnie (Highlands and Islands) (Green)

Good morning, panel, and thank you for your submissions. Will you outline whether damages-based agreements have any advantages over no-win, no-fee arrangements?

Patrick McGuire (Thompsons Solicitors)

I am happy to begin answering that question. The reality is that the terms—particularly in the bill—are entirely interchangeable. The bill legalises the type of arrangement that, until now, professional rules and other aspects have prevented solicitors from entering into, whereby, in the event of a case being successful, a specific percentage of damages could be taken as a fee. Until now, solicitors could enter into a specific form of speculative fee agreement that centred on the ability to charge a percentage increase on damages.

The bill seeks to make things simpler for practitioners and—most important—for victims of accidents, injuries and disease so that they can have a clear picture in their mind in deciding whether to take forward a claim and which solicitor to choose to engage in that process. The bill is about providing simplicity and clarity, and for that reason, it will be a good and welcome addition to the law.

Brian Castle (Motor Accident Solicitors Society)

At the moment, when a client engages a solicitor on a written speculative fee agreement, the client has no clear understanding of how much they will be charged at the end of the day. Under the rules as they stand, a solicitor can charge up to 100 per cent of the judicial expenses that they recover. Even a solicitor at the outset of a case cannot tell a client what the judicial expenses are likely to be.

Under a damages-based agreement, a client can readily understand that a percentage of damages can be taken as a fee. That gives certainty and, as Paddy McGuire said, makes things simpler. The proposal under the Taylor review was to cap success fees or DBAs to prevent solicitors from taking an inordinate amount of damages from clients.

I think that, as well as the certainty, clients will like the idea that, if a solicitor is fighting their corner and can charge a fee that is based on the amount that is recovered, they will have an interest in fighting for the best deal for their client.

Ronnie Conway (Association of Personal Injury Lawyers)

I agree with what my colleagues have said. Taylor looked at the fact that some larger firms of solicitors have a parallel claims management company and that clients are already offered a damages-based agreement. In the main, Taylor found that clients were perfectly happy with that. The existing rules on speculative fees are byzantine and incapable of being understood by the public.

I have no factual basis for saying that there has been abuse, but the rules at present are open to such abuse, and it seems to me that the bill represents a substantial improvement on the current position.

John Finnie

If damages-based agreements were to be introduced, where would that leave the no-win, no-fee arrangement?

Patrick McGuire

A damages-based agreement is just a form of no win, no fee. Simply, it has clarity; the basic building blocks are the same, but the solicitor will act and charge a fee only in the event of success. It is just about what happens in the event of success; under the bill, the success fee will be at a fixed percentage that is clear from the outset. As colleagues have described, there is at the moment a strange and byzantine—I agree with Mr Conway’s description—approach to fees uplift.

As I said, this is just a matter of clarification. No win, no fee is a generic term, and damages-based agreements are a form of such arrangements. As I think Hamish Goodall explained the other week, the bill allows solicitors to engage in old-fashioned speculative fee agreements, if they so choose, but I would be surprised if they did.

John Finnie

Is there confusion about the terminology, or is there just a lack of clarity on my part? The position does not necessarily seem straightforward to the layperson.

Patrick McGuire

Do you mean the terminology in the bill?

John Finnie

Yes.

Patrick McGuire

For the public, the common parlance is “no win, no fee”; when they hear that, they expect to be able to engage a solicitor and be charged a fee only in the event of success. That currently happens, but the rules that govern what a solicitor can charge are in the main not clear.

There is also an unlevel playing field, because claims companies and certain organisations of solicitors who are allied to such companies can engage in the type of arrangement—the damages-based agreement that you are talking about—that is being envisaged for all under the bill. At the moment, only a limited number of organisations can say, “In the event of success, the fee will be X per cent.” Most solicitors cannot do that, so all that the bill does is allow everyone to operate in the same way and in a way that is entirely clear to the public. To take your point, Mr Finnie, I think that that is what the public expect and need. They want to know that there will be no charge in the event of the case being unsuccessful, and they want to know—I think—what the charge will be in the event of success. The bill sweeps away the confusion, and the market will balance out and determine things.

Ronnie Conway

I wonder whether part of the answer relates to the regulations, which have still to be made and which will be subject to the affirmative procedure. In its recommendations, the Taylor review—I make it clear that, although I was part of the Taylor reference group, I did not write a single word; Sheriff Principal Taylor is the review’s only begetter—set out provisions, which Mr McGuire just highlighted, on clarity for the public. Members of the public will have access to a fixed format of agreement, and I suspect that, within a very short time, the kind of speculative fee agreements that have been used up to now will wither on the vine.

The Convener

One of the points that John Finnie has raised and which Mr McGuire has clarified is that no win, no fee comes in various forms—it is just a generic term. The bill sets out a precise formula.

I will take a supplementary from Stewart Stevenson.

Stewart Stevenson (Banffshire and Buchan Coast) (SNP)

You must excuse my voice.

Mr Castle has spoken with approbation about the solicitor having a financial interest in the outcome. Is that really a good thing? Historically, a solicitor has, of course, represented their client in court, but they were independent of their client’s interests; they were able to provide independent advice, and they had duties to the court.

I accept that the train might well have left the station on the subject, but I wonder whether solicitors having a financial interest of the kind that you describe, which you appear to speak of approvingly, is a good thing in any circumstances.

Brian Castle

I was speaking on behalf of the client. We were talking in the context of looking at damages-based agreements and the potential benefit to a client. The client would see it as a good thing if the solicitor was fighting their corner and had an interest in doing well and securing full and proper compensation for the client.

You are right about the traditional situation. As it stands, the law that prevents solicitors from directly entering into a contingency fee agreement with the client is there because of concerns in the past. Sheriff Principal Taylor’s review took account of those concerns, but he recommended that, for the sake of clarity and certainty at the outset of an agreement, a client who was entering into an agreement should know at the outset what the terms of that agreement and the charging regime were.

Stewart Stevenson

Do you—and possibly others—see it as important for the professional standards regime, which is not a matter for Parliament, to be updated to make clear where the boundaries in respect of responsibilities are in the new regime, if Parliament passes the legislation?

Brian Castle

Absolutely. That has to be and remains important. A solicitor will have duties to the court, aside from looking at personal interests, and that has to be reflected in the rules.

John Finnie

Is anyone on the panel aware of examples of clients being required to pay two separate fees from an award of damages—one to a claims management company and one to their solicitor?

Ronnie Conway

I am not aware of any such examples.

Brian Castle

Likewise, I am not aware of any.

Patrick McGuire

Not to my personal knowledge.

John Finnie

The phrase “access to justice” is much used. Will the provisions enhance access to justice?

Patrick McGuire

I have absolutely no doubt that the provisions that are in the bill will enhance access to justice. That includes the provisions that cover group litigation, which we might come on to talk about. The entire purpose of part 2 and qualified one-way costs shifting under Sheriff Principal Taylor’s recommendations was to enhance access to justice. We have all expressed some concerns about the drafting of the bill and how it could be improved. There is no doubt in my mind that, if we assume that Sheriff Principal Taylor’s recommendations are reflected fully in the bill, it will improve access to justice. Equally important, it will also do what Sheriff Principal Taylor said was his prime focus and what I see as the mischief of the bill, which is redressing the imbalance in the asymmetrical relationship, which Sheriff Principal Taylor spoke about, between pursuers of personal injury claims and the extremely large, powerful and wealthy insurers that count their profits in billions of pounds.

Ronnie Conway

APIL strongly supports the bill’s aims and has been waiting on such legislation since the Taylor report was issued in 2013. In world jurisprudence, the most widely cited article is “Why The ‘Haves’ Come Out Ahead”, which Marc Galanter wrote in 1974. His critical point is that litigants can be divided into two categories. On the one side, we have the one-shotter, and on the other side, we have the repeat player.

If my car is rear ended by someone else, I am a one-shotter. If I have to get involved in litigation or a dispute with the person who banged into me, I am dealing not with a one-shotter but with a repeat player. That covers not just personal injury cases but cases of landlords and tenants and of private utilities and so on against individuals.

The repeat players have distinct advantages: they are resource rich, have easy and well-established conduits to blue-chip lawyers and can decide what cases to settle and what cases to take to the Supreme Court. We know from the Parliament’s experience of the asbestos wars that they are perfectly capable of doing that. Critically—and this is the point about the bill—they have no real financial or emotional involvement in the dispute.

10:15

The Convener

We will cover that in more depth. You have taken quite some time to explain that point. The issue is complex and the one-shotters can come in various forms; we hope to tease that out.

Before we move on, I will ask about the possibility of two separate success fees from an award of damages. You all said that you were not aware of that happening, but it would not be impossible under the bill. Is that correct? I am talking about a situation where a claims management company charges a fee and the solicitor to whom it referred the case also charges a fee.

Patrick McGuire

I have not considered that in respect of the bill’s wording and I apologise for that. Given what has been said and the fact that there is a requirement for secondary legislation under part 1, the issue might need to be addressed at that point.

Ronnie Conway

Convener, you are correct that that is a possibility. APIL’s hope is that claims management companies will wither on the vine—there is no real need for them and they are a kind of dating agency that no one needs. Once clarity has been introduced into the system, people should go straight to a solicitor, who will charge a single fee.

The Convener

So there is nothing in the bill to stop two fees being charged. Does that need to be looked at?

Brian Castle

To repeat my colleague’s comment, if there is a concern that that is a possibility, it can be addressed through secondary legislation on fee charging.

Rona Mackay (Strathkelvin and Bearsden) (SNP)

I will follow on from Mr Finnie’s line of questioning but focus on the pursuers side of things. How can the future care needs of pursuers who have suffered significant injury be managed if some of their damages award goes towards paying a solicitor’s success fee?

Ronnie Conway

I think that you are looking at section 6. Taylor adopted an evidence-based approach to the matter. If you do not mind, convener, I will refer to section 6.

The Convener

Go ahead.

Ronnie Conway

If you are talking about care costs, you are probably talking about cases that are worth more than £2 million. Once the proposed damages bill comes into play, in cases against institutions such as the national health service, the Motor Insurers Bureau or regulated insurance companies, the expectation is that periodical allowances will be put in place. In that event, Taylor excluded the possibility of any success fee being calculated on the future amount. In cases that are worth more than £1 million, under section 6(5), the norm will be that there will be no calculation of a future success fee.

The bill has to envisage two possibilities. The first is one in which there is an adjudication, so the court resolves matters. If it is a choice between a lump-sum payment and a periodical allowance, the judge will have to be satisfied about the future element being paid as a lump sum. In cases where damages are obtained by settlement, the pursuer’s lawyer will have to instruct an independent actuary, who will have to certify that the future element should be paid as a lump sum rather than periodical payments. Therefore, once the legislation on periodical payments is introduced, the expectation is that there will be periodical payments rather than lump sums.

If all of that falls by the wayside and we end up with a lump sum, Taylor’s suggestion is that the amount of success fees should be a once-and-for-all 2.5 per cent on damages of more than £500,000. In his report, he uses an example in which there is a future loss element and the amount that is recovered is £1 million. He says that, in such a case, the maximum success fee should be 20 per cent for the first £100,000, 10 per cent for the next £400,000 and 2.5 per cent for all the amount after that. From a practitioner’s perspective, that additional amount is the most difficult, involved and disputatious element of the litigation. There are constant disputes about life expectancy in particular, as well as about amounts and levels of care. I agree with Taylor that a single success fee of 2.5 per cent for damages of more than £500,000 supplies sufficient incentive to keep going without overrewarding the lawyers involved.

Rona Mackay

How do you feel about the argument that Scotland should follow England and Wales in protecting the future loss element of a claim from forming part of the success fee calculation?

Brian Castle

Taylor considered that in some detail. He considered the possibility of restricting a success fee to past damages only and decided that the better position would be to allow solicitors to charge a limited success fee on future damages. I think that the rationale was largely that, as Ronnie Conway said, the bulk of the work in these big-value cases goes into the claim for future damages and continued care costs. Those are hotly disputed and the vast majority of the solicitor’s time examining such cases would be focused on calculating and putting forward the future element. Taylor did not want to discourage solicitors from doing that work or from doing it properly.

The secondary point that Taylor recognised is that, anecdotally, it has been suggested that, if solicitors were to be allowed to charge a fee only on past losses, there might be an incentive to drag a case out for as long as possible so that more of the compensation would be treated as past losses. That is clearly not in the client’s best interests. We want to get to full and appropriate compensation as quickly as possible and we want the legislative framework to encourage that.

Patrick McGuire

The overall purpose is to achieve a fair balance with appropriate safeguards for the victim. Sheriff Principal Taylor spent a great deal of time looking at that, and the recommendations in his report, as reflected in the bill—subject of course to the issue of section 4, which requires secondary legislation to set the parameters of the sliding scale of fees, as my colleagues have spoken about—strike the balance appropriately. Solicitors will be paid fairly for the extremely hard work that is put into these extremely trying and difficult high-value cases, but in a way that means that the victim is properly protected. The bill just strikes that balance correctly.

Liam Kerr (North East Scotland) (Con)

I will go back to the basic premise for the bill, if I may, and the issue of access to justice. Mr Conway, you said in your submission that cases are not being brought or there is routine undersettlement. Mr Castle, you said that people were

“prevented or dissuaded ... because of ... costs implications”.

This is a very important point. Are you aware of any research that shows how many claims are not being made or progressed, broken down by what those claims are and why they are not being made or progressed?

Brian Castle

There have been studies. I cannot put my hands on the references at the moment, but I would be happy to submit them following the meeting. A number of studies have said that—even now in Scotland and the rest of the United Kingdom—statistically speaking, a majority of people who would, on the face of it, have a valid claim for damages decide not to pursue that claim. There are various rationales for that, which the studies look at to a degree. One of those must be a concern that, in advancing a claim, they are putting themselves at significant risk of adverse expenses if they do not prove their case. However, it is difficult to give you first-hand evidence because, by the very nature of the situation, those clients are not coming to me, as a practitioner, to seek advice.

The Convener

If you gave us the details of the studies later, that would be very helpful.

Brian Castle

I am happy to do that.

Liam Kerr

If you would not mind because, although I suspect that you are right, I am concerned that the fundamental premise behind the bill, which is that costs are preventing access to justice, may be groundless. It may not be, but we need some data, because I understand that there has been a significant increase in personal insurance claims in the past six years in Scotland, which would tend to suggest that it is not to do with cost.

Could you help me with something, Mr McGuire? It is a long time since I practised in England, so I might be wrong on this, but, when England and Wales did what they did, did the judicial college there not increase awards by 10 per cent?

Brian Castle

I can help you with that. Historically, when a claimant in England was pursuing a damages claim and took out after-the-event insurance, the insurance premium and the uplift in terms of the fee agreement or the speculative element of the fee were recoverable from the insurers on success. As part of the regime in England, where they decided that they were no longer comfortable with having the insurers pay for the success fee and the insurance premium, the quid pro quo was an instruction to the judiciary to increase damages by 10 per cent to balance that out.

In Scotland, we have never been able to recover an insurance premium if the client has taken out after-the-event insurance. As Mr McGuire said, there are well-founded principles for how to calculate a damages claim that are used day in and day out by the bench in Scotland. The bench is not going to depart from that and I suspect that, if it did, there would readily be appeals. Therefore, like Mr McGuire, I do not see any prospect of damages awards being increased, which some of the submissions have suggested might happen. I think that that is a smokescreen; it simply is not going to happen.

Ronnie Conway

I say to Mr Kerr that the tender-hearted judge or sheriff is not a creature that I recognise. Judges and sheriffs have taken a judicial oath to uphold the law and to follow practice and precedent. They will not be adding a little extra to the damages.

The Convener

Mr Conway, I do not think that you answered the first question about how pursuers who have suffered significant injury can properly manage their future care needs if some of their damages go to pay solicitors or anyone else. You mentioned periodical payments being omitted from the agreement but, inevitably, somebody will fall through the net. How do people meet their costs if some of the amount that has been attributed for them to look after themselves—that is, an amount that has been deemed appropriate for that purpose—has to be paid to solicitors? Perhaps some of the other panel members would like to answer that first, Mr Conway, because you have already had a shot at it.

Patrick McGuire

I have made my view on that clear. It comes down to a question of balance, with the appropriate safeguards. I think that that balance has been properly struck. I have certain views politically and in an industrial sense about where the argument is coming from. I have seen that argument being made by the insurance lobby and I am happy to share my views on that now, because it ties into another recent development south of the border that will no doubt come before the committee soon in relation to the discount rate, as it is called.

I can deal with the issue now or we can move on—it is up to you—but the bottom line is that that particular line has been promulgated by the insurance industry as part of its attack on the bill, and I simply do not accept it as a legitimate argument.

The Convener

I think that we are talking about the issue not from the perspective of the insurance companies but from the perspective of a client who has had a severe personal injury and has been given a certain amount of money to enable them to look after themselves but who is not getting that full payment.

Patrick McGuire

Absolutely. I am happy to explain my point. The argument about concern for the victim comes from the insurance lobby. That is the same lobby that recently decided that it was going to stand up against a decision of the United Kingdom Government to increase what is called the discount rate. The discount rate applies to the most serious levels of claims, which involve people who have had life-altering injuries and receive damages that have to see them through the rest of their lives.

The discount rate recognises that, if someone gets money now, they are expected to invest it, which will give some form of return over the years. It says that, to be fair to the insurance industry, some discount should be given—hence the term “discount rate”—because the money has been paid now.

Until now, the discount rate has overlooked the incredibly low levels of interest and inflation that there have been in the UK. The Lord Chancellor made recommendations that the discount had to be reduced. That is exactly the point that the convener makes—that people should get as much as possible in damages.

By reducing the discount rate, the money that insurers pay is increased. The insurance industry decided that it was completely inappropriate that they should be paying more money. The insurance industry went to war and the UK Government backed off. That shows what is really behind the apparent concern for victims from the insurance lobby.

10:45

The Convener

I want to stop you there. My question is from someone who is going to court, is not familiar with things and has a huge injury. I am not talking about the insurance lobby; I am talking about an individual in court who is awarded so much money to look after themselves for years to come and they are not getting the full amount. That is what they understand when they are in court.

Please leave the insurance lobby out of it and answer that point specifically.

Patrick McGuire

I answered that question before and I will answer it again. It comes down to what is a fair balance between the solicitor being paid fairly for the extremely pressured work involved in the most high-value cases and safeguards to ensure that the victims do not have to pay too much. We are talking about victims—victims of the most serious accidents.

There is no problem with stonewall certainties—we would take such cases on, and we would advise our clients to do so.

Going back to Liam Kerr’s line of questioning, you will have seen the evidence that we took from the bill team a couple of weeks ago. Figures from the Department for Work and Pensions were quoted that suggest that between 2008 and 2011 personal injury claims rose by 23 per cent south of the border and 7 per cent in Scotland. Indeed, I think that Sheriff Principal Taylor alluded to a compensation culture south of the border that was not reflected north of the border.

However, between 2011 and 2016, there has been a 16 per cent increase in PI claims in Scotland, while the figure for the UK has fallen dramatically to 4 per cent. Although I take Mr McGuire’s point about the bill’s general principles, those of us who are charged with the responsibility of scrutinising legislation need to understand its basis and the case that is being made for it. We will be hearing from Sheriff Principal Taylor next month. Although that will be helpful, it appears that the picture has changed quite dramatically since the publication of his report, and it is reasonable for us to seek an understanding of what the trends tell us about what is happening and about disincentives or obstacles in relation to access to justice. I would therefore welcome your comments on that.

Brian Castle

You are right, Mr McArthur. Looking at the CRU figures, which have to be the best guess with regard to the number of personal injury claimants, I think that it is true to say that there has been a percentage increase in claims since Taylor carried out his review.

Liam McArthur

The other slight concern that MASS members in Scotland had, which may or may not be shared by my colleagues on the panel, was the suggestion that the actuary was the final determinant of which road we would go down. In the context of a court action, the framework is that all parties would get an opportunity to feed in their wishes and hopes, there would be an actuarial report and the judge would decide what was in the best interests of all and what the outcome would be. However, the framework proposes that, if a case of value is settled before it gets to court proceedings, an actuary will take a view and that will be the end of the matter.

There has to be some mechanism for an individual client’s wishes and circumstances to be taken into account. There absolutely have to be safeguards as well because, if the matter is driven by the solicitor, it will be suggested that self-interest is driving it because the solicitor wants to charge a success fee for the future element of the damages if it is paid as a lump sum. The MASS membership is slightly worried that there might be a number of reasons to advise an individual client that they would be slightly better off if they took a periodical payment rather than a one-off lump sum, but the client might say, “No—I prefer to do it this way.” In those circumstances, there must be a mechanism in which some cognisance is taken of their interests. Quite how we arrange that will have to be a matter for further consideration and, presumably, secondary legislation.

11:00

Ronnie Conway

I say to Brian Castle that there is no reason why that cannot happen. A success fee is chargeable on the future element if the client insists that he wants a lump sum. If you like, the protection is trying to force clients away from lump sums and preventing solicitors from getting a success fee if the advice is otherwise.

Mairi Gougeon (Angus North and Mearns) (SNP)

I have some questions about QOCS. Looking at such matters is not my day-to-day job, but I am sure that the panel sees a full variety of cases. One thing that has struck me is that—as I understand it—Sheriff Principal Taylor gave the justification of the David and Goliath scenario for the pursuer and the defenders in the vast majority of cases that panel members would see. However, my point is about the other cases. From looking at the surface, I say that it would strike me as being unfair if I, as an individual, were taken to court by someone, the court found in my favour and not in favour of the pursuer, but I then had to pay the pursuer’s legal fees. I would like to hear panel members’ views on whether that is a realistic example, or what other examples they can give us to illustrate the scenario.

Patrick McGuire

Sheriff Principal Taylor took that view because in the vast majority of cases an insurer will act for the defender. The scenario in which any of us, or any of our colleagues in the profession, would bring a personal injury claim against an ordinary person is virtually impossible. It is very unlikely because we have to be conscious of the fact that if we are successful, our clients must be able to get the money to which the court says they are entitled. We could not do that and bring a claim against an ordinary member of the public except in a case such as the one that was discussed at the committee’s meeting on 5 September, about a half-billionaire. We might contemplate it in such circumstances, but in no others. Therefore, I take Mairi Gougeon’s point, but it is so unlikely that there would probably be a danger that the old adage about hard cases making bad law would bleed into the process. Sheriff Principal Taylor got it right.

Mairi Gougeon

I am interested to hear whether anyone else has examples of cases that are not quite that David and Goliath scenario.

Ronnie Conway

I read about the billionaire cyclist example; it is not completely daft, if I may say so. I cannot remember who came up with it. That probably also illustrates the ubiquity of insurance: almost all such people would be insured, one way or another.

Do you think that there are enough safeguards in the bill to prevent an increase in spurious claims?

Brian Castle

Yes.

Patrick McGuire

Yes.

Ronnie Conway

Yes. May I answer somewhat obliquely by recommending the APIL campaign, can the spam, which wants cold calling and nuisance texts to be banned? If there is an engine for fraud in this process, it is the texts that people get that tell them that they are entitled to £3,000 if they have been in an accident, and so on. Such a ban was in the UK Conservative Party manifesto. I understand that the issue is being considered in the House of Lords, in the context of the Financial Guidance and Claims Bill.

A ban would be a simple measure. There are a lot of people out there in Wongaland who live from pay cheque to pay cheque. They get a phone call or text saying, “You’ve been in an accident, and you must have some kind of injury.” Of course, the firm has got the person’s mobile number from a repair garage that is paid a referral fee for the number. It must be very tempting for people who are told that it will be easy—

The Convener

We get the picture, Mr Conway. We are pressed for time, so if you could be succinct with your answers, that would be much appreciated.

Ronnie Conway

Can the spam is the answer to a cheat’s charter.

Liam Kerr

Very briefly, the justification that Mairi Gougeon has put up for QOCS is the David and Goliath situation. What about the situation in which the pursuer is fully backed by, for example, a trade union? Effectively, that is Goliath versus Goliath. The arms have been equalised. Should QOCS not disapply?

Patrick McGuire

As I said earlier, Mr Kerr, that is not a Goliath versus Goliath situation. Sheriff Principal Taylor took evidence widely and recognised that point. There is a financial imbalance between an insurance company that counts its profits in billions and a trade union that has a fiduciary duty to use its members’ dues fairly and appropriately. It is not the same thing.

Liam Kerr

If there were equality of arms—if there were an uninsured defendant, for example—should QOCS disapply?

Patrick McGuire

That goes back to Ms Gougeon’s point—I apologise for my pronunciation. The prospect of there ever being a claim brought against an uninsured person is negligible.

Mr Conway talked about the need to look at

“the litigation landscape as it is.”

You will be aware of the information that I asked the bill team for the other day, which was the proportion of cases in which the defence will seek its legal costs from the pursuer in the event of a successful defence. I am to interested to hear whether you know that figure.

Can you also shed light on the Government’s point in the financial memorandum, that

The financial memorandum then goes on to say that

“Pursuers are unlikely to raise actions with little prospect of success”.

It is difficult to square those two statements. Can you square them for us?

Ronnie Conway

On QOCS, the civil judicial statistics on cases raised show no increase over the past five or six years—there has probably been a decrease. Those are the cases to which QOCS will apply. The CRU figures are the whole balloon, so to speak, and it is only the litigated cases to which QOCS will apply.

If you are asking whether there will be situations in which insurers will make an economic decision to settle a case rather than run it, that happens at present; there are nuisance-value offers and settlements. In significant cases, such a decision is not made.

Liam McArthur

Will there be more of those as a result of the provisions in the bill?

Ronnie Conway

It is impossible to know—

The Convener

Please be succinct, Mr Conway.

Ronnie Conway

It is impossible to know exactly. There is no doubt that there will be more cases raised.

Patrick McGuire

I can try to square the circle, if that will assist. The two quotations are referring to two different parts of the claims process. There is the compulsory pre-action protocol that a claim must go through before a court action is raised, which was spoken about at the committee’s meeting on 5 September, and there is the litigation itself.

My reading of the two quotations is that the first relates to the compulsory pre-action protocol through which the parties may settle before going to court. The second relates to a solicitor advising the claimant pursuer to proceed to raise a court action when there is little prospect of success. That is how the circle is squared. We would continue, with the advent of QOCS, not to raise frivolous cases. In terms of the cost to the insurance industry—

11:15

Liam McArthur

I am grateful to you for shedding light on the Government’s financial memorandum. Witnesses were not able to do that on 5 September. Is it your expectation that there will be a higher proportion of cases through that pre-action protocol that will settle in the terms that are set out in paragraph 59 of the financial memorandum?

Patrick McGuire

That comes back to some of the questions earlier. It is impossible to tell. The question is whether we are looking at it through the wrong end of the telescope. Some of the challenges to the bill and the entire notion behind it are that all additional claims are frivolous, bad and arising from a compensation culture—I use the term disparagingly—that does not exist. I utterly challenge that view.

If there are more claims, the vast majority are likely to be meritorious. If they increase, that is a good thing. That is what the bill is there to do and that is what we should encourage. It goes back to my point about the primary purpose being to improve access to justice.

The Convener

I know from the recent submissions that there are concerns about the tests in the bill which would determine where QOCS protection is lost. Would you outline some of those concerns and let us know if you have any specific suggestions about how the test could be improved, and the consequences if those concerns are not addressed?

Who would like to start?

Ronnie Conway

I am happy to start. It is not just about cases which are not taken, although there are meritorious cases in the middle which are not.

Having read all three of our submissions and the submissions from the Scottish Trades Union Congress and others, I can say that the concerns relate to the current drafting of section 8(4)(a), which says:

“makes a fraudulent representation in connection with the proceedings,”

and section 8(4)(c), which says:

“otherwise, conducts the proceedings in a manner that the court considers amounts to an abuse of process.”

Although the concerns are phrased slightly differently, they are the same in relation to both tests. They are all about certainty. The entire purpose of Sheriff Principal Taylor’s recommendations is the need for certainty. All the trade unions would say that the current drafting does not provide that certainty. It is an open invitation to challenges and to what is called satellite litigation.

Both section 8(4)(a) and section 8(4)(c) need to be tightened. The problem with “a fraudulent representation” is that that could be a single comment that is entirely peripheral to the centre point or significant material part of the claim. The equivalent test in the English rules that have been in place since 2013 is that the entire claim must be fundamentally dishonest. That is the level that we have to get at to reach the very high bar—to refer to Sheriff Principal Taylor—that is required.

In our submission, we suggest that it has to be something that is not peripheral but at the heart of the claim. For alternative forms of words, there are greater minds than mine when it comes to drafting. It could be something that indicates that the entire claim or a material aspect of it is fraudulent. There has to be material proportionality.

Everyone who commented on section 8(4)(c) makes the point that Sheriff Principal Taylor recommended that QOCS should be removed if the Wednesbury test of reasonableness is met. I do not need to go over that as it was in every submission and was canvassed at length at the committee meeting on 5 September. Our submission states that the current drafting does not meet that test. There is a suggestion that the words at the end of the section 8(4)(c)—

“amounts to an abuse of process”—

may be the saving grace, as they suggest that there must be not only unreasonable conduct but an abuse of process, which takes the test to the Wednesbury level.

That may be the case, but we all want to avoid hours upon hours of satellite litigation. The subsection could be framed more tightly, and to make things simpler for everyone it ought to be. A statutory definition of “unreasonable conduct” ought to be in the bill and should be the Wednesbury test verbatim.

The Convener

Thank you. That is comprehensive. Are the other members of the panel happy with that explanation or do they have anything to add?

Ronnie Conway

In the APIL submission, the suggested phraseology regarding “fraudulent representation” is on pages 4 and 5.

The Convener

Thank you. Do you have anything to add, Mr Castle?

Brian Castle

I am happy.

Mary Fee (West Scotland) (Lab)

I will be very brief. I want to direct my questions to Mr McGuire, in the absence of Dave Moxham from the STUC.

Will you give the committee some assistance on the issue of unions? I would like a bit of detail on the impact that unions paying court fees up front currently has on the union and its members.

I will roll my questions into one, because that might make things easier. Do unions currently recover fees from members? Could there ever be a situation in which unions would consider referring members to no-win, no-fee solicitors?

In their submissions, the STUC and Thompsons have said that the bill should expressly state that section 10 does not apply to trade unions.

Patrick McGuire

Thank you for that lengthy question.

I have neither the hair nor the beard to stand in the stead of Dave Moxham, but I will do my best to answer on his behalf.

Perhaps we can deal with some of the simpler questions quickly. Section 10 should not apply to trade unions. It is perfectly clear from Sheriff Principal Taylor’s recommendations and from the Scottish Government’s response that it is intended to apply only to litigation venture capitalists—I guess that that would be the term—and not to trade unions.

I return to the point about the clarity of drafting. There is an argument that, as currently drafted, section 10 does not apply to trade unions, because of the words:

“but has a financial interest in”.

There is an argument that trade unions do not have such a financial interest. Let us not, however, invite satellite litigation. Let us have a clear black-and-white interpretation section.

Here is an even easier answer. Trade unions would never take court fees from their members. Trade union members always receive 100 per cent of their damages. Trade unions would also never refer their members to a claims company. The forefathers of the trade union movement would turn in their graves at that prospect. The answer is an unequivocal no.

We have to find a system that recognises that it is not Goliath versus Goliath. Trade unions are under more and more financial pressure these days because of the sweeping and aggressive changes in law south of the border, many of which are specifically aimed at trade union finances. It is becoming more and more difficult to operate.

Court fees place an additional financial burden on trade unions—it is that plain and simple. The current model of court fees is described in the submissions from Thompsons and the STUC as a pay-as-you-go model. As soon as a person wants to go to court, they have to get their cheque book out and pay for different stages of the process. If and when a trade union client is successful, that money comes back, but the model represents a significant—I use that word deliberately—cash-flow strain on trade unions when they can least do with that problem.

With regard to the recent decision by the Supreme Court that relates to employment tribunal fees, it is interesting that those fees were roundly accepted as inappropriate and an absolute barrier to access to justice, and so they were. Court fees have been an overlooked barrier, but that barrier is absolute and real and is becoming more so as trade union finances become more strained. Thompsons and the STUC propose a simple remodelling—no more, no less—with no reduction in the overall income to the Scottish Government or the civil justice fund. Our model is simply a different way to pay court fees. A move from a pay-as-you-go model to a model of deferred payment at the end would treat court fees in exactly the same way as defenders’ costs are treated in the bill. Because the bill deals with access to justice, and especially because of the Supreme Court judgment, the bill is a perfect opportunity to make that change.

Mary Fee

That was very helpful. Thank you.

The Convener

I should say that Dave Moxham, deputy general secretary of the STUC, was due to appear but has been unable to due to ill health. Thank you for answering on his behalf. We move to our final set of questions.

Ben Macpherson (Edinburgh Northern and Leith) (SNP)

Good morning, panel. Could there be consequences of formal regulation of claims management companies not being introduced as part of the bill? A few of you have already touched on this important area, but I seek your thoughts and would like to get clarity on it.

Patrick McGuire

Your final words—“as part of the bill”—caused me to hesitate. There is an absolute need to regulate claims management companies, but there is an even greater need at this moment for the bill to be progressed. I would not want one to derail or put on hold the other. If regulating the companies will take place a year down the line and the bill comes into force in the meantime, so be it.

Ben Macpherson

However, just for clarity, do you think that it would be more beneficial if regulation could be introduced in tandem with the bill being passed?

Patrick McGuire

Patrick McGuire

I am very cautious, because Thompsons and the trade union movement are part of a wider organisation and movement. The amount of satellite litigation that we have seen over the years because of bills that are exactly like this one makes me extremely cautious. My preferred route would be for a one-liner to be added at stage 2 or, indeed, at stage 3 to put the definition beyond doubt.

The Convener

That concludes our line of questioning, so I thank the panel members for attending. That was a very worthwhile session.

19 September 2017

Third meeting transcript

The Convener

Item 3 is our third evidence session on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I refer members to paper 2, which is a note by the clerk, and paper 3, which is from the Scottish Parliament information centre.

It is my pleasure to welcome our first panel of witnesses: Simon di Rollo QC from the Faculty of Advocates; Andrew Stevenson, vice president of Glasgow Bar Association; and Kim Leslie, convener of the civil justice committee of the Law Society of Scotland. I thank all the witnesses for providing submissions, which is hugely helpful to the committee.

Before we move to questions, I invite Liam Kerr to make a declaration.

Liam Kerr (North East Scotland) (Con)

I declare an interest in that I am a director and 100 per cent shareholder of Trinity Kerr Ltd, which is a provider of legal services, and I am a member of the Law Society of Scotland.

The Convener

The Convener

We will cover future losses in more detail as we continue our line of questioning.

Simon di Rollo

Your question was specifically about professional regulation, convener. Counsel have a duty of independence and a duty not to present a case unless it is statable. There is a case from the inner house in the 1930s—as far as I am concerned, it is still good law—that maintains that, for a case to be conducted on a speculative basis, there must be reasonable prospects of success. There is in place a requirement on counsel not to conduct a case unless there are reasonable prospects of success, and a case may not be stated unless it is statable—I suppose that that is another way of saying the same thing.

Protocols may be needed to ensure that cases are not presented when there is no reasonable prospect of success. By that I mean that pre-action protocols must be in place, such as I believe are envisaged. Case management procedures in the courts are also designed to ensure that cases cannot be presented unless there is a statable basis, and summary dismissal of cases that have no merit is possible.

Liam McArthur

I will follow up Kim Leslie’s point about the involvement of actuarial advice. It came up in our evidence session last week that that advice would have to be sought in the absence of the solicitor, which raised some eyebrows. Do you see any problems with a client having to seek that actuarial advice without having a solicitor present? Is it assumed that that provision will work and is in place for a good reason?

Kim Leslie

If the provision gives comfort that there is no taint to the advice, the Law Society will accept it. I wonder whether it is strictly necessary because, in such high-value cases, there will generally be a legal provider, potentially senior and junior counsel and maybe even a financial guardian. However, if the provision gives comfort that the public are being protected—given that there will be a change that means that solicitors will for the first time have a stake in the outcome of a litigation—we understand the reasoning behind it.

As lawyers, we always have a duty to act in our client’s best interest. It is comforting that, because of the transparency that is involved, there are very few complaints to the Law Society about arrangements, which are on-going, in which claims management companies are being operated as a funding vehicle but the work is being carried out by solicitors.

The short answer is that we believe that the primary objective must be to include future losses at the appropriate tapered level. If the committee feels that the provision in the bill is essential to protect the public, we understand that and are prepared to accept it.

Liam Kerr

Is the point about the actuary or the court certifying that the deal is in the client’s best interest a tacit admission that the true independence of the profession—of which it is, rightly, proud—is potentially compromised? Could there be a public perception that that independence is being compromised?

Kim Leslie

I made the point that a number of people advise in such cases. I have experience of such work and I have certainly never felt conflicted in my advice to a client. As I said, if the provision gives comfort, it is necessary. However, it anticipates a choice that means that a lawyer could be paid more by way of a success fee, or less. I would agree with anyone who said that the lawyer should always be able to make the right choice because it is in the client’s interest. The provision is an extra stage that says that the advice will be without taint but, to be frank, the advice will probably be the same as the advice that the lawyer would have given in the first instance.

Simon di Rollo

The Faculty of Advocates has commented that its concern is that section 6(6) carries with it the statutory suggestion that there is a conflict and that the lawyers cannot be trusted, as Mr Kerr just indicated. That is problematic.

It is not clear to the Faculty of Advocates how an independent actuary will be able to assist with the question that requires to be answered in such a situation. An actuary’s purpose is to give advice on how a calculation will work out, but the decision as to what to do in the light of that calculation is for the client to take. Normally—in my experience, invariably—the client should have independent advice from counsel in such cases, and a financial guardian, who should be a professional person, should be present. I have never come across a solicitor who was not conscious of the need to do what is in the client’s best interests in such circumstances.

10:30

The Taylor proposal created a conflict and then sought to resolve it. I suggest that the way around the problem is to avoid the conflict by allowing the solicitor to charge a fee when there is a periodical payment order. That would mean that there was no conflict between a lump sum and a periodical payment order. Surely we can find some mechanism to allow a fee to be charged in such circumstances. The fee would have to be a very small percentage of the value, perhaps over a number of years, of the periodical payment order. That money could be found from the damages and should not affect the future element because, in claims of the size that we are talking about, there will be enough money to pay the fee without affecting the ability to fund future care and so on.

Stewart Stevenson

As a mathematician and someone who has been involved in financial things, I have undertaken actuarial calculations. In law, does that make me an actuary?

Simon di Rollo

I imagine that the idea is that someone is an actuary if they are a member of the Institute and Faculty of Actuaries. I do not know whether the Institute and Faculty of Actuaries is happy about all this or whether its members are keen to get involved and do what they are being asked to do in such a situation. I do not know whether that has been considered.

Stewart Stevenson

I am on the same page. I would not wish to be described as an actuary, but I wonder whether we are aware of any legal definition of an actuary and whether—this might not be a question for the panel—there are professional standards for actuaries that cover their independence as part of their professional duties.

Simon di Rollo

Actuaries have professional standards—there is a professional body. You would have to ask the representative body to deal with that question.

The Convener

What does the panel think the impact will be on lower-value cases once caps on the fee levels under the success fee agreement are introduced?

Kim Leslie

Are you suggesting that the power to cap in a written speculative fee agreement would have an impact on lower-value cases?

The Convener

Once the lower value and the cap have been agreed and the case appears to be low value and not worth the solicitor’s time, will that have an impact?

Kim Leslie

We are always keen for the judicial expenses to be increased so that what we are getting paid for the work that is done is met by those expenses.

In a damages-based agreement, there might be an interim payment before the claim has concluded. That may be before it has gone into court or after it has gone into court. If there is an interim payment, the lawyer would be entitled to deduct their success fee at that point. They might choose not to, if there is a reason why they are getting an interim payment, because the client has to pay for something, but in effect, the lawyer would be entitled to do that at that point.

Simon di Rollo

I am happy with the explanation, but I will add something just so that the committee understands the position of counsel. If counsel are acting on a speculative basis—a no-win, no-fee basis—they will be paid at the end of the case. It is very unusual to be paid at any point before that. Counsel will almost certainly not be acting on the basis of a damages-based agreement; they will continue to be instructed as they are at present, which is on a no-win, no-fee judicial recovery basis. There are reasons for that. The solicitor enters into a damages-based agreement with the client, but counsel is not involved in that. They are brought in at a later stage, in essence as an independent consultant, and they are paid through judicial recovery from the person who is paying the damages.

Liam Kerr

Kim Leslie talked about how the lawyer can “work the cases profitably”. Are you aware of any evidence that suggests that extra rewards to solicitors’ firms are actually required?

Secondly, I ask the whole panel whether the bill will actually solve the problem. Is there not a risk that solicitors will still prefer to choose the easy, more straightforward claims, or the ones that are most likely to be settled, such as road traffic accidents, whereas the more difficult cases—the longer and more evidentially challenging ones such as stress claims—that are lower value and higher risk, will remain unattractive, so we will not have solved the problem of how those can be taken on?

Kim Leslie

That problem will be solved to an extent by the introduction of qualified one-way costs shifting. Undoubtedly, there are cases where the fault element is straightforward—or it should be, although no case is guaranteed to win—but there are some cases where the risks are higher. You are absolutely correct that some types of work are more complex and time consuming and require greater investigation and financial outlay in the investigation and preparation of the case.

The system has to tie together, and Sheriff Principal Taylor looked at the system in an overarching way. In effect, he acknowledged that there is an issue with access to justice in certain types of case, which may not be attractive. That is simply because, when a lawyer is balancing up a case and analysing it, if they think that they will have to invest too much money and time in investigating it, and if the cost ramifications will be significant if they lose, it becomes less attractive. The introduction of QOCS will enable certain work types to become viable that may not be viable at present, given the risks involved of losing the case and paying adverse costs to your opponent.

Simon di Rollo

The short answer is that the bill will improve the position but not resolve it altogether, because there will still be difficult cases that are unattractive to take on.

Those cases will probably continue—the bill will not completely resolve that problem. Therefore, there is still a need for legal aid, which is an important resource in allowing those cases to be brought. The very difficult cases for which legal aid is not available will still be difficult to bring, but the solution to that problem will not be easily found.

10:45

Rona Mackay (Strathkelvin and Bearsden) (SNP)

Good morning, panel. I was going to ask about compensation for future loss, but I feel that the subject has been covered extensively. Instead, I will ask for clarification on a point about periodical payments. If I understood you correctly, Mr di Rollo, you said that, at the moment, a solicitor can decide on periodical payments. Should the court be able to impose periodical payments?

Simon di Rollo

Frankly, with any future loss, there is always going to be a range. The pursuer is going to have a value for it and the opponent is going to have a value for it, and those are not necessarily going to be the same—it is not a fixed amount; there is always going to be a range. The reality is that the margin between those two figures is unlikely to be as little as 2.5 per cent.

The Convener

Mr Stevenson, do you have a view on why that should be included?

Andrew Stevenson

My organisation, the Glasgow Bar Association, does not generally get involved, in that its members are not generally involved in high-value reparation actions such as those that you have been referring to. I do not really have anything to add to what the others have said, because they, in my submission, are far more qualified than I am to give your committee useful information on these matters.

Mairi Gougeon (Angus North and Mearns) (SNP)

I would like to discuss qualified one-way costs shifting, which you mentioned earlier. The bill would apply it to personal injury cases based on what Sheriff Principal Taylor called the David versus Goliath relationship between pursuers and defenders. That David and Goliath scenario might describe the majority of cases, but what about other cases and other situations? That is my concern. Do you have any examples that highlight those other situations that people might be caught up in?

When I raised that with the witnesses who gave evidence last week, I was told by the witness from Thompsons Solicitors:

“The scenario in which any of us, or any of our colleagues in the profession, would bring a personal injury claim against an ordinary person is virtually impossible.”—[Official Report, Justice Committee, 19 September 2017; c 19.]

He said that that would not really happen. I will be interested to hear your take on that—and do you have any examples to add?

Simon di Rollo

There are a number of examples of individuals being sued in the non-accidental injury area, for assault, abuse or things of that kind. The person might not be insured, they are not a public authority and they might not have resources. Therefore, they might be in a David against David scenario, rather than David against Goliath. We have suggested that QOCS could be available only to somebody who is insured, a public authority, somebody who has the backing of the Motor Insurers Bureau or somebody whose means and resources are such to enable them to make payment of expenses.

The formulation that I have just given you is the same type of formulation that is found in the interim damages rule of court, whereby you cannot get interim damages against someone who is not a public authority or insured or whose means and resources are such to enable them to make a payment. The idea would be to protect individuals against financial ruin as a reason for paying a small amount to get rid of a claim.

Kim Leslie

One thing to say at this stage is that, although there may be an increase in personal injury claims, the bill deals with civil litigation. QOCS will deal with cases that are in court, which have remained relatively steady over the past four or five years. It is about legitimate claims, is it not? We need to ensure that the cases where people are accessing justice are legitimate claims where the public are choosing to exercise their legitimate rights and seek a remedy.

Is this the point where you want to discuss fraud and the exceptions to QOCS?

Liam McArthur

I think that we will come on to that in a second.

The Convener

We will.

Kim Leslie

I will pause there.

Maurice Corry (West Scotland) (Con)

Do the panel members consider that the tests in the bill for losing QOCS protection will implement what Sheriff Principal Taylor recommended?

Simon di Rollo

I think that the bill will not quite do that in relation to the reasonableness test—the wording does not seem to reflect what was suggested. It was suggested to the committee by another witness earlier in the month that the wording be the same as Wednesbury unreasonableness, but I am not sure that I agree with that suggestion.

The Faculty of Advocates has suggested that in terms of reasonableness, the wording should be,

“if in the opinion of the court that person’s behaviour is so manifestly unreasonable that it would be just and equitable to make an award of expenses against him.”

That is stronger wording than is in the bill. I think that that is required in order to make it clear that it is only where one has behaved manifestly unreasonably that one should lose the benefit of QOCS.

There is no issue in relation to abuse of process, but there is a potential issue about fraudulent representation because of the wording. As the committee will see from our submission, there is concern that it will be a little bit too easy to meet the test. Material fraud or something that goes to the root of the claim should result in a person losing the benefit of QOCS.

Abuse of process is the essence of the matter. If you have abused the process, you should lose the benefit of QOCS. Fraud and unreasonableness are just examples of abuse of process.

Andrew Stevenson

Are you asking about exceptions to the application of QOCS?

Maurice Corry

Yes.

Andrew Stevenson

It seems to me that section 8(4)(b) would really take in 8(4)(a) and (c), although I think that paragraph (b) is a bit nebulous.

The test that applies in relation to legal aid is quite interesting because frequently, where a party is in receipt of legal aid, a motion will be made for modification of his or her expenses if he or she loses. The test is that the court will not make someone in that situation liable for an amount that exceeds an amount that is reasonable, having regard to all the circumstances, including the means of all the parties and their conduct of the proceedings. That may sound a bit bland, but the courts generally know what that means and, in my experience, it works in a fair way. If QOCS is to be introduced, the exception should probably be worded in a way that is similar to the test that applies in relation to legal aid because everyone understands what that means and it works reasonably well.

Kim Leslie

This starts with the principle that introduction of QOCS should give certainty about what our exposure will be. We certainly do not want a provision that says, “You will be protected, unless—”, because that could end up making legitimate pursuers anxious. Given that litigation is perceived as being a costly business, they want total reassurance that they are protected.

There is absolutely no doubt that the principle is that QOCS should apply in the majority of cases, but exceptions to it should be of a high standard. In other words, one should lose QOCS only if conduct has been such that it would be unjust and inequitable for QOCS to apply. You do not want in effect to push people back into having to get insurance because of the exceptions.

The Law Society of Scotland is also concerned about the reference in section 8(4)(a) to making “a fraudulent representation”. Again, we are trying at all costs to avoid satellite litigation so, as a result, we talk in our submission about “materiality” and suggest that the bill refer to a person making a material “fraudulent representation” that is designed to materially increase the value of the claim. We want the provision to get to the root of the litigation instead of its dealing with some ancillary claim about, say, an individual being off for three weeks instead of two and the paperwork not showing that.

With regard to abuse of process, I just want to pause and point out that Lord Gill said in a case in 2004 that

“There are many diverse ways in which a litigant can abuse the process of the court; for example, by pursuing a claim or presenting a defence in bad faith and with no genuine belief in its merits ... or by fraudulent means ... or for an improper ulterior motive, such as that of publicly denouncing the other party.”

Yes.

Recommendation 75 in Taylor’s report suggested that the Law Society should make it a ground of professional misconduct for a solicitor to accept a referral from a claims management company that makes cold calls. My understanding is that just north of 40 per cent of cold calls are about accident claims. Will the Law Society be looking to implement that recommendation?

Kim Leslie

I would take some advice on that. I cannot answer today.

Mary Fee (West Scotland) (Lab)

Good morning, panel. I will move on to third-party litigation funding. The bill would make it possible for third-party funders to be found liable for legal expenses. In the evidence that we have received, the Law Society’s submission referred to “unintended consequences”, and Mr di Rollo’s submission suggested that certain sections of the bill should be reworded. There are concerns that trade unions, insurers and solicitors might be caught. The Scottish Government has given an assurance that those organisations will be exempt and that they are not where the bill is aimed. Could you expand on your concerns and tell us how you think those concerns should be dealt with?

Simon di Rollo

It is really a drafting problem. The concern is that the bill, as it is currently framed, would catch people that it is not intended to catch. As I understand it, the idea behind the provision is more to deal with people in a commercial context, who are using the funding of litigation as an investment vehicle, and to make them liable for expenses in such situations. The concern is that, as it is framed, the bill is wide enough to catch even solicitors firms that are offering that service—not just trade unions and the like. I understood from reading Mr Goodall’s evidence that there is an understanding that the provision needs to be looked at again and redrafted in order to make it clear that that will not happen.

Mary Fee

Would you like the bill to state explicitly who will be caught by that provision?

Simon di Rollo

That is difficult; I think that that might be the case. It should be clear and explicit, but how that is achieved is a matter for the draftsman.

Mary Fee

Okay. What is Ms Leslie’s view?

Kim Leslie

There is an exception for family proceedings. Who could be caught? Imagine a divorce proceeding in which a father is providing funding to his daughter who is going through a divorce. It can be argued that they would be caught by the provision.

Also, solicitors that are offering DBAs would be caught if they were to pay for an outlay. That would create a bizarre situation; the solicitors might be better simply not to prepare the case, because if they were to pay for an outlay they would effectively be putting themselves forward as third-party funders. It is clearly a drafting issue and it needs to be looked at again.

Ben Macpherson (Edinburgh Northern and Leith) (SNP)

For clarity and transparency, I point out that I am no longer a non-practising member of the Law Society of Scotland, but I am still on the roll of Scottish solicitors.

Paragraph 32 of the Law Society’s submission suggests that after-the-event insurers be excluded from the provisions on third-party funding. I ask Kim Leslie to specify why the society thinks that that is important.

Kim Leslie

It is, in effect, because of the cost. If you allow solicitors to offer DBAs, they have to be meaningful. The cost involved will still be prohibitively expensive if the after-the-event insurers are caught by the third-party funding arrangements.

John Finnie

The bill will empower the Court of Session to introduce rules on group proceedings. I ask the witnesses to outline their position on those provisions.

Kim Leslie

The Law Society was originally a bit more ambitious but has, on reflection, agreed that because group proceedings are novel—we have not had them before—the simplest route is perhaps not the wrong choice.

In our response to the bill, we distinguish between liability and causation. The bill does not allow jury trials for group proceedings. However, once all common issues of liability and causation have been dealt with, there may be pursuers whose claims may be better dealt with or could be dealt with by juries, so we did not understand why that restriction encapsulated liability, causation and quantification of damages. We wanted to bring that to the committee’s attention. Of course, if a pursuer makes an application for their case to be heard by jury, the defender can always make the argument that the case is too complex and not suitable. Therefore, there is a hurdle to get over at that point, anyway.

Simon di Rollo

The Convener

I thank the witnesses for attending this comprehensive evidence session.

11:34 Meeting suspended.

11:42 On resuming—

The Convener

I welcome our second panel of witnesses on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. Calum McPhail is from the Association of British Insurers, Luke Petherbridge is a senior public affairs manager at the Association of British Travel Agents, Andrew Lothian is from the Forum of Insurance Lawyers and a partner at DWF LLP, and David Holmes is the head of legal services, Scotland and corporate, at the Medical and Dental Defence Union of Scotland. I thank you all for providing written submissions. The committee finds that hugely helpful.

I will ask the first question. Does the panel support the introduction of damages-based agreements? Who would like to start?

Andrew Lothian (Forum of Insurance Lawyers)

It was helpful of you to set that out.

Calum McPhail

I have just had a bit of clarification. I think that the point that was made in the report that you referred to was about conditional fee arrangements. We would be happy to write to you with the details of that.

The Convener

That would be very helpful.

Rona Mackay

Would the panel like the bill to provide greater protection for compensation for future loss? As you know, we covered that issue with the first panel.

Andrew Lothian

Ben Macpherson

This is another question for Andrew Lothian and FOIL. In your written evidence, you make two strong statements about the issue. At paragraph 19, you state:

“To safeguard pursuers we strongly support an overall cap on the success fee.”

You add, at paragraph 21, that you believe that a

“complex mechanism is unnecessary, and can be avoided entirely by ring-fencing future losses and making them exempt from the DBA/SFA.”

For clarity, will you put that in the context of your statements about the threshold and your answer to Liam McArthur?

Andrew Lothian

Yes. In a case in which an award is made by a judge or a jury, it is possible to identify what the future losses will be and to ring fence them, because they are known—they are identified. However, that will be harder in a case that is settled out of court, because in current circumstances it will be settled for a lump sum—an amount—and the distinction between future and past losses will not be described within that amount. That is why we are suggesting, as an alternative, that a threshold should operate as a means of protecting the likely future losses. There are other potential mechanisms—a threshold is only one—but we are trying to avoid the sort of complex mechanism that the bill envisages to deal with the conflict of interest that the bill creates. That point was made in the earlier evidence session. That complexity can be avoided by introducing some sort of cap or threshold in cases that are settled out of court and ring fencing future damages in cases in which the court makes the award.

Ben Macpherson

Thank you for clarifying that point about the threshold and cap. That is helpful.

Liam Kerr

This point is of concern to me and I raised it with a previous panel. In the panel’s view, is there a risk that there will be an inflation of the awards given by the court in order to ensure that future losses are covered? One of you—Mr Holmes, I think—made the point that a pursuer should get the full amount. Will the court decide, in order to ensure that the pursuer gets the full amount, to add the legal fees on, whether explicitly or not, leading to an inflation of the awards? I ask you, with your insurer’s hats on, what impact that would have on your business models and the premium for the consumer at the other end.

Calum McPhail

Potentially, that raises a driver or an expectation that the pursuer will be aware that an element of their damages is not going to be paid to them and that, therefore, they might seek a higher amount than they would ordinarily. That may have the result of driving cases into litigation that would otherwise have been settled out of court.

I understand the point that you are making about how the courts might view the matter. I am not qualified to comment on how any individual court would view the matter, but I certainly understand your concern that that awareness might colour how they approach awards. If we see that in court awards, we will also see an increased expectation in pre-litigation awards. We will see claims inflation, which will increase the cost of claims and will ultimately have an impact on our customers’ claims experience. That will obviously colour how their renewals are viewed. For some of our customers, we handle claims with their money, so there will be a direct impact on their bottom line.

David Holmes

I will answer just the second leg of Liam Kerr’s question, about the impact on premiums. The MDDUS, which I am representing today, is a rather different organisation because it is not an insurer. It is a not-for-profit organisation that has no shareholders but has 14,000 members from the medical and dental professions in Scotland. If there is claims inflation, either in the level of award or the number of cases coming forward, that will directly correlate with what general practitioners and dentists have to pay for their annual indemnity subscription. The MDDUS is slightly different, because there is no shareholder body as there is with an insurer. It has a more direct correlation with the membership, so claims inflation would be a significant concern for us.

Luke Petherbridge

In the travel industry, the vast majority of claims do not fall back on an insurer but are within the deductible costs of the tour operator. I echo the comments that have just been made. We have some concerns about claims inflation and the knock-on impacts of that for the premiums that our membership will pay.

Mairi Gougeon

I would like to discuss qualified one-way costs shifting. In its submission, FOIL said that

“if QOCS is implemented without appropriate safeguards, there will be significant adverse consequences including increase in nuisance calls, increase in fraudulent claims and higher insurance premiums”.

The submission then goes into further detail about that. Will you elaborate? What additional safeguards should there be if the bill passes?

12:00

Andrew Lothian

We think that it is important to have safeguards to balance QOCS. Some of the safeguards were in Sheriff Principal Taylor’s review and are not in the bill, but the world has moved on since he finished his report. In the Taylor review, as has been discussed previously, there was provision that claims management companies should be regulated. I imagine that we might come back to that. That is one thing.

The second part of the Taylor review that is not in the bill was discussed earlier, where a pursuer does not beat a tender—a sealed offer. For example, if the offer is £10,000, the pursuer could reject it and go to court but only get £8,000; they would still have full QOCS protection, despite the defender offering more than the case is worth. That is not in the bill. We might come back to that, too.

Sheriff Principal Taylor also recommended that it should be a criminal offence to pay a referral fee to someone who is not a regulated person, or for an unregulated person to receive a referral fee. In other words, if you are paying or receiving a referral fee, you should be a regulated person; otherwise, it is a criminal offence. That is not in the bill either, as I read it. Those are important safeguards that were in the Taylor review but are not in the bill.

Over and above that, because the world has moved on, there are other safeguards that we think would assist. We might talk in a minute about the fact that there are now more injury claims in Scotland than there have ever been. There are procedural steps that can help, for example the courts in England and Wales have put in place steps that might assist. I can write to the committee about that, if that would help, so that I do not get too far into the detail now. There is no anticipation of such steps happening here—at least, they are not in the bill and we have no indication that they will be coming through the court system either.

I will pause there, because the next thing that I would like to say is about the exceptions to QOCS, which might take me into someone else’s area.

Mairi Gougeon

Thank you. Tenders and claims management companies will be covered by other members. Does anyone have any further comments?

Calum McPhail

We have a real concern that we will see a further influx of claims management companies into Scotland. It has already been identified that that is happening. We are very conscious of what is happening in England and Wales, and the work that has been done to try to deal with that. We are also very conscious that there is regulation of claims management companies in England and Wales for the protection of the man in the street—the consumer—and that we do not have that in place in Scotland at the moment. Whether to transfer that to the Financial Conduct Authority is currently under review in England and Wales.

Changes that have happened in England and Wales around the compensation culture, as it might be described, have created more pressure on less scrupulous bodies. Our concern is that with the advent of QOCS and the removal of the risk, the development of a compensation culture will accelerate in Scotland.

That is right. There are dangers with comparing ourselves to England; I do not know why we keep doing it. The reality is that this is a form of arbitrage by claims management companies. Injured people are not choosing which place to litigate in; business models determine where they will bring their activities and generate claims.

Mr McArthur made a point about travel claims increasing; I will let Mr Petherbridge speak about that. That is right, because there was a decline somewhere else. In England, that decline has been in road traffic claims. That happened because QOCS came in but claimant costs were capped, so the margin reduced in that area of work. The risk reduced, but the margin reduced, too, and the business model moved on to travel claims. For us in Scotland, the risk is that, because we are bringing in QOCS but we are not banning referral fees or immediately regulating claims management companies and there is no discussion about reducing costs, we will find ourselves in the same position.

Liam McArthur

I take your point about the regulation of claims management companies, but in its evidence a couple of weeks ago, the bill team gave us a pretty heavy hint that such regulation is coming down the track. Are you seriously saying that, with regard to where you would seek to operate and how you would build your business model in the future, you would ignore the fact that the regulation of claims management companies is coming down the track?

Andrew Lothian

We are looking at a delay of several years.

Liam McArthur

As we are with the implementation of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. In a sense, the two things are progressing in parallel. When the provisions on claims management companies are introduced, their implementation will march ahead at the same pace as the bill’s implementation.

Andrew Lothian

If that is the case, we would entirely support the regulation of claims management companies and the bill becoming effective on the same date. That would be a major step forward, but there is a risk that that will not happen and that the bill will be implemented before CMC regulation. From the CMCs’ point of view, we are talking about the flick of a switch. They are technology enabled and, in many cases, they are highly efficient—they are largely call centres. It would be very easy for them to add in some postcodes to the areas that they phone.

Luke Petherbridge

David Holmes

Will there be questions about tenders and exceptions more generally?

Maurice Corry

Yes.

A number of respondents to our call for evidence suggested that the fraud test be replaced with the English test of “fundamental dishonesty”, but Sheriff Principal Taylor thought that that would not be well understood in Scotland. What are your views on that?

Andrew Lothian

It is not a major issue. One of the potential benefits is that there is already case law on the definition of “fundamental dishonesty” in England and Wales, and there might be less risk of satellite litigation if we adopt a test that has already been considered by the courts in the context of personal injury claims.

Calum McPhail

A witness on the previous panel suggested that a material increase in the value of a claim could be used to try to identify fraudulent behaviour, and I would certainly encourage that approach. I can think of one recent case in court in which the pursuer claimed for around £180,000 in damages; although the judge had concerns about the pursuer’s credibility in various areas of his evidence, he still made an award of £7,000. If such increases were regarded as material, I would certainly support the suggested approach, because the legal costs of dealing with that claim were astronomical. This is really about reaching a clear and acceptable definition.

David Holmes

Practical issues arise at a public policy level when we look for a deterrent against, for instance, the embellishment of claims, which could have a significant effect on outcomes. We have certainly seen that at MDDUS; we have had concerns and, ultimately, much lower settlements have been achieved when further evidence has been forthcoming.

Maurice Corry

Andrew Lothian

Yes, you would have to find a solicitor.

Liam Kerr

On another point that was raised earlier, is it your view that the claims management companies will wither on the vine when the bill is passed?

Andrew Lothian

Our strong view is that until such companies are regulated, the opposite will be the case. There is little doubt about that. They might well wither on the vine once they are regulated, but who knows? The bill will put solicitors on a level playing field with claims management companies only after such companies are regulated. Until that time, there is no level playing field and therefore no reason why such companies should wither on the vine.

Calum McPhail

Making a profit is the incentive for claims management companies, and there is more money to be made in the claims process in Scotland than there is in England and Wales. Let me take as an example a road traffic claim settlement in which damages of £10,000 are awarded in both jurisdictions; in England, the recoverable costs for a solicitor, excluding any disbursements, would be £500, whereas in Scotland the figure would be over £2,000.

Sheriff Principal Taylor had no objection to referral fees, but their being part of our process and system and the potential acceptance that they are part of what we will allow is a fundamental driver for claims management businesses to seek to operate here and to continue to do so. There is money to be made out of the claims process.

Liam Kerr

Finally, we have talked about premiums and the cost to small businesses increasing. I note in the evidence the reference to the holiday industry and the point that, because many travel agents are small to medium-sized enterprises and because any claims might be below their insurance excess, they do not have insurance backing. If premiums go up, the people who will feel the most impact will be the less well-off purchasing insurance products to cover themselves or their business, as well as those in rural areas seeking motor insurance. Does the panel think that an unintended consequence of the legislation might be a long-term reduction in access to justice because, although it will make the court system more accessible, it will also make damages less recoverable? Does that make sense?

Andrew Lothian

The question does make sense. What you suggest is a possibility. As a solicitor, rather than an insurer, I cannot speak about the effect on insurance premiums, but I have had clients who had to defend claims that fell within their excess and they did not have the backing of insurance. That sometimes happens. There are also the other risks that you have suggested.

Calum McPhail

It is probably a risk for many local authorities with regard to the level of deductible they hold. It is a risk to public funds.

Luke Petherbridge

Just to clarify, the majority of claims on larger tour operators fall within their deductibles and are therefore not insurer backed. We have begun to see some SME members who had previously relied on insurance no longer getting their excess at a level where they can pass things off to the insurers. It is a huge concern for the travel industry, particularly because, next year, the package travel directive is being extended, and that will extend obligations with regard to travel sickness claims to many more small and medium-sized travel companies that currently do not have them.

David Holmes

There could also, as you have mentioned, be a wider societal impact. I know that the convener has written to the national health service central legal office looking for more information on what effect it expects the loss of the deterrent to have on claims frequency with regard to the NHS in Scotland in general. It will also have an effect on my organisation; if the deterrent is lost and more claims are made, subscriptions are likely to rise for general practitioners and dentists. There will be wide impacts across the NHS generally, and perhaps a point for discussion is whether QOCS should apply to all sectors or just in relation to insurers or public bodies.

Liam Kerr

That is interesting. Thank you.

Ben Macpherson

On claims management companies, paragraph 39 of the FOIL submission suggests that regulation could be provided most expediently through the UK Financial Guidance and Claims Bill. Can you expand on that?

12:30

Andrew Lothian

I understand that the bill is going through Westminster just now. There was a debate in the House of Lords about whether an amendment including Scotland in the regulation of claims management companies should be allowed, but I think that, ultimately, the amendment was dropped. However, that vehicle is still available. The bill has not yet been passed, and it would be possible for the Scottish Government, if it were so minded, to make representations to the UK Government that Scotland should be included, at least for the time being.

Among the Westminster bill’s other purposes is the transfer of the regulation of claims management companies in England and Wales to the FCA, which is a UK-wide body. That, too, would be possible in Scotland. As other parts of the bill relating to financial assistance, debt management and so on apply to Scotland, I think that that would be one option. If it is going to take some time to set up a claims management regulator for Scotland, that could be an option for filling the gap.

Ben Macpherson

That is very interesting. Thank you.

Liam McArthur

On Ben Macpherson’s line of questioning, when I raised the same matter with the bill team, they revealed that they anticipated moves to be made in relation to regulation sooner rather than later. I hope that the minister will read this evidence and come up with a response to that specific suggestion, as it does not seem unreasonable.

Going back to the responses to Liam Kerr’s line of questioning, I am slightly concerned at the suggestion that claims management companies might wither on the vine. In other parts of the UK where regulation has been introduced, we have seen no such withering; indeed, as has been accepted, there are highly reputable claims management companies operating. Despite the margins that Mr McPhail referred to north and south of the border, we in Scotland are still dealing with a market that is very much smaller than the market in the rest of the UK, and I have to wonder about the extent to which Scotland will somehow be seen as a great nirvana in which the unregulated can romp to their hearts’ content, making massive profits, while the bulk of the work will remain, albeit regulated, in other parts of the UK. We are slightly in danger of inflating the risk—to make an entirely valid point, I will admit—as the impacts of what we are talking about are probably going to be more marginal over the next few years.

Andrew Lothian

Calum McPhail

As member companies will look at that on an individual basis, it is difficult to give a generalised view.

The Convener

Okay, but you could answer the first question. Indeed, if the other panel members can come back with a fuller explanation or any further thoughts on whether that is likely to be the case, it will be much appreciated.

In the meantime, that concludes our questioning, and I thank all our witnesses for appearing today. Our next meeting will be on 3 October, when we will begin to take evidence on the Offensive Behaviour at Football and Threatening Communications (Repeal) (Scotland) Bill.

Meeting closed at 12:40.

26 September 2017

Fourth meeting transcript

The Convener

Agenda item 2 is our evidence-taking session on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I refer members to paper 1, which is a note by the clerk, and to paper 2, which is a Scottish Parliament information centre paper.

Today, the committee will take evidence on two bills, so time is tight. I welcome our witnesses for the first evidence session: Sheriff Principal James Taylor, author of the independent report that preceded the bill; and Elaine Samuel, who is an honorary fellow at the University of Edinburgh and who supported Sheriff Principal Taylor’s review group. Thank you both very much for attending today.

We will move straight to questions, starting with Liam Kerr.

Liam Kerr (North East Scotland) (Con)

I declare an interest up front: I am a practising solicitor and a member of the Law Society in England and Wales and the Law Society of Scotland.

The Scottish Government has stated that the bill’s primary objective is to address access to justice. How far do the recommendations in your report go towards tackling that issue?

Sheriff Principal James Taylor

There are two main elements for consideration today that, in my submission, will improve access to justice. The first is the facility to make damages-based agreements available to solicitors rather than continuing in the present fashion, which is for solicitors, wearing a second hat, to form their own claims management company and offer damages-based agreements. The other element relates to qualified one-way costs shifting.

As far as damages-based agreements are concerned, I would be surprised if there was a material increase in the number of cases being brought to the court or of complaints being made to the compensation recovery unit. The reason I say that is because we do not need to predict what damages-based agreements will do to the legal landscape in Scotland—they are here, alive and kicking.

In order to make sure that I had not fallen too far behind current affairs in my four and a half years of fallow, I made inquiry of one firm of solicitors that has its own affiliated claims management company to ascertain the volume of such work that it is doing. In the past three years it has signed up 17,600 new damages-based agreements—the five-year figure is 23,800. I have seen the transcripts of the committee’s earlier evidence sessions covering the increase in registrations with the CRU and so on, and that will almost certainly be the explanation for that. DBAs are out there and the public are enjoying the benefit of them.

I should say that, in that same three-year period, 14,000 cases were settled. That is because damages-based agreements do much more than give access to the courts—they give access to negotiation.

Liam Kerr

The Justice Committee heard previously that a great deal of your report was based on Department for Work and Pensions data, which showed that between 2008 and 2011 the number of claims registered in Scotland rose by 7 per cent, compared with the 23 per cent by which it rose in England and Wales. The report concludes from that data that there is an issue with access to justice.

The same data shows that, between 2011 and 2016, in Scotland the number of compensation claims increased by just over 16 per cent, whereas in England and Wales the figure appears to have decreased by 4.5 per cent. Does that change your view of the recommendations that you made in 2013? Given that data, are your conclusions and recommendations on the lack of access to justice still valid?

Sheriff Principal Taylor

That data does not change my conclusions at all. I was aware of the figures. Earlier, I sought to explain—perhaps rather inelegantly—that there has been an increase in the number of claims, but that that is almost certainly because, in the past five years, damages-based agreements have become a common way of funding a party who is seeking to exercise their legal rights.

You mentioned the figure of 16 per cent. I cannot say whether this is the case, because I have not done an analysis, but it would not surprise me at all if that increase occurred as a result of the popularity of damages-based agreements, which is evidenced by the figures that I gave from one firm: 17,600 claims in three years is a lot of damages-based agreements to enter into.

Maurice Corry (West Scotland) (Con)

Good morning, sheriff principal. What advantages do damages-based agreements have that justify overturning the traditional prohibition on their use by lawyers?

Sheriff Principal Taylor

If damages-based agreements are as popular as I have just indicated that they are, it would be legitimate to ask why we need all this. We need all this because, at present, they are completely unregulated. They are being offered by claims management companies, which, as we know, are currently unregulated. My report recommends that damages-based agreements should be permitted to be entered into only by regulated bodies, and I would like the bill to contain such a provision.

The lack of regulation has two major impacts. First, the percentage that the solicitor or claims management company—they are one and the same—can take is unlimited. I understand that the present rate can be anywhere between 15 and 20 per cent of all damages, including past and future loss. I know of one firm that uses a taper, which is what I recommend should be deployed, whereby the rate falls down to 2.5 per cent at the upper levels.

The other mischief that requires to be addressed—I am pleased to say that the bill addresses it—is that, at present, there is no clarity on what “no win, no fee” actually means. Different offerers of DBAs use different definitions of what “no win, no fee” means. For example, who will pay for the medical reports? Who will pay for the court dues? Who will pay for the expert who will inevitably be required? I wanted there to be a level playing field, whereby the solicitor would have to pick up all those costs, save only for any after-the-event insurance premium. That would mean that a member of the public could go to two or three providers and get directly comparable quotes. The last thing that I would like to see is a Gocompare for claims management companies.

The Convener

Rona Mackay’s question will probe damages-based agreements a bit further.

Rona Mackay (Strathkelvin and Bearsden) (SNP)

Good morning. Sheriff Taylor, you briefly mentioned future loss. Can you explain the reasoning behind your recommendation not to protect damages for future loss from inclusion in the success fee calculation in most cases? Will that lack of protection for compensation for future loss leave pursuers worse off if they pursue an action under a damages-based agreement?

10:15

Sheriff Principal Taylor

At present, the success fee that is deducted from future loss is between 15 and 25 per cent; indeed, I heard yesterday that one firm is charging 33 and a third per cent.

The public, notwithstanding what might appear—to me, at least—to be rather generous terms for solicitors, are still entering into those agreements. They do so because the agreements are simple, they understand them and they know precisely what the outcome is going to be.

I included future loss in the calculation of the success fee because to do otherwise provides an in-built incentive to solicitors to delay proceedings. The longer someone waits to get their decision, the greater their past loss will be and the smaller the future loss will be. We do not need incentives for delay.

Further, it is usually the tricky cases that proceed to court. Very often, future loss is the sticking point that prevents a settlement from occurring. It is at that point that the solicitor and the lawyer—counsel are usually involved if it is in court at that level—start to earn their corn. I think that they are entitled to be rewarded for that work.

The vast majority of claims settle. They usually settle on a lump sum, because a broad-brush approach is taken to the negotiation. There is no definition of past loss and future loss. If a case settles at the door of the court, you can bet your bottom dollar that there is no consideration of past and future loss—there is just the lump sum that the insurer is prepared to pay, and the pursuer is prepared to accept, in order to get rid of the claim.

When I was going round during the consultation period, one firm of solicitors told me of the problem that arises when there are multiple pursuers. For example, a family is injured in a road accident and the insurer of the driver of the car at fault simply says, “Here is a large sum—divvy it up among yourselves”. As the solicitors told me, it would be hard enough to divvy up a sum among the individual members of a family, but it would be even harder if they had to start working out not just what each member was entitled to but what their future and past losses were. That is looking at it from the solicitor’s point of view.

Few if any judges would claim that their awards for future loss are accurate to 2.5 per cent. They are not. Furthermore, few care plans are implemented to the letter, and it is the care plan upon which the future loss is predicated. The care plan ends up not being followed for a whole raft of reasons. Those might be social reasons—the family circumstances change or they have to move house; sometimes, there are medical improvements that make life much simpler for the particular handicap for which an award is being made. The 2.5 per cent is not going to make a material difference to the manner in which a pursuer is cared for post-accident, and one ends up with a balance. It is a loss of 2.5 per cent, but it provides access to justice—97.5 per cent of something is better than 100 per cent of nothing.

Going back to Rona Mackay’s question about future loss, it has been suggested to the committee that not protecting future loss could lead to overall award inflation as courts and negotiators will ensure that the pursuer gets the full amount to which they have been judged to be entitled. How do you respond to that?

Sheriff Principal Taylor

I think that there is zero chance of there being damages inflation as a consequence of the proposals. The reason why I say that is that the judiciary does not go about with its head in the sand. I am pleased to say that people saying, “Who are the Beatles?” is a thing of the past. The judiciary knows that the litigations that come before it are being funded by damages-based agreements. In the case of Powell back in 2011, it said that claims management companies perform a useful function and damages-based agreements are a good thing. It knows that a percentage of the damages are presently going to solicitors, and we have not had any inflation of claims to date. I do not think that damages-based agreements will result in a significant rise in claims. We have seen that rise because DBAs have been popular over the past half dozen years or so.

whereas my preference would be for the wording to be:

“has acted fraudulently in connection with the proceedings”.

“Fraudulent representation” involves word of mouth; fraud can take place through actions.

The suggestion that was made to you that, if one stayed with “fraudulent representation” one should at least define it, is, frankly, nonsense. The law of Scotland has known what fraud is for many years; it was decided back in the 19th century that

“fraud is a machination or contrivance to deceive by words or acts”—

that comes from Bell’s Principles.

The suggestion that one could enumerate the circumstances in which fraud would be said to have taken place is a non-starter. I had to look out some really old legal textbooks, but the 11th edition of Gloag and Henderson said:

“it is impossible to enumerate the various words or acts which the law will regard as fraudulent”.

I have dealt there with not just the wording, but the nonsense that you have heard from others.

Therefore, I am not in line with the pursuers’ lobby for section 8(4)(a). However, I am in line with them in their criticism of 8(4)(b), because I do not think that that bar is high enough. Wednesbury unreasonableness was what I recommended, and I think that the formula that Mr di Rollo suggested to you came very close to being what I would choose to have there. I tweaked his formula ever so slightly. I suggest that, as an alternative, it should read, “if, in the opinion of the court, the pursuer’s decision to raise proceedings, or their subsequent conduct, is so manifestly unreasonable that it would be just and equitable to make an award of expenses against the pursuer”. Therefore, I would raise the bar.

I think that section 8(4)(c), which is on dealing with an abuse of process, is okay.

My report recommended another set of circumstances in which qualified one-way costs shifting should not apply, which is in the event that a case is summarily dismissed or, to use an expression from England, “struck out”. Much has been said here—rightly—about the potential for frivolous claims being brought.

In my opinion, there are two reasons why frivolous claims will not be brought. One is that you would need to persuade a solicitor to pick up the cost of his time, the fees and the outlays, with little prospect of recovery.

Secondly, if the action raised is of no merit, there is a facility in the court, which was introduced about five years ago following the civil courts review, whereby a defender can say to the court, “This action has no merit—strike it out.” In those circumstances, the benefit of qualified one-way costs shifting is lost, and should be lost. Therefore, I would add another element to section 8(4)—it could be section 8(4)(d).

Finally, in the session that the committee had with the insurance lobby, it was said by one of their number that even though the pursuer did not beat a tender, qualified one-way costs shifting continued to apply. Well, not in my world, it does not, nor in the report that I made. I accept entirely the bill team’s rationale that dealing with tenders and their nuances should be in secondary legislation, because we do not want to start fiddling with the common law in an act of Parliament. I am persuaded that qualified one-way costs shifting should not be available, and should be specified as not being available, in the event that the pursuer has failed to beat a tender.

Mairi Gougeon

You touched on a few of my other questions and, in particular, on the test in relation to unreasonable behaviour. What you said about spurious claims echoed the evidence that we heard from solicitors, who said that they would not take on a case if they thought that it would not get anywhere.

Sheriff Principal Taylor

I did a little exercise to see the sort of outlays that solicitors have to pay. At present, according to the Scottish Courts and Tribunals Service website, there has to be an outlay of £214 to raise an action. Every time that there is a motion, each party has to pay £54 just to enrol the motion. Further, they have to pay £77 per half hour for the proceedings. Under a damages-based agreement, those payments have to come out of the solicitor’s pocket. That is before we start looking at the costs of medical reports and experts’ reports, all of which will be in the hundreds, if not the thousands, of pounds. That is a pretty strong deterrent for frivolous claims, taken with the knowledge that the defender can come into court and move a summary dismissal or, in the vernacular, “strike out” the action.

Mairi Gougeon

Thank you; that was helpful. You touched on tenders. Should that process be more clearly defined in the bill?

10:45

Sheriff Principal Taylor

No, I do not think that what I propose in regard to tenders should be dealt with in the bill, because that is getting into more technical detail. I think that that should properly be in an act of sederunt, but one line could be added to the bill. Section 8(4) says that

“a person conducts civil proceedings in an appropriate manner unless the person—”

does various things. We might say that QOCS flies off in the event that “the person—fails to beat a pursuer’s tender”. I hesitate to draft on the hoof, but something like that.

Mairi Gougeon

Okay. Thank you very much.

The Convener

I will go back to the Wednesbury test. Would it be your position that, as it stands, the bill might catch a weak case, as opposed to the Wednesbury test that a decision is so unreasonable that no reasonable person could have reached it? Would the wording that you have suggested meet that test?

Sheriff Principal Taylor

Yes, I think so.

The Convener

Okay, thank you.

Liam McArthur (Orkney Islands) (LD)

Good morning. I will return to an issue that you raised in your initial response to Liam Kerr in relation to claims management companies. One of the red flags that has been raised south of the border about QOCS relates to the regulation of claims management companies. Such regulation will certainly not be in place at the outset in Scotland.

I will ask about the definition that you provided of “professional funder”, which seems to me to catch it quite nicely. The definition is:

That does not help us, particularly. Could you give me the number of the paragraph again?

11:00

The Convener

It is in paragraph 57 of chapter 11 of your review report.

Sheriff Principal Taylor

It would be a bit embarrassing if I had to go back on that now.

“A professional funder who finances part of a pursuer’s—”

The Convener

The definition starts:

“A funder, motivated by a desire to make a profit, who effectively purchases a stake in the outcome of a litigation”.

It is the second sentence in paragraph 57.

Sheriff Principal Taylor

I think that the definition is fine. It meets the point, does it not?

The Convener

Yes, I think so. I think that it is excellent.

Liam Kerr

I have a brief supplementary question. I would like to take you back to the start and to the basis of the whole process. In paragraph 43 of chapter 8 of the report, you talk about individuals being

“put off from pursuing legitimate claims for fear of an award of expenses against them.”

Do you have any idea how many such pursuers exist? Is there evidence that fear of an award against them is putting them off?

This question has just sprung to mind. If the claim is “legitimate”, to use the word in your report, why would an individual have an award for costs made against them? Should not the solicitor say, “You’re okay on this—go forward”?

Sheriff Principal Taylor

From my time in private practice, I can say that there is no doubt in my mind that the fear of an adverse award of costs inhibits people from exercising their legal rights.

I can also speak to that personally. I had a claim that was valued at £30,000 in which my prospects of success were probably about 80 per cent. I settled my action at £10,000—one third of what it was worth—and I did that entirely on the basis that I thought that I had before-the-event insurance, but did not, which was my fault. An award of expenses of well into six figures, which is what it would have taken to litigate the £30,000 claim, was not in my or my family’s interests, so that deterred me from litigating. That fear has certainly deterred a lot of my clients from litigating, so I have absolutely no doubt that it is a deterrent.

That happens when the solicitor realises that negotiation will not produce a result and they will therefore have to go to court. The clock only starts ticking for an adverse award of costs when you get into court.

In the circumstances that Liam Kerr has suggested, the solicitor would write to the alleged wrongdoer and then, I would hope, a negotiation would ensue. By that time, both sides will have a fairer idea of how the land lies; rarely is there a monopoly of right on one party. At the point at which they have to go into court because the negotiation has proved unfruitful, the solicitor has to tell the person that, if they lose, they run the risk of a severe adverse award of expenses. In many cases, that could bankrupt the individual.

The Convener

Two of your recommendations that are not in the bill are the additional fee—the extra amount of judicial expenses that a judge can award where the case has been particularly complex or time-consuming—and the suggestion that additional fees should continue to be decided at the end of the case, but limited to 100 per cent uplift of the judicial expense amount. Should those be in the bill or regulated in some other way?

Sheriff Principal Taylor

Those are probably best dealt with by secondary legislation.

The Convener

They should be built in to secondary legislation.

Sheriff Principal Taylor

Yes.

11:11 Meeting suspended.

11:16 On resuming—

31 October 2017

Fifth meeting transcript

The Convener

Item 4 is our fifth evidence session on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I refer members to paper 3, which is a note by the clerk, and paper 4, which is a private paper. I welcome Martin Haggarty, managing director of Accident Claims Scotland; Paul Brown, chief executive and principal solicitor of the Legal Services Agency; John Symon, director of Quantum Claims; Professor Alan Paterson of the school of law at the University of Strathclyde; and Thomas Docherty, the parliamentary affairs manager for Which? [Interruption.] I beg your pardon; I have misnamed the director of Quantum Claims, who is George Clark. It is nice to have you with us.

I thank Thomas Docherty in particular for providing a written submission. We will move straight to questions, starting with Fulton Mackay.

Fulton MacGregor (Coatbridge and Chryston) (SNP)

MacGregor.

The Convener

MacGregor. [Laughter.]

Fulton MacGregor

I can let you off for misnaming Mr Clark, but I have been on the committee for a while now, convener. I have also been called Fulton Mackay before.

I have a general question to kick us off. We obviously know that the objective of the bill is to increase access to justice. We have heard evidence from various people on that very issue, but what are the views of the panel? Will the bill increase access to justice? Is there an issue around access to justice in the first place?

Paul Brown (Legal Services Agency)

We vigorously support the introduction of class actions or group proceedings. Indeed, it is an idea that has been floating around for my entire career. I can claim to have been involved with two forms of group proceedings. One was the now defunct procedure under the Public Health (Scotland) Act 1897, which was a group procedure. The other was as one of hundreds of pursuers in a class action in New York. Both sets of proceedings were infinitely more straightforward and supportive than the equivalent individual actions.

In the case of the Public Health (Scotland) Act 1897, it was to do with abatement of a nuisance. There were 18 pursuers and only one writ, and the complexity and the costs to the defender were undoubtedly less than they would have been otherwise. The only complexity was the 18 legal aid applications and some people falling off legal aid, but that was my responsibility and not an access-to-justice issue as such. A remedy—the abatement of a nuisance—was obtained fairly speedily and I was impressed by that. That procedure has now been abolished, but the opportunity to take similar actions seems to me to be a good idea.

The New York action was a small claim that would have been unpursuable without a class action. It was an opt-out class action. You get a letter saying, “You are in this claim whether you like it or not, or you can sign a document to get out if you want.” I had no reason not to pursue the claim and I was impressed by the procedure. It was far more straightforward than claiming most benefits.

I therefore have no doubt that the introduction of a group procedure would increase access to justice. The main issues would be legal aid and publicity, but problems in that regard can be overcome. I think that the ordinary person who reads the national press or watches the television news and hears about class actions will come to an understanding of them fairly speedily. As I said, my experience is that class actions are hugely less stressful and more straightforward for the pursuers involved.

Professor Alan Paterson (University of Strathclyde)

I, too, have been a member of a class action in America. I think that it was for overcharging for gas services and applied to a whole area. Instead of hundreds of thousands of people in the area each having to raise an individual action against the gas company, a collective action was raised. We did not have to opt in, because it was an opt-out process and was very straightforward. That is how to deal with small or medium-level cases involving defective washing machines, for example, where everybody has a common interest and thousands of people are involved. It is not cost effective for thousands of people to have to raise the same action against a washing machine company, a gas company and so on.

As Paul Brown has indicated, though, the problem is how we fund such class actions. We have known for 30 years that class or group actions are a good thing. We have had three reports in Scotland that have all said that we should have class actions, but the problem has been how we fund them. We will no doubt come back to that.

Thomas Docherty (Which?)

We echo the view that it is important to have the principle of group proceedings. I think that the key point that you are hearing already, convener, is that opting out is the crucial aspect rather than having an opt-in mechanism. As we indicated in our written submission to the committee, our concern is that, although we believe that the bill is a glass half full and better than nothing, it will not deal with the cases to which Professor Paterson referred. There might be a relatively small amount of damage for an individual if there was an opt-in mechanism rather than an opt-out one, but the cumulative damage to a group would be significant in that case.

George Clark (Quantum Claims)

I am here just to air a couple of concerns about the bill. I have two brief points on part 1, section 4 and part 2, section 10.

First, I will give you some background information about Quantum Claims. The company was formed in 1988 and was one of the first no-win, no-fee organisations in the UK. We have a very mature funding product that has evolved over time as the law has changed and evolved. Our pricing structure has evolved carefully to match the requirements of the public and meet its expectations, and to market ourselves in the best way.

The bill as it stands gives me two concerns, which are about access to justice and a potential funding gap for individual cases. My concern is not about group litigation, which is a subject that I will pass on to those who have looked at it in more detail. I will deal first with part 1, section 4 of the bill, on “Power to cap success fees”. That obviously comes from Sheriff Principal Taylor’s report, which made various recommendations about capping the degree of the success fee, generally at about 20 per cent. I should say that that figure is roughly in line with Quantum Claims’s product. We gave evidence to Sheriff Principal Taylor, so perhaps he derived the idea of a 20 per cent cap from our experience of it.

However, I have a word of warning about that proposed cap. The law is evolving, but it seems to me that Sheriff Principal Taylor seeks to apply a cap across all categories of cases. From our experience, we believe that that would be extremely dangerous, particularly with regard to areas such as medical negligence, breach of contract and professional negligence. Cases in those areas are extraordinarily complex and, by definition, long running, and they are expensive to fund. The capping of the success fee at a level that might not be sustainable would discourage funding organisations from participating in the process and therefore, in my view, deny access to justice to a certain category of pursuer.

10:30

I have a similar point about part 2, section 10, on “Third party funding of civil litigation”. It proposes the introduction of one-way cost shifting—which I think is a good thing and is generally approved—but with an exception whereby third-party funders can be made liable for expenses in an action. It would clearly be difficult for a company such as ours to provide funding if we were looking at a risk that we did not know before we entered into a funding arrangement. It would also be difficult for pursuers, as they could suddenly find themselves in a position where there was a funding aspect to their case that they had not been aware of when they started.

I will give an example of my concern—

The Convener

We will cover the issue in more detail, but at present we would just like rough guidance on the areas of the bill that you have concerns with. There will be an opportunity to come back with more detail when we go into the line of questioning on third-party funding.

George Clark

Just to cover it very briefly and to finish, my final point is that, in the funding of a small case—such as the £5,000 to £10,000 category of case—the funder is exposed to the coverage of outlays, which average about £2,000 minimum for even the smallest of cases. If, in the event of the case not being won, they are also exposed to civil expenses of, for example, £30,000 to £40,000, that would discourage the funding of any action. There is a large category of parties who would be discouraged from pursuing an action for which they have to find £2,000 to £3,000 of funding.

My only point is that such provisions have to be looked at extremely carefully to see whether they defeat the point of the bill, which is to improve access to justice. That is my submission, if you like.

The Convener

Thank you. Are there any other comments?

Martin Haggarty (Accident Claims Scotland)

I will pick up on that last issue. My comment does not relate directly to claims management companies, although there are companies that are encouraging payment protection insurance claims, and when solicitors have been involved, questions have arisen about for whom the solicitors are acting. Is it the claims company or the claims company and the client? That makes a big difference: it affects fiduciary duty and remedies, depending on whether the lawyer is acting for the client or only for the claims company. It is therefore very important that, in such contracts, there is a clear explanation. That extends to claims management companies.

There is not only a duty on solicitors to act in the best interests of their client; there is also an ethical duty on them to communicate effectively and to get the client’s informed consent to certain contracts. That means that the solicitor has to tell the client everything material that they are aware of that relates to the case.

All those things have to be carried through. I am sure that Quantum Claims carries them through, but we are talking about all kinds of other claims management companies coming through, and those issues have to be addressed. The Law Society of Scotland is aware of that and a working party is being set up to consider the ethical issues that might arise. We have to be aware of them.

John Finnie

The bill will enable solicitors to enter damages-based agreements. Will you outline the pros and cons of that form of payment? Is there a need for additional protections for consumers? Is there the perception of a conflict of interests for solicitors?

Professor Paterson

I will just follow on from what I just said. Yes, there is. If the solicitor enters into a contract with a client, that contract has to be fair and reasonable, has to have informed consent and must be something that an independent person would advise. As a matter of ethics, in addition to the fiduciary duties, independent advice is required.

That is impractical when it comes to the contract of retainer between lawyers and clients—the general contracts of borrowing and lending between a client and a solicitor or getting gifts and wills. However, when we get into unusual retainers—suppose that the fee was an equity fee or a publicity fee—there is a need for informed consent and proper communication and, I would argue, there is in some cases a need for independent advice. Some of the claims management fees and speculative fee agreements that we have heard about could be viewed as being quite unusual.

For example, Sheriff Principal Taylor is of the view that 2.5 per cent of future loss is not, in the grand scheme of things, a problem. However, in some cases, it might be a problem so people need to be advised about that. That is why section 6(6) mentions the need for advice from an independent actuary. In some cases—not all cases—there may be need for advice from an independent lawyer.

John Finnie

Do any other panel members care to comment on that point?

10:45

George Clark

I cannot comment on solicitors’ duties to advise their clients. I welcome regulation: it is absolutely essential. There are what one might call cowboy organisations out there that would take advantage of situations. That has been prevalent; it is less so now, but it still exists.

Quantum Claims has never engaged in telephone marketing and sales or anything like that; we have advertised traditionally, and we have written contracts in which clients have cooling-off periods, and they have advice available to them. I endorse what Professor Paterson said: it is entirely right and should be brought in for every contract that a client enters into.

John Finnie

I would like clarification from Professor Paterson. Do you see that independent advice as a protection not only for the client but for the solicitor as well?

Professor Paterson

Yes. Underlying all this is the potential for conflict. Independent advice protects both clients and solicitors. I do not suggest that it is needed for every speculative fee agreement and every damages-based award, but there may be an argument for it for some situations.

Martin Haggarty

In principle, I agree. My company removes itself from the process at the stage of litigation and, for impartiality, hands over to the solicitor control of the case and any success fee thereafter. We do not engage in any activity other than accident claims: we do not get involved in the less reputable—in my opinion—side of the business, such as PPI or holiday sickness claims.

Until recently, I would have said that Scotland did not need regulation because there are very few claims management companies here. The problem stems from the amount of England-based companies that advertise nationwide and proffer advice to people here without any regard for the laws of Scotland or our system of damages. They perhaps sell that case on to the highest bidder—sometimes even England-based solicitors firms ostensibly take cases forward and try to resolve them without any need for litigation. With the recent increase that we have seen in such cases, I now welcome some form of regulation here.

Mairi Gougeon (Angus North and Mearns) (SNP)

In previous evidence concern has been raised, in particular by defender representatives, that the bill, as drafted, will lead to a compensation culture in Scotland, such that additional measures would be needed, such as fixed fees and strengthened pre-action protocols, to militate against that. What are your thoughts on that concern? Do you believe that the bill will give rise to a compensation culture?

Martin Haggarty

I have been involved in claims since 1979. Accident Claims Scotland was formed in 2003, and we have, over the years, done a lot of research into the behaviour of claimants and potential claimants. Over the past 10 or 15 years, I have not seen a particularly large uptake in claims or a rise in compensation culture in Scotland, despite the rise in advertising through the press, TV and radio for accident claims companies or lawyers. We have always been fairly conservative with a small “c”, if I may say so. Roughly one in three claims has sought compensation for minor injuries—most claims are for minor injuries.

I do not think that the bill will fuel a sudden rise in compensation claims. All that it will really do is offer to members of the public a fair means by which to seek recompense to which they are legally entitled. The majority of people who are entitled to make a claim for personal injury do not do so—the reasons for that are varied—and the claims are mostly for minor injuries. I do not think that we will have a huge rush towards the whiplash culture that has been experienced in particular parts of the south of Great Britain.

Mairi Gougeon

Would anybody else like to comment on that?

Professor Paterson

There is a lot of press publicity about compensation cultures. However, the research evidence does not bear out its existence in England and Wales, apart from in the pockets of the whiplash culture to which Martin Haggarty referred. There is a beautiful article that was produced by an academic that shows a direct correlation between the number of claims going down and the number of media stories about compensation going up.

In Scotland, the evidence is that civil litigation rates have been gradually falling over the past five or six years. I know that there was a spike in personal injury claims, but I do not think that there is evidence that there is huge interest in raising personal injury claims. I would be quite interested if there were, because when I was doing the original research for “Paths to Justice Scotland: What people in Scotland do and think about going to law” with Hazel Genn, which was the start of the needs assessment literature that has gone around the world, we found large areas where people either did nothing when faced with a significant possible claim, or tried to help themselves and failed. One might think that people know to go to a solicitor or claims management company with personal injury cases, but we found that people are likely to do nothing about personal injury claims. Admittedly, that research was done 15 years ago.

There is room for the claims management companies to help us to take cases, provided that we have appropriate safeguards and that we monitor what is happening. I do not think that a compensation culture is likely to take off in Scotland.

Paul Brown

My experience is that, in some areas, there has been a big decline in claims. People hear publicity about cutbacks in legal aid that do not apply to Scotland, and they think that that is the end of legal aid for them. They hear about cutbacks in, say, criminal injuries compensation, and think that compensation will not apply for them, but do not realise that compensation for their particular injury has not been abolished. People hear that wage loss has been removed from criminal injuries compensation claims, although it still exists for some situations. They hear about time limits, but do not realise that, in some situations, time limits are for guidance—they are not absolute and can be argued around. There are all sorts of impediments.

There is a need for greater publicity. Some publicity results in overshooting, but there are some areas—such as Equality Act 2010 claims and rafts of employment-related matters—that are rarely pursued, so I do not see a compensation culture becoming a problem.

However, we have to look at the form of words that is used: in our world, compensation is a way of achieving accountability, so appropriate compensation needs to be encouraged. Lying and exaggerating need to be discouraged, if that is what the problem is, rather than saying that people who claim are lying, exaggerating and making fraudulent claims. The bill has sanctions built into it for lying and exaggerating and people need to know about them, too.

Mairi Gougeon

You said that the bill will tackle some of that, but will it be effective in preventing fraudulent claims? We have also heard evidence on spurious claims from representatives of pursuers and from Sheriff Principal Taylor. They seem to think that there would not necessarily be a rise in spurious claims because it would not be in a solicitor’s interest to take on a claim that will not go anywhere and has nothing behind it. Do you think that there would be a rise in spurious claims as a result of the bill?

Paul Brown

Solicitors have to appropriately and clearly analyse cases and tell people when they do not have a claim. Sometimes they have difficulty doing that because they want to help people, but that is a professional issue, because misleading someone and being overoptimistic is just as bad as telling someone that they do not have a claim when they do.

At one level, that is about ensuring that publicity is clear so that people understand what they are getting compensation for—people need to know the basics of the law. We also need to keep on telling people about those basics because it is not something that they are necessarily fascinated by. The other thing is to encourage the right sort of soaps on telly to explain such things, because people pick up a lot through those. As I said, I do not see spurious claims as a major problem: I have not come across that.

Martin Haggarty

As a representative of the claims management side, I add that we have not seen a great increase in spurious claims over the last few years. However—I am sure that Mr Clark will concur—as a responsible company, we discover and weed out the less desirable or more spurious cases. We prevent many such cases from getting as far as a solicitor. It is not in our interests to deal with spurious claims because if such a claim were to find its way to a solicitor and potentially to litigation, any work that we have done or any referral fee that we charge the solicitor would be clawed back in the event that the case turned out to be fraudulent or the client was misrepresenting the situation unreasonably. There is an onus on us to ensure that we perform our part and weed out undesirable claims.

Professor Paterson

The bill contains protections such that a legal representative who raises a spurious action may be found personally liable for expenses. I happen to think that that is already the law anyway, but I am glad to see it being reinforced in statute. Now, no one can say that they do not agree with that bit of case law—it is clear in statute.

On qualified one-way costs shifting, the benefit of that is lost if the claim proves to be fraudulent, as with legal aid. One of the protections of legal aid is that if you lose, you can get your liability to pay the other side’s expenses modified to nothing, but that applies only if the court takes the view that you have behaved reasonably. The bill also requires that. There are protections against spurious claims.

Thomas Docherty

This goes back to the question that Mr MacGregor asked about access to justice. We see claims management companies as being a symptom of the problem that companies and institutions too often do not pay back to consumers money that they owe them. A simple statistic that the National Audit Office estimated is that, between 2011 and 2015, claims management companies received £4 billion to £5 billion in management fees for PPI claims. That is because the financial institutions did not in the first place come forward to say to customers that they had got it wrong and therefore owed them money, even though they knew who their customers were.

I will give you an example that we use a lot. Which? runs on our website a free service for PPI claims, and we have engaged with a lot of the financial institutions. One Which? member got £15,000 just by going on to our website and putting in his details. I will not say which financial institution was involved. That cut out the CMCs and was a great result. However, it can be argued that if not for those CMCs chipping away and raising the issue in the first place, the financial institutions would not have paid out £18 billion to £20 billion over the last few years. I hope that that answers your question.

Mairi Gougeon

Yes, it does. I look forward to the TV dramatisation of civil litigation. [Laughter.]

The Convener

I want to ask about ambulance chasers. You are talking about legitimate claims from consumers that have not been followed, but there is also the other side of the coin. The three representatives of the claims companies have explained that they would behave with absolute propriety, but is ambulance chasing still an issue?

11:00

George Clark

I return to Martin Haggarty’s point that there is still an issue in England. There is a telemarketing culture. We will all have received anonymous telephone calls or texts asking whether we have had an accident in the past three years, for example. That is still an issue, but it is a country-wide issue and not just a Scottish one. However, I genuinely think that the issue is not generated in Scotland and that it comes from afar. I am not aware of anyone in our industry in Scotland who actively practises that approach, and I certainly do not. Nevertheless, it is an issue and it needs to be looked at. As I said, there is still a danger in that field.

Martin Haggarty

I agree that the issue is very much driven from afar. In my day-to-day work, I am constantly bombarded by data marketing companies from other parts of not just the United Kingdom but the world, offering data on people who have had accidents, PPI or whatever. I deal only with accident claims, but I do not engage in buying data and nor do my colleagues who I know of in the industry. That approach is a very shoddy way to do business. Something should be done to protect the public from those mass data-gathering exercises and the constant exchange of details. In many cases, the data that I am offered, whether or not it is genuine, is said to originate from insurance companies, which are the very people who cry wolf at the first sign of a potential personal injury claim. However companies are getting the data, there is no doubt that some less than savoury practices are involved.

Thomas Docherty

We completely disagree that Scotland does not have a problem; indeed, Scotland has more of a problem with nuisance calls than any other part of the United Kingdom. We have done research on that. In September, there was a debate on the issue in the Scottish Parliament, which some members of the committee took part in. As we say in our written submission, our studies show that 80 per cent of Scots reported receiving nuisance calls on their land lines in the month of August alone and that almost half of people—44 per cent—receive accident and PPI calls. It is not true that Scotland does not have a problem; Scotland has more of a problem than anywhere else.

I will give you one more statistic. In the past year, 16 claims management companies based in Scotland have registered with Companies House. The problem is not getting smaller; it is getting bigger.

Martin Haggarty

As I said, I do not deny that members of the public are receiving unsolicited communications by text or telephone on issues such as PPI and personal injury. My point is that, in my experience, the vast majority of those calls or texts originate from outwith Scotland. The opportunities to buy that data or to acquire those potential customers or clients generally do not originate in Scotland. It may be that several claims companies have registered at Companies House, and I understand that there might be many PPI-based companies of that nature, but I have not seen any great increase in relation to the personal injury side of the business in Scotland.

I take Thomas Docherty’s point that we are plagued by such communications, but I do not think that there is a big problem with the data originating here. The issue is with national companies marketing to the country as a whole and trying to pass clients on to us up here in some way, shape or form.

The Convener

Mr Docherty’s written submission certainly contains useful information about the number of calls, even just in the Glasgow area. We might cover that later.

Maurice Corry (West Scotland) (Con)

I have a general question for the panel. There is a feeling of reticence among people who genuinely believe that they have a claim but are put off by the fact that they might incur a black mark against their name on the industry’s notepad when they come to ask for insurance cover for a house, for example. Can you comment on that general trend?

Martin Haggarty

That is very much the case for motor accidents, which the majority of personal injury claims will emanate from. People think that, if they make a claim for their vehicle or their person, that will somehow affect their insurance premium, which it very often does. As a result, people often seek the assistance of a claims management company or just decide that the matter is more bother than it is worth, swallow their policy excess for the damage to their car and get on with their daily lives.

Liam Kerr

I know Quantum Claims pretty well from my previous career, so I know that it runs itself reputably and well. However, there are 16 other firms that we do not know and, if I have a problem with them, I have no recourse. Your suggestion, Mr Clark, is that the Law Society should be named as a regulatory body for claims management companies.

George Clark

I see no reason why not. Claims management companies should adopt the same professional standards as solicitors. I am not afraid of that. There is a body already constituted to deal with that. Okay, it is a self-regulatory body; nonetheless, it is and has been the custodian of legal services in Scotland for many years, so why not let it do that? It is not a huge arena. If there are 16 companies, that is not a huge number. There are hundreds of solicitors firms, so it would be a relatively small part of the Law Society’s remit.

Paul Brown

If the same regulatory environment were to be introduced for claims management companies as for solicitors, the Scottish Legal Complaints Commission, which was set up by statute, would have to be brought in as well. I presume that that process would be fairly complicated, although I am sure that it could be done. However, we need to remember that solicitors are regulated for different purposes by two bodies. The Scottish Legal Complaints Commission has fairly substantial teeth to deal with inadequate professional service.

Thomas Docherty

There is a reason why the Financial Guidance and Claims Bill is moving the regulation of claims management companies in England and Wales from the Ministry of Justice to the Treasury. We just touched on some of it.

We are not opposed to claims management companies being regulated through legal regulation, but we are a bit sceptical about how close the relationship is between some of them and the law firms of which they purport to be part. The key principle is that, regardless of the regulator, every claims management company should operate to the same standard. If some are regulated by the Law Society and some are regulated by the Financial Conduct Authority, we will not die in a ditch over that. The principles of regulation are more important.

Martin Haggarty

I agree with that. To touch on Mr Kerr’s initial point, at the moment, claims management activity is a service industry and, as for any other service industry, there is a means to complain about service. In the case of my company and others that I know of, if somebody makes a complaint, it is dealt with by a director of the company. If they still cannot receive satisfaction, customers will find a way of going to a solicitor—ironically—the Legal Services Agency or a citizens advice bureau to take advice on it.

In all the years that we have been operating, I have seen very few genuine complaints. We have had a couple of instances in which people have even gone to the papers and their complaints have been found to be groundless. Nevertheless, people find ways of making their voices heard.

It does not make a great deal of difference whether regulation becomes a Law Society matter or sits with the Ministry of Justice, as was the case when we registered with the English side of regulation. As long as we are all judged by the same standards, anybody who operates properly and reputably has nothing to fear.

Professor Paterson

The short answer to Liam Kerr’s question—who regulates claims management companies at the moment?—is that it is trading standards services, if anybody. I will not comment on whether the Law Society should do it.

If you are going to regulate claims management companies, which you should—I agree with Sheriff Principal Taylor about that—there is an argument that it should be done on a UK-wide basis because the problem that we have now is companies moving up to Scotland. We do not want a situation in which one lot of companies is regulated by one set of regulators and rules and the other lot is regulated by another. The argument for UK-wide regulation sounds quite strong. You should remember that the reason why claims management companies were set up in the first place is that there were problems in the regulatory environment, from their perspective, in that damages-based awards were not allowed.

Referral fees are also a problem. On the Taylor review, there was a huge fight about them. England has swapped. There were places where it allowed referral fees and then it banned them. In the end, Sheriff Principal Taylor came to the conclusion that there would be ways around referral fees. That is, ultimately, why we came to the situation that we arrived at. A solicitor has to do something if they are going to get a referral fee. It is not a reward for giving something away; they must have prepared and done some real administrative work. The client must also fully understand what the referral fee is about and why it is being paid. Referral fees remained contested in Sheriff Principal Taylor’s report.

Mary Fee

Good morning. Much of what I was going to ask about regulation has been covered. It is clear that the witnesses agree that claims management companies need some form of regulation. Is the bill a missed opportunity to explicitly name claims management companies?

Thomas Docherty indicated agreement.

Mary Fee

Mr Docherty is nodding. Does the rest of the panel agree? The witnesses will be aware of the Scottish Government’s view that it could piggyback on the Westminster regulation. Do they agree that the bill is a missed opportunity that could have been taken here?

Thomas Docherty

We are not wedded to that being done through the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill or the bill that is currently going through Westminster—although the clock is ticking, and I think that that bill is about to have its third reading in the House of Lords; I suspect that it will go to the House of Commons in the new year. We are not saying that it has to be done that way, but it would be astonishing if, in the new year, we found that we did not have a mechanism in process to regulate.

Mary Fee

Do any other panel members have a view on that, or is everyone in agreement?

Martin Haggarty

We have mentioned that, during the past year, 16 claims management companies have registered at Companies House. When my firm was registered with the Ministry of Justice for English and Welsh-related activities, we were one of roughly 2,800 registered UK claims management companies at that time. Bear in mind that few Scottish firms bothered registering, as there was no requirement to do so. To keep a sense of proportion, 16 claims management companies in Scotland is a very small number.

I agree that we should be regulated, but I do not think that that is anything to panic about. I do not know the current number of claims management companies in England and Wales—I do not receive the memos any more—but, as I said, there were approaching 2,800 registered UK claims management companies when we registered. If we assume that Scotland has roughly 10 per cent of the UK population, we could expect there to be around 280 such firms in Scotland. We are talking about 16 newly registered firms, and there were very few existing firms before that, so a sense of perspective should be retained.

Mary Fee

The Scottish Government has argued that claims management companies are covered by the definition of a provider of “relevant legal services” in the bill. If all of you agree that claims management companies should be regulated, am I to suppose that you do not agree with the Scottish Government’s view?

Martin Haggarty

I do not think that you can say that we provide legal services per se. We provide access to legal services. We provide assistance in finding the right path to justice, but we do not provide legal services, so that catch-all does not really apply.

Mary Fee

If there is a delay in the regulation of claims management companies, however long that might be, is there the potential for problems to occur for people who are looking for services and do not know where to go? Earlier, we spoke about cowboy companies. Is there the potential for cowboy companies to slip into a gap that is provided before regulation happens? I see that Mr Docherty is furiously nodding.

Thomas Docherty

Absolutely. That is why both Which? and the ABI are in exactly the same place on that issue. It is common sense that, if England and Wales have a tighter regulatory framework, less scrupulous firms will see that Scotland does not have the same regulatory framework. If we wait for Esther Roberton’s review to be published and then for a bill to come forward and be enacted, there could be a significant period of time in which there is a vacuum in regulation. That is why that needs to be done through either the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill or the Financial Guidance and Claims Bill.

Mary Fee

Thank you. That is helpful.

The Convener

A couple of panel members have referred to Esther Roberton’s review of the regulation of legal services, which will certainly touch on aspects of the bill that have been of concern to us. Given that there seems to be a lack of progress with that review, I think that the committee should write to ask for an update of exactly where things stand, and perhaps make specific reference to the aspects of the review that are pertinent to the bill.

Ben Macpherson

I want to return to an issue that was raised at the beginning of the evidence session by Paul Brown and Thomas Docherty and in the written submission from Which? It concerns part 4 of the bill, on group proceedings. There was some discussion about this earlier, but I would like to probe further the alternatives of an opt-in system and an opt-out system. Mr Docherty, I know that you argued in your written evidence and your earlier contribution that you would prefer an opt-out system. Will you explain why you see that as more advantageous?

11:30

Thomas Docherty

We are talking specifically about claims in which the detriment to an individual is relatively small but there is a large number of claimants. If we have an opt-in mechanism, Which?, a law firm or anyone else who wishes to act on behalf of the claimants would have to bear all the up-front costs and resource commitment in reaching out and trying to find everybody who might be affected by the class action. They would have to advertise widely and then demonstrate to the courts that they were suitable to represent those people. That would be fine if the individual claim was worth a huge amount of redress or compensation but, if it was a relatively small amount of money, with the best will in the world, Which?, law firms or anybody else would really struggle to justify that.

We have had some interaction with the Scottish Government on the issue, and we are puzzled by its argument that it is too difficult to come up with an opt-out system. We have such a system under the Consumer Rights Act 2015. It operates effectively for two reasons: because people understand the mechanisms that they have to go through to demonstrate that they are acting on behalf of a class of people and because the bar has not been set at a point that means that vexatious claims have been made.

We will not see “Boston Legal” or “LA Law”-style mass class actions; we are talking about a relatively small number of cases. As we said in our written submission, we have brought cases, such as the JJB Sports football shirts case, in which we were not able to represent everybody who was affected because they were under the old opt-in system. In the past couple of years, we have had the opt-out system, under which there have been only two cases so far at UK level—the MasterCard case and the mobility scooter case—both of which are currently not being proceeded with because the judge involved said that the threshold had not been met.

An opt-in system will not do anything to help the consumer on individual small amounts of money. Therefore, we have to have an opt-out system, and that approach works at UK level under the Consumer Rights Act 2015.

Ben Macpherson

It is interesting to hear that from the consumer perspective.

Mr Brown, you touched earlier on the community perspective on the difference between an opt-in system and an opt-out system. That interests me as a constituency MSP as well as a member of the committee. Will you elaborate on that?

Paul Brown

The petition procedure under the Public Health (Scotland) Act 1897 was definitely an opt-in procedure, and it worked well for a group of people concerned about disrepair in a block of housing. However, I take the point that, in any case that is more diffuse, the people who are leading it will have big expenses. In a community situation in which people know one another and possibly know the social media to look at, things will take off but, if a case has a national basis or small amounts of money are involved, I can certainly see that there would be problems. The New York case of which I was a beneficiary was an opt-out case. That worked well.

It has taken an inordinate amount of time to get to where we are, and it is a significant step that we are discussing group proceedings. It would be a pity if one went for the most ambitious arrangement and that resulted in further delay. Therefore, although I am entirely in favour of an opt-out system, I am principally in favour of there being some form of group proceedings, which I am sure will help some people. I can envisage people taking up quite major issues.

In principle, I suppose that the more that is in the bill, the better. However, that is okay as long as there is consultation. One possibly needs to encourage as open consultation as possible. It will be fairly complex. There also needs to be consultation on asking the Lord President to say which charities get pro bono legal expenses.

It is not part of the Scottish legal tradition to consult widely about rules but, with encouragement, I do not see why it should not be done. People will think, “Ah, rules. Just technical stuff,” but there will be substantive and major issues to do with implementing such remedies that need to be discussed in as open a way as possible.

Ben Macpherson

So you are generally satisfied with that approach and that an opt-in system would make a difference.

Paul Brown

Yes, it would make a difference.

Thomas Docherty

I suspend the meeting briefly to allow for the changeover of witnesses and a comfort break.

11:42 Meeting suspended.

11:47 On resuming—

14 November 2017

Sixth meeting transcript

The Convener

Agenda item 5 is our sixth and final evidence-taking session on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I refer members to paper 3, which is a note by the clerk, and paper 4, which is a private paper.

I welcome to the meeting Annabelle Ewing, Minister for Community Safety and Legal Affairs, and the following Scottish Government officials: Hamish Goodall, civil law and legal system division; and Greig Walker, solicitor, directorate for legal services. I believe that the minister wishes to make an opening statement.

The Minister for Community Safety and Legal Affairs (Annabelle Ewing)

Good morning, convener and committee members. I am grateful for the opportunity to make some opening remarks. Before doing so, though, I felt it appropriate on this occasion to remind members of my entry in the register of members’ interests. It shows that I am a member of the Law Society of Scotland in that I hold a current practising certificate, although I am not currently practising.

We know from Sheriff Principal Taylor’s review of the expenses and funding of civil litigation in Scotland that the potential costs involved in civil court action can deter many people from pursuing legal action even if they have a meritorious claim. There is therefore a need for more certainty as to the cost of exercising their rights. Three major reforms proposed in the bill will make the cost of civil litigation in Scotland more predictable and therefore increase access to justice: sliding caps on success fees; allowing solicitors to offer damages-based agreements; and qualified one-way costs shifting.

The first major reform, the introduction of sliding caps on success fees, has generally been welcomed, and I am minded initially to set the levels at those suggested by Sheriff Principal Taylor in his report. The second major reform will allow solicitors to offer damages-based agreements directly rather than through claims management companies. Damages-based agreements are very popular as they are simple to understand; basically, the client pays nothing up front. Instead, they pay a percentage of the damages awarded or agreed to the provider of the legal services, with the solicitor responsible for all outlays in personal injury actions. As Sheriff Principal Taylor stated in his evidence, one solicitor-owned claims management company has entered into 17,600 new damages-based agreements in the past three years and 23,800 in the past five. That might go some way to explaining the rise in the number of claims in Scotland over the past five years, which others giving evidence have flagged up.

On the subject of claims management companies, I appreciate that concern has been expressed that the bill makes no provision for their regulation. I am therefore pleased to be able to tell the committee that appropriate amendments to the Financial Guidance and Claims Bill have been tabled at Westminster and are expected to be voted on later today at the bill’s third reading in the House of Lords. Claims management companies will therefore be regulated in Scotland more quickly than was first anticipated.

The third major reform is the introduction of qualified one-way costs shifting for personal injury cases, which will level the playing field as the vast majority of defenders are well resourced and the majority of pursuers are of limited means. Although very few claimants are pursued for expenses by successful defenders, there is always a risk that a pursuer might be liable for considerable expenses and possibly bankruptcy if they lose. Sheriff Principal Taylor confirmed that that is a real fear that stops too many meritorious claims from getting off the ground.

Qualified one-way costs shifting removes the risk as long as the pursuer and his or her legal team have conducted the case appropriately. The test of when the benefit of qualified one-way costs shifting can be lost has been the subject of varying views, as can be seen in the evidence that has been given. Defender groups have suggested that the bar is too high and pursuer groups have contended that the bar is too low. Both groups have expressed concerns that the provisions as drafted in section 8(4) will lead to satellite legislation. We will therefore consider amendments at stage 2 to make it clear that it is the tests envisaged by Sheriff Principal Taylor that are to be applied.

The bill also makes provision for third-party funding. Sheriff Principal Taylor recommended that all third-party funding be disclosed; however, only venture capitalists who have only a commercial interest in the case will be liable for awards of expenses. There have been concerns that awards will be made against trade unions and legal service providers. Trade unions do not have a financial interest in the proceedings, so they will not be subject to awards for expenses under the bill as drafted. We are considering whether an amendment is necessary to make it clear that providers of success fee agreements will not be subject to the provision.

Finally, I want to briefly mention the issue of group proceedings. As the committee will have seen, the proposal to introduce class actions to the Scottish courts has found broad support. I am convinced that the way forward is to introduce an opt-in system given that when introducing a new procedure in the Scottish courts it is prudent to select the option that will be easier and quicker to implement. However, that does not rule out introducing the opt-out procedure at a later date, and we will keep the issue under review.

That concludes my opening remarks. I look forward to the committee’s questions.

The Convener

Thank you, minister. We will move straight to questions, starting with John Finnie.

John Finnie

Good morning, minister, and thank you for your opening statement. We are told that the bill’s objective is to increase access to justice, but a number of witnesses have suggested to us that such access is not a problem. Why is the bill necessary, and how will it improve access to justice?

Annabelle Ewing

It is important to go back to the bill’s first principles and reiterate what happens when someone tries to bring a personal injury action. The pursuer will want to know first of all what their solicitor will charge them, but it is also important for the pursuer to know their potential liability for the defender’s expenses if they lose. Such a situation introduces considerable unpredictability with regard to the bill for the pursuer in trying to assert what they view as their legal rights. The bill is designed to deal with each of those areas of unpredictability in turn and to increase the funding options available to a pursuer seeking to take a claim through the courts.

In terms of greater predictability and certainty as to what a pursuer’s solicitor could charge the pursuer, we have taken Sheriff Principal Taylor’s approach and proposed a sliding cap on the percentage that can be taken by way of a success fee from any award received. That will be done on the basis set out by Sheriff Principal Taylor in his report, which is a maximum cap of 20 per cent for the first £100,000, although the solicitor would not be required to charge the maximum; a proposed cap of 10 per cent for the next £400,000; and a proposed cap of 2.5 per cent for sums above £500,000. That gives clarity to the matter.

With regard to outlays in personal injury actions, we propose in the bill that they be met by the pursuer’s solicitor, which also provides clarity. As for the issue of liability for a defender’s expenses and what has been called the David versus Goliath asymmetric relationship between the pursuer and the defender in personal injury actions, our proposal, which again takes up Sheriff Principal Taylor’s recommendation, is for what is called qualified one-way costs shifting in personal injury actions. I know that the committee is now expert on that term of art, so I do not need to belabour the point.

12:00

That is what we propose for personal injury actions, with the important word here being “qualified”. It is not an absolute but, assuming that the pursuer and their legal team have acted appropriately, the benefit of qualified one-way costs shifting should not be lost. It therefore gives predictability and certainty, and it removes the fear that by seeking to raise a court action the individual could be sequestrated if found liable for the defender’s expenses.

As for the desire to create some equity in funding between the pursuer and the defender, the vast majority of cases are, as I have mentioned, seen as a David and Goliath battle involving a defender, who is either an insurance company or backed by an insurance company, and we expect the key principles underpinning the legislation to reflect that fact.

Another issue that I should mention is that the solicitor profession will be allowed to enter into damages-based agreements for the first time. All in all, we feel that the proposals allow potential pursuers to consider carefully whether they wish to pursue their rights in the courts by way of a civil claim instead of not pursuing a case simply because of worries about the cost and potential sequestration.

John Finnie

Thank you for that detailed answer. I think that there will be specific questions from my now fellow experts on the subject, but I want to stick with the generalities. We have had a lot of anecdotal evidence about the much-used phrase “access to justice”, but there seems to be a dearth of up-to-date research on that. Will you commit to doing such research?

Annabelle Ewing

I have read the committee evidence carefully. The issue of statistics has come out in evidence; the number of claims recorded has certainly risen, but the number of cases being litigated has actually remained more or less the same since 2009-10. It is important to bear in mind that the civil justice statistics show a slight drop in the number of personal injury cases raised in 2015-16 compared with the figure in 2009-10. The number of personal injury cases before the court has remained more or less constant, although there has been an increase in claims, because many claims do not go anywhere or are settled long before they get to the courts.

On that basis, I am not necessarily convinced that the world is very different now from how it was when Sheriff Principal Taylor was conducting his two-and-a-half-year review; his review was long and thorough and he had an impressive reference group who assisted him in his work. We also proceeded with a consultation on the bill, as we are required to do, in the first half of 2015; that was more recent, and at the time, more responses favoured proceeding with our key proposals than opposed them. We therefore feel that we have as reasonable a picture as we can get. At the end of the day, raising a civil action is a permissive choice on the part of the pursuer, and it is not something that we can anticipate in any great numbers.

When discussing in evidence whether there should be a delay to wait for the regulation of claims management companies through some vehicle—which is an issue that we will probably get on to—a representative of the Law Society of Scotland said that she would rather get on with the bill. I think that there is a feeling among key stakeholders that we just want to make some progress.

The Convener

I would be grateful, minister, if you could answer specific questions quite briefly, as we will get into more detail in later questions.

John Finnie

Finally—and I shall make this brief—trade union respondents highlighted the fact that court fees would remain a barrier for members pursuing personal injury claims. They proposed a QOCS-like solution, in which court fees would be paid only at the end of a case that the defender lost. Will the Scottish Government commit to investigating that?

Annabelle Ewing

You might be aware of the on-going consultation on court fees, which started in October and is due to close on 12 January. Those who wish to look at that issue have the opportunity to do so.

If court fees are not on a pay-as-you-go basis, somebody else—the Scottish Courts and Tribunals Service and the Scottish taxpayer—will have to pay them. That is something to bear in mind. Sheriff Principal Taylor’s report quoted Lord Justice Jackson in England in making the point that 100 per cent cost recovery was never an accepted principle in the law of costs. It was felt that some discipline should be instituted in the system as a deterrent against frivolous claims and to keep costs to a minimum. As I have said, a consultation on court fees is on-going, and I imagine that some of those points will be raised in that context.

Rona Mackay

In your opening statement, you said that you were minded to approve the caps on success fees recommended by Sheriff Principal Taylor. Would that be done through secondary legislation?

Annabelle Ewing

We feel that that would be the better course than putting them in primary legislation, as it would give us the flexibility to keep them under review and to amend them in due course where appropriate. As I have indicated, we intend to proceed by way of secondary legislation, at the levels proposed by Sheriff Principal Taylor. Any such instrument would be affirmative, so there would be consultation on it.

Rona Mackay

Moving on to damages-based agreements and solicitors’ conflict of interest, I note that Sheriff Principal Taylor recommended that a solicitor be required to write to a client, outlining all the funding options and giving reasons for their particular recommendation. However, it is unclear how those matters will be taken forward. What additional steps is the Scottish Government taking to address the issue of conflict of interest in damages-based agreements? Would that happen through secondary legislation or with the Law Society of Scotland?

Annabelle Ewing

Damages-based agreements would be a matter for the Law Society, which would need to look at the practice rules that are applicable to members of the solicitor profession. I understand that, according to Professor Alan Paterson, the Law Society has set up a working group to look at the issue.

I noted with interest that debate and what Sheriff Principal Taylor said in his evidence at the end of October. He made the important point that if there is a straw man—a defender who is not the insurance company or is not backed by an insurance company—what is the point of raising the action? No money will be recovered. That is a factor to bear in mind.

The fundamental objective of introducing qualified one-way costs shifting is to introduce predictability to the cost equation for a person who is considering taking an action and enforcing their rights. The predictability element for a person who has a no-win, no-fee and damages-based agreement is that if they lose, they do not pay anything. If they win, the arrangements are—as we know from the provisions of the bill—that the pursuer would meet the outlays. For the predictability objective of the bill, it is important that we maintain that position.

It was suggested by Sheriff Principal Taylor that, if we were to seek to make any qualification, that may not preclude circumvention by the defender, such as a defender who should get insurance but who has chosen not to, or who seeks a much bigger excess than in the normal commercial approach.

It is important to remember the evidence that was cited in Sheriff Principal Taylor’s report, which referred to work that had been done for Lord Justice Jackson’s report: of the sample of tens of thousands of cases, only 0.1 per cent involved cases in which the defender had recovered expenses. It is important to bear that in mind.

12:15

Finally, there is qualified one-way cost shifting in England and Wales, which was introduced in legislation in 2012. The UK Government tabled post-legislative scrutiny of that legislation at the end of October, during which no significant concerns were raised about QOCS. Taking all those factors into account, we have struck the right balance in the bill.

Mairi Gougeon

I thank you for highlighting the post-legislative scrutiny in England and Wales because I was not aware of that.

We also heard from witnesses about their concern that the tests for losing the QOCS protection lacked clarity and may lead to further litigation. What are the minister’s thoughts on that? There was a particular concern that the tests do not implement the Taylor recommendation on Wednesbury unreasonableness.

Annabelle Ewing

We have listened to the evidence that was presented in the recent submissions, and we intend to reflect further on the matter for stage 2. We want the bill to be as clear as possible, and we accept that clarity could be improved. Regarding the general thrust of amendments, which have still to be framed, our commitment was to introduce the test as it was envisaged by Sheriff Principal Taylor, which would have regard to the Wednesbury case. Suggestions have been made in evidence to the committee about phraseology; I am not in a position to say exactly what it will be. We are definitely seeking to implement what Sheriff Principal Taylor had in mind, in that regard.

Mairi Gougeon

That was helpful. Thank you.

I am not aware of any NHS boards that do not have insurance. That would be quite worrying. I will check that with my colleagues, but I had thought that all boards would have insurance in place.

There are many factors. The committee is aware of the damages bill that was referred to in the programme for government, which we intend to introduce early in 2018. One of the elements of that bill will be to address mandatory periodical payment orders—that is where there is a catastrophic case in which it is necessary to make an arrangement for future caring arrangements and loss. Periodical payment orders allow that to happen, and the provision in the forthcoming bill will make that mandatory—in other words it will override the views of the parties to the case. At the moment, both parties need to consent to a PPO being granted.

Members will recall that the bill already provides for the fact that where there is a future-loss element and a PPO is recommended, the damages cannot be taken from that element of the future loss. That is an important safeguard.

To go back to some of the points to which I alluded in my opening remarks, if a client goes to see a lawyer and there is no prospect of recovering any money, the lawyer will not take on the case. A lawyer is also an officer of the court and is subject to various rules and regulations, including on not clogging up court time with vexatious cases. The mandatory pre-action protocol will also help in that regard. Finally, the benefit of cost shifting can be lost, although only in certain circumstances—it is not an absolute. We should bear all those factors in mind.

Liam Kerr

Perhaps my question was not sufficiently clear. I am saying that NHS witnesses have told us that there will be more clinical negligence claims, greater cost to the NHS and more pressure on budgets. Do you have a response to that?

Annabelle Ewing

Starting from first principles, if someone has a right to bring a claim, they have a right to bring a claim: it will be for the parties to settle in advance or for the courts to determine the rights and wrongs of the case. I am sure that Liam Kerr would not suggest that if there has been a wrong and a failure to act, there should be no remedy for the citizens of Scotland. If one has a right, one should be entitled to seek enforcement of that right through the courts and so have access to justice.

I am afraid that I cannot give you chapter and verse on what the amendments will say, because they are still to be drafted, as far as I am aware. However, we will seek to lodge amendments on third-party funding at stage 2 to address the concerns that Mary Fee has referred to, because we accept that we need to provide more clarity in that regard.

As far as trade unions are concerned, the current language of the bill’s provisions on third-party funders would not catch them. However, we will reflect on all the points that have been made about third-party funding in order that we are 100 per cent sure that our reading of the matter is correct. We feel that there is also an obvious lack of clarity in the bill in respect of legal services providers, so we will look at that, too. However, we understand the points that have been made: it is absolutely not the Government’s intention to catch trade unions or legal service providers in the third-party funding provisions. We want to ensure that the provisions will apply only to venture capitalists and commercial third-party funders.

Mary Fee

There will be a clear definition of who you are meant to be catching and not catching. Will you also make it clear what the requirements on third-party funders are compared to those for general funders?

12:30

Annabelle Ewing

On your first point, as I say, the drafting is still to be done. I fully understand the concerns that exist, which will be reflected in the drafting.

On your second point, transparency was to be an obligation on all third-party funders, so that the court and the other side would know what was going on in relation to the funding, but there was a concern that the issue had been conflated a bit with the liability issue. We will look again at that matter and hope to make it absolutely clear that transparency is an erga omnes obligation, whereas the liability issue is for the commercial funders of the venture capitalists.

Maurice Corry

Why does the Scottish Government consider the employment of court auditors by the Scottish Courts and Tribunals Service to be a better guarantor of independence than the use of self-employed auditors?

Annabelle Ewing

Is it a better guarantor? It would at least provide the same guarantee of independence.

My reading is that the issues tend to be about accountability. For example, the freedom of information process is not available at the moment, so there are issues of transparency to consider as well as the need to ensure better consistency. A number of practitioners are concerned that the situation can be a bit of a lottery and say that clear guidance would be helpful.

On the status of the auditors, we advocate that there should be salaried positions in the Scottish Courts and Tribunals Service. Auditors should not make a private profit out of a public service, which is the position at the moment.

The provisions that we have introduced will ensure greater transparency and consistency in this very important part of the court process.

Maurice Corry

Can you offer us an assurance that the current sheriff court auditors will be able to work under their present regulations and arrangements until they choose to retire or until they reach a specific age?

Annabelle Ewing

I am not sure whether the member’s point is to do with the security of tenure, because the auditor of the Court of Session has security of tenure and that has been explained in the documents that we have submitted. The auditor of the Court of Session will remain in tenure until he reaches 65—which I think will be in 2022—or earlier if he decides to go sooner. The position is not the same for the sheriff court auditors, but they would be perfectly able to apply to be a salaried auditor in the Scottish courts and tribunals system. That option would be open to them. We will not be able to get new auditors in place, trained up and operating overnight, so there will be a bit of breathing space. As I say, they will be entitled to apply to become salaried auditors.

Maurice Corry

There will be some overlap until the new system is in place.

Annabelle Ewing

Yes, there will be transitional provisions. We are dealing with existing situations, and we must reflect that in the work that we are doing here.

Ben Macpherson

As the minister did, I remind the committee that I am a registered Scottish solicitor.

Good morning, minister. I have a number of questions about part 4 of the bill, which is on group proceedings. We have heard a variety of evidence, including last week, on the matter. You mentioned that an opt-in system would be easier to implement and more efficient in the short to medium term. You also said that you would be open to looking at an opt-out system in the future. Will you explain why the Scottish Government has chosen to reject the option of an opt-out procedure at this stage?

Annabelle Ewing

The debate on group proceedings has gone on for many decades. I had not appreciated that until I did all my homework—I think that the figure of 30 years was mentioned in that regard. We are keen to make progress, and it was considered that it would be more straightforward to start with an opt-in system.

It is a new procedure for the courts in Scotland, because we do not have group proceedings as such at the moment. We felt that the prudent and more pragmatic course of action would be to start with an opt-in system, which is more straightforward as there is a defined group of claimants—that is not the case with an opt-out system—so we will proceed on that basis. I think that it was Paul Burns of the Legal Services Agency who remarked that, although his preference would be an opt-out system, if it was going to take five years he would rather start with an opt-in system so that we could make some progress. The fact that it is more straightforward to start with an opt-in system is driving our pragmatic approach.

Scotland is a smaller jurisdiction than some of the others that, by way of comparison, have been mentioned in reference to the issue. Court rules will need to be drawn up, which is not an overnight process. However, it will be more straightforward, over a shorter period of time, to come up with a package of court rules that deal with opting in than it would be to try to come up with a package of rules for opting in and opting out. That would take much longer given how long it has taken for a final conclusion to be arrived at for various court rules. There will be a consultation on the court rules, so there will be an opportunity for people to comment.

That is our thinking behind putting in the opt-in procedure at this point. As the member said, we will keep the opt-out approach under review, but it is important to start somewhere and to make progress on that basis.

Ben Macpherson

That pragmatic management approach is important. What is striking in the evidence is that the opt-in procedure is more accessible for communities but there might be an administrative burden when it comes to consumer and environmental cases, so it is reassuring that the Government will keep an open mind on that. I agree that the opt-in procedure was welcomed last week. There was also a sense that an opt-out system would be preferable in the longer term.

Witnesses also highlighted that funding group proceedings could be a problem and that, historically, it has been a problem. Does the Scottish Government plan to develop any support mechanisms to tackle that, perhaps with a specific fund?

Annabelle Ewing

The funding arrangements would be legal aid or success fees; that is the general approach. There would be a requirement to amend the current legal aid rules, and the on-going legal aid review might have certain views on that.

Going back to the general view of opt-in and opt-out approaches, it seems to me, from reading the evidence, that every stakeholder supports an opt-in system. That includes the Law Society of Scotland, which changed its mind on the issue. The one stakeholder that has not supported opting in and prefers opting out is the Which? organisation. It is important that the weight of stakeholder agreement suggests that, for pragmatic reasons, stakeholders would accept proceeding with an opt-in system in the first instance, although that is not how they would wish to proceed in the long term.

Ben Macpherson

You mentioned that the detailed rules on group proceedings will be developed by the Scottish Civil Justice Council. Will the Scottish Government have any control over that process?

Annabelle Ewing

It will not have control as such, because there is separation from the courts. However, we will have input to that process. We have representation on the Scottish Civil Justice Council and its various sub-committees, and there is wider representation on the Scottish Civil Justice Council of consumers and various other stakeholders. We will have input into the process, but we will not control it, as it is not appropriate for us to control the courts because of the separation of powers.

Ben Macpherson

Nevertheless, in the interests of access to justice, it is important to provide some reassurance to us and to stakeholders. There have been calls to develop a group proceedings element in Scots law for over 35 years, but it is happening only now. Although we welcome that, if the Government will not have—rightly, due to separation of powers, as you say—direct control over the process, are you confident that the latest initiative will not be bogged down in detail or kicked into the long grass?

Annabelle Ewing

I do not believe that it will be kicked into the long grass. People want it to happen, and now is seen as the moment for us to really get a shiftie on—sorry, that is perhaps not appropriate language for the Official Report.

As we have done before, we will issue a policy note that will give a clear idea of the Government’s general sense of direction and its thinking on the matter. I am happy to reflect on whether there might need to be some other language to that effect in the bill to give a clearer steer. The matter will definitely not be kicked into the long grass; we want it to happen and the stakeholders want it, too.

The Convener

Liam, do you have a declaration to make?

Liam Kerr

Yes. Forgive me, minister. Before I put my questions to you, I intended to declare an interest as a solicitor with a current practising certificate with the Law Society of England and Wales and with the Law Society of Scotland.

The Convener

There is one final question. The Delegated Powers and Law Reform Committee raised concerns about the unusually wide scope of section 7(4), which will enable amendments to be made to part 1 through secondary legislation. Can you provide specific examples to explain why the modification of part 1 under that delegated power is necessary and proportionate?

Annabelle Ewing

I know that officials are aware of those issues. I do not know whether Hamish Goodall would like to say something now or whether we could write to the committee on the matter. [Interruption.] I am getting advice that it is quite a technical issue, so perhaps we could write to the committee.

The Convener

The unusually wide scope of that section is certainly of concern.

Annabelle Ewing

We are happy to write to the committee, which we will do in short order.

The Convener

We will be happy to receive that advice.

As there are no further questions, that concludes our consideration of the bill. I thank the minister and her officials for attending.

Our next meeting will be on Tuesday 5 December, when we will take closing evidence from the minister on the Offensive Behaviour at Football and Threatening Communications (Repeal) (Scotland) Bill and consider a draft report on stage 1 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. As we did not complete the stage 2 amendments on the Domestic Abuse (Scotland) Bill, we will complete those on 5 December, too.

Meeting closed at 12:42.

21 November 2017

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14 November 2017

21 November 2017

Justice Committee Stage 1 report

Find out what else the Justice Committee is doing.

What is secondary legislation?

Secondary legislation is sometimes called 'subordinate' or 'delegated' legislation. It can be used to:

bring a section or sections of a law that’s already been passed, into force
give details of how a law will be applied
make changes to the law without a new Act having to be passed

An Act is a Bill that’s been approved by Parliament and given Royal Assent (formally approved).

Delegated Powers and Law Reform committee

This committee looks at the powers of this Bill to allow the Scottish Government or others to create 'secondary legislation' or regulations.

It met to discuss the Bill in public on:

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23 January 2018:

Read the Stage 1 report by the Delegated Powers and Law Reform committee published on 9th November 2017.

Find out what else the Delegated Powers and Law Reform Committee is doing.

Debate on the Bill

A debate for MSPs to discuss what the Bill aims to do and how it'll do it.

Stage 1 debate on the Bill transcript

The Presiding Officer (Ken Macintosh)

The next item of business is a debate on motion S5M-09894, in the name of Annabelle Ewing, on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill.

14:24

The Minister for Community Safety and Legal Affairs (Annabelle Ewing)

I am pleased to open the stage 1 debate on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I thank all the members of the Justice Committee for their careful consideration of the bill thus far. I also thank the very hard-working clerks on the Justice Committee and the many stakeholders who contributed to the proceedings.

Above all, I express my sincere thanks to Sheriff Principal Taylor for his diligent and thorough review, which lasted more than two years, of the issues to do with the expense and funding of civil litigation in Scotland. Sheriff Principal Taylor was kind enough to give very comprehensive evidence to the committee in spite of on-going health problems. I am sure that we all wish him well.

The context of the review was a 41 per cent decrease in civil litigation in Scotland since 2008-09. We know that, further to the review, the potential costs involved in civil court action can deter many people from pursuing legal action even where they have a meritorious claim.

When the bill was introduced, Sheriff Principal Taylor said:

“The proposals address some concerns which may cause people not to exercise their legal rights and ultimately their right to go to court. The fear of having to pay their own solicitor and also the legal costs of their opponents can be a significant deterrent. This Bill provides for the setting of a straightforward formula, in personal injury and other civil cases, to enable a client to work out what his or her own lawyers can charge. It also removes the risk of having to pay their opponent’s costs in personal injury cases, provided they have acted properly.”

Those contemplating civil litigation need to have more certainty about how they will be able to afford to exercise their rights, and the provisions contained in the bill will make the cost of civil litigation in Scotland more predictable and hence increase access to justice.

The three major reforms proposed in the bill that will bring that about are the introduction of sliding caps on success fees, allowing solicitors to offer damages-based agreements, and qualified one-way costs shifting.

The first proposed reform—the introduction of sliding caps on success fees—has been generally welcomed and, when the time comes to provide the caps in regulations to be made under the bill, I confirm that I am minded to set the levels at those suggested by Sheriff Principal Taylor in his report—that is, up to 20 per cent on the first £100,000, up to 10 per cent on the next £400,000 and up to 2.5 per cent on any amount more than £500,000.

The second major reform proposed will widen the availability of damages-based agreements by allowing solicitors to offer them directly. Currently, damages-based agreements are not enforceable by solicitors but are offered through claims management companies. They have proven to be very popular for those contemplating pursuing a claim, as they are simple to understand. Basically, the client pays nothing up front, but agrees to pay a percentage of the damages awarded, or agreed, to the provider of the legal services. The solicitor will be responsible for all outlays in personal injury actions, such as court fees.

Sheriff Principal Taylor stated in his evidence that one solicitor-owned claims management company has entered into 17,600 new damages-based agreements in the past three years and 23,800 such agreements in the past five years. This, he argued, goes some way towards explaining the rise in the number of claims in Scotland over the past five years, about which some giving evidence to the committee have expressed concern. The Government considers that the enforcement of legal rights by individuals is something to encourage.

While on the subject of claims management companies, I will mention the concern that has been expressed that the bill does not make provision for their regulation. We have, however, been in discussions with the United Kingdom Government about the extension to Scotland of the regulation of claims management companies by the Financial Conduct Authority, as proposed in the Westminster Financial Guidance and Claims Bill. I am pleased to say that appropriate amendments were accepted during the bill’s third reading in the House of Lords. Claims management companies will therefore be regulated in Scotland more quickly than would have been the case through our initial approach, which would have involved relying exclusively on the work of the Esther Robertson review of legal services regulation. However, at this stage, I cannot give a definite date when the Westminster legislation will be implemented.

The third major proposed reform is the introduction of qualified one-way costs shifting in personal injury cases. The vast majority of defenders in personal injury actions are well resourced and the majority of pursuers are of comparatively limited means. Although very few claimants are pursued for expenses by successful defenders, there is always a risk to a pursuer that they would be liable for considerable expenses and could face bankruptcy if they lose. Sheriff Principal Taylor’s review confirmed that there is real fear of that in the minds of potential pursuers, which stops too many meritorious claims from getting off the ground. Qualified one-way costs shifting removes that risk, so long as the pursuer and his or her legal team conduct the case appropriately.

The tests by which the benefit of qualified one-way costs shifting can be lost by pursuers due to their behaviour have been the subject of varying views from witnesses before the committee. Broadly, representatives of insurers have suggested that the bar is too high, while representatives of claimant groups have suggested that it is too low. We are therefore considering amendments at stage 2 to make it clearer that the Wednesbury test of reasonableness recommended by Sheriff Principal Taylor is to be applied to determine whether the benefit of qualified one-way costs shifting might be lost.

The bill also makes provision for the potential payment of expenses by third-party funders, which is intended to ensure that venture capitalists, whose only interest in a case is commercial, will be subject to adverse awards of expenses. There have been concerns that awards of expenses will be made against trade unions and providers of success fee agreements. That is not the Government’s intention; indeed, as trade unions have no financial interest in the proceedings, they will not, as the bill is drafted, be subject to such awards. We will, however, consider amendments at stage 2 to make it clear that trade unions and providers of success fee agreements will not be liable for expenses. Moreover, Sheriff Principal Taylor recommended that all funding of litigation be disclosed, and amendments will be considered to broaden the requirement for disclosure.

Part 3 of the bill relates to auditors of court, who determine a successful party’s expenses in litigation by order of the court or where there is a dispute with their opponent—a process referred to as taxation. The Scottish civil courts review, headed by the former Lord President, Lord Gill, expressed concern that the auditor of the Court of Session and the sheriff court auditors were able to make private profit out of a public office that provides a public service. The bill’s provisions will remedy that situation by providing that auditors will, in future, be employees of the Scottish Courts and Tribunals Service. Auditors of court who are currently self-employed will remain so until they retire, if they so wish; however, in future, auditors will be appointed under the same civil service rules that apply to the appointment of other officers of court.

Auditors will continue to have functional independence as part of the Scottish Courts and Tribunals Service and the auditing process will continue as it has in the past. As part of the service, auditors will be independent of the Scottish ministers in the same way as the rest of the service, which is an independent body corporate under the Judiciary and Courts (Scotland) Act 2008. Provision for an annual report on the activities of court auditors will make the system of taxation of judicial accounts more transparent.

Finally, I want to say a word about group proceedings. I am pleased that the proposal to introduce class actions to the Scottish courts has broad support. I am convinced that the best way forward at this time is to introduce an opt-in system, as it is prudent when introducing a new procedure in the Scottish courts to select the option that will be more straightforward to implement and will therefore not cause undue delay in getting the procedure off the ground. Opting in means that individuals must have explicitly chosen to be part of the group, having weighed up the benefits and possible disbenefits of doing so. The approach has been supported by an overwhelming majority of stakeholders, including the Faculty of Advocates, the Law Society of Scotland, the Scottish Trades Union Congress, the Association of Personal Injury Lawyers and the Forum of Insurance Lawyers. Of course, we have not ruled out considering an opt-out procedure at a later date, once group proceedings have bedded in.

In summary, the bill seeks to put in statute approximately half of the recommendations in Sheriff Principal Taylor’s review. Some of his recommendations, for example on sanction for counsel, have already been implemented in the Courts Reform (Scotland) Act 2014, while the remainder will be considered for potential rules of court by the Scottish Civil Justice Council.

As I have mentioned, the civil justice statistics for Scotland show an overall—and continuing—decrease in civil litigation in Scotland of no less than 41 per cent since 2008-09. That should be a source of concern for all those who care about the provision of access to justice in Scotland and, indeed, the health of our Scots civil law jurisdiction. The bill will therefore implement Sheriff Principal Taylor’s major recommendations to begin to address this situation by making the cost of going to court more affordable, more predictable and more equitable.

I move,

That the Parliament agrees to the general principles of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill.

14:34

Margaret Mitchell (Central Scotland) (Con)

I am pleased to speak on behalf of the Justice Committee in this stage 1 debate on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I begin by thanking all the witnesses who provided evidence to the committee. I also thank the Delegated Powers and Law Reform Committee for its report, which we endorsed. I pay particular tribute to the Justice Committee clerks, who have done a superb job in producing the stage 1 report on what is a technical and complicated bill.

By changing the rules on how people can fund their claim and the costs that they could be liable to pay the other side, the bill will directly affect many thousands of people in Scotland who bring a civil claim. The bill’s principal policy objective is to improve access to justice. The committee considers that, on balance and despite conflicting evidence, there are problems with access to justice in respect of civil litigation. However, it also considers that more up-to-date research on the consumer experience of legal services in Scotland is required in order to properly inform future policy.

I turn to the detail of the bill. The bill will regulate success fee agreements, which are often known as no-win, no-fee agreements. For the first time, solicitors in Scotland will be allowed to enforce damages-based agreements where the solicitor receives a percentage of the compensation awarded to their client if the case is won. One of the committee’s key concerns relates to the approach that the bill takes to damages for future loss in personal injury cases. For example, damages can cover lost earnings while an injured person is off work recovering. In more serious personal injury cases, damages can cover the loss of all future earnings, as well as care and medical costs. The bill will allow a solicitor to include damages for future loss when calculating their success fee, subject to certain conditions. Here, the bill implements Sheriff Principal Taylor’s considered recommendations, but the committee remains concerned that the failure to ring fence damages for future loss could reduce the money available to a person to pay for their future care and medical support. The committee therefore asks the Scottish Government to reconsider that approach.

The bill will also introduce qualified one-way costs shifting, known as QOCS. That means that, provided that the pursuer has acted appropriately, they will not be liable for the defender’s expenses if they lose their case. Committee witnesses had starkly opposing views on the introduction of QOCS. Pursuers’ representatives argued that QOCS is necessary to redress the David and Goliath relationship between pursuers, who tend to be individuals with little experience of the legal system, and defenders, who tend to be insurance bodies. However, representatives of defenders and insurers argued that QOCS could have adverse unintended consequences and could facilitate a compensation culture in Scotland.

The committee was persuaded that QOCS could improve access to justice for pursuers, but it considered that that must be balanced by other safeguards to prevent any rise in fraudulent claims—for example, through the introduction of pre-action protocols in certain cases to safeguard against fraudulent claims without adversely affecting access to justice. Crucially, the committee asked the Government to commit to post-legislative scrutiny of the bill.

The regulation of claims management companies is a vital safeguard against any rise in fraudulent claims. Regulation was introduced in England and Wales in 2007, but there is no regulation of claims management companies in Scotland. Witnesses spoke about the negative impact of the practices of some claims management companies on Scottish consumers, particularly as a result of cold calling, which Sheriff Principal Taylor stated was

“the biggest mischief of claims management companies.”—[Official Report, Justice Committee, 31 October 2017; c 15.]

In addition, research from Which? reveals that Scottish cities suffer the highest number of nuisance calls in the UK.

The UK Financial Guidance and Claims Bill, which will strengthen the regime in England and Wales by transferring responsibility for regulation to the Financial Conduct Authority, was being considered at the same time that the committee was considering the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. Following correspondence between the committee and the Minister for Community Safety and Legal Affairs, the UK bill has been amended to extend regulation by the FCA to claims management companies in Scotland. Nonetheless, there remains a potential regulatory gap that could have detrimental consequences for Scottish consumers if the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill is implemented before such FCA regulation is in place. The committee therefore recommends that the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill should not be implemented until claims management companies in Scotland are regulated.

The bill allows group proceedings or multiparty actions to be brought in Scotland for the first time. Although that is welcome, to improve access to justice, the bill allows group proceedings to be brought only on an opt-in basis—that is, a person must expressly consent to being part of the action. In an opt-out system, the court agrees the definition of those affected, and anyone who is covered is deemed to have consented to court action on their behalf unless they expressly opt out.

The committee recognises the Government’s pragmatic reasons for starting with an opt-in approach. However, given the strong evidence from Which? on the benefits of an opt-out approach for low-value consumer claims, the committee considers that there could be advantages in the court deciding whether proceedings are to be opt in or opt out.

So far, the minister has made no commitment to post-legislative scrutiny, to commissioning more consumer research, to changing policy on future damages, QOCS and uninsured defenders, to delaying the bill’s implementation until the claims management companies are regulated, and to amending the bill to ensure that only regulated bodies can offer success fee agreements. Although the committee unanimously agrees with the general principles of the bill, it asks the Scottish Government to give serious consideration to the above recommendations to ensure that access to justice is improved and unintended consequences are avoided.

14:41

Liam Kerr (North East Scotland) (Con)

At the outset, I declare an interest: I am a practising litigation solicitor and hold practising certificates with the Law Society of Scotland and the Law Society of England and Wales.

I am pleased to open for the Scottish Conservatives and to speak in favour of the principles of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. The Scottish Conservatives are committed to the principle of access to justice. Anything that ensures that those who have rights are better able to avail themselves of those rights must be a good thing.

In the 2013 Taylor review, Sheriff Principal Taylor concluded that there would often be a David and Goliath relationship that prejudiced the attractiveness and prospects of litigation for those with rights. He made 85 recommendations on funding civil litigation in Scotland, and the bill seeks to introduce some of them.

However, there are a number of areas in which the bill can be improved. First, like the Justice Committee, I am concerned about the lack of ring fencing for future loss and the consequent potential for award erosion. Under the bill as drafted, compensation that is intended to pay for the care of a seriously injured litigant will be reduced by a cut going to their solicitor. That could lead to injured parties being undercompensated and not receiving the full value of the damages that a court awards. We should bear in mind the fact that future losses are an assessment of what might be required to pay for future care needs. It could also lead to courts overcompensating claimants by increasing the damages award to negate that carve-out, or the statement of valuation of claim could perhaps be inflated to offset the deduction.

Many have expressed their concern over those points, including the Forum of Insurance Lawyers, which argued that

“To apply a crude percentage deduction from such huge sums could result in an enormous windfall for the solicitor and a funding gap (and significant anxiety) for the injured pursuer.”

I therefore agree with the Justice Committee’s recommendation that the future loss part of any award should be ring fenced and, notwithstanding the Scottish Government’s response to the stage 1 report, I urge further consideration of the matter.

The second question that merits further reflection is whether there are sufficient safeguards in place around QOCS to prevent a rise in unmeritorious and/or fraudulent claims. Some evidence suggests that, in Scotland, the number of personal injury claims has risen significantly during the past seven years, without QOCS. Logically, removing the financial risk in raising a claim will result in a further increase as access to justice is increased. By extension, there will, of course, be a rise in the number of fraudulent or unmeritorious claims. As drafted, the bill does not sufficiently define the circumstances in which a pursuer will lose QOCS protection. We therefore support the proposal from Sheriff Principal Taylor and the Justice Committee that section 8(4) should make it clear that the benefit of QOCS would be lost in fraudulent situations when the pursuer fails to beat a tender and when a pursuer’s claim is summarily dismissed.

I welcome the amendments to the Financial Guidance and Claims Bill, which will provide for the regulation of claims management companies in Scotland. That is a sensible move that will provide Scottish consumers with the same level of protection against nuisance calls that consumers in other of the UK receive.

However, reasonable concern has been raised that if the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill comes into force before UK-wide regulation is in place, there will be a regulatory gap, whereby there are no rules governing the activities of claims management companies in Scotland. According to Which?, that could lead to more claims management companies registering in Scotland, leading to even more nuisance calls for Scottish consumers and leaving Scottish consumers open to harmful practices by rogue firms. I hope that the Justice Committee’s recommendation that the bill should not be brought into force until UK-wide regulation of claims management companies is in place is looked upon favourably at stage 2.

Finally, I am concerned at the lack of detail in the financial memorandum on the cost implications for public bodies—in particular, the national health service. NHS Greater Glasgow and Clyde argues that a more comprehensive analysis of future costs is “essential” to quantify the financial impact. The Medical and Dental Defence Union of Scotland argues that QOCS, if introduced, will mean that NHS resources will be taken up in defending unsuccessful claims, rather than spent on delivering services to patients.

The purpose of the financial memorandum is to assess the financial implications for public bodies. It is surely possible to calculate the total number of claims made against public bodies and then to calculate the increased cost to the taxpayer if there is, for example, a 5 or 10 per cent uplift in the number of claims. Like the Justice Committee, I urge the Scottish Government to undertake more detailed modelling on the likely impact of the bill.

The general principles of the bill are sound and I shall vote accordingly today. However, there are some flaws, and we hope that the Government will reflect on the debate and lodge appropriate amendments.

14:47

Daniel Johnson (Edinburgh Southern) (Lab)

Before I begin, I draw members’ attention to the fact that my wife is a practising solicitor.

Justice that is only open to those who can afford it is not justice at all. A critical component of any justice system is the ability to seek redress against third parties who have harmed an individual or their interests. That is a fundamental point of the civil justice system, and we must ensure that that ability is available to as many people as possible. As Sheriff Principal Taylor put it:

“Court action is always going to be stressful for litigants. Much of the stress is a fear of the unknown: ‘Will I win my case and if I don’t, what will it cost me?’”

The Taylor proposals represent a sensible way of increasing certainty and rebalancing the risks, particularly through qualified one-way costs shifting. The bill takes forward those proposals and has the potential to mark a significant improvement in the ability and confidence of individuals to seek justice, so Labour will be supporting it at stage 1 at decision time.

However, as the bill progresses, we would like improvements to be made on a number of issues. In particular, we feel that trade unions must be explicitly exempted in section 10; that more could be done on the predictability and affordability of court fees; and that improvements might be possible with regard to group litigation.

For many people who pursue a case involving their employment or workplace, seeking assistance from their trade union is the single most important step that they will take. Trade unions provide support to the individual and can help them to meet their financial costs, so the role of trade unions in this area is highly complementary to the aims and objectives of the Government in introducing the bill.

It is right that the bill seeks to ensure that speculative involvement by third parties is limited or excluded from the changes, but trade unions are not a corporate interest and their explicit exclusion in section 10 is vital. I welcome the minister’s comments in her opening remarks, but I seek a firm commitment and would welcome the minister making such a commitment in her closing speech.

Currently, court fees are incurred and payable on an on-going basis as a case proceeds. The pay-as-you-go model can prove to be an insurmountable barrier, even for those with a good chance of success, as they find that that cash-flow hurdle stops them taking their complaint to court. One way to address that could be by making fees payable only at the end of litigation, and the Government could consider whether they should be payable only if the case is successful, with fees being recovered from an unsuccessful defender.

The provision for group proceedings on an opt-in basis is welcome, but further consideration should be given to adopting an opt-out model. The consumer group Which? contends that, given the often low value to individuals in consumer claims and the lack of awareness or knowledge of the claims process, individuals might not choose to opt in. The Government should clarify its thoughts on the area and give those proposals serious consideration.

There are two areas of very real concern: the financial memorandum and the provision for delegated powers. Although nobody would wish for the NHS, the Parliament or any other public body to have increased costs, making it easier to pursue litigation clearly gives rise to the risk of an increase in the number of court actions that are taken against the public sector. The financial memorandum must be improved to include actuarial projections and risk-based forecasting to assess the possible financial impact on the public purse.

Liam Kerr

I agree with the point that the member has just made. As an extension of that, does he recognise the evidence that was given to the committee that the bill could increase insurance premiums? Does he agree that that is an unintended consequence that the Government needs to reflect on before the next stage?

Daniel Johnson

Naturally, any action that could increase the volume of civil litigation has that potential consequence. I was going to come on to the fact that there needs to be post-legislative scrutiny of the impact of the legislation and the general environment. I very much agree with the member on that point.

The Delegated Powers and Law Reform Committee concluded in its report on the bill that the provision in section 7(4) would enable the Government to amend part 1 of the bill and in that regard is “unusually wide”. Parliament must protect its right to legislate and hold the Executive to account, and section 7(4) must be amended to ensure that that happens.

The bill is welcome, and we all hope that it leads to greater access to justice. However, as I have just remarked, it is vital that Parliament reviews the impact of the changes, as there might well be unintended consequences, such as an increased compensation culture or a greater number of vexatious or weak claims. For that reason, the Government should commit to a review of the legislation in five years, particularly of qualified one-way costs shifting and damages-based agreements.

We support the aims and objectives of the bill and we will vote for it, but we ask the Government to consider our constructive comments so that the bill can be improved as it progresses through Parliament.

The Presiding Officer

We move to the open part of the debate.

14:52

Rona Mackay (Strathkelvin and Bearsden) (SNP)

I support the general principles of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill at stage 1, because the purpose of the bill, which can seem complex and which is hard to boil down into a four-minute speech, is to increase access to justice and, in my view, that can never be a bad thing.

There is a need for civil litigation to be more accessible and affordable to everyone. How many times have we heard about people being put off bringing an action because they say that they cannot afford it? Since 2008-09, there has been a decrease of 41 per cent in civil litigation and, in my view—and, more importantly, in Sheriff Principal Taylor’s view—that is based on a fear of the costs that are involved.

I will briefly outline what to me seem the most relevant points in the bill. I am aware that other members will focus on one or two more specific issues. To me, the most relevant points are damages-based agreements, the power to cap success fees, damages for future loss, qualified one-way costs shifting, the regulation of claims management systems and group proceedings.

On damages-based agreements, the set-up of a Law Society of Scotland working group will work to protect against conflicts of interest. It is vital that the pursuer is aware of the full range of funding options that are open to them.

The bill includes the power to cap success fees, which means that clients are not required to pay two success fees from damages obtained. I am pleased that the Government has committed to consider whether legislation is required to ensure that caps would apply.

On damages for future loss, much of the committee’s evidence and questioning surrounded whether those should be ring fenced when calculating solicitors’ fees, particularly when someone has been injured so severely that they require lifelong care. As has been said, the committee is asking for that provision.

The bill introduces qualified one-way costs shifting for personal injury claims. Under QOCS, a pursuer is not liable for the defender’s expenses if they lose but can still claim for their own expenses from the defender if they win.

We heard opposing views on the introduction of QOCS. Supporters of its introduction argue that it is necessary to redress the David and Goliath relationship in personal injury cases between pursuers, who tend to be individuals with little or no experience of the legal system, and defenders, who tend to be insurance bodies. People who are against the introduction of QOCS argued that it could have unintended consequences and, in particular, could facilitate a compensation culture or fraudulent claims in Scotland. I believe that QOCS will improve access to justice for pursuers, but the committee heard concern about that. However, I agree with Sheriff Principal Taylor’s oral evidence that it would not facilitate a compensation culture or fraudulent claims, among other reasons because a solicitor would not take on a case that had little prospect of recovery.

I am pleased that the Government will consider amending section 10 of the bill to protect third-party funders such as trade unions or public bodies so that they are not affected by the introduction of QOCS.

We are all aware of the prominence of claims management companies and the negative impact of cold calling on customers, so I am encouraged that regulation will be introduced for claims management companies in Scotland. Apart from deterring nuisance calls, that will discourage spurious court actions. This year, £125,000 was provided to fund call blocking for people who are identified as vulnerable. The Government agrees that the Law Society should make it clear to solicitors that a case referred by a claims management company must not be a result of cold calling.

The bill will also allow one set of court proceedings to be brought on behalf of two or more people with similar claims—referred to as group proceedings—which the committee welcomed. It will allow group proceedings to be introduced only on an opt-in basis, whereby the pursuer must express their consent to be part of the action, as opposed to an opt-out system, in which the court agrees a definition of the people who are affected by the proceedings. It is simpler for an opt-in system to be introduced in the first instance.

The Deputy Presiding Officer (Christine Grahame)

I am sorry, but you must conclude.

Rona Mackay

The bill will facilitate access to justice, and I am happy to recommend its general principles to the chamber for that important reason.

The Deputy Presiding Officer

The previous item of business overran, so we are on tight four-minute speeches.

14:57

Maurice Corry (West Scotland) (Con)

Ensuring that everyone has suitable access to justice is a principle that is vital to an open democracy, and it is one that I and the Scottish Conservatives are deeply committed to maintaining. That is why I will join my Conservative colleagues in supporting the bill at stage 1, but only on the understanding that the Government will lodge amendments during stage 2 to address the flaws that we are all aware exist in the bill.

Everyone accepts that the bill’s aims and objectives are well intentioned. The Association of Personal Injury Lawyers argued:

“the fear of swingeing expenses awards … currently results in cases not being brought or routine undersettlement in our jurisdiction”.

Unison Scotland similarly stated:

“the risk of being exposed to that legal bill is a real barrier to access to justice even to members supported by their trade union.”

As Ronnie Conway of the Association of Personal Injury Lawyers pointed out, the number of personal injury claims in Scotland has increased in the past few years. However, he emphasised that it was from “a very low base” and that the rate of claims per head of population in Scotland remains well below that in England. That view was shared by Sheriff Principal Taylor, who said that he had

“no doubt … that the fear of an adverse award of costs inhibits people from exercising their legal rights.”—[Official Report, Justice Committee, 31 October 2017; c 17-18.]

There is also a general consensus that the bill has the potential to improve access to justice. In its written submission, the Law Society of Scotland stated that the bill had

“the potential to significantly increase access to justice.”

Nevertheless, improvements will be required to ensure that the bill does not cause issues while solving others.

One potential issue, on which I would be interested to hear from the minister in her closing speech, is the potential for the bill to result in an increase in insurance premiums for the Scottish people. If there is a large increase in court action because there is no financial risk in going to court, insurers will pick up the cost of more court cases. That would increase their overheads, and I worry that it would lead to price pressure on premiums for everyone in Scotland.

In addition, I am interested to hear from the minister about what thought she has given to ensuring that proper resourcing follows group proceedings because of the possibility that they will require correspondingly greater judicial preparation time and consistent management by a nominated judge who deals with those particular proceedings. The increases in court delays, with only three courts—Portree, Lerwick and Lochmaddy—managing to meet the 26-week target for 100 per cent of cases in any month in 2017 is of particular note. It would be a comfort to us and the professional person working in the courts service to know that the Government has started to think about and plan for proper and effective resourcing.

I welcome the bill and its intentions, but I would like to hear from the minister on the issues that I have raised.

15:00

Fulton MacGregor (Coatbridge and Chryston) (SNP)

I speak in this debate as a member of the Justice Committee and, like others, I want to put on record my thanks to those who provided evidence during the course of the scrutiny of the bill.

I am pleased that the committee agreed to the general principles of the bill, and we have made some suggestions about how it can be improved. The balance of evidence that we heard suggested that there is an access-to-justice issue in Scotland, and the bill, carrying out the conclusions of the review of Sheriff Principal Taylor, seeks to address that.

Many people are put off pursuing legal action even when they have a genuine claim. As mentioned by the minister, civil justice statistics from 2015-16 demonstrate a decrease in civil law cases initiated across the Court of Session of 41 per cent from the 2008-09 figures, and we should all be worried about that. Many people fear that they will have to pay the solicitor and defender if they lose a case, and I cannot help but think that the current issues around austerity, welfare and other financial factors are at play here. On that basis, I would say that we need the bill, and I am glad that the committee has agreed to its principles.

Like Rona Mackay, I want to concentrate on the bill’s introduction of qualified one-way cost shifting for personal injury claims. Under that arrangement, the pursuer is not liable for the defender’s legal expenses if they lose, but can still claim the expenses from the defender if they win. On balance, the committee is persuaded that the introduction of QOCS could improve access to justice for pursuers, but notes concerns that it could have unintended consequences, as mentioned by Daniel Johnson for example, including a rise in unmeritorious and fraudulent claims. However, the arguments for QOCS were much stronger, and included the rectification of the David and Goliath situation that was raised by the Association of Personal Injury Lawyers and was referenced by Sheriff Principal Taylor. Further, during the committee’s sessions on the bill, Unison said that the issue was the cornerstone of Sheriff Principal Taylor’s report.

There were arguments against QOCS, such as those from the Glasgow Bar Association, which legitimately had concerns about weak claims because of a nothing-to-lose attitude. The main argument against QOCS, as I could tell, was that there would be a rise in spurious claims. However, we heard evidence from many people, such as Patrick McGuire of Thompsons Solicitors Scotland and Paul Brown of the Legal Services Agency, who argued that it was unlikely that there would be a rise in such claims, that the bill would protect against that and that the majority would indeed be genuine. As a further safeguard, as Daniel Johnson mentioned, the committee has asked the Government to consider post-legislative scrutiny of the bill, including of QOCS, at the five-year mark.

Liam Kerr

Does the member therefore support the expansion of the test for fraud in section 8(4), as Sheriff Principal Taylor recommended?

Fulton MacGregor

I am not going to comment on that at this stage. My point was on QOCS and the David and Goliath situation.

The David and Goliath argument really resonated with the committee and I note that that particular argument resonated with Liam Kerr. I think that we were all agreed on that issue and it was good that the committee was in agreement on that. We should be united in trying to restore a balance to access to justice.

However, what about cases where there is not a David and Goliath situation? I think that those situations were referred to at one stage as David v David. The Faculty of Advocates argued, for example, that QOCS should only be available in claims against public bodies and insured defenders. The committee therefore asked the Government to consider that as an option, but I welcome the Government’s response, which highlights why it is not minded to change its position. Some reasons that it gave were that defenders may

“choose not to be insured when they should be; take a larger excess than they should; or breach the terms of their policy so that the insurance company will not act”.

I note those concerns. The Government’s arguments for not being minded to change its position have been laid out well.

15:04

Mary Fee (West Scotland) (Lab)

I thank the Justice Committee and its clerks for the informative stage 1 report that was produced for the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill.

As a member of the committee during the evidence sessions and the drafting of the report, I heard from a wide range of voices that supported the bill. I am no longer a member of it, but I take this opportunity to pass on my best wishes to the committee as it continues its work.

Scottish Labour welcomes the bill and its aim of improving access to justice. The Scottish Government’s commitment to justice reform is commendable and the bill shows that the Government’s intent is honourable. Sheriff Principal Taylor’s detailed review, which shows the challenges facing Scots in accessing civil justice, is also welcome. During committee discussions about the bill, there were conflicting views on whether there was a problem with access to justice. I am glad that the majority opinion backed the position of Sheriff Principal Taylor, the Scottish Government and the bill.

However, as highlighted by the committee and previous speakers, there are numerous areas where the bill must be improved. That was acknowledged by the minister in the Government’s response to the stage 1 report. The most notable issue is with section 10. As a trade unionist, I deeply value the role played by unions in supporting members to access justice. I would like section 10 to be amended to make it explicit that the power to award expenses against third-party funders does not apply to trade union-funded litigation. I welcome the fact, as stated in the Government’s response to the stage 1 report, that the minister is considering amending section 10, and I am grateful for the minister’s comments on the issue today, but we need a clear commitment that no trade union or trade union member will suffer any unintended consequence of the bill.

It is commendable that the imbalance between individuals and large insurance firms is being redressed. The regulation of success fee arrangements is a step in the right direction to tilt justice back in favour of the individual. The introduction of qualified one-way costs shifting, or QOCS, will also help to address the imbalance.

The committee has rightly raised concerns about possible unintended consequences, such as a rise in unmeritorious and fraudulent claims. I have sympathy with the minister’s position in her response to the committee’s concerns, but I believe that the Scottish Government must be vigilant after the bill has been enacted, to ensure that the committee is not proved right and that pursuers are not at a loss because of unmeritorious claims.

I support the Government’s ambition to improve access to justice for all. I hope that the concerns raised today and in the committee report are properly considered and that the right safeguards are there for pursuers and solicitors against conflicts of interest.

The Deputy Presiding Officer

At this rate, we are making up time at an accelerated pace. Members should not take that as a licence to go over their time.

15:07

Mairi Gougeon (Angus North and Mearns) (SNP)

It is fair to say that this is one of the more complex matters that the committee has dealt with. It is probably also fair to say that it is an issue that does not pick up a lot of traction or interest in the press or among the public. When we say civil litigation, sometimes it feels like people’s eyes tend to glaze over. That is unfortunate, because it is a vitally important issue that is about fairness and access to justice. The legislation that we are looking at today could affect any one of us at any given time.

The element of the bill that I will focus on today is section 8 and the proposed introduction of qualified one-way costs shifting, or QOCS, for personal injury cases. Others have already talked about QOCS. In Scotland, we follow the principle that expenses follow success, and that the unsuccessful party in a case should bear the legal costs of the successful party. There are situations where that does not apply, such as when the unsuccessful party is in receipt of legal aid, has before-the-event insurance or is supported by a trade union. However, that is not always the case.

After-the-event insurance is another option. It can be purchased by the pursuer before any significant legal costs are incurred, but it is often prohibitively expensive—it can cost as much as 60 per cent of the cover sought. People can therefore be prevented from bringing forward a claim because they are effectively being priced out of taking any action for fear of the legal expenses that they might incur. It is because of that, along with the view that in personal injury cases the pursuer tends to be an individual versus a large organisation or insurer—the David v Goliath scenario—that Sheriff Principal Taylor, in his review of expenses and funding of civil litigation in Scotland, argued for the introduction of QOCS in relation to personal injury claims.

The introduction of QOCS will essentially mean that there will be no risk to the pursuer in bringing forward a claim. During our evidence sessions we heard fears that that would result in a rise in spurious claims, though that was refuted by some, such as Thompsons Solicitors, which stated that it was quite simply not in their interests to take forward a claim that had little chance of success or where the defender was an individual, as there would be little chance of recovering expenses.

I had a particular concern that if I, as an individual, was taken to court by someone and the court found in my favour, I could still be liable for the pursuer’s legal fees. The Glasgow Bar Association had similar concerns and felt that QOCS subverts the principle that expenses follow success. As the association put it,

“Not every defender is a Goliath and not all defenders are insured or wish to rely on insurance ... Section 8 would protect even wealthy pursuers. And prejudice even poor defenders.”

Rather than there being a blanket application of QOCS, Simon Di Rollo of the Faculty of Advocates suggested in oral evidence to the committee that in order to create a balanced civil justice regime,

“QOCS could be available only to somebody who is insured, a public authority, somebody who has the backing of the Motor Insurers Bureau or somebody whose means and resources are such to enable them to make payment of expenses.”—[Official Report, Justice Committee, 26 September 2017; c 17.]

However, all those concerns were not shared by Sheriff Principal Taylor when he responded to that issue at committee. He said:

“We can look to England and Wales, where the rules of court are the same as what is proposed here, to find out what has happened there. We have heard of no difficulties with qualified one-way costs shifting being operated as it is proposed to be operated here.”—[Official Report, Justice Committee, 31 October 2017; c 10.]

The system has been operating in England and Wales with no issues having been raised, as far as the committee is aware, which makes the point that he raised hard to argue with.

Consideration of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill has been one of the most difficult pieces of work that we have undertaken, because of the polarising views on each side of the issues raised, so finding a compromise on all of them was never going to be an easy task. I want to add to what my colleagues have said by thanking all those who took time to submit evidence to the committee, and the clerks for pulling it all together.

The introduction of QOCS will be a positive step, and the bill, if passed, will increase access to justice for people in Scotland. That is why I support the general principles of the bill.

15:12

John Finnie (Highlands and Islands) (Green)

I took gratification from the convener saying earlier that the bill was technical and complicated. We have heard that from others, too. The bill has also broadened our parliamentary vocabulary to include QOCS, of which we have just heard an excellent explanation from Mairi Gougeon. I am grateful to all the people who continue to give us briefings, including the Law Society of Scotland, which said of QOCS that

“the basic terms are good and will help provide certainty which is the priority for solicitors.”

We need to have a discussion about the purpose of our legal system, and we did so in the course of examining the bill. It is to serve our citizens, and we heard from the minister that there was a reduction of 41 per cent in the level of litigation. Clearly, there are a lot of interests to be served, not least those of David and Goliath, which have been much mentioned in the debate thus far. Patrick McGuire, representing Thompsons Solicitors, told the committee:

“I have absolutely no doubt that the provisions that are in the bill will enhance access to justice ... Equally important, it will also do what Sheriff Principal Taylor said was his prime focus and what I see as the mischief of the bill, which is redressing the imbalance in the asymmetrical relationship ... between pursuers of personal injury claims and the extremely large, powerful and wealthy insurers”.—[Official Report, Justice Committee, 19 September 2017; c 5.]

The Scottish Government made it clear that the principle of the bill was to create a more accessible, affordable and equitable justice system, and at close of play today the Scottish Green Party will support the general principles of the bill. That is not to say that there are not things that we would wish to see improved, such as issues relating to court fees. Again, Thompsons Solicitors had a clear view on that and suggested that court fees should be treated in the same way as expenses are treated under QOCS, which would mean that pursuers’ court fees would be paid only at the end of the case, and then only when they could be recovered from an unsuccessful defender, so the pursuer would always be protected from liability. If the case was won the defender would pay the pursuer’s fees, and if the case was lost the pursuer would not have to pay court fees.

Money is at the heart of much of what we discussed. We were particularly concerned about issues surrounding future loss, and the committee suggested that that be ring fenced. That is a personal thing and something that could affect a person’s future career prospects, loss of earnings and health projections, and I hope that that can be taken on board.

A number of colleagues have mentioned third-party funders. Clearly, we have heard the assurance from the minister that those were not to include trade unions. That should be expressly said.

I welcome the issue of disclosure of funding, and post-legislative scrutiny, which is also important.

I want to touch on something that the minister will not be surprised to hear me mention, as I seem to mention it on every piece of civil legislation. I refer to the Aarhus convention, and the view that access to environmental justice in Scotland urgently requires a comprehensive response. It is certainly the view of Friends of the Earth Scotland and others that Parliament should extend qualified one-way costs shifting to environmental cases, in order to ensure that bringing such cases is not prohibitively expensive. We know that equality of arms has not applied thus far, and the bill goes some way to addressing that.

Criticism has rightly been directed to the Scottish legal system and its failure to comply with the Aarhus convention. Addressing that was a manifesto commitment of the previous Government. It said that it would consult on it and, in fairness, four years and 50 weeks into its five-year term, it did so. I hope that the minister takes that on board.

I confirm that the Scottish Green Party will support the general principles of the bill.

15:16

Ben Macpherson (Edinburgh Northern and Leith) (SNP)

I declare an interest as a previous practising solicitor who is still registered on the roll of Scottish solicitors, although not practising.

I thank my colleagues on the Justice Committee, the witnesses who gave evidence and the clerks for helping us through the process to this point.

I highly commend the Scottish Government for bringing forward the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill in order to enhance access to justice through a number of means, as we have already heard, and to undertake the constant evolution of our independent legal system to make sure that it keeps in touch with the needs of society and the development of our economy.

As others have done, I will focus on a specific part of the bill—in my case, part 4 on group proceedings, which came out of Sheriff Principal Taylor’s chapter 12 on multiparty actions. As the Scottish Government has said, the bringing forward of group proceedings in Scotland will help to broaden access to justice by allowing a litigant the opportunity to take part in a multiparty action at a lower cost than an individual case. It will also deliver a more streamlined and cost-effective outcome and reduce court time by enabling a number of related claims to be taken forward as one group procedure.

That has support from many stakeholders. As the Scottish Government’s response to the Justice Committee’s report says, the Scottish Law Commission supported group proceedings in the 1990s with the opt-in procedure, which the bill includes at present. That was also supported in written evidence that we received in August 2017 from the Law Society of Scotland, which said:

“The basic proposals for group actions seem sensible and should be able to work for solicitors in practice. A system which proceeds on the basis of ‘opt in’ (rather than ‘opt out’) is a positive development and is welcomed by agents.”

I appreciate that the difference between opt-out and opt-in procedure is a point of contention. I listened attentively in committee to the evidence from Which? on the benefits of an opt-out procedure. We also received an interesting briefing from Friends of the Earth Scotland about the value of an opt-out procedure. I asked a number of questions about that in committee.

However, I am convinced that there are practical issues around introducing a new area of Scots law such as this. There needs to be an opportunity for the legal system to build up experience of group proceedings. An opt-in is better for introducing something entirely new to Scots law.

The Scottish Government’s remarks on legal aid, which we mention in paragraph 396 of our report, are reassuring, but there is a need to keep looking at the matter. I therefore welcome the fact that the Scottish Government has committed to looking at it on an on-going basis. Opt-in is better in order to not cause undue delay now but, as a Parliament and as a society, we need to keep looking at the possible value of using an opt-out system in the future for group proceedings. If there is a commitment to post-legislative scrutiny, which the convener of our committee suggested, perhaps an evaluation of opt-out procedure could be undertaken then.

Finally, I note that the Law Society of Scotland states in its briefing for this debate:

“the question of how issues of expenses in group actions will be dealt with has not been considered in the Bill and, we believe, would be helpful to address.”

I support the principles of the bill.

The Deputy Presiding Officer

For a fleeting moment, Mr Macpherson, I thought that witches had given evidence, but I realised that it was Which? That was quite intriguing, as the bill is about group actions. [Laughter.]

I call Daniel Johnson to close for Labour.

15:20

Daniel Johnson

I should have pointed out at the beginning of my previous speech that I am a trade union member, being a member of both Community and the Union of Shop, Distributive and Allied Workers.

The high degree of consensus in this afternoon’s debate is notable. There is a huge common agreement that we must commit to the reforms in terms of both the specifics and the general principles. Mairi Gougeon put it very well. Quite often, when we discuss these matters, people’s eyes glaze over and they wonder what on earth it means to them, but the reality is that, when someone needs redress and needs to use the courts, it all becomes all too real.

For too many people, both the cost and the complexity of taking court action become prohibitive, and that is why the key measures that the Government is bringing forward in the bill will be helpful. I think that there is broad agreement about the sliding caps, the introduction of damages-based agreement for solicitors, qualified one-way costs shifting and group proceedings. They will improve the transparency of the costs that people are likely to face while pursuing a court case, and they will remove downside uncertainty, provide more options for individuals to access legal services and provide more routes to justice through the introduction of group proceedings. Those things are all welcome.

There has been a lot of talk of QOCS and David and Goliath relationships, but it is the central and key provision. Fulton MacGregor did an excellent job of outlining both the advantages of the introduction of QOCS and the pitfalls. The removal of the awarding of costs to people pursuing a case removes the huge consideration that many people would contemplate, which is clearly of considerable advantage, but it also comes with the possibility of some downsides. Fulton MacGregor provided a balanced analysis of that. The Government will need to watch for what might happen because of the reduction in the threshold for litigation, and the examples of David v David actions need to be considered.

Three key concerns that I did not cover in my opening remarks were well expressed in the debate. First, a number of members pointed out the issue around future losses. One of the key reasons why individuals pursue court actions is that they are facing increased living costs or care costs because of personal injury. It is vital that those people are still able to achieve awards to enable them to support themselves, and any consequences of the bill that led them to find it harder to achieve those awards would be of serious concern. Ring fencing must be looked at.

Likewise, a regulatory gap that might be introduced through the bill passing into law needs to be looked at. It would be absurd if claims management companies descended on Scotland because they found a loophole as we were attempting to democratise the law. Again, that point was well made.

We also heard about the possibility or risks of increased insurance premiums, and that needs to be watched. I mentioned in my opening speech the cost to the public sector. The point about what might happen if there are increased volumes and values of claims needs to be looked at, whether in relation to insurance premiums or costs to the public sector. For those reasons, it is vital that the Government commits to a review.

The points that John Finnie made on the possibility of QOCS for environmental cases were well made. It is clear that that would be of real interest in environmental cases in which communities look for redress. The costs can be prohibitive, and it is worth looking at whether those principles could be extended in those cases.

In conclusion, the measures are welcome and are a positive step forward. We must ensure that the law is accessible and open to all. The bill is but one step. As Ben Macpherson said, we must continually review the law and how it works and seek to improve it, whether there are specific issues or in general. I ask the Government to commit to excluding trade unions from section 10. I know that it has said that it will look sympathetically on amendments, but I would welcome a further and more robust commitment to that. It is also vital that we have a commitment to a five-year review of the legislation as a whole.

The Deputy Presiding Officer

I call Gordon Lindhurst to close for the Conservatives.

15:26

Gordon Lindhurst (Lothian) (Con)

I begin by mentioning my register of interests: I am a practising advocate and a member of the Faculty of Advocates.

I want to provide an anecdote and to mention a mythical creature that has hardly featured in the debate, except in the minister’s speech: the auditor of the Court of Session. I do not know whether anyone else here has appeared before the auditor of the Court of Session, as I have. The auditor has a long history, of course. The office was created by an act of sederunt of the Lords of Council and Session in 1806, and confirmed by an act of Parliament in 1821. I note the minister’s comments and am pleased that she has confirmed that the auditor will remain independent of the Scottish ministers. I want to raise with her one or two brief points on that.

Having acted in a case a number of years ago, I appeared before the auditor of the Court of Session, who can determine whether fees are fair or reasonable. Therefore, I did not appear before the current auditor, but one of his predecessors. The solicitor had questioned the level of fee that I had charged on the basis that it was too much, although I thought that it was reasonable. We went into a room, and the auditor sat at one side of the table. I explained in detail to the auditor why I thought that the fee was appropriate, and the solicitor explained in detail why he thought that it was not. The auditor then basically made a decision as a judge does in a court case. The hearing was very professional, and it did not interfere with the relationship between the solicitor and me, as professionals.

The confidence in the process for the office of auditor of the Court of Session is probably not in question. My confidence in that process was certainly boosted by the outcome of that hearing. The auditor’s decision arrived to my surprise: although I had not asked for it, he decided that my fee was too low, so he increased it. I do not know whether it was for that reason that I never had to appear in front of him again. I should add, of course, that solicitors and I would discuss fees on occasion, because that is normally how one would adjust fees.

I have a question on which the minister may want to give reassurances. Section 13(4) deals with the appointment of an auditor of court. It says that the appointment

“lasts for such period, and ... is on such other terms and conditions ... as the”

Scottish Courts and Tribunals Service “may determine.” My concern about that is whether we will continue to have, as we have had with the previous 13 auditors, someone who is legally qualified and entitled to litigate in the courts, and is therefore in a position to judge matters properly, fairly and appropriately. The auditor holds a sort of quasi-judicial office. I am pleased to see that the auditor’s functions for the whole of Scotland in the auditing of court fees will be retained in the legislation. Will the minister give us an assurance on the length of tenure, which does not seem to be spelled out, and the security of conditions of the office, because the office is an integral part of ensuring that the legislation that is before the Parliament will be properly applied?

I think that most points have been covered in this fairly consensual debate. On the primary purpose of the legislation, which is said to be to resolve disparity between the positions of pursuer and defender, particularly in personal injuries litigations, the question has always been the fear of swingeing expenses awards, similar to those in a court of law. My understanding from the Justice Committee’s report is that the evidence was not entirely clear on that issue, but the committee has clearly come to a view on the value of the proposals based, in particular, on Sheriff Principal Taylor’s view that fear of adverse awards and costs inhibits people from exercising their legal rights.

It is right that members should also bear in mind the other side of the coin: we should avoid creating in Scotland the compensation culture that we see in other jurisdictions, and which is not necessarily of benefit to people who have valid claims. That point was addressed by Justice Committee members Rona Mackay and Fulton MacGregor.

I wonder about the test for qualified one-way costs shifting being based on Wednesbury unreasonableness. Fraud would be a very high standard to apply, but Wednesbury unreasonableness is equally hard in the specifics of a case, when one tries to argue for it before a judge, as I have done. It may be helpful to have more clarity on that test.

I welcome the committee’s proposal that the Government consider extending the mandatory pre-action protocol for personal injury claims. Consideration and definite proposals are needed for post-legislative scrutiny, as Daniel Johnson called for. Margaret Mitchell also touched on the issue on behalf of the committee.

We need to look at the bill very carefully. Liam Kerr referred to David against Goliath cases, but some cases are simply David against David—or, indeed, Goliath against Goliath.

The Deputy Presiding Officer

Before I call the minister, I will say that we will be moving on shortly to the next debate. I do not see any front-bench members or other speakers for the next debate. I hope that they are paying attention, wherever they are, because in eight minutes they had better be on their toes. I call the Minister for Community Safety and Legal Affairs. You have eight minutes.

15:32

Annabelle Ewing

I point members to my entry in the register of interests, wherein they will find that I am a member of the Law Society for Scotland and hold a current practicing certificate, albeit that I am not practising.

I have listened with great interest to the debate and contributions from across the chamber. I welcome the general support that has been expressed for the bill, although I appreciate that some members have concerns. It will be helpful to stress at the outset that the fundamental aspiration of the bill is to ensure that people who contemplate litigation in our civil courts will have more certainty about what it will cost them. With predictability about costs and increased funding options, we seek to address inequality of arms in personal injury cases. Those, in turn, will afford increased access to justice, which, I am pleased to hear, all members support.

The bill has received broad support from stakeholders who represent pursuers and those who represent defenders. I will now, in the time that I have available, which is about seven minutes, turn to issues that have been raised. I may not be able to deal with every issue, but I shall do my best.

On section 10 funding, I thought that I had made it clear at the Justice Committee, and again in today’s opening statement, that we do not intend to cover or encompass trade unions in the obligation. We and the parliamentary draftsmen will reflect on that point very carefully. They take the view that section 10 is clear, but I acknowledge the concerns that have been raised and undertake to ensure that it is absolutely clear that trade unions and legal service providers are not covered.

A number of members raised the important issue of the future-loss element of damages; the Justice Committee asked us to have another think about the matter. It is important to remember that, in his report, Sheriff Principal Taylor gave detailed and careful consideration to the future-loss element of damages and whether it should be paid by way of a periodical payment or a lump sum. Periodical payment orders are currently a matter of practice in our courts, albeit that the court cannot impose a PPO without the parties’ consent. We propose to introduce this year legislation to amend the position. The future-loss element of damages is already ring fenced under the bill’s provisions, because it may not be included in any success fee calculation, if there is a PPO. PPOs tend to be made in cases in which the longer-term care needs of individual pursuers have to be addressed.

Sheriff Principal Taylor concluded that future loss that is to be compensated for in a lump sum

“should not be excluded from the ambit of a damages based agreement”

and the calculation of a success fee under that agreement. He went on to say that

“This has the considerable advantage of simplicity.”

He came to that conclusion on the basis that the approach would not involve agreement on how a principal sum of lump-sum damages should be divided between past and future loss. Indeed, he remarked that there was a risk of incentivising delays in proceedings, such that people would seek to attribute more to past loss than to future loss.

Sheriff Principal Taylor also argued:

“To require parties to stipulate how an agreed lump sum settlement figure should be divided into different heads of loss could be impractical and pose a barrier to settlement.”

He concluded that

“Protection for the pursuer should be achieved by other means”.

Such “other means” are set out in the bill. Subsections (5) and (6) of section 6 make provision, in circumstances in which the lump sum exceeds £1 million, for independent assessment of whether it is in the best interests of the pursuer to have the future-loss element paid by periodical payment or in a lump sum. If the damages are awarded by the court, the court will make that assessment. If they are agreed in a settlement, the question will be referred to an actuary.

The bill faithfully follows Sheriff Principal Taylor’s recommendations in that regard. The Scottish Government, taking account of that and Sheriff Principal Taylor’s comprehensive evidence to the Justice Committee on the issue, is not persuaded that there is a need to change its policy on the matter. Reference has been made to what happens in England and Wales; Sheriff Principal Taylor said that Lord Justice Jackson had taken a different view some years ago, but had subsequently got cold feet.

It is important also to point out that the success fee that can be deducted as a percentage of the claim will be capped, on a sliding scale. Currently, if the claim is for £1 million, a fee of 15 per cent applies to the entire amount—it is £150,000. If the proposed cap and sliding scale are accepted by Parliament, the success fee in such a case would be £72,500. It is important to bear that in mind.

I welcome the Justice Committee’s conclusion that the introduction of qualified one-way costs shifting will “improve access to justice”, but I do not accept—and nor is this conclusion borne out by the key evidence—that the approach will lead to

“a rise in unmeritorious and fraudulent claims.”

A number of factors militate against that happening. First, why would a solicitor take on a case if there was no chance of success? The solicitor would not be paid, they would use up their time and they would spend money on outlays that they could not recover. Secondly, the regulation of claims management companies in Scotland will discourage unscrupulous companies from operating north of the border.

Liam Kerr

Does that mean that the minister agrees that we should wait for that regulation before passing the bill?

Annabelle Ewing

I was coming on to that, but time is short. No, we should not wait, because first, if there is to be a gap, I think that it will be very short and, secondly, we should remember that many claims management companies already operate subject to regulation, be it through their solicitor ownership or through the Ministry of Justice.

Also, the direction of travel in Scotland is clear. The message is out there for any claims management company that wishes to operate in a way that is inconsistent with the legislation that, should the bill be passed by Parliament, the legislation will be applied to it in very short order.

Also, with regard to the unlikelihood of there being a huge surge in unmeritorious claims, it is the case that the bill provides in section 8(4) for circumstances in which the benefit of qualified one-way costs shifting might be lost. I understand the comments that have been made about section 8(4), and we are looking into the matter.

On possible increases in insurance premiums, it is not founded that there will be an automatic rise in spurious claims. I therefore do not accept that the consequential conclusion that there will be a significant rise in insurance claims is founded.

I see that I am quickly running out of time. Before I do so, I thank the Justice Committee for its work, and I look forward to further discussion on all the issues at stage 2. I did not have time to deal with a number of issues today, but I am always happy to speak to members about concerns that they may have.

I thank the members for their support in principle for the bill. I commend the motion in my name.

The Deputy Presiding Officer

That concludes the debate on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill at stage 1. Before we move on to the next item of business, I will suspend briefly to allow members to take their places on the front benches. I apologise to Ms Hyslop, who is in already in the chamber, and to Mr Carlaw, who is looking a bit peeved.

15:41 Meeting suspended.

15:42 On resuming—

16 January 2018

Financial resolution

A financial resolution is needed for Bills that may have a large impact on the 'public purse'.

MSPs must agree to this for the bill to proceed.

Financial Resolution Transcript

The Presiding Officer (Ken Macintosh)

The next item of business is consideration of motion S5M-08437, in the name of Derek Mackay, on a financial resolution for the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill.

Motion moved,

That the Parliament, for the purposes of any Act of the Scottish Parliament resulting from the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill, agrees to any expenditure of a kind referred to in Rule 9.12.3(b) of the Standing Orders arising in consequence of the Act.—[Annabelle Ewing.]

16 January 2018

Vote at Stage 1

Vote at Stage 1 transcript

The Presiding Officer (Ken Macintosh)

There are six questions to be put today.

The first question is, that motion S5M-09894, in the name of Annabelle Ewing, on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill at stage 1, be agreed to. Are we agreed?

Motion agreed to,

That the Parliament agrees to the general principles of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill.

The Presiding Officer

The next question is, that amendment S5M-09887.3, in the name of Claire Baker, which seeks to amend motion S5M-09887, in the name of Fiona Hyslop, on Scotland’s international policy framework and priorities for 2018, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

For

Adam, George (Paisley) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Arthur, Tom (Renfrewshire South) (SNP)
Baillie, Jackie (Dumbarton) (Lab)
Baker, Claire (Mid Scotland and Fife) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Bibby, Neil (West Scotland) (Lab)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Constance, Angela (Almond Valley) (SNP)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Dey, Graeme (Angus South) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Ewing, Annabelle (Cowdenbeath) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fee, Mary (West Scotland) (Lab)
Finnie, John (Highlands and Islands) (Green)
FitzPatrick, Joe (Dundee City West) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Gougeon, Mairi (Angus North and Mearns) (SNP)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
Grant, Rhoda (Highlands and Islands) (Lab)
Gray, Iain (East Lothian) (Lab)
Greer, Ross (West Scotland) (Green)
Harper, Emma (South Scotland) (SNP)
Harvie, Patrick (Glasgow) (Green)
Haughey, Clare (Rutherglen) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Hyslop, Fiona (Linlithgow) (SNP)
Johnson, Daniel (Edinburgh Southern) (Lab)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lamont, Johann (Glasgow) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lochhead, Richard (Moray) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
MacDonald, Gordon (Edinburgh Pentlands) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Martin, Gillian (Aberdeenshire East) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Matheson, Michael (Falkirk West) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McKee, Ivan (Glasgow Provan) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
McMillan, Stuart (Greenock and Inverclyde) (SNP)
McNeill, Pauline (Glasgow) (Lab)
Rennie, Willie (North East Fife) (LD)
Robison, Shona (Dundee City East) (SNP)
Rumbles, Mike (North East Scotland) (LD)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Russell, Michael (Argyll and Bute) (SNP)
Sarwar, Anas (Glasgow) (Lab)
Scott, Tavish (Shetland Islands) (LD)
Smyth, Colin (South Scotland) (Lab)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Kevin (Aberdeen Central) (SNP)
Swinney, John (Perthshire North) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
White, Sandra (Glasgow Kelvin) (SNP)
Wightman, Andy (Lothian) (Green)
Yousaf, Humza (Glasgow Pollok) (SNP)

Abstentions

Balfour, Jeremy (Lothian) (Con)
Ballantyne, Michelle (South Scotland) (Con)
Bowman, Bill (North East Scotland) (Con)
Briggs, Miles (Lothian) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Carlaw, Jackson (Eastwood) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Chapman, Peter (North East Scotland) (Con)
Corry, Maurice (West Scotland) (Con)
Davidson, Ruth (Edinburgh Central) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Golden, Maurice (West Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Harris, Alison (Central Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Mason, Tom (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Scott, John (Ayr) (Con)
Simpson, Graham (Central Scotland) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Tomkins, Adam (Glasgow) (Con)
Wells, Annie (Glasgow) (Con)

The Presiding Officer

The result of the division is: For 80, Against 0, Abstentions 30.

Amendment agreed to.

The Presiding Officer

The next question is, that amendment S5M-09887.1, in the name of Mark Ruskell, which seeks to amend the motion in the name of Fiona Hyslop, be agreed to. Are we agreed?

Members: No.

The Presiding Officer

There will be a division.

Against

The Presiding Officer

The result of the division is: For 79, Against 30, Abstentions 0.

Motion, as amended, agreed to,

That the Parliament notes the new International Framework and International Policy Statement published on 8 December 2017 and the four overarching objectives that it contains; supports the Scottish Government working with business, higher education, civic Scotland, trade unions and the UK Government in achieving the best outcomes for the people of Scotland; recognises that Scotland must now work toward a new lasting progressive partnership with the EU based on shared values and history; agrees that maintaining an international perspective remains vital to the continued prosperity of Scotland’s economy, society and people; commends the Principles for Just Trade Deals paper, which has been published by the Trade Justice Scotland Coalition; believes that international trade agreements are a key opportunity for Scotland to provide ethical leadership; further believes that such trade deals should support rather than undermine human rights, labour and environmental standards and that these trade agreements should be based on solidarity and facilitating the two-way sharing of knowledge and technologies with the Global South; calls on the UK Government to ensure that the devolved administrations have a formal role in the negotiation and democratic scrutiny of future agreements; commends the efforts of those building partnerships to advance Scotland’s role as a good global citizen; shares the importance of a human rights-based approach in doing so; believes that there should be a clear protocol on human rights for Scottish public agencies operating in countries where there is cause for concern, and calls for the Scottish Government’s working practices and cabinet secretary sign-off protocols to be revised to make sure that basic checks on the human rights record of potential partners and investors are made at an earlier stage.

The Presiding Officer

The final question is, that motion S5M-08437, in the name of Derek Mackay, on a financial resolution for the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill, be agreed to.

Motion agreed to,

16 January 2018

MSPs agreed that this Bill could continue

Changes to the Bill

MSPs can propose changes to a Bill – these are called 'amendments'. The changes are considered then voted on by the lead committee.

The lists of proposed changes are known as a 'marshalled list'. There's a separate list for each week that the committee is looking at proposed changes.

The 'groupings' document groups amendments together based on their subject matter. It shows the order in which the amendments will be debated by the committee and in the Chamber. This is to avoid repetition in the debates.

How is it decided whether the changes go into the Bill?

When MSPs want to make a change to a Bill, they propose an 'amendment'. This sets out the changes they want to make to a specific part of the Bill.

The group of MSPs that is examining the Bill (lead committee) votes on whether it thinks each amendment should be accepted or not.

Depending on the number of amendments, this can be done during one or more meetings.

First meeting on amendments

Documents with the amendments considered at this meeting held on 27 February 2018:

First meeting on amendments transcript

The Convener

Agenda item 6 is consideration of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill at stage 2. Members should refer to the bill, the marshalled list of amendments and the groupings. For the last time today, I welcome Annabelle Ewing, the Minister for Community Safety and Legal Affairs, and her officials.

We move straight to consideration of the amendments.

Section 1—Success fee agreements

The Convener

Group 1 is on success fee agreements: claims management services. Amendment 18, in the name of the minister, is grouped with amendments 19, 20, 20A, 21 to 26, 30 and 65.

Annabelle Ewing

At the outset, I refer members to my entry in the register of members’ interests, where they will find that I am a member of the Law Society of Scotland and that I hold a current practising certificate, albeit that I do not currently practise.

Amendments 20 and 22 are intended to clarify that the provisions of part 1 on success fee agreements apply to claims management companies as well as to solicitors, as providers of relevant services. Concerns had been expressed that that was not clear. There are a wide range of ways in which claims management companies operate or may operate in future, and that sometimes may be in association with firms of solicitors. It is claims management companies rather than law firms that currently offer damages-based agreements in Scotland, although the bill will provide for solicitors also to offer damages-based agreements.

The approach taken is to define success fee agreements as agreements for the provision of “relevant services” rather than just “relevant legal services” and to define that master concept as including legal services and claims management services respectively. Amendment 20 defines “legal services” and “claims management services” in a similar way to that in proposed section 419A of the Financial Services and Markets Act 2000, which is to be inserted by the Westminster Financial Guidance and Claims Bill. It seems appropriate to draw on the definition of “claims management services” that will be applied by the Financial Conduct Authority, which the Parliament has agreed through a recent legislative consent motion should be the regulator of claims management companies in Scotland in the near future.

The definition of “claims management services” includes advising claimants as to funding options, such as success fee agreements or commercial funding for commercial cases. It also includes services in relation to legal representation, which means getting everything in place in terms of paperwork and witnesses so that, when a case is handed over to a lawyer, the amount of time and cost spent by lawyers doing non-legal work is minimised.

The purpose of amendment 20 is to ensure that part 1 applies to claims management companies. However, amendment 20A, in the name of Daniel Johnson, would amend the definition of “claims management services” in amendment 20 so that only “regulated” claims management services would be caught by the definition. That would therefore mean that the provisions of part 1 on success fee agreements would not apply to claims management companies as providers of relevant services until such companies are regulated by the Financial Conduct Authority. In other words, it would not stop claims management companies offering success fee agreements in the regulatory gap; instead, it would negate Government amendment 20, which brings such companies within the ambit of part 1. They would therefore have a free-for-all, because none of the restrictions and protections under part 1 would apply. In particular, that would mean that claims management companies would not be subject to the cap on success fees that will be brought forward in regulations.

I understand that Daniel Johnson does not intend amendment 20A to have that effect. If the inspiration for the amendment was to be clear that providers of success fee agreements would all be regulated persons, I am happy to put it on the record that a provider of a success fee agreement under the Government’s amendments will be either a regulated law firm or a regulated claims management service provider, once the Financial Conduct Authority assumes its full rather than its transitional powers. For that reason, I ask Daniel Johnson not to move amendment 20A.

Amendment 65, in the name of Gordon Lindhurst, would delay the commencement of parts 1 to 4 until claims management companies are regulated by the Financial Conduct Authority. Members should be clear that the amendment would delay not only the commencement of QOCS—qualified one-way costs shifting—but every single provision set forth in parts 1 to 4. A balance needs to be struck between the benefits of increased access to justice and the risk of increased unscrupulous operations of claims management companies in Scotland during the so-called regulatory gap. The Scottish Government does not consider that there will be a flood of rogue claims management companies moving north from England in the period between commencement of the provisions of parts 1 and 2 and the commencement of full regulation of claims management in Scotland by the FCA. Sheriff Principal Taylor was quite clear in his evidence that he did not believe that that would happen. Although there will be a gap between implementation of the bill and full FCA regulation, the gap is expected to be relatively short.

There have been certain developments since stage 1. Specifically, the Financial Guidance and Claims Bill, as amended, which is now going through the House of Commons, has transitional clauses that will give the FCA the power, on a transitional basis, to obtain reports, information and documents from claims management companies operating in Scotland in advance of full commencement of the FCA’s regulation. Further, the UK bill has also recently been amended to ban cold calling for claims management services, and that provision is to apply in Scotland. In fact, I wrote to the convener on 8 February about those important amendments at the Palace of Westminster, and I hope that all committee members have had an opportunity to look at that information.

Although that does not mean immediate regulation, the FCA will be able to clamp down on errant companies the moment that regulation starts. Any rogue companies that are contemplating a move to Scotland will know that regulation is coming and that any such operations will be short lived. Any delay in implementing the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill will delay its access-to-justice benefits to anyone in Scotland who is contemplating civil litigation. Kim Leslie, the convener of the civil justice committee of the Law Society of Scotland, was clear that the Law Society did not want to delay implementation until there is full regulation of claims management companies in Scotland.

Gordon Lindhurst will be unsurprised to hear that I am unable to support his amendment to delay commencement of all the substantive provisions of the bill until FCA regulation of claims management companies is in place. First, that does not take into account the latest developments, which I have referred to in some detail, with respect to the amendments to the UK Financial Guidance and Claims Bill. Secondly, to do so would be to delay the real access-to-justice benefits that the bill that we are considering delivers.

I reiterate that amendment 65 would not only delay QOCS but would delay the other provisions of the bill, such as group procedure, third-party funding, solicitors being able to offer damages-based agreements, a sliding cap on success fees and so on. Consequently, I ask Mr Lindhurst, in light of those latest developments, not to move amendment 65.

Amendments 18, 19, 21, 23 to 26 and 30 are all consequential on amendments 20 and 22.

I move amendment 18.

Daniel Johnson

I lodged amendment 20A as a probing amendment, because although I fully acknowledge the minister’s comments and recognise that pressing my amendment might have consequences, it is important that we address the possibility of a regulatory gap for claims management companies. Indeed, the committee asked the Government to look at that in our stage 1 report, and it continues to be a concern. I recognise that, in the fullness of time and as the UK legislation comes forward, that would cease to be an issue, but at the moment there is a gap that is not clear or certain. It is important that the Government looks at how it could use the precautionary principle to provide for interim regulation of claims management companies for the period of the gap.

For those reasons, I thought that it was important to lodge my probing amendment, but I also fully support the bill. I acknowledge that Gordon Lindhurst’s amendment may well be in the same broad space as mine and may have the same broad intent, but I would not support delaying the bill overall. I hope that that explains and clarifies my intentions behind amendment 20A.

Gordon Lindhurst (Lothian) (Con)

I refer to my entry in the register of members’ interests, and to the fact that I am a member of the Faculty of Advocates and a practising advocate.

I do not need to go into detail about the wording of amendment 65, in light of the fact that the minister has covered that. The purpose of my amendment is to ensure that protection for those who are seeking access to justice under the terms of the bill, by regulation of claims management companies, is in place before the bill is brought into force.

That would anchor in the bill the committee’s recommendation in paragraph 326 of its stage 1 report, which says:

“The Committee considers that the Bill’s provisions should not be brought into force until such regulation is in place.”

As committee members are aware, amendment 65 also has the support of the Association of British Insurers, which, in its stage 2 briefing to the committee, said:

“This would ensure that there is no regulatory gap to the detriment of Scottish consumers and safeguard against a further increase in CMC activity in Scotland.”

11:15

I take on board the minister’s comments, but with regard to the suggestion that the bill’s principal provisions need to be brought into force urgently—indeed, immediately—I point out that the Taylor report was published in October 2013, and that it has, quite properly, taken a number of years for us to get to this stage. I submit, therefore, that there is no urgency to bring the principal provisions into force immediately, in light of what the minister has said about the minimal delay that will be caused. The comment that regulation is coming is not, in my view, good enough, given that minimal delay and, because quite a number of years have been spent bringing the bill to this stage, it is important that claims management company regulations are in force and the bill is brought into force in tandem with them.

Liam McArthur

It is a happy timetabling coincidence that we move from the Offensive Behaviour at Football and Threatening Communications (Repeal) (Scotland) Bill and our debate over whether there is a gap in that respect, and the desirability of closing any such gap, to this instance, in which the minister seems to be taking a slightly more relaxed position. I not only accept her points about the wider benefits of the bill’s provisions and the desirability of not delaying their implementation but acknowledge the steps that she and her officials have taken to link into the process at UK level and try to address the problem of claims management companies that was raised with us at the outset of stage 1.

On the amendments in this group, I was probably more taken with Daniel Johnson’s approach to addressing the issue—I am sure that he is happy to accept that the idea originally came from Sheriff Principal Taylor as a way of addressing that hiatus—than with the approach that, for very genuine reasons, Gordon Lindhurst has suggested. I accept some of the shortcomings or problems that are inherent in the approach in Daniel Johnson’s amendment 20A, but I think that we will need to look at the matter again at stage 3 to ensure not only that we are doing everything possible to deliver the bill’s wider benefits but that this very serious concern, which has been raised with us pretty much across the board and from the get-go, is dealt with as best as it can be.

The Convener

I would add that we raised the concern that there would be a period in which the claims management companies would not be covered by regulation and the fear that, in that interim period, they might gravitate towards Scotland and its less stringent regime. It would be very much appreciated if the minister could address that in her comments.

Annabelle Ewing

The purpose of the Government amendments in the group is to ensure and remove any doubt that the bill’s provisions apply to both solicitors and claims management companies as providers of success fee agreements. As I have said, those providers will be regulated either by the Law Society of Scotland, in the case of solicitors, or by the Financial Conduct Authority, in the case of claims management companies.

Gordon Lindhurst, quite rightly, referred to the committee’s stage 1 report, but I would note that the developments at the Palace of Westminster that I have mentioned postdate it. They will give the FCA on a transitional basis the power to demand information, reports and documents from claims management companies and, very importantly, will introduce a ban on cold calling, which will also apply to Scotland. As I have said, given those further moves to ensure that claims management companies operate in a reasonable fashion, it is for us to weigh them up with where we ourselves have reached and where we are with the important provisions in the bill, which indeed emanate from Sheriff Principal Taylor’s excellent review.

However, given that the review is dated 2013, I would have thought that that might be a reason to crack on and ensure that the bill contains the important provisions concerning group proceedings, that solicitors will be able to offer damages-based agreements that will not just be within the purview of claims management companies, and that there will be a sliding cap on success fees and qualified one-way costs shifting and many other provisions. We will allow the bill to go ahead to ensure that individuals in Scotland feel that they have a remedy to enforce their rights in civil litigation.

Amendment 18 agreed to.

Amendment 19 moved—[Annabelle Ewing]—and agreed to.

Amendment 20 moved—[Annabelle Ewing].

Amendment 20A not moved.

Amendment 20 agreed to.

Amendments 21 to 24 moved—[Annabelle Ewing]—and agreed to.

Section 1, as amended, agreed to.

Section 2 agreed to.

Section 3—Expenses in the event of success

Amendments 25 and 26 moved—[Annabelle Ewing]—and agreed to.

Section 3, as amended, agreed to.

Section 4 agreed to.

Section 5—Exclusion for family proceedings and other proceedings

The Convener

Group 2 is entitled “Success fee agreements: exclusion of certain matters”. Amendment 27, in the name of the minister, is grouped with amendments 28 and 29.

Annabelle Ewing

Amendments 27 and 29 will remove the exclusion of family proceedings for success fee agreements generally. However, amendment 28 will permit a more nuanced approach by allowing the Scottish ministers to make regulations setting out what kinds of success fee agreement will be prevented from being used in certain kinds of litigation.

The Scottish Government agrees with Sheriff Principal Taylor that family proceedings should not be financed by damages-based agreements. However, section 5 of the bill will currently prevent any type of success fee agreement from being used to finance family proceedings. Success fee agreements can be either speculative fee agreements or damages-based agreements. Those terms are not defined in the bill and the Scottish Government does not propose to introduce definitions because that would add unnecessary complexity.

The Faculty of Advocates submitted to the Justice Committee evidence to the effect that speculative fee agreements are sometimes, if rarely, used in family proceedings, and argued that such a funding option should, where appropriate, remain available to litigants. Amendment 28 will therefore extend the existing power of Scottish ministers to provide by regulations the kinds of litigation that might or might not be financed by certain types of success fee agreements.

The risk in dealing with the matter in the bill is that either too many types of funding arrangements will be excluded, as the bill does currently, or too few. Primary legislation could prove to be inflexible in that regard.

The approach that we suggest will allow for future proofing, because regulations can change as practice changes. Such regulations would be the subject of public consultation before being presented to Parliament, and would be subject to affirmative procedure. Amendments 27 and 29 will remove from the bill the exclusion of family proceedings.

The Government remains committed to prohibiting the use of damages-based agreements in family proceedings, as was recommended by Sheriff Principal Taylor. Equally, it is concerned to ensure that speculative fee agreements should continue to be available, where those are appropriate and will assist litigants in pursuing cases. The amendments in the group will permit that, and the expanded delegated power will ensure sufficient flexibility to react to changes in success fee agreement practice in the years ahead.

I move amendment 27.

Liam McArthur

I understand the rationale for the amendments, and it is helpful that the minister has set out the position further. I suppose that there is always a slight anxiety in moving measures from primary legislation into secondary legislation, but as I said, I understand the rationale. Is it the minister’s understanding that the amendment on post-legislative scrutiny of the bill that we will debate later would capture those provisions and allow us an opportunity, at a later stage, to review how the provisions are working?

Annabelle Ewing

Yes. My understanding is that the post-legislative scrutiny proposals are sufficiently wide to allow how—assuming that the bill is passed—the act operates in practice to be looked at.

Liam McArthur

Thank you.

Amendment 27 agreed to.

Amendments 28 and 29 moved—[Annabelle Ewing]—and agreed to.

Section 5, as amended, agreed to.

Section 6—Personal injury claims

Amendment 30 moved—[Annabelle Ewing]—and agreed to.

The Convener

Group 3 is entitled “Personal injury claims: use of damages for future loss in calculation of success fee”. Amendment 57, in my name, is grouped with amendments 58, 59 and 31.

Amendment 57 would ensure that damages for future loss are effectively ring fenced and cannot be included in a success fee agreement, so those would not form part of the overall damages that would be awarded in a claim for the purpose of calculating a success fee agreement.

Amendments 58 and 59 are consequential on amendment 57.

The committee heard evidence at stage 1 about the term “future loss”. The committee report states that future loss can cover damages awarded for

“lost earnings while an injured person is off work recovering, or travel expenses for expected future hospital appointments. In more serious personal injury cases, it could cover loss of all future earnings, as well as the costs of future care and specialist equipment which may be needed.”

The bill will allow for damages awarded

“for future loss to be included when calculating a solicitor’s success fee, provided certain conditions are met”.

In summary, the conditions state that the damages are

“paid in a lump sum”

and that

“if damages for future loss are for a lump sum”

exceeding

“£1 million, then ... damages will only be included if ... the solicitor has”

advised the client to accept the lump sum and

“either the court (where damages are awarded by the court) or an independent actuary (where damages are obtained by settlement) has confirmed that it is in the client’s best interests that payment be in a lump sum.”

It is fair to say that witnesses had conflicting views on the issue. The Association of British Insurers and the Forum of Insurance Lawyers both argued—because damages for future loss are awarded to pay for the pursuer’s care and support, including accommodation and equipment that they may need for the rest of the lives—that that money should not be included in the fee agreement.

Taking the opposite position, pursuer representatives

“argued against ring-fencing damages for future loss”

and said that they considered that the bill

“struck the right balance between protecting the pursuer and ensuring that a solicitor is paid fairly for the work involved”.

11:30

In its stage 1 report, the committee voiced its concerns about

“damages for future loss”

being “included”, and it asked

“the Scottish Government to reflect on this evidence and to reconsider whether damages for future loss should be ring-fenced when calculating a solicitor’s success fee.”

Having considered the evidence from defender, insurer and pursuer representatives, I am persuaded that damages for future loss should be ring fenced from the calculation of a solicitor’s success fee. Quite simply, that money has been specifically awarded to the pursuer for their future care and support in whatever form that might take. Some aspects might, for example, be necessary immediately at the time of the award, but it is evident that they will be required over time.

Furthermore, the pursuer’s representatives can still be paid through a variety of methods, including through recovering judicial expenses, claiming from any part of the award that does not include damages for future loss and, possibly, claiming an additional fee in complex cases. The committee heard that those fees could be

“a multiple of three or four times the judicial expenses.”

In conclusion, I believe that amendments 57, 58 and 59 not only strike the right balance in calculating a success fee, but are necessary to ensure that the appropriate measures are in place to protect a pursuer’s entitlement for an award for future loss.

I should say that I support the definition of “actuary” in amendment 31.

I move amendment 57.

Annabelle Ewing

The group of amendments is about damages for future loss. From the outset, it is important that we do not lose sight of the fact that we are considering people who have been victims of very tragic circumstances and who have received catastrophic injuries through no fault of their own.

Sections 6(4) to 6(8) make provision for the future element of damages awards. The system in the bill as drafted would be, as Sheriff Principal Taylor recommended, that damages for future loss

“will be included in the amount of damages”

from which the success fee will be calculated if, but only if, the

“future element ... is to be paid in a lump sum”.

If the future element is to be paid by periodical payment, it will not be included in the calculation. In other words, in the bill as drafted, it will be ring fenced.

Following the change to the discount interest rate, and in the light of the provisions in the forthcoming damages bill, it seems to be much more likely that, in the future, the element of damages payment relating to future loss will be made by means of a periodical payment order. Sheriff Principal Taylor considered the position in England, where all of the future element of the award is ring fenced and is not included in the calculation of the success fee. The bill faithfully implements Sheriff Principal Taylor’s recommendations on success fees and lump-sum payments, including future loss, when calculating the success fee.

Alongside that, the bill contains a number of safeguards in sections 6(5), 6(6) and 6(7). If the future element is more than £1 million, the court will have to agree that it is in the client’s “best interests” that the payment be made by lump sum rather than by periodical payment order. If the award is agreed by settlement, an actuary would have to agree that the payment relating to future loss should be paid by lump sum.

Margaret Mitchell’s amendment 57, and the consequential amendments 58 and 59, go further than Sheriff Principal Taylor’s recommendations. Amendment 57 would change the effect of the provisions in section 6(4) of the bill in relation to the calculation of a success fee. It would mean that no success fee could be taken from the future-loss element of an award if it is to be paid as a lump sum. Under the bill’s existing provisions, the future element of an award is already excluded from the calculation of the success fee if the future element of an award of damages is to be paid by periodical payment order.

In that light, and having considered the issues that the committee raised in its stage 1 report, the Government is prepared to support the amendments, which will make the position the same when the future element of an award of damages is paid by lump sum. If the committee supports the amendments, the Government will consider whether any changes will be needed as a consequence. If they are, the Government will lodge appropriate amendments at stage 3.

Amendment 31 responds to concerns that were raised by Stewart Stevenson—a former member of the committee—at stage 1 about the need for an appropriate definition of “actuary” to be provided in section 6. However, the intention of amendment 31 will be overtaken by the changes that amendment 58 seeks to make, so I intend at this point not to move amendment 31. I will wait to find out the result of the debate on the convener’s amendments.

However, as I will not have another opportunity to speak on this group of amendments, I will quickly explain the intention behind amendment 31, just in case the committee votes against amendment 58.

In his evidence, Sheriff Principal Taylor suggested that the actuary should be a chartered actuary. Amendment 31 provides that the reference to an actuary in section 6(6)(b) would mean

“an Associate or Fellow of the Institute and Faculty of Actuaries.”

The Institute and Faculty of Actuaries has advised that the approach should be future proofed, because even if the concept of “chartered actuary” emerges in the future, the concepts of “associate” and “fellow” would be retained.

I will not move amendment 31, because its intent would be overtaken by the changes that the convener’s amendment 58 seeks to make.

John Finnie (Highlands and Islands) (Green)

I want to speak briefly in support of amendment 58. The minister mentioned the client’s best interests, which I think should be at the forefront of our deliberations. A lot of what we do here can be very dry, and we have to think about the practical implications. I do not for a second doubt that the very able individuals who deliver the important sums of money for personal care and so on that we are discussing will use appropriate methods to ensure that people are properly remunerated, but I think that it is wholly appropriate that the money be ring fenced.

Liam McArthur

We were all seized by the fact that there appears to be an incongruity with regard to the use of lump-sum payments as opposed to periodic payments, and I welcome the fact that the minister accepts that amendments 57 to 59 will address that concern.

I am slightly concerned about the fact that the minister does not intend to move amendment 31, which I see as an attempt to stave off attempts by Stewart Stevenson to set himself up as an actuary, but I am reassured that she thinks that amendment 58 will achieve the same objective. I therefore whole-heartedly support amendment 58.

The Convener

I note that the minister said that it is likely that the proposed damages bill will provide for payments for future loss to be made in instalments, but that is by no means certain. In the meantime, lump sums will still be recommended and will continue to be awarded. Moreover, £1 million is a colossal amount of money; indeed, for some pursuers, £1,000 is a colossal amount of money. There is a danger that a pursuer could, under what is proposed in section 6, lose out even in relation to a payment of damages for future loss of £1,000, so I will press amendment 57.

Amendment 57 agreed to.

Amendments 58 and 59 moved—[Margaret Mitchell]—and agreed to.

Amendment 31 not moved.

Section 6, as amended, agreed to.

Section 7—Form, content etc

The Convener

We move to group 4, which is on independent advice about success fee agreements. Amendment 63, in my name, is the only amendment in the group.

Amendment 63 seeks to address a potential conflict of interests with regard to success fee agreements, which is an issue that was raised by Professor Alan Paterson during stage 1. Professor Paterson stated that success fee agreements had to be subject to appropriate protections and that in some cases there might be a need for clients to receive advice, independent from their original solicitors, on the terms of success fee agreements. He considered that that would protect both solicitors and clients from underlying potential conflicts of interest. Although it would not be necessary for every speculative fee agreement and every damages-based award, there is an argument for it in some situations.

Amendment 63 therefore allows further discussion to ascertain from the minister her views on the independent review issue and how best to ensure that the necessary protections are in place. The amendment would allow the Scottish ministers to make regulations about

“the circumstances in which the provider (‘A’) must ensure that, prior to the agreement being entered into, the recipient receives advice”

from an independent provider as to whether the agreement is

“in the recipient’s best interests”.

However, I am aware that, thereafter, the question would be what those circumstances were.

Since lodging the amendment, I have spoken further with Professor Paterson, who pointed out that all lawyers are required to act in good faith and in the objective best interests of their clients. Currently, fee agreements regarding property transactions are voidable if there is either an actual or a potential conflict of interest, unless the transaction was fair and reasonable in the circumstances, there was no undue influence, the client gave his or her informed consent following disclosure of all the relevant facts, and another independent solicitor would have advised it.

At present, such tests are applied in property cases but not in the basic lawyer-client fee contract. Therefore, to ensure that vulnerable potential clients have a level of protection and that success fee agreements are fair, I propose that those tests be applied to such agreements in personal injury cases. That is on the basis that a success fee agreement involves a lawyer taking a share of the client’s damages, which is their property. It therefore follows that, in certain success fee agreement cases, we need more than the normal protection in a client retainer contract. The onus should be placed on the lawyer to show that those two tests—first, that the agreement is fair and reasonable, with no undue influence, and, secondly, that there has been informed consent—have been met. If those tests have not been met as provided for, the agreement would be voidable.

I look forward to hearing the minister’s comments, and I would be grateful for a commitment from her to work with me to look at those tests with a view to putting them in the bill.

I move amendment 63.

Annabelle Ewing

Amendment 63, in the convener’s name, as drafted—which is all that I can deal with as that is all that is in front of me today—provides that the Scottish ministers may make regulations about the circumstances in which a services provider must furnish a pursuer with advice from another independent provider before the pursuer enters into a success fee agreement.

I find it difficult to know when such a check might be required. I take into account what the convener has just said but, as has also been said, many providers will be solicitors, who are professionally required to act in the best interests of their clients at all times. It is therefore difficult to see whether there is any need to provide the pursuer with a second opinion—if that is still what is being contemplated—with attendant costs and the questions of who should bear them, what the process should be, what steps would be required and how long all that would take.

Of course, one of the overarching objectives of the bill is to make costs more predictable. The pursuer will be able to go to a lawyer who can offer, for example, a damages-based agreement, no up-front costs and so on, and there will be QOCS in personal injury actions. That is the straightforward approach of the bill, and it seems to me that the proposed process could unintentionally lead to a more cumbersome approach in circumstances in which the solicitor is duty bound under their practising certificate to act in the best interests of their client.

11:45

With regard to the theoretical conflict that has been mentioned, solicitors have been able to offer speculative fee agreements since, I think, the early 1980s—[Interruption.] Sorry—it is since the 1990s. Although there has been a theoretical conflict of interests with regard to the provision by solicitors of speculative fee agreements, that has not presented any problem in practice. We can take some comfort from the fact that that arrangement has been in operation for some decades now without any need for the additional process that is set out in the amendment.

Further, the setting of professional standards rules for solicitors, for example, is a matter for the Law Society of Scotland, as the professional regulator. As I said during the stage 1 evidence session that I attended, it is not for the Scottish Government to direct the Law Society of Scotland to take particular actions, although, of course, we can have discussions with it. Therefore, the member’s concerns might more properly be addressed by having discussions with the Law Society of Scotland, as the regulator, to see what its view is.

I hope that that is helpful.

The Convener

Thank you for those comments. There are potential conflicts of interest with regard to success fee agreements and the bill does not address them. I endorse the two-test provision that Professor Paterson set out in our discussions, which involve the lawyer or solicitor proving that the arrangement is fair and reasonable, with no undue influence being exerted, and that the client has given their informed consent. I believe that Sheriff Principal Taylor said that the provision concerning informed consent in particular would mean that the solicitor would say that they charge a certain amount per hour, set out the reasons for that and say that other rates are available, which would allow the client to make an informed choice about whether to engage the solicitor or look elsewhere. The provision seems to work in the interests of the client and of access to justice.

I am aware that, as drafted, amendment 64 does not do what I want the review of the success fee agreement to do. For that reason, I will seek leave to withdraw the amendment. However, I will do what the minister suggests and speak to the Law Society, and I hope that she will engage with me to consider what might be brought forward at stage 3 to ensure that vulnerable clients and others are not disadvantaged as a result of not benefiting from the two tests for success fee agreements that have been suggested.

Amendment 63, by agreement, withdrawn.

The Convener

Group 5 is entitled “Success fee agreements: multiple providers”. Amendment 32, in the name of the minister, is the only amendment in the group.

Annabelle Ewing

Amendment 32 is intended to address a potential problem that was identified by members of the committee, particularly John Finnie and Rona Mackay, during stage 1 evidence, which concerned the possibility that attempts might be made to charge more than one successive fee in relation to a case, thus circumventing the caps to be imposed on success fees under section 4.

The suggestion was that a firm of solicitors and a claims management company might both take a success fee, and that the combined charge to the client might exceed the proposed caps on success fees to be paid out of damages awarded or agreed.

Pursuer representatives gave evidence to the committee that that does not happen in practice. Nevertheless, we wish to ensure that it can never happen in practice, and amendment 32 will give ministers the power to ensure that it will not. It will allow regulations to be made, under the existing delegated power in section 7(3), that will prevent a pursuer from being liable to pay two or more success fees. Those regulations will engage the affirmative procedure.

By referring to more than one provider rather than more than one agreement, we intend to allow the provision to deal with cases, first, in which there is more than one party to an agreement and, secondly, in which there are multiple agreements.

In addition, the committee will be pleased to learn that the Law Society of Scotland’s working group on success fee agreements proposes to develop a model success fee agreement. That model should make it clear that only one success fee is payable, which will further reduce the risk of abuse.

I move amendment 32.

Amendment 32 agreed to.

The Convener

Group 6 is on the power to make further provision about success fee agreements. Amendment 33, in the name of the minister, is the only amendment in the group.

Annabelle Ewing

The Delegated Powers and Law Reform Committee’s report on the bill at stage 1 expressed concern about the breadth of the power that section 7(4) gives to the Scottish ministers to modify part 1. Amendment 33 responds to those concerns by restricting that power so that it will apply just to section 7, rather than to part 1 as a whole. The amendment also contains a restriction that the regulations can add to section 7 or modify text that is added by the regulations, but they cannot otherwise alter section 7. In other words, none of the text of section 7 that the Parliament agrees to at stage 3 may be removed by regulations.

It might be helpful if I explain the kind of addition and modification that is envisaged. As the Government explained in its response to the DPLRC, the purpose of sections 7(3) and 7(4) is

“to augment the current provisions of the Bill in relation to success fee agreements”,

where it is considered to be desirable to have future provision about the mandatory terms of success fee agreements or their enforcement. Such provision would be brought forward only after consultation on the regulation of success fee agreements with stakeholders and thus it cannot be included in the bill at present. The regulations would mean that any new provisions could be set out in section 7, rather than in freestanding regulations, which would mean that all the mandatory terms that relate to success fee agreements would be found in the primary legislation.

I move amendment 33.

Amendment 33 agreed to.

Section 7, as amended, agreed to.

Section 8—Restriction on pursuer’s liability for expenses in personal injury claims

The Convener

Group 7 is on the restriction of the pursuer’s liability for expenses in environmental proceedings. Amendment 60, in the name of John Finnie, is the only amendment in the group.

John Finnie

I wish to speak on the implications of the Aarhus convention, which is now 20 years old. I have not talked about the subject continuously throughout that intervening period, but I have certainly done so frequently, with the minister and her predecessors in her position and with ministers in environmental portfolios.

The bill introduces qualified one-way costs shifting in personal injury cases, including those with an environmental aspect—so-called toxic torts. That is seen as first-class protection, because we know that costs are a huge barrier to justice. We also know that the Scottish Government has consistently been criticised for its perceived failure to comply in full with the convention, although I accept that that is not the Government’s position. Amendment 60 would go some way toward addressing that issue, although it would not do so completely. I am keen to hear what the minister has to say; I am always keen to engage on this subject.

I move amendment 60.

Annabelle Ewing

Amendment 60, in the name of John Finnie, is intended to give pursuers or petitioners in environmental cases that fall under the Aarhus convention the protection of qualified one-way costs shifting, under section 8.

At present, protective expenses orders, or PEOs, limit a party’s liability for paying the expenses of an opponent or third party up to a particular sum, whatever the outcome of the case. That limit gives a degree of certainty and predictability in relation to litigants’ potential exposure to an opponent’s expenses.

Rules of court currently regulate the award of protective expenses orders in judicial review cases and statutory reviews that fall within the scope of the public participation directive—broadly, Aarhus cases. Last year, the Scottish Civil Justice Council consulted on further draft rules in relation to protective expenses orders. Following the consultation, the Scottish Civil Justice Council has set up a working group to consider protective expenses orders. We await its final conclusions and it would be wrong to pre-empt them now.

During Sheriff Principal Taylor’s two-and-a-half-year review of expenses and civil litigation, he examined in some detail the need to restrict certain litigants’ liability for expenses in judicial review applications, which would cover most Aarhus cases. He stated:

“To an extent, the judiciary are already embracing the concept of QOCS, albeit under the guise of PEOs.”

Sheriff Principal Taylor rejected an extension of QOCS to other types of case that he considered did not always involve a weak pursuer against a powerful defender. The Scottish Government considers that that argument applies to environmental cases, given that well-funded charities, wealthy landowners or businesses might be the ones seeking to judicially review Scottish ministers’ decisions on energy consents, for example.

Under amendment 1, section 8 would apply only when it appears to the court that the defender is insured in respect of the claim, when the defender is not insured but the Motor Insurers’ Bureau is liable to make payment, or when the defender is a public body. In other words, QOCS would only be available if the pursuer had no funding and the defender was insured or, if not insured, was a person for whom the MIB would pick up the tab, or was a public body.

The committee heard evidence from Sheriff Principal Taylor and from Patrick McGuire of Thompsons Solicitors that pursuers do not in practice sue uninsured defenders. As Sheriff Principal Taylor said:

“if the defender is a man of straw the pursuer will not raise proceedings. After all, there is no point in obtaining a court award that cannot be enforced.”

In his stage 1 evidence, Sheriff Principal Taylor also pointed out some of the drawbacks of further restricting QOCS:

“The difficulty with that is that you could end up with parties not bothering to insure themselves when they ought to or with parties taking on a much higher excess in order to pay a much lower premium and thereby making themselves, in effect, self-insured. You could find parties who have policies—so QOCS would apply—but who have breached the terms of their policy with the insurers, such as the obligation for fidelity. As a consequence, one-way costs shifting would not be available in circumstances in which it should be available.”—[Official Report, Justice Committee, 31 October; c 9, 10.]

I think that Liam McArthur picked up on those points in Sheriff Principal Taylor’s evidence.

QOCS is part of a raft of measures introduced by the bill to provide more certainty about the cost of litigation for those with a meritorious claim. The bill makes it clear that the pursuer will not be liable for the expenses of the defender if the case is lost. Sheriff Principal Taylor quoted statistics from England, where it was noted that defender insurers claim expenses only in 0.1 per cent of the cases that they win. Sheriff Principal Taylor had no doubt that the situation was the same in Scotland.

Amendments 2 and 9 would have similar effects in restricting QOCS where the pursuer was separately funded—I think that Daniel Johnson’s concern dealt with that.

The effect of amendment 3 would be to disapply QOCS where the pursuer was legally aided. It is not, however, envisaged that personal injury claimants will be legally aided if they have a success fee agreement. It is, of course, absolutely right that there should be no benefit if the claim is pursued inappropriately—we will discuss shortly fraud and other grounds on which QOCS protection may be lost—but to add the further restrictions that Liam Kerr seeks through his amendments would just add uncertainty about costs to the process of litigation. That would be in direct contradiction to the bill’s overarching principle, which is to increase the predictability of the costs of civil litigation such that we can promote access to justice on the part of the citizens of this country; and it would reduce the bill’s effectiveness and remove an essential element of the carefully constructed framework of recommendations made by Sheriff Principal Taylor. Again, I cite the fact that QOCS was introduced in legislation in England and Wales in 2012 without such restrictions being in place. Moreover, no problems in that regard were identified in the recent post-legislative scrutiny of that legislation.

A number of stakeholders have cautioned against any reforms that could invite satellite litigation. I fear that Liam Kerr’s amendments could increase the likelihood of such disputes. It is for the foregoing reasons that I ask Liam Kerr to consider withdrawing amendment 1 and not moving amendments 2, 3 and 9.

The Convener

I invite Liam Kerr to wind up and to say whether he will press or withdraw amendment 1.

Liam Kerr

I am grateful for the arguments that have been made and I will respond to some of the points. On the situation in England and Wales, I think that I am right in saying that there are some significant differences. That is not to say that I disagree with the minister; I simply think that there is more to be investigated in that regard. Mr McArthur’s point about insurance, which the minister also made, is concerning. Again, I would be interested in looking at that further, although I am not convinced that it is a reason to withdraw amendment 1.

I am not attempting to remove success fee agreements, although I am interested in the minister’s point. The minister pointed out that some evidence suggests that, as a matter of practice, pursuers do not pursue the uninsured, but I do not know whether that is a good basis on which to legislate with regard to a person with an interest. On that note, I declare my interest as a registered member of and practising solicitor with the Law Society of England and Wales and the Law Society of Scotland.

The minister talked about introducing uncertainty around costs, but it is arguable that relying on a practice whereby a pursuer does not pursue an uninsured person provides even more uncertainty than would be the case were my amendments agreed to. I want my amendments to be put to the vote, so I am pressing amendment 1 and will move amendments 2, 3 and 9.

The Convener

The question is, that amendment 1 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Corry, Maurice (West Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)

Against

Adam, George (Paisley) (SNP)
Finnie, John (Highlands and Islands) (Green)
Gougeon, Mairi (Angus North and Mearns) (SNP)
Johnson, Daniel (Edinburgh Southern) (Lab)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
McArthur, Liam (Orkney Islands) (LD)

The Convener

The result of the division is: For 3, Against 8, Abstentions 0.

Amendment 1 disagreed to.

Amendment 2 moved—[Liam Kerr].

The Convener

The question is, that amendment 2 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Corry, Maurice (West Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)

Against

The Convener

The result of the division is: For 3, Against 8, Abstentions 0.

Amendment 2 disagreed to.

Amendment 3 moved—[Liam Kerr].

The Convener

The question is, that amendment 3 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Corry, Maurice (West Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)

Against

The Convener

The result of the division is: For 3, Against 8, Abstentions 0.

Amendment 3 disagreed to.

The Convener

The next group is on the grounds on which a pursuer may be liable for expenses in a personal injury claim. Amendment 34, in the name of the minister, is grouped with amendments 4, 35, 5, 36, 6 to 8, 10, 40, 47 to 49 and 17.

Annabelle Ewing

This group of amendments provides for the circumstances in which the protection of qualified one-way costs shifting, or QOCS, will be lost by a pursuer in personal injury proceedings.

Amendment 34 makes it clear that failure to conduct proceedings in an appropriate manner by the pursuer’s legal representative as well as by the pursuer may lead to the loss of benefit of QOCS. When Sheriff Principal Taylor gave evidence to the committee, he said that

“‘Fraudulent representation’ involves word of mouth”

but that fraud can also

“take place through actions.”—[Official Report, Justice Committee, 31 October 2017; c 11.]

Amendment 34 faithfully reflects Sheriff Principal Taylor’s suggested wording for the test of fraud in relation to QOCS. It ensures that actions as well as representations will be considered by the court in deciding whether the benefit of QOCS should be lost.

Amendment 4, in the name of Liam Kerr, is very similar to the Government’s amendment 35 but relies on a further amendment, which is amendment 5. Although the Government’s amendment is simpler from a drafting point of view, the amendments have the same aim. I am, therefore, willing to support Liam Kerr’s amendments 4 and 5, as they have the same effect as amendment 35. I do not intend to move amendment 35 if the committee supports amendment 4. If amendments 4 and 5 are agreed to, the Government will, of course, consider whether any drafting changes may be required at stage 3.

Amendment 36 makes it clear that the test of reasonableness in section 8(4)(b) is tantamount to that of Wednesbury unreasonableness. The original drafting was intended to reflect the Wednesbury test, but it was clear that stakeholders wished the Government to revisit its drafting approach. Amendment 36 broadly follows the wording that was suggested to the committee on 26 September by Simon di Rollo QC of the Faculty of Advocates and that Sheriff Principal Taylor endorsed in his evidence to the committee on 31 October. It means that any “manifestly unreasonable” behaviour by the person bringing the proceedings or a legal representative will result in QOCS protection being lost. The concept of manifest unreasonableness delivers in substance the Wednesbury test. Sheriff Principal Taylor said in his review that there has to be a high test, because otherwise the benefits of QOCS might be lost as pursuers might not have the confidence to litigate.

Amendment 6, in the name of Liam Kerr, would mean that the benefit of QOCS would be lost if the pursuer failed to beat a tender that was made during the court proceedings or an offer of compensation to settle that was made before the court proceedings started. The question of tenders—that is, whether a pursuer should lose the benefit of QOCS—was raised in written submissions by much of the insurance lobby. Other groups that responded to the call for evidence, such as the Law Society of Scotland and Brodies LLP, considered it to be the kind of issue that may be dealt with in rules of court. I agree with Sheriff Principal Taylor that the benefit of QOCS should be lost if a pursuer fails to beat a tender. However, I also agree that it is more appropriate to deal with tenders through secondary legislation.

Members will have noted that that is the firm position of the Lord President, who recently wrote to the committee on the issue. If, as the Lord President indicated, tenders and settlement offers are to be dealt with in rules of court, that is the appropriate place for any provision on the failure to beat a tender or a settlement offer. Section 8(6) clearly states that QOCS are subject to such exceptions as may be provided for in an act of sederunt—that is, in court rules. The Lord President has stated that having a reference to tenders in primary legislation, which would be the effect of Mr Kerr’s amendment 6, would restrict the courts’ ability to regulate in the area. Indeed, it would preclude the Scottish Civil Justice Council from coming up with straightforward terminology rather than using the word “tender”, which may have other connotations.

12:15

Liam Kerr’s amendment 7 is similar. The benefit of QOCS would be lost if the pursuer was, in the court’s opinion, being unreasonable in refusing to accept an offer under a pre-action protocol. Again, I consider that that should be left to the rules of court. In his letter of last week to the convener, Lord Carloway, the Lord President, commented that the committee might take the view that amendment 7 would be

“anomalous in both its operation and effect”,

and I agree with the Lord President. Pre-action protocols are a matter for rules of court.

Amendment 8, in the name of Liam Kerr, would mean that the pursuer would be deemed to have acted in an inappropriate manner and so would lose the benefit of QOCS if the proceedings were summarily dismissed by the court. I am not aware that the term “summarily dismissed” is used in primary legislation, and there appears to be some doubt about whether the Court of Session has powers to dismiss a case summarily. However, I am aware that the Scottish Civil Justice Council is considering the matter and that rules are likely in the foreseeable future.

Whether those rules will use the term “summary dismissal” or some other phrase, such as “strike out” as is used in England and Wales, is not yet known. Again, the Lord President has emphasised that Parliament should be slow to tie the Scottish Civil Justice Council’s hands. In his letter, Lord Carloway also noted that the general power of summary dismissal that is referred to in amendment 8

“will be considered as part of the current rules rewrite project.”

Amendment 10, in the name of Liam Kerr, defines what is meant by “proceedings” in section 8(4) to the effect that it means all actions of the pursuer in a damages claim before and after proceedings have been served. The amendment will be unnecessary if the Government’s amendments succeed, as the phrase

“in connection with the proceedings”

will cover behaviour by the pursuer or their lawyer in the pre-litigation period as well as in the civil proceedings proper.

Amendments 40, 47 and 49 are consequential drafting amendments. Amendment 49 inserts a new section after section 12 that provides the definition of “legal representative” for the whole of part 2 of the bill.

Amendment 40 is a consequential amendment that removes the definition from its previous place in the bill at section 9(4). The definition is not changed. That change is necessary because the definition of “legal representative” is now relevant to section 8, on QOCS, as well as to section 9, on third party funding, and section 11, on the award of expenses against legal representatives.

Amendment 47 is another consequential amendment that removes the reference in section 11 to the definition of “legal representative” in the now defunct section 9(4).

Amendment 48 is a minor consequential amendment to the Courts Reform (Scotland) Act 2014. It relates to section 81(5)(b) of that act, which provides that only in the case of unreasonable behaviour will a party lose the benefit of fixed expenses in civil procedure cases in the sheriff court.

Amendment 17, in the name of Liam Kerr, requires the Court of Session to make rules for a new pre-action protocol for clinical negligence cases. The amendment also provides that clinical negligence cases would not have the benefit of QOCS until those rules come into force. We consider that the extension of pre-action protocols to medical negligence cases is for the Lord President and the Scottish Civil Justice Council to consider. We do not consider it appropriate that there should be a delay in extending the benefit of QOCS to pursuers in such cases. We do not consider that that would be in accordance with the spirit of the bill.

I move amendment 34.

Liam Kerr

I hope that you will forgive me, convener, as I have not done this before.

My amendments deal with where the benefit of QOCS should be lost pursuant to section 8(4). I am grateful to the minister for clarifying that my intention in amendment 4 is in the same vein as the intention of amendment 35 and for clarifying that, if amendment 4 is agreed to, amendment 35 will not be moved.

The benefit of QOCS should be lost when, on the balance of probability, a claimant has acted fraudulently in connection with a claim or proceedings. Again, I am grateful for the clarification that it is a wider category of proceedings. Many claims will never reach court, so the test should include the behaviours and actions prior to litigation, because that will deter more spurious claims. That accords with Sheriff Principal Taylor’s recommendations.

On amendments 6 and 7, which, as the minister has said, rather go together, the bill’s provisions on QOCS do not take account of the tender process. As we have heard throughout the evidence taking, tenders are a very important aspect of this type of litigation, and it is my view that the bill should refer specifically to them. Indeed, if I recall correctly, that was a recommendation of the Taylor report. Certainly, Sheriff Principal Taylor stated in evidence to the committee:

“I am persuaded that qualified one-way costs shifting should not be available, and should be specified as not being available, in the event that the pursuer has failed to beat a tender.”—[Official Report, Justice Committee, 31 October 2017; c 12.]

At present, when a pursuer fails to beat a pre-litigation offer, they must beat the offer at the conclusion of the action or be liable for the defender’s judicial expenses from the date of the offer. My view is that that discourages unnecessary litigation and ensures that courts and parties to lawsuits can focus on claims that can genuinely not be settled. However, if QOCS protection was not lost if a pursuer failed to beat a defender’s tender, that would seriously undermine the tender process and dilute the current incentive to resolve cases before they go to court. My amendment therefore covers tenders made prior to the commencement of court proceedings to encourage early settlement of claims to the benefit of the parties.

On amendment 8, which relates to summary dismissal, I do not necessarily agree that the provision should not be in the bill. I have tried to make it clear that QOCS protection should be lost when a pursuer’s claim is summarily dismissed, which I think is in line with Sheriff Principal Taylor’s recommendations and, indeed, his evidence to the committee. That would be a key protection against the bringing of frivolous claims.

I think—if I heard correctly—the minister clarified that, if the Government amendments were to be agreed to, there would be no need for amendment 10. In that case, I would not seek to move it. Amendment 17 proposes that clinical negligence claims should not fall under section 8 until a pre-action protocol is in place. Sheriff Principal Taylor recognised in his evidence the vital importance of pre-action protocols in that, inter alia, they incentivise settlement and allow a focus on claims that cannot be settled by the court. As members will remember, I was concerned about the cost of clinical negligence claims, and it is certainly my view that a pre-action protocol is required before implementing something—in this case, QOCS—that, by its own definition, will increase the number of claims.

On that basis, I will move amendment 4 and other attendant amendments at the relevant time.

Liam McArthur

I, too, welcome the progress that we appear to be making on ensuring that the provisions adhere to the Wednesbury principle. I think that the minister said that amendments 4 and 5, in the name of Liam Kerr, do so. Amendment 36 reinforces that, too, and I very much welcome the progress in that respect.

The question is, that amendment 9 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Corry, Maurice (West Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)

Against

The Convener

Second meeting on amendments

Documents with the amendments considered at this meeting held on 6 March 2018:

Second meeting on amendments transcript

The Convener

The second item on the agenda is the continuation of stage 2 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I refer members to the bill, the marshalled list and the groupings of amendments.

I welcome back to the committee Annabelle Ewing, the Minister for Community Safety and Legal Affairs, and her officials.

After section 8

The Convener

The first group of amendments is on the pursuer’s liability for court fees in personal injury claims. Amendment 11, in the name of Daniel Johnson, is grouped with amendments 64 and 16.

Daniel Johnson (Edinburgh Southern) (Lab)

The purpose of amendment 11 is to reconsider the pay-as-you-go model for court fees. It is an issue that has been raised by trade unions and other bodies as a not insignificant hurdle in bringing forward court actions. Amendment 11, in my name, seeks to allow fees to be paid at the end of the court action, rather than have them paid during its course. In a successful action, the fees would be a lot easier to settle once damages have been awarded.

In broad terms, amendment 11 is very much in line with amendment 64, which has been lodged by John Finnie, although his amendment goes further. I urge members to support both the amendments.

Some comments contrary to the amendments have been made by the Scottish Courts and Tribunals Service, which argues that the pay-as-you-go model encourages early settlement and that debt recovery would carry a cost. However, the argument that the pay-as-you-go model encourages early settlement is not particularly strong, given that the bill as a whole seeks to lower the barriers to people bringing court cases. Amendment 11 proposes something that is in line with that aim.

The nature of court actions is that people bring them forward via solicitors. The very fact that there would be an intermediary would simplify the recovery of debts, as courts would be pursuing solicitors firms and, similarly, solicitors firms will be very mindful about people’s ability to pay court fees as they go. A person paying at the end of a service that has been undertaken and that they have procured does not mean that they stop looking at whether they can afford it. Regardless of whether it is a court action or work that they are having done to their house, people will always have to be mindful of the bill that they are likely to face at the end. Simply paying at the end does not necessarily have a significant impact on that.

To recap, I say that the primary reason for amendment 11 is to lower the barriers to people bringing court actions. As I have said, the provision is being sought by several groups, including trade unions, to aid their work.

I move amendment 11.

John Finnie (Highlands and Islands) (Green)

I align myself with everything that Daniel Johnson said. The issue is a concern for trade unions. The SCTS’s suggestion about debt recovery is a wee bit off the mark: the nature of the engagement in the process means that debt recovery is extremely unlikely to be an issue. Indeed, I imagine it would be said that the parties involved had not acted in good faith if that were the case, and that it would have wider implications.

I initially had an amendment that was similar to Daniel Johnson’s amendment 11, but I have been told that my amendment 64 is what is required to bottom out the issue. I support amendment 11 and encourage members to support my amendment 64.

The Minister for Community Safety and Legal Affairs (Annabelle Ewing)

The main intention of amendment 11 appears to be to make court fees payable at the end of a case rather than, as is the case under the present system, as an action proceeds through the courts. Amendment 11 would apply only to personal injury proceedings. However, in practice, personal injury claimants usually do not pay up-front fees because they benefit from a success fee agreement. Part 1 of the bill encourages that practice and makes it more likely that personal injury claimants will not pay any up-front fees at all, including court fees. Thus, it could be argued that the real beneficiaries of amendment 11 could well be law firms and claims management companies.

A consultation on court fees closed recently: the Government’s response to it was published last week, with impact assessments. I am sure that members will find it to be of interest because it sets out how the Government proposes to protect access to justice while retaining the current pay-as-you-go model of court fees in general terms. I have just signed new fees instruments for the period April 2018 to March 2021, which have now been laid for scrutiny by the Justice Committee and the Delegated Powers and Law Reform Committee.

The Scottish Government supports the current pay-as-you-go model because it encourages people to resolve their disputes outside the courts; it encourages settlement and it ensures that people value the resources of the court and use them wisely. The model also reinforces the level of financial risk if a party loses a case, it discourages unreasonable behaviour and it deters weak or vexatious claims.

The pay-as-you-go model actively supports those outcomes specifically because fees are charged in small increments as cases progress through each of the key steps in the legal process. The effect is to make the parties stop to consider whether it is appropriate for them to continue. Ultimately, under either pay as you go or payment of a bill at the end of the case, the losing party will normally pay the fees of both parties and the winner will be reimbursed or not billed. The two models affect the timing, but they do not change the eventual outcome.

It is worth pointing out again that under the proposals in section 6 for success fee agreements in personal injury actions, it will be the solicitor rather than the client who will be liable for all outlays that are incurred in provision of the relevant services to the client, including—of course—court fees. The client will therefore not pay for court fees in such cases, which are among the most commonly litigated in Scotland. There is therefore no barrier, under the bill, to access to justice for personal injury actions, because the individual pursuer will not pay fees up front.

Moreover, the solicitor, for his or her part, will recover the court fees as part of the expenses that are recovered from the opponent at the conclusion of the case, assuming that it is successful. Under the bill’s provisions on qualified one-way costs shifting, the client cannot become liable for their opponent’s court fees even if they lose their case.

It is worth pointing out that there are generous exemptions to the requirement for parties to pay court fees, which means that many vulnerable and disadvantaged groups of people do not pay court fees. The consultation analysis to which I referred a moment ago confirms that the Scottish Government will extend the exemptions regime to include recipients of Scottish welfare funds and people—often women—who are seeking civil protection orders, as was suggested by Scottish Women’s Aid. In addition, the income threshold below which fees are not to be paid will be increased.

It is also worth noting the recent Supreme Court judgment—of which I am sure members are aware—concerning fees in employment tribunals. In striking down the fees because they were exorbitant and acted as a barrier to justice, the Supreme Court went on to say something that I think is worth quoting. It said:

“Fees paid by litigants can, in principle, reasonably be considered to be a justifiable way of making resources available for the justice system and so securing access to justice.”

It must also be stressed that billing for court fees at the end of cases would place an immense burden on the Scottish Courts and Tribunals Service, and the long-standing arrangements for payment of court fees on the pay-as-you-go principle would have to be completely revised and reformed, with consequent expense and disruption to business.

Furthermore, the Scottish Courts and Tribunals Service must attempt to recover court fees that are due on behalf of the taxpayer and there will, inevitably, be a measure of loss through irrecoverable debt. If court fees were not paid on a pay-as-you-go basis, the SCTS, and therefore the Scottish taxpayer, would have to pay them and the debt might not be recovered in all cases. There would therefore be a high cost to the Scottish Courts and Tribunals Service and the taxpayer, and the efficient conduct of business in Scotland’s courts would be disrupted if the long-standing arrangements for court fees were to be fundamentally altered to make court fees payable at the end of cases, rather than on an on-going basis.

Liam McArthur (Orkney Islands) (LD)

Will the minister take an intervention?

Annabelle Ewing

Certainly, I will.

Liam McArthur

I appreciate the clarification that the minister has given.

On the clawback provision, you have already suggested that the fees would be payable at each stage by the solicitor, who would then, in turn, recover them from the litigant. It seems unlikely that there would be considerable difficulty in clawing back from solicitors firms fees that are due to the courts. The problem would be for solicitors in recovering the fees, rather than for the Scottish Courts and Tribunals Service. Is that a fair reflection of the actual problem in chasing down debt?

Annabelle Ewing

I will turn that slightly on its head and look at it from the perspective of the motivation for amendments 11, 64 and 16, which is concern about access to justice. We all share that concern.

The most likely scenario for personal injury actions is that they will be done under success fee arrangements. In such circumstances—as Liam McArthur pointed out—the solicitor takes the hit in that they take on the obligation to pay up-front fees, including court fees. In terms of the barriers to justice that there have been concerns about, it is difficult to see how that will impede a person who is pursuing a personal injury action.

On Liam McArthur’s point about recovery, court fees are currently paid on a pay-as-you-go basis, which helps to resource the work of the Scottish Courts and Tribunals Service, as it said in its letter to the committee. If we take away that on-going resource, we will have a problem. At the end of the day, seeking to recover might look easy on paper, but it might prove not to be practicable in every single case, for whatever reason.

The pay-as-you go system means that the money is going into the court service. If we were to take that away, we would take away a big part of the Scottish Courts and Tribunals Service’s budget. That point is made in the relevant documentation about the fees instruments that the committee will consider shortly. The instruments look at the potential negative impact and possible shortfall for the operation of the Scottish Courts and Tribunals Service, which could run to £30 million-plus over the piece. That is a not insignificant budget item.

I understand the motivation for the amendments in the group, but bear in mind that the amendments are intended to cover personal injury actions and such cases will most likely benefit from success fee agreements. Therefore it is the solicitor that will, as part of the package, take on the onus of paying all fees, including court fees.

On the budgetary implications, if there were to be a gap in the budget of the Scottish Courts and Tribunals Service, it would ask central Government to fill it. Under the current financial budgetary constraints, if the service were to look for money from the justice portfolio to fill that gap, something else in the justice budget would have to give: there is not an infinite amount of money available.

Members have referred to the letter that the Scottish Courts and Tribunals Service sent to the committee about the impact that it, as the organisation that operates the system, says that such a move would have, and the fear of the unintended consequences of the amendments in the group.

On the procedural aspect, the service recommended use of secondary legislation on management of fees in order to retain the current flexibility and accessibility to a wider audience.

For those reasons, I respectfully ask Daniel Johnson to seek to withdraw amendment 11 and not to move amendment 16.

John Finnie’s amendment 64 would mean that a pursuer who had the benefit of QOCS would not be liable for court fees at all. I consider amendment 64 to be unnecessary. If a pursuer has the benefit of QOCS, they are liable to pay only the success fee at the end of the case, but only if they win.

As I said, it is the responsibility of the solicitor, not the pursuer, to pay up front all other expenses, including court fees. It is not clear to me why a substantial benefit should be provided to them when that benefit would come at a substantial cost to the Scottish Courts and Tribunals Service and, ultimately, the taxpayer.

10:15

In addition, I say that exemptions from civil court fees are best made in the body of court fees orders, in line with the existing enabling power in section 107 of the Courts Reform (Scotland) Act 2014. The new fees instruments that I mentioned include new additional exemptions that will be particularly relevant to women who seek civil protection orders for domestic abuse.

Therefore, although amendment 64 is well intentioned, for the reasons that I have set out at some length—I thought it important to do so—I believe it to be unnecessary and potentially harmful to the funding of the Scottish Courts and Tribunals Service, so I ask Mr Finnie to not move it.

Daniel Johnson

The arguments are relatively straightforward. I think that there is a slight contradiction between the minister’s statement that law firms would be the primary beneficiaries and her dismissal of the point that they would be liable and would have to recover their fees. Amendment 11 addresses a significant barrier as regards cash flow, particularly for trade unions. For that reason, I press it.

The Convener

The question is, that amendment 11 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Finnie, John (Highlands and Islands) (Green)
Johnson, Daniel (Edinburgh Southern) (Lab)

Against

Adam, George (Paisley) (SNP)
Corry, Maurice (West Scotland) (Con)
Gougeon, Mairi (Angus North and Mearns) (SNP)
Kerr, Liam (North East Scotland) (Con)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
McArthur, Liam (Orkney Islands) (LD)
Mitchell, Margaret (Central Scotland) (Con)

The Convener

“disclosure expedites dispute resolution to the benefit of both parties and promotes efficiency in the legal system.”

As a result, section 10 has been reworked to cover all disclosure of all funding of litigation. In the bill as introduced, section 10 provided only for transparency in the case of third-party funders with “a financial interest” in the outcome of a case. Amendment 41 adjusts section 10(1) to ensure that the section now applies a duty of disclosure to all funding of litigation in Scottish courts.

It might also be the case that a pursuer is crowdfunded by people using pseudonyms or who remain anonymous, so he or she will not know the identity of all the funders. Amendment 42 provides for that possibility and makes an exception to the rule that the names of all funders must be disclosed, with the effect that it will apply only if those funders are known to the litigant.

Amendment 44 now makes separate provision for those narrower cases in which the funder has a financial interest in the proceedings—in other words, commercial funding. Proposed subsection (2A) includes the text that was formerly in section 10(2)(c) as well as section 10(3), which is removed by amendment 43 and allows the court to make awards of expenses against venture capitalists and commercial funders if a case is lost.

Concern was expressed at stage 1 that solicitors and other providers of success fee agreements would also be pursued for expenses by a successful defender—albeit, of course, that such defenders would not be able to claim expenses from the litigant in personal injury cases because of the effect of qualified one-way costs shifting in section 8. New subsection (2B) as proposed in amendment 44 therefore makes it clear that the provision of section 10 on liability to expenses will not apply to providers of success fee agreements.

Amendment 61, in the name of John Finnie, makes it clear that a trade union or similar body representing the interests of workers will also not be liable for any expenses if the pursuer whom they have supported is unsuccessful in court. Amendment 12, in the name of Daniel Johnson, is similar, but restricts the exemption only to trade unions and exempts funding from trade unions from the general disclosure requirement. Such a provision would depart from Sheriff Principal Taylor’s recommendations on transparency.

I have noted the concerns that were raised at stage 1 in relation to the application of section 10 to trade unions and similar bodies, and I am happy to support amendment 61. I am afraid that I cannot say the same of amendment 12. Although it seems likely that Mr Johnson was seeking to achieve the same results, I think that Mr Finnie’s amendment better reflects the bill’s overarching principles.

Finally, I note that in its written evidence to the Justice Committee, the Family Law Association expressed concerns about the application of section 10 in some situations. First, a pursuer, particularly one who has been dependent on their spouse or partner for support throughout their relationship, might require a litigation loan to raise proceedings against that spouse or partner. Secondly, parents might give a loan to a child to fund the deposit on a pre-marriage property that then becomes part of the dispute in subsequent proceedings.

The association’s view is that it is neither helpful nor appropriate to require parties to family proceedings to disclose such funding arrangements. The Scottish Government agrees. Amendment 45 therefore disapplies section 10 in family proceedings that are funded by a close family member, who will therefore not be exposed to any risk of an adverse award of expenses. Additionally, in the interests of family privacy, the pursuer will not be required to disclose the funding. Close family members are defined as a spouse, civil partner, co-habitant, parent, child or sibling.

Amendment 46 is consequential on amendment 45 and defines family proceedings for the purposes of the exception for close family members.

I move amendment 41.

John Finnie

I align myself with the minister’s comments, and I think that everyone is supportive of the principle of disclosure.

Throughout our deliberations, we have heard that the intention was never for trade unions to be caught up in the provisions. Amendment 61 refers to a

“trade union or similar body”,

which will cover a range of staff associations. I hope that members will support that.

I strongly support the family privacy aspects that the minister outlined, which are an excellent addition to the bill.

Daniel Johnson

It is important that we explicitly exempt trade unions. I am minded to move amendment 12, although I recognise that John Finnie’s amendment 61 largely achieves the same result; I will be mindful of that at the appropriate time.

The Convener

We will come to that in due course.

Liam McArthur

Like John Finnie, I welcome the amendments that improve transparency, which was certainly a theme at stage 1.

The minister talked about crowdfunding. I would welcome a bit of additional clarification on what the provisions that are to be put into the bill imply for what an individual who receives crowdfunding might have to declare. With any crowdfunding initiative, there will be people who will not be known to the individual, and that issue is captured in the provisions. However, there is the prospect of there being very many funders of small amounts that cumulatively add up to a lot. Is it the expectation that all those individuals would have to be revealed to the court under the amendments that we are considering?

Annabelle Ewing

I am proposing that only those funders who are known to the pursuer need to be disclosed. If the pursuer does not know who the people are, perhaps because they are using pseudonyms, they cannot be expected to disclose that information. I am happy to reflect further on that aspect as we move to stage 3, just to take a belt-and-braces approach and to ensure that we are covering what we need to cover and excluding what we need to exclude.

Liam McArthur

That is helpful. I welcome that clarification. I entirely support the principle; I am just wary about whether the provisions are proportionate in those specific circumstances.

The Convener

Were those your winding-up comments, minister?

Annabelle Ewing

Yes.

Amendment 41 agreed to.

Amendments 42 to 44 moved—[Annabelle Ewing]—and agreed to.

Amendment 61 moved—[John Finnie]—and agreed to.

Amendments 45 and 46 moved—[Annabelle Ewing]—and agreed to.

Amendment 12 not moved.

Section 10, as amended, agreed to.

Section 11—Awards of expenses against legal representatives

10:30

Amendment 47 moved—[Annabelle Ewing]—and agreed to.

Section 11, as amended, agreed to.

Section 12—Minor and consequential modifications to rule making powers

Amendment 48 moved—[Annabelle Ewing].

The Convener

The question is, that amendment 48 be agreed to. Are we all agreed?

Members: No.

The Convener

There will be a division.

For

Against

Corry, Maurice (West Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)

The Convener

The result of the division is: For 8, Against 3, Abstentions 0.

Amendment 48 agreed to.

Section 12, as amended, agreed to.

After section 12

Amendment 49 moved—[Annabelle Ewing]—and agreed to.

Section 13 agreed to.

Schedule—Auditors of court: modification of enactments

The Convener

The next group is on auditors of court. Amendment 51, in the name of the minister, is grouped with amendments 52, 50, 53 and 54.

Annabelle Ewing

Section 51(3) of the Solicitors (Scotland) Act 1980 and section 2(2)(b) of the Legal Profession and Legal Aid (Scotland) Act 2007 set out lists of auditors of court and other legal figures who are entitled to make certain complaints to the Scottish Solicitors Discipline Tribunal and the Scottish Legal Complaints Commission respectively. Those lists ought now to include the auditor of the sheriff appeal court, who, for the first time, is given statutory status by section 13 of the bill. Amendments 51 and 52 therefore allow the auditor of the sheriff appeal court to report any wrongdoing or inadequate professional services discovered on the part of a lawyer to the appropriate authorities.

Amendment 50 provides for situations in which there is a vacancy in the office of auditor of the Court of Session or where, for some other reason, the incumbent auditor of the Court of Session cannot carry out his or her functions—for example, due to illness or maternity or other family-related leave. Amendment 50 empowers the Lord President to appoint an ad hoc office-holder to act as auditor of the Court of Session for the relevant period. This amendment was requested by the Lord President of the Court of Session and has been agreed with his office and the Scottish Courts and Tribunals Service. The person so appointed on a temporary basis will be treated as the auditor of the Court of Session for most purposes, but he or she will not have any responsibility for the provision of the guidance under section 15 of the bill. A temporary auditor must, of course, comply with the statutory guidance.

Amendment 53 responds to concerns raised by the Lord President and the Scottish Courts and Tribunals Service that section 15, as drafted, would require the auditor of the Court of Session to produce a large tome of voluminous guidance on the taxation of judicial accounts, such as currently exists in England. It was feared by the Lord President and the Scottish Courts and Tribunals Service that the production of such a volume would take the auditor away from his or her normal duties, thus potentially causing delays in the taxation of accounts and even potentially inviting satellite litigation. The amendment amends section 15(2), which is the provision requiring the auditor of the Court of Session, as head of the auditor of court profession, to provide guidance on practice and policy relating to the taxation of accounts of expenses. It is intended that the auditor will provide guidance on questions of taxation of judicial accounts as they arise. That will build into a comprehensive set of guidance for practitioners, which is more consistent with the recommendations made by the Scottish civil courts review, headed by the former Lord President, Lord Gill. However, it should not be such an onerous task as to interfere with the auditor’s other duties.

Amendment 54 makes it clear that, when preparing guidance, the auditor of the Court of Session must nonetheless have regard to the need for auditors across Scotland to exercise their functions in a manner that is consistent and transparent. The Scottish civil courts review referred to the objective of guidance as being

“to ensure that a consistent approach is taken to the taxation of accounts across Scotland”.

Amendment 54 will achieve that objective, as regards the way in which we have now formulated the requirement.

I move amendment 51.

Amendment 51 agreed to.

Amendment 52 moved—[Annabelle Ewing]—and agreed to.

Schedule, as amended, agreed to.

After section 13

Amendment 50 moved—[Annabelle Ewing]—and agreed to.

Section 14 agreed to.

Section 15—Guidance

Amendments 53 and 54 moved—[Annabelle Ewing]—and agreed to.

Section 15, as amended, agreed to.

Section 16 agreed to.

Section 17—Group proceedings

The Convener

Group 14 is on group proceedings: opt-out proceedings. Amendment 13, in the name of Liam McArthur, is grouped with amendments 14 and 15.

Liam McArthur

I welcome the provisions in the bill that allow group proceedings to take place under Scots law. That is welcome, and I do not diminish the importance of that, but I believe that an opportunity will be missed to underscore the ambition that we have on protections for consumers if we limit ourselves simply to an opt-in model. The minister has argued that an opt-in solution is quicker and easier to put in place, but that is contested by the consumer organisation Which?, which suggests that it risks delivering very little for very few in practice. As Which? makes clear, breaches of consumer law invariably have a small impact on a large number of people, so the cumulative impact may be high but the incentive for any single individual to bring legal action is perhaps very low.

For legislation that is meant to be about widening access to justice, and which looks set to do that in a number of areas, the current lack of ambition in relation to group proceedings is a concern. That is why my amendments seek to expand the options available, including the possibility of an opt-out route being taken. As colleagues will see, amendment 13 does not require opt-out rather than opt-in. Instead, it seeks to introduce discretion to the court, allowing it to take into consideration the nature and circumstances of a case. That reflects the approach taken in the Consumer Rights Act 2015 and seems a pragmatic and reasonable way of addressing the concerns that the committee heard at stage 1 from Which? and others.

For the sake of completeness, amendments 14 and 15 go on to lay out what would be required for a proficient opt-out mechanism, including the need to provide a description of a group of persons whose claims are eligible, as per the Consumer Rights Act 2015, as an additional condition of the court’s assessment that reasonable measures have been taken by the representative party to identify and notify any eligible persons, so that they can choose whether or not they want to opt out. Those additional measures should help to address some of the concerns that have been raised that an opt-out proceeding might disadvantage any person or be an administrative burden on the court, by providing definitive boundaries and leaving responsibility for identification and notification with the representative party.

After the Competition Act 1998 introduced an opt-in clause, just one action was brought in 17 years. Only with the introduction of an opt-out provision in the Consumer Rights Act 2015 have we seen a move forward in consumer protection, illustrated by the successful case brought against JJB Sports in 2007 over price fixing for football shirts. I believe that amendments 13 to 15 provide a pragmatic solution that will reinforce the measures in the bill around group proceedings. They have the potential more effectively to incentivise corporate social responsibility on the part of businesses and to underpin the rights of consumers.

I look forward to hearing contributions from colleagues and the minister.

I move amendment 13.

John Finnie

I speak in support of Liam McArthur’s amendments. The key word that he used was “opportunity”. We deal with complex legislation, and the issue should not be the ease with which a provision can be applied. We heard some compelling examples of practice that the amendments would support, and it is important that we try to make that better in the future, so I support the amendments.

Daniel Johnson

I, too, would like to speak strongly in support of Liam McArthur’s amendments. I think that they would be extremely useful. The examples that he set out and the impact of opt-in legislation that we see south of the border lead us to the conclusion that opt-out legislation would be extremely useful. The situations in which a large number of people are suffering a low-level cost present quite a compelling argument. For those reasons, I strongly support the amendments.

The Convener

I also welcome the amendments. We are presented with an opportunity, and I think that the amendments strike the right balance in giving the court the discretion to go to the opt-out procedure if that is deemed to be the best option.

Annabelle Ewing

I am pleased that the proposal to introduce group proceedings, otherwise known as class actions, to the Scottish courts has broad support. To pick up on Liam McArthur’s description of my position, I would say that I do not lack ambition either, but I am perhaps more of a pragmatist, as a result of my position as a Government minister. I will flesh out the reasons why I take that view at this stage.

It is the position of the Scottish Government and most stakeholders—including the Faculty of Advocates, the Law Society of Scotland, the Scottish Trades Union Congress and the Association of Personal Injury Lawyers—that the best way forward is to proceed at this time by way of the introduction of an opt-in system. Principally, that is because it will be more straightforward to implement, easier for potential litigants to understand and easier for practitioners to administer. Further, there would also not be undue delay in commencing the procedure.

The Scottish Government does not have any financial or political objections to opt-out, and the decision to go for opt-in at this stage has been for purely practical reasons.

It is to be borne in mind, of course, that group procedure—notwithstanding the clever drafting of Liam McArthur’s amendment 13—still involves the discretion of the court, and there still have to be court rules in place. That is where we get to one of the nubs of the matter. Group procedure—whatever kind of procedure is adopted—will require new court rules from the get-go, which will be drafted by the Scottish Civil Justice Council. Some of the issues relating to the opt-out option are much more complicated than those relating to the opt-in option. For example, the opt-out option will imply that people might become part of litigation without their consent, and, possibly, without their knowledge. That would have to be addressed in court rules. Further, the concept of aggregated or global damages sits uneasily with Scots law, which adheres to the compensatory principle. No stakeholder has yet proposed a scheme that would ensure that individual claimants are not under or over-compensated.

Members will have seen that the Lord President has written to the committee commenting that any extension of the group proceedings provisions in the bill should be approached with considerable caution. He went on to say that the practical and legal challenges that are presented by an opt-out model are significantly greater than those that are presented by an opt-in model. The Government therefore believes that it would take the Scottish Civil Justice Council far longer to draft rules for both the opt-in and the opt-out procedures from the same starting point, which is what would be required if amendment 13 were to be accepted by the committee, because we would still need to have court rules in place in order to follow a procedure, regardless of whether the court exercised discretion to follow the opt-out procedure. It has been explained why, from the same starting point, it would take longer to formulate those court rules.

John Finnie

If your view is that you will not support the amendments, when do you think would be the appropriate time to move to the system that is proposed?

10:45

Annabelle Ewing

That is an extremely practical question. If we proceed on the basis of the bill as it currently stands, and proceed with the opt-in procedure—because that would allow us to start somewhere, as was highlighted by several of those who gave evidence to this committee—it will take some time even to get the opt-in procedures going. The next group of amendments address the issue of post-legislative scrutiny, and it might well be that that would be the perfect stage at which to assess where matters have got to.

There is no question of kicking the matter into touch for ever; my view is inspired by pragmatic considerations that have been raised. We heard in committee that the subject has been discussed for many decades. We need to get on with it and start somewhere. If it is too complicated from the start, we risk delaying the whole thing. Instead of being able to start with at least some opt-in proceedings, we may find ourselves in a position in which no class actions are possible for a considerably longer period of time, as an unintended consequence, because we are trying to be too ambitious at the outset. I am sure that that is not Mr McArthur’s intention, but my concern is that class actions per se could be delayed.

A number of people, including Paul Brown of the Legal Services Agency, have given evidence to the committee to the effect of taking that more pragmatic view. It was not that those people do not wish to see opt-outs—they do. There is a fear that the simultaneous introduction of two processes—one of which is extremely complex, because it introduces elements that we do not currently wrestle with in Scots civil procedure—would mean a delay to all class actions.

I will pick up on the reference—I think it was by Mr McArthur or Mr Johnson—to the experience of the United Kingdom Competition Appeal Tribunal where class actions have been possible. I think that Which? flagged up that experience. We are not sure that the experience of the tribunal is typical; a particularly large number of claimants are before it in competition actions, and competition law is highly specialised and a technical area of law. Scotland has a much smaller jurisdiction, so introducing an opt-in scheme as the starting point would be more straightforward. That is something to bear in mind.

For all those reasons, I ask the committee not to support Liam McArthur’s amendment 13. In response to Mr Finnie’s point, I recognise that this area of the bill would be right for post-legislative scrutiny, assuming that, in the grouping of amendments that we will shortly get to, an amendment on post-legislative scrutiny is agreed to by the committee.

I would be happy to support Liam McArthur’s amendments 14 and 15, which are potentially useful additions to the proposals for opt-in group proceedings. I emphasise that we are not closing the door on an opt-out scheme; I am simply guided by pragmatism whereby I wish to see class actions as a possibility in Scotland as soon as possible. Court rules will need to be drafted and it would be easier to start with an opt-in scheme and then move to opt-out. Post-legislative scrutiny would give members the assurance that this is not an attempt to kick opt-out into touch. If our starting point would be to have to come up with court rules for both opt-in and opt-out schemes, I fear that we would see no class actions for years to come because of the complexity of that approach.

Liam McArthur

I thank the minister and members for their contributions, and I thank the convener, John Finnie and Daniel Johnson for their strong support for my amendments. There seems to be a tussle over who has greater claim to the badge of pragmatism, and I stake my claim again. The way in which I have sought to cast the amendments strikes the right balance by recognising the complexities and the need for court discretion in taking the schemes forward. The minister pointed out, quite fairly, that we still require amendments to rules of court. I do not entirely dismiss the concerns of the opponents cited by the minister, but, given the strength of the evidence that we have heard from Which?, which is a representative of consumer interests, we need to ascribe a suitable weight to its concerns. Direct comparisons between the situations north and south of the border are probably fraught with difficulties—I hear what the minister has said about the actions before the tribunal—but it has taken 17 years south of the border to move from the Competition Act 1998 to the Consumer Rights Act 2015.

We should gain some optimism from the fact that the Consumer Rights Act 2015 demonstrates that it is not beyond the wit of man to construct an opt-out model and in such a way that allows for group proceedings. As Daniel Johnson reminded us, the issue affects high numbers but has a low impact. Unless we address that, we will miss the opportunity that John Finnie raised in his comments.

Liam Kerr (North East Scotland) (Con)

Section 18 agreed to.

After section 18

The Convener

The final group of amendments is on post-legislative review. Amendment 55, in the name of the minister, is grouped with amendments 62 and 56.

Annabelle Ewing

During the stage 1 debate, several calls were made for there to be post-legislative scrutiny of the bill in five years’ time. In its stage 1 report on the bill, the Justice Committee asked the Scottish Government to commit to post-legislative scrutiny of the bill within five years of its provisions coming into force. In particular, the committee was concerned that such a review should look at the impact of qualified one-way costs shifting.

I have listened to the arguments and I am persuaded that post-legislative scrutiny is appropriate for the special circumstances of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. That does mean that the Government accepts that a statutory requirement for post-legislative scrutiny is appropriate for all legislation passed by the Scottish Parliament. The Government continues to believe that there is a need to take a flexible and proportionate approach to post-legislative scrutiny, so that time and resources are targeted effectively. We look forward to working with the Public Audit and Post-legislative Scrutiny Committee on that.

Amendment 55 provides for post-legislative scrutiny of parts 1 to 3 of the bill, five years after each part is fully commenced. In respect of part 4, on group proceedings, the five-year period will commence from the day on which the first rules of court for group proceedings come into force. That different arrangement is considered necessary because the detail of the procedures for group proceedings will be provided in rules of court to be brought forward by the Scottish Civil Justice Council, which will draft and consult on the rules of court that are to govern group procedure. Group proceedings cannot take place until such rules are in force. Arguably, there is therefore no point in triggering the five-year period for post-legislative scrutiny of group proceedings until they have actually taken place and have had a chance to bed in over the proposed five-year period.

The post-legislative reports that are envisaged in amendment 55 will require consultation with appropriate stakeholders. They will have to be laid before the Scottish Parliament as soon as is practicable after the relevant report has been prepared and then published. The post-legislative scrutiny will provide an opportunity to look at how various key parts of the act are operating and whether amendment is necessary. That could include, for example, the part 1 provisions, as amended, on the future element of damages, taking into account the likely addition at that time of specific damages legislation.

The post-legislative scrutiny of part 2 will allow, as the committee has requested, a review of the operation of qualified one-way costs shifting and how the grounds on which QOCS protection is lost are operating in practice, since they are intended to facilitate meritorious claims while discouraging spurious ones. The post-legislative scrutiny of part 2 will also allow consideration of whether QOCS should be extended to areas of civil litigation other than personal injury actions.

As regards post-legislative scrutiny of part 4, most stakeholders have agreed that opt-in is the practical option for the introduction of group proceedings. However, we heard the committee’s view on that just a moment ago.

Amendment 55 seeks to link the post-legislative scrutiny to the timing of the entry into force of the various parts. I do not want to belabour the point.

Amendment 56 will mean that the whole of the new part will come into force automatically two months after royal assent.

Convener, your amendment 62 appears to have much the same purpose as the Government’s objective in amendment 55. Although it embodies differences from the Government’s proposal, I am willing to support it. As with other non-Government amendments that we are supporting at stage 2, the Government will consider whether any refinements are required and bring them forward at stage 3 if necessary. If Margaret Mitchell’s amendment 62 is duly agreed to, we may nonetheless be required to reflect on the rationale for the timing of the review as it pertains to particular parts of the bill.

That is where we are. On the basis that I need to move amendment 55 in order for the group to be considered, I will move it, although that is only to allow debate to take place on the rest of the group of amendments.

I move amendment 55.

The Convener

Thank you, minister. I will speak to my amendment 62. I think that it complements the minister’s amendment 55. Both insert provisions for post-legislative review of the operation of the act as soon as is practicable after five years, and both require the laying before Parliament of a report on the review.

However, in our stage 1 report, the committee specifically asked the Scottish Government

“to commit to post-legislative scrutiny of the Bill (within five years of its provisions coming into force), in particular to review the impact of introducing”

qualified one-way costs shifting in section 8. Amendment 62, therefore, specifically calls for a review of the effect and operation of section 8 and QOCS, which represents a radical departure from the traditional loser-pays principle. It also specifically calls for a review of the effect and operation of section 17, on group proceedings, including the opt-in approach, and now that the committee has agreed to Liam McArthur’s amendment, it would include a review of the opt-out provision, as well a review of how sections 8 and 17 affect

“access to justice and the administration of Scottish courts”.

Amendment 62 states:

“The report must include a statement by the Scottish Ministers setting out—

(a) whether they intend to bring forward proposals to modify any provision of this Act, and

(b) where no such proposals are to be brought forward, their reasons for not doing so.”

As such, it covers all the provisions in the minister’s amendment, but it specifically provides for QOCS, as the most contentious aspect of the bill, to be reviewed, with further scrutiny of its operation, together with section 17 and group proceedings.

As there are no other comments from members, I ask the minister to wind up.

Annabelle Ewing

I just want to point out that, as you have highlighted, post-legislative scrutiny will permit a number of complex and technical aspects of the bill to be reconsidered in the light of five years of its operation. I must emphasise again that the Government does not believe that post-legislative scrutiny is necessary for every piece of legislation, but, as I have said, we will work with the Public Audit and Post-legislative Scrutiny Committee in that regard.

In the light of the convener’s comments, I will not press amendment 55. I support amendment 62, in the name of Margaret Mitchell, and as with all stage 2 amendments, I will, if the committee agrees to that amendment, reflect whether any refinements might be required at stage 3.

11:00

Amendment 55, by agreement, withdrawn.

Amendment 62 moved—[Margaret Mitchell]—and agreed to.

Section 19—Regulations

Amendment 16 moved—[Daniel Johnson].

The Convener

The question is, that amendment 16 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division. [Interruption.] The clerks could not see who was voting. We will take the division again.

For

Against

The Convener

The result of the division is: For 6, Against 5, Abstentions 0.

Amendment 16 agreed to.

Section 19, as amended, agreed to.

Sections 20 and 21 agreed to.

Section 22—Commencement

Amendment 56 moved—[Annabelle Ewing]—and agreed to.

Amendment 17 moved—[Liam Kerr].

The Convener

The question is, that amendment 17 be agreed to. Are we all agreed?

Members: No.

The Convener

There will be a division.

For

Corry, Maurice (West Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
McArthur, Liam (Orkney Islands) (LD)
Mitchell, Margaret (Central Scotland) (Con)

Against

The Convener

The result of the division is: For 4, Against 7, Abstentions 0.

Amendment 17 disagreed to.

Amendment 65 moved—[Gordon Lindhurst].

The Convener

The question is, that amendment 65 be agreed to. Are we all agreed?

Members: No.

The Convener

There will be a division.

For

Corry, Maurice (West Scotland) (Con)
Kerr, Liam (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)

Against

The Convener

The result of the division is: For 3, Against 8, Abstentions 0.

Amendment 65 disagreed to.

Section 22, as amended, agreed to.

Section 23 agreed to.

Long title agreed to.

The Convener

That ends stage 2 consideration of the bill. The bill as amended will now be printed. The Parliament has not yet agreed when stage 3 proceedings will take place, but members can lodge stage 3 amendments with the clerks in the legislation team at any time. The deadline for lodging amendments will be announced as soon as it is known.

I thank the minister and her officials for their attendance, and I suspend briefly to allow them to leave.

11:04 Meeting suspended.

11:11 On resuming—

6 March 2018

Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill with Stage 2 amendments

Additional related information from the Scottish Government on the Bill

Revised explanation of the Bill (Revised Explanatory Notes)

Revised Explanatory Notes Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Revised Explanatory Notes Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

More information on how much the Bill is likely to cost (Supplementary Financial Memorandum)

Supplementary Financial Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Supplementary Financial Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

More information on the powers the Scottish Parliament is giving Scottish Ministers to make secondary legislation related to this Bill (Supplementary Delegated Powers Memorandum)

Supplementary Delegated Powers Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill Supplementary Delegated Powers Memorandum Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

Scottish Parliament research on the discussion of the Bill

Debate on the proposed amendments

MSPs get the chance to present their proposed amendments to the Chamber. They vote on whether each amendment should be added to the Bill.

Documents with the amendments considered at this meeting on 26 April 2018:

Debate on proposed amendments transcript

The Deputy Presiding Officer (Christine Grahame)

The next item of business is consideration of stage 3 amendments to the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. In dealing with amendments, members should have with them the bill as amended at stage 2, the marshalled list and the groupings.

The division bell will sound and proceedings will be suspended for five minutes for the first division of the afternoon and the period of voting for that first division will be 30 seconds. Thereafter, I will allow a voting period of one minute for the first division after a debate.

Members who wish to speak in the debate on any group of amendments should press their request-to-speak buttons as soon as possible after I call that group.

Members should now refer to the marshalled list of amendments.

Section 2—Enforceability

The Deputy Presiding Officer

I call group 1. Amendment 34, in the name of Margaret Mitchell, is the only amendment in the group.

Margaret Mitchell (Central Scotland) (Con)

For an ordinary member of the public, understanding civil litigation can be a complex and confusing process. The Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill seeks to increase access to justice. By means of success fee agreements, it introduces provision whereby a lawyer who uses a damages-based agreement can take a share of their client’s injury compensation, which can include compensation for both past and future loss.

Amendment 34 seeks to ensure that the bill will protect the consumer by ensuring that the injured pursuer has the relevant information with which to make an informed choice about whether to accept the terms of the success fee agreement that is on offer where the damages are awarded not by a court but through a negotiated settlement. The amendment ensures that before the success fee is agreed—which can be by means of a damages-based agreement—the solicitor or provider has explained in writing to the client

“how the terms of the success fee agreement would determine the fee payable in respect of the different elements of damages that may be obtained”.

The onus is on the lawyer to state, in writing, that the amount that is being taken as part of the lawyer’s fee is fair and reasonable. Amendment 34 also ensures that the client has confirmed, in writing, that they have understood and agreed to the terms of the agreement. In addition, it ensures that, after an offer of damages is received, but before it is accepted, the recipient fully understands how much of the damages amount is being paid to their lawyer and, in particular, to what extent the part of the offer that relates to damages for future loss is being claimed as part of the lawyer’s fee.

It is important to recognise that compensation for future loss is awarded to an injured pursuer to cover their future care, which can include lost earnings while an injured person is off work and recovering, or travel expenses for expected future hospital appointments. In more serious personal injury cases, it could cover loss of all future earnings as well as the costs of future care and specialist equipment that may be needed. Therefore it is crucial that an injured pursuer fully understands how much of their future loss entitlement—which can vary, depending on very complex care needs—will instead go towards their solicitor’s fee if their case should be successful.

In addition, the amendment will ensure that the lawyer must provide

“a certificate that the fee payable is fair and reasonable in the circumstances of the case, and ... that no conflict of interest or undue influence has arisen”.

That will also provide protection for the lawyer.

In conclusion, in the minister’s remarks at stage 2, she indicated, in essence, that she thought that the Law Society of Scotland should be responsible for providing that client protection. However, as the Law Society lobbies in the best interests of its members, it is not best placed to set out what form that protection would take after the bill has been passed. By contrast, amendment 34 would set out provisions in the bill to ensure transparency and openness in a success fee agreement, and that an injured pursuer has the necessary information to enable them to make an informed choice as to whether to accept the agreement. As such, the amendment will provide checks and balances that will serve to protect solicitors and clients from any underlying potential conflict of interest.

I move amendment 34.

Daniel Johnson (Edinburgh Southern) (Lab)

I share many of Margaret Mitchell’s concerns, and it is important to note her comment on the proposals in the bill being about increasing access to justice. It is important that individuals who bring forward cases do so with the fullest possible knowledge and that their interests are protected. However, we do not support amendment 34, first and foremost because it would introduce an unnecessary layer of bureaucracy. Requiring the arguments and reasons to be set out in writing would not necessarily protect clients’ interests in the way that Margaret Mitchell has set out. Critically, some in the legal profession have argued that the approach would prevent so-called at-the-court-door settlements, which are often in the client’s best interests in preventing court action and arriving at an agreement that ensures that their interests are looked after.

On Margaret Mitchell’s comments on the Law Society and who is best placed to look at the matter, in the final analysis lawyers are in a highly regulated profession. Solicitors undergo a great deal of scrutiny and are required by law to uphold their clients’ best interests. If there is an issue, it is a much wider issue relating to the profession that would be best looked at from a regulatory point of view, rather than through the specifics of the bill.

For those reasons, we will not agree to amendment 34.

Liam McArthur (Orkney Islands) (LD)

Like Daniel Johnson, I think that Margaret Mitchell very fairly identified an issue. Access to justice is predicated on there being a level of transparency and predictability about what any litigant might expect from the process. However, I share Daniel Johnson’s concerns about the amendment putting in place something that would, in practice, come to be seen as fairly cumbersome and not necessarily in the best interests of the individual.

As Margaret Mitchell rightly said, the Law Society is developing proposals. With a five-year review provision built into the bill, there will be an opportunity to keep under review whether the processes that the Law Society has undertaken are fit for purpose. On that basis, and for the reasons that Daniel Johnson has identified, we will not support amendment 34.

The Minister for Community Safety and Legal Affairs (Annabelle Ewing)

I refer members to my entry in the register of interests. Members will note that I am a member of the Law Society of Scotland and that I hold a current practising certificate, albeit that I am not currently practising.

Amendment 34, in the name of Margaret Mitchell, would include in the bill certain requirements for a success fee agreement to be enforceable. I ask members not to agree to the amendment, as it would undermine the principle of an independently regulated legal profession. The provisions in the amendment are also unnecessary—I will deal with that in a moment.

Turning to the first point, the amendment would mean that substantial provisions about solicitors’ professional obligations would be fixed in primary legislation rather than in Law Society rules, which, aside from any other consideration, are much more flexible when it comes to updating and so forth. The amendment therefore appears to strike at the heart of an independent Law Society and does not take account of the principle that professional rules are best made by a professional body.

Sheriff Principal Taylor has commented that he believes that the second part of the amendment in particular is impractical. As Daniel Johnson mentioned, a number of cases still settle at the eleventh hour and at the door of the court. Sheriff Principal Taylor believes that paragraphs (b)(i) and (b)(ii) of the amendment would be difficult to comply with, and points out that a solicitor is already under an obligation to comply with the provisions in paragraphs (b)(iii) and (b)(iv), which the amendment would require to be certified. If the provisions are inserted into primary legislation, there is also a question of who will be responsible for regulating them. As it stands, it is not clear from the amendment that the Law Society would have that responsibility, so that is a matter of uncertainty.

It is a fundamental principle of maintaining an independent legal profession that no state interference or influence is exerted. The Scottish Government is committed to the principle of an independent profession, and I ask the Parliament to support that principle. It is well known that, as I said, Scottish solicitors are already required to act in the best interests of their clients at all times and must ensure that their clients understand fee arrangements and give informed consent.

Success fee agreements are not new; indeed, they have been in place in some form since the 1990s, and any theoretical conflicts and other issues have not prevented speculative fee agreements from being rolled out since that time. Where the provider of relevant services is a claims management company, it will of course fall under the regulation of the Financial Conduct Authority.

The Law Society has set up a working party that is considering success fee agreements, what provision should be made in Law Society rules and guidance to govern their terms and any other relevant issues. I understand the motivation behind Margaret Mitchell’s amendment 43, and I undertake to write to the Law Society to draw its attention to the points that the amendment raises. The Scottish Government will of course work with the Law Society as the bill is implemented to seek to ensure that the provisions relating to success fees are implemented in a way that best gives effect to the principles of the bill.

In summary, amendment 34 provides for matters that should not be set out in primary legislation, that risk undermining the principle of an independently regulated legal profession and that are more appropriately handled in rules and guidance that are provided by the Law Society of Scotland in its capacity as regulator of solicitors. Hence, I ask Margaret Mitchell to consider withdrawing amendment 34.

Margaret Mitchell

A number of points have been raised. Daniel Johnson said that the amendment might prohibit settlements at the court door, but there is nothing to prevent a pro forma being available for the client to use. That would be against a strengthened background should the amendment be agreed to.

The Deputy Presiding Officer

We come to group 2. Amendment 5, in the name of the minister, is grouped with amendments 6 to 8, 13 and 14.

Annabelle Ewing

Amendments 5 to 8 are technical in nature. We have been working with Her Majesty’s Treasury on the United Kingdom Financial Guidance and Claims Bill, which will now regulate claims management companies in Scotland. The Treasury envisages success fee caps being imposed by professional rules. Those will be rules of the Financial Conduct Authority in the case of claims management companies, or rules of a legal services regulator in the case of solicitors.

It is thought at present that there is little likelihood that success fee caps in professional rules and success fee caps under section 4 of the bill will interact. Success fee caps in professional rules could, however, interact with success fee caps under section 4 if the Westminster secondary legislation on claims management companies changes at some point in the future.

In addition, the current legal services review that the Scottish Government has instructed could lead to changes in legal profession regulation that change the extent or nature of professional rules applied to solicitors.

Therefore, in effect we are seeking to provide future proofing. Specifically, the Financial Services and Markets Act 2000, which is to be amended by the UK Financial Guidance and Claims Bill in order to regulate claims management companies, will allow the Treasury to make regulations to give power to the FCA to make professional rules. Such rules would be tertiary legislation.

Amendments 5 to 8 will amend section 4(3)(b) and section 4(4) of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill to ensure that success fee caps made in professional rules in accordance with an enactment will be treated the same as success fee caps made in an enactment. The policy in section 4 has always been that where there are two sets of fee caps, the lower one has effect.

The amendments reflect that a fee cap in professional rules might not count as a fee cap in an enactment and, therefore, the relevant text will become

“by, or in accordance with, an enactment”.

I reiterate that we do not expect the Westminster fee caps as currently proposed by the Treasury to interact with those to be provided further to this bill.

Amendments 13 and 14 are also technical drafting amendments. Amendment 13 combines section 10(2B) and section 10(3A) into one subsection that indicates the circumstances in which subsection (2A) does not apply. Thus, there will be a single subsection providing that the providers of success fee agreements and trade unions and staff associations will not be at risk of an award of expenses. Amendment 14 is a technical drafting amendment that ensures that the first reference to the Lord President of the Court of Session in section 13A uses the Lord President’s full title, which is already used in section 9(3). Given that both amendments are minor and technical, they do not make any substantive changes to section 10 and section 13A.

I move amendment 5.

Amendment 5 agreed to.

Amendments 6 to 8 moved—[Annabelle Ewing]—and agreed to.

Section 6—Personal injury claims

The Deputy Presiding Officer

We move to group 3. Amendment 1, in the name of Daniel Johnson, is grouped with amendments 2, 2A, 3 and 4.

Daniel Johnson

I will speak to amendments 1 to 4 in my name and against Margaret Mitchell’s amendment 2A.

I apologise in advance, Presiding Officer, as these are complex amendments and it may take some time to rehearse the arguments and issues. I also declare an interest, as a proud trade unionist and a member of the Community trade union and the Union of Shop, Distributive and Allied Workers. I have worked on the amendments with the Scottish Trades Union Congress and the lawyers who work with it on personal injury cases.

Ultimately, the decisions that the Parliament makes on the bill are around access to justice. For each amendment, we should set ourselves one clear test as we vote—will voting for the amendment increase access to justice or reduce it? That is precisely what lies at the heart of Sheriff Principal Taylor’s proposals and at the heart of the bill. Furthermore, we must ask ourselves whether the amendment makes it more or less likely that a claimant who has been wronged will get the justice that they deserve. Importantly, we must also ask whether, when damages are awarded, that makes it more or less likely that a claimant will get the true value of their claim.

At stage 2, the Justice Committee decided to agree to amendments from Margaret Mitchell. My amendments today seek to reverse that decision and I would like to explain why. The issue at hand is whether success fee agreements, which are also known as damages-based agreements and best known as no-win, no-fee agreements, are allowed to include any proportion of future losses in the fee for the lawyer.

On the face of it, as I am sure that Margaret Mitchell will argue, that seems unfair. The argument goes that lawyers should not receive a single penny of the damages that are awarded for the costs of a catastrophic injury. However, we must return to that test—does that increase access to justice? Sheriff Principal Taylor, the architect of the legislation as the author of the report that led to the bill, wrote to the committee—in a surprising and extraordinary move in many ways—and set out in the starkest possible terms his view of the bill as it was amended at stage 2. He wrote that the bill, as amended, posed

“an existential threat”

to damages-based agreements

“being offered in higher value cases in Scotland”.

In other words, if we ring fence future losses, lawyers are simply not incentivised to offer no-win, no-fee agreements for those higher-value cases.

Sheriff Principal Taylor’s report had to strike a carefully constructed balance to ensure that lawyers would actually offer no-win, no-fee agreements to those who have suffered catastrophic injuries. To do that, he allowed lawyers to include a small—and, importantly, capped—percentage of damages. That means that lawyers will be incentivised not just to pursue catastrophic cases but to ensure that they are settled for the maximum possible value—in other words, the interests of the client and the lawyer are perfectly aligned.

What if we do not reverse the stage 2 amendments? What would the impact be? Sheriff Principal Taylor was very clear:

“The likely outcome is that cases will either not be raised at all or will settle for considerably less than the true value of the claim.”

That is a direct quotation. Furthermore, the Law Society of Scotland agrees. It stated:

“To ring-fence future losses from the calculation of a success fee may mean that success fee agreements will not be offered in the higher value cases, as it is simply not economic to do so and the public at large will be the poorer.”

The reason that we can be so sure about this is that a recent change along these lines in England and Wales has led to exactly the situation that Sheriff Principal Taylor and the Law Society outlined. No-win, no-fee agreements are simply not being used to fund personal injury actions and thus access to justice has been greatly diminished.

Furthermore, ring fencing future losses could lead to past losses and future losses being treated differently in the courts, leading to two unintended consequences. Those with existing losses—losses already incurred—would have more opportunity to bring forward litigation than those with future losses, due to the greater availability of success fee agreements. That feels inconsistent and unfair. It could also incentivise the delaying of action so that past losses are incurred rather than being future losses at the point that court action takes place.

I turn to Margaret Mitchell’s amendment 2A. Firstly, and fundamentally, it is based on an assumption that the court fees that are awarded to lawyers are sufficient. At present, the fees that lawyers receive for cases are simply not enough to cover their costs. If they were, no one would be going down the current damages-based agreement route. However, they are doing so in large numbers, on the basis of taking 20 to 35 per cent cuts of the total damages amount.

15:00

The bill gives ministers the ability to regulate the allowable deductions that lawyers can make as part of their agreements. Sheriff Principal Taylor recommended a sliding scale—from 20 per cent on the first £100,000, down to 2.5 per cent on damages over £500,000. That represents a reduction on the current situation. Crucially, ministers can alter that scale by regulation, so that if it comes to pass that there are unintended consequences or that lawyers are taking disproportionate sums from awards, it can be modified.

Most critically, I believe that Margaret Mitchell’s amendment 2A makes a crucial error in its drafting, in that it does not allow for that flexibility. Instead, it hard-codes figures on proportion and value into the bill, removing the flexibility and the ability for different decisions to be made in the future.

Unfortunately, the figures that Margaret Mitchell has chosen come not from Taylor’s carefully balanced proposals but from the insurance industry’s briefing papers. While I perfectly understand the insurance industry’s right to pursue its interests, we must take a much broader view on the interests of the legislation. Clearly, it is in the insurance industry’s interest to reduce the number of cases brought and the value of the final claims settled, rather than to increase those things. It thus fails the critical test that I set out at the beginning.

This group of amendments does not represent a minor point in the bill. Taylor—the architect of the legislation—said that, if we do not reverse the amendments that were made at stage 2 by agreeing to amendments 1 to 4, the bill will

“make access to justice less accessible to the man in the street than if I had not reported”.

That is a stark warning indeed. I urge members to vote for amendments 1 to 4 in my name, and to vote against amendment 2A.

I move amendment 1.

Margaret Mitchell

Amendment 2A would amend amendment 2, in the name of Daniel Johnson, the effect of which would be to remove the ring fencing of future loss that was agreed to by the Justice Committee at stage 2. I have therefore lodged amendment 2A in an attempt to mitigate the potential adverse consequences of the future care costs that would be lost to lawyers’ fees.

Under the terms of the bill as introduced, a success fee agreement could include a damages-based award as part of the solicitor’s fee. That could include past and future loss. In recognition of the importance of protecting future loss and the associated care and support for injured pursuers, the Justice Committee amended the bill at stage 2 and ring fenced future loss. That was supported by the European Court of Human Rights and representatives of the insurance industry.

However, Sheriff Principal Taylor subsequently wrote to the committee to express his opposition to that decision and set out the reasons why; Daniel Johnson accepted those reasons in lodging his amendments. In support of his view, Sheriff Principal Taylor stated that, in England and Wales, the effect of ring fencing future loss on DBAs was that lawyers will not enter into a DBA. In doing so, however, he has not taken into account the fact that in Scotland, unlike in England and Wales, lawyers entering into DBAs can, in addition to those agreements, claim judicial expenses and potentially an additional fee that recognises the complex nature of cases that can take many years to conclude. The additional fee or uplift can amount to three or four times the original award for judicial expenses.

Daniel Johnson

Does the member recognise that the awarding of additional fees, as she has set out and which she is setting a great deal of store by, is done in only 5 per cent of cases? Is that really a sufficient ground for the member to rest her argument on?

Margaret Mitchell

We are looking at legislation in which it is clearly set out that those cases are very complex, and the award amounts that we are talking about refer specifically to those cases. I rather think that the percentages that the member quoted do not reflect the amount of judicial expenses that recognise the complexity of the case.

The point of amendment 2A is to mitigate the amount that a solicitor can claim from their client’s award as part of their fee. To recap: if future loss remains ring fenced, there is no question of an injured pursuer’s future loss being eroded as part of a solicitor’s fee. However, if Daniel Johnson’s amendment 2 is agreed to, only awards of over £1 million will be subject to the conditions that are set out in the bill.

There is no provision in the bill for the amount of damages that lawyers can claim, because the Scottish Government has left the determination of those amounts to regulations. Amendment 2A therefore seeks to cap the amount of success fee that can be claimed in damages-based agreements to 1 per cent of any amount awarded over £500,000; those are the sums that tend to be involved in complex personal injury cases.

One of the least persuasive arguments that Sheriff Principal Taylor and Daniel Johnson have deployed in opposing the ring fencing of future loss is that it might lead to unscrupulous lawyers delaying cases in order to increase the past loss amount from which they can take their fee. Surely we should not be regulating to look at a small minority of people who do not reflect the practice of the Law Society of Scotland’s members; and surely the whole point of the bill is that it seeks to increase access to justice for an injured pursuer and ensure that they receive the support for a care package that they need for future loss.

Liam McArthur

It is difficult to admit that we got it wrong, but I think that that is exactly what all of us on the committee did at stage 2. There are mitigating circumstances to be considered for the bill, and undoubtedly the issue that we are discussing, as Daniel Johnson intimated in his opening remarks, was one of the most sensitive that we had to wrestle with during our scrutiny of the bill. The bill is, after all, about increasing access to justice, and doing so for those who have been most grievously harmed or wronged carries particular significance. However, I am now convinced that ring fencing future losses, as happens in England and Wales and as we voted to support at stage 2—motivated by the best of intentions—would have the perverse consequences that were graphically set out by Sheriff Principal Taylor in his letter to the committee post stage 2.

Sheriff Principal Taylor recommended that damages for future loss be included in success fees if, and only if, the

“future element ... is to be paid in a lump sum”.

If the future element is to be paid by periodical payment, those damages are not to be included. Going over the account in the Official Report of the stage 2 proceedings, I was struck by what the minister said when she pointed to the change to the discount interest rate and the provisions in the forthcoming damages bill. She said that

“it seems to be much more likely that, in the future, the element of damages payment relating to future loss will be made by means of a periodical payment order.”—[Official Report, Justice Committee, 27 February 2018; c 32.]

It is also worth bearing in mind that, if the future element is more than £1 million, the court will have to agree that it is in the client’s best interests for that to be paid in a lump sum; and if it is agreed by settlement, an actuary would be involved in that decision. There is no getting away from the fact that damages-based agreements have proven to be popular even where success fees of anything up to 60 per cent are being charged. As Sheriff Principal Taylor pointed out, without Daniel Johnson’s proposed amendments, the bill as amended at stage 2 could pose an “existential threat to DBAs”. Surely it would be better to cap those fees at 2.5 per cent, as is proposed.

As I said, it is not easy to admit that we got it wrong. I have had the experience of speaking against an amendment that I had lodged, so there are degrees of discomfort. However, I believe that ring fencing future losses might indeed work against the interests of the very people whom we are seeking to protect and provide access to justice for, so for that reason the Liberal Democrats will support Daniel Johnson’s amendments 1 to 3.

John Finnie (Highlands and Islands) (Green)

I associate myself with the comments of my colleagues Daniel Johnson and Liam McArthur. I am prepared to say that it is important that we constantly reflect on what we are seeking to do. Sheriff Principal Taylor’s letter caused me to reflect on our proposed approach, and he is the architect of the bill. “Access to justice” will undoubtedly be a recurring phrase in today’s proceedings and the stage 3 debate, and the issue that we are discussing lies at the core of that. It might well seem entirely counterintuitive to hear phrases such as “loss to lawyers’ fees” being used in the context of hard-fought-for awards.

Daniel Johnson talked about “mutual interest”. It is important that the client and the lawyer have a joint interest in working together. He also talked about the role of regulation in relation to allowable deductions, which is important, too. However, if the purpose of the bill is to increase access to justice, what is most important is that we avoid the possibility that Sheriff Principal Taylor raised that such cases will

“not be raised at all”.

Therefore, I encourage members to support Daniel Johnson’s amendments and to oppose Margaret Mitchell’s amendment 2A.

Liam Kerr (North East Scotland) (Con)

I will speak against amendments 1 and 2. If amendment 2 is agreed to, we will support amendment 2A. I confirm that we will vote for amendments 3 and 4.

At the outset, I declare that I am a practising solicitor—I hold practising certificates with the Law Society of England and Wales and the Law Society of Scotland.

Amendments 1 and 2, in the name of Daniel Johnson, seek to allow pursuers’ solicitors to take an element of the claimant’s damages for future loss when calculating their success fee. At stage 2, the amendment to ring fence damages for future loss and to exclude them when success fees are calculated was unopposed. I believe that the ring fencing of damages for future loss is the right thing to do. When someone has been injured, damages for future loss are paid to put them back in the financial position that they would have been in if they had not been injured and, crucially, to fund the costs of care and support. In such circumstances, a need will have been identified and a sum awarded to cover it. I cannot see that it is right to reduce any element of that and thus potentially prejudice the amount available to the pursuer for their future care and support in order to reward and incentivise pursuers’ solicitors.

Daniel Johnson

Would Mr Kerr not recognise that the proportions that are charged under success fee agreements at the moment can be as high as 60 per cent, as Liam McArthur pointed out?

Mr Kerr’s argument would ring true only if judges’ awards were 100 per cent accurate, but I do not believe that any judge’s assessment of future losses is accurate to within 2.5 per cent, unless he can correct me on that.

Liam Kerr

I will come back to that point, but I want to deal with a point that Daniel Johnson made earlier. He criticised the insurance industry for allegedly wishing to reduce the number of claims, but in the same breath, he lionised, without caveat, the words of those lawyers who wish to ensure that their fees are enhanced. Perhaps he could address that in his winding-up remarks.

With regard to the level of the award, I put it to various witnesses who appeared before the Justice Committee that it is difficult to believe that, over time, a court would not—as I believe has happened elsewhere—gently and perhaps understandably increase the award to ensure that the full costs of care would be recovered after the solicitors had taken their fee, thereby leading to damages inflation or even overcompensation.

Annabelle Ewing

What evidence can the member cite to support that claim? He will be aware that it has been refuted by, for example, the Association of Personal Injury Lawyers.

Liam Kerr

That is quite so but, in committee, we received a variety of evidence that suggested that there was a possibility of that happening and that it had happened in other jurisdictions. I accept that there is differing evidence, but as I said in exchanges with various witnesses in committee, I think that it is possible that that would happen—that would be a logical progression, given what Daniel Johnson said earlier.

I think that the committee was right to ring fence future losses at stage 2. We will oppose Daniel Johnson’s amendments 1 and 2 to ensure that people are not undercompensated for their future care. That said, if Parliament is not with me on that, I urge members to support Margaret Mitchell’s amendment 2A, which seeks to cap success fees that are applied to future losses at 1 per cent, so that those who receive future losses to provide for their care retain as much of their award as possible.

15:15

Annabelle Ewing

I rise to support Daniel Johnson’s amendments 1 to 4. The bill as introduced followed Sheriff Principal Taylor’s recommendation that an award for future loss in personal injury success fee agreements should not be ring fenced—in other words, future loss should not be excluded from the calculation of a success fee—in cases that are taken forward under a success fee agreement in circumstances where the future loss element is to be paid as a lump sum. That is not the position, of course, where the future loss element is to be paid by way of a periodical payment order. As we have heard, in such circumstances, ring fencing will indeed apply.

Considerable concern was expressed in the Justice Committee’s stage 1 report that those unfortunate claimants with catastrophic injuries would not receive the full amount that was awarded by the court if the part of their damages that was attributable to future loss was included in the calculation of the success fee to be paid to their legal representatives. That point has already been made this afternoon.

Margaret Mitchell’s stage 2 amendments provided that the future element in any award for personal injury would be excluded from any uplift by a legal services provider in a success fee agreement irrespective of whether it was to be paid by way of a lump sum or by way of a periodical payment order. I supported the amendments at that time on the basis that we believed that they would, as matter of practice, affect very few cases and that they would mainly involve claims relating to catastrophic injuries and no other particular cases. Since stage 2, however, the Scottish Government has been in discussions with Sheriff Principal Taylor, the Law Society of Scotland and the Association of Personal Injury Lawyers—and we have received submissions from other bodies—and two important considerations have come to light.

First, we now believe that the stage 2 amendments relating to the ring fencing of future loss in all circumstances might have the unintended effect of restricting access to justice. The Scottish Government believed that awards for future loss affected only a few very high-value cases, but we are now informed that that is not the case. The Law Society has indicated that even low-value cases of, for example, £3,000 may contain a future element to the award or settlement. The future loss element of a claim is often complicated and involves a solicitor in a considerable amount of work. As the Law Society put it in its letter to the Justice Committee of 14 March,

“The calculation of future loss is often the most complex and time consuming aspect of a personal injury claim”.

If the solicitor is unable to be remunerated for that work through a success fee agreement, he or she might not be able to offer damages-based agreements for personal injury cases. Sheriff Principal Taylor confirmed that that was a possibility in his letter to me of 8 March, which was copied to the Justice Committee. In that letter, he defended his decision not to exclude all future loss from the calculation of a success fee, but rather to impose such an exclusion where the settlement for future loss is to be paid by way of periodical payment order.

Sheriff Principal Taylor stated:

“If I did not permit a sufficient percentage deduction, solicitors would not offer DBAs as a funding mechanism. They would not recover sufficient in the successful cases to compensate for the unsuccessful cases. One has to remember that should a case be unsuccessful not only does the solicitor not get paid for his or her own time but must also meet court dues, expert witness fees, medical reports etc out of the solicitor’s own pocket. I had to create an environment in which DBAs were sufficiently attractive to solicitors but still fair to the injured pursuer.”

The amended provisions on future loss may therefore represent a severe restriction of access to justice and negate some of the principles on which the bill was founded. It is thought that the failure of damages-based agreements to take off in England and Wales is in fact a result of future loss being completely ring fenced south of the border and thus unattractive to legal practitioners. We should not make the same mistake here.

I heard Margaret Mitchell’s comments about the issue of judicial expenses and the differing approaches to that north and south of the border, but we heard in evidence—indeed, from Sheriff Principal Taylor himself—that although Lord Justice Jackson, who conducted a similar review south of the border, promoted the position that Margaret Mitchell is supporting today, he now has cold feet, because it has led to solicitors south of the border and in Wales not offering damages-based agreements for personal injury actions.

The other point that I want to make is that, as an unintentional consequence of the approach of ring fencing all future loss that was proposed at stage 2, those with catastrophic injuries could paradoxically receive lower awards and settlements. In other words, stage 2 amendments that were intended to maximise pursuer compensation could, in practice, have the opposite effect.

As I stated earlier, the future loss element of a claim is often complicated and involves a solicitor in a considerable amount of work. I am informed that it is not uncommon for solicitor outlays to be in the region of £100,000 over a three-year period in such cases. Sheriff Principal Taylor recommended in his report that lump-sum damages for future loss should be included in the calculation of the success fee under a success fee agreement, because solicitors need to be incentivised.

As Liam McArthur said, Sheriff Principal Taylor recommended in his report the safeguards that were set forth in the bill as introduced, and he also recommended that future loss damages would not be included if they were to be paid by periodical payment orders. Only a small number of personal injury cases end up before a court and the vast majority are settled out of court. Discussions with personal injury solicitors have revealed that solicitor-led cases result in higher settlements, as defenders try to avoid the expense of a court hearing. In other words, having a solicitor is likely to result in the claimant receiving greater damages—possibly much greater damages.

Liam Kerr

In those conversations with solicitors firms, did many of them report back that, if the future loss was ring fenced, they would cease to act in personal injury claims?

Annabelle Ewing

We have to look at the facts that are before us and listen to the evidence that has been submitted to me as the minister and to the committee. People are telling us that there is a significant risk. We should look at what has already happened south of the border, in light of the similar approach that is being pursued there. That approach was promoted by Lord Justice Jackson, and Sheriff Principal Taylor has said that he had a conversation with him in which Lord Justice Jackson admitted that he now has cold feet, because solicitors operating damages-based agreements in England and Wales find themselves in a position that is the opposite of what he had hoped it would be.

Margaret Mitchell

Does the minister acknowledge that the situation in England and Wales is not analogous with the situation in Scotland, and that we are not comparing apples with apples?

Annabelle Ewing

I have already dealt with that point. Notwithstanding the issue about judicial expenses, the architect of the policy south of the border has effectively recanted in his conversation with Sheriff Principal Taylor, because the policy has had the opposite effect, such that solicitors in England and Wales are not offering damages-based agreements. As mentioned by Daniel Johnson, John Finnie and Liam McArthur, the bill is designed to do the very opposite of that. It is designed to improve access to justice as far as litigation in Scotland is concerned.

In the letter to which I have alluded, Sheriff Principal Taylor said:

“My concern is that the recent amendment to the Bill will have the same consequence in higher value cases in Scotland as has happened in England & Wales; DBAs will not be offered to pursuers who have sustained catastrophic injury. The recent amendment thus poses an existential threat to DBAs being offered in higher value cases in Scotland. What will be the consequence of the amendment? The likely outcome is that cases will either not be raised at all or will settle for considerably less than the true value of the claim.”

Perhaps that helps to deal with Mr Kerr’s point.

Finally, the Law Society letter to the Justice Committee reiterates two practical issues that Sheriff Principal Taylor raised in his report. The first relates to settlement offers. At present, most of those are put forward by insurers without there being any breakdown for the different heads of claim, meaning that past loss and future loss are not broken down and separated when an offer is made. The second practical interest is that, as the legal services provider will be paid for past loss work and not for future loss, an obvious conflict of interests will be created between the solicitor and the client.

Margaret Mitchell

In relation to establishing what the future loss element is, does the minister accept that insurance companies do that every day and that they have confirmed that it would not be a difficulty if it was required?

Annabelle Ewing

With respect, I saw a submission from a representative of the insurance industry, and it is really a matter for the pursuer acting on the advice of his or her legal adviser to decide what is best. It is not really for the insurance company, which has an entirely different, and conflicting, interest in the matter, to have a role in that important client-legal adviser relationship.

Without Daniel Johnson’s amendments, the solicitor could have a financial interest in apportioning as much as possible to the past loss element rather than to the future loss element. Even a solicitor acting in good faith—which we hope is the case for all solicitors—would have to deal with that important conflict.

I have considered the matters long and hard since stage 2, as have Daniel Johnson, John Finnie and Liam McArthur. For the reasons that I have stated, I am now persuaded that it is right to reintroduce into the bill the measures that are in Daniel Johnson’s amendments.

I am unable to support Margaret Mitchell’s amendment 2A. I mean no criticism of Margaret Mitchell, as I know that her amendments are motivated by the aim of maximising pursuer compensation, as I said in our debate on the first grouping. However, the balance of evidence on the matter that has been submitted following stage 2 is compelling. The bill has the objective of increasing access to justice and civil litigation. Its goal is to make the costs of litigating more affordable and more predictable to Scotland’s citizens. I am now convinced that the bill as introduced would better serve those objectives and goals and that Margaret Mitchell’s amendment 2A, although well intentioned, will not result in enhanced access to justice. Rather, it will result in the reverse.

At stage 2, for understandable reasons, we focused on people who have suffered catastrophic injury receiving all the moneys that are awarded to them by the court. I am now persuaded that we should allow the solicitor to take a small percentage. It is important to point out that that would be 2.5 per cent of damages over £500,000. At present, a claims management company could receive a success fee of, say, £330,000 for an award of damages of £1 million. Under the sliding cap that the bill is proposing—a carefully crafted package of interlinking provisions—the success fee for the same award of damages of £1 million will be £72,500.

Ring fencing all future loss may result in few personal injury claims of any value being pursued under success fee agreements, which would restrict access to justice. To put it plainly, it is surely better to have 97.5 per cent of something than 100 per cent of nothing. Therefore, I support Daniel Johnson’s amendments 1 to 4. I have explained why Margaret Mitchell’s amendment 2A would not maximise the amount that is available to the pursuer, particularly in cases of catastrophic loss. Also, as has been mentioned, there is provision in the bill to ensure that any regulations proposing changes to the sliding cap on fees would be dealt with by the affirmative procedure.

I support Daniel Johnson’s amendments 1 to 4 and do not support Margaret Mitchell’s amendment 2A.

Daniel Johnson

The fundamental points regarding amendments 1 to 4 were best made by John Finnie and Liam McArthur. John Finnie said that it is about ensuring that the interests of solicitors and of the people on whose behalf they make claims are aligned; ensuring that there are no caps or limitations will mean that their interests are perfectly aligned. Otherwise, there will be a clear incentive for solicitors to settle early.

Likewise, Liam McArthur is absolutely right that we must recognise current practice. DBAs are popular. What is more, the people who represent claimants are claiming not 2.5 per cent of awards, but as much as 60 per cent, with a typical amount being 30 per cent. The bill will reduce that; it will introduce a sliding scale from 20 per cent to 2.5 per cent. There will be more cases and more of the damages will go to clients.

Therefore, although I understand the motivations behind Margaret Mitchell’s amendment 2A—the desire to give the greatest possible amount to clients—the reality is that, were the amendment to be agreed to, clients would have fewer opportunities to pursue their cases, which would limit access to justice.

Liam Kerr suggested that I was criticising the insurance industry. I was doing no such thing. I was saying that we must recognise that, although the arguments that the insurance industry makes are legitimate—the industry is right to pursue its interests—they run contrary to the interests of clients, as the minister said. It is in the insurance industry’s interests to reduce the number of claims that are made and the amounts that are settled on.

15:30

My criticism is not of the insurance industry, but of people who copy and repeat its arguments without qualification or criticism, because they ignore the wider public interest in favour of corporate interest. That is not acceptable. Ultimately, we must return to the clear test: will the proposal and the amendments increase access to justice? Will the amendments allow more people to make claims and achieve the highest possible value? My amendments will do exactly that. Unfortunately, I feel that Margaret Mitchell’s amendment fails that test.

Sheriff Principal James Taylor has made a balanced and well thought-through set of proposals, to which we should stick. The amendments that were lodged at stage 2, in his words,

“make ... access to justice less accessible”.

My amendments are required to save the bill effectively from misguided attempts to qualify and put safeguards in it. I urge Parliament to support my amendments and to reject Margaret Mitchell’s amendment 2A. I will press my amendments.

The Deputy Presiding Officer

The question is, that amendment 1 be agreed to. Are we agreed?

Members: No.

The Deputy Presiding Officer

There will be a division.

For

Adam, George (Paisley) (SNP)
Adamson, Clare (Motherwell and Wishaw) (SNP)
Allan, Alasdair (Na h-Eileanan an Iar) (SNP)
Arthur, Tom (Renfrewshire South) (SNP)
Baker, Claire (Mid Scotland and Fife) (Lab)
Beamish, Claudia (South Scotland) (Lab)
Beattie, Colin (Midlothian North and Musselburgh) (SNP)
Bibby, Neil (West Scotland) (Lab)
Brown, Keith (Clackmannanshire and Dunblane) (SNP)
Campbell, Aileen (Clydesdale) (SNP)
Coffey, Willie (Kilmarnock and Irvine Valley) (SNP)
Cole-Hamilton, Alex (Edinburgh Western) (LD)
Constance, Angela (Almond Valley) (SNP)
Crawford, Bruce (Stirling) (SNP)
Cunningham, Roseanna (Perthshire South and Kinross-shire) (SNP)
Denham, Ash (Edinburgh Eastern) (SNP)
Dey, Graeme (Angus South) (SNP)
Doris, Bob (Glasgow Maryhill and Springburn) (SNP)
Dornan, James (Glasgow Cathcart) (SNP)
Dugdale, Kezia (Lothian) (Lab)
Ewing, Annabelle (Cowdenbeath) (SNP)
Ewing, Fergus (Inverness and Nairn) (SNP)
Fabiani, Linda (East Kilbride) (SNP)
Fee, Mary (West Scotland) (Lab)
Findlay, Neil (Lothian) (Lab)
Finnie, John (Highlands and Islands) (Green)
FitzPatrick, Joe (Dundee City West) (SNP)
Forbes, Kate (Skye, Lochaber and Badenoch) (SNP)
Freeman, Jeane (Carrick, Cumnock and Doon Valley) (SNP)
Gibson, Kenneth (Cunninghame North) (SNP)
Gilruth, Jenny (Mid Fife and Glenrothes) (SNP)
Grant, Rhoda (Highlands and Islands) (Lab)
Gray, Iain (East Lothian) (Lab)
Greer, Ross (West Scotland) (Green)
Griffin, Mark (Central Scotland) (Lab)
Harper, Emma (South Scotland) (SNP)
Harvie, Patrick (Glasgow) (Green)
Haughey, Clare (Rutherglen) (SNP)
Hepburn, Jamie (Cumbernauld and Kilsyth) (SNP)
Hyslop, Fiona (Linlithgow) (SNP)
Johnson, Daniel (Edinburgh Southern) (Lab)
Johnstone, Alison (Lothian) (Green)
Kelly, James (Glasgow) (Lab)
Kidd, Bill (Glasgow Anniesland) (SNP)
Lamont, Johann (Glasgow) (Lab)
Lennon, Monica (Central Scotland) (Lab)
Leonard, Richard (Central Scotland) (Lab)
Lochhead, Richard (Moray) (SNP)
Lyle, Richard (Uddingston and Bellshill) (SNP)
MacDonald, Angus (Falkirk East) (SNP)
Macdonald, Lewis (North East Scotland) (Lab)
MacGregor, Fulton (Coatbridge and Chryston) (SNP)
Mackay, Derek (Renfrewshire North and West) (SNP)
Mackay, Rona (Strathkelvin and Bearsden) (SNP)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Maguire, Ruth (Cunninghame South) (SNP)
Marra, Jenny (North East Scotland) (Lab)
Martin, Gillian (Aberdeenshire East) (SNP)
Mason, John (Glasgow Shettleston) (SNP)
Matheson, Michael (Falkirk West) (SNP)
McAlpine, Joan (South Scotland) (SNP)
McArthur, Liam (Orkney Islands) (LD)
McDonald, Mark (Aberdeen Donside) (Ind)
McKee, Ivan (Glasgow Provan) (SNP)
McKelvie, Christina (Hamilton, Larkhall and Stonehouse) (SNP)
Neil, Alex (Airdrie and Shotts) (SNP)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Rennie, Willie (North East Fife) (LD)
Robison, Shona (Dundee City East) (SNP)
Ross, Gail (Caithness, Sutherland and Ross) (SNP)
Rowley, Alex (Mid Scotland and Fife) (Lab)
Rumbles, Mike (North East Scotland) (LD)
Ruskell, Mark (Mid Scotland and Fife) (Green)
Russell, Michael (Argyll and Bute) (SNP)
Sarwar, Anas (Glasgow) (Lab)
Smyth, Colin (South Scotland) (Lab)
Somerville, Shirley-Anne (Dunfermline) (SNP)
Stevenson, Stewart (Banffshire and Buchan Coast) (SNP)
Stewart, David (Highlands and Islands) (Lab)
Stewart, Kevin (Aberdeen Central) (SNP)
Todd, Maree (Highlands and Islands) (SNP)
Torrance, David (Kirkcaldy) (SNP)
Watt, Maureen (Aberdeen South and North Kincardine) (SNP)
Wheelhouse, Paul (South Scotland) (SNP)
Wightman, Andy (Lothian) (Green)
Yousaf, Humza (Glasgow Pollok) (SNP)

Against

Balfour, Jeremy (Lothian) (Con)
Ballantyne, Michelle (South Scotland) (Con)
Bowman, Bill (North East Scotland) (Con)
Briggs, Miles (Lothian) (Con)
Burnett, Alexander (Aberdeenshire West) (Con)
Cameron, Donald (Highlands and Islands) (Con)
Carlaw, Jackson (Eastwood) (Con)
Carson, Finlay (Galloway and West Dumfries) (Con)
Chapman, Peter (North East Scotland) (Con)
Corry, Maurice (West Scotland) (Con)
Fraser, Murdo (Mid Scotland and Fife) (Con)
Golden, Maurice (West Scotland) (Con)
Greene, Jamie (West Scotland) (Con)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Hamilton, Rachael (Ettrick, Roxburgh and Berwickshire) (Con)
Kerr, Liam (North East Scotland) (Con)
Lindhurst, Gordon (Lothian) (Con)
Lockhart, Dean (Mid Scotland and Fife) (Con)
Mason, Tom (North East Scotland) (Con)
Mitchell, Margaret (Central Scotland) (Con)
Mountain, Edward (Highlands and Islands) (Con)
Mundell, Oliver (Dumfriesshire) (Con)
Scott, John (Ayr) (Con)
Simpson, Graham (Central Scotland) (Con)
Smith, Liz (Mid Scotland and Fife) (Con)
Stewart, Alexander (Mid Scotland and Fife) (Con)
Tomkins, Adam (Glasgow) (Con)
Wells, Annie (Glasgow) (Con)
Whittle, Brian (South Scotland) (Con)

The Deputy Presiding Officer

The result of the division is: For 86, Against 29, Abstentions 0.

Amendment 1 agreed to.

The result of the division is: For 86, Against 29, Abstentions 0.

Amendment 2 agreed to.

Amendments 3 and 4 moved—[Daniel Johnson]—and agreed to.

John Finnie

Sheriff Taylor’s report was long awaited, and concerns significant changes in law. The purpose was to bring about a level playing field in respect of personal injury litigation. That is because Sheriff Taylor recognised something very important, which is that the balance of power had gone too far in favour of the insurance companies. The solution involved qualified one-way cost shifting—QOCS. We have not heard much about that today, but I think that we shall hear more of it. It involves a restriction on the pursuer’s liability for expenses in personal injury claims.

If the test for when people benefit from QOCS and, most importantly, lose the benefit of QOCS is flawed, the intention of the bill will be frustrated. Amendment 9 seeks to address that problem. For QOCS to be effective, legislation must ensure two things: certainty; and the setting of a sufficiently high bar. Claimants, and those who financially support claimants, such as trade unions and staff associations, must be able to bring difficult but meritorious cases without fear of financial ruin if the case is lost. If there is not a high degree of certainty about the cases that will benefit from QOCS and those that will not, the fear that currently serves as a barrier to justice, which we all want to be removed, will remain. The current barriers will be raised only with certainty. Accordingly, if the statutory test for removing the benefits of QOCS is vague, that will serve as an open invitation to insurers to challenge a claimant’s right to QOCS in a large number of cases, and the purpose of the bill will be lost.

It will also lead to satellite litigation. That is a phenomenon that is seen in England and Wales and is a result of the vague language in legislation there and a desire to push back against advances in the rights of personal injury claimants. That has led to large, long and expensive litigation not about the subject matter but, instead, about the legal costs. Satellite litigation is expensive and time consuming and, in England, it has clogged up the legal system. We want to avoid that happening at all costs. Vague and uncertain language in relation to the test will undoubtedly result in satellite litigation as the courts grapple with what Parliament intended. That would be a disappointing consequence of the legislation.

With regard to the high bar that we have talked about, Sheriff Taylor was clear in his report and in the evidence that he gave to the Justice Committee that the bar for removing QOCS must be set at a high level—the benefit of QOCS must not be lost lightly or easily. The wording

“has acted fraudulently in connection with the claim or proceedings”

is vague and will lead to satellite litigation.

As a matter of proportionality, which is at the heart of everything, the loss of QOCS would be an extremely harsh and significant sanction, particularly as claimants and the staff of the trade union or staff association that is financially supporting the claimant will have begun the process believing that QOCS will apply. This significant sanction must be imposed only when it is proportionate to the wrong that has been committed by the claimant. There could be occasions when the claimant’s conduct is inappropriate but it would not be proportionate to remove the benefit of QOCS. The fundamental position is that, for the claimant to lose the benefit of QOCS, their conduct must be materially wrong, and must have the potential to have a material impact on the litigation.

I would not introduce amendment 9 if I did not believe in the highest standards of conduct and integrity in our legal process, including with regard to this aspect. As things stand, the court has the power—which, of course, it might not use—to remove the benefit of QOCS in situations in which the claimant does little more than overegg the pudding—that is to say, the court could remove the benefit of QOCS when the claimant does no more than exaggerate, to a fairly small extent, an issue that is fairly peripheral to the case.

It may be entirely reasonable to assume that that would not happen, but it is what the courts could do, based on the current wording. The point is not whether the court would use its powers in those circumstances but that it is an open invitation to insurers to challenge claims, which will lead to higher levels of the satellite litigation that none of us wants.

15:45

Insurers would move to have claims withdrawn that have been overegged but which are 100 per cent correct and accurate on everything else. No one—least of all me—supports fraud: we must have a fraud test. Currently, the phrase “makes a fraudulent representation” is open to be used to defeat the spirit and intention of the bill. Our rules of court are robust and unambiguous, and I am proposing robust wording, which is that QOCS would not be available

“where the claim is found to be fraudulent or dishonest”.

There is absolute clarity about that, and I hope that members will lend their support to it.

I move amendment 9.

Daniel Johnson

I am very mindful of the length at which I spoke on the previous grouping, so I will be brief on this one. I will shortly move amendment 9A, in my name, and will now speak in support of amendment 9, in John Finnie’s name.

As John Finnie has summed up very well, QOCS, which is one of the key features of the legislation, is about improving and increasing access to justice. It cannot be abused and we must have safeguards against that. However, there is some concern about the terminology—“a fraudulent representation”—that was introduced at stage 2. Amendment 9 is fundamentally about making sure that that is qualified and clarified so that people who simply overegg their cases and exaggerate but do not make fraudulent representations as such are not caught up in the safeguards that are introduced here. With that in mind, we support amendment 9.

We note that many of those problems would persist if the Government’s amendments 10 and 11 were to be agreed to. However, if amendments 9 and 9A were to fall, we would support them.

I move amendment 9A.

Annabelle Ewing

The proposal for QOCS in section 8 has been the subject of much of the scrutiny at stages 1 and 2. Section 8(4)(a) was amended at stage 2 by two amendments in the name of Liam Kerr. At that time, I stated that I was willing to support Liam Kerr’s amendments but that I might come back at stage 3 with some tidying-up drafting changes. As a result of that consideration, I have lodged amendments 10 and 11. They are technical drafting amendments, and there is no intention to change the effect of the provision as amended at stage 2. The policy is that a pursuer who has acted fraudulently—whether by fraudulent representation or by another fraudulent act—should lose the protection of QOCS.

The legal test for fraud is a high one to satisfy and, because it is a high bar, even a single fraudulent act in civil litigation should lead to QOCS protection being lost. Sheriff Principal Taylor has been clear that a court finding a pursuer to be incredible should not, by itself, mean that there has been fraud. Just as Sheriff Principal Taylor has been, the Government is of the view that the relevant meaning of “fraud” is the time-honoured definition from Erskine’s “An Institute of the Law of Scotland” from the 18th century:

“a machination or contrivance to deceive”.

Therefore, an innocent or isolated example of minor exaggeration is not ever going to be fraud. Amendment 10 puts the reference to fraudulent acts in the present tense, which is consistent with the rest of subsection (4). Together with amendment 11, it makes it clear that making a fraudulent representation is an example of acting fraudulently.

Amendment 12 amends section 8(4)(b) by including a reference to the claim as well as to the proceedings. Although we considered that a reference to behaviour in connection with the proceedings would cover pre-litigation conduct, we think that paragraph (b) ought to be consistent with paragraph (a), because they are both intended to cover pre-litigation conduct.

I turn to amendment 9, in the name of John Finnie. In light of his position throughout the passage of the bill, he seeks to make sure that the benefit of QOCS is not lost if there is a single fraudulent or dishonest act in relation to a claim. I have already pointed out that, under the Government’s preferred wording, a pursuer would not lose the benefit of QOCS for an isolated instance of exaggeration—that does not come close to fraud as it is defined in Scots law.

The Government and, I hope, members cannot support the proposition that pursuers or their lawyers—we should not forget them—should be able to act fraudulently in civil litigation without consequence.

I consider that amendment 9 would have a number of particular consequences. First, it attaches the fraud and the dishonesty to the claim rather than to the behaviour in the pursuit of the claim. Sheriff Principal Taylor considered that fraudulent behaviour by pursuers or lawyers in connection with a claim should result in loss of QOCS. It should also be noted that the approach in amendment 9 does not technically work in the context of section 8 as drafted.

Secondly, the introduction of the word “dishonest”, which was not discussed in relation to section 8 at stage 1 or at stage 2, lowers rather than raises the bar required for the loss of the benefit of QOCS. I suspect that that is not John Finnie’s intention. Introducing the concept of dishonesty, which is not founded in Sheriff Principal Taylor’s report, would introduce new uncertainty to the QOCS provisions and, indeed, would be very likely to invite the satellite litigation that Mr Finnie is rightly concerned about. Therefore, I cannot support amendment 9.

Daniel Johnson’s amendment 9A seeks to improve amendment 9 by seeking to remove the word “dishonest”. The Government will support amendment 9A in order that amendment 9, if it is passed, will not introduce the concept of dishonesty. However, my amendments achieve what Sheriff Principal Taylor recommended, so my vote for amendment 9A should not be taken to suggest that the Government supports amendment 9.

I consider that the wording in section 8(4)(a), as amended by Liam Kerr at stage 2 and my amendments 10 and 11 at stage 3, will achieve the desired result, and I ask Mr Finnie to consider seeking to withdraw his amendment and Mr Johnson not to move his amendment, having regard to my strong reassurance that an isolated incident of exaggeration will not be deemed to amount to fraud as far as Scots law is concerned.

Liam Kerr

I rise to speak against amendments 9 and 9A. For the avoidance of doubt, I say that I will vote in favour of amendments 10 to 12, in the name of Annabelle Ewing, which seem sensible for the reasons that were set out in the purpose and effect notes and in the minister’s remarks.

We believe that, if amendment 9, in the name of John Finnie, and amendment 9A, in the name of Daniel Johnson, were to be agreed to, that could encourage unmeritorious claims. John Finnie talks about his robust wording. I respectfully point out to him that I am not convinced that the wording as drafted makes sense with the section that it relates to. I think that the minister pointed that out, too.

As we shall hear on Tuesday, we believe that the bill is a good one and that the end game of access to justice is good. However, there is a delicate balancing act in which Parliament must seek to increase access to justice but not go so far as to create a compensation culture, with pursuers seeking inflated and unjustified awards. By limiting the fraud or dishonesty to “the claim”, Mr Finnie’s amendment risks exactly that. To lower the bar and simply say that protection is lost where the claim is fraudulent means that a genuine claim that is perhaps bolstered by overestimates of vehicle repairs, care costs, lost wages or suchlike would maintain protection with no sanction. Under Mr Finnie’s amendment, it would be open to a claimant to perhaps lie repeatedly about a claim or to act fraudulently but, as long as the fundamental claim was not fraudulent, still retain the benefit.

Mr Finnie quite rightly talks about Sheriff Principal Taylor. Sheriff Principal Taylor was explicit that the benefit of QOCS should be lost where a pursuer

“has acted fraudulently in connection with the claim or proceedings, or makes a fraudulent representation”.

He was right. Let us be clear: acting fraudulently or dishonestly is not the same as making a mistake. I think that the minister made that point, too. As the bill is drafted, there is no risk to a pursuer who mistakenly claims for something to which they are not entitled. On the contrary, fraud is a deliberate act that is designed to cheat the system and the defender.

The committee heard that overegging the claim was not considered to be a concern by some witnesses. It seems that some closer to home think that too. However, it very much should be if we are to avoid award inflation and an increase in claims.

For those reasons, amendments 9 and 9A should not be agreed to.

John Finnie

I want to make remarks about Mr Kerr’s contribution in particular. I certainly would not be party to encouraging unmeritorious or fraudulent claims. I know that he is not suggesting that, but language is important, and I find phrases such as “compensation culture” unhelpful in the context of a debate in which we are talking about access to justice. It is irrefutable that there will be a challenge from insurance companies, which are trying to row back against the culture. However, I have far greater confidence in our existing rules of court than perhaps Mr Kerr does, and I think that some of the conduct that he alluded to would be picked up in court and responded to accordingly.

After section 8

The Presiding Officer

We turn to group 6. Amendment 36, in the name of John Finnie, is grouped with amendments 37 to 39.

John Finnie

Amendment 36 is about the ever-important issue of finance. Members will perhaps have seen the Scottish Trades Union Congress briefing paper on the issue, which refers to the Scottish Government’s response to the three-yearly review of court fees on 26 February this year, in which the Government stated that paying court fees on behalf of litigants

“is not an unreasonable burden to place on ... trade unions”.

There is a question about whether the bill is the vehicle to address the issue of who should bear the cash-flow burden of running the Scottish court service while cases progress through the court system. Members will know that the successful party in a court action recovers the legal costs from the unsuccessful party. That is all at the conclusion of the case but, at various points throughout the case, fees are required to be paid. There is a view that successful litigants, in effect, lend the Scottish Government money while their claim progresses. Repeat players such as trade unions and staff associations, which support hundreds of personal injury claims each year through the Scottish courts, therefore lend the Scottish Government significant sums of money each year.

16:00

A freedom of information request revealed that the court fees related to personal injury cases in 2015-16 totalled £3.8 million, which was 14 per cent of all court fees. The court fees paid by claimants totalled £1.9 million, and in trade union-supported cases the figure was roughly £1 million. That is a significant outlay, and people might well ask whether it is reasonable that the Scottish Government receives those moneys from the trade unions when there is an opportunity to take a different tack. The sum of £1 million is not a lot of money to the Scottish Government, but it is a significant sum of money to those who represent front-line and other workers. The proposal to move away from that model would have some implications for the Scottish Government but, within a two-year or three-year period, the costs of transition to deferred payment of court fees would be eradicated, including any cash-flow problems.

The Scottish Government talks about two of the issues that that gives rise to: the fact that it encourages pre-litigation, and the possibility of bad debt. The people who are involved in the process are not people whom one would consider as being likely to be bad debtors and, as has been mentioned on a number of occasions, this is an opportunity to look at that important issue. I encourage members to support amendment 36.

I move amendment 36.

Daniel Johnson

I speak in favour of amendment 37, in my name, and in favour of the similar and not contradictory amendments 36 and 38. I urge colleagues to support all three amendments. I thank the STUC for the briefing paper that it circulated.

This group of amendments focuses on when payments to a court should be made. At present, court fees are paid on a pay-as-you-go basis, which means that the pursuer must pay up front for each individual court action, the fees for which are, for example, £219 for an initial writ in a personal injury court and £55 for the lodging of a motion.

Amendment 37 would change the law so that payments were no longer paid on that basis but were paid at the conclusion of a case. The effect of that would be to shift the burden of debt while the case was on-going from the pursuer and potentially, by extension, their trade union, professional body or other funder to the courts. As John Finnie pointed out, following a freedom of information request, the STUC assessed the impact as being around £1 million. As John Finnie also said, that amounts to, in essence, a short-term loan from trade unions and other bodies to the Scottish Courts and Tribunals Service.

Agreeing to amendment 37 would be a positive step, because the cash-flow implications of personal injury cases for trade unions and other bodies have become an issue. Although much of the money is ultimately returned to the pursuer or their funder at the conclusion of the case, money is tied up in the court system, which could prevent cases from being taken forward and could act as a barrier to justice. There is also an opportunity cost with regard to the things that we expect trade unions to do, such as organising, education and industrial relations.

In effect, the money works out as a £1 million loan from trade unions to the Government. The question boils down to who should bear the burden of running the Scottish Courts and Tribunals Service while cases progress. Should it be trade unions, who could spend that money on supporting their members and pursuing their interests, or should it be the state? I suggest that it should be the latter.

Annabelle Ewing

The main intention of amendment 36, in John Finnie’s name, and amendment 37, in Daniel Johnson’s name, is to make court fees payable at the end of a personal injury case rather than, as is the case under the present system, as an action proceeds through the courts. In the case of amendment 36, that would happen only in cases in which financial assistance was provided by a trade union or a similar body. In the case of amendment 37, that would apply in all cases to which qualified one-way costs shifting applied, irrespective of which body, if any, was providing financial assistance.

Similar amendments were debated at stage 2 and were not supported. It is worth reiterating, for the benefit of members who were not present for that debate, the reasons why the pay-as-you-go system is the current system for court fees. Their objectives include the following: encouraging people to resolve their disputes outside the courts, encouraging settlement and ensuring that people value the resources of the court and use those resources wisely.

John Finnie

The issue of early settlement has come up previously. Does the minister agree that personal injury cases are subject to a compulsory pre-action protocol, which is an important aspect in shaping when a case is concluded?

Annabelle Ewing

I agree with the member regarding cases up to a value of £25,000, which are subject to a compulsory pre-action protocol. That is the current threshold—cases of above that value are not subject to such a protocol. There is, therefore, the important issue that the member raises of encouraging frivolous claimants to settle and not use public resources unwisely.

The pay-as-you-go model actively supports the courts system. It supports the objectives of reasonable management of the courts and of non-frivolous claims being pursued, and it allows the fees to be paid in small increments as cases progress through each step of the process. The effect is to make parties stop and consider whether they will proceed to the next stage. That important element of the negotiation process is inherent in personal injury proceedings.

Part 1 of the bill will make it much less likely in personal injury proceedings that, in respect of damages-based agreements offered by solicitors, any up-front fees will be paid by pursuers. It is worth pointing out again that, under section 6, the pursuer’s solicitor will be required to meet all outlays for personal injury actions. We should also note that Sheriff Principal Taylor made no recommendations in his report on changing the position regarding fees. The solicitor will pay the outlays and will recover the court fees as part of the expenses recovered from the opponent at the conclusion of the case, assuming that it is successful. Under the provisions on qualified one-way costs shifting for personal injury actions, the pursuer will not be liable for the opponent’s court fees even if they lose their case, assuming that the benefit of QOCS is not lost.

It is important to bear all those points in mind in the context of these amendments. All other expenses, including court fees, will be the responsibility of the solicitor. It is, therefore, not clear to me why a substantial benefit should be provided to those providers when that benefit will come with a substantial cost to the Scottish Courts and Tribunals Service and, ultimately, the taxpayer.

I know that Justice Committee members are aware that there was a recent consultation on court fees. We sought to widen the circumstances in which people would be exempt from court fees. I understand that those regulations went through the committee without any particular note being taken. The exemptions in relation to widening those circumstances include increasing the income threshold below which fees will not be paid, and there will be an extended exemption regime to include recipients of Scottish welfare funds and those seeking civil protective orders, as was suggested by Scottish Women’s Aid.

Billing for court fees at the end of the case will place an immense burden on the Scottish Courts and Tribunal Service, which is ultimately a cost for the taxpayer. The figure referred to in the letter from the STUC, which I hope to meet further to its letter, was a cost of £1 million to the trade unions. It is not entirely clear how that figure was arrived at, but it is suggested that it was somehow a loan to the Scottish Government. It cannot really be characterised as a loan to the Scottish Government; it is an amount of money that pays for the service that the SCTS provides.

There will be a cost that will have to come from somewhere. The £1 million—if that figure is correct—will have to come from somewhere else in the justice budget. Members of the committee will be aware that the SCTS wrote to the committee on 22 February, expressing concerns about any move away from the pay-as-you-go model for court fees and specifically advising against any proposals to introduce a system whereby court fees are paid at the end of the process, given the unintended impact on the SCTS budget. It also recommended secondary legislation for the management of fees to retain the current flexibility and accessibility to a wider audience.

Amendment 37 moved—[Daniel Johnson].

The Deputy Presiding Officer

The question is, that amendment 37 be agreed to. Are we agreed?

Subsection (2)(a) of the amendment provides that the person taxing the account must be treated as though they were an auditor of court. Thus, the person would have to comply with the statutory guidance under section 15, as if they were an employed auditor.

Subsection (2)(b) of the amendment provides that the remuneration and expenses of a person appointed to act as auditor are to be determined by the SCTS.

Amendment 16 is consequential on amendment 15. Section 16 requires the SCTS to publish an annual report on taxations. This amendment provides that the report must include details of any accounts taxed by a person who is not an auditor of court. This is restricted to information in relation to the account remitted under the new section, to avoid catching any other work carried out by that person.

Amendment 33 relates to section 3 of the Courts of Law Fees (Scotland) Act 1895, which provides for certain accounts of expenses to be remitted to the Auditor of the Court of Session. The accounts concerned are those found due in the High Court of Justiciary, or in any inferior court whose judgment has been brought under the review of the High Court, unless the amount of the expenses is determined or modified (that is, reduced) by the High Court.

The Auditor of the Court of Session has to examine and tax these accounts of expenses in the same way, and subject to the same rules, as accounts of expenses in civil actions in the Court of Session.

There are, in fact, only limited cases in which taxation of accounts can arise as regards criminal proceedings; for example, as regards failed bail appeals by the prosecutor. Those cases are quite exceptional and are provided for in the Criminal Procedure (Scotland) Act 1995. The usual practice is for the criminal court to fix or modify the amount of any award of expenses itself, but it is still competent for the matter to be remitted to taxation. The 1995 act does not state who is to carry out the taxation, so the 1895 act applies. Section 3 of the 1895 act therefore continues to have relevance to the exceptional cases where a taxation of accounts arises out of criminal proceedings in the High Court.

Amendment 33 modifies and modernises section 3 of the 1895 act to make it relevant to the new auditing regime. It replaces the reference to “regulations” with a reference to “rules of court”, since the regulations meant were acts of sederunt under section 32 of the Court of Session Act 1821, which is to be repealed by paragraph 1 of the bill’s schedule. The amendment preserves the requirement that the Auditor of the Court of Session should tax accounts arising in the High Court in the same way as accounts of expenses in relevant civil proceedings in the Court of Session. It extends that requirement to accounts of expenses in criminal proceedings in the Sheriff Appeal Court, which will be taxed by the auditor of that court under the rules applicable to civil proceedings in that court. The same rules of court and common law principles will apply as in civil taxations in the Sheriff Appeal Court, as will the statutory guidance to auditors of court now required by section 15 of the bill. The Lord President’s Private Office and the Scottish Courts and Tribunals Service have approved the amendments in group 7, which emphasises that, although technical, they are important refinements to the new statutory regime for auditors of court.

I move amendment 15.

The Deputy Presiding Officer

As no one else has requested to speak, does the minister wish to wind up?

Annabelle Ewing

I think that I have probably comprehensively set out the position.

Amendment 15 agreed to.

Section 16—Reports

Amendment 16 moved—[Annabelle Ewing]—and agreed to.

Section 17—Group proceedings

The Deputy Presiding Officer

We move to group 8. Amendment 17, in the name of the minister, is grouped with amendments 18 to 23 and 40. I call the minister to speak to and move amendment 17, and to speak to the other amendments in the group.

Annabelle Ewing

At stage 2, the Justice Committee voted by majority to support amendments to section 17 that were lodged by Liam McArthur, which had the bill specify that group proceedings should be either opt-in or opt-out proceedings. The intention was that the type of proceedings that would be used in each particular case would be specified by the court.

As I have previously said, the Scottish Government has no financial or political objections to opt-out proceedings. Rather, we wish to flag up concerns arising from the obligation implied by Liam McArthur’s amendments at stage 2, on the Scottish Civil Justice Council to draft and consult on rules for opt-in and opt-out procedures simultaneously, which risks delaying the introduction of group proceedings in Scotland, per se.

Lord Gill’s Scottish civil courts review drew attention to the fact that opt-out procedure might be appropriate in a consumer case in which a large number of consumers are affected, but it also noted that where the potential class membership might be small and easily identifiable, opt-in procedure is likely to be much more appropriate, in order that only those who make a positive choice to opt-in are bound by the outcome.

During stage 1, the Justice Committee heard, from a number of those who submitted evidence, about the possible benefits of opt-in procedure for community groups. We would not wish small groups to be denied the advantages of opt-in group proceedings while opt-out rules are drawn up that might be more appropriate for larger-scale consumer actions.

Our concerns are shared by the Lord President, who wrote to the Justice Committee prior to stage 2 to ensure that members were aware of the complexities of the opt-out procedure. He noted that the practical and legal challenges that could be presented by an opt-out model are significantly greater than those that could be presented by an opt-in model.

My amendments in group 8 would permit the Scottish Civil Justice Council to develop separately the rules for the opt-in and opt-out procedures, while not preventing it from developing those rules concurrently. In other words, the Scottish Civil Justice Council will decide how best to timetable drafting of the rules. Indeed, it would be open to the SCJC, as the independent rule-making body, to decide to proceed with opt-out rules first. However, the key issue is that it is the Scottish Civil Justice Council that will determine its own programme of work. It is clear, therefore, that there will be a duty on it to provide rules for both procedures.

The Scottish civil courts review noted that it would be necessary to amend the legislation relating to prescription and limitation in order to take account of a group litigation procedure that permits opt-out. It also pointed out that it would be necessary to confer powers on the court to make an aggregate, or global, award of damages, and for the disposal of any undistributed residue of an aggregate award.

Opt-out would also give rise to new issues of general principle in that, for the first time in Scots law, individuals could become party to litigation without their consent, and possibly without their knowledge.

In the face of all those issues, if the Scottish Civil Justice Council is obliged to produce rules on opt-out at the same time as it produces rules on opt-in, because of the extra complexities that are involved with opt-out, that will risk delaying the introduction of any kind of group proceedings.

The SCJC is an independent body that is headed by the Lord President of the Court of Session. Although the Scottish Government cannot dictate its work programme or the timing of production of its rules, it has already made the public commitment that implementation of the bill will be one of its priorities for 2018-19.

We expect that the SCJC will set up a working group to consider rules on group procedure, as it did on fatal accident inquiries, and that representatives of consumer bodies will be represented on that body.

It is worth noting that the Scottish Law Commission has previously produced a draft act of sederunt on opt-in proceedings, so it is to be hoped that the SCJC will be able to produce rules on opt-in relatively quickly, thereby enabling it to move on without delay to the more complex issue of opt-out proceedings.

I have spoken to Liam McArthur about the need for expeditious progress to be made on group procedure, and I can give him the assurance that the Scottish Government will use all levers of influence to support the most expeditious introduction of group procedure.

I turn to the detail of the amendments. Proposed replacement section 17(7A), which amendment 21 seeks to introduce, will allow the Court of Session to make rules that provide for group proceedings to be brought as opt-in proceedings, opt-out proceedings or either. The intention is to give the court the flexibility to provide for all proceedings to be opt-in proceedings, or for there to be a choice, but also for the court to be able to make different provision for different purposes.

Proposed replacement section 17(7B) seeks to define “opt-in proceedings” and “opt-out proceedings”. Opt-out proceedings are defined as group proceedings in which all persons within the group description who are domiciled in Scotland are automatically opted in and therefore must opt out to leave the group. However, persons who are domiciled outside Scotland must opt in. That is because one of the difficulties that the Lord President identified in relation to opt-out is the potential extraterritorial effect of orders that are granted in opt-out proceedings, particularly when a deemed member of a group would otherwise have had the option of raising proceedings in a different legal jurisdiction.

The Government’s amendments seek to address that concern. In doing so, they draw on the UK Competition Appeal Tribunal provisions in the Competition Act 1998. The consumer organisation Which? has been highly supportive of the group proceedings provisions and has helpfully noted that that is a relevant precedent.

Proposed new section 17(7B) is a replacement for sections 17(3), 17(3A), and 17(3B) in the bill as amended at stage 2, which will be removed by consequential amendment 17, but care has been taken in the drafting of the replacement provisions to carry across the relevant wording that was introduced by Liam McArthur at stage 2.

Proposed new subsection 17(7B)(b) provides for the court to specify a description of the claims that are eligible to be brought in opt-out proceedings, and because that is not relevant to opt-in proceedings, amendment 18 seeks to remove section 17(6A). That does not alter the effect of that subsection, other than to restrict its application to opt-out proceedings.

Section 17(7)(aa), which was inserted at stage 2, places a duty on members of the group as a whole to identify and notify all potential group members. We consider it inappropriate that that duty would be placed on all members of the group, with the possible cost and delay that would be involved, so amendment 19 will place the duty to identify group members on the representative party only. In practice, the Government expects that the law firm supporting the representative party would carry out the necessary administrative work.

Amendment 20 will simply add some words of clarification to the end of section 17(7)(aa). Amendment 22 will add to the illustrative list in section 18(2) of things that the Court of Session may include in group procedure rules. The additions are rules about how a person may give consent for their claim to be brought in opt-in group proceedings, and how a person may give notice that they do not consent to their claim being brought in opt-out group proceedings. In other words, they deal with how people are to opt in or opt out, as appropriate.

16:30

Amendment 23, which will insert a new section after section 18, enables Scottish ministers to make further provision about group proceedings in regulations. Among other things, it will permit Scottish ministers to make necessary amendments to the substantive law, as envisaged by the Scottish civil courts review, which will facilitate the introduction of opt-out group proceedings.

Amendment 23 also gives examples of how that power might be used. For example, it will allow for the provision of aggregate or global damages, including potentially the involvement of an assessor or actuary, and the distribution of any surplus damages. That would largely be done through modification of common-law rules, whereas in the case of prescription and limitation, primary legislation would require to be modified.

Picking up on an earlier conversation, I point out that I have been mindful of the fact that the Delegated Powers and Law Reform Committee discourages the introduction of new delegated powers at stage 3. In that regard, the Minister for Parliamentary Business wrote to the committee on 16 April, making it aware of the need for the new power, which has arisen specifically as a result of amendments that the Justice Committee agreed to at stage 2.

Amendment 40 will make the new power in amendment 18 subject to affirmative procedure, thereby ensuring that there will, appropriately, be full debate on and scrutiny of regulations that are proposed by the Scottish Government.

Presiding Officer, having dealt with all the key amendments in the group, I move amendment 24.

The Deputy Presiding Officer

It is amendment 17.

Annabelle Ewing

I am ahead of myself. I am sure that many members wish that we were at that point, but we have not reached it yet.

I move amendment 17.

Gordon Lindhurst (Lothian) (Con)

I opt in to the debate at this point by mentioning my entry in the register of members’ interests as a practising advocate. [Interruption.]

The Deputy Presiding Officer

Excuse me, Mr Lindhurst. There is an awful lot of chatter going on. Can we have some quiet, please? Please listen very carefully—he will say this only once. [Laughter.]

Gordon Lindhurst

As we say in court, Presiding Officer, I am much obliged for that plaudit for the comments that I am about to make, which will be very brief.

Members: Hooray. [Laughter.]

Gordon Lindhurst

The Scottish Conservatives will vote for all the amendments in the group with the exception of amendment 23. Section 18(1) already provides that the Court of Session

“may make provision by act of sederunt about group procedure”,

The result of the division is: For 85, Against 28, Abstentions 0.

Amendment 23 agreed to.

Section 18A—Review of operation of Act

The Deputy Presiding Officer

We move to group 9. Amendment 24, in the name of the minister, is grouped with amendments 25 to 31.

Annabelle Ewing

Section 18A was inserted into the bill at stage 2 as a result of an amendment lodged by Margaret Mitchell. It requires the whole act to be reviewed as soon as practicable following a period of five years that starts on the day of royal assent. Amendments 24 to 31 form a group of amendments that make only one substantive change to section 18A. Although there are eight amendments in this group, I emphasise that there is no intention to interfere with the main thrust of Margaret Mitchell’s stage 2 amendment.

However, the Scottish Government does not believe that there is any point in triggering the five-year period for post-legislative scrutiny of part 4 of the bill on group proceedings until rules are in place allowing group proceedings to take place and have had a chance to bed in over the proposed five-year period. Different arrangements are required because the detail of the procedures for group proceedings will be provided in rules of court to be introduced by the Scottish Civil Justice Council, which will draft and consult on them. Group proceedings cannot take place until such rules are in force. It will take some time for the council to develop group procedure rules.

In the previous group, the chamber agreed that it will be for the council to decide whether opt-in and opt-out proceedings are introduced at the same time or if one type is to come first. In any event, the principle remains that some time will be needed for there to be due deliberation and consultation on the detailed rules. That, in turn, means that, if the five-year period is to run from royal assent, the review report that is envisaged may be able to consider only a relatively short period of group procedure operation.

I am not convinced that that is what members intended. Rather, I believe that they seek meaningful post-legislative scrutiny on group proceedings. Therefore, the Government considers that, as far as post-legislative scrutiny is concerned, part 4 needs to be dealt with separately from parts 1 to 3, so amendment 24 separates the requirement to review and report on the operation of the act into two separate reviews and reports.

Amendments 25 and 26 apply section 18A(2) to the review of parts 1 to 3 and adjust it so that the report on that review does not need to consider section 17 on group procedure. Amendments 28 and 29 are minor consequential amendments.

Amendment 27 replicates subsection (2), but only for the review of part 4, which includes section 17 on group proceedings. Amendment 30 starts the review period for parts 1 to 3 running from the day of royal assent. Amendment 31 starts the review period for part 4 running from the day on which the first rules of court about group procedure come into force.

I move amendment 24.

Daniel Johnson

I reassure members that my contribution will be measured in seconds rather than minutes. [Interruption.] The more they heckle, the longer I will take.

I welcome the proposal for a five-year review. It is a welcome innovation. We will support the amendments in the minister’s name. However I make a small plea that some of the proposals that fell at stages 2 and 3—namely, the inclusion of environmental cases in group actions and the pay-as-you-go fees that were discussed—be included in the review if that is possible.

Annabelle Ewing

I welcome Daniel Johnson’s support for what is really a pragmatic reflection of what happened at stage 2. It will be for the people who conduct the post-legislative scrutiny to set its parameters. I imagine that they will wish to pick up on a number of issues that have been discussed in the passage of the bill.

Amendment 24 agreed to.

Amendments 25 to 31 moved—[Annabelle Ewing]—and agreed to.

Section 19—Regulations

Amendment 38 not moved.

That ends consideration of amendments. As members will be aware, at this point in the proceedings, the Presiding Officer is required under standing orders to decide whether, in his view, any provision of the bill relates to a protected subject matter—that is, whether it modifies the electoral system and franchise for Scottish parliamentary elections. The Presiding Officer has decided that, in his view, no provision of this bill relates to a protected subject matter. Therefore, the bill does not require a super-majority to be passed at stage 3.

As agreed by Parliament yesterday, the stage 3 debate on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill will take place on Tuesday 1 May.

26 April 2018

Final debate on the Bill

Once they've debated the amendments, the MSPs discuss the final version of the Bill.

Final debate transcript

The Deputy Presiding Officer (Christine Grahame)

The next item of business is a debate on motion S5M-11829, in the name of Annabelle Ewing, on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill at stage 3.

16:02

The Minister for Community Safety and Legal Affairs (Annabelle Ewing)

I thank the members of the Justice Committee for their careful consideration of the bill. They have all become quite expert and conversant in dealing with a number of very technical civil law provisions, and I commend them for their determination to get to grips with the intricacies of Scots civil law. I thank the committee clerks for their extreme hard work—the bill was very large and dealt with a number of technical issues—and also the stakeholders who contributed views and opinions. Above all, I thank Sheriff Principal James Taylor, not only for conducting a most thorough and detailed review of the expenses and funding of civil litigation in Scotland, but for his continued involvement during the bill’s progress through Parliament. I hope that he will now enjoy his retirement and feel very proud of his significant contribution to improving access to justice in civil litigation in Scotland.

The context of the review was a continuing 41 per cent decrease in civil litigation in Scotland since 2008-09, as I pointed out in the stage 1 debate. That should be a cause for concern for all those who have an interest in the health and wellbeing of Scots civil law as an independent jurisdiction and in the ability of our fellow Scots to exercise their legal rights in an affordable way. We know, as a result of Sheriff Principal Taylor’s review, that the potential costs involved in civil court action can deter many people from pursuing legal action, even when they have a meritorious claim.

The fundamental aspiration of the bill is that people who contemplate litigation in the civil courts should have more certainty about what it will cost them and that it will, indeed, be possible for them to access justice. Litigants will be able to take a claim forward on a no-win, no-fee basis under damages-based agreements that solicitors will now be able to offer for the first time, as opposed to via claims management companies. Success fee agreements, including damages-based agreements, which are all types of no-win, no-fee agreements, are already very popular, because people understand how they work and, of course, they are a route to remedy that otherwise may be unaffordable. Litigants do not pay anything in advance and the provider of the legal service will pay for all of the outlays of raising the action, including court fees in personal injury cases. In return, the provider of the legal service will be entitled to a success fee, to be deducted from the damages that are awarded or agreed, as well as the judicial expenses that are recoverable from the defender.

The level of the success fee will, as recommended by Sheriff Principal Taylor, be capped in regulations; they will be introduced for parliamentary scrutiny under the affirmative procedure.

Success fee agreements are offered by claims management companies. Although many such companies offer a service that prospective litigants can trust, there has been some concern about the operating practices of some companies. There was therefore widespread consensus that claims management companies should be fully regulated. In parallel to scrutiny of the bill, Parliament agreed by legislative consent motion that claims management companies operating in Scotland will be regulated by the Financial Conduct Authority. That is being provided for by the Financial Guidance and Claims Bill, which had its Commons report stage on 24 April. Earlier this week, HM Treasury published the draft regulations that will provide for the detail of claims management regulation. Members can therefore be confident that any apparent regulatory gap between the implementation of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill and full Financial Conduct Authority regulation will be short.

Whereas the first part of the bill is concerned with how much an individual might be liable to pay their own lawyer, part 2 is concerned with what a litigant might become liable to pay the other side if the case is lost. The most recent civil justice statistics for Scotland identified a fear of that as a possible reason for the reduction in litigation in Scotland, to which I have already referred. Part 2 of the bill will therefore introduce qualified one-way costs shifting, or QOCS, for personal injury cases.

The majority of defenders in personal injury actions are well resourced and the majority of pursuers are of limited means. Although, as a matter of practice, few claimants are pursued for expenses by successful defenders, a pursuer might be liable for considerable expenses and risk possible bankruptcy if they lose. Sheriff Principal Taylor’s review confirmed that there is real fear in the minds of potential pursuers and introduced the provision for QOCS, which removes that risk as long as the pursuer and his or her legal team conduct the case appropriately.

The tests by which the benefit of QOCS can be lost by pursuers owing to their behaviour has been the subject of much discussion and refinement at stages 2 and 3, but I am satisfied that the bill, as now finalised, faithfully implements Sheriff Principal Taylor’s recommendations.

Part 2 also makes provision for the potential payment of expenses by third-party funders. That is intended to ensure that venture capitalists, whose only interest in a case is commercial, will be liable to adverse awards of expenses. The Scottish Government and John Finnie lodged amendments at stage 2 to ensure that trade unions and providers of success fee agreements are excluded from that provision.

The bill has also been amended to ensure full disclosure of litigants’ funding, as Sheriff Principal Taylor identified that as an aid to early settlement and thus to enhancing the efficiency of the courts.

Part 3 of the bill has been the subject of less focus, although I am sure that there has been considerable interest on the part of members. It deals with issues around auditors of court, which are to be brought within the Scottish Courts and Tribunals Service. SCTS will be required to publish annual reports on taxation.

I am pleased to say that the final part of the bill introduces group proceedings—multi-party or class actions—for the first time in Scotland. The proposition received broad support in the committee and the view was very much that the introduction of such actions to the civil law of Scotland is long overdue. As members will recall, the Government has accepted that both opt-in and opt-out models are referred to in the bill. I pay tribute to the particular tenacity of Liam McArthur and all committee members who, I could see, were quite determined from fairly near the outset of proceedings to ensure that that happened.

Finally, the bill allows for post-legislative scrutiny to take place in five years’ time. That suggestion was also very much driven by the committee. It will not always be the case that such scrutiny will be the best use of resources—we do not want to devote all our resources to the post-legislative scrutiny of every single bill—but this is the kind of bill that merits such attention.

I am convinced that such a review will show in due course that the legislation has been effective and successful in its objectives of making civil litigation in Scotland more accessible and the costs more predictable to those who are contemplating seeking to exert their legal rights.

I move,

That the Parliament agrees that the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill be passed.

16:09

Liam Kerr (North East Scotland) (Con)

At the outset, I declare an interest as a practising litigation lawyer. I hold current practising certificates with the Law Society of Scotland and the Law Society of England and Wales.

I am pleased to open for the Scottish Conservatives to speak in favour of passing the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. I thank the bill team for their assistance throughout the process, in particular for their drafting support with the many amendments that were lodged, and I thank the clerks for getting the bill to this stage. I found the evidence sessions genuinely fascinating, but they required a great deal of work behind the scenes to ensure that we all understood the background and the concepts being explained.

Finally, I thank my colleagues on the committee. I feel that this was an example of a cross-party committee working well together to achieve a result that was better than what we started with. Although, as I shall elaborate on shortly, I was not in favour of some of the amendment decisions that were taken last Thursday, I am of the view that, for example, the debate on whether to ring fence future loss awards showed Parliament and the Justice Committee at their best. Members heard the evidence, debated it, moved from an initial position, then—in response to the evidence and the debate—moved again.

The journey from the 2013 Taylor review to this point has been long but worth while. Back then, Sheriff Principal Taylor concluded that there would often be a David and Goliath relationship that prejudiced the attractiveness and prospects of litigation for those with rights and that therefore there was a denial of rights—a denial of the principle of access to justice. The Justice Committee agreed, recommending that the general principles of the bill be approved because

“on balance, the Committee considers that there are problems with access to justice in respect of civil litigation.”

Anything that ensures that those with rights are able to avail themselves of those rights must be a good thing. The bill aims to do that by introducing some of Taylor’s recommendations, including the increase in funding options for success fee agreements; the ability to enter damages-based agreements; the introduction of QOCS, meaning that pursuers in personal injury cases will usually not have to pay legal costs if they lose; and the introduction of a class action procedure for the first time in Scotland.

Will the bill achieve those aims? The Law Society of Scotland certainly thinks so, stating in its evidence that the bill

“has the potential to significantly increase access to justice”.

I hope that it does.

In passing, I worry about whether there has been too easy or too quick a conflation of the phrase “access to justice” with the phrase “access to solicitors and to the courts”. I am not convinced that they are the same thing. I suggest—as I did during the committee meetings—that hiring solicitors and litigating through the courts are a means to achieve whatever “justice” means to a particular pursuer.

Annabelle Ewing

I note the member’s point, but I think that Sheriff Principal Taylor dealt with that when he suggested that we should perhaps be considering the phrase “access to negotiation”. Perhaps that deals with the member’s point.

Liam Kerr

I take the point that the minister makes. I put exactly the same question to Sheriff Principal Taylor and he did indeed deal with it. I think that there is a wider philosophical discussion to be had on that point, but this is perhaps not the time to have it.

I listened to Daniel Johnson gently suggest at stage 2 that the insurance industry might have been too influential and insufficiently questioned in this process—I am paraphrasing, so forgive me. I understand that point, but I do not accept it as a fair reflection of the considerable scrutiny that we all individually and as a committee subjected the witnesses to.

If that charge sticks, the same accusation might plausibly be levelled in relation to representations made by some of the legal fraternity. For example, last week, we heard a great deal about how we should not ring fence future loss awards because to do so might lead solicitors to wind back from offering damages-based agreements. We will never know whether that would have been the case, but, as I said last week, it worries me that we reduce any element of what are ultimately future care costs, and thus potentially prejudice the amount that is available to the pursuer for care and support, in order to incentivise pursuer solicitors.

There is a risk that the courts will, over time—gently and perhaps understandably—increase such awards to ensure that the full costs of care are recovered after the solicitors have taken their fee. I think that that is a realistic possibility, but if I am wrong, I will be happy to admit it to this chamber.

On the flipside, I was pleased to see Parliament, at stage 2, vote to ensure that the benefit of QOCS should be lost where a pursuer

“has acted fraudulently in connection with the claim or proceedings, or makes a fraudulent representation”.

That is important, as unintended consequences could arise from a significant increase in court actions, such as insurers picking up the cost of more court cases. Thinking purely commercially, that would presumably increase overheads, and I remain concerned that increased overheads could be loaded on to people’s premiums. I feel therefore that the full protection against unmeritorious or fraudulent claims that went through at stage 2 should help to prevent a rise in such claims.

The implementation of the act must be closely reviewed, to ensure that consumers, taxpayers and pursuers do not lose out. Earlier in the process, I flagged up the fact that witnesses from several national health service boards suggested that the anticipated increase in claims for clinical negligence would be difficult to cover. That will have an attendant impact on healthcare delivery, as NHS resources will be taken up with defending unsuccessful claims rather than the delivery of services to patients. That is a concern.

For a second time, I refer to the Law Society of Scotland’s submission, in which it noted:

“It is difficult to gauge the full impact of the Bill, as many of the details of the provisions will be made at a later stage, through regulations”.

To that end, like the minister, I was pleased that Margaret Mitchell’s amendments requiring a report after five years were agreed to last week. Again, that is a better outcome as a function of the process.

The bill aims to increase access to justice. Through a comprehensive process in which all parties and viewpoints were engaged and debated, we have arrived at a bill that I hope will do just that. My colleagues and I shall vote for its passing this evening and I look forward to the future that I am sure it will deliver.

16:15

Daniel Johnson (Edinburgh Southern) (Lab)

Many members may be wondering whether, after Thursday’s lengthy and detailed stage 3 debate on amendments, there is anything left to say about the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. However, I assure members that I have plenty left to say and I intend to use my full five minutes. I am just surprised that there are not more members in the chamber, although I am sure that they are all watching on their televisions.

As the minister said, many of us seem to have become experts and very impassioned on the topic. Civil litigation is dry and technical, but there is a reason why so many of us have become impassioned. We hope never to use civil litigation proceedings and to have to pursue compensation in that way, but, when people have to do that, they really have to. The proposals will make it easier for people to bring cases and will give them more certainty in doing so. People who have experienced catastrophic life changes through injury will have a distinct and very real improvement to their prospects of getting redress and compensation. I hope that the bill addresses the decline in civil litigation cases that the minister mentioned.

Scottish Labour fully supports the bill and the positive reforms that it will put in place. I, too, record my thanks to Sheriff Principal James Taylor, whose balanced and well-thought-through recommendations are at the heart of the bill. Today marks the concluding stage of many years of work for him, with the report having been published in 2013. I also add my thanks to the bill team and the clerks, whose work has enabled the detailed and thorough debate and inquiry.

I am perhaps in danger of repeating what others have said, but it is worth remarking on what I see as the three key propositions in the bill. The first is the introduction of qualified one-way costs shifting, or QOCS, which can sound a little bizarre to the uninitiated but is hugely important in increasing certainty for many people in relation to costs. It is also important that we properly enshrine in law the already popular no-win, no-fee agreements, so that solicitors as well as claims management companies can offer them. It is a mark of the balance in the bill that ministers will be able to bring forward secondary legislation to cap success fees, along with a sliding scale, so that any unintended consequences can be addressed. The introduction of group proceedings is also a welcome step, especially for those who have experienced a small loss and who may feel that it is not worth while bringing a case individually but for whom acting collectively would make bringing a case more of a possibility.

The thoroughness of the stage 3 amendment debate is a mark of the seriousness with which the bill has been taken. Indeed, I think that, throughout the process, I ended up being on the opposing side to just about every combination of parties, which is a mark of how thoroughly everyone approached the bill. Other members have mentioned the amendments, but I will briefly set out the ways in which I think that the bill has been genuinely improved.

The first is the introduction of an opt-out approach in relation to group actions, which was spearheaded by Liam McArthur. That is a welcome addition that will hugely strengthen the possibility of group actions. I thank John Finnie for the collaboration that he and I participated in to ensure protections for trade unions. It would have been an absurdity if the bodies that seek to help people to pursue litigation and support them when they experience injury in the workplace were prevented from doing so.

The amendments that we agreed to at stage 3 to protect no-win, no-fee agreements were important. Sheriff Principal Taylor’s involvement right the way through the process in highlighting the potential dangers of leaving the bill as it had been left at stage 2 was extremely helpful. I understand and acknowledge the concerns that many members have highlighted, but one important aspect of the bill is that there is a possibility of introducing instruments to improve and amend the provisions on claims against future losses that solicitors can make.

The five-year review, introduced and stewarded by Margaret Mitchell, is an incredibly important improvement to the bill. Although I note the minister’s caution about overuse of that approach in future legislation, we should look at whether it is a right and proper way to consider legislation in the future to ensure that it does not have unintended consequences and has the proposed effect.

The bill is strong and I look forward to supporting it at decision time.

16:21

John Finnie (Highlands and Islands) (Green)

The bill is the important document, but I often look to the policy memorandum for more lay guidance on the policy objectives. It says:

“The principal policy objective of this Bill is to increase access to justice”—

I heard what my colleague Liam Kerr said about that, but that is a debate for another day—

“by creating a more accessible, affordable and equitable civil justice system. The Scottish Government aims to make the costs of court action more predictable, increase the funding options for pursuers of civil actions and introduce a greater level of equality to the funding relationship between pursuers and defenders in personal injury actions.”

That is intended to satisfy a number of national outcomes, not least

“National Outcome 11 on resilient communities by increasing public confidence in justice institutions and processes.”

That is important.

The bill has been referred to as long-awaited legislation. As many other people are, I am certainly grateful to Sheriff Principal Taylor for not only his work on the report but, as the minister said, his continuing involvement and wise counsel, which had us all reflect at stage 3. That showed maturity in how we deal with legislation.

As Daniel Johnson and other colleagues said, there was a lot of collaborative working. There was a genuine effort on the committee’s part to improve the bill. I am grateful, as others are, to the witnesses, staff, the bill team and the minister for how we went about that.

The minister said that she understood that Justice Committee members got to grips with the terms. I will own up and say that I did my very best. When I look at the policy memorandum, I find a three-page glossary of terms. The one that jumps out at me is “One way costs shifting”. As we now all know, that is

“A regime under which the defender pays the pursuer’s expenses if the action is successful, but the pursuer does not pay the opponent’s expenses if the action is unsuccessful.”

That became QOCS. Anyone who casually dropped in on a debate must have found that term peculiar.

There has been a lot of support for the bill from within and outwith the legal profession. At the outset, the Law Society of Scotland said:

“the basic terms are good and will help provide certainty which is the priority for solicitors.”

Since then, with the combined efforts of the committee, improvements have been made. As is the way, a lot of effort was made to persuade colleagues about things that were not successful, such as the issue relating to trade unions and staff associations and fees. That was about whether the bill would frustrate what were referred to as difficult but nonetheless meritorious cases.

The bill has been improved. It is important that that has happened for a number of reasons, not least the one to which the minister alluded when she rightly flagged up concerns about the 41 per cent drop in the level of civil litigation. Civil litigation is vital. Daniel Johnson remarked on the importance of the trade union movement and staff associations.

Patrick McGuire, of Thompson’s Solicitors, said:

That concerns that level playing field that we are all keen to bring about.

I could say a lot more, but I will stop there. The Scottish Green Party will support the bill at decision time tonight.

16:25

Tavish Scott (Shetland Islands) (LD)

I will start with an apology on behalf of Liam McArthur, whose tenacity has not extended to his being here today. It says in my speech notes that he has an important engagement in his constituency this afternoon. I think that means that he is opening something, but I cannot remember what it is. He has been unable to get down to Edinburgh this afternoon. Loganair schedules achieve many things, but not whisking one to Edinburgh in time for 4 o’clock on a Tuesday afternoon. He would certainly wish me to pass on his thanks to his committee colleagues, the clerks, the Scottish Parliament information centre and, of course, the people who gave evidence to the Justice Committee, including the minister and her colleagues, for the work that has been done in relation to the bill.

I also pay particular tribute to Sheriff Principal James Taylor, in recognition of his work in laying the foundations for the legislation. As he made clear to the committee, the recommendations in his report in 2013 were about improving access to justice through addressing the expense and funding of civil litigation in Scotland. The bill does that in a number of important ways, which is why Liberal Democrat members will be happy to support it at decision time.

In the brief time that is available, I want to make a few observations about the legislation—recognising, of course, that, unlike some colleagues in the chamber, I have not had the benefit of living and breathing qualified one-way costs shifting over recent months. In that regard, I say that I was taken with Daniel Johnson’s masterful pronunciation of the acronym for that, which I am certainly not going to attempt. I recognise that that system is the centrepiece of the changes that are set to be introduced through the bill, and that it strikes at the heart of the problem that was identified by Sheriff Principal Taylor; namely, that a lack of certainty about the likely costs in bringing a case, and the prospect of having to bear the legal costs of a defendant, can act as significant deterrents.

I should just say that the past couple of minutes represent one of the few occasions when I have learned something while reading my speech notes.

I acknowledge concerns that have arisen about the risk of creating a so-called compensation culture. However, the regulation of claims management companies in Scotland that is being taken forward elsewhere will help to address some of those fears.

The issue that arose most in the debate on amendments last week, and earlier, during stage 2, was the question whether damages for future loss should be ring fenced in success fees. I appreciate the inherent sensitivities. No one would wish individuals who have suffered the most grievous loss or harm to face the prospect of not receiving the full amount of the compensation that is awarded to them. However, on balance, the Scottish Liberal Democrats are persuaded that, in ring fencing lump-sum damages, we run the risk of diminishing the chances of cases being taken on. A consequence of that would be to reduce the prospect of individuals accessing the justice that they so desperately need and richly deserve.

Finally, I mention the bill’s proposals in relation to group proceedings. As with damages-based agreements, the bill’s introduction of group proceedings to Scots law is welcome, and reinforces its overarching objective of improving access to justice. Although the Government was initially minded only to allow for an opt-in approach, I am pleased that the committee backed Liam McArthur’s amendment to include, too, an opt-out approach in the bill. I am grateful for colleagues’ observations on Liam McArthur’s work in that regard. Obviously, that provision will take a little longer to introduce, but having the option available is essential if we are to deal with breaches of consumer law. Inevitably, those will have a relatively small impact on a large number of people, so the cumulative impact will be high. However, the incentive for any one individual to participate in court action is low. Thanks to the efforts of Which? and the amendments that were successfully promoted by Liam McArthur, we have a bill that offers the prospect of access to justice in such cases, as well.

Obviously, there is a lot more that I could say about Q-O-C-S, but in the interests of brevity, and owing to my lack of knowledge, I will leave it there, save for my confirmation that the Liberal Democrats will be happy to support the bill at decision time.

16:29

Rona Mackay (Strathkelvin and Bearsden) (SNP)

Access to justice is the hallmark of a civilised society and it is at the heart of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. Last Thursday, the stage 3 amendments were, for the most part, passed consensually, and I believe that the changes that have been made since stage 2 have strengthened the bill and closed possible loopholes. As deputy convener of the Justice Committee I, too, thank all the stakeholders who gave evidence, and I thank the clerks for their excellent work. They did a great job of simplifying the key points of the bill to help the committee’s understanding.

The bill will create a more affordable and equitable civil justice system. How many times have we heard about people being put off bringing actions because they cannot afford it? As the minister said, there has been a 41 per cent decrease in civil litigation cases since 2008. Despite the Justice Committee’s having heard conflicting views from witnesses on the matter, I believe that that fact proves that there has been a problem. Now, costs in civil litigation will be more predictable. Therefore, the bill will provide crucial access to justice.

The bill provides the legal framework to implement a number of key recommendations from Sheriff Principal Taylor’s balanced review of the expenses and funding of civil litigation, which was published in 2013. Although the bill might seem to be a little technical—or, as Daniel Johnson said, “dry”—it will have a significant impact on the public and on anyone who gets involved in civil litigation, the background to which usually results in a stressful situation.

Approximately half the report’s recommendations do not require primary legislation and will be implemented mostly by rules of court to be drafted by the Scottish Civil Justice Council, and the recommendations regarding sanction for counsel in personal injury actions were provided for in the Courts Reform (Scotland) Act 2014. Most of the recommendations that require primary legislation will be implemented through the bill. The main exceptions are, as we heard, regulation of the claims management industry and referral fees, which will be the subjects of forthcoming legislation.

Specifically, the bill includes provisions for Scottish ministers to introduce caps for success fee agreements—which are commonly known as no-win, no-fee agreements—speculative fee agreements and damages-based agreements in personal injury and other civil actions. The bill will also allow solicitors to use DBAs in Scotland.

As we have heard, the bill will introduce QOCS when a pursuer is not liable for the defender’s expenses if they lose, but can still claim their own expenses from the defender if they win. That would apply in personal injury cases and appeals, including those involving clinical negligence, for example. The bill will allow for new court rules in respect of third party and pro bono funded litigation, and for legal representatives to bear the cost when their conduct in a civil action has caused needless cost.

The bill will enable the auditor of the Court of Session and sheriff court auditors to become salaried posts in the Scottish Courts and Tribunals Service, and it will allow for the introduction of a group procedure. The group procedure element, which is being introduced for the first time in Scotland, is an important part of the bill, and the Justice Committee welcomes it. The Scottish Government has been persuaded that having opt-in and opt-out systems is the best way forward, and I believe that that is an improvement on the stage 2 position. It is also a clear example of how consensual the bill’s passage has been. All factors have been considered carefully, as my colleague Liam Kerr stressed.

Another aspect of the bill is that litigants will now be aware of every funding option in as clear and comprehensive a way as possible—which will, again, improve access to justice.

The bill will facilitate access to justice and create a more affordable and equitable civil justice system. For those very important reasons, I am happy to support the bill at stage 3 and for it to go on the statute books.

16:33

Gordon Lindhurst (Lothian) (Con)

I open by referring members to my entry in the register of members’ interests, as I am a practising advocate.

The stated aim of the bill is to provide greater access to justice in civil cases. Who could disagree with such a proposition? QOCS is the tool through which that access is to be opened up, but getting the balance right—a bit like getting the pronunciation of QOCS right, perhaps—is slightly more difficult. We want to ensure that the number of unmeritorious claims does not spiral out of control, which is one of the main concerns about the possible effects of the bill. Indeed, it is questionable whether allowing actions to be brought without a party having to weigh up the most important factor in litigation—court expenses—is, in principle, a good idea. As those who are involved in litigation know all too well, cases are sometimes settled on grounds that relate but little to their merit, simply because of the spiralling costs of an action.

The wording of the bill, which was debated in the chamber last week, is important, and the fraud test has, at least, been strengthened rather than diluted.

Equally important, however, is that in the future an assessment of the number of unmeritorious claims should be made, in order to enable accurate assessment of the bill’s impact on justice for everyone. For that to happen, it will be required that a variety of accurate information be gathered and collated. I suggest, because it is critical that justice be properly served, that among the things that need to be looked at are the number of cases that are settled without proof, and the number that are taken to a full hearing and are unsuccessful. If damages for future loss are not to be ring fenced, that will require particularly careful review, in due course.

Strong evidence-based arguments were made on both sides during consideration of the bill. Insurers have real concerns that high-value claims could lead to significant sums for critical care and support later in life being lost. We heard from my colleague Margaret Mitchell that a simple comparison with what has gone before in other parts of the UK does not take into account differences in the Scottish system.

Measurement of the success or failure of the decisions that are made in the chamber should be an important part of the policy-making process. We are meant to be here to make people’s lives better, which must include ensuring that unintended consequences do not produce results that are different from what was expected. That is why the part of the bill that allows for review is so important; it will ensure that the bill can, in the future, be assessed on whether it has increased access to justice for the people who need it and, indeed, whether they have been fairly compensated when they have accessed justice.

The UK Parliament’s Financial Guidance and Claims Bill will, as members will be aware, regulate claims management companies and use of cold calling. Everyone here will be familiar with the frustrating practices that are used by certain companies in that regard. I am pleased that the Scottish Government has finally agreed to the UK Government’s standards on the issue. However, as colleagues will know from stage 2, I would like to have seen the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill being delayed until the Westminster legislation had come into force. I hope that the regulatory void that will be created by the other parties in Parliament does not lead to negative consequences for the most vulnerable people in our society.

16:37

Mary Fee (West Scotland) (Lab)

I am pleased to have the opportunity to speak in this debate on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill. During the early stages of the bill, I was a member of the Justice Committee and heard evidence from a range of individuals during the early evidence sessions. I take this opportunity to commend the current members of the Justice Committee and the committee’s clerks for all their work on the bill throughout the legislative process.

The bill will remove the considerable uncertainty that exists around the legal costs of civil litigation and will work to redress the notable imbalance that has existed between individual litigants, including those supported by their trade union, and large insurance firms. Scottish Labour supports both the core principle of the bill, which is to widen access to justice, and the numerous detailed sections that have been strengthened by amendments at stages 2 and 3. At stage 2, the most significant amendments were to section 10. Those amendments were crucial, as they clarified the wording of section 10 to make it explicit that the power to award expenses against third-party funders does not apply in trade union-funded litigation.

Further amendments to the bill were agreed to in the chamber at stage 3 last week. I was pleased that there was cross-party support from the Greens, the Liberal Democrats and the Scottish National Party for the Scottish Labour amendments in the name of my colleague Daniel Johnson, which served to provide a guarantee and protection for the status of no-win, no-fee cases. It is important to note that, without those Scottish Labour amendments, the bill could have severely limited access to damages-based agreements for accident victims, including in high-value cases, which regularly involve individuals who have suffered very serious injury at work.

The bill in its final, amended form protects the legal rights of individuals who have experienced serious injury in the workplace to pursue a fair and just compensation settlement without any concern about or fear of being burdened with significant financial debt. Scottish Labour’s amendments to the bill at both stage 2 and stage 3 have been vital in ensuring that the bill upholds its fundamental principle of improving and widening access to justice.

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill is a vital piece of legislation. It serves a strategic purpose and it will have a positive impact on the thousands of individuals in Scotland each year who become involved in civil litigation, first by helping to redress the imbalance that existed for individual litigants, and secondly by providing a cast-iron guarantee and protection for the status of no-win, no-fee cases. Along with my colleagues on the Labour benches, I will be happy to support the bill at decision time tonight.

16:41

Mairi Gougeon (Angus North and Mearns) (SNP)

The minister was being very kind to us earlier when she claimed that we are now all experts on the bill, because it has been very difficult to get our heads around the subject matter. Tavish Scott passed on Liam McArthur’s thanks to the committee clerks and other members of the committee, and I am sure that Tavish also passed on his own thanks to Liam McArthur for allowing him to take part in the debate. However, we could tell that he is relatively new to the subject, as he has not quite got his head around the fancy acronyms that we have, or how to articulate them.

Daniel Johnson highlighted some of the reasons why the bill is vital. At its heart, it is about widening access to justice, and today I intend to focus on two elements that I believe will do that—the introduction of qualified one-way costs shifting, or QOCS, which we have heard a lot about this afternoon, and group proceedings.

Essentially, QOCS removes any financial risk to the pursuer who brings forward a claim, even if they are unsuccessful. I found that area particularly interesting in committee. Initially, what concerned me were cases that are brought forward where the defender is an individual as opposed to a large insured firm or organisation. Initially, I wondered whether it was fair to expect them to foot the cost of litigation even if they are successful in defending a claim that is brought against them. There was also a fear that, if QOCS was introduced, it would lead to a rise in spurious claims.

At stage 2, we considered amendments that would impose certain restrictions on who should be able to benefit from QOCS, including an amendment that would provide protection for defenders who were uninsured but remove protection for third-party funders. However, there was concern, as Liam McArthur rightly pointed out during the committee’s considerations, that that would provide an incentive for people not to take out insurance so that they could then escape that liability. That concern was also raised by Sheriff Principal Taylor during our evidence sessions when he stated:

“you could end up with parties not bothering to insure themselves when they ought to or with parties taking on a much higher excess in order to pay a much lower premium and thereby making themselves ... self-insured.”

It is also important to note that QOCS is in operation elsewhere. Sheriff Principal Taylor went on to say:

It is important that a balance is struck that ensures that there is fairness and that access to justice is delivered. I believe that, following the stage 3 consideration of amendments, we now have that in place with the current, amended QOCS provisions.

The bill will also introduce group proceedings for the first time—a move that has been widely welcomed by insurers, unions and law firms. The main point of contention was about whether there should be an opt-in system, as the Scottish Government originally proposed, or an opt-out system. The consumer group Which? was in favour of an opt-out system in which, after the claim had been won and the defender had been ordered to pay compensation, affected consumers could come forward and claim the proportion of the compensation that was rightfully theirs. Which? felt that that removed the administrative burden of gathering together affected consumers before proceedings are commenced, when the incentive is low for consumers to get involved because the outcome of the action is uncertain.

During our discussions at the committee, the concern was raised that the opt-out mechanism might take a considerable time to put into practice. Paul Brown from the Legal Services Agency stated:

“It has taken an inordinate amount of time to get to where we are ... It would be a pity if one went for the most ambitious arrangement and that resulted in further delay.”—[Official Report, Justice Committee, 14 November 2017; c 31-2.]

At stage 3, we have managed to strike the correct balance, in which it is at the court’s discretion which system will be used—whether that is the opt-in system, the opt-out system, or the choice of either.

As I said, the bill is about increasing access to justice. I believe that, following the committee’s consideration, all the different stages of the bill and the consequent amendments that have been agreed to, we have got the balance just about right, and I gladly support the bill.

16:45

Daniel Johnson

The debate has continued the theme that has proceeded with the bill. There has been engaged discussion about very technical and potentially dry items.

I thank Mary Fee and other members for acknowledging the broad sweep of the committee’s work. The committee has done an excellent job, and I thank my fellow committee members. I took up work on the bill around halfway through its consideration, at stage 2, after stage 1 had been concluded. I thank everyone for the work that they have done.

The debate was best summed up by Mairi Gougeon. She opened by pretending that none of us is an expert, but she gave the game away by giving a comprehensive speech in which she went through technical details, explained why they are important and talked about the balance that the original proposals sought to strike and the balance that we as a committee sought to strike throughout the process. I thank her for her contribution.

Liam Kerr brought up on-going concerns about specific provisions in the bill and some general points. The point about access to justice not being the same as access to courts and solicitors was well made. We can sometimes blur the distinction between those two things, but they are not one and the same.

The bill broadly gets the balance right. The minister pointed to proposals from Sheriff Principal James Taylor that sought to strike that balance. That is a principle that we should continue to uphold, examine and challenge ourselves with. Indeed, I would go further. Although I think that the bill is a step forward on access to justice and that it will improve people’s ability to bring forward cases, it is certainly not the last word on access to justice. We have been able to strike a balance between the awards that people might be able to achieve through the courts and offsetting the costs against them. There is a broad range of actions that one might bring to court or that one might be involved in at court in which that sort of mechanism is not available. It is an on-going concern of mine and of Scottish Labour members more broadly that justice is increasingly becoming something that people can access if they can afford it. We must continue to examine that thoroughly and challenge it robustly.

I want to deal with some of Gordon Lindhurst’s points. We have an important opportunity with the five-year review, which is an important mechanism. Gordon Lindhurst very fairly identified some things that will need to be tested and challenged at that point. We will need a very clear assessment of what is happening in respect of the numbers of cases, how they are concluding, and how the legislation is operating. There may well be unintended consequences, and it is important that we capture them. I include future losses in that. I recognise that the changes that we have made at stage 3 are not uncontroversial and that it is important that we challenge so that there are no unintended consequences.

Other things should be examined, including the fraud arrangements. It is obvious that we must prevent those involved in fraudulent actions from receiving the benefit of QOCS, but the STUC and others argued that overegging that aspect would lead to people losing QOCS unfairly. We must look at whether that happens and whether it is an unintended consequence of the provisions.

I lodged amendments at stage 2 and stage 3 on pay-as-you-go arrangements. Trade unions face issues when funding court actions, and I would very much like that issue to be examined in the five-year review.

I have raised before the question whether environmental cases could be included in actions, especially group actions. There are good reasons why that should be examined.

This has been a good debate; it has continued the approach that has been taken as the bill has passed through the Parliament. We should all be very pleased with the end result. It is a good piece of legislation, and I look forward to voting on it. I am disappointed to conclude the debate without hearing Tavish Scott say the word “QOCS”, but that is my only regret this afternoon.

16:50

Margaret Mitchell (Central Scotland) (Con)

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill is complex and, as Daniel Johnson stated, very technical. Based on the Taylor review and the previous Gill review recommendations, the bill seeks to address a David-and-Goliath scenario whereby there is an imbalance in the relationship between pursuers and defenders. The former tend to be individuals with little experience of the legal system who have limited resources; the latter tend to be insurance bodies or large companies who have substantial resources. The legislation makes provision to redress that imbalance by introducing qualified one-way costs shifting, which overturns the established principle that the loser pays the winning side’s expenses.

The bill also allows group proceedings, or multi-party actions, to be brought in Scotland for the first time through an opt-in process. Prompted by evidence from Which?, the UK’s largest consumer organisation, which argued for the introduction of an opt-out mechanism to be included alongside the opt-in provision, Liam McArthur lodged an amendment to that effect, which was agreed to at stage 2. Stage 3 amendments were lodged to permit the Scottish Civil Justice Council to develop the rules for both opt-in and opt-out procedures. Crucially, both of those procedures are now in the bill.

The legislation allows for damages-based agreements to be enforced as part of success fee agreements, which means that solicitors can claim a percentage of the compensation awarded to their client, if the case is won.

As Liam Kerr pointed out, the future loss provision, on which concerns have been raised from the outset, has been one of the most contentious issues in the bill. However, let us be clear: future loss can include money that is awarded to an injured pursuer specifically to cover, for example, essential and expensive medical equipment and the cost of future care.

On the issue of ring fencing, witnesses’ evidence was diametrically opposed. Personal injury lawyers argued for future loss to be included as part of lawyers’ fees, while insurance company representatives, as well as the Equality and Human Rights Commission, argued for that to be protected by ring fencing. The committee considered both sides of the argument, and ultimately decided at stage 2 to ring fence the future loss element, so that it cannot be claimed as part of lawyers’ fees. However, following that stage 2 decision, Sheriff Principal Taylor wrote to the committee outlining his personal concerns and opposition to the approach. Consequently, the decision to ring fence was reversed at stage 3.

Having carefully considered Sheriff Principal Taylor’s letter, I remain unconvinced by his arguments. For example, he says that ring fencing future loss in England and Wales has meant that it is not worth solicitors taking on such cases. However, that fails to recognise that the situation in Scotland is different. Scottish solicitors, unlike their counterparts in England and Wales, can enter into DBAs, claim a percentage of their fees from a lump-sum settlement and, in addition, be awarded judicial expenses for all their outlays and costs, with the possibility of an additional uplift for complex cases. In other words, I maintain that the comparison is not analogous.

I am disappointed that the amendments that were lodged that would have required lawyers to be open and transparent about the future loss element in settled claims were rejected.

Post-legislative scrutiny of the bill is crucial. The bill might have unintended consequences, given some of the controversial provisions. I thank the minister for improving on the amendment that I lodged at stage 2 in that regard.

I thank everyone who gave evidence, written or oral. I also thank my fellow committee members and the bill team and I pay tribute to the stalwart work of the Justice Committee clerks in helping the committee to scrutinise the bill.

The bill seeks to increase access to justice for individual consumers and the general public, in civil litigation cases. The Scottish Conservatives will be pleased to support it this evening.

16:55

Annabelle Ewing

I refer members to my entry in the register of members’ interests. I declared an interest at the beginning of consideration of amendments at stage 3; I hope that the declaration carries forward to the debate.

I have listened with interest to members’ speeches in this final part of our consideration of the bill and I very much welcome the support for the bill that has been expressed by members of parties across the chamber. In closing the debate, I will pick up on a few issues about the bill, which will improve access to civil justice in Scotland and thereby increase the possibility of negotiating a settlement.

The power to cap success fees, in section 4, is important. I remind members that the Government will lay draft regulations on caps, which will be subject to the affirmative procedure. Our intention is to follow the recommendations of Sheriff Principal Taylor, which he thought would permit solicitors and claims management companies a reasonable return on their work and the outlay involved in the pursuit of claims under success fee agreements.

Sheriff Principal Taylor thought that his carefully considered proposals struck a balance between the needs of individuals and the incentivisation of their legal advisers. As he said, an individual is much more likely to welcome 80 to 85 per cent of their damages claim than 100 per cent of nothing, if they cannot pursue a claim because they have no means of funding. In the context of the sliding cap on success fees, it should be borne in mind that the percentages are maxima and competition among providers will drive down deductions, in practice.

Although practitioners were clear that people would not have to pay more than one success fee, amendments to the bill at stage 2 made that clear and put it beyond doubt.

On the future loss element of damages, which is important, we had a good debate during consideration of amendments at stage 3 last Thursday. In light of the concerns that were raised at stage 2, I and other members were happy to support the amendment in Daniel Johnson’s name that means that future loss in cases in which the award is paid as a lump sum is not ring fenced—subject of course to certain important safeguards, which are set out in the bill.

As I said to Liam Kerr during earlier stages of the bill, there is no evidence that the approach will lead to inflationary damages awards. Judges make awards according to the law as it stands. I think that Sheriff Principal Taylor said that the chance of such a direct correlation was zero. [Interruption.]

The Presiding Officer (Ken Macintosh)

I ask members who are coming into the chamber to keep the noise down, please.

Annabelle Ewing

On the important issue of QOCS—I agree that we want to hear Tavish Scott pronounce that; he can always intervene—I do not think that the approach will lead to unmeritorious claims, as has been suggested. A number of important factors will discourage spurious court actions.

First, as Sheriff Principal Taylor said, solicitors are unlikely to run cases that have little chance of success on a no-win, no-fee basis, because they are unlikely to be paid. Secondly, the regulation of claims management companies in Scotland will discourage unscrupulous companies from operating north of the border. Thirdly, the compulsory pre-action protocol that was introduced in the sheriff court for personal injury actions that involve claims of under £25,000 will enable the identification at an early stage of claims that have no merit. Finally, section 8(4) provides that the benefit of QOCS may be lost if the pursuer behaves inappropriately, which will also discourage the raising of vexatious claims.

In its plan of work for the coming year, the Scottish Civil Justice Council has confirmed that it will prioritise implementation of the bill. It will therefore look at the important issues of what happens in circumstances in which a case is summarily dismissed or abandoned or the pursuer fails to beat a tender, all of which were raised during consideration of amendments.

On the important issue of third-party funding, it was never the intention to see trade unions facing awards of expenses against them when they act as funders and amendments have put that absolutely beyond doubt.

On auditors of court, we will see changes to the system, but we also anticipate transitional arrangements to deal with those who are currently in post.

The Government’s amendments at stage 3 on procedure in group proceedings will permit the Scottish Civil Justice Council, if it so wishes, to prioritise rules on opt-in procedure. In so doing, it might wish to look at the draft act of sederunt that was produced by the Scottish Law Commission some time ago. The Government will also provide the council with a policy note on what it considers is required for rules on opt-in. It is to be hoped that that will facilitate expeditious action.

In summary, the bill will directly enhance the ability of people in Scotland who have meritorious civil claims to pursue such cases in the courts. It seeks to remove some of the barriers that, in the past, have deterred individuals from accessing justice in the civil courts. It extends the funding options for individuals and clarifies how much it will cost to enter into a success fee agreement. It makes it clear that a pursuer will not become liable for the costs of the defender if a personal injury case is lost. The bill also addresses concerns about transparency of the work of auditors of court, who currently derive a private income from what is, in effect, a public office. Finally, the bill will lead to the introduction of group proceedings in Scotland for the first time.

I repeat my thanks to all those who gave evidence to help improve the bill during its parliamentary process, and I commend the motion in my name.

1 May 2018

Final vote on the Bill

After the final discussion of the Bill, MSPs vote on whether they think it should become law.

Final vote transcript

The Presiding Officer (Ken Macintosh)

We come to decision time. The first question is, that amendment S5M-11967.2, in the name of Brian Whittle, which seeks to amend motion S5M-11967, in the name of Aileen Campbell, on the success of the Commonwealth games, be agreed to.

Amendment agreed to.

The vote was unanimous. The motion is therefore agreed to, and the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill is passed. [Applause.]

1 May 2018

Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill

Overview

Why the Bill was created

Becomes an Act

Introduced

Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill as introduced

Related information from the Scottish Government on the Bill

Scottish Parliament research on the Bill

Stage 1 - General principles

Committees involved in this Bill

Who examined the Bill

Who spoke to the lead committee about the Bill

First meeting transcript

The Convener

Hamish Goodall (Scottish Government)

The Convener

Hamish Goodall

The Convener

Hamish Goodall

The Convener

Hamish Goodall

The Convener

Hamish Goodall

Greig Walker (Scottish Government)

The Convener

Hamish Goodall

The Convener

Liam McArthur

Hamish Goodall

Liam McArthur

Hamish Goodall

Liam McArthur

Hamish Goodall

Greig Walker

John Finnie

Hamish Goodall

John Finnie

Hamish Goodall

John Finnie

Hamish Goodall

John Finnie

Hamish Goodall

John Finnie

Liam Kerr

Hamish Goodall

Liam Kerr

Hamish Goodall

The Convener

Hamish Goodall

The Convener

Hamish Goodall

The Convener

Hamish Goodall

The Convener

Hamish Goodall

Rona Mackay (Strathkelvin and Bearsden) (SNP)

Hamish Goodall

Greig Walker

Rona Mackay

Hamish Goodall

Rona Mackay

The Convener

Hamish Goodall

The Convener

Hamish Goodall

The Convener

Rona Mackay

Hamish Goodall

Rona Mackay

Hamish Goodall

Liam Kerr

Hamish Goodall

Liam Kerr

Hamish Goodall

Greig Walker

Rona Mackay

Hamish Goodall

Greig Walker

Rona Mackay

Hamish Goodall