Legal Watch Scotland

Issue 7: November 2018

Welcome

This month’s Legal Watch Scotland highlights the contribution to be made by all

of us in shaping the future of litigation in Scotland. The current rate of evolution

of court rules is unusual and offers a great opportunity for your views to be

heard. The Scottish Government and the Law Commissions of Scotland, England

and Wales both launched consultations this month, seeking views on diverse

issues ranging from success fees, to how we might litigate in future when an

automatic or driverless vehicle is involved in an accident. Both will have a

significant impact on litigation and how insurers future-proof their business.

The Scottish Civil Justice Council has also launched a review of the use and practice of Compulsory Pre-Action

Protocols. Two years in – are they effective in cutting litigation, or simply another hurdle for the claimant

industry to negotiate to get their case into court? The case of Zdrzazlka v Sabre Insurance sheds some light on

how the judiciary views their use and the importance of reasonable pre-litigation behaviour when it comes to

dealing with costs

Finally, the Prescription Bill has passed its last stage in Parliament meaning that the new five-year

discoverability test is one step closer to being brought into force.

Cameron McNaught, Partner

Scottish Parliament News

1. Prescription (Scotland) Bill

2. Damages (Investment Returns and Periodical Payments) (Scotland) Bill

Case Law

Compulsory Pre-Action Protocol: A Judicial View

Consultations:

1. Success fee agreements: Consultation on Part 1 of the Civil Litigation

(Expenses and Group Proceedings) Scotland) Act 2018

2. Automated Vehicles: A Preliminary Consultation Paper

Scottish Civil Justice Council

1. Personal Injury Committee

2. Cost and Funding Committee

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1. Personal Injury Committee

The minutes of the latest meeting of the PI Committee are now available. Of interest is the

discussion surrounding the Compulsory Pre-Action Protocols (CPAP), and how they are

working in practice. They have been used in the industry for two years, and in line with usual

Council practice, the time has come to review their use. In the first instance, this will be done

on an informal basis within the Committee as there is a good representation from claimant,

defendant and insurance bodies.

As the CPAP only applies to incidents that occur on or after 28th November 2016, the

experience of members with pre-litigation caseloads will be of vital importance. There are

few reported decisions about the mechanisms of the CPAP. That said the recent case of

Zdrzazlka v Sabre Insurance provides some judicial commentary on the protocols as

discussed in this edition of our newsletter. And the Committee should take note – the

comments were not complimentary.

2. Cost and Funding Committee

The Cost and Funding Committee met on 5th November 2018. Squarely on the agenda was

the creation of rules relating to QOCS, pro-bono work and awards of expenses against legal

representatives, all as raised in the Civil Litigation (Expenses and Group Proceedings)

(Scotland) Act 2018. Unfortunately, at the time of writing the minutes of the meeting had

not yet been published. We hope to provide you with a summary of their considerations in

our next edition.

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Scottish Civil Justice Council

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1. Success fee agreements: Consultation on Part 1 of the Civil Litigation (Expenses

and Group Proceedings) Scotland) Act 2018

Part 1 of The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 seeks to regulate

damages based agreements (DBAs), by setting caps on the percentage that claimant firms, and claims

management companies, can charge. The Act gives the Scottish Ministers the powers to set those limits,

and this Consultation sets out to garner opinion on the appropriate level of the cap.

The Consultation also sets out to establish which cases should not be funded by DBAs. For example, some

types of family actions may not sit comfortably within this framework.

Finally, the Act gives the Scottish Ministers the power to make further provision about success fee

arrangements, so the Government are looking for general feedback on the form and content of success

fees.

Success fees and the way that they are used and regulated will have a significant impact on how litigation

runs, and the levels of new cases that are taken on by claimants’ firms. The higher the possible reward, the

more likely companies are to take on a risky case. Combine that with QOCS, and this could increase costs to

insurers. It is important that all views are heard by the Government, and the eventual level of cap strikes a

balance between access to justice and a free for all.

The Consultation closes on the 31st January 2019. To participate click here.

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Consultations

2. Automated Vehicles: A Preliminary Consultation Paper

The Law Commissions of Scotland, England and Wales have launched the first of a series of public

consultations about critical legal reforms that will be required to ensure that the UK is prepared for the

introduction of automated vehicles. The consultation document is lengthy covering areas such as:

• How should we provide safety assurance for self-driving systems?

• How should road rules be adapted for automated vehicles so that they drive safely?

• Should we introduce a new Government agency to monitor and investigate accidents involving automated

vehicles?

• Do we need to modify criminal and civil liability laws to ensure clarity and certainty in the law about who is

accountable if things go wrong?

For road traffic insurers the latter question is significant and builds on work already carried out by the UK

Government on insurance reforms for automated vehicles. The Automated and Electric Vehicles Act 2018

sets out the basic rules concerning indemnity which this Consultation seeks to augment.

The Act anticipates a push toward automated vehicles and sets out who picks up the tab if things go wrong.

Part 1 confirms that the individual claim remains against the insurer of the vehicle. This does not prevent the

insurer from raising a product liability case against the manufacturer at a later date.

However, the Act has been criticised for not clearly setting out how other aspects of civil liability will be dealt

with in this automated era. The purpose of this first Consultation is to seek views on whether further

guidance or clarification is required. Specifically, the Consultation covers areas such as:

• Contributory Negligence

• The Meaning of Causation

• Data retention

• Secondary claims against manufacturers

• Software sold without a physical medium

The Government is hoping to lead the way in creating a legislative environment which allows innovative

automative technology to flourish in Britain. The views of the insurance industry are critical in shaping that

future. The Consultation is open until 8th February 2019. To participate click here.

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Consultations

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1. Prescription (Scotland) Bill

The Prescription (Scotland) Bill has now been approved by Parliament. The concerns surrounding the

exceptions to the five-year prescription period in non-personal injury claims have not abated.

However, although this caused some heated debate in the Chamber, ultimately the Bill remains

unchanged from stage 2.

The Bill did not set out to be a panacea to all time limits in all situations. It set out to ‘increase clarity,

legal certainty and fairness in the law of negative prescription’. It is questionable whether the new

discoverability test – the rules surrounding when the five-year period starts to run – fulfils that brief.

Indeed, delaying the start of the five-year prescriptive period until the identity of the wrongdoer is

clear continues to cause concern – particularly for insurers in the professional indemnity and

construction sectors. However, to balance the rights of defendants and claimants, the 20-year

prescriptive backstop can now no longer be interrupted or extended, where it applies to the

obligation to pay damages. This starts to run from the date of the act or omission and creates some

long-term certainty for insurers when they are assessing their indemnity risks.

In addition, insurers may also benefit from the discoverability test in situations such as the Stockline

explosion case, which prompted the change in the first place. Where an insurer is seeking to recover

damages in a situation where the identity of the wrongdoer is not easy to ascertain, the new test will

prevent the clock from starting.

We are now in the four-week period where the legislative competence of the Bill can be challenged.

Assuming there are no challenges, the Bill will be passed for Royal Assent. However, it can’t come

into force without further regulation from the Scottish Parliament, and we will let you know when

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Scottish Parliament News

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2. Damages (Investment Returns and Periodic Payments) (Scotland) Bill

Evidence is currently being heard by the Parliamentary Committee at stage 1 of this Bill. It will be

interesting to read the Committee’s report once it is published to discover whether any of that evidence

has been influenced by the recently published Draft Damages (Jersey) Law 201.

As discussed in the last edition the terms of the Scottish Damages Bill have been shaped by the joint

consultation carried out by the Ministry of Justice and the Scottish Government. As a result, the terms of

the Damages Bill in Scotland and the Civil Litigation Bill in England and Wales are similar. That

notwithstanding it is predicted that discount rates will differ between the two jurisdictions, with a rate

between 0% and 1% in England and Wales, and 0% in Scotland.

Jersey has also used the joint consultation and the analysis of the UK Government Actuary’s Department

to inform their Draft Law, along with the 15-year inflation data which shows no difference between the

UK and Jersey. As the impetus for the Draft Law arises from a current case, in which judgement is

awaited, that proposes a discount rate of -3.75%, Jersey’s interpretation of this evidence is interesting.

The Draft Law proposes discount rates of:

• + 0.5% – where the lump sum is to cover a period of up to 20 years.

• +1.8% – where the sum is to cover more than 20 years. It is, however, applied to the full future

damages award.

It also proposes that no future rate should be a negative figure.

It may be problematic that different jurisdictions have different rates and indeed in limited situations

may even encourage forum shopping. However, Jersey’s willingness to pin its colours to the mast

regarding the discount rate may have a positive effect on the UK Governments’ decision making about

rates in the future.

This dual rate method is based on the finding that the expected real return on investments is higher over

longer time periods. Both the UK Bills allow dual rates to be set, but that has not met with much

enthusiasm yet. The Jersey example may increase the call for this method to be employed and could be

a boost for the insurance industry after the impact of negative rates has increased their costs, and in

turn, costs to the consumer.

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Scottish Parliament News

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November marks the two-year anniversary of the introduction of the Compulsory Pre-Action Protocol

(CPAP) – for injury claims worth up to £25,000. Whether that is a cause for celebration or not remains to be

seen. With the Civil Justice Council about to conduct a review of its use, the recent case of Zdrzazlka v Sabre

Insurance represents a timely intervention from the judiciary. The concluding words of Sheriff McGowan

in this recent judgement being:

“…the structure of the CPAP and the relevant OCR… [Court Rules] … creates a number of challenges for

practitioners and the court.”

Although a relatively restrained assessment his words leave little doubt that, in his opinion, there is a way to

go before the CPAP fully achieves its aims.

The Sheriff was being asked to decide whether or not the Defendant had failed to comply with the CPAP in a

situation where they offered a qualified admission of liability but did so quickly and with the intention to

settle. The Claimants’ solicitors litigated arguing that the Defendant was in breach, and therefore they were

no longer bound by the CPAP. The matter settled post-litigation quickly, following receipt of medical

evidence, and the Defendant opposed an application for costs on the litigated scale, arguing that costs

should be restricted to those allowed under CPAP. Part of their argument about this was based on the CPAP

costs framework found in the Court Rules, and the aims and ethos of the CPAP itself.

On considering the terms of the CPAP and its interaction with the Court Rules, Sheriff McGowan took the

view that he had no option but to conclude that the Claimants’ solicitors were entitled to litigate based on

the qualified admission of liability. Having been entitled to exit the CPAP framework no reliance could be

placed on the guidance relating to CPAP costs in the Court Rules. Nor could the appropriateness of the

Claimants’ behaviour be judged against the spirit of the CPAP.

However, the CPAP did not preclude the use of the Court’s inherent power to deal with costs. As the

Claimants’ solicitors had not produced medical evidence timeously, the Court concluded that they had

delayed settlement and on this basis awarded costs on the normal Court Scale, but restricted to 50%. In

addition, the Defendant was awarded 50% of their costs of the litigated case.

Although costs were ultimately awarded by the principle and application of discretion, there are some

important lessons for insurers to take home from this case:

• The qualified admission was made as there was an indemnity issue. This was not explained to the

Claimants’ solicitors. The admission was made quickly and, although this was an attempt to expedite

matters, that admission could have been made later, on an unqualified basis, once indemnity had been

resolved. The CPAP allows a three-month window for admissions to be made.

• Although the wording is vague in some sections of the CPAP, Rules 9 and 13 combined make it clear that

any obligation not to litigate flies off if a defendant refuses to provide an unqualified admission of

liability.

• Unless a binding admission of liability is made and accepted, there is no obligation to follow the CPAP or

its aims.

• Nonetheless, when dealing with costs in any litigation which follows the Court will still look at parties’

conduct and penalise unreasonable behaviour. So a breach of the CPAP while allowing a claimant to

litigate does not alter their obligation to act reasonably before doing so.

Case Law

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Whilst we take care to ensure that the material in this newsletter is correct, it is made available for information only, and no representation is given

as to its quality, accuracy, fitness for purpose, or usefulness. In particular, the articles in this newsletter do not give specific legal advice, should not

be relied on as doing so, are not a substitute for specific advice relevant to particular circumstances. Plexus Law accepts no responsibility for any loss

which may arise from reliance on information or materials published in this newsletter.

Cameron McNaught, Partner

T: 0131 3229 252 | M: 07972 638 356 | E: cameron.mcnaught@plexuslaw.co.uk

Laurie Traynor, Partner

T: 0131 3229 253 | M: 07972 638 357 | E: laurie.traynor@plexuslaw.co.uk

Exchange Place 2 | 5 Semple Street | Edinburgh | EH3 8BL

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