Back to top
Article

No protocol – what expenses?

17 March 14

A number of recent cases have concerned disputed issues on expenses where defenders' insurers have refused to follow the Pre-Action Protocol [shorter version]

by Peter Crooks

What happens when an insurer refuses to agree to a claim being conducted under the Scottish Pre-Action Protocol, proceedings are raised and a case settles? Is the pursuer entitled to full judicial expenses on the basis that proceedings were raised because of the insurers’ refusal to agree the protocol?

This article considers the issue and some of the cases that have been decided so far.

Operative from 1 January 2006, the protocol scheme was set up by agreement between the Law Society of Scotland and the Forum of Scottish Claims Managers. It governs cases with a value below £10,000. Agreement by both parties to the protocol renders them contractually bound. There is an overarching tariff fee agreement under the scheme which was reached after negotiation, based on a scale relating to settlement value.

Most insurers/claims handlers agree to claims being conducted under the protocol. Some, however, do not, including many local authorities and some fairly familiar names in the insurance industry.

Fees payable under the protocol are more generous than those chargeable under the old “chapter 10” scale of the Society’s General Table of Fees. Chapter 10, also a voluntary scheme, was abolished in 2005, but some insurers still seek settlement of claims under it. The enhanced level of fee payable in protocol cases is probably a recognition of the work required to properly construct a claim on liability, quantum and negotiation with insurers. In that connection, it is perhaps worth noting that Lord Gill’s Civil Court Review found that the pre-litigation judicial block fee did not properly take account of the totality of work required at that stage.

The “general rule” in litigation is that a successful party is entitled to “his full expenses as taxed” (Macphail, Sheriff Court Practice (3rd ed), para 19.07). If the sheriff does not follow this usual course, he must have some ground capable of statement to justify departure from this rule (para 19.08).

Examples are given at paras 19.09-19-12. Collectively, they may be described as situations where a successful party’s actions, either pre- or post-litigation, may be described as “unreasonable”, either unreasonably commencing or unnecessarily prolonging litigation.

What, then, do recent cases say regarding the interplay between the protocol and judicial expenses?

McIlvaney v A Gordon & Co Ltd [2010] CSOH 118

This was a claim arising out of an accident at work, which the defenders’ insurers refused to conduct under the protocol. A pre-litigation offer of £6,000 was rejected. Court of Session proceedings were raised. The defenders tendered £6,000, which was accepted. The Lord Ordinary modified the pursuer’s expenses to nil. Given the pre-litigation offer, this decision is perhaps hardly surprising.

Campbell v Gallagher (Sheriff Principal B A Lockhart, Dumfries Sheriff Court, 13 March 2012)

Although this case did not involve the protocol, it is useful in relation to pre-litigation actings. In a road traffic claim, a pre-litigation offer of £3,000 was rejected by the pursuer on the basis that he was awaiting final medical evidence. Protective proceedings were raised ahead of the triennium. A tender for £3,000 was lodged and accepted. The pursuer was held entitled to judicial expenses to the date of tender, a decision upheld by the sheriff principal.

Durie v Sabre Insurance (Sheriff Lindsay Foulis, Perth Sheriff Court, 27 June 2012)

After a claim was intimated, insurers made an admission of liability, but did not agree to the claim being conducted under the protocol. The pursuer’s solicitors raised proceedings once they obtained a medical report, without disclosing it beforehand to the defenders. A minute of tender was then “promptly lodged”. The defenders moved that no award of expenses be made. Sheriff Foulis held that the pursuer had acted reasonably.

Brown v Sabre Insurance Co [2013] CSOH 51

Defenders, pre-litigation, “confirmed that liability was not an issue”, but otherwise refused to deal with the pursuer’s claim under the protocol. They indicated willingness to negotiate on receipt of a medical report and any vouching. None was produced. The pursuer raised proceedings. A tender for £3,500 was lodged. On the pursuer enrolling for decree, the defenders sought modification of the pursuer’s expenses to nil on the basis that the litigation was premature and unnecessary. Lord Boyd at paras 14-19 commented favourably on the protocol, in particular (para 18) alluding to access to justice issues in smaller value claims if a pursuer cannot recover proper and reasonable expenses. He held the pursuer entitled to raise the action, awarding expenses on the summary cause scale with a reduction of 15%.

Lawson v Sabre Insurance Co (Sheriff Gregor Murray, Peterhead Sheriff Court, 2 August 2013)

A road traffic claim was intimated to the defenders, seeking agreement to use of the protocol. The defenders admitted liability, offering to negotiate settlement with fees on the “former Chapter 10 scale”. In other words, the protocol was not agreed. The pursuer’s agents obtained medical evidence and, without further intimation, raised an ordinary action. A tender was lodged within the summary cause limit and accepted. The defenders moved for expenses to be modified to Chapter 10 level, failing which to protocol level. The sheriff awarded expenses on the summary cause scale, restricted to 40%.

The thrust of his reasoning relates to what he perceived as unreasonable conduct by the pursuer’s agents pre-litigation (he is also critical, although less so, of the defenders’ conduct). He considered Chapter 10 expenses in the case to be “generous” (para 32). Although the only live issue was quantum, “the pursuer’s agents ignored that issue and concentrated instead on expenses” (para 33). The protocol was “not mandatory”; the initial onus was on the pursuer to justify an award of expenses; the defenders’ conduct was “not relevant per se when considering whether or not to mark the court’s disapproval of some aspect of the pursuer’s conduct”.

There are several grounds in the sheriff’s reasoning which are either questionable, doubtful or, arguably, wrong as a matter of law:

The protocol explicitly promotes the expeditious and efficient disposal of cases with a value below £10,000. On the evidence of the Scottish Civil Courts Review, it is widely accepted as a significant improvement to the litigation landscape. It is unreasonable (if not improper) to expect a pursuer to “justify protocol expenses”, and unhelpful for individual sheriffs to seek to micro-analyse what might be an appropriate level of expenses in protocol cases. Indeed, the same consideration applies to block judicial fees.

The sheriff’s reasoning is partly contradictory. In Brown, Lord Boyd held that “the defenders cannot have it both ways. If they decline to be bound by the terms of the protocol they cannot expect the pursuer’s agents to be bound by it”.

While the protocol is not mandatory, the issue is whether refusal to agree the protocol is reasonable in the overall assessment of both parties’ conduct, particularly against the background of the Civil Courts Review’s conclusion that its use should be mandatory.

The sheriff’s opinion that the “initial onus is on the pursuer to justify an award of expenses, then to justify the amount payable” is arguably an error of law. The general rule is clearly set out in Macphail, referred to above.

A pursuer’s conduct cannot simply be assessed in isolation from the conduct of a defender, particularly where it arises as a consequence of a defender’s actings (in this case offering to settle expenses on an out-of-date fee scale).

Burns v Royal Mail Group Ltd (Sheriff Principal M Stephen, Edinburgh Sheriff Court, 30 January 2014)

This was an appeal which I recently conducted on behalf of the pursuer. The substantive point in the case did not relate to the protocol, but both the sheriff and sheriff principal refer to it. The views of the sheriff principal, in particular, are helpful.

The action, a road traffic claim, proceeded under Chapter 34 of the Summary Cause Rules. The defenders did not agree to the protocol, nor did they disclose their liability position. Proceedings were raised a year after intimation of the claim, by which time the pursuer had obtained a medical report. After service, but before the last day for lodging a response form, the defenders’ agents offered a principal sum of £750, with expenses on the undefended summary cause scale. The offer was rejected. The defenders then offered expenses on the protocol scale. This was also rejected by the pursuer on the basis that the claim was not being settled under the protocol. The original offer was then repeated, and rejected. The defenders lodged a response form formally denying liability, and simultaneously lodged a tender for £750 with expenses of process. This was accepted.

The defenders moved for modification of expenses to the summary cause undefended scale. Despite their concession that the pursuer had been entitled to raise proceedings, the sheriff acceded to this motion, following a similar decision in Moloney v Royal Mail Ltd, Sheriff Douglas A Brown, Hamilton Sheriff Court, 9 July 2012. The sheriff commented (obiter) unfavourably on the protocol: he referred to “shortcomings” and “fault”; and in relation to small value claims, “there may be offers made which the insurers expect to succeed at proof, but nevertheless make an offer on an economic basis to avoid the agent/client cost of proceeding. In such circumstances it is unreasonable… to expect the insurers to disclose their position on liability”. This, of course, is fundamentally at variance with the aims and objectives of the protocol.

The basis for the sheriff’s decision was that as the defenders’ offer was made before a response form/defences had been lodged, the pursuer was only “entitled” to expenses on the undefended scale. Sheriff Principal Stephen sustained the pursuer’s appeal. She found the pursuer’s conduct pre- and post-litigation to be “beyond reproach”. The sheriff had failed to have regard to the defences lodged, which were skeletal and denied liability. The pursuer was entitled to know what the defence was, as it had important implications when considering any offer of settlement. The sheriff had also erred in law. Once defences had been lodged, the action was in foro. The pursuer was therefore entitled to his expenses as taxed (Macphail, para 19.07); Moloney had been wrongly decided. The rules governing expenses are also directed at defenders incurring expense by refusing to disclose a proper defence; the focus has to be on both parties’ behaviour.

The protocol was relevant. The sheriff principal agreed with Lord Boyd’s opinion in Brown, particularly his comments concerning access to justice. In particular, many small value claims might not be taken if a pursuer has to consider whether the value of their claim is eroded by failure to recover a proper level of expenses.

Peter Crooks, solicitor advocate, Bonnar Accident Law Ltd, Airdrie.

Have your say