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Funding "obstacles" to litigation should be removed, says Taylor review

11 September 2013

Radical reforms to the funding of civil litigation in Scotland have been recommended in the report of the Taylor review, published today.

Running to over 350 pages and containing 85 recommendations, the report is the result of an independent review by the former Sheriff Principal of Glasgow and Strathkelvin, James Taylor, commissioned in March 2011 by the Scottish Government. It follows on from the civil courts review carried out by Lord Gill, covering aspects which that review left to one side pending a similar review for England & Wales by Lord Justice Jackson.

Among the main proposals, solicitors will be able to offer their clients “no win – no fee” agreements in terms of which their fee is calculated as a percentage of the damages recovered. At present, solicitors are barred by law from enforcing such agreements but claims management companies are free to enter into them with clients. Sheriff Principal Taylor acknowledges that they are popular with the public and easily understood, and that some solicitors' firms set up separate companies in order to offer percentage agreements to clients. "If the law can be so easily circumvented, that is a good argument for changing it", he said on presenting his report.

The maximum percentage which could be deducted from damages in personal injury cases would be set on a sliding scale, of 20% on the first £100,000, then 10% on any further part of an award up to £500,000, and 2.5% on any damages over 2.5%. Such agreements, however, would be available in other types of actions, with different figures applying – such as 35% in employment tribunal cases and 50% in commercial actions.

At the launch event the sheriff principal said his proposal was not intended to involve legal aid being withdrawn from such actions, as happened in England & Wales.

Reducing liability

It is also recommended that a pursuer in a personal injury action should no longer run the risk of having to pay the defender’s expenses should the court action fail, except in very limited circumstances. This will remove the fear of individual pursuers having to pay a lot of money to the defender’s solicitors should they lose. Such a fear can result in good claims not being pursued.

This proposal would not apply where there has been fraud or an abuse of process; and where a pursuer fails to beat a sum tendered in settlement by a defender, the court should have a discretion to determine whether the pursuer acted reasonably in not accepting – failing which, liability to the defender should be limited to 75% of the damages awarded.

For commercial actions, recommendations are made to involve the judiciary in the management of expenses. Pilots for commercial actions are recommended for the introduction of a system of expenses management, with parties presenting proposed budgets at the outset of a case, and for the summary assessment of expenses. Such procedures should enable a commercial litigant to assess the benefits of proceeding with a litigation in the full knowledge of what the expenses might be should the litigation be won or lost.

Sheriff Principal Taylor does not recommend the abolition of referral fees, paid by solicitors to insurance companies and others in return for cases being passed to them. The practice has been banned south of the border, but the sheriff principal believes that the practice is not being abused in Scotland, it increases access to justice where for example a legal firm has links with a trade union and acts for its members, and it would be inconsistent to ban payment in cash but not in kind.

Consequences

In his foreword, Sheriff Principal Taylor comments: "If there is one lesson to be learned in this jurisdiction from the various attempts to reform the issue of legal costs in England & Wales, it is that predicting how lawyers will react when the financial dynamics and incentives are altered is very difficult." He therefore recommends pilot schemes and ongoing monitoring by the new Scottish Civil Justice Council, with rapid action to correct any damaging unintended consequences.

Concluding his presentation, he added: “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?' Apart from the success or otherwise of the action, the most significant unknown is the size of the legal bill which will land at the unsuccessful litigant’s door. I believe that the recommendations in this report, if implemented, will go a long way to reduce that stress and thus remove barriers which presently deny access to justice for all.”

Click here to view the report.

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