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Consultation on Expenses and Funding of Civil Litigation Bill

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Annex A: Relevant Recommendations from Sheriff Principal Taylor's Review into the Costs and Funding of Civil Litigation in Scotland

Speculative Fee Agreements (Chapter 7)

42. The maximum success fee which can be charged in a speculative fee agreement in relation to personal injury cases should be capped with respect to what may be taken out of damages as follows. A cap of 20% (inclusive of VAT) should be set on the first £100,000 of damages, 10% (inclusive of VAT) on damages between £100,001 and £500,000, and 2.5% (inclusive of VAT) on all damages over £500,000. These caps should apply to all heads of damages. Solicitors should not be obliged to offset the judicial expenses against the success fee to which they are entitled. (Paragraph 67)

44. For all other civil actions funded by speculative fee agreements, the maximum success fee which can be charged should be capped at 50% of the monetary award recovered. (Paragraph 69)

45. In a speculative fee agreement to fund a personal injury action, the solicitor should be required to meet counsel's fees and all other unrecovered outlays, plus VAT, out of the success fee. The only outlay which should remain the responsibility of the client is any premium to obtain After the Event insurance cover, should the client deem that necessary. (Paragraph 72)

Qualified One way Costs Shifting (Chapter 8)

46. A qualified one way costs shifting regime should be introduced in Scotland for personal injury, including clinical negligence, litigation. The regime should apply whether there is a single pursuer or a multiplicity of pursuers. (Paragraph 51)

47. A qualified one way costs shifting regime should apply to appeals from decisions in personal injury cases. (Paragraph 53)

48. In the event that a pursuer's successful action for personal injuries includes an unsuccessful non-personal injury element and there is an order for expenses against the pursuer for that unsuccessful element, such award will be enforceable against the pursuer. (Paragraph 54)

49. If the claim, or an element of it, is made for the financial benefit of someone other than the pursuer, the benefit of qualified one way costs shifting will extend only to the element of the claim which may benefit the pursuer. (Paragraph 54)

50. In the event that the recommendation of the Scottish Civil Courts Review to adopt the rule in Carver v BAA plc is implemented in Scotland, the court should have a discretion to determine whether the pursuer acted reasonably in not accepting a defender's tender and thus the extent to which the pursuer should be liable to meet the defender's entitlement to judicial expenses from the date of the tender. In the event that the recommendation of the Scottish Civil Courts Review is not implemented, the pursuer's liability to meet the defender's post tender judicial expenses should be limited to 75% of the damages awarded. (Paragraph 72)

51. Where the court finds that fraud on the part of the pursuer is established on the balance of probabilities, the pursuer should lose the benefit of one way costs shifting. (Paragraph 75)

52. Where a pursuer's conduct is found by the court to have been an abuse of process, the pursuer should lose the benefit of one way costs shifting. (Paragraph 76)

53. Where a pursuer's case is disposed of summarily, the pursuer should lose the benefit of one way costs shifting. Conversely, the pursuer should be entitled to found on the defender's failure to move for summary disposal should the defender subsequently argue that the benefit of one way costs shifting should fly off. (Paragraph 77)

54. Where a pursuer conducts the litigation in an unreasonable manner, the pursuer should lose the benefit of one way costs shifting. For the avoidance of doubt, the test of unreasonableness should be that set out in the case of Associated Provincial Picture Houses Ltd. v Wednesbury Corporation. (Paragraph 78).

Damages Based Agreements (Chapter 9)

55. Damages based agreements entered into by solicitors in cases where a monetary award is sought should be enforceable in Scotland, other than in family actions. (Paragraph 70)

56. Where a damages based agreement has been entered into, solicitors should be entitled to retain the judicial expenses in addition to the agreed success fee. (Paragraph 81)

57. In personal injury cases funded by a damages based agreement, the maximum percentage which can be deducted from damages should be on a sliding scale, as follows. On the first £100,000 of damages, the maximum should be set at 20% (inclusive of VAT), on damages between £100,001 and £500,000 the maximum should be set at 10% (inclusive of VAT), and on any damages over £500,000, the maximum should be set at 2.5% (inclusive of VAT). (Paragraph 88)

59. In commercial actions funded by a damages based agreement, the maximum percentage which can be deducted from the monetary award should be 50% (inclusive of VAT). (Paragraph 90)

60. Damages based agreements may be entered into in commercial cases on a "no win lower fee‟ basis. (Paragraph 90)

61. All damages based agreements in personal injury actions should be on the basis of "no win no fee" as opposed to "no win lower fee". (Paragraph 91)

62. The damages from which a success fee may be recoverable under a damages based agreement may include damages for future loss. (Paragraph 103)

63. Should an order for periodical payments be made by the courts, the success fee in a damages based agreement should be calculated by reference to the award of damages excluding the periodical element. (Paragraph 108)

64. Where a pursuer is funded by a damages based agreement and the agreed damages contains an element for future loss in excess of £1 million, the solicitor will require to obtain either the approval of the court or a report from an independent actuary certifying that it is in the best interests of the pursuer that damages should be paid by way of a lump sum as opposed to periodical payments before the pursuer's solicitor will be entitled to make a deduction from the future loss element of an award of damages in order to satisfy the success fee. (Paragraph 111)

65. In the preparation of the report from an independent actuary, the actuary must meet the pursuer outwith the presence of the solicitor. The liability for the actuary's fee should fall upon the solicitor should the solicitor advise that a lump sum award be made, regardless of the actuarial recommendation. (Paragraph 111)

66. Where a client is advised by his or her solicitor to accept periodical payments but elects to accept a lump sum payment of damages instead, the solicitor is entitled to calculate his or her success fee only by reference to the award of damages, excluding the periodical element which the client would have received had the advice been accepted. (Paragraph 112)

67. In a damages based agreement to fund a personal injury action, the solicitor should be required to meet counsel's fees and all other unrecovered outlays out of the success fee, plus VAT. (Paragraph 115)

68. Only solicitors, members of the Faculty of Advocates and claims management companies which are regulated should be entitled to enter into damages based agreements. (Paragraph 115)

69. Prior to entering into a damages based agreement with a client, a lawyer or claims management company should be obliged to write to the client setting out in clear language what percentage will be deducted by way of a fee from the damages awarded, when and how the client may terminate the agreement, and the client's obligations in the event of such termination by the client. How conflicts of interest are to be managed should they arise must also be specified. It should also be made clear who will have the responsibility to meet an award of judicial expenses against the client. (Paragraph 116)

70. There should be a 14 day cooling off period after a client enters into a damages based agreement which would be mandatory, save in circumstances where a client's interests would be prejudiced. (Paragraph 117)

Multi-Party Actions (Chapter 12)

82. Expenses management should be mandatory in all actions that proceed under multi-party procedure unless the case management judge determines otherwise, having regard to all the circumstances. (Paragraph 71)

83. Damages based agreements should be available for use in multi-party actions, subject to the same restrictions as are set out in Chapter 9 for damages based agreements. (Paragraph 81)

84. The test for making an award of expenses against the multi-party action fund should be that set out in section 19 of the Legal Aid (Scotland) Act 1986. (Paragraph 85)

Alternative sources of funding (Chapter 11)

77. A professional funder who finances part of a pursuer's expenses of litigation should be potentially liable for the judicial expenses of the opposing party to the extent of the funding provided. Any award of expenses against the funded litigant should be on a joint and several basis, with the funder's liability capped at the extent of the funding provided by it. (Paragraph 57)

78. In all civil litigation in the Scottish courts, parties should be under an obligation to disclose to the court and intimate to all parties the means by which the litigation is being funded at the stage when proceedings are raised or notification given that a case is to be defended. Thus if an action is being funded by a trade union or a damages based agreement, for example, it should be disclosed in the same manner as a legally aided party is obliged to disclose that assistance has been obtained from the Legal Aid Fund. Disclosure should include both the type of funding and the identity and address of the funder. It should not include details of the financial agreement made between the funder and the funder's client before the case has been decided as this may provide opponents with too deep an insight into the funder's view as to the strength of the funded case. (Paragraph 63)

80. The civil courts in Scotland should be granted an express power to enable them to make an award of expenses in favour of a successful party who has been represented on a pro bono basis. Payment of that award should be made to a charity prescribed by the Lord President. The charity must be a registered charity which provides financial support to persons who provide, organise or facilitate the provision of legal advice or assistance free of charge. (Paragraph 157)

81. When a judicial account of expenses is prepared by or on behalf of a party whose representation was pro bono, it should be prepared on the normal party and party basis. (Paragraph 161)