Changes to the QOCS in Scotland, from 30 June 2021

The rules concerning Qualified One-Way Costs Shifting (QOCS) have finally been published in Scotland and will be in place from 30 June 2021. This could have a major impact on Scottish personal injury claims.

This significant change will mean that in most personal injury actions, a pursuer’s liability for the defenders’ costs in the event that a pursuer’s claim is unsuccessful is removed. This is quite a substantial change which arguably could improve access to justice for those who have suffered personal injury by removing the risk of them incurring a substantial costs liability in respect of a failed claim, something which could have a profound effect on whether a pursuer decides to continue with their claim or not

QOCS applies to actions raised on or after 30 June 2021 regardless of the date of the accident. It also applies where a person makes a claim for personal injury or death (including medical negligence cases) and conducts the proceedings in an appropriate manner. In contrast to QOCS in England, this also applies to Scottish mesothelioma claims. These new rules will be applicable to both Court of Session and Sheriff Court cases.

Exceptions

However, there are some exceptions to QOCS.

Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018

Section 8(4) of the 2018 Act provides for three exceptions where the pursuer has not conducted themselves in an ‘appropriate manner’ and may therefore be liable for the defender’s expenses. These are where the pursuer:

(a) makes a fraudulent representation or otherwise acts fraudulently in connection with the claim or proceedings;
(b) behaves in a manner which is manifestly unreasonable in connection with the claim or proceedings; or
(c) otherwise, conducts the proceedings in a manner that the court considers amounts to an abuse of process.

The standard of proof in respect of all three exceptions is on ‘the balance of probabilities’.

Act of Sederunt (Rules of the Court of Session 1994, Sheriff Appeal Court Rules and Sheriff Court Rules Amendment) (Qualified One-Way Costs Shifting) 2021

The 2021 Regulations create three additional exceptions where QOCS protection can be lost:

(a) failure by the pursuer to obtain an award of damages equal to, or greater than, the sum offered by way of a tender lodged in process;
(b) unreasonable delay on the part of the pursuer in accepting a sum offered by way of a tender lodged in process:
(c) where the pursuer seeks to abandon the action, by way of decree of dismissal or decree of absolvitor in favour of the defender

Significance for defenders

These exceptions are of relevance from a defenders’ perspective because they add significant new restrictions to the operation of QOCS and give defenders some negotiating power when trying to resolve cases without going to Proof, where expenses can be recovered in cases where a tender was not accepted, (or where there was an unreasonable delay in acceptance).

It is arguable that with these new QOCS rules the pursuer goes from the position of having no liability for expenses to becoming potentially liable for all the defenders’ expense. The original position was that both parties were previously at risk of being liable for expenses throughout the case so the exceptions to the new rules could provide defenders with some degree of protection in the event that settlement cannot be agreed.

Where a party wishes the court to dis-apply QOCS they must make an application by written motion prior to the final interlocutor disposing of expenses. The court can use discretionary powers to dispose of the motion as it sees fit, including the possibility of fixing an evidential hearing on the merits of the motion.

The introduction of QOCS may mean an increase in litigation and so insurers should work closely with solicitors in Scotland to prepare for this and the potential changes in tactics by claimant solicitors. All insurers with Scottish claims liabilities should understand the effect of these rules, and in particular the exceptions to the application of QOCS.

Interestingly, following the introduction of QOCS in England in 2013 there was significant concern initially within the insurance market that it would be flooded with increased levels of poor quality claims, brought in the confidence that even if the claim was unsuccessful there would be no costs liability on the claimant. In fact, that concern has not necessarily proven accurate with solicitors in England generally remaining cautious about what claims should be litigated. Whilst the risk of an adverse costs order against the claimant has been removed, it is clear that many claimant firms do not want to advance weak claims to avoid the risk of being left with liabilities for disbursements such as experts’ reports or having to write-off significant profit costs that they cannot recover. Whilst in some cases a discontinuance has been delayed until immediately prior to trial, thus frustrating the defendant by not permitting costs recovery, these cases appear to be few and far between and, to some extent, the behaviour of claimant firms has not altered simply as a result of the introduction of QOCS. In ‘disease’ cases in England in particular, any unrecoverable defence costs have by and large been eclipsed by the QOCS benefits to insurers, with the removal of recoverable ATE insurance premiums and success fees in most cases.

The lessons learned from running QOCS claims in England will be useful in Scotland. In particular, the existence of QOCS should encourage defenders to lodge realistic tenders at an early stage in proceedings in order to put pressure on pursuers to consider the true value of their claims and accept, given that QOCS can be dis-applied if the pursuer fails to beat the tender at proof.

It remains to be seen how the courts in Scotland will approach the issue of fundamental dishonesty given the significant difficulties defendants in English cases have experienced when trying to persuade a court to make such a finding.

The next 12 months will be an interesting time in Scottish litigation and we will have to wait and see if QOCS leads to any substantive change in the behaviour of pursuers. Insurers in Scottish claims can perhaps take some comfort from what has happened in England over the past 8 years. Whilst we cannot be complacent, the hope is that QOCS will not result in a significant increase in costs liabilities for our clients.