Scottish compulsory protocol – One month to go!
Compulsory Protocol in Scotland November 2016
From 28th November 2016 the Scottish pre-action protocol becomes compulsory. The protocol limit will increase from £10,000 to £25,000. Courts will have clearer powers to penalise claimants for premature litigation but only where insurers have adhered to the new rules. Costs, especially for low value claims, will increase, although they will still remain lower than costs in litigated claims. To take advantage of the new regime, insurers need to understand the rules and develop systems to challenge any poor pre-litigation behaviour by claimants.
Unlike England and Wales no compulsory framework has ever applied to negotiating claims in Scotland. A Voluntary Pre-Action Protocol for personal injury claims came into effect in Scotland on 1 January 2006. It was agreed between the Forum of Scottish Claims Managers (FSCM), (a lobbying organisation representing a number of insurers, financial institutions and two of Scotland’s local authorities) and the Law Society of Scotland. There is no statutory basis for the protocol and it can only be entered into voluntarily, by mutual agreement, on an individual case-by-case basis. There are no clear sanctions for failure to comply.
The current regime therefore involves a long wait for resolution for claimants, an incentive for claimants to litigate without penalty, and an unpredictable cost regime for insurers.
The Scottish Civil Courts Review 2009 recommended the introduction of a compulsory protocol, and the Courts Reform (Scotland) Act 2014 gave the Court of Session power to make the necessary rules.
28 November 2016
The Act of Sederunt (Sheriff Court Rules Amendment) (Personal Injury Pre-Action Protocol) 2016 comes into force on 28 November 2016. It introduces a new chapter into both the Ordinary Cause Rules (Chapter 3A) and the Summary Cause Rules (Chapter 4A) requiring parties to comply with the compulsory protocol prior to commencing proceedings.
The Personal Injury Pre-Action Protocol sets out the steps which must be followed prior to raising proceedings.
Aims to encourage the fair, just and timely settlement of disputes before court proceedings are raised, and to narrow the issues for litigation in cases which do not settle.
Will apply to personal injury claims (NOT disease) up to the value of £25,000 in local sheriff courts and in the All-Scotland Personal Injury Court. (This is an increase from the voluntary protocol threshold of £10,000.)
Only applicable where the accident or other circumstance giving raise to the claim for damages occurred on or after 28 November 2016. There will therefore be a “soft launch” of the new regime.
Imposes a requirement on the pursuer (claimant) when rejecting an offer to issue a reasoned response explaining why it has been rejected.
Creates an express power allowing the courts to make an award of expenses (costs) against a party which has:
(1) failed to comply with the Protocol or
(2) unreasonably failed to accept a settlement offer made under the Protocol which is then lodged as a tender (Part 36 offer) following the commencement of proceedings.
Expenses (costs) are also calculated differently and are likely to lead to higher recovery of expenses for the lowest value claims (see Schedule 1 para 31 of new rules). Previously, there was an instruction fee and a completion fee. Under the compulsory protocol, a pursuer will be able to recover the total of: the fixed sum of £546; plus 3.5% of the total agreed damages; plus a sliding scale of % of damages dependant on the level of award.
This is likely to lead to higher recovery of expenses for the lowest value claims.
For example, for a claim settling at £1,000, under the voluntary protocol the recoverable expenses would be £620 plus VAT and disbursements. Under the new compulsory protocol the fee increases to £831 plus VAT and disbursements.
The most important consideration for insurers is that pursuer solicitors in Scotland can no longer simply litigate for no good reason. The expenses recoverable in court in Scotland are higher than those recoverable from out of court settlements therefore it has always been the practice of pursuer firms to get claims into court as soon as they can. Following the introduction of the compulsory protocol in November not only do pursuers have to expressly reject an offer, they have to explain why they are rejecting it. This should reduce poor pre-litigation behaviours and premature litigation. Where it does not, then insurers must be wise to asking the court to impose a sanction.
While it is unlikely the compulsory protocol will reduce claim volumes overall in Scotland the expectation is that it should reduce litigation rates and following from this claimant expenses.
There is a real opportunity for insurers to make use of the compulsory protocol to keep cases from litigation and make significant cost savings.
Consideration is being given to developing additional compulsory personal injury protocols in specific areas. For example, a proposal for a clinical negligence pre-action protocol is to be considered and further developed by the personal injury committee of the Scottish Civil Justice Council, with a view to coming into force during 2017.
We will be issuing regular updates as the courts begin to exercise their powers under these new rules.
The Act of Sederunt (Simple Procedure) 2016
The Simple Procedure Rules 2016 also come in to force on 28th November replacing the current Small Claims and Summary Cause procedure rules for most claims under £5,000. The Simple Procedure (Special Claims) Rules will be published in 2017 and will deal with complex and specialised claims such as personal injury actions, proceedings for aliment and actions for recovery of heritable property.
The rules pave the way for the introduction of online processing. An online portal will enable the legal profession and the public to start actions, submit case documents, pay fees and track progress online.
There are 4 noticeable main changes to the rules:
The format of the rules has changed and they are laid out in question/answer style paragraphs;
The language used in the rules has also changed and English terminology has been introduced;
The rules set out principles which parties are expected to adhere to; and
The Sheriffs now have very wide powers for dealing with the management and deciding of the case.
Although the rules regarding expenses are dealt with in the new rules a fee schedule has yet to be produced.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.