In atempting to map out the future of litigation funding in Scotland, the Taylor review is taking up where Lord Gill left off. The Journal interviews the man in charge

Agree or disagree with its approach, the Gill review of Scotland’s civil justice system did not shrink from its task of taking a fresh look at where and how disputes between private litigants should be settled. But one key question was, deliberately, left unanswered: who pays, and how?

It has fallen to James Taylor, lately Sheriff Principal of Glasgow and Strathkelvin and also one of the three board members who assisted Lord Gill in writing his review, to take this agenda further. Appointed last March with a target 18-month timescale (see next page for his terms of reference), he has now published an extensive consultation paper in response to initial submissions from the legal profession and others, posing questions the answers to which will determine the shape of his recommendations.

Not surprisingly for a report that proposed radical changes, Gill has proved controversial, perhaps especially in relation to its three-tier court structure and its scheme for allocating cases within that framework. Personal injury and family lawyers are among those expressing strong reservations. For the purposes of his own review, however, Taylor does not intend to reopen these issues, as his foreword makes clear.

“I think those who were disappointed with the outcome of the Civil Courts Review would welcome another opportunity to have their voice heard in those areas, and while I’m very happy to have their voices heard, it is in respect of the remit of this review that I would like to hear from them, not in respect of matters that have already been determined,” he tells me.

Fear is the key

To date, it appears that it is those whose interests lie in the commercial courts who have led the representations. “As I say in the foreword,” Taylor observes, “they have thought it undesirable that when a client asks how much will this project cost me, the solicitor is unable to say. He or she might be able to give a pretty good estimate of their own charges, but the amount that the other side would be entitled to charge in the event that they are successful is almost impossible to assess, and from my own time in practice, I can sympathise with that position. And therefore the thrust of some of the sections in the consultation paper is towards greater certainty and greater predictability of cost.”

Fear of cost is at least as much of a deterrent to those whose disputes fall within the sub-£5,000 band of value proposed by Gill as the province of the new tier of district courts, yet here the Taylor consultation has little to say. He explains that it is difficult, if not impossible, to take this forward until more is known of the procedural regime that the Scottish Government will put in place – something beyond the timescale to which he has to work.

Does he not have an opportunity to influence Government thinking, I ask? “I would very much like to influence Government thinking, but until such time as one knows what the rules are going to be and the various stages in the process, it’s very difficult to formulate any sort of guidance. The Civil Courts Review recommended that there should continue to be separate tables of fees for actions under £3,000 and between £3,000 and £5,000.

“What we are doing”, he adds, “is examining a reasonable cross-section of small claims and summary cause actions which have been defended, to see the extent to which the expenses eventually awarded might be thought to be disproportionate to the sum involved.”

The paper does ask whether more cases should come under a fixed expenses regime, and whether there should be more discretion to restrict recoverability in small claims. And he points out that Gill has already made recommendations in respect of in-court advisers, and provision for assisting party litigants and permitting lay representation in low-value cases, which he expects will stand alongside any proposals of his own.

Affordable justice

Of perhaps more central interest to Taylor is the position of the litigant just above the legal aid limit, if they are not covered for legal costs through their household insurance, trade union membership or otherwise, and cannot afford an after-the-event (ATE) insurance premium. “How can they have access to the courts which is meaningful? Because as we say in the consultation paper, access to the courts means effective access to the courts, not just theoretical access.”

Traditionally in Scotland, the speculative fee arrangement has been available to such parties. At one time relatively rare, it appears that their popularity has grown in recent years, though the paper notes a view that they carry the potential for conflict of interest. They provide a no-win, no-fee element as respects the client’s own solicitor if the action fails, but no protection against liability for the other side’s costs. Nor is the success fee, payable to the solicitor in the event of success, recoverable from the other side; the same applies to any ATE insurance premium.

With England and Wales having over the past decade allowed much more generous recoverability for conditional fee agreements, but now pulling back on this under the Jackson recommendations, Taylor asks whether speculative agreements should become regulated, and if so in what respects.

A more radical departure would be the adoption of a contingency fee type arrangement, or damages-based agreement (DBA) as it is becoming known, the fee being calculated as a percentage of any damages won. Long regarded in the UK as against public policy for lawyers (through possibly encouraging unethical behaviour), they are standard practice for claims management companies – and solicitors have found ways of operating in association with such.

Taylor is keen to hear from both solicitors and clients what they think about such agreements. “At the present moment, I have not been told of any problems created by the availability of DBAs through claims management companies. If there are problems, I should like to hear them.”

When the Legal Services (Scotland) Act 2010 was passing through the Parliament, ministers decided that despite the introduction of regulation south of the border, there were insufficient concerns over the operations of such companies in Scotland to justify the expense of a new framework. Taylor however regards the issue as requiring a fresh look, given the advent of alternative business structures combined with the changes taking place in England, which appear to be tipping the scales in favour of DBAs and away from arrangements employing a success fee element.

Any departure from a level playing field as between solicitors and others, would, he believes, have to be justified. “Unless it can be justified that there should be a difference, it is difficult to see why there ought to be. But if there is justification, then I should like to hear it.”

Would it be possible now to prohibit DBAs even if he thought that should be done? “I’d be very interested to hear people’s comments on that. It’s a very valid question, and it is one that I will have to answer in the fullness of time. But it’s a little premature to be answering it now.”

Chapter 6 in the paper turns to referral fees, another subject in relation to which a broad prohibition on paper may not be as effective in practice as some might wish. With the Westminster Government now taking steps to outlaw referral fees in personal injury cases, Taylor is attempting to ascertain the extent of their use in Scotland. He poses some questions as to what should be permitted, though admits that he has not as yet had any submissions in support of them.

Do they even affect the availability of funding, I wonder, or just allocate fees as between one claims handler and another? “I’m not sure of the answer to that, and that’s why I want to hear more about the problems which referral fees might be creating. The position of the Law Society of Scotland, as I understand it, is that solicitors ought not to be paying a referral fee to a claims handler or whoever. On the other hand, there does not seem to be any obstacle to solicitors making payment to insurance companies and others to be put on a panel, and receiving a flow of work as a consequence of being on that panel. It’s quite an interesting position.”

On the coat tails?

To what extent will decisions taken in England determine what happens in Scotland? The Gill review did, after all, refrain from considering funding questions because Lord Justice Jackson’s own review was in progress, and Taylor’s current paper acknowledges in places that it may be necessary to follow the English approach in Scotland in order to avoid injustice.

“There are a number of aspects of the procedure which is about to be adopted in England & Wales that could impact on litigation in Scotland, and there are very mixed views as to whether it would impact”, he tells me. “For example, in England and Wales, one is going to have a system of one-way cost shifting in personal injury actions, which means that if the claimant loses, they will not be liable for the expenses of the successful defendant unless they have acted unreasonably or there has been what we would call a tender which has not been beaten.

“Now if somebody with a personal injury claim against an employer comes to see a solicitor in Scotland and the claim could be established on either side of the border, the question arises as to the duty of the solicitor with regard to advising on where the action should be raised. And the provision for one-way cost shifting might be a relevant consideration, as may be the imminent availability of DBAs south of the border.”

While the Jackson reforms have proved very controversial, Taylor observes that this has largely centred on aspects of less relevance to Scotland: the banning of referral fees, and ending the recoverability of success fees and ATE premiums.

But he insists that the extent to which Scotland will have to go along with the English position remains open. “It’s a very open question, yes. I’m not for a moment suggesting that just because referral fees have been banned in England, it follows that they must be banned in Scotland. Nor indeed that because there will be DBAs available in England from some time next year, that they should be equally available in Scotland.”

Court controlled

Another aspect of English practice in which Taylor is interested is the limits placed on the use, and the cost, of expert witnesses. This has been reported to him as a large and growing area of expense in Scotland, especially in cases involving child welfare. South of the border, you have to have permission of the court before you can call an expert witness; and fees also are under the control of the court.

Taylor cites a visit just made to the Mercantile Court and Technology & Construction Court in Birmingham, where “one of the judges was telling us that in some cases he has accepted that expert evidence needs to be led in the field of accountants’ practice, but not that the fees charged should be the partner rates of a “Big Four” firm, if someone from a high street firm would be just as skilled at providing the information and the costs would be more proportionate to the amount at stake”.

Also in Birmingham, the judges are piloting a cost-management exercise that requires parties to submit an estimate of their costs at the first case management conference, to be shown to the other side and approved or otherwise by the judge. “It isn’t then set in stone: there is provision as I understand it for the estimate to be varied if there is good cause, but otherwise the estimate holds good.”

Returning to where we started, this would clearly provide some of the predictability over costs that litigants appear to be seeking. But is it compatible with resolving another complaint already made to the review: that successful litigants are only likely to recover about 60% of their costs in Scotland, compared with about 80% in England? Taylor claims not to see any incompatibility, but adds: “That, of course, begs the question as to whether it is a legitimate aim that there should be more recoverability. There is a certain tension between making litigation more affordable and providing for greater recoverability.”

So is achieving greater recoverability one of his aims? “I’m very anxious to have a broad cross-section of responses to the consultation paper in order to address the interests of all parties, and not just one particular section.”

Open questions

Looking further afield, the German system has been mentioned to him as a possible model to follow: both court fees and recoverable lawyers’ fees are calculated as a percentage of the value of the claim. This does produce its own tensions and may be called into question in relation to European competition law. Taylor appeals: “If anybody has experience of litigating in Germany and is enthusiastic about the way they deal with expenses, I would be very interested to hear from them.”

He assures us that he has at present a completely open mind on the 68 questions he poses (and that views are equally welcomed from those who wish to address only a few of these). “When we went onto the Civil Courts Review, I had already spoken in public on a number of occasions and expressed views as to the structure the courts might follow. Therefore the eventual report shouldn’t have come as a huge surprise to people who had previously heard me. I have to say I go into this review without any preconceived ideas at all as to what the final outcome might be.”

More info:The consultation can be accessed through this link: Responses are requested by 16 March 2012.

The remit of the Taylor review

The specific terms of reference of the Taylor review are:

  • To consult widely, gather evidence, compare our expenses regime with those of other jurisdictions and have regard to research and previous enquiries into costs and funding, including the Civil Litigation Costs Review of Lord Justice Jackson
  • To consider issues in relation to the affordability of litigation; the recoverability and assessment of expenses; and different models of funding litigation (including contingency, speculative and conditional fees, before and after the event insurance, referral fees and claims management)
  • To consider the extent to which alternatives to public funding may secure appropriate access to justice, and pay particular attention to the potential impact of any recommendations on publicly funded legal assistance
  • To have regard to the principles of civil justice outlined in Chapter 1, paragraph 5 of the Civil Courts Review;
  • To consider other factors and reasons why parties may not litigate in Scotland
  • To report with recommendations to Scottish Ministers, together with supporting evidence within 18 months of the work commencing.

The principles of civil justice referred to are summarised as:

  • The civil justice system should be fair in its procedures and working practices.
  • It should be accessible to all and sensitive to the needs of those who use it.
  • It should encourage early resolution of disputes and deal with cases as quickly and with as much economy as is consistent with justice.
  • It should ensure that justice is secured in the outcome of dispute resolution.
  • It should make effective and efficient use of its resources by allocating them to cases proportionately to the importance and value of the issues at stake.

It should have regard to the effective and efficient application of the resources of others.


Too much of a free ride?

Family cases currently take up some 60% of the civil legal aid budget, but it is said that those who are legally aided are not applying the same controls to the way they conduct their case as they would if paying themselves. Taylor comments: “We would like to hear the full extent of that, and to hear views from those who have experience of the system as to what steps might be taken to remedy any defect which is thought to exist.”


A solution, or a problem?

Is part of the funding answer to make more use of before-the-event (BTE) insurance cover? Many household and motor insurance policies, for example, include legal expenses cover in relation to certain disputes, but this is not so often claimed.

“There has been quite a bit of feedback to us about the difficulties created by BTE insurance”, says Taylor. “First, the common limit of £50,000 is thought to be on the low side, and secondly, the legislation which requires that the insured choose their own solicitor has been interpreted not to kick in until the time the action is raised, which can be many months after the actual engagement of the solicitor. However, recent judicial pronouncements in England & Wales have cast considerable doubt on that interpretation, and I think there are some interesting times ahead in BTE insurance.”

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