Qualified one-way costs shifting introduced in Scotland

The rules represent a fundamental change in the way expenses are dealt with in Scottish court proceedings.

The introduction of qualified one-way costs shifting (QOCS) restricts a court's ability to make an award of expenses against a person bringing a personal injury claim or a related appeal, provided that they conduct the proceedings in an "appropriate manner".

Currently, expenses are awarded at the discretion of the court and the normal rule is that expenses are awarded to the successful party.

A similar system of QOCS was introduced in England under the Jackson reforms of April 2013.

Personal injuries include any disease and any impairment of a person’s physical or mental condition.

The QOCS regime is introduced under the Act of Sederunt (Rules of the Court of Session 1994, Sheriff Appeal Court Rules, Sheriff Court Rules Amendment) (Qualified One-Way Costs Shifting) 2021, which amends the relevant court rules to support the implementation of section 8 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018.

While the Civil Litigation Act provided the framework for the new QOCS regime, much of its detail, including whether there should be additional exceptions to the costs protection it affords, was still to be fleshed out in secondary legislation.

The new rules mean that costs protection will be lost if it can be shown, on the balance of probability, that the litigant or their legal representative acted fraudulently; behaved in a manifestly unreasonable manner; or is otherwise guilty of an abuse of process.

Dispute resolution expert Bruce Craig of Pinsent Masons, the law firm behind Out-Law, said the exceptions included in the Act of Sederunt would be of some relief to defenders. These included the situation where a pursuer has failed to beat a tender or has unreasonably delayed in accepting a tender.

“An award of expenses may also be sought by a defender where the pursuer has abandoned their action. Summary dismissal, however, is not included, although it may be that in such cases there is an argument that the matter falls within one of the other exceptions,” Craig said.

Although determination of an application for an award of expenses on the basis of one of the exceptions is at the discretion of the court, the Act of Sederunt sets out a number of limitations to that discretion where it is founded on a tender. In particular, the aggregate amount of expenses awarded may not exceed 75% of the amount of damages awarded to the pursuer, and that sum is to be calculated without offsetting against those expenses any expenses due to the pursuer by the applicant, or applicants, before the date of the tender.

The new regime applies to actions commenced after 30 June 2021. Whilst the Act of Sederunt provides some of the procedural detail necessary to allow the new regime to operate questions remain, as will concerns in some sectors of the potential consequences.

Craig said defenders and their insurers would await with interest further guidance on what might amount to “manifestly unreasonable” behaviour, and what should happen when proceedings are brought through a counterclaim.

“While the ultimate aim of the legislation, widening access to justice, is to be applauded, careful consideration of the detail of its application in practice is vital if the competing interests involved are to be met. For defenders, the timing of any tender will be crucial,” Craig said.