Scottish QOCS case law for 2023 – the lessons learned so far

It is two and a half years since Qualified One-Way Costs Shifting (QOCS) was introduced to personal injury claims in Scotland. There has been much interest in how case law will develop the application of QOCS, what this will mean for a defender’s ability to recover costs from a pursuer and, ultimately, for the way in which proceedings are conducted. Following a spate of judgments over the last 12 months, we look at the lessons learned so far.

Before 30 June 2021, the long-standing default position on expenses (costs) in almost all civil litigation in Scotland was that “expenses follow success”. However, the introduction of QOCS by the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (the Act) in June 2021 changed that for personal injury claims in Scotland. The policy objectives of the Act included the introduction of greater equality in the funding relationship between pursuers and defenders in personal injury actions, where the defender is frequently an insurance company or commercial enterprise. In line with those objectives, the court now must not find a pursuer liable in the expenses of a civil claim or appeal relating to personal injury (or death resulting from personal injury) if they have conducted the claim in an appropriate manner.

However, as with all rules there are some exceptions: the court may disapply QOCS (i.e. award expenses against a pursuer) if satisfied that the pursuer or his/her agent has (a) made a fraudulent representation or otherwise acted fraudulently in connection with the claim or proceedings, (b) behaved in a manner which is manifestly unreasonable in connection with the claim or proceedings, or (c) otherwise, conducted the proceedings in a manner that the court considers amounts to an abuse of process (section 8(4)). 

The Act also allowed for further exceptions to QOCS to be introduced under the courts’ powers to regulate their own procedures. That resulted in the Court of Session rules and the Sheriff Court rules providing further limited exceptions to QOCS: in addition to the grounds specified in section 8(4) of the Act, an award of expenses may also be made against a pursuer where (a) the pursuer fails to obtain an award of damages greater than the sum offered by way of tender, (b) there is unreasonable delay on the part of the pursuer in accepting a tender, (c) summary decree has been granted against the pursuer, or (d) the claim has been abandoned (see OCR 31A.2 and RCS 41B.2).

The lessons learned so far

An interesting collection of published decisions has built up, offering guidance to parties and their solicitors about the sort of conduct and behaviour the court will or will not sanction by agreeing to disapply QOCS. The lessons learned from those decisions may be summarised as follows:

• The correct approach to considering the disapplication of QOCS is first to identify if a QOCS exception arises, and second to consider whether the court should nonetheless exercise its discretion not to disapply QOCS (McRae v Screwfix Direct Limited and another [2023] SC EDIN 28; Paterson v Topek Ltd & Ors [2023] SC EDIN 43).
   
• Each case in which the disapplication of QOCS is sought must be considered on its own facts and circumstances (Murray v Mykytyn [2023] SC EDIN 32; Lennox v Iceland Food Limited 2023 S.L.T. (Sh Ct) 73; Gilchrist v Chief Constable Police Scotland 2023 S.L.T. (Sh Ct) 119).
   
• Fraudulent representation is not a new concept, and the threshold for establishing it is high: if having considered the whole facts and circumstances the court concludes on the balance of probabilities that the pursuer or their legal representative acted intentionally to mislead the court, the threshold will be met (Ali & Hussain v Royal & Sun Alliance [2023] SC EDIN 35); Musialowska v Zurich Insurance [2023] SC EDIN 36; Gilchrist).
   
• Where there are issues with the pursuer’s evidence which go beyond the more common scenario of the court having simply preferred one version of events over a competing version of events, the court may, having considered all the facts and circumstances, find that on the balance of probabilities the pursuer has acted intentionally to mislead the court (Ali & Hussain; Musialowska).
   
• "Manifestly unreasonable" conduct means “obviously unreasonable” conduct (Lennox).
   
• Where the pursuer is found incredible on a core issue, the issue of manifestly unreasonable conduct may arise, although it does not invariably do so (Gilchrist).
   
• A finding that one of the pursuer’s witnesses was unreliable is not evidence that the conduct of the pursuer or their agent was manifestly unreasonable (Murray).
   
• Where a pursuer is found to have acted to intentionally mislead the court, this may also amount to manifestly unreasonable behaviour (Ali & Hussain; Musialowska).
   
• The circumstances in which the court will find that court proceedings have not been conducted in an appropriate manner are likely to be exceptional (Murray; Lennox).
   
• The court preferring the defender’s witnesses or account over the pursuer’s witnesses or account does not of itself imply the pursuer has tried to mislead the court or has acted in a manifestly unreasonable way and so will not necessarily give rise to the disapplication of QOCS; whether it does, depends on the court’s reasons (Lennox, Gilchrist).
   
• Where a party’s conduct has been in line with legal advice received, it is unlikely the court will find the pursuer’s own conduct to have been manifestly unreasonable or to have amounted to an abuse of process (Love).
   
• Where QOCS is disapplied due to the pursuer having abandoned the claim, it is not necessary for the defender to go further and to establish fraudulent representation, manifestly unreasonable behaviour, or abuse of process on the part of the pursuer (McRae).
   
• Where an action against multiple defenders is abandoned following settlement with one, in deciding whether to exercise their discretion to disapply QOCS at the request of an ‘abandoned’ defender the sheriff will consider three issues, namely (1) the basis on which the pursuer included that defender in the action, (2) whether the ‘settling’ defender did anything to induce the pursuer to include the abandoned defender and, if so, (3) whether that justified the discretion being exercised in the pursuer’s favour. A pursuer has a duty to take reasonable steps to investigate the basis for their claim and only to make allegations of fault against a party where diligent enquiries suggest they have a case to answer. If a pursuer sues multiple defenders due to reliance on conflicting information without taking the time to make those enquiries, the pursuer cannot expect the court to exercise its discretion not to disapply QOCS when they abandon against one or more defenders (Paterson).
   
• An application for QOCS to be disapplied should be the subject of a separate motion. It is incompetent to advance arguments for the disapplication of QOCS within opposition to a different motion (although the court may cure such incompetence by exercising its dispensing power) (Anderson v Emtelle UK Limited [2023] SC EDIN 40).
   
• With regard to manifestly unreasonable conduct on the part of the pursuer’s legal representatives, the court will not second guess the professional judgments taken by legal advisors with the benefit of 20/20 hindsight: behaviour must be judged at the time, with the knowledge the agent then had (Clarke v Marks & Spencer plc [2023] SC EDIN 42).

There seems to be a fairly consistent picture emerging of the circumstances in which the court will agree to disapply QOCS. In summary, it is clear from the case law that QOCS will only be disapplied on account of s.8(4) grounds (i.e. fraud, manifestly unreasonable conduct or abuse of process) in exceptional circumstances, having considered the case on its own facts and circumstances. The defender should anticipate a high bar to persuade the court that the pursuer’s (or the pursuer’s agent’s) conduct should be sanctioned by the disapplication of QOCS in such instances. The disapplication of QOCS is only slightly more predictable where the defender is able to rely on the events provided for in OCR 31A.2 or RCS 41B.2 (pursuer fails to beat a tender, pursuer unreasonably delays in accepting a tender, summary decree is granted against pursuer, or the pursuer abandons). However, as the case law demonstrates, the disapplication of QOCS may still be complicated in such cases if abandonment against one or more defenders follows settlement with another or if there are arguments of unreasonable delay in accepting a tender.

We will continue to monitor the Scottish QOCS case law and to provide relevant updates on the operation of QOCS in Scotland. Given the current increase in the number of QOCS decisions being reported, we expect to see more ‘lessons’ from which parties and agents may learn before long. 

Article co-authored by Martin Melvin, Trainee Solicitor at CMS.