Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 118
PD1101/10	OPINION OF LORD TYRE in the cause JAMES McILVANEY Pursuer; against A. GORDON & CO LIMITED Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Lloyd; Lefevre Litigation

Defender: Davie; Simpson & Marwick W.S.

16 July 2010

Introduction

[1] In this action the pursuer sought reparation for loss, injury and damage sustained as a consequence of an accident at work which occurred on 29 July 2008 in the course of the pursuer's employment by the defender. The sum sued for was £100,000. The action was settled by Minute of Tender and Minute of Acceptance of Tender in the sum of £6,000 free and net of any recoupment of social security benefits, together with the expenses of process to the date of tender. The pursuer enrolled a motion for certification of an expert medical witness. This motion was opposed by the defender who moved for modification of the defender's liability for expenses to nil on the ground that a pre-litigation offer in the same terms had been made by the defender and declined by the pursuer.

Background to the motion
[2] The following narrative was provided by counsel for the pursuer at the hearing on the motion roll. After the occurrence of the accident, the pursuer consulted Quantum Claims Limited ("Quantum"), a company which offers a compensation claims negotiation service to persons who have sustained personal injury. Quantum is not a firm of solicitors. Its service is offered in consideration of a payment of a percentage of damages recovered: in the pursuer's case, Quantum was entitled to payment of 25% of the first £5,000 recovered and 20% of the balance. Having entered into an agreement with the pursuer on these terms, Quantum conducted negotiations with the defender's insurers with a view to achieving settlement of the pursuer's claim without the need for litigation. Offers by the defender of £2,500 and of £5,000 were rejected on behalf of the pursuer. Thereafter, in January 2010, following discussions between Quantum and the defender's loss adjuster, Quantum indicated a willingness on the part of the pursuer to settle for £7,500 net of recoupable benefits and outlays but without any additional allowance for a fee payable to Quantum. My understanding is that this sum was proposed because Quantum considered that it would afford reasonable reparation to the pursuer after deduction from it of Quantum's percentage fee. The insurer offered £6,000 net of recoupable benefits. On Quantum's advice, the pursuer rejected this offer. An action was raised in April 2010 on the pursuer's behalf by Lefevre Litigation, Solicitors. Defences were lodged in which liability was not admitted and contributory negligence was averred. The tender referred to above was lodged in June 2010 before any further procedure took place and, on counsel's advice, was accepted by the pursuer.

[3] At this stage it is relevant to mention the voluntary pre-action Protocol in personal injury cases agreed between the Law Society of Scotland and the Forum of Scottish Claims Managers. This Protocol, to which many insurers are subscribers, contains a scheme in terms of which solicitors are paid fees at prescribed rates for pre-litigation work in cases where settlement is achieved. In Scotland the Protocol operates by agreement and has no statutory basis. Quantum is not a member of the Law Society of Scotland and is not a signatory to the Protocol but does sometimes agree with insurers that its fee will be paid. I was informed that in cases where Quantum succeeds in obtaining payment of its fee by an insurer, the amount which it receives is deducted from the percentage fee which Quantum charges the pursuer. In such a case the pursuer is accordingly better off than if the insurer had not agreed to pay Quantum's fee. In the present case, however, Quantum sought but did not obtain the agreement of the defender's insurer that Quantum would be paid a fee calculated in accordance with the Protocol.

Submissions of the parties
[4] Counsel for the defender founded her submission on the fact that the sum tendered and accepted following the lodging of defences was the same as that which had been offered in pre-litigation negotiations. Litigation had been unnecessary because the pursuer's claim had been properly quantified by the defender at £6,000 before the action was raised. Although the Minute of Tender had included an offer of the expenses of process to date (as any judicial tender must do), it was within the discretion of the court to modify expenses, even to nil. Reference was made to the Opinion of Lord Osborne in Neilson v Motion 1992 SLT 124 at 129-30. The contentious issue prior to the raising of the action had been the payment of Quantum's fee, which the defender's insurer had refused to meet due to concerns that Quantum would thereby obtain double remuneration. There had been no suggestion until the hearing of this motion that the pursuer would gain advantage by raising an action. Conversely, refusal of the pre-litigation offer had left the defender worse off because recoupable benefits had increased by some £3,000 between the time of the refusal of the pre-litigation offer and the date of acceptance of the tender.

[5] Counsel for the pursuer accepted that the matter was within the discretion of the court and that that discretion extended to modifying expenses to nil, although only extreme circumstances would justify such a course. The test to be applied was whether the pursuer had acted reasonably in refusing the pre-litigation offer and raising the action. The raising of the action left him better off than he would have been if he had accepted the offer. It followed that he had not acted unreasonably in refusing the offer and resorting to litigation. It was, rather, the defender's insurer who had acted unreasonably in refusing either (a) to settle at the figure of £7,500 which would have allowed reasonable reparation to the pursuer after deduction of Quantum's fees or (b) to agree to pay Quantum's fees in accordance with the terms of the Protocol.

Decision
[6] It is clearly desirable that litigation should neither be commenced nor prolonged unnecessarily. The general rule that expenses follow success seems to me to reflect the fact that, once an action is concluded, it can be seen with the benefit of hindsight, at least in a straightforward case, that the action was either necessary (if the pursuer succeeds) or unnecessary (if he does not). The rules regarding award of expenses following the lodging of a tender, and the discretion of the court in a case in which an extra-judicial offer was made before litigation commenced, also appear to me to be concerned with the discouragement of unnecessary commencement or prolongation of litigation. They afford a measure of protection to defenders against such unnecessary commencement or prolongation. That protection is, in principle, afforded to a defender who makes a pre-litigation offer of the full value of the pursuer's claim and who then repeats that offer as a judicial tender including an offer of expenses (see Gunn v Hunter (1886) 13 R 573).

[7] In the present case, it is said that the pursuer acted reasonably in refusing the pre-litigation offer and raising the action because this course of action has operated to his financial advantage, in that at least part of the amount which he has contracted to pay to Quantum will be paid instead by the defender's insurer. I reject this submission for the following reasons. Firstly, I was referred to no authority for the proposition that a private contractual arrangement between a pursuer and a compensation claims company is relevant to the amount which a defender ought to tender in order to secure protection against liability for subsequent expenses. Such an arrangement seems to me to be res inter alios in assessing the sufficiency of a settlement offer. The fact that the pursuer has chosen, doubtless for good reason, to enter into an agreement to pay a proportion of his damages to a claims company should not, in my opinion, impact upon the position of a defender who has offered the full value of the pursuer's claim prior to litigation and who repeats that offer in the form of a judicial tender. Secondly, it appears to me that the pursuer's argument that he acted reasonably in raising the action proceeds upon an assumption that an award of expenses will be made in his favour. That being so, the argument is circular. If the sole benefit sought to be gained by a party from litigation is a favourable award of expenses, rather than a principal sum greater than that which has previously been offered, this appears to me to be a reason why I should, in the exercise of my discretion, refuse to make an award of expenses in that party's favour. I should add that it is in any event unclear to me why the raising of an action might enable the pursuer to recover expenses in relation to work done by Quantum prior to the involvement of the solicitors who commenced proceedings on his behalf. The Opinion of Temporary Judge R E A Rae QC in Smith v Highland Council 2010 SLT 2, to which I was referred in the course of the motion roll hearing, suggests that this would not be the case. It appears to me that the reasons why the auditor disallowed Quantum's charges in that case would have applied with equal force in the present case.

[8] For each of these reasons separately, I accede to the defender's motion and, in the exercise of my discretion, modify to nil the expenses of process payable by the defender in pursuance of the Minute of Tender and Minute of Acceptance of Tender.