Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2013] CSOH 51
	OPINION OF LORD BOYD OF DUNCANSBY in the cause ROSS BROWN Pursuer; against SABRE INSURANCE COMPANY LIMITED Defenders: ________________

Pursuer: Cleland; Thompsons

Defender: MacDougall, solicitor advocate; HBM Sayers

25 April 2013

[1] This action settled on the acceptance of a minute of tender of £3,500. The pursuer enrolled a motion for decree and for certification of an expert witness. The motion was opposed in respect of an award of expenses. The defenders sought modification to either nil on the basis that the litigation was both premature and unnecessary as no medical evidence had been produced prior to proceedings being raised, or alternatively, the summary cause scale without sanction for counsel on the basis of the low value of the litigation and that it was not complex.

[2] Having heard counsel I awarded the pursuer expenses on the summary cause scale without the sanction of counsel but modified by 15%.

[3] The pursuer was involved in a car accident on 20 September 2012. He suffered relatively minor injuries and damage to his car. The following day solicitors acting for him intimated a claim against the defenders, who insured the driver of the other car. In the letter the pursuer's solicitors asked the defenders to confirm that they would deal with the action under the Voluntary Pre-Action Protocol in Personal Injury Claims ("the protocol"). The defenders replied on 27 September 2012. They declined to deal with it under the protocol but confirmed that liability was not an issue. A further letter was sent to the defenders intimating that the pursuer's agents intended to instruct a medical report and again requesting that the claim be dealt with under the protocol. Again that request was refused. In the course of the correspondence however the defenders indicated a willingness to negotiate on receipt of a medical report and any vouching. None was produced. On about 26 February 2013 the present action was raised and a summons served on the defenders. They instructed solicitors to deal with the action. Their agents wrote to the pursuer's solicitors formally requesting sight of the medical report and that was produced by return. The minute of tender was lodged on 25 March. The action called on 19 March. Defences were lodged on 25 March and the tender was accepted on 11 April.

[4] The background to this is a dispute over the status and use of the protocol. I was informed that the protocol was negotiated between the Law Society and the Scottish Forum of Claims Managers representing the insurance industry in 2005 and came into effect in 2006. The aims of the protocol are

·      "To put parties in a position where they may be able to settle cases fairly and early without litigation;

·      To ensure the early provision of reliable information reasonably required to enter into meaningful discussions, reliability and quantum;

·      To enable appropriate offers to be made either before or after litigation commences".

The protocol also sets out good practice making it easier for the parties to obtain and rely upon information required, encourages the joint exploration of rehabilitation at an early stage in appropriate cases without prejudice to liability. The standards within the protocol are to be regarded as a normal reasonable approach to pre-action conduct in relation to protocol cases.

[5] Unlike the position in England and Wales there is no statutory basis for a pre-action protocol. Accordingly in Scotland it is a voluntary protocol and requires to be entered into on an individual basis. Mr Clelland for the pursuer informed me that most insurers have signed up to the protocol. Where insurers had not signed up to it I was informed that in many individual cases they will routinely agree to abide by its terms. The defenders have declined to sign up to the protocol and routinely refuse to deal with claims under the protocol. However Mr Clelland informed me that his instructing agents were aware of a number of cases where the defenders had settled expenses on the scale laid down in the pre-action protocol.

[6] The protocol sets out a structure, including timetable, for the negotiation and, where possible, the settlement of claims. Claims should be submitted in accordance with the terms of specimen letters. The insurer has 3 months to investigate the claim and either accept or deny liability in whole or in part. If liability is denied then reasons should be given including any alternative version of events accompanied by any available documents supporting their position. A medical report should be instructed at the earliest opportunity but in any event no later than 5 weeks from the date the insurer admits liability in whole or in part. Any medical report should be disclosed to the other party within 5 weeks of its receipt. It is anticipated that it will normally be for the pursuer's agents to instruct a medical report but provision is made for the insurer to obtain such a report. Provision is also made for the appropriate disclosure of medical records. If liability is admitted the pursuer's agents will send the insurer a statement of value claim. The pursuer's agents should delay issuing proceedings for a period of 5 weeks from the date the insurer receives the statement of valuation to enable the parties to consider whether the claim is capable of settlement. The insurers should advise the pursuer's agents within that time of their position serving a counter-valuation if they dispute the level of claim. The pursuer's agents then have 5 weeks to consider the offer. They are to advise the insurers whether or not the offer is to be accepted or rejected before raising proceedings. It should also be noted that where liability is admitted under the protocol the insurer is bound by that admission except where there is evidence that the claim is fraudulent. The fees to be recovered by pursuer's agents under the protocol for actions settled after 1 January 2011 include both an instruction fee and a completion fee. The instruction fee on settlements up to £1,500 is £370 and for settlements over £1,500 is £810. The completion fee is a percentage of the settlement. On settlements up to £2,500 it is 25%. On the excess over £2,500 up to £5,000 it is 15%. There are three further traunches above £5,000 with decreasing percentages on such excess. On an excess over £20,000 it is 2.5%. Thus if the action had been dealt with under the protocol and settled at £3,500, the solicitor's fees would amount to £1,585, comprising £810 instruction fee and £775 completion fee. The foregoing figures do not include VAT or outlays.

[7] These sums are more generous than what was formerly the case under the old chapter 10 of the Law Society table of fees. This chapter is now effectively in desuetude although the latest Law Society fees supplement notes that for non-protocol claims there is no agreement which binds insurance companies to pay any particular fees to the claimant's solicitors. The document says however that for non-protocol cases most insurers will agree to pay fees based on what was chapter 10. The difference between the two sets of fees is effectively the instruction fee. Thus if this action was settled under chapter 10 the fee would have been £775 plus VAT and outlays.

[8] The use of pre-action protocols was considered in the Scottish Civil Courts Review ("the Gill Review"). The Review noted the advantages and disadvantages of such protocols as reported through the consultation process. Most respondents favoured greater use of pre-action protocols with only 1 in 10 being against. One respondent said that their use should significantly improve the chances of a prompt settlement and can reduce court time and the cost of litigation. On the other hand there was concern over the front loading of costs and concern that it can result in legal costs far in excess of the settlement value of the claim. Compliance with the protocol might become a simple formality. Problems were noted with the existing pre-action protocol for personal injury actions. These included what was seen as a deliberate policy of under-settlement that the insurance industry had adopted. It may be more cost effective for insurers to wait until proceedings are initiated and to lodge a tender with the defences than to make a reasonable pre-litigation offer in settlement. The Review noted that there was considerable support for making the current pre-action protocols in relation to personal injury and industrial diseases compulsory, for increasing the value of the claims to which they apply and for extending them to all personal injury claims. The report concluded: "we are persuaded that compliance with pre-action protocols should be compulsory as they reflect good practice".

[9] In his submissions Mr Clelland accepted that the action should have been raised as a summary cause in the sheriff court. The reason it was raised in the Court of Session was that the pursuer's solicitors had been wrongly informed by the pursuer's insurers that they had not received the sum of £2,500 being the sum due in respect of repairs to the pursuer's car. That information turned out to be untrue. The money had been paid to them on 26 November 2012. The defenders had already paid the pursuer's excess of £500 (I note in passing that this problem could have been avoided if the action had been dealt with under the protocol).

[10] Accordingly Mr Clelland's motion was for expenses on the sheriff court summary cause level without sanction for counsel. Mr Clelland outlined the history of the protocol and took me to the Gill Review. He described the defenders as obstinate in their refusal to deal with the claim under the protocol and submitted that the court should take this opportunity to censure the defenders for their behaviour. He informed me of a number of sheriff court cases where the issue had arisen and took me to the case of Neilston v Motion a decision of Lord Osborne. He informed me that a draft account of expenses on the summary cause level showed fees in this case of just over £1,900 with VAT and outlays. If I was against him in respect of expenses on the summary cause level then I should award expenses in line with the fees that would have been due under the protocol. He submitted that if expenses were routinely paid at the old chapter 10 level, then it would not be financially viable for firms to deal with low value claims.

[11] For the defenders Mr McDougall submitted that the protocol was voluntary and that meant that the defenders were free to enter into it or not as they wished. The defenders had decided not to do so. Their business model was based on not entering the protocol. They do not want the benefits or the hindrance of the protocol. The guidance from the Law Society was clear. For non-protocol cases there was no entitlement for any expenses to be paid to the pursuer's solicitors, though it was noted that solicitors could normally expect to be paid on the old chapter 10 rates.

[12] Mr McDougall's primary position was that no award of expenses should be made in this case as litigation was unnecessary. The defenders had accepted liability and indicated that they were willing to negotiate. They had asked for sight of the medical report. That had not been sent to them before the action was raised. He also criticised the decision of the pursuers to lodge the summons for calling before accepting the tender. They had 3 months in which to lodge the action for calling. Their decision to do so before then had forced the defenders to lodge defences to preserve their position.

[13] Accordingly he submitted that no expenses should be awarded as the defenders were not given an opportunity to negotiate. If I was against him I should award expenses on the old chapter 10 scale. His fallback position was expenses should be on the summary cause scale without sanction for counsel. He submitted that I should not make an award of expenses in line with the protocol as the defenders had rejected its use.

Discussion

[14] The protocol is a voluntary scheme. Accordingly in the absence of statutory underpinning or, at the very least a practice note, it is not for this court to punish or censure litigants who choose not to follow it. Nevertheless it is open to this court to take a view on the desirability of its use and encourage it to be used where possible. There are several reasons for this.

[15] First, the protocol was negotiated between the Law Society and the Forum of Scottish Claims Managers representing the industry. The Gill Review suggested that participation in the protocol is patchy - just over 50% of motor accident claims. This appears a little at odds with the impression I was given by Mr Clelland, though it may be that use of the protocol has increased since the research for the Gill Review was undertaken. Nevertheless the fact that the two representative bodies have negotiated the protocol as setting down good practice to be followed by both sides should, in principle, be recognised by the court.

[16] Secondly the introduction of chapter 43 into the Rules of the Court of Session has made a considerable difference to the efficient conduct of personal injury litigation in the Court of Session. That does not however detract from the interest that the court has in ensuring that so far as possible disputes are settled before they reach litigation. That may mean an element of front loading to the investigation, presentation and response to such claims, but the gains to the administration of justice justify this approach.

[17] Thirdly the protocol sets out a structure within which the negotiation and settlement of personal injury claims can take place. It should provide a level of confidence and trust on both sides that claims will be timeously made and properly vouched. In return, where appropriate, offers of settlement may be made. The claimant's agents will know that any admission of liability will not be withdrawn unless fraudulent. The insurers know that litigation will not be commenced before they have an opportunity of making an offer in settlement. The confidence of the industry and the working of the protocol will be boosted if the court is prepared to take cognisance of it.

[18] Fourthly, the court must be concerned about access to justice. If the fees recovered by claimant's agents are not financially sustainable, then the result will be the potential claimants may not be able to access legal advice and assistance in pursuing claims. Many smaller value claims may not be made.

[19] In this case it was of course open to the defenders to opt not to deal with the pursuer under the protocol. However the defenders cannot have it both ways. If they decline to be bound by the terms of the protocol they cannot expect the pursuer's agents to be bound by it. In my opinion the pursuers were entitled to raise the action in the absence of agreement to negotiate under the protocol. However I take the view that it would have been proper for the agents to have let the defenders have sight of the medical report irrespective of the decision to raise the action. Whether that would have resulted at that stage in an offer which would have been acceptable to the pursuer is speculative. I note the concerns cited in the Gill Review of a deliberate policy of under settlement, and waiting until proceedings were initiated and then lodging a tender. In all the circumstances I shall make a modification of 15% to reflect the fact that the medical report was not furnished to the insurers prior to the action being raised. I note incidentally that that produces a figure slightly in excess of what the pursuer's agents would have been entitled to if the matter had been settled at £3,500 under the protocol.