Scottish Sheriff Court Decisions

Sheriffdom of Grampian, Highland and Islands at Peterhead

Judgement of Sheriff Gregor Murray

in causa

Emma Lawson, Pursuer

Against

Sabre Insurance Company, Defenders

PD4/13

Peterhead, 2 August 2013

Act:- Thompsons, Solicitors

Alt :- HBM Sayers, Solicitors

The Sheriff, having resumed consideration of the Pursuer's opposed Motion Number 7/1 of Process, the Defenders' Tender Number 9 of Process, the Pursuer's Minute of Acceptance thereof Number 10 of Process and of the cause, (i) of consent grants Decree against the Defenders for payment to the Pursuer of the sum of Three Thousand One Hundred and Fifty Pounds Sterling net of recoverable benefits (ii) of consent certifies Mr JE Scullion as an expert witness in the cause and (iii) having heard parties' procurators finds the Defenders liable to the Pursuer in expenses on the Summary Cause Personal Injury scale modified to forty per cent thereof; allows an account to be ingiven to the Auditor of Court and remits same for assessment.

Signed

Gregor Murray

Factual Background

1. On 26 October 2012, the Pursuer was injured after a vehicle insured by the Defenders collided with the rear of her car.
2. On 21 November 2012, solicitors for the Pursuer intimated a claim to the Defenders. The Defenders were asked to agree to the claim being handled under the Voluntary Pre-Action Protocol agreed between the Law Society of Scotland and the Forum of Scottish Claims Managers ("the Protocol").
3. The Defenders replied the following day. They admitted liability and offered to negotiate settlement on production of medical and other relevant evidence. They also offered to meet the solicitors' fees on the basis of "the former Chapter 10 scale as referred to in the Law Society Directory Fees Supplement 2012 in relation to non-protocol claims".
4. In a response dated 23 November 2012, the solicitors refused to accept Chapter 10 expenses. They stated that unless the Defenders altered their stance on that issue, "litigation is inevitable".
5. In February 2013, the solicitors obtained a Medical Report on the Pursuer from a Consultant Orthopaedic Surgeon, Mr J.E. Scullion.
6. Without further intimation or correspondence, the present action was raised on 3 April 2013. It is a personal injury action regulated by Chapter 36 of the Ordinary Cause Rules.
7. On 16 May 2013, a Tender and Defences were lodged. On 27 May, the Pursuer's agents lodged a Minute of Acceptance and a Motion seeking Decree in terms of the Tender and Acceptance, certification of Mr Scullion as an expert witness and expenses as taxed. The Motion was opposed in relation to expenses and called before me in that respect on 19 July 2013.
8. Written submissions, productions and authorities were lodged by the principal agents in advance. I am grateful to them for doing so.

Chapter 10

9. Chapter 10 was part of the former Law Society of Scotland General Table of Fees. Though it had no formal status, for decades it was accepted by solicitors and insurers as an acceptable means of calculating Pursuers' expenses in the event of settlement pre-litigation. Though the General Table was abolished in 2005, Chapter 10 continues to be used. It calculates expenses as a sliding percentage of the settlement sum. Posts and Incidents at 5%, VAT and outlays are then added to the expenses. In this case, Chapter 10 expenses would have amounted to £722.50 + VAT and outlays.

The Protocol

10. The Protocol was published on 1 January 2006 for use in Scottish personal injury claims, soon after the General Table of Fees was abolished. Its use is voluntary. According to the Society's website, 35 insurers/Claims Managers presently agree to use it. The Defenders are not among them.
11. The purposes of the Protocol are stated to include ease of use and general acceptability (presumably to agents and insurers). Its aims are stated to include claims being able to be settled fairly, at an early stage before litigation. For that to occur, reliable information must be exchanged between parties to enable meaningful discussion. The Protocol also encourages the rehabilitation of Pursuers.
12. The Protocol is designed to regulate the handling of inter alia road traffic claims valued at less than £10,000 (para 3.6). It is entered into contractually - after a claim is intimated using a specimen letter, the opposing party must agree to its use within 21 days (para 2.1). If there is no reply, a Pursuer is entitled to raise proceedings (para 3.5). If the Protocol applies, the opposing party has three months from the claim to admit or deny liability and, if applicable, to give reasons (para 3.7). Both sides must exchange relevant documents within defined timescales to clarify or resolve disputed issues (paras 3.8 - 3.10). If liability is admitted, the Pursuer must then intimate a Statement of Valuation. A five week window follows, within which the opposing party must either settle the claim or issue a counter Valuation. During that window, the Pursuer must not raise proceedings (paras 3.13 and 4.01 - 4.3). If settlement cannot be negotiated, a Pursuer may raise proceedings. If settlement is negotiated, the opposing party is obliged to pay compensation and expenses within five weeks, failing which judicial interest runs on both sums until payment (para 4.4).
13. Protocol expenses are assessed by reference to a Table of Fees which provides for payment of a (fixed) Instruction and a (variable) Completion Fee plus VAT and outlays. The Completion Fee is a percentage of the compensation. The Instruction Fee is a fixed amount, albeit one which has been regularly revised, presumably to reflect inflation. Protocol expenses in this case would have amounted to £1,532.50 + VAT and outlays.

Chapter 36 of the Ordinary Cause Rules

14. On 2 November 2009, Chapter 36 of the Ordinary Cause Rules was amended to introduce a bespoke procedure for personal injury cases. It mirrored one which had already been successfully introduced in the Court of Session. A new expenses structure was also brought into force. On 1 September 2012, Chapter 34 of the Summary Cause Rules was amended to introduce similar personal injury procedures for claims of less than £5,000. The existing expenses structure for Chapter 34 actions continues to regulate expenses in such cases.
15. Indicative expenses under the Chapter 36 expenses structure from the raising of this action until acceptance of the tender (preparation of a two page precognition of the Pursuer, Pre-Litigation Fee, Instruction Fee, Fee for action settling before Record Closed, Fees for considering then accepting the Tender and handling the opposed Motion plus a Process Fee), total £2,339 + VAT and outlays. Indicative expenses under Chapter 34 on a similar basis total £1,533.10 + VAT and outlays.

The Pursuer's Submissions

16. The Pursuer's primary position was that expenses should follow success (Shepherd v Elliot (1896) 23R 695 @ 696 and Howitt v Alexander & Sons (1948) SC 154; McLaren on Expenses @ page 21 and Macphail (3^rd Ed) @ 19-07). She was put to her rights and vindicated. There was nothing improper in the manner in which the case had been litigated.
17. While the court held common law and statutory discretion to modify any award of expenses, it was not appropriate to exercise it. It was not necessary to save the expense of taxation, to show that success was not complete or to mark the court's disapproval of some aspect of conduct (Howitt supra, Macphail @ 19.09 - 19.10). Any departure from the standard of conduct required to be considered objectively - there was no definitive standard expected.
18. As the Pursuer had been successful, the cost of the litigation should be borne by the Defender. The court should be slow to depart from the general rule of expenses following success. The Defenders had failed to make out any aspect of conduct which would entitle the discretion to modify to be exercised. I was urged to follow an unreported decision of Sheriff Foulis from Perth Sheriff Court, (Durie v Sabre Insurance Company), in which he found in the Pursuer's favour in almost identical circumstances. If it was felt appropriate to modify, modification should be at the lower end of the scale, perhaps 15%, which had been Lord Boyd's view in a recent case, (Ross Brown v Sabre Insurance Co), as yet unreported.
19. Other submissions anticipated the Defenders would seek to modify expenses to nil; as no such motion was made, I have not considered them further.

The Defenders' Submissions

20. The Defenders recognised the Tender and Acceptance bound them to concede expenses in principle. However, they submitted expenses should be modified to Chapter 10 level, which failing to Protocol level. It was competent to modify expenses to a fixed sum (Macphail, 19.09)
21. The Defenders were not obliged to agree to the Protocol. They did not do so in cases such as this as it gave them no "opt-out"; if the claim value increased substantially, they would be bound to pay expenses out of all proportion to the case. Many other agents continued to accept Chapter 10 expenses in similar cases. They continue to be routinely paid in cases not involving personal injury (see e.g. Fees Supplement 2012 @p28).
22. It was submitted the Defenders' conduct could not be faulted. They indicated a willingness to settle well before litigation; they promptly admitted liability and expressed a desire to settle on production of a medical report. No report was exhibited before the action was raised. The Defenders could do no more before the action was raised. As soon as it was, the Defenders promptly tendered at an acceptable level. It was difficult to see any benefit to the Pursuer in raising proceedings; however, her agents would benefit - an award of expenses would give them an estimated minimum fee of £2,500 + VAT. The Pursuer's agents had insisted on Protocol expenses to settle pre-litigation and had not suggested any other scale was acceptable.
23. These circumstances justified exercise of the court's discretion to modify expenses. They founded on Neilson v Motion (1992) SLT 124 as an illustration of the court's ability to do so when a Tender was lodged and accepted. Similar support could be derived from paragraphs 19.09 - 19.11 of Macphail. It was submitted the true reason for this litigation was the issue of expenses; an offer to settle had been promptly made and ignored, no medical report had been disclosed and the court should mark its "dissatisfaction" with such conduct by modifying expenses.

Other Cases involving the Defenders

24. I was referred in submissions to four cases, all unreported, in which similar issues involving the Defenders were raised - Durie, a decision of Sheriff Foulis from Perth Sheriff Court dated 27 June 2012, Smith, a decision of Sheriff Robb from Dumfries Sheriff Court dated 10 August 2012, Ross, a decision of Sheriff Drummond from Selkirk Sheriff Court dated 18 June 2013 and Brown, a Court of Session case earlier this year.
25. In Durie, on almost identical facts Sheriff Foulis held it was reasonable for the Pursuers to have raised proceedings without disclosing their medical report. In Smith, the action was raised without any pre-litigation correspondence at all, albeit Sheriff Ross accepted that occurred in error. He held it is reasonable for Pursuers to raise proceedings when faced with a Defender who is not inclined to negotiate using the Protocol. He saw the Protocol as a mutually reasonable procedure. In Ross, the principal sum had been agreed before the action was raised and all that was in issue was expenses. Followed McIlvaney v Gordon, Sheriff Drummond held modification to nil was appropriate in such circumstances. In Brown, Lord Tyre modified expenses to the Summary Cause scale and reduced them by a further 15%; however, as his decision has yet to be published, the facts of the case are not yet known. It appears all the Sheriff Court cases were Summary Causes but were not brought under the new Chapter 34 regime.

Discussion

26. I accept the authorities on the court's discretion to modify expenses. However, the parties' submissions cannot, in my opinion, be considered in isolation. They ignore context, a factor not apparently referred to in the other cases.
27. This case arose after a rear end shunt. Liability was never likely to be in issue. The Pursuer suffered no unusual injury and there are no other heads of claim. It ought to have settled soon after liability was admitted.
28. That it did not settle is due to the Pursuer's agents ignoring value of the claim at the expense of immediately adopting an entrenched position on expenses. They refused to accept anything except Protocol expenses. The Defenders refused to pay anything other than Chapter 10 expenses. As the other cases reveal, these are standard tactics, apparently adopted in all such cases.
29. In one respect, that is not surprising. Pursuers and insurers arguing about expenses in personal injury actions is a daily feature of courts throughout Scotland. Each side commonly takes diametrically opposing positions.
30. In all other respects, the haste to dig trenches is surprising. For some time, Sheriff Court personal injury court procedure has been tailored to minimise dispute and promote swift resolution of claims. Between 1993 and 2009, Ordinary Cause Standard Procedure reduced procedural delay and abolished debate by ambush; there has also been a judicial tendency to appoint cases more quickly to proof before answer. Since 2009, Chapter 36 personal injury procedure has specifically provided for abbreviated pleadings, the exchange of expert reports, witness details, claim valuations and meaningful pre-proof conferences in all cases. A proof date is allocated as soon as an action becomes defended. Chapter 34 of the Summary Cause Rules is very similar. The ethos of Chapters 34 and 36 is to promote transparency, fairness, speed, flexibility and, when appropriate, compromise. The related expenses structures reflect these aims. The procedures and the expenses structures are used daily by insurers and personal injury lawyers. The Protocol has similar aims. The parties ignored these familiar principles entirely.

Decision

31. The Defenders accept in principle that an award of expenses should be made against them. The first question is whether that award should be modified. In my opinion, it should, for several reasons.
32. Further, it was not suggested to me that the Pursuer's agents considered whether Chapter 10 expenses were realistic before the action was raised. They might have enabled the agents' fees to be met in full. Ex facie, Chapter 10 expenses in this case appear generous - liability was never likely to be an issue and the injury was uncomplicated. It is difficult to imagine a hypothetical solicitor's file in such cases containing more than a precognition, letter of claim, instruction of the expert, perusal of his findings and file notes on quantum and negotiation of settlement.
33. Separately, a full three months passed between the correspondence and the raising of the action. Liability had by then been conceded. The real live issue was quantum. However, the Pursuer's agents ignored that issue and concentrated instead on expenses. They did not look into seeing if the Defenders would accept Mr Scullion as a joint expert. There was no attempt to justify Protocol expenses - for example by providing a break-down of work already carried out and of that still to be done. Even if, quite reasonably, they did not expect a change of heart by the Defenders they should have foreseen such information was essential to a court determining whether to exercise its discretion to modify expenses. No such information was given to me.
34. In addition, the agents did not exhibit the expert report or quantify her claim. Both steps are mandatory under the Protocol Chapter 36 and Chapter 34. Of course, had either course had been adopted, the Defenders might have immediately offered, as occurred in Ross, meaning they risked expenses being modified to nil. The decision to concentrate on expenses and the fundamental failures to consider alternatives or to follow familiar personal injury action procedures all lead to the conclusion that they raised proceedings primarily to prevent that occurring.
35. Of course, the Defenders contributed to that occurring. This case is simple, but they did not know that when they offered Chapter 10 expenses. They had not seen a medical report. The letter of claim alerted them to the possibility of other heads of claim. Other cases will not be simple, even if ultimately worth less than £10,000; a Pursuer's agent may need to obtain many other precognitions, expert opinions and reports to be able to formulate and/or quantify a claim. Contributory negligence may need detailed consideration. Chapter 10 expenses in such cases will never be realistic.
36. The Defenders could also have showed flexibility or reasonableness - they could have sent reminders to the Pursuer's agents, offered to meet rehabilitation costs, suggested an expert whose opinion they were prepared to accept or they could have made an interim payment. They could have agreed to restricted use of the Protocol - for example for a limited period or until the claim was known to be worth more than £10,000. It was not suggested to me they considered any of these steps. It therefore appears they wish to pay minimal expenses in each case, regardless of whether that is reasonable.
37. However, the Protocol is not mandatory. Indeed, use of Chapter 10 was only customary. The Defenders are not the first insurers to adopt such tactics. In any case, expenses are at the discretion of the court. The initial onus is on the Pursuer to justify an award of expenses then to justify the amount payable. The Defenders' conduct is not relevant per se when considering whether or not to mark the court's disapproval of some aspect of the Pursuer's conduct. As and until Lord Gill's recommendation on the mandatory use of pre-action protocols is implemented, the Defenders' refusal to agree to the Protocol is perfectly legitimate.
38. I was not given details of the Pursuer's agents' fees. I do not know if she has Legal Expenses Insurance. Any shortfall between Chapter 10 and those fees might be insured. I was not told if there is a Speculative Fee Agreement - if there is, is it a condition that the Pursuer will retain the principal sum? If so, there can be no doubt her agents are trying to maximise their fees. Again, I was not given that information. Absent it, I can neither hold that her agents were trying to profit nor can I discount that possibility.
39. For all these reasons, modification is necessary to mark the court's disapproval of this case ever having to be raised. As the case was raised by the Pursuer, and ought to have been handled differently, she must bear the financial consequences of her agents' failures. However, neither side emerges with any credit.
40. The remaining question is to what extent modification is appropriate. I respectfully agree with Sheriff Robb in Smith that it is inappropriate to modify expenses to either Chapter 10 or Protocol levels, as doing so leads to the court imposing figures which are designed to be consensual. The action clearly ought to have been raised under Chapter 34 - the sum accepted is (just) over the Summary Cause limit. I will therefore find the Defenders liable to the Pursuer in expenses on the Summary Cause Personal Injury Scale, restricted to 40% thereof, a proportion I regard as appropriate taking into account the number and extent of failures on the part of the Pursuer in the case. Had the Pursuer not been faced with a Defender who deliberately seeks to pay minimal expenses, modification to nil might well have been appropriate.