Act:  Mr Reid, Advocate, instructed by Digby Brown, Solicitors, Glasgow

Alt:  Miss Wilson, Solicitor, Glasgow

STIRLING, 23 February 2015.  The Sheriff Principal, having resumed consideration of the cause, allows the appeal and recalls the sheriff’s interlocutor of 11 November 2014 complained of insofar as it finds no expenses due to or by either party; finds the defender liable to the pursuer in the expenses of the action on the summary cause scale modified by 15%; refuses to certify the appeal as suitable for the employment of junior counsel; finds the defender and respondent liable to the pursuer and appellant in the expenses of the appeal as assessed; remits to the sheriff clerk at Stirling to assess the said expenses of the action and appeal and to the sheriff to grant decree therefor.

NOTE:

[1] This is an appeal by the pursuer in a summary cause seeking to recover damages for personal injury sustained in a road traffic accident on 20 February 2014.

[2] The action was settled by minute of tender and acceptance and, on an opposed motion for expenses, the sheriff found no expenses due to or by either party.  This appeal is directed to that finding.

[3] It is well recognised that appeals solely on a question of expenses are severely discouraged but both parties submitted that this appeal raised a point of general importance and for that reason I was invited to entertain it.  The point at issue is the extent to which the court ought to have regard to the voluntary pre action protocol as agreed between the Law Society of Scotland and the forum of Scottish Claims Managers (hereinafter referred to as “the protocol”) and whether that protocol should be recognised as setting out a reasonable approach to pre action conduct.

[4] The particular factual circumstances in which that issue arises can be stated briefly.  On 12 June 2014 solicitors for the pursuer sent a letter of claim to the defender’s insurers proposing that the claim should be negotiated in terms of the protocol.  It is important to note that the defender’s insurers in this case were signatories of the protocol. In terms of paragraph 3.5 of the protocol the insurers should acknowledge the letter of claim within twenty one days of the date of receipt of the letter of claim and should advise whether it is agreed that the case is suitable for the protocol.  Paragraph 3.5 explicitly provides that if there has been no reply by the defender or his insurer within twenty one days, the claimant will be entitled to issue proceedings.

[5] In the present case no reply was received to the letter of claim and on 18 July 2004 the action was raised without further warning.  It is this lack of warning which influenced the sheriff in the decision which he took.  In his note the sheriff expresses the view that if a party raises litigation without warning they risk being liable for expenses or at the very least modification of expenses or no award at all.  He states that litigation is a last resort and that resort to litigation without meaningful attempts to avoid it should be discouraged.  He criticises the pursuer’s letter of claim as being insufficient to allow the defender either to respond to liability or to make any assessment of quantification or in any way to give fair notice to the defender or his insurers of the detailed basis of the claim.  Accordingly he took the view that in these circumstances there should be no award of expenses due to or by either party.

[6] According to its terms, the aims of the protocol are i) to put parties in a position where they may be able to settle the case fairly and early without litigation; ii) to ensure the early provision of reliable information reasonably required to enter into meaningful discussions regarding liability and quantum; and iii) to enable appropriate offers to be made either before or after litigation commences.

[7] Paragraph 1.5 of the protocol states:

“The standards within the voluntary protocol are to be regarded as the normal, reasonable approach to pre action conduct in relation to voluntary protocol cases.”

[8] Paragraph 2 of the protocol makes it clear that there is no statutory basis for a pre action protocol and that the protocol will therefore require to be entered into voluntarily on an individual case by case basis by mutual agreement.  It envisages the intimation of the claim in the general format of a specimen letter set out as Form A1 in the protocol and it is not in dispute that the letter of claim in the present case was in the form provided for.

[9] In support of the appeal counsel for the pursuer submitted that the sheriff’s requirement for a further letter of warning that litigation was about to be commenced was inconsistent with the terms of the protocol and was liable to undermine confidence in it.  It was submitted that, as a signatory to the protocol, the insurers had acknowledged that what the pursuer’s solicitor had done reflected reasonable practice and that ought to be supported by the court.  The insurers had explicitly signed up to a protocol which agreed that if they received a letter of claim in the form provided for and no response was made within twenty one days then proceedings might be raised.  It was pointed out that the sheriff had explicitly acknowledged that the pursuer was entitled to raise proceedings after the lapse of twenty one days without any response.

[10] It was submitted that the protocol was designed to facilitate pre litigation negotiation. A response to a letter of claim was the gateway to that. According to paragraphs 3.1 and 4 of the protocol quantification of damages was normally deferred until after liability was determined. Given that context it was submitted that the sheriff’s view was inconsistent with the terms of the protocol.  If the sheriff was well founded in saying that the letter of 12 June was insufficient then the scheme of the protocol would be fundamentally undermined.  If the letter of claim complies with the protocol and there is a failure to answer within the prescribed period of twenty one days so that the pursuer is then entitled to raise proceedings (which furthermore is recognised by the parties as the normal and reasonable approach), it was submitted that a finding by the court that these steps failed to give sufficient notice to entitle a party to raise proceedings would mean that the protocol could not be accepted as a reliable guide to the court’s view about the reasonable approach to litigation.  If that approach was correct it risked depriving the protocol of any value.

[11] In the course of argument reference was made to the case of Brown v Sabre Insurance Co Limited 2013 CSOH 5 and Burns v Royal Mail Group Limited unreported Edinburgh Sheriff Court 30 January 2014 both of which expressed support for the protocol as providing a level of confidence and trust on both sides that claims will be timeously made and properly vouched.  In the case of Brown, Lord Boyd of Duncansby stated that the confidence of the industry and the working of the protocol will be boosted if the court is prepared to take cognisance of it.  In that case the insurers were not in fact signatories to the protocol and yet his Lordship was plainly minded to lend support to the protocol and encourage its use where possible.  Although her remarks were obiter, in Burns Sheriff Principal Stephen stated that she agreed with the observations made by Lord Boyd of Duncansby.

[12] In responding to this part of the appeal, the solicitor for the defender and respondent changed the position that had been taken before the sheriff.  It is clear that at the hearing before the sheriff it had been submitted on behalf of the defender that expenses should be awarded in favour of the defender or that, at least, any expenses awarded to the pursuer should be modified to nil on the basis that litigation was unnecessary and by implication unreasonable.  At the hearing of the appeal however the solicitor for the defender made what appeared to me to be significant concessions.  Firstly, she acknowledged that the insurers were signatories of the protocol and that in terms of the protocol the pursuer had been entitled to raise the current action.  She acknowledged that the letter of claim complied with what was required by the protocol and that there had been a failure on the part of the insurers to respond within twenty one days.  She acknowledged that in that event the protocol envisaged that the pursuer could raise proceedings without further warning and that paragraph 3.5 of the protocol accepted that adherence to the terms of it was recognised by the insurers as signatories to it as the normal and reasonable approach to these cases.

[13] In light of these concessions it was unsurprising that she came to accept that the pursuer had been reasonably entitled to raise the action and that she did not support the sheriff’s view that a further warning letter was required.

[14] While it seems therefore that parties are agreed on what was represented to be the point of general importance in the appeal, the sheriff has reached a different view and accordingly I should express my own opinion on the matter.  In my view the common position of the parties on the principle point in the appeal is well founded.  I associate myself with the observations of the Lord Ordinary and the Sheriff Principal in the cases of Brown and Burns respectively and consider that the court ought to take cognisance of the protocol and to encourage its use where possible.  Where it is accepted that adherence to the protocol reflects the normal and reasonable approach it seems to me that there is a risk of causing uncertainty and undermining confidence in the protocol if the court superimposes additional requirements such as that suggested by the sheriff.  One should not lose sight of the fact that an important principle in relation to expenses is that the cost of litigation should fall on him who has caused it, which is the principle underpinning the normal rule that expenses should follow success (see generally Macphail Sheriff Court Practice at paragraph 19.07ff).  It was the insurers’ failure to respond to the letter of claim within twenty one days which was the proximate cause of the pursuer raising the action and, standing the scheme of the protocol to which they were signatories, in my view the insurers cannot be heard to say that the pursuer had acted unreasonably in raising the action.  The minute of tender carries with it an offer of expenses.  While the court can modify those expenses to reflect unreasonable conduct on the part of the pursuer I do not consider that it would be a proper ground for refusing expenses to say merely that the action was raised without further warning after the letter of claim and the lapse of twenty one days when that was not required by the protocol and where the pursuer has adhered in every respect to the terms of the protocol.

[15] I should emphasise that I make these comments in the context of an insurer who is a signatory of the protocol.  Counsel for the pursuer recognised that the position might be different in relation to an insurer who was not a signatory although submitting that the thrust of the observations of the Lord Ordinary in Brown might produce the same result.  I reserve my opinion in that regard.

[16] In the result I find myself in agreement with the common position of the parties on the principle point in the appeal and have therefore come to the view that the sheriff’s approach is erroneous.  It follows that the question of expenses is at large.

[17] In continuing to resist the appeal the solicitor for the defender refocused her complaint by submitting that the conduct of the pursuer’s solicitor after the action was raised had unreasonably prolonged the litigation and that that ought to be reflected in a modification of expenses.  It should be said that this submission rests upon the particular circumstances of this case and does not raise any point of general importance. Accordingly I have dealt only briefly with that issue. The relevant factual circumstances are that, once the action had been raised but before a form of response had been lodged, the defender’s insurers requested sight of the medical evidence.  The solicitor for the pursuer replied that the medical evidence could be released once a form of response had been lodged, to which the solicitor for the defender responded that the matter should be capable of resolution before the return date. A question then arose about whether liability was admitted and expenses. Liability was conceded on 14 August 2014 and the medical evidence disclosed on 28 August. A form of response was lodged on 29 August 2014, although it appears to have been intimated the day before. There was no agreement as to how expenses should be dealt with.

[18] Before the sheriff the contention for the defender was that the pursuer’s solicitors were motivated more by their desire to achieve an award of expenses than to obtain an award of damages and had manipulated matters accordingly. It seems clear that the solicitor for the defender was attributing bad faith to the solicitors for the pursuer. As counsel pointed out, that is a serious allegation and perhaps wisely the solicitor for the defender did not persist in it at the appeal. She nevertheless submitted that the delay in releasing the medical evidence was unreasonable and had delayed settlement of the action. She submitted that this should be reflected in a modification of expenses and proposed an award of expenses restricted to those which would have been recovered under the protocol together with the court dues.

[19] In responding to these submissions counsel pointed out that the insurers could have had the benefit of protocol expenses had they engaged in the protocol procedure. Once the action was raised any offer of settlement could not have been considered without some clarity about the expenses which were offered. There had been no response from the solicitor for the defender on that question. It was submitted that, if any modification was justified, it should be restricted to one of 15%.

[20] It seems to me that there was some delay in making the medical report available and in my view it would have been preferable had it been disclosed as soon as it was requested. It was unnecessary to get any agreement about expenses in advance of any offer to settle and such an offer could not be made until the medical evidence had been disclosed. It is a matter of speculation about whether settlement could have been achieved before the expiry of the time for lodging a form of response but irrespective of that possibility the issue of expenses would still have been open to agreement as part of any settlement proposal or, failing agreement, as fixed by the court. I am in some doubt about whether the short delay in producing the medical evidence really constitutes the sort of unreasonable conduct which warrants a modification of expenses but I note that the solicitor for the pursuer had already offered a modification of 15% to avoid a disputed hearing on expenses when the court was asked to grant decree in terms of the minute of tender and acceptance. I think this fairly accepts a degree of exposure for the pursuer on this matter and with some hesitation I have come to the view that such a modification is warranted. The suggestion by the solicitor for the defender that expenses should be restricted to those recoverable under the protocol is not an attractive one given the insurers’ failure to abide by the protocol and might be seen as removing the incentive to respond timeously to a letter of claim, thus undermining the protocol when, as I have indicated, the court should be minded to lend it support.

[21] In the result I have allowed the appeal, recalled the sheriff’s interlocutor insofar as dealing with expenses and found the defender liable to the pursuer in the expenses of the action on the summary cause scale modified by 15%.

[22] It was agreed that the expenses of the appeal should follow success. I was asked to certify the appeal as suitable for the employment of junior counsel. This was opposed. While I am grateful for counsel’s assistance I consider these submissions could have been advanced equally effectively by a solicitor and that the services of counsel were not reasonably required.