By Matthew Pascall, Senior Underwriting Manager
(Estimated reading time: 6 minutes 44 seconds)
Third Party Funding, Group Proceedings and Litigation Insurance – Sections 10 and Sections 20 to 22 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018.
You may feel you’ve already heard too much about Third Party Funding and Group Proceedings, but I hope the next few paragraphs and six top tips will help you understand how Temple Legal Protection can help you protect your clients if they are in receipt of Third Party Funding and/or are involved in group proceedings.
First, here’s a quick round-up of the key provisions.
Third Party Funding: Section 10 contains two key provisions: the need to disclose the fact that a party is in receipt of funding to the Court (subsection (2)) and the fact that a funder and any intermediary through whom funding has been provided can be made the subject of an order to pay expenses if they have “… a financial interest in respect of the outcome of the proceedings” (subsection 3)).
Group Proceedings in the Court of Session: The relevant provisions are in Part 4 – sections 20 to 22. Section 20 establishes the form of procedure. At its heart is the “representative party” who can bring proceedings on behalf of others with claims. Permission is required and can only be given if the Court considers: –
“(a) … that all of the claims made in the proceedings raise issues (whether of fact or law) which are the same as, or similar or related to, each other,
[and]
(b) only if it is satisfied that the representative party has made all reasonable efforts to identify and notify all potential members of the group about the proceedings.
Section 21 provides the power for the making of group procedure rules and section 22 empowers Scottish Ministers to make Regulations in connection with group proceedings.
The Group Procedure is in Chapter 26A of the Court of Session Rules.
- Rule 26A.5 sets out the procedure for applying to be a representative party.
- Rule 26A.7 (2) sets out the criteria to be applied by the Lord Ordinary when deciding whether or not an applicant is a suitable person to be the representative party where more than one person applies to be a representative party.
- The process for dealing with applications for permission to bring group proceedings by a representative party is dealt with under rules 26A.9 to 26A.11.
The criteria for refusing permission are set out in rule 26A.11 (5) (a) to (d) and include a finding that there is no prima facie case made out, that the Representative Party has not demonstrated that “… it is a more efficient administration of justice for the claims to be brought as group proceedings rather than by separate individual proceedings [or] … the proposed proceedings have any real prospects of success.”
The Opt-In procedure is in Part 4 and applies to group proceedings where the group members are identified in a register.
A key feature of the procedure is the early Preliminary Hearing, provision for which is in Rule 26A.21. Readers will note the very wide range of issues in respect of which orders can be made to take the case through its various stages. Provision is then made for a case management hearing in Rule 26A.22. Readers will again note the very wide range of case management orders the judge can make.
Third Party Funding – How we can Help
Temple have been working alongside litigation funders in England and Wales for a long time. We know their approach to cases and the various ways in which they can provide funding. We are also familiar with the various ways in which the cost of funding is met by a successful litigant.
Litigation (ATE) Insurance is important to funders and those whose proceedings are funded by a third party. The Court of Session Rules include a power, referred to above, to make a funder liable for the expenses and outlays of other parties.
Bearing all this in mind, what advice can we as an insurer give to those looking for third-party funding for proceedings raised in Scotland? Here are our “top-tips:”
- Arrange Litigation (ATE) Insurance and funding at the same time – well before proceedings are raised;
- You will need to agree what happens if the case is successful. A relatively simple “Priorities Agreement” should be able to identify who gets paid and in what order of priority at various stages of the funded proceedings. The client, the funder and the insurer can be parties to the agreement. It is essential that this is agreed before the insurance and funding is finalised and the client needs to be fully aware of what will happen in the various scenarios set out in the agreement. Managing expectations is important, particularly in a situation where the amount the insurer and funder will each take out of any damages increases as proceedings get closer to proof;
- Beware that the funder will have conditions about the way a case is to be conducted and retain a degree of control. Temple’s Litigation Insurance policies contain similar but not identical terms, so it is important that a prospective pursuer and their lawyers know what needs to be reported to whom and when and whose consent is needed at various points in the case. It doesn’t have to become too burdensome; we are currently insuring a funded case that the funder requires an up-date on from time to time. For this a standard template is used. The information set out in the template provides us with exactly the information we need, when we need it, and we don’t require anything in addition.
Group Proceedings – How we can Help
This is very familiar territory for Temple. The great advantage is that pursuers can leverage significant power by acting together. On their own, individual litigants can become very poorly equipped ‘Davids’ taking on very well-resourced ‘Goliaths. Act together and the situation changes completely.
However, without adequate insurance, the group litigants all remain exposed to the risk of paying very significant costs. In England and Wales, adverse costs are typically divided into common costs that relate to issues common to the whole group, the liability for which falls on the whole group, and individual costs that are specific to any individual claimant within the group, liability for which rests on that individual.
With years of experience in insuring group litigation, here are our six top tips for getting the most out of litigation insurance in these cases: –
- Once again, arrange insurance well before proceedings are raised. Talk to us at the earliest opportunity;
- We can provide a single policy insuring the whole group, with each individual pursuer listed as an insured on an endorsement, or we can issue individual policies for each pursuer;
- With a single policy, we can apportion payment of the insurance premium (only payable if and when the proceedings are successful) so that each insured only pays in proportion to the damages they recover;
- If you are acting for the Representative Party and the whole Group, ensure that clear arrangements are agreed in writing to ensure that primary liability for your clients’ expenses and outlays are agreed that makes sensible and fair provision for the liability of your clients to pay a share of common expenses and outlays and those specific to their own claims. The agreement can refer back to the insurance Temple can provide in respect of the adverse common and individual expenses and outlays;
- A steering or management committee, with power delegated to it by the whole group to take key decisions, is often very useful;
- Get the hang of spreadsheets – Excel (or an equivalent) is about to become your best friend!
Conclusion
We think Third Party Funding and the new Group Procedure will bring huge benefits to litigants in Scotland and increase their access to Justice on a sensible and relatively risk-free (or risk-mitigated) basis. We know that Scotland’s first group action is underway and have been told that the Judiciary is taking every opportunity to bring fresh and innovative thinking to make the new procedure workable and effective for Pursuers and Defenders alike.
We look forward to talking to you soon about your Group Proceedings or just an individual funded claim. Please email or call me on 01483 514428.
Matthew Pascall
Legal Director – Head of Commercial
Matthew Pascall
Matthew was called to the Bar in 1984 and joined Guildford Chambers two years later. Spending more than 30 years in practice there, he was listed as a Legal 500 Tier One barrister.
He joined the commercial team at Temple Legal Protection as Senior Underwriting Manager in 2017.
Matthew was appointed to Temple’s Board in December 2022 as Legal Director and Head of Commercial.
His knowledge of the commercial legal sector and litigation practice is invaluable to the business and our clients, providing specialist experience to lead the commercial litigation insurance team.
Read articles by Matthew Pascall
