I INTRODUCTION TO CLASS ACTIONS FRAMEWORK

While many Commonwealth jurisdictions provide a legal mechanism for the facilitation of group litigation, such a framework has remained notably absent in Scotland. The debate concerning whether or not such a procedure should be introduced in Scotland has persisted for decades. In 1979, the Scottish Consumer Council (SCC) established a working group to review the existing methods under which consumers could enforce their rights. The SCC's final report was published in 1982, concluding that the means of the Scottish courts to entertain matters of 'group interest' were restrained, and advocating for the availability of class action procedure in Scotland.2 A report drawing similar conclusions was published in 1996 by the Scottish Law Commission (SLC).3 The SLC concluded that a single litigation could deal with a number of possible claimants or pursuers with a core of common issues, and that the advantages of the single litigation outweigh the disadvantages.

Despite this continued discussion, and seeming approval for class actions in both academia and practice, it has taken until 2018 for the Scottish Parliament to tackle the issue head-on. The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (the 2018 Act) received Royal Assent on 5 June 2018. The 2018 Act, for the first time in Scotland, makes provision for class action litigation. However, with the more detailed rules needed to implement the 2018 Act still a work in progress, there remains a great deal of uncertainty surrounding how the 2018 Act will operate in practice.

II THE YEAR IN REVIEW

Traditionally, the Scottish courts have required to utilise existing tools of procedure to grapple with multiple claims which, in essence, are premised on the same or similar rights and obligations. A pragmatic approach is taken and courts will often sist (a stay in Scottish procedure) all but one claim, and allow that one matter to run to a debate (a legal argument without evidence) or proof (a civil trial on the evidence in Scotland) as a 'test case'.4 The remaining cases will then be continued, pending the final outcome of the test case. For example, there are over 500 cases presently before the Court of Session seeking damages for personal injuries caused by allegedly defective vaginal mesh products. On 1 June 2018, and following a five-day debate, Lord Boyd handed down his decision in AH v. Greater Glasgow Health Board,5 which constitutes a combined judgment of four of the 18 'lead actions' in these vaginal mesh claims. In the introduction to his decision, his Lordship explains that all but 18 of the 500 cases have been sisted, pending the outcome of these proceedings.6 Lord Boyd accepted the position of the pursuers and granted a proof before answer (a mixed trial of law and evidence) in all of the cases, subject to time bar.7

The primary downfall of such an approach is that, strictly speaking, these cases are still entirely distinct: there is no means by which numerous actions can be consolidated into a single court action and managed as a group. The outcome of the test case therefore has no automatic bearing on the remaining cases, subject to the doctrine of precedent. As different claimants may rely on different documentation and different witnesses, this approach poses a risk to decisional harmony. Moreover, by having to advance each case separately, there still remain issues as to cost and duplication of papers; problems that underpin the rationale for class action procedure.

In light of these shortcomings, the 2018 Act was passed, its provisions regulating what are 'group proceedings', and came into force on 30 January 2019.8 The 2018 Act's genesis dates back to 1 June 2017, when the then Cabinet Secretary for Justice, Michael Matheson MSP, introduced a Bill before the Scottish Parliament. The Bill was intended to deal with various matters of civil procedure in Scotland, including success fee arrangements, expenses in civil litigation, and the regulation of claims management companies. A novel concept for Scotland, at least through a strictly legal lens, was the proposal to introduce multiparty procedure.

Termed 'group proceedings', the Scottish Parliament's Stage 1 Report to the Bill9 explored the possible forms that the new procedure might take. For example, the Report identified three broad categories of group proceedings, described respectively as class actions, organisation actions, and public interest actions. Class actions are brought by a named pursuer who acts as a representative of the class of individuals with the same legal issue, with the representative seeking redress for themselves and on behalf of the class as a whole. Organisation actions are brought by organisations, such as consumer or environmental groups, on behalf of their members or the general public. Public interest actions are advanced by public officials on behalf of the public at large, or a specific group of the public. The new procedure, which could encompass all of these forms, is termed 'group proceedings' under the 2018 Act.

The Report further highlighted that group proceedings can take the form of either an opt-in or opt-out procedure. The former refers to a procedure where a group of pursuers expressly consent to be a part of, and therefore opt in to, the proceedings. An opt-out procedure, on the other hand, operates by defining a class of individuals who are deemed to be entitled to benefit from any ultimate remedy. Anyone falling within the definition of the group is deemed to have consented to the proceedings being pursued on their behalf, unless they opt out expressly. Only those who actively opted out of the proceedings would be entitled to raise their own separate claim.

III PROCEDURE

i The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018

The 2018 Act establishes the overarching framework for group proceedings in Scotland. Section 21 of the 2018 Act then confers power on the Court of Session to make more detailed provision about group proceedings by way of what is called an Act of Sederunt.10 These more detailed procedural rules, intended to supplement the 2018 Act, are currently being drafted by the Scottish Civil Justice Council (SCJC), the rule-drafting body to the Court of Session. While the SCJC has a degree of discretion over the final form that the rules will take, they must fall within the parameters set down by the 2018 Act. Nevertheless, it is only possible to provide an outline of the procedure at this early stage.

The 2018 Act provides that group proceedings will only be available in the Court of Session.11 The Court of Session is Scotland's supreme civil court, and it will not be competent to initiate group proceedings in any lower court, such as local sheriff courts. The sheriff court has exclusive jurisdiction over claims in Scotland worth £100,000 or less.12 The 2018 Act provides powers for the Court of Session to make rules regarding the disapplication of this rule in relation to group proceedings. Until a draft of the rules governing group proceedings is available, it remains unclear whether any monetary limit will apply to group proceedings, or whether their aggregate value might have to be £100,000 or more to qualify as competent group proceedings. Given the Court of Session has exclusive jurisdiction to hear group proceedings, the current thinking is that no monetary limit will apply, making them an even more unique species of Scottish civil court procedure, post the 2014 Act reforms.

Group proceedings in Scotland will be initiated by a person known as a 'representative party', who will bring the proceedings on behalf of the wider class, described in the legislation as a 'group'.13 There may only be one representative party to the proceedings.14 A group, for these purposes, comprises two or more legal individuals who each have a separate claim in the subject matter of the group proceedings. The representative party will often be a member of the defined class on whose behalf the proceedings have been brought, although not necessarily so. If the representative party is not a member of the class, they can only advance the claim with the Court's authorisation.15 The 2018 Act does not contain any indication as to whether the Court has an unfettered discretion in granting this consent, or whether there are guiding principles to be followed in the making of such a decision.

Permission must be granted by the Court before group proceedings can be progressed.16 The 2018 Act provides that permission is only to be granted if the Court considers that all of the claims raise issues, whether of fact or law, which are the same, similar or related to each other; and if the Court is satisfied that the representative party has made all reasonable efforts to identify and notify all potential members of the group about the proceedings.17 These are cumulative requirements. Further, the Court will only be permitted to give permission in accordance with the procedural rules to be developed by the SCJC.18

The 2018 Act leaves the question of whether an opt-in, opt-out or hybrid regime will be established open to the Court of Session, and therefore to the SCJC.19 At present, the SCJC has given no indication which route is likely to be taken. For the purposes of the legislation, 'opt-in proceedings' are defined as group proceedings that are brought with the express consent of each member of the group on whose behalf they are brought.20 Conversely, 'opt-out proceedings' are defined as group proceedings that are brought on behalf of a group, each member of which has a claim that is of a description specified by the Court as being eligible to be brought in the proceedings, and either (1) is domiciled in Scotland and has not given notice that they do not consent to the claim being brought in the proceedings; or (2) is not domiciled in Scotland and has given express consent to the claim being brought in the proceedings.21 In short, non-Scots domiciliaries will not be able to participate in the opt-out process; they must opt in to the class irrespective of whether those particular proceedings are running on an opt-out basis for Scots domiciliaries.

At first blush, the definitions of opt-in and opt-out group proceedings, and the class requirements, in the 2018 Act are markedly similar to those in the Competition Act 1998 (CA), as amended by Schedule 8 to the Consumer Rights Act 2015. Section 47B CA provides that opt-in proceedings for the purposes of competition law are collective proceedings brought on behalf of each class member who 'opts in by notifying the representative . . . that the claim should be included in the collective proceedings'. Opt-out proceedings, under the CA, are defined as those brought on behalf of each class member except: (i) any member who opts out by notifying the representative; or (2) any class member who is not domiciled in the UK and does not opt in to the proceedings. In other words, the 2018 Act follows the CA's approach in defining opt-out class actions. Both instruments proceed on the basis that, unless they explicitly opt out, the class for the purposes of the proceedings will encompass every possible member of the class, unless that member is domiciled outside Scotland or the UK or specifically opts out. Those with a foreign domicile can only take part in the proceedings by opting in, reflecting the UK's far more conservative approach to class action procedure in contrast to jurisdictions such as the US. So far as class definition is concerned, the Competition Appeal Tribunal (CAT) must determine whether the claims raise 'the same, similar, or related issues of fact or law'.22

Until a fully fledged body of case law emerges in Scotland, it remains to be seen how the judiciary will interpret the provisions of the 2018 Act on class definition. The 2018 Act is not a UK statute, and so there is not the same need as arises in interpreting such a statute to take a consistent approach across the UK. This said, it is possible, given the similar definitions of class in both sets of legislation, that the Scottish courts, in deciding whether permission should be granted for group proceedings, will have one eye on decisions of the CAT, which sits primarily in London. Further, given that the CA's territorial scope extends to Scotland in competition law matters, there may nevertheless be a desire to take a consistent approach to applications under the 2018 Act as would be taken to applications to the CAT deriving from Scotland.

ii The funding of litigation

The reforms introduced by the 2018 Act do not stop at the introduction of group proceedings. The 2018 Act brings about significant procedural changes that complement class actions, including radical change to the funding of litigation in Scotland.

On 3 June 2014, Sheriff Principal Taylor published the Taylor Review of Expenses and Funding of Civil Litigation in Scotland (the Taylor Review).23 The Taylor Review recommended the introduction of various changes to the expenses and funding regime in Scotland, including more detailed provisions about success fee arrangements, the introduction of qualified one-way costs shifting (QOCS), and the notification of third-party funding.

Until 30 January 2019, solicitors in Scotland were not competent to enter into damages-based agreements (DBAs). DBAs are a subset of success fee arrangements, whereby the solicitor's legal fees are calculated as a percentage of the sum awarded upon successful litigation. Traditionally, such arrangements were deemed an agreement for a share of the litigation proceeds (pactum de quota litis) in Scotland, and consequently unenforceable. The reasoning was that lawyers take on a professional role for their clients in relation to a claim, and that they were therefore debarred from combining that function with a pecuniary interest of their own in the amount received.24

Section 2 of the 2018 Act reverses this position, providing that a success fee arrangement is not unenforceable by reason only that it is an agreement for a share of the litigation. One of the primary drivers for the introduction of group proceedings is a desire to reduce legal expenses incurred per capita and improve access to justice for consumers. DBAs are arguably being introduced into Scottish litigation for similar reasons. DBAs often proceed on a 'no win, no fee' basis, and similarly provide claimants with the opportunity to litigate without being restricted by the financial barriers associated with pursuing court proceedings. It is possible that the two will operate together to bring about a more favourable environment for, and therefore an increase in, class actions in the Scottish courts. Claimants may be more willing to pursue group proceedings if they do not have to fund their own fees unless they are successful; and solicitors may well see the attraction of acting on a damages-based arrangement for multiple clients in group proceedings.

The 2018 Act's implementation of OQCS may bring about a similar effect, at least in the context of mass personal injuries claims. The general rule on legal expenses in Scotland is that 'expenses follow success'. In other words, a successful litigant, whether pursuing or defending, will be entitled to recover expenses from the unsuccessful litigant, who bears both his or her own expenses and the opponent's. The risk of a party potentially incurring liability for their opponent's expenses, should the litigation prove unsuccessful, may be seen as constraining that party's access to justice.25

QOCS 'shifts' this burden from the unsuccessful litigant. Section 8 of the 2018 Act prohibits the Court from making an award of expenses against an unsuccessful pursuer, essentially removing this hurdle. The new QOCS regime is restricted to personal injuries actions and contains its own procedural safeguards to ensure that vexatious litigants are not afforded such protection. Section 8(1)(b) of the 2018 Act provides that QOCS only applies where the pursuer conducts the proceedings in an appropriate manner, which they are considered to have done unless their lawyer makes fraudulent representations, acts fraudulently, behaves in a manner that is manifestly unreasonable or otherwise conducts the proceedings in a manner that the Court considers amounts to an abuse of process.26 Evidently, the 2018 Act imposes a high threshold before the protection under the QOCS regime can be taken away from a pursuer. In all other circumstances, pursuers will be taken as having conducted the proceedings appropriately and will therefore be entitled to the exemption under Section 8(1)(b). Again, that is likely to make the environment more favourable for class actions in personal injuries matters, including clinical negligence claims, subject to the pursuers being able to establish a class at the permission stage.

Finally, the 2018 Act requires parties receiving financial assistance in respect of proceedings from another third party to notify that fact to the Court.27 The litigant must disclose both the identity of the third party and the nature of the assistance provided. Typical examples of third-party funding of litigation include insurance cover and legal aid. However, litigation funding increasingly takes the form of an investment, whereby commercial funders assist litigants by covering their legal expenses, and take a return in the event the litigants succeed.

Unlike in England and Wales, Scotland has never imposed a restriction on third-party funding. However, the English restriction on third-party funding arrangements has gradually been eroded, resulting in England becoming one of the premier jurisdictions for third-party funding, along with Australia and the US.28 By contrast, the Scottish market for third-party funding has never quite found fertile ground.29 However, as has already been mentioned, certain aspects of the 2018 Act may make Scotland a more attractive jurisdiction for third-party funders, most notably its introduction of the possibility of opt-out class actions.

It will ultimately be up to the SCJC to decide which types of claim may be the subject of opt-out proceedings, and for the Court of Session then to exercise its discretion in any given case. However, should opt-out proceedings become a reality, Scotland will become the only jurisdiction in the UK where, aside from in competition matters, they are available to litigants. The financial rewards that might be available from a successful opt-out litigation are bound to attract the interest of litigation funders, not least when Scotland is generally a less expensive jurisdiction in which to litigate than its neighbouring jurisdictions.

IV CROSS-BORDER ISSUES

The UK was due to leave the European Union on 29 March 2019. At the time of writing, it remains unclear what transitional measures (if any) will apply once (and if) the UK does leave the European Union at any future date.

Currently, holders of decrees (judgments) from Scottish court actions enjoy the almost automatic right to enforce these throughout the EU. Post-Brexit, the national law of each EU Member State will determine the enforceability of a judgment (unless the decree emanates from proceedings where parties contracted for exclusive Scottish jurisdiction, which will remain recognisable under the Hague Convention on Choice of Court Agreements).

Domestic rules vary considerably as to the extent to which the merits of the underlying action can be reopened and as to the procedure to be followed. One factor that many states take into account is reciprocity (i.e., whether or not the sending state would enforce a judgment of the destination state in similar circumstances). Post-Brexit, the position on cross-border enforcement may be less straightforward than the current procedure under Brussels I Recast and the Lugano Convention.

More generally, Brexit's impact may be felt in subtler ways: the advent of group proceedings in Scotland owes much of its heritage to developments in the fields of competition, data protection and consumer law, all of which have strong roots in EU law. It remains to be seen how much of that shared heritage will continue to shape the future development of Scots law, post-Brexit.

V OUTLOOK AND CONCLUSIONS

As already mentioned, the Court of Session is entitled to design the procedural rules of group proceedings in secondary legislation known as an Act of Sederunt. This responsibility is presently vested in the SCJC, whose first draft of the rules is expected later in 2019. The scope of the rules is only restricted by the substantive provisions of the 2018 Act outlined above, which override any existing Rule of the Court of Session. So long as the SCJC stays within the bounds of the 2018 Act's substantive rules, it will be entitled to regulate the procedure however it sees fit.30 The 2018 Act does, however, provide a non-exhaustive list of the matters the relevant Act of Sederunt may cover, including, among others, the persons who may be authorised to be a representative party, the action to be taken by a representative party, and the means by which members of the class give their consent or notice of non-consent, depending on whether the matter is an opt-in or opt-out class action.31

The SCJC will need to decide which claims can, subject to the Court's discretion, be made the subject of group proceedings. One obvious possibility is claims for losses suffered as a consequence of breaches of the Data Protection Act 2018 (DPA). The precursor to the DPA, the EU General Data Protection Regulation, gave Member States the option of allowing opt-out class actions for claims for damages for data breaches. This option was not included in the DPA (a subject of much debate during the DPA's passage through the UK Parliament). Instead, the DPA provided the UK government with the power to make regulations enabling, effectively, opt-in class actions alone. That restriction is, however, only applicable to England and Wales. The position in Scotland will instead be governed by the 2018 Act and the Court of Session's Rules.

The framework is in place, through the 2018 Act, for Scotland, in the next few years, to move closer to an US-style opt-out class action model. The litigation funding environment has also been made far more receptive. Depending on how the SCJC's draft rules approach matters, the stars may be aligning for class actions in Scotland for 2020 and beyond.

 


Footnotes

1 Colin Hutton and Graeme MacLeod are both partners at CMS Cameron McKenna Nabarro Olswang LLP. Colin and Graeme would like to acknowledge the assistance of Jordan Rhodes (trainee solicitor) and Emma Boffey (associate) in the preparation of this chapter.

2 Scottish Consumer Council (SCC), Class Actions in the Scottish Courts: A new way for consumers to obtain redress? (May 1982).

3 Scottish Law Commission (SLC), Multi-Party Actions: Report on a reference under Section 3(1)(e) of the Law Commissions Act 1965 (July 1996).

4 The Scottish Parliament Justice Committee, Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill: Policy Memorandum (2 June 2017).

5 [2018] CSOH 57.

6 AH v. Greater Glasgow Health Board [2018] CSOH 57 at [1].

7 AH v. Greater Glasgow Health Board [2018] CSOH 57 at [1].

8 Regulation 2, The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (Commencement No. 1, Transitional and Saving Provisions) Regulations 2018.

9 The Scottish Parliament Justice Committee, Stage 1 Report on the Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill (21 December 2017).

10 An 'Act of Sederunt' in Scotland is a form of secondary legislation enacted by the Court of Session, regulating civil procedure in the Scottish Courts. Such Acts are accordingly 'laid only' and are not subject to the typical legislative process of the Scottish Parliament.

11 Section 20(1) 2018 Act.

12 Section 39(1) and (2) Courts Reform (Scotland) Act 2014.

13 Section 20(2) 2018 Act.

14 Section 20(4) 2018 Act.

15 Section 20(3) 2018 Act.

16 Section 20(5) 2018 Act.

17 Section 20(6)(a) and (b) 2018 Act.

18 Section 20(6)(c) 2018 Act.

19 Section 20(7) 2018 Act.

20 Section 20(8)(a) 2018 Act.

21 Section 20(8)(b) 2018 Act.

22 Section 47B(6), CA.

23 Taylor Review of Expenses and Funding of Civil Litigation in Scotland (June 2014).

24 Quantum Claims Compensation Specialists Ltd v. Powell 1998 S.C. 316.

25 See, for example, Taylor Review of Expenses and Funding of Civil Litigation in Scotland (June 2014), page 161.

26 Section 8(4) of the 2018 Act.

27 Section 10(2) of the 2018 Act.

29 Taylor Review of Expenses and Funding of Civil Litigation in Scotland (June 2014), page 244.

30 See the opening of Section 21(2).

31 For the full list, see Section 21(2) 2018 Act.