The Class Actions Law Review: United Kingdom - Scotland
Introduction to the class actions framework
Scotland's first formal class action mechanism, known as 'group procedure', was introduced on 31 July 2020.2
Primary legislation was required to introduce the new procedure. The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (the 2018 Act) received royal assent on 5 June 2018. The 2018 Act introduced a framework that would enable both opt-in and opt-out procedures to be created by way of detailed court rules. In March 2020, the Scottish Civil Justice Committee3 (SCJC) conducted a limited consultation to introduce an opt-in scheme. The SCJC indicated that further consideration would be given to introducing an opt-out scheme at a later date. Following that consultation, the Act of Sederunt (Rules of the Court of Session 1994 Amendment) (Group Proceedings) 20204 was laid before the Scottish Parliament in early July 2020 and came into force on 31 July 2020.
At the time of writing, group procedure is still in its infancy. It remains to be seen precisely how the new rules will be interpreted and operated in practice, as well as when the SCJC will consider the introduction of an opt-out mechanism.
The year in review
i Pre-2020 procedures and ongoing litigation
Prior to the introduction of the Group Procedure, the Scottish courts used existing procedural tools, sometimes with tailored directions for particular groups of cases, to manage multiple claims premised on the same or similar rights and obligations.5 These procedures will continue to be used for cases commenced prior to July 2020.
The primary disadvantage of this approach is that the individual cases within these 'groups' remain entirely distinct, so, while the court can issue directions to procedurally manage these cases collectively,6 each case must be determined individually. The outcome of a test case, therefore, has no automatic bearing on the remaining cases, subject to the doctrine of precedent.
ii The group procedure – 2018 Act framework
From 31 July 2020, new class actions may be taken forward using the group procedure.
The framework of the procedure is set out in Sections 20 and 21 of the 2018 Act. Since this framework is relatively short form, the SCJC had a wide degree of discretion as to how to design the new procedure, and it, and the Court of Session, will continue to enjoy considerable latitude in further development.
Section 20 of the 2018 Act sets out certain basic requirements that the procedure must include. In particular: group proceedings may only be brought with the permission of the court;7 permission to raise group proceedings may only be given if the court (1) considers 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 other8 and (2) is satisfied that the representative party has made all reasonable efforts to identify and notify all potential members of the group about the proceedings;9 and group proceedings are to be brought by a representative party who requires to be authorised as such by the court.10
Section 21 of the 2018 Act sets out a broad scope of more detailed issues that the court rules may deal with. These include the types of claim that group procedure is not to apply to,11 who may be authorised as a representative party,12 the circumstances in which permission to raise group proceedings may be refused13 and appeals against permission decisions.14
One particularly fundamental point that the 2018 Act deals with specifically, is the type of class action mechanism that may be developed in the court rules. The 2018 Act takes a broad approach to this, specifying that the court rules may make provision for group proceedings to be brought as '(a) opt-in proceedings, (b) opt-out proceedings, or (c) either opt-in proceedings or opt-out proceedings'.15 The express provision within the 2018 Act for the introduction of an opt-out mechanism is the most radical feature of the legislation, and while the Group Procedure currently in force does not include any opt-out mechanism, there is potential for this to be introduced in future, potentially at quite short notice.
iii The group procedure rules
The Act of Sederunt (Rules of the Court of Session 1994 Amendment) (Group Proceedings) 202016 introduced a new Chapter 26A into the Rules of the Court of Session (the Rules).
The 2018 Act provides that group proceedings will only be available in the Court of Session.17 The lower courts, such as local sheriff courts, will not have jurisdiction to hear group proceedings.
As with most class action mechanisms, group proceedings in Scotland provide for a 'certification stage', which serves an important purpose in rejecting unsuitable claims early in the process rather than allowing them to proceed to proof (trial).
There are two phases to the certification process, namely authorisation of the proposed representative party and granting of permission to bring group proceedings.
With regard to the first phase, there may only be one representative party to the proceedings.18 A group, for the purposes of the 2018 Act and the Rules, comprises two or more 'persons' who each have a separate claim in the subject matter of the group proceedings.19 The 2018 Act allows for both the representative party and the represented persons to be either natural or legal persons (e.g., corporations).20 Significantly, unlike some collective redress procedures in other jurisdictions, this means that the group procedure is not restricted to consumer claims and so could also be used, for example, on behalf of small and medium-sized enterprises.
The court will authorise a proposed representative 'only where the applicant has satisfied [the court] that the applicant is a suitable person who can act in that capacity should such authorisation be given'.21
The matters that the Rules direct the court to consider in determining an applicant's suitability are helpfully listed in the Rules: the special abilities and relevant expertise of the applicant; the applicant's own interest in the proceedings; whether there would be any potential benefit to the applicant, financial or otherwise; confirmation that the applicant is independent from the defender; whether it has been demonstrated that the applicant would act fairly and adequately in the interests of the group members as a whole and that the applicant's own interests do not conflict with those of the group; and whether it has been demonstrated that the applicant has sufficient competence to litigate the claims properly.22 This last factor will include considering whether the applicant has the financial resources to meet any expenses awards. However, the Rules expressly state that the details of funding arrangements do not require to be disclosed. This raises questions. How is the court to be satisfied on the applicant's ability to meet adverse expenses without full disclosure of funding arrangements? It is likely that case law will be required to settle this and other questions.
With regard to the second phase of the certification process, permission must be granted by the court before group proceedings can be initiated.23 The Rules set out four situations in which the court may refuse permission.24 These circumstances collectively require the application of a commonality test, a merits assessment, and a superiority test.
The first situation in which the court may refuse to permit group proceedings to be brought is where either of two key requirements of Section 20 of the 2018 Act have not been met, namely 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' (the commonality test), and that 'the representative party has made all reasonable efforts to identify and notify all potential members of the group about the proceedings'.
The Commonality Test is a typical feature of class action mechanisms. The notification obligation, however, is not a criterion commonly imposed in opt-in regimes and may present significant logistical challenges for coalescing groups, depending on how strictly the courts interpret this provision.
There are two situations in which the court may refuse permission that relate to the substantive merits of the proposed proceedings. The Rules state that the court must refuse permission where either it has not been demonstrated by the applicant that there is a prima facie case, or that the proposed proceedings have any real prospects of success. This potentially provides any defenders with an opportunity to attack the merits of the proposed claims on multiple fronts at an early stage. It remains to be seen what approach the court will take to this in practice.
The final situation in which the court may refuse permission is where it has not been demonstrated by the applicant that it will be a more efficient administration of justice for the claims to be brought as group proceedings than by separate individual proceedings. This is essentially a superiority test, obliging the applicant to demonstrate that the group procedure is more suitable for the proposed claims than individual actions.
To join the group, a potential members must send the representative a specified form25 with details including their name, address, date of birth and contact details. Most significantly a 'full and detailed summary' of the claim and 'evidence in support of [the] claim' must also be supplied. The requirements for full and detailed information and evidence could prove burdensome. The cost of collecting, collating and presenting this information for each and every group member initially falls on the claimant law firm, likely supported by a litigation funder. For any given opt-in group procedure, the more burdensome the joining requirements, the more participation rates will be depressed – particularly in circumstances where individualised losses are fairly low and there is already a limited incentive to join a group.
There are ambiguities in the Rules concerning the deadline for joining a group. When certification is granted, the court will make an order specifying, amongst other things, 'the period of time in which claims may be brought by persons in the group proceedings'.26 This suggests the court will fix a cut-off date for joining a group. A cut-off date assists claimant law firms because it encourages potential group members to make a decision on joining the group without having to wait (potentially a lot longer) for the risk of time-bar (limitation) to have the same impact. However, the Rules also suggest that potential group members are entitled to join the group by right at any point prior to the court setting the date for proof (trial on the evidence), which will normally be after pleadings are closed. The mandated entitlement to join the group at any stage prior to trial being set appears to circumscribe the court's ability to set a cut-off date. Finally, the Rules also provide that persons can potentially join the group after a date for proof has been set, but only with the permission of the court and 'on cause shown'.27
The members of the group are identified in the group register, which is filed with the court.28 The court further signalled the importance it places on the group register and its being properly maintained in its Practice Note No. 2 of 2020 (the Practice Note), in which it is stated that 'the group register, a key component central to the procedure, is considered by the court at every hearing'.29 It is for the group representative to maintain the group register by recording when new members join the group and also when existing members leave.30 The solicitor signing the group register must certify that each group member's claim is 'brought within the statutory limitation period' and that the Court of Session 'is the appropriate forum' for each claim. While the claimants' solicitor should consider those issues in any event, the requirement to do so establishes what may be a fairly onerous obligation given that the position on time bar and jurisdiction could vary widely depending on the personal circumstances of each group member.
Subject to any bespoke requirements that the court may specify at the time of certification, if a group member wishes to withdraw from a group, the member must send the mandated form to the authorised representative.31 Withdrawal is then effective from when the group register is updated.32 The Rules also provide that a group member may withdraw without the permission of the court, provided that withdrawal is made 'either (or both)': (1) before any trial on the evidence commences; or (2) where withdrawal would not reduce the group composition below two members.33
Once a group claim has been certified and served, the procedure for ongoing management of the case is broadly similar to that for other commercial litigation in the Court of Session. The same judge will preside at all hearings of particular group proceedings, 'save in exceptional circumstances'.34 The expectation is that the summons (claim) and defences will be in abbreviated form, always ensuring that fair notice of the claim has been given and that the extent of the dispute is reasonably well identified.35 The rationale for only requiring abbreviated pleadings is that 'parties are expected to be aware of each other's position before proceedings are commenced'.36 The court also expects documents relied upon in a party's summons or defences to be lodged simultaneously with the summons or defences.37
Once written defences have been be lodged, an initial preliminary hearing will take place at which the judge will have the power to make a wide range of orders concerning development of written pleadings and preparation and lodging of documents, affidavits and expert evidence. The Practice Note makes clear the court's preference that parties should discuss how the issues can be most efficiently litigated, signalling the importance placed by the court on achieving efficiency though professional cooperation.38
Later in the process, parties will be required to submit further documents such as proposals for disposal of the case and summaries of any legal arguments they wish to take.
If and when any settlement is reached, the Rules require the authorised representative to 'consult with the group members on the terms of any proposed settlement before any damages in connection with the proceedings may be distributed'.39 This obligation to 'consult' does not, however, grant any group member express veto rights over a proposed settlement. As drafted, the rule merely requires consultation prior to distribution rather than prior to agreeing terms of settlement with the defender or defenders. It is accordingly questionable whether the obligation to consult will have any meaningful impact. Leaving aside the requirements set out in the Rules, a robustly constituted group should have contractual obligations as between group members and the representative party, which govern agreement on settlement and other key decisions on the conduct of the litigation.
iii Interpretation of the new Rules
The structure of the group procedure as set out in the 2018 Act and the Rules has some similarities with the Collective Proceedings Order (CPO) group proceedings regime introduced for competition claims by the Competition Act 1998 (CA), as amended by Schedule 8 to the Consumer Rights Act 2015. This is true notwithstanding the fact that the CPO regime permits both opt-in and opt-out claims, whereas the group procedure regime, as currently implemented, only permits opt-in claims. It remains to be seen the extent to which there will be argument over whether judgments that interpret the CA CPO regime40 will be persuasive or binding when the Scottish courts require to interpret the 2018 Act and the Rules. It is important to remember in this context that the CA CPO regime is a UK-wide regime, and not solely an English device.
iv Changes to fee arrangements
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 permissibility of contingent fee arrangements.
On 3 June 2014, Sheriff Principal Taylor published the Taylor Review of Expenses and Funding of Civil Litigation in Scotland (the Taylor Review).41 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.
Historically, solicitors in Scotland were prohibited from entering 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, rather than by reference to time billed. 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.42
Section 2 of the 2018 Act, which came into force on 27 April 2020,43 reversed this position by providing that a success fee arrangement is not unenforceable simply because it is an agreement for a share of the litigation proceeds. The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (Success Fee Agreements) Regulations 2020 set out the new regime applicable to success fee arrangements in Scotland. This covers both speculative fee arrangements and damages-based agreements (DBAs).
These changes are likely to bring about a more favourable environment for, and therefore an increase in, class actions (and other claims) in the Scottish courts. Pursuers 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 the basis of a DBA for multiple clients in group proceedings.
Section 8 of the 2018 Act also introduces a new QOCS regime. At the time of writing, this Section is not yet in force, but is expected to come into force in the first half of 2021. Once in force, the QOCS regime may bring about an effect similar to that of DBAs, at least in the context of mass personal injury 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.44
Section 8 of the 2018 Act prohibits the Court of Session from making an award of expenses against an unsuccessful pursuer, essentially removing this hurdle. The new QOCS regime will be restricted to personal injury actions and contain its own procedural safeguards to ensure that vexatious litigants are not afforded protection of this kind. Section 8(1)(b) of the 2018 Act provides that QOCS will only apply where the pursuer conducts the proceedings in an appropriate manner, which pursuers are considered to have done unless they or their lawyer make fraudulent representations, act fraudulently, behave in a manner that is manifestly unreasonable or otherwise conduct the proceedings in a manner that the court considers amounts to an abuse of process.45 The 2018 Act will therefore impose 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 will require parties receiving financial assistance from a third party in respect of proceedings to notify that fact to the court.46 The litigant will be required to 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 that the litigants succeed. Unlike 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 United States. By contrast, the Scottish market for third-party funding has never quite found fertile ground.47 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, in due course, whether an opt-out mechanism should be introduced at least for certain types of claim. Should opt-out proceedings become a reality, Scotland may become the only jurisdiction in the United Kingdom where, aside from discrete areas such as competition matters and possibly also data protection claims, an opt-out mechanism is available to litigants. The financial rewards that might be available from 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 southern neighbour.
It remains an open question whether an opt-out or hybrid regime will be established in Scotland in the future. Were that to happen, however, a question would arise over the territorial limits of such a regime.
The 2018 Act deals with this by defining 'opt-out proceedings' as group proceedings brought on behalf of members who are either domiciled in Scotland and have not chosen to opt out, or who are not domiciled in Scotland and have expressly opted-in. It is, therefore, clear that if any opt-out procedure is brought into force, it will not automatically include non-Scottish domiciled claimants. Such persons would require to take active steps to be included.48 This arrangement is similar to that provided for in the CA CPO regime under which only those individuals domiciled in the United Kingdom are automatically included in the claimant group. Those domiciled outside the United Kingdom would have to make an active choice to opt in. This approach is unsurprising since a mechanism that automatically included non-UK domiciled individuals in the class would potentially offend against principles of comity. Indeed, concerns over this issue were noted by the Lord President, Scotland's most senior judge, at the time the 2018 Act was making its way through the Scottish Parliament as a bill. The Lord President highlighted in a letter to the Justice Committee that the practical and legal challenges of the opt-out model were 'significantly greater' than those of the opt-in model in part because of the potential extraterritorial effect of orders granted. This was noted to be particularly problematic where a potential group member had the option of raising the same or similar proceedings in the jurisdiction of his or her domicile.
As regards the recognition and enforcement in Scotland of judgments in foreign proceedings, there are no issues particular to class actions proceedings, as distinct from other litigation proceedings, that would be taken into account by the Scottish courts. Accordingly, absent material concerns over matters such as fair notice or procedural fairness of the litigation, the Scottish courts are likely to recognise and enforce these judgments.
Outlook and conclusions
Although the Court of Session has, for the time being, chosen not to introduce the most radical feature of the 2018 Act, an opt-out mechanism, the SCJC has stated that consideration will be given to introducing this at a future point.
The 2018 Act makes express provision for the operation of its various parts to be reviewed within five years of them coming into force49 and the introduction of an opt-out regime may, therefore, be considered as part of that review process. However, it is possible the SCJC may decide to look at the issue before then, particularly if changes in England and Wales allow consumers there to utilise opt-out procedures that are not available to consumers in Scotland.50 Similarly, if a workable opt-out class action procedural device is implemented in Scotland first, this may put pressure on the UK Parliament to introduce a statutory mechanism.51
In the meantime, there is a sense of anticipation around how the new opt-in group procedure will develop, and it is likely that both case law and additional guidance will emerge over the next few years to shape this. It will be interesting to see what types and size of claim are taken forward. There are no limits on the types of claim that may seek to utilise the group procedure. In addition to the expected data breach, product liability and consumer claims, we may see claims related to the covid-19 pandemic come forward, for example, workplace claims and event cancellation claims.
The 2018 Act's other provisions in relation to expenses and funding are also likely to contribute to the expected uptake in group proceedings. These provisions facilitate greater access to justice through enhanced litigation funding options and, through QOCS, the promise of greater financial protection for certain pursuers.
1 Colin Hutton, Graeme MacLeod and Kenny Henderson are partners at CMS Cameron McKenna Nabarro Olswang LLP. The authors would like to acknowledge the assistance of Catriona Garcia-Alis (senior associate), Jessica Eaton (trainee solicitor) and Joanna Clark (professional support lawyer) in the preparation of this chapter.
2 Prior to this, the Scottish courts used existing procedural tools to manage groups of similar or related claims. These tools did not provide the full functionality of a class action procedure but could be used, e.g., to designate lead cases and effectively case manage the group.
3 The Scottish Civil Justice Committee (SCJC) is the body responsible for preparing draft rules of procedure for the civil courts in Scotland for approval by the Court of Session. The SCJC also has a wider role to advise and make recommendations on the civil justice system.
4 SSI 2020/208.
5 For example, the vaginal mesh litigation (over 500 claimants).
6 See, for example, Direction No. 2 of 2015: Personal Injury and Product Liability Actions relating to the use of Vaginal Tape & Mesh.
7 Section 20(5) 2018 Act.
8 Section 20(6)(a) 2018 Act.
9 Section 20(6)(b) 2018 Act.
10 Section 20(3)(b) 2018 Act.
11 Section 21(2)(d) 2018 Act.
12 Section 21(2)(a) 2018 Act.
13 Section 21(2)(e) 2018 Act.
14 Section 21(2)(f) 2018 Act.
15 Section 20(7) 2018 Act. Note that 'opt-in proceedings' and 'opt-out proceedings' are defined terms in the 2018 Act – see Section 20(8) 2018 Act.
16 SSI 2020/208.
17 Section 20(1) 2018 Act.
18 Section 20(4) 2018 Act.
19 Section 20(2) 2018 Act.
20 Sections 20(3) and 21(2)(a) 2018 Act.
21 Chapter 26A.7(1) of the Rules of the Court of Session (RCS).
22 RCS 26A.7(2).
23 Section 20(5) 2018 Act.
24 RCS 26A.11 and section 20(6) 2018 Act.
25 Form 26A.14-A.
26 RCS 26A.12(1)(e).
27 RCS 26A.16.
28 Court of Session Practice Note No. 2 of 2020, paragraph 26: the court's stated preference is for the group register to be lodged in electronic form, with the representative party's solicitor applying the requisite degree of data protection measures, such as using a secure email address or at least password-protecting or encrypting the group register.
29 Court of Session Practice Note No. 2 of 2020, paragraph 9.
30 RCS 26A.15.
31 RCS 26A.14(2).
32 RCS 26A.26.
33 RCS 26A.17.
34 Court of Session Practice Note No. 2 of 2020, paragraph 5.
35 Court of Session Practice Note No. 2 of 2020, paragraphs 19 and 21.
36 Court of Session Practice Note No. 2 of 2020, paragraph 19.
37 Court of Session Practice Note No. 2 of 2020, paragraphs 20 and 22.
38 See for example Practice Note, paragraphs 28, 29 and 31.
39 RCS 26A.30.
40 Such as the UK Supreme Court ruling in Merricks v. MasterCard Incorporated & Ors  UKSC 51.
41 Taylor Review of Expenses and Funding of Civil Litigation in Scotland (June 2014).
42 Quantum Claims Compensation Specialists Ltd v. Powell 1998 S.C. 316; A&E Investments Inc and anr v. Levy & McRae  CSOH 14.
43 The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (Commencement No. 2 and Transitional Provision) Regulations 2020 (SSI 2020/23).
44 See, for example, Taylor Review of Expenses and Funding of Civil Litigation in Scotland (June 2014), page 161.
45 Section 8(4) 2018 Act.
46 Section 10(2) 2018 Act. At the time of writing, this Section is not yet in force, but it is expected to come into force in the course of 2020.
47 Taylor Review of Expenses and Funding of Civil Litigation in Scotland (June 2014), page 244.
48 Section 20(8)(b) 2018 Act.
49 Section 23 2018 Act. For group proceedings, which come under Part 4 of the Act, this review must take place by 30 July 2025.
50 For example, by using CPR 19.6 as happened in Lloyd v. Google  EWCA Civ 1599; the appeal against that decision is due to be heard by the UK Supreme Court in 2021.
51 This is something that the UK government is already considering in the context of data protection, following a consultation that closed on 22 October 2020.