Class actions make it easier than ever to seek redress
This news article was originally published by The Scotsman and is reproduced here with permission.
From 31 July, class actions (group proceedings) will be permitted in Scottish courts for the first time. Under the new rules, two or more people with the same, similar, or related claims can pursue court proceedings in a single action. This development brings Scotland into line with numerous countries across the world that are enacting and expanding class action procedures, resulting in large claims being filed with increasing frequency.
Taken together with other recent developments (including permitting solicitors to offer success fee arrangements), there is a perceptible change in the landscape of civil litigation in Scotland; presenting unprecedented options to claimants raising proceedings at low (or no) cost and risk. This creates both opportunities and challenges to people living and conducting business in Scotland.
Group proceedings is an important part of the progressive move towards ensuring greater access to civil justice that has occurred in Scotland in recent years. Enacted in June 2018, the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 provides the statutory framework, and the recently published rules enter into force on 31 July.
The rules contain qualifying criteria for raising group proceedings, but this is not likely to present a great challenge in practice.
Proceedings are to be raised be a representative party, who could be a solicitor or member of the group. There can only be one representative party, who will be the first party to apply and be approved by the Court.
Permission must also be granted by the Court to raise group proceedings but, tested on the balance of probabilities, the test is unlikely to be onerous. The default position appears to be that permission is granted unless one of the limited circumstances prescribed in the rules is satisfied, which include: the claims do not raise issues which are the same, similar or related to each other; failure to take all reasonable efforts to identify and notify all potential members of the group; and failure to demonstrate a prima facie case and / or that the proceedings have any real prospect of success.
The rules prescribe “opt-in procedure”, requiring express consent from a party to be included within proceedings. Whilst this could be achieved by submission of a form online, it is nonetheless an important limitation and could potentially avoid proceedings being raised, on a blanket basis. A move towards “opt-out” procedure is, however, still being considered.
In England, class actions have been particularly prominent concerning data breaches, consumer goods, and health and safety incidents. It is likely that group proceedings will follow a similar pattern in Scotland; resulting in an increased volume of claims in similar sectors. Without having to raise individual claims, it has never been easier (or more cost-effective) to seek redress. Whilst all businesses operating in Scotland should note the likelihood of an increase in their exposure to claims, given Scotland’s lead in the financial and business services and consumer supply sectors, those operating in these sectors could be particularly vulnerable.
Whilst the rules are detailed, a number of practical questions remain. For example, how the veracity of each claim will be tested. What checks will be carried out before a person can join a group? Will a defender have the opportunity to investigate and challenge individual claims raised collectively?
What involvement (if any) will individual group members have before settlement is agreed?
Funding arrangements are also uncertain. Whilst courts can consider financial resources to meet expenses awards when determining applications to be a representative party, the rules state that funding arrangements do not require to be disclosed. Therefore, the nature and level of remuneration of the solicitor (or member) raising proceedings will not be considered. There is a risk that members will not receive best value. It is also unclear how costs will be addressed within a group, and how this will impact on the overall exposure of a defender. This could have an impact on insurers.
As well as seeking to achieve greater access to justice, group proceedings also present wider opportunities. A new market could emerge (domestic and overseas), investing and trading in Scottish civil claims. Whilst this may be welcomed, conflicts and duties of care must be carefully considered.