Pursuers' offers: proceed with care

The Act of Sederunt (Rules of the Court of Session 1994 and Ordinary Cause Rules 1993 Amendment) (Pursuers’ Offers) 2017 came into force on 3 April, introducing formal pursuers’ offers into both Court of Session and Sheriff Court Ordinary Cause procedure in cases where the conclusion or crave is for payment of a sum of money. The new provisions will not apply to simple procedure (or summary cause cases, where they still exist).

Practitioners will be familiar with the philosophy behind the rules, since they largely mirror the current common law systems of defenders’ tenders. However, they are ultimately a creature of statute and as a result the draftsman has had the task of recreating many of the flexible customs surrounding tenders into the legislation.

On the face of it the rules are relatively straightforward. Pursuers’ offers may be made by lodging the offer in process at any time before the court makes avizandum or issues a final decision. Broadly speaking they will operate the same way as defenders’ tenders, in that there will be financial implications for late acceptance of the offer after the “appropriate date”, or failing to beat the offer following a final award by the court after proof or jury trial. Should defenders fall foul, the consequence is that the pursuer can, on cause shown, move the court to decern for payment by the defenders to the pursuer a sum of money that equates to 50% of the pursuer’s judicial fees (including any “additional fee” awarded by the court) attributable to the “relevant period” of time after the date by which the offer could reasonably have been accepted.

Background and rationale

The new rules arrived without much fanfare or, arguably, any real forewarning. They came into force only one month and a day after being laid before Parliament under the negative procedure: in other words without any parliamentary scrutiny. This is perhaps somewhat surprising, given that the pervious attempt to introduce pursuers’ offers in 1996 was a doomed project, with the rules being revoked after six weeks and the Inner House holding that they were ultra vires: Taylor v Marshall Food Group 1998 SC 841. (I am grateful to Robert Milligan QC for bringing this to my attention.)

That said, the Scottish Civil Courts Review published in 2009 (colloquially known as the Gill Review after Lord Gill, the principal author) made recommendations that a system of pursuers’ offers be introduced with a view to encouraging early settlement. The review saw the system of defenders’ tenders as one-sided and unfair. Thereafter, however, with the ebb and flow of legal reform all went silent, even throughout the enacting of the Courts Reform (Scotland) Act 2014. Then in January 2016 the Lord President, Lord Carloway, who is also chair of the Scottish Civil Justice Council (SCJC), asked the SCJC’s Costs & Funding Committee to consider the matter due to concerns over the late settlement of actions.

A review of the committee’s minutes shows that at its first meeting thereafter, in March 2016, it drew up a wish list of principles and proposals to apply to pursuers’ offers. These were largely in line with the specific recommendations of the Gill Review and have been followed through into the final rules. The committee’s discussion papers on the subject have not been published, so their detailed analysis and scrutiny will not be known, especially where they have ultimately deviated from the Gill Review.

It is perhaps also of note that the Gill Review went further than just recommending the introduction of pursuers’ offers. In concluding that the current system of defenders’ tenders was one-sided, the review proposed that the whole system of making offers, by both pursuers and defenders, ought to be codified with a view primarily to encouraging early settlement. This is something that the Costs & Funding Committee noted but for whatever reason has not followed up.

Ambiguities and points to clarify

As with any new rules there will be various points of ambiguity until practice settles.

Form of offer and acceptance

The rules give some guidance regarding the contents of the offer, but without a form it would appear largely up to practitioners’ discretion to formulate the exact wording. For example, whilst the rules do not make specific mention about the recovery of benefits (CRU) in personal injury cases, one would expect pursuers’ offers to make express reference to CRU, as is required with defenders’ tenders. Cautious guidance can perhaps also be taken from the old form 34A.2 that was appended within the schedule to the Act of Sederunt (Rules of the Court of Session Amendment No 4) (Miscellaneous) 1996, which unsuccessfully introduced pursuers’ offers. Appropriate modifications would be required in order to meet the requirements of the new rules, which do differ in form from the 1996 edition.

Genuine attempt to settle

Written into the rules is a provision that, should a defender fail to beat a pursuer’s offer after proof, the court must be satisfied that the offer was a “genuine attempt to settle proceedings”. This provision does not relate to the situation where the offer is accepted late. At first glance this provision may seem somewhat irrelevant: presumably if a pursuer is awarded a higher sum after proof, any lower sum lodged as a pursuer’s offer must on the face of it have been a genuine attempt to settle.

What the draftsman had in mind is not overly clear. It may be that since there are no rules on disclosure of evidence contained within the rules, it is envisaged to come into play when a pursuer is deemed to have lodged an offer before disclosing all relevant material that a defender requires to have sight of in order to consider the offer. The phrase also makes an appearance in the accompanying new entry within the table of judicial fees: a pursuer’s agent will be entitled to a block fee for lodging multiple offers, but only where it is deemed to be a genuine attempt to settle.

Nature of additional payment

It has been reported that any payment to the pursuer under the rules is in effect an uplift in the pursuer’s judicial fees. This would appear wrong: whilst the payment is calculated by reference to the pursuer’s judicial fees, the payment itself is not a judicial fee. It may be helpful to contrast the payment to the award of an “additional fee” which is, of course, an uplift of judicial fees.

The nature of the payment is a legacy argument from the original attempt to introduce pursuers’ offers in 1996 and the Taylor case, where the Inner House held that the payment was ultra vires. Any award under the rules would appear not to be ultra vires as it would be a payment made by reference to s 103(2)(k) of the 2014 Act, which grants the Court of Session power to make provision for “other payments [not including fees] such parties may be required to make in respect of their conduct relating to such proceedings”. Ultimately, the nature of the payment may make little difference to defenders, but for those acting for pursuers there will be a need to take care as to how this impacts on funding arrangements with new and existing clients. Appropriate changes will require to be made.

Further practical difficulties will arise when explaining the nature of the payment to pursuer clients, on the basis that the calculation of the payment has no bearing whatsoever on the value of their case. Explaining that calculation is by reference to the work their solicitor will carry out, or has carried out, during a period of time that is yet to be, and may never be, defined is far from easy. Explaining tenders and expenses to laypersons is not straightforward at the best of times!

The 50% rule

Both the Gill Review and the Costs & Funding Committee believed that the court should have the power to vary the 50% figure. There was no specification as to whether this should be only in an upward or downward direction, so it must be assumed that the court would have had the discretion to go either way. However, provision for such discretion has not appeared in the rules and the 50% figure appears set in stone. The one exception is where there are multiple defenders liable to make the payment, although it would appear that whilst they individually may pay less than 50% each, they cannot cumulatively be responsible for more than 50%. In short, the pursuer will receive the 50% from one or more defenders but no more and no less.

Time to accept

The rules refer to the “appropriate date”, this being the date by which the offer could reasonably have been accepted. The rules give no further guidance despite the Gill Review undertaking an assessment of comparative provisions in other jurisdictions, all of which appear to provide specific time periods. The time to accept may in large part depend on the level of disclosure, more of which below.

QOCS

Pursuers’ offers were not discussed in the Sheriff Principal Taylor’s Review of Expenses and Funding of Civil Litigation in Scotland, published in 2013, which advocated the introduction of Qualified One-Way Cost Shifting. However, pursuers’ offers are likely to remain relevant even if QOCS become a reality. Ultimately, pursuers’ offers are being introduced, not as a way to award punitive damages by the back door, but as a tool to facilitate negotiation and early settlement. With QOCS defenders’ tenders will remain relevant, so if parties are to have equality of arms then pursuers’ offers are likely to remain post-QOCS.

Defenders’ tenders. It has been reported that rules will swing the pendulum too far in favour of pursuers in particular, because defenders do not get the benefit of any “uplift” in their fees where a defenders’ tender bites. It has even been suggested that defenders could seek their own 50% uplift on any contra-accounts. But that somewhat misses the point.

First, as stated above, the payment is not an uplift of the pursuer’s expenses so it would not be appropriate to uplift a defender’s fees. Similarly, with a contra-account the losing party is already receiving a payment from the successful party. The successful party has vindicated his or her right but is paying the losing party a sum for having failed accept an offer at an earlier date.

Secondly, the system is not meant to provide a windfall to either party but to provide equality of arms when negotiating whilst incentivising early settlement. It is the facilitation of negotiations and the incentivisation towards settlement that is key to the system operating successfully. No system is perfect and it could be argued that 50% of the judicial fees incurred post-offer is not sanction enough to facilitate settlement, especially in higher value cases where the sum, calculated by reference to the pursuer’s judicial fees, is trivial compared to the sums at stake in the action.

Tactics

Both pursuers and defenders will need to rethink the tactical landscape going forward. For pursuers’ agents they must recognise the benefits and pitfalls here. A pursuer must not fall into the trap of making an offer unnecessarily. There is no obligation whatsoever to make a pursuers’ offer; it is not necessary to protect the pursuer’s position in the same way that it can be necessary to protect the defenders’ position with a tender. In fact, a pursuers’ offer will become a risk should the value of the case increase and the offer not be withdrawn. It would be wise for agents to get into the habit of regularly reviewing any pursuers’ offers made and, where appropriate, withdraw them should the value of a case increase.

With the power to make an offer comes responsibility. A pursuer may not want to bet against themselves by making such an offer unless the circumstances are right. There are of course certain circumstances where such offers are almost certainly of immediate value, straightforward cases where only a single issue is in dispute and all relevant material has been disclosed, such as quantum-only cases; or perhaps where the pursuer has been frozen out of negotiations between the defender(s) and/or a third party.

Where liability, causation and contributory negligence are live issues, pursuers’ agents will now find themselves in the same position as a defender that wishes to lodge a tender, by having to second-guess their opponent’s attitude to risk. If there are multiple disputes, there are multiple risks. When a pursuer lodges an offer, defenders will of course gain the advantage of seeing exactly where a pursuer stands; but where a pursuer chooses to stand is the key question.

Unlike with defenders’ tenders, the pursuer will have nothing to lose by offering what they view as the full value of the case, although that may achieve little in the long run. Conversely, as with the skill of tendering, a perfectly weighted offer will no doubt be one that the pursuer will stick to without compromise, and falls within, but at the upper end, of the range of awards that reflect (i) the value of the case; and (ii) the risks that the case may be wholly or partially unsuccessful. How this will pan out in practice will be interesting. Games of brinksmanship may develop where defenders’ tenders and pursuers’ offers are lodged that are not too far apart and neither side wishes to blink first. This then has the added impact that the force of defenders’ tenders is eroded somewhat. Perhaps until now practitioners have been blind for too long and it was just accepted practice that a defender can tender without any real response from a pursuer to apply pressure in the opposite direction. No longer will the arsenal of the negotiators be unequal.

Where an action involves multiple defenders or third parties it would appear that a pursuer will have a variety of options, which will in part depend on whether the defenders are sued jointly and severally or severally or a case adopted against a third party. The acceptance of an offer by a single defender can be qualified by rights of indemnity, relief or contribution, making it clear that a pursuer’s offer can be made to multiple defenders together, or individually, and it would be open to one of the defenders to accept that sum but reserve the right to proceed with the action and seek recovery, in whole or part, from the remaining defender(s). That may be of particular assistance in cases where there are contractual or delictual liabilities between the defenders to which the pursuer is not party. However, such multi-party actions are often complicated and will need to be approached on a case by case basis. Generally speaking, where an offer to multiple defenders is made, the action will not settle until all defenders accept the offer, although there is provision that a single defender can accept the offer. Experience suggests that the simplistic nature of tendering is not suited to multi-party actions, although there is no doubt they are a tool that triggers negotiation.

Practitioners must take care when making a pursuer's offer. Naturally, the pursuer’s express instructions will be required, especially so where the offer carries an element of concession for issues regarding risks such as poor evidence, liability or contributory negligence. The offer must also be made at a time when the defenders’ agents will be able to assess the offer properly, otherwise the defenders’ agents will have strong grounds to oppose any payment. This may be of little concern in certain personal injury cases, as the new compulsory pre-action protocol for personal injury cases has at its heart early disclosure, a principle also being espoused by the All-Scotland Personal Injury Court. However, where an action is live and all relevant evidence has not been disclosed, pursuers will require to think carefully before offering.

Lastly, the value of the offer needs to consider judicial interest carefully. Defenders’ tenders are taken to include interest, and a sensible tender will cover the position up to and possibly even beyond proof. However, the rules regarding pursuers’ offers are designed so that they reflect the value of the case on the day the offer is made. Unlike a tender, the sum offered should not include any future interest that may accrue. If an offer is subsequently accepted late, the court will award the missing interest backdated to the date of the offer. If the award is made after proof, it ought to include interest. However, when considering whether an offer has been beaten, interest that has accrued post-offer will be discounted – a situation that may involve some arithmetical gymnastics.