Hansard

I rise to support Daniel Johnson’s amendments 1 to 4. The bill as introduced followed Sheriff Principal Taylor’s recommendation that an award for future loss in personal injury success fee agreements should not be ring fenced—in other words, future loss should not be excluded from the calculation of a success fee—in cases that are taken forward under a success fee agreement in circumstances where the future loss element is to be paid as a lump sum. That is not the position, of course, where the future loss element is to be paid by way of a periodical payment order. As we have heard, in such circumstances, ring fencing will indeed apply.

Considerable concern was expressed in the Justice Committee’s stage 1 report that those unfortunate claimants with catastrophic injuries would not receive the full amount that was awarded by the court if the part of their damages that was attributable to future loss was included in the calculation of the success fee to be paid to their legal representatives. That point has already been made this afternoon.

Margaret Mitchell’s stage 2 amendments provided that the future element in any award for personal injury would be excluded from any uplift by a legal services provider in a success fee agreement irrespective of whether it was to be paid by way of a lump sum or by way of a periodical payment order. I supported the amendments at that time on the basis that we believed that they would, as matter of practice, affect very few cases and that they would mainly involve claims relating to catastrophic injuries and no other particular cases. Since stage 2, however, the Scottish Government has been in discussions with Sheriff Principal Taylor, the Law Society of Scotland and the Association of Personal Injury Lawyers—and we have received submissions from other bodies—and two important considerations have come to light.

First, we now believe that the stage 2 amendments relating to the ring fencing of future loss in all circumstances might have the unintended effect of restricting access to justice. The Scottish Government believed that awards for future loss affected only a few very high-value cases, but we are now informed that that is not the case. The Law Society has indicated that even low-value cases of, for example, £3,000 may contain a future element to the award or settlement. The future loss element of a claim is often complicated and involves a solicitor in a considerable amount of work. As the Law Society put it in its letter to the Justice Committee of 14 March,

“The calculation of future loss is often the most complex and time consuming aspect of a personal injury claim”.

If the solicitor is unable to be remunerated for that work through a success fee agreement, he or she might not be able to offer damages-based agreements for personal injury cases. Sheriff Principal Taylor confirmed that that was a possibility in his letter to me of 8 March, which was copied to the Justice Committee. In that letter, he defended his decision not to exclude all future loss from the calculation of a success fee, but rather to impose such an exclusion where the settlement for future loss is to be paid by way of periodical payment order.

Sheriff Principal Taylor stated:

“If I did not permit a sufficient percentage deduction, solicitors would not offer DBAs as a funding mechanism. They would not recover sufficient in the successful cases to compensate for the unsuccessful cases. One has to remember that should a case be unsuccessful not only does the solicitor not get paid for his or her own time but must also meet court dues, expert witness fees, medical reports etc out of the solicitor’s own pocket. I had to create an environment in which DBAs were sufficiently attractive to solicitors but still fair to the injured pursuer.”

The amended provisions on future loss may therefore represent a severe restriction of access to justice and negate some of the principles on which the bill was founded. It is thought that the failure of damages-based agreements to take off in England and Wales is in fact a result of future loss being completely ring fenced south of the border and thus unattractive to legal practitioners. We should not make the same mistake here.

I heard Margaret Mitchell’s comments about the issue of judicial expenses and the differing approaches to that north and south of the border, but we heard in evidence—indeed, from Sheriff Principal Taylor himself—that although Lord Justice Jackson, who conducted a similar review south of the border, promoted the position that Margaret Mitchell is supporting today, he now has cold feet, because it has led to solicitors south of the border and in Wales not offering damages-based agreements for personal injury actions.

The other point that I want to make is that, as an unintentional consequence of the approach of ring fencing all future loss that was proposed at stage 2, those with catastrophic injuries could paradoxically receive lower awards and settlements. In other words, stage 2 amendments that were intended to maximise pursuer compensation could, in practice, have the opposite effect.

As I stated earlier, the future loss element of a claim is often complicated and involves a solicitor in a considerable amount of work. I am informed that it is not uncommon for solicitor outlays to be in the region of £100,000 over a three-year period in such cases. Sheriff Principal Taylor recommended in his report that lump-sum damages for future loss should be included in the calculation of the success fee under a success fee agreement, because solicitors need to be incentivised.

As Liam McArthur said, Sheriff Principal Taylor recommended in his report the safeguards that were set forth in the bill as introduced, and he also recommended that future loss damages would not be included if they were to be paid by periodical payment orders. Only a small number of personal injury cases end up before a court and the vast majority are settled out of court. Discussions with personal injury solicitors have revealed that solicitor-led cases result in higher settlements, as defenders try to avoid the expense of a court hearing. In other words, having a solicitor is likely to result in the claimant receiving greater damages—possibly much greater damages.