21 January 2019

When many of us were busy stuffing the turkey, wrapping parcels and putting the last minute Christmas preparations in place, there were some significant legislative developments in the personal injury sector which you might have missed amongst the festivities. In the week before Christmas, the Civil Liabilities Bill (applicable to England and Wales only) received Royal Assent from Westminster and the Prescription (Scotland) Bill received Royal Assent from the Scottish Parliament. January seems a fitting time to look at the progress of the various pieces of legislation through Parliament.

The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act received Royal Assent on 5 June 2018 although little of the Act is currently in force.  This is the vehicle which will reform the funding of civil litigation in Scottish claims to include making provision for Damages Based Agreements (DBAs), introducing Qualified One Way Cost Shift (QOCS), as well as making provision for bringing of civil proceedings by groups of persons in the Court of Session and also about the Auditor’s offices of the courts in Scotland.  Only Part 6 of the Act came into force with immediate effect, which allowed the Scottish Parliament to pass the necessary secondary legislation.  Part 5 of the Act came into force on 5 August 2018 which requires the Scottish Ministers to review and report on the operation of the provisions of the Act after 5 years of it coming into force (or for the provisions relating to group proceedings 5 years from the date the subordinate legislation comes into force).  The Scottish Civil Justice Council (SCJC) is currently working on the rules which are required for practical implementation of much of the Act and there is no timescale for completion of this process.  It is understood that the SCJC have discussed and agreed on certain issues to be covered by the rules and draft rules of court reflecting this are being prepared.

The Damages (Investment Returns and Periodical Payments) (Scotland) Bill was introduced on 14 June 2018.  This Bill makes provision for (i) fixing of the assumed rate of return for investment of damages and (ii) making provision in relation to periodical payments, both relating to futures losses in personal injury claims.  The Act is expected to come into effect this year.  The Scottish Parliament’s Economy, Jobs and Fair Work Committee published its Stage 1 report on the Bill on 3 December 2018.  In the round, the committee supported the general principles of the Bill, i.e. to reform the methodology underpinning how the discount rate is set so that it is clear, certain, fair transparent, regular and credible, together with giving the Courts power to impose PPOs for future pecuniary losses. The committee has recommended to Parliament that the Bill’s general principles be agreed. The Bill passed its Stage 1 reading in the Scottish Parliament on 18 December 2018.  The committee has tabled amendments for Stage 2 which is scheduled for 22 January 2019.   The amendments propose the following changes:

• Increase the period for review of the discount rate from 3 years to 5 years.
• Increase the standard adjustments from 0.5% to 1.5% to represent taxation and the costs of investments advice and decreasing the standard adjustment proposed by way of a further margin from 0.5% to 0.25%.  The standard adjustments are deductions to be applied to the discount rate arrived at by the rate-assessor. 
• In the provisions relating to PPOs, removes the power of the court to make an order with or without the consent of the parties and substituting this with a statutory presumption for the court to decide in accordance with the wishes of the pursuer unless there are compelling reasons not to do so.
• Introduces a provision requiring the court, when making an order for a PPO, to specify why it considers the continuity of payment to be reasonably secure.
• In relation to varying of PPOs, the Bill had allowed for variation where a change has occurred in an injured person’s condition.  An amendment has been introduced that the change in the person’s condition has to be attributable to the injuries for which the court has awarded damages.  This allays one of the concerns raised by BTO with the terms of the original Bill.
• Introduces a new provision that no award of expenses can be made against the injured person in respect of the costs of any proceedings in relation to the variation or suspension of the PPO as provided for in the Bill.

The proposal to increase the review cycle from 3 years to 5 years is noteworthy but not unexpected given the concerns that had been raised at stage 1 that claims would be pushed forward or held back with a 3 yearly review cycle. The most controversial of these amendments, however, is the variation of the standard adjustments.  This amendment will result in a deduction of 1.75% being applied to the rate determined by the rate-assessor. There is no similar provision for adjustment of the discount rate by a prescribed amount in the equivalent legislation south of the Border.  Thus, if this amendment remains, it will almost inevitably result in a lower discount rate being fixed in Scotland than in England and Wales.   

The equivalent provisions relating to fixing of the assumed rate of return for England and Wales are contained in the Civil Liability Act 2018 which received Royal Assent from Westminster on 20 December 2018.  This Act also makes provision for whiplash claims in England and Wales (for which there is no equivalent provisions in the Damages (Investment Returns and Periodical Payments) (Scotland) Bill).  The provisions in the Act for review of the discount rate commenced on the date the Act received Royal Assent.  Thus, the first review of the discount rate for England & Wales must commence by 19 March 2019 and that review will be conducted with reference to the procedure set down in the Act.  The Act stipulates that the new rate must be set within 140 days which is on or before 6 August 2019.  The remainder of the provisions in the Act, to include the whiplash provisions, are not yet in force.  The regulations setting the whiplash tariff are yet to be finalised. The Government has indicated an intention for the whiplash reforms to come into force in April 2020.

The Prescription (Scotland) Bill was first introduced to the Scottish Parliament on 8 February 2018.  The Bill received Royal Assent on 18 December 2018 and is now entitled Prescription (Scotland) Act 2018.  This Act will reform the law of negative prescription which establishes time-limits for when obligations and rights, such as obligations under a contract, are extinguished.  These provisions are not yet in force and ancillary regulations by the Scottish Ministers are awaited before the terms of the Act are law.  For the avoidance of any doubt, the Act does not alter the law of limitation for personal injuries claims in Scotland.  In other words, the three year limitation period within which an action for damages for personal injury ought to be raised will remain unaltered by the new Act.

Finally, the Proposed Recovery of Medical Costs for Industrial Disease (Scotland) Bill was lodged on 28 March 2018 and the consultation closed on 22 June 2018.  This is a Bill to enable the Scottish Ministers to recover from the party responsible for causing an industrial disease, costs of the treatment given by the NHS to those suffering from that disease.  Essentially, this is extending the current powers of recovery by the Scottish Ministers of NHS charges in personal injury claims to disease claims which are currently excluded from the existing provisions.  The recoveries will apply to claims arising from certain industrial diseases prescribed in the Bill.  It is proposed that recovery be made by the Compensation Recovery Unit (CRU), but there are no current proposals to deliver a similar Bill for England and Wales.  This could result in an anomaly for the CRU (which is a UK wide scheme) if such NHS charges are recoverable in Scotland but not south of the Border.  Although the Bill is likely to receive cross party support due to the significant recoveries that would be made which would benefit the NHS in Scotland, questions have been raised over the practical operation of such provisions.  We will thus need to wait and see if this proposed legislation progresses any further through the Scottish Parliament. There have been no developments since June of last year.

Of the various pieces of legislation discussed, clearly the priority of the Scottish Government will be the Damages (Investment Returns and Periodical Payments) (Scotland) Bill.  With the English equivalent provisions for fixing the discount rate now in force, and the new discount rate south of the border set to be fixed on or before 6 August 2019, it is evidently not desirable for the fixing of the Scottish discount rate to lag significantly behind this.  BTO will watch with interest for developments and will issue further updates as matters progress.  For further information, please contact:

Joanne Farrell Senior Associate jfa@bto.co.uk T. 0141 221 8012