With the introduction of group proceedings in Scotland, access to justice has increased. Parties are encouraged to take part in group proceedings by taking advantage of the economies of scale that reduce costs and time. However, any organisation that is exposed to group proceedings will need to be aware of the potential costs of defending such an action. A defender will also be concerned about whether expenses can be recovered if the defence is successful.
Risks
The introduction of group proceedings in Scotland has increased the risk that claims are brought against large organisations, whether companies or public bodies. Before group proceedings were possible, each individual in the group was unlikely to have brought an action by themselves, where the claim was modest and, as litigation can be expensive, the legal costs may be too great to bear. Now the cost can be spread over many individuals and, as covered in a recent Brodies' blog, group proceedings are attractive to litigation funders, who look for a return from the compensation or settlement awarded to the group as a whole.
Whilst a third-party funder may provide funding to raise group proceedings, a defender will be understandably concerned about its costs. Although group proceedings are often more cost efficient for a defender – who is faced with one single action rather than several similar actions – they raise the risk that the group of pursuers may not have the funds to satisfy any adverse award of expenses. This may be concerning for a defender faced with the prospect of defending complex and expensive group proceedings.
A defender is protected, to some extent, by the rules governing group proceedings. Brodies can provide advice on the relevant rules when devising litigation strategy.
Rules
Introduced by the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018, group proceedings involve a single action brought by a representative party on behalf of the group. This means that an award of expenses is made for or against the representative party.
Defenders will be rightly concerned about the identity of the representative party, in particular its ability to cover any award of expenses made in favour of the defender. The rules require a two-stage application process before group proceedings can begin.
First, the court must authorise the appointment of a "representative party" to bring proceedings on behalf of two or more parties. Second, the court must give permission for the group proceedings to be brought.
A defender can make representations in relation to the applications and be represented at the hearing on the applications, so full consideration should be given to this opportunity.
(1) Whether group proceedings should be allowed?
The first protection for the subject of group proceedings is built into the rules on the admissibility of group proceedings. Of relevance here is the rule that a court may refuse permission for group proceedings if it has not been demonstrated that there is a prima facie case or that it has not been demonstrated that the proposed proceedings have any real prospect of success.
Group proceedings case law in Scotland is still in its infancy, but, to date, there has been no in-depth consideration of the legal or factual issues. When deciding whether there is a prima facie case, the courts are looking only at whether there is a "serious question or questions to be tried" (Lord Sandison in Mackay v Nissan Motor Co Ltd). The test for whether proceedings have "any real prospects of success" is whether there is "demonstration of real and substantial such prospects, albeit less than probable success, and not creating an insurmountable barrier which would prevent what might appear to be a weak case from being fully argued in due course" (Lord Sandison in Mackay v Nissan Motor Co Ltd).
These two tests are not 'high hurdles' to overcome. Nevertheless, defenders are well advised to assess the strengths of any proposed group proceeding at the application stage.
(2) Who should be the representative party?
Certification of the representative party is not a formality, and the defender may have a part to play in the court's decision. Before approving a proposed representative party, the judge has to be satisfied that the applicant is a suitable person.
When deciding upon this, a judge can consider any relevant matter, but the rules specifically require the judge to consider the competence of the "applicant to litigate the claims properly, including financial resources to meet any expenses award (the details of funding arrangements do not require to be disclosed)."
As answers can be lodged in relation to whether authorisation should be given, the defender can refer to the financial standing of the proposed representative party. Although any details of any funding agreement do not require to be disclosed, the existence of such an agreement is a relevant consideration. Previous cases demonstrate that litigation funders have given undertakings to the court that they will indemnify the representative party and members against expenses awards in favour of the defender.
A defender should take advice on the legal test and the financial status of the proposed representative party. This advice should be regularly reviewed to ensure that the financial position of the representative party does not change during the litigation.
When faced with a potential group proceeding, a defender should take advice on the procedure and the tests applied by the courts. Brodies' group proceedings team can guide a defender through the steps required to protect its interests.
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