Most people, including Scottish lawyers until recently, will have only been aware of class actions through the medium of the Hollywood blockbuster.

The most famous example of a class action on the silver screen was the Oscar-winning Erin Brockovich, a dramatisation of a class action lawsuit against an energy company accused of contaminating a rural Californian town's groundwater.

The latest use of this well-trodden theme was explored in last year's Dark Waters, focusing on one lawyer's efforts to raise a class action against a chemical manufacturer accused of dumping 'forever chemicals' into landfill.

Class actions are a useful vehicle for telling a story in a short space of time on the big screen, portraying plucky individuals against 'big bad' corporations. The platform is so well-trodden that most of us will feel as though we understand what a class action is.

Until recently though, there was no equivalent to a class action in Scotland. That changed when new rules came into force on 31 July this year under the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018, enabling groups of two or more people to raise proceedings together in a single action in the Court of Session. In Scotland this is called group proceedings, in contrast to the American class actions terminology.

The principal aim of the new rules is to make it easier to bring claims together that could not economically be brought to court individually due to their low value - thus ensuring their efficient progression through the Scottish Courts.

The principal requirement to join a group is that the members must each have claims that raise issues of fact or law which are the same as, similar, or related to each other.

The new rules are framed on an 'opt in' basis, as opposed to the US style 'opt out' system. Potential class members must elect to join the group, as opposed to being automatically included unless they elect to opt out. This means that advertisements are likely to become commonplace on the radio and in newspapers trying to solicit potential members to join group proceedings.

The potential impact for businesses across all sectors is significant. Any organisation providing goods or services to consumers or whose operations may interact with the public will be at risk. Beyond that, even a non-consumer facing business employing more than one member of staff could still be susceptible to group claims raised by its workforce.

In the past, potential pursuers with claims for sums of lower value might have been reluctant to spend money and energy on litigation. Now, those perceived economic barriers are lifted and individuals can group together to share the expense and time in progressing their claims.

Furthermore, group members may not be exposed to the risk of having to meet their own legal fees or any awards of expenses made against them if they are unsuccessful. They will likely have an agreement with their lawyers about their own legal fees, and with insurers/litigation funders in respect of any adverse expense awards made against them. Fee agreements between clients and lawyers are not new, but litigation funders are not often interested in standing behind claims of limited value. Many claims of limited value grouped together, however, might make it worth their while.

There are steps though, that businesses can and should take now to minimise their exposure to the risk of group proceedings, including;

  • Checking insurance policies to ensure coverage for group proceedings actions;
  • Notifying insurers as soon as group proceedings are threatened;
  • Considering 'After The Event' insurance if no insurance is in place;
  • Engaging lawyers early, particularly if no insurance cover is in play; and
  • Hiring a PR representative, given that group proceedings are new and will attract press attention.

Many businesses may be nervous that the recent changes to the law open them up to a tsunami of claims that they would not have faced previously. We are yet to see what the full impact of the new procedure will be in terms of the volume and type of litigation being raised in Scotland. One thing that is clear is that an awareness of the new rules, its impact on your business and taking steps now to minimise exposure should ensure, in so far as possible, a Hollywood ending.

This article originally appeared in The Scotsman. 


Craig Watt

Partner & Solicitor Advocate