Unnecessary litigation and the position on expenses (costs)

The Outer House of the Court of Session (Scotland's highest civil court) determined in Keenan v EUI Limited [2020] CSOH 89 that settling a litigated claim at the equivalent of a pre-action offer did not necessarily mean the litigation was unnecessary. 

The pursuer, Susan Keenan, raised a court action for damages following injuries sustained during a road traffic accident in August 2015. She was travelling as a passenger in her daughter's car when a third-party driver collided with the rear of the vehicle. The third-party driver was insured by EUI, the defender. As a result of the collision, the pursuer claimed to have suffered a whiplash injury to her neck, together with other soft tissue injuries. She also claimed to have developed other conditions, including adhesive capsulitis and fibromyalgia.

In October 2017, the defender made an offer to settle the claim for the sum of £43,500 with the offer being open for 21 days "after which it should be considered withdrawn". That offer to settle was rejected by the pursuer.

Proceedings were raised in the Court of Session in July 2018. Various heads of claim were sought, including solatium (general damages for pain and suffering), loss of earnings and loss of pension. A statement of valuation of claim lodged by the pursuer valued her claim at just over £1.1m

Shortly before proof (trial), the defender produced a copy of surveillance footage and lodged a minute of tender (formal offer) with the court offering £43,500 to settle the claim – the same as the pre-litigation offer. The minute of tender was accepted by the pursuer.

The defender argued that any litigation expenses (costs) awarded to the pursuer should be modified to nil as the tender that had been accepted was the same value as the pre-litigation offer. That offer had been reasonable and should have been accepted. They alleged that the offer had not been accepted because the pursuer had fabricated, or at least over-exaggerated her symptoms.

Decision by Lord Weir

Lord Weir emphasised that findings of dishonesty by a party would be rare in the absence of evidence having been led, since any material relied on could not be assessed and scrutinised as it would be at proof (trial). On the material before him he concluded that the action had not been commenced or prolonged unreasonably as a result of any dishonesty on the part of the pursuer.

As Lord Weir was unwilling to find the pursuer was dishonest, the only argument that could be considered in relation to modification of expenses, was the level at which the case settled.

Lord Weir stated that the mere fact that the case had settled at the same level as the pre-litigation offer did not, of itself, render the action unnecessary or unreasonable. At the time of the initial pre-litigation offer, the pursuer's agents were investigating medical evidence which suggested the value of the claim was much higher than that offered by the defender.

He accepted that a pre-litigation offer followed by a judicial tender is capable in principle of providing a defender with protection against a liability in litigation expenses, but in this case the offer had only been open for a limited time and had not been followed up by the lodging of an early tender. The pursuer was therefore entitled to her expenses to the date of tender.

Conclusion

Scottish courts have generally appeared unwilling to dismiss fraudulent claims – or indeed penalise the pursuer in expenses - where there remains a genuine element at the core of the claim. For more details see, Kate Donachie's blog, Fraudulent claims: the difference North and South of the Border. 

It seems the position adopted by the court in Grant Grubb v John Finlay [2018] CSIH 29 remains: "Although the conduct of the parties is important, the presence or absence of a tender is an important factor – and often the decisive one."

Case strategy will vary from case to case, but Defenders need to be mindful of protecting their position on expenses if appropriate.

This matter will likely be considered further following the introduction of qualified one-way cost shifting (QOCS) which is due to come into force in the next few months - Qualified one way cost shifting by Winter 2020? The impact of QCOS will be such that an unsuccessful pursuer will not be liable for the defender's costs unless it can be shown the pursuer has behaved fraudulently. The arguments made in Keenan are therefore ones which we may see more often in the future.