Scotland´s New Litigation Procedures

Scotland's litigation procedure for smaller value actions (those between £1,500 & £5,000) ¹ has been updated by the introduction of new court rules². In addition the judicial expenses (solicitor's costs) have also been revised.³ This article takes a brief look at undefended and defended litigation and costs in the event of the case being defended.

With the new rule book extending to some 156 pages many will expect radical changes to current procedure. However, only 55 pages relate to the actual rules with the rest of the pages being devoted to the various forms along with a very useful glossary.

The rules and forms prescribe the means by which litigation is conducted for all types of court action, both undisputed and defended, including payment actions; actions for damages for personal injury and actions for delivery. However, credit controllers will be more focussed on payment actions – being the style required for debt recovery. Although many of the new rules are virtually identical to the old ones – important changes have been introduced.

Whether the rules will represent a "sea change" in Scottish litigation remains to be seen although a real attempt has been made to respond to litigators' greatest concerns.

From a debt collecting perspective the greatest impact will be on defended litigation and the increased fees which can be levied should a case be defended.

If clients suspect the case will be defended they should tell this to their lawyer at the outset. This is because usually with the vast majority of cases being undefended the summons, by necessity, is not usually drafted with any great precision. Many creditors take the view once a case becomes defended "it's really too much bother" and what they want is an early exit at little or no cost. There may be good commercial reasons for this. The court's rules do allow for early abandonment although pursuers (claimants) will have to appreciate there will be a financial consequence. Unless the creditor's lawyer can agree with the defender's counterpart the case can be abandoned on the basis of no expenses being due to or by either party there could be quite a hefty sum due to the defender for these expenses. Perhaps the moral is creditors should iron out any dispute they are aware of prior to embarking on litigation.

Contemporaneously the Small Claims Rules were also amended. A Small Claim is very similar in form and substance to a Summary Cause action with the proposed financial limit being £1,500. As for the proposed expenses, in the event of a Small Claim being defended should the value of the action be between £200 and £1,000 the maximum amount of expense, which may be awarded will be £100. In the event of the claim exceeding £1,000 the maximum expenses will be no more than 10% of the value of the claim; i.e. £150.

The court action is commenced by the pursuer preparing a summons which requires to conform to the rules. There is little difference between the style of the old and new forms. Payment actions will have to contain a monetary claim (the sum sued for) with a supporting "statement of claim".

The rules stipulate the statement of claim has to give the defender fair notice of the claim and its basis. So, for example, if the claim relates to the provision of goods or services their description, their date of supply, value and possibly their order date should be stated.

For reasons to become apparent, when discussing defended litigation it may be prudent for supporting invoices or a statement of account to be produced to the court along with the summons when first submitted to the court for warranting. The writer is conscious how difficult this can be, particularly for institutional creditors such as banks and building societies. However, only the sands of time will determine whether this requirement will be, for practical purposes, accepted practice.

A copy of the summons will require to be served on the defender. This is done by the pursuer's lawyer – usually by recorded delivery post – and thereafter by sheriff officer if postal service is unsuccessful. Different types of service copy will be used depending upon whether the defender is entitled to apply for time to pay the debt, whether this be by Time to Pay Direction or Time to Pay Order.

With any summons there will be two critical dates, being the return date and calling date.⁴ Generally the return date is the day when the defender must return any document to the court whilst the calling date (always 7 days after the return date) is the date the case will call in court for a hearing. The calling date will be critical in defended cases.

If in response to the summons the defender does nothing the pursuer can ask for judgment (known as minuting for decree) by completing a pre-printed form. However, where appropriate (in cases where the defender is an individual or small trader) the defender may admit liability and offer to make payment of the debt by instalments or by a deferred lump sum – known as a Time to Pay Direction or Time to Pay Order.

Such an offer has to be made by the defender completing the appropriate sections in the copy summons. This must be returned to the court on or before the return day. If accepted by the pursuer then another form is lodged in court and decree will be granted in these terms with there being no requirement for the case to formally call in court.

However, if the pursuer opposes the defender's application for a Time to Pay Direction or Time to Pay Order a minute to this effect must be lodged in court at least two days prior to the calling date. The case will then call in court and the sheriff (judge) will decided on the application. The sheriff may decide on an opposed application in the absence of both parties.

With some sheriffs agreeing to TPDs for up to 2 years claimants may wish to ponder whether it is worth their while going to the expense of making objections should an offer to clear the debt be made within this time frame.

Instead of making written application for a Time to Pay Direction or Time to Pay Order the defender may indicate his intention to appear in court to make an oral application. Should this arise the case will call in court on the calling date and the sheriff will make a decision on the application.

From the creditor's perspective the major impact of the rule changes will focus on defended litigation. One significant advantage is the new requirement for the defender's line of defence to be disclosed far earlier on in the proceedings.

The requirement for a written defence is an important departure from the old rules where a defender was only required to say he intended to appear at the calling date to state a defence.

However under the new rules should the defender wish to defend the action he must complete the "form of response" in the service copy summons which must be returned to the court on or before the return day. The defender will require to give notice of the details of any defence. There is space for this along with spaces for the defender to state which facts in the statement of claim are admitted; and the facts upon which he intends to rely. (If appropriate there is also a space for the defender to detail a counterclaim.)

Perhaps now litigators will be aware why a relevant statement of claim should be made in the summons and why supporting invoices should be lodged. This is because a relevant and accurate statement of claim should elicit a relevant defence – time wasting defences should be flushed out early on. Genuine disputes will be apparent as soon as a defence is lodged. If the claim is poorly drafted one can hardly complain if the defence is also deficient.

Once the defence has been lodged the case will call in court on the "calling date" for a "Hearing". There will be no need for litigants to appear in person at the Hearing with their lawyers attendance being sufficient to represent their interests. (See Appendix 1)

The policy aspiration supporting the new rules is that the sheriff should try to achieve real progress with the action at this stage and, if possible, seek to negotiate and secure settlement.

Readers should be aware if at the Hearing "the facts are sufficiently agreed" the sheriff may hear both parties "forthwith" on the merits of the action and may grant decree in whole or in part in favour of either litigant.

To facilitate settlement between the parties it may be appropriate for the sheriff to continue the Hearing so that parties can be addressed at length. What is likely to occur in practice is that the parties may request a continuation of the Hearing to enable the relevant facts to be marshalled. Obviously if settlement can be achieved by these means this will be more beneficial than being involved with the expense and uncertainty of a proof (trial). Creditors should be aware their lawyers will be asking them for quite a lot of information at this stage to ensure a relevant claim can be stated. Failure to provide this information could result in the action being dismissed with fairly severe cost consequences.

The rules provide the Hearing may be continued "to such other date" as may be appropriate. This will allow parties to adjust their written submissions to enable the sheriff to make a meaningful decision at the Hearing. It is thought multiple continuations will be discouraged as being contrary to the ethos of early dispute resolution.

Examination of rule 8.3 (See Appendix 1) reveals at the Hearing the sheriff will take a leading role by establishing the basis of the action and the defence. In so doing an attempt to achieve settlement will be mounted. If settlement cannot be achieved the sheriff must identify and note on the summons the issues of fact and law which are disputed and what has been agreed.

Remember also if the sheriff is satisfied the claim or defence has no sound basis in law after the Hearing decree may be granted in favour of the other. So an irrelevant statement of claim could be fatal for the pursuer. The other side of the coin, is, of course, an irrelevant defence could be "struck out" at this stage with judgment being awarded to the pursuer.

This is far superior to the old system where questions of law could only be established after Proof (Trial) even although it was obvious there was no relevant defence. Practically this will mean if the case is not disposed of at the Hearing pursuers having to prepare for the proof for an irrelevant defence will be a thing of the past – with much money in lawyers fees and witness time being saved.

As soon as it is known a case will be defended the pursuer's lawyer will have to marshall all of the facts and be able to present these in a cogent manner before the court at the Hearing. It may be the pursuer's lawyer will only be aware a defence is lodged the day after the return date. With the return date being only seven days from the calling date this will leave the creditor's lawyer only five days to prepare for the Hearing at the calling date – hence the provision for the Hearing to be continued.

If the defence is irrelevant the creditor's lawyer will try to persuade the sheriff to exercise his discretion and grant decree in terms of rule 8.3(c).

Creditors should also be aware Scottish lawyers often instruction local solicitors to appear for them. It will be necessary for the principal lawyer to impart all of the case history to his local counterpart without having to revert to the creditor for additional clarification.

A suggested "check list" is attached (Appendix 2) alerting credit controllers of the type of questions and information with which they should be able to supply to their lawyer.

And as timescales will be short (not least because the pursuers may only have 5 days to gather this information) credit controllers will have to exercise a fair degree of alacrity to respond accurately.

This is another reason why if it is suspected the action will be defended, credit controllers should ensure all papers are passed to their lawyer at the time the action is raised rather than later – it will save much scurrying about and anxiety during a window of only five days!

Subject to there being an issue of fact between the litigants and the court being satisfied the claim and defence are legally sound, the sheriff is required to fix a proof (trial) when evidence is heard.

Credit controllers will do well to remember in Scotland provision to give evidence by way of affidavit is extremely limited so it is likely witnesses will have to attend. This will obviously have cost as well as administrative implications.

The new rules have been tightened to allow more opportunity for decree by default. The sheriff will now be able to grant decree in situations where a party fails to appear at a hearing (including a proof). This will also benefit credit controllers because the previous rules allowed a continuation where a pursuer with witnesses was ready to go to proof and the opponent simply failed to turn up at court. Hopefully credit controllers will not have such anti-climaxes in the future should the sheriff exercise his discretion by granting decree in their favour in these circumstances.

However, only time will tell how the discretion will be exercised although one can expect variations amongst the 49 different sheriff courts.

The new fee scale is more generous to solicitors than in the past. This will be good news if the litigation is successful but if the case is lost the liability to the opposing party will be greater.

Also if the pursuer wishes to abandon the action for any reason and is unable to agree settlement on the basis of no expenses being due to or by either party, it is likely the pursuer will have to pay the defender's expenses.

These expenses are calculated on a "block fee" basis. Included in the fee structure are such items as recovery for work done before the action commences; an instruction fee; attendance at first calling and procedure preliminary to proof.

Typically an account of expenses in favour of a successful claimant could include the following where there was an opposed motion; the parties prepared for proof but settled the case prior to this taking place:

There may well be additional expenses depending on what work was done and the procedure followed in any particular litigation so the foregoing is by no means the total which could be claimed and serves merely as an example.

The new Small Claims Rules do contain useful additions absent from their predecessor.

In particular the central ethos being the court's attempts to have cases settled earlier at the Hearing by focussing on the disputed issues will be useful. This should avoid the expenses of going to proof although, as can be seen, abandoning a defended case could be costly.

Only time will tell how different sheriffs will interpret the rules and how interventionist they will be in achieving their purposes. Hopefully they will adopt an imaginative approach.

Two pieces of advice to credit controllers: (One) If you think there is even a remote chance of the case being defended speak to your lawyer before sending instructions and (Two) if the case is defended please ensure you have all the relevant facts at your fingertips.

The new rules provide as follows:-

8.3. 1. If at the hearing, the sheriff is satisfied that the action is incompetent or that there is a patent defect of jurisdiction, he must grant decree of dismissal in favour of the defender or, if appropriate, transfer the action….

2. At the hearing, the sheriff shall –

1. ascertain the factual basis of the action and any defence, and the legal basis on which the action and defence are proceeding; and
2. seek to negotiate and secure settlement of the action between the parties.

3. If the sheriff cannot secure settlement of the action between the parties, he shall –

1. identify and note on the summons the issues of fact and law which are in dispute;
2. note on the summons any facts which are agreed;
3. where it appears that the claim as stated or any defence stated in response to it is not soundly based in law in whole or in part, hear parties forthwith on that matter and may grant decree in favour of any party; and
4. if satisfied that the claim and any defence have or may have a sound basis in law and that the dispute between the parties depends upon resolution of disputed issues of fact, fix a diet of proof or, alternatively, if satisfied that the claim and any defence have a sound basis on the merits of the action and may grant decree in whole or in part in favour of any party.

Where the sheriff fixes a proof, the sheriff clerk shall make up a folder for the case papers.