Why have they been introduced?
The Gill review recommended a system of pursuers' offers be introduced to reduce settlements at the doors of the court and encourage parties to meaningfully engage with one another on the value of cases. The Lord President and Lord Justice General, Lord Carloway, Chair of the Scottish Civil Justice Council (SCJC) commented: "Court rules have an important role to play in promoting and encouraging early settlement of cases. Under these rules, a defender who chooses not to accept a pursuer's offer risks incurring a penalty if that decision proves to have been ill judged. As with judicial tenders, the lodging of a well pitched pursuer's offer will therefore provide a strong inducement to settle".
Lord Carloway tasked the SCJC's Costs & Funding Committee with considering a system of pursuers' offers which was enforced by statute in April this year.
A pursuer's offer requires to be lodged with the court and must state that it is made in terms of the relevant rules and offer to accept a sum of money and the judicial expenses.
Once lodged, it is then for the defender to decide whether or not to accept the offer.
If the offer is accepted within a "reasonable period", there will be no financial implications for the defender and decree will simply be granted in favour of the pursuer for the sum offered and expenses.
However, if the offer is not accepted within a "reasonable period" or it is not accepted at all, and the pursuer is subsequently awarded a sum equal to or above the offer following proof, there may be a financial penalty. In those circumstances, it is for the pursuer to apply to the court for an uplift.
The Financial Penalty
In considering whether an offer has been accepted within a "reasonable period", whilst no time limit is provided in the rules, it is likely up to 21 days would be considered appropriate. If the defender accepts an offer beyond this date, they will be held liable to pay an uplift to the pursuer. This uplift would be the equivalent of 50% of the pursuer's expenses for the period from when the offer could reasonably have been accepted until it was accepted.
Where the pursuer's offer is not accepted and the pursuer subsequently matches or beats the offer following proof, the defender will be held liable for an uplift equal to 50% of the pursuer's expenses for the period from when the offer could reasonably have been accepted until the date of the judgement.
It should be noted that the uplift includes any "additional fee" awarded but excludes outlays. The distinction also requires to be made that whilst this calculation is based upon the pursuer's judicial expenses, this is not an uplift in expenses, but an additional award to the pursuer.
An Automatic Uplift?
The uplift is not automatic. The pursuer requires to move the court to award the uplift on "cause shown". Therefore, it is open to the defender to argue that the pursuer is not entitled to receive the uplift.
Whilst the rules provide no guidance on this, arguments can be envisaged in circumstances where the value of the case cannot properly be assessed due to the failure to lodge or late lodging of medical evidence or vouching by the pursuer preventing a full breakdown of the value of the claim. It should be noted that courts have been prepared to modify awards of expenses in cases where it has been deemed appropriate due to the handling of the case by a party (Devine v Laurie (2016) SC EDIN 83). In addition, whilst the rules apply a 50% uplift, it was originally anticipated that the court could vary this on a case by case basis. Only time will tell whether this remains a fixed level.
The new system can undoubtedly be used to the pursuer's advantage by putting pressure on the defender to seriously consider the value of a claim without any delay. The later the offer is accepted, the greater the financial penalty might be. However, there are also advantages for the defender who may be provided with a more realistic view of the value of the pursuer's claim, rather than the best case scenario set out in the Statement of Valuation of Claim. If utilised correctly, the new system should assist defenders to settle cases - particularly where liability is not in dispute - earlier and on a more economic basis.
Of course, the flip side of the argument for defenders is that the stakes are now higher if a case proceeds to proof given the risk of failing to beat the pursuer's offer. Some argue there is now inequality as defenders will be penalised for unnecessary delays in accepting an offer or not accepting an offer when there is no equivalent penalty for a pursuer not accepting a tender. However, further changes relating to expenses are expected in the future and these will likely alter the position once again.
Only time will tell how pursuers' offers will work in practice and how solicitors deal with the complexities of the timing and level of offers to best serve their clients. It will be interesting to see whether these new rules have the desired effect of encouraging greater discussion between agents on the value of cases, perhaps ultimately easing the ever increasing pressure on the courts.