1. What are the main reasons relating to the cost of litigation that discourage potential litigants from court action?

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1 LIST OF QUESTIONS CHAPTER 2: ACCESS TO JUSTICE 1. What are the main reasons relating to the cost of litigation that discourage potential litigants from court action? Aviva has restricted its answer to reasons relating to Personal Injury litigation as this is the area which Aviva has experience of. Aviva does agree that the perception of cost, noted at paragraph 2.3 as identified by Lord Woolf is generally a factor in discouraging litigation. Aviva does not though agree that the cost of litigation will discourage potential litigants from a Personal Injury action. Aviva considers this is so because of the wide availability in Scotland of Speculative "No Win - No Fee" agreements. Aviva believe that the general public in Scotland has a wide awareness of such litigation cost funding agreements and the circumstances in which they can be used e.g. Road Traffic Accidents or accidents at work etc. As is obvious from the advertising of such agreements that where a Pursuer is unsuccessful, no fee is payable by him/her. This is an effective risk reduction measure and in practice, the Pursuer's Agent will either assess the prospects of success and act for free until a successful outcome (or not) is achieved or have the benefit of a Before The Event (BTE) or After The Event (ATE) insurance policy which will cover the Pursuer for his own costs and / or any costs award made against him. BTE policies are widely sold by insurance companies typically as an add on to a motor or household policy. ATE policies are more typically purchased by Pursuer's Agents and the premium will in many instances only be payable in the event of a successful outcome. With such a well developed system, Aviva argues that a potential pursuer will not be discouraged from potential litigation in a personal injury action. Aviva notes reference made at 2.9 to the differential between personal injury claims registered with the CRU in England & Wales and in Scotland between 2008 and Aviva notes that in Scotland the rise in the number of claims was 7% (compared to 23% in England). Aviva accepts that there are significant differences in civil procedure in Scotland compared to England and that the growth of Claims Management Companies in England with associated "Claim Farming" techniques is far more prevalent. Aviva however makes the point that a 7% rise in the number of Personal Injury notifications to the CRU in Scotland has come during a period when Road Traffic Accidents have fallen. DfT figures have reported a 10% fall in RTAs in the last 3 years and the HSE has equally indicated the number of accidents at work has shown similar reductions and yet the figures in 2.9 indicate a 7% increase in Scottish personal injury claims. This is clear evidence to Aviva that the Scottish public fully understand their rights when they suffer a personal injury and that the cost of litigation is not a discouraging factor. Aviva would further like to stress that the figures quoted in 2.9 and 2.11 are evidence that the Scottish civil justice system has a better balance than that in England. It has widely been reported in England and confirmed in the reviews undertaken by Lord Justice Jackson and Lord Young that the English Civil Procedure Rules which replaced Legal Aid in Personal Injury actions have created a system of disproportionate costs, dysfunctional referral fees and encouraged fraudulent claims. These in Aviva's opinion are responsible for the disproportionate increases in numbers of personal injury claims in England.

2 Scotland does not have claim frequency as high as in (parts of) England and the fraud rings I "crash for cash" scams have not in Aviva's knowledge become endemic in Scotland because the Civil Justice system does not support the excesses that the CPR currently does in England. Aviva, in its response to the Ministry of Justice consultation on Lord Justice Jackson's proposals made reference to retuming the English CPR in personal inj ury actions to one similar to Scotland where access to justice is clear and yet not capable of exploitation by those who seek merely to profit from a pursuer's injury. CHAPTER 3: THE COST OF LITIGATION 2. Should solicitors' fees for litigation be recovered as expenses on the basis of time expended, value of the claim or some other basis? Aviva's response to this question depends upon a number of variables which we will discuss in more detail. The fundamental answer is that a solicitor should not receive higher reward for expending more time on a case to recover the same (or lesser) level of damages for their client than had they settled sooner. (This equally applies to defending claims in that a Solicitor should not receive higher award for defending their client for longer than reasonable to reach the same (or higher) level of damages for that matter) The current Voluntary Pre-Action Protocol with a fixed fee component works extremely well to maintain the above principle, however, at the present time; there is no real sanction in place to stop a scenario where a Pursuer's Solicitor can choose to litigate with the sole intention of maximising recoverable expenses. (Whilst aiming to recover the exact same level of damages for their client they could have achieved without the need for litigation) We accept that a Sheriff can choose to modify an award of expenses, but this seldom occurs in practice. We believe a greater focus on pre-litigation behaviour by all parties and a greater focus on the decision point at which to litigate is critical for the courts to decide what is fair and reasonable when it comes to recoverable expenses. The Pursuing Solicitor has to stipulate that the action is necessary when drafting any for of Court Action - in Aviva's view; this question should come under far greater scrutiny than it presently does and costs sanctions implied if the action is deemed unnecessary in retrospect. (Suggested sanction being the imposition of a fee equivalent to the Pre-Action Protocol fee or other sanction as the court sees fit) The present system works well however, it does overlook the drivers as to why a case litigates when assessing costs and sanctions for all parties. If greater scrutiny were to be applied, then it could result in more cases settling pre-litigation and court time could be preserved for cases where Judicial intervention is truly justified. Another key aspect is proportionality of solicitors fees related to the level of damages. In short, we believe there is a clear and gross disproportionality cases which requires to be redressed. on low value personal injury This disproportionality leads to manifest unfairness for the consumer in terms of higher insurance premiums - if insurers have to payout more in expenses, they need to charge higher premiums from consumers to cover that expense. Aviva is aware of an on going study being undertaken by the Forum of Scottish Claims Managers where settled litigated cases are being analysed to understand the relationship between the level of damages paid and the amount paid in Pursuers Costs.

3 In the analysis of January 2012 cases alone, (sample size of 343 cases) there were 144 cases where the Pursuers costs (including Counsel's fees if applicable) were higher than the actual level of damages paid. Within those 144 disproportionate cases, the highest level of damages paid was 16,000 and 141 cases (97.9%) had damages paid of 10,000 or less. The study is on going and more information will be added with every month that passes. The results clearly indicate the need for a fixed fee procedure in low value cases where proportionality can be restored and Pursuers costs are capped as a percentage of the damages, otherwise there is clear danger that justice for the consumer can be lost within a system where costs are the main driver of litigation.. Aviva would suggest a fixed fee process similar to the MOJ process in England and Wales for cases where damages do not exceed 25,000. In summary, Aviva agrees that solicitors' fees should be recovered on a time expended basis as long as that results in fair and reasonable remuneration. The test of fair and reasonable needs a greater focus on why the individual case litigated in the first place. In our view, the present system has stood the test of time and works well in the main, but requires a little modernisation to ensure it is fair and reasonable for all parties with greater, transparent and penalising sanctions (for either Pursuers or Defenders) for creating or prolonging unnecessary litigation. Furthermore, the area of disproportionality highlighted in low value personal injury cases needs to be redressed by a new process which builds upon mandatory pre-action protocols and costs sanctions for pre-litigation behaviour by restoring balance and capping costs and introducing a fixed fee scheme. 3. Is LPAC, as currently constituted, an appropriate body to review the level of fees for litigation which may be recovered as expenses? If not, what alternative body should carry out this function and what should be its composition? Aviva believes that as the Scottish Civil Justice Council is the vehicle being set up to facilitate reform and modernisation of Scotland's civil justice system, then the function of LPAC should be amalgamated within the Scottish Civil Justice Council. Aviva responded to the proposed membership of the Scottish Civil Justice Council by stating that:

4 Aviva is of the view that a Scottish Civil Justice Council must act as to represent SCOttiSl1 Court users - taking "use" as to mean those who are involved in all aspects of the legal process, pre and post litigation. While the membership should therefore include representatives from the judiciary, the legal profession and civil servants, these are not the sole users. Aviva strongly believes that the Council must also include members with specific interests such as insurers and trade union representatives. These groups are not included in the proposed membership at S37 of the consultation and in Aviva's view should be. Insurers are the largest single "user" of the court system in respect of Personal Injury claims in Scotland which form a significant proportion of cases litigating in Scotland. In Aviva's view it is therefore absolutely imperative that insurers are represented on the Council. Without the input of insurers the Council will lack credibility in this important area of litigation as only Insurers will be able to give valuable input and insight. As such, we also believe that Insurers must be represented on any body which reviews the level of fees for litigation to ensure fairness, equality and a transparent process. It is important that costs reform is dealt with in tandem with court reform and Aviva's view is that this is best dealt with by one body, which encompasses a wide range of views and interests. It is therefore essential that the body engaged to undertake such activities encompasses real court users in terms of consumers and insurers to create an inclusive and unilaterally agreeable judicial system. 4. Is the test currently applied by the sheriff court in sanctioning the instruction of counsel appropriate? If the sanction of the Court of Session were to be required prior to the instruction of senior counsel, what test should be applied? Aviva believes that the test itself for sanctioning instruction of counsel is appropriate; however it takes place at the wrong time in the action leading to great uncertainty regarding predicting costs for the litigant. Our view is that it would be more appropriate for the court to assess suitability of the action for the instruction and use of counsel as outlined in Such motions would create a clear understanding amongst the parties of the real issues of any case, together with creating a greater transparency and understanding of the cost consequences of the action. We also believe that the same basis should be adopted for sanction for Senior Counsel in the Court of Session and that the court should be allowed to consider if an action merits the involvement of Senior Counselor alternatively, allow the parties to use Senior Counsel if that is their wish, but with a clear understanding that costs equivalent to that of Junior Counsel will be all that is recoverable. 5. What test should the court apply when considering a motion for certification of an expert witness - should it be necessity, reasonableness or some other test? Our view is that the test for certification of an expert witness should be one of reasonableness, both in terns of whether it is reasonable to employ such a skilled person and also reasonableness in terms of the fees or charges of said expert witness. Like our answer to Question 4, Aviva believes that motions for certification and level of fees should take place before instruction of the expert witness or at the first practical opportunity in court. (As set out in 3.28)

5 This would lead to greater case management by the court which provides for transparency of expense for all parties. The present system of certification can result in inflated expert witness charges or the involvement of an expert only becoming known at the point settlement is being agreed by the parties. (Their reports or involvement having never been divulged previously) Such late notice can lead to settlement being conditional on expert witnesses being paid in full - in other words, the party agreeing to pay the settlement has to agree to pay the expenses in full for an expert witness who's involvement was not previously known or disclosed (and no reports ever exhibited) simply to secure settlement of the action. 6. In the sheriff court, should counsel's fees be a competent outlay in a judicial account of expenses only from the date of an interlocutor certifying the case as suitable for the employment of counsel? Yes. Aviva believes this creates the transparency fair system. and predictability of costs required within a 7. In the Court of Session, should senior counsel's fees be a competent outlay in a judicial account of expenses only from the date of an interlocutor certifying the case as suitable for the employment of senior counsel? Yes. In the same was as 6, Aviva believes this creates the transparency costs required within a fair system. and predictability of 8. Should the presiding judicial office holder assess what would be a 'reasonable fee for counsel in any account of expenses? If so, at what point in the proceedings should that assessment be made? Yes. In our opinion, the basis set out at 3.26 and supported by the Scottish Civil Courts Review for the creation of a table of fees for counsel is a sensible approach which could then be easily implemented by the presiding judicial office holder to assess the reasonable fee for counsel appropriate to the complexity and value of the case. Aviva believe that anecdotally, such notional tables of fees exist already between firms of solicitors and counsel instructed on a speculative fee basis, therefore there is no reason not to make this process more formal and transparent to allow for predictability. As in our response to 4, the assessment should take place at the same point as the motion for certification for counsel Le. before counsel's involvement is allowed. 9. From when should the fees of an expert witness be a competent outlay in a judicial account of expenses? As in our response to 5, Aviva believes that the fees of an expert witness should become a competent outlay from the point in time where the court decides the involvement of that expert witness is reasonable. (Payment for any preparatory work can be decided as part of that initial motion)

6 10. Should the presiding judicial office holder assess what would be a reasonable fee for an expert witness in any account of expenses? If so, at what point in the proceedings should that assessment be made? Aviva believes that the presiding judicial office holder should assess what a reasonable fee for the expert witness is in any account of expenses. As in other answers, that decision point can be taken at the motion for certification stage when the appointment of an expert witness is being argued about. The cost of an expert witness is an obvious component part on assessing the 'reasonableness' of their instruction. 11. Is it reasonable for counsel to be entitled to charge a commitment fee and, if so, should that be prescribed or left to the discretion of the Auditor? No. Aviva believe the only fair and transparent way is for Counsel to be paid for the work actually done whereas Commitment fees allow for counsel to receive duplicate payment in situations where they allow themselves to be 'double booked' for Proofs in the assumption that one or more cases will settle without the Proof going ahead. Any form of commitment fee or cancellation cost should be prescribed. 12. Should the level of fees recoverable by the successful party in a commercial action be greater than in other types of action and, if so, what is the justification? Aviva has no firm view to offer on this. 13. Should a tariff-based system for assessing the level of recoverability of judicial expenses be introduced? If so, how might such a system be structured? In our experience, there is little or no gap in the true recoverability of expenses in the majority of cases. The present system provides a great deal of flexibility in the way costs are dealt with. It is our view that any alterations to the current system must have proportionality at the heart of the matter. As in our earlier answers, there should be a greater focus on Pre-litigation behaviour with costs sanctions for parties who embark on unnecessary litigation or delay settlement unreasonably. Low value Personal Injury cases account for gross disparity in the level of recoverable costs. We are aware of an on-going study being undertaken by the Forum of Scottish Claims Managers where settled litigated cases are being analysed to understand the relationship between the level of damages paid and the amount paid in Pursuers costs. In the settled cases for January 2012 alone, (sample size of 343 cases) there were 144 cases where the Pursuers legal costs (including Counsel's fees where applicable) were higher than the actual level of damages agreed. In other words, the Pursuers legal costs were more than the damages in 41.98% of cases which is a clear sign of a lack of proportionality.

7 This becomes even more apparent when looking at the make up of those 144 cases - the highest level of damages agreed was 16,000. In 141 of those cases or 97.9% the damages agreed were 10,000 or less. Aviva understands this study is on-going and a more accurate picture will be built up over the coming months. This disproportionality leads to manifest unfairness for the consumer in terms of higher insurance premiums - if insurers have to payout more in expenses, they need to charge higher premiums from consumers to cover that expense. We would advocate a fixed fee process for low value personal injury cases (Motor Personal Injury, Employers Liability and Public Liability) where recoverable fees operate on a fixed percentage basis in the manner adopted by the MOJ process being followed in England and Wales and certainly without sanction for Counsel to be used. 14. Should any table of fees provide for a more experienced solicitor to recover at a higher rate than a newly qualified solicitor and/or for an accredited specialist to recover at a higher rate than a solicitor without accreditation? Aviva does not believe there should be any distinction. 15. Is the ability to request an additional fee a reasonable procedure for regulating the recoverability of judicial expenses? Yes. We believe so. 16. If the concept of an additional fee is retained: a. At what stage in the proceedings should a motion for an additional fee be made? Aviva's opinion is that there is no reason why the motion for the additional fee cannot be made at any time during the life of the court action. It may be argued that the most appropriate time is at the conclusion (as presently occurs) when the true complexity has been known and dealt with. b. Should motions for an additional fee, and the percentage increase, be determined by an auditor of court or by the member of the judiciary hearing the motion? We believe the member of the judiciary hearing the motion would be best placed to decide, with appropriate input from the auditor regarding Court of Session actions. 17. Should a litigant be entitled to claim interest on an award of judicial expenses and, if so, from what date and at what rate? Aviva believe it is fair and reasonable for interest to be paid on an award of judicial expenses should payment not have been made within 28 days of said award. The current rate of judicial interest however bears no relation to current interest rates, therefore we would propose the interest rate should be the prevailing bank rate at the appropriate time.

8 CHAPTER 4: FURTHER ENHANCING THE PREDICTABILITY OF THE COST OF LITIGATION 18. Should the court have a discretion to restrict recoverable expenses in a small claim even in cases where a defender, having stated a defence, has decided not to proceed with it? Yes. Aviva believes that the court should have such discretion so pre-litigation conduct can be considered and penalised by costs sanctions where appropriate. 19. Should more cases in Scotland come under the scope of a fixed expenses regime? If so, what types of case should be included? Yes. Aviva believe the universal acceptance that the voluntary Pre-Action Protocol works well should be taken further by making Pre-Action Protocols compulsory and allowing the courts to imposes sanctions if either party behaves unreasonably or the case litigates unnecessarily. We would refer to our answer to question 13 where we have set out our belief that a fixed costs regime for personal injury cases under 25,000 would bring greater proportionality and fairness for all parties. 20. Should each party to a litigation in Scotland bear their own expenses? If so, in what types of litigation? Should the rule be qualified and, if so, in what circumstances? In particular, is the general rule in family cases appropriate? Aviva believes the present system should remain that costs follow success. The problems faced in England and Wales are well reported in Lord Jackson's report and can be traced back to the abolition of legal aid for Civil cases together with the satellite litigation surrounding costs. Scotland has retained Legal Aid for civil cases which fulfil the funding criteria and do not have the satellite costs litigation issues so it would seem unreasonable to introduce measures to fix issues which do not exist. Family cases are outwith our area of expertise, therefore, we are unable to comment further. 21. Should a procedure for the summary assessment of expenses be introduced into the civil courts in Scotland? Aviva does not believe a procedure for the summary assessment of expenses should be introduced in Scotland. We believe that the present system is flexible enough that it does not require wholesale change, but that any change should be looking at sanctions for pre-ligation behaviour and a greater degree of case management in terms of the use of counsel and expert witnesses. In our opinion, an introduction of summary assessment of expenses could lead to creating more issues than it resolves.

9 22. If a procedure for summary assessment was introduced, In what circumstances should the summary assessment of expenses take place and should it be restricted to any particular types of action? We are not in favour of summary assessment on any types of action. 23. Would there be any benefit in introducing a procedure of submitting schedules of expenditure similar to the pilot scheme operating in the Birmingham Mercantile Court and TCC? No. We do not believe such a procedure would aid the system in Scotland. 24. Apart from imposing sanctions, what other powers, if any, should be made available to the courts to promote predictability and certainty of judicial expenses? Aviva believes that a greater transparency of how cases are funded would lead to greater predictability of costs as at the moment, there is no compulsion on the parties to disclose any details of speculative fee agreements, Before The Event insurance, legal aid etc. and sometimes this leads to complications where the parties are not aware of other parties with a vested interest in the litigation at hand. The Chapter 36 and Chapter 42 rules in the Sheriff Court and Court of Session respectively go some way towards creating opportunities for settlement or agreement on evidence (or at least highlighting the areas in dispute) however, the present timetable approach with a set Proof date or date for a Jury Trial means there is no real compulsion on the parties to meet or do so before the Pre-Trial minute is due four weeks prior to the Proof or Trial date. We would welcome greater judicial case management where the parties should be convened by the court to have earlier Pre-Trial Meetings where the process of evidence gathering is complete and the only outstanding matter is the Pre-Trial Meeting, then preparation for the Proof or Trial if settlement cannot be achieved. We would also welcome costs consequences should a party engage in unnecessary or unreasonable delay. CHAPTER 5: PROTECTIVEEXPENSESORDERS 25. Should the power to apply for a PEO in Scotland be limited to environmental cases or should PEOs be available in all public interest cases? Aviva has no view to offer on this. 26. Should limits be set on the level at which a PEa is made or should this be a matter for judicial discretion? Aviva has no view to offer on this.

10 CHAPTER 6: REFERRAL FEES 27. Should lawyers be permitted to pay a sum of money to a third party in return for referrals or instructions for other business? Aviva believes that the approach applied in Scotland should mirror the position in England & Wales and therefore a ban on payment of referral fees in respect of personal injury claims should be applied. The helpful description provided in this Review clearly details that despite an attempt to control and prohibit the payment of referral fees in Scotland; lawyers are paying a variety of third parties for the referral of new cases. It is Aviva's position that this review should recommend that the regulators in both Scotland and England & Wales need to work together to ensure that the ban on making a referral payment is consistently implemented. In our view the OFT position and also the views of the Legal Services Board as to the benefits to consumers have quite correctly been challenged in England by LJ Jackson and referral fees have had a negative impact on the level of legal costs (which must now be reduced) and have been a key component in the rise in the cost of insurance and affected all compensators. The ban in England & Wales is long overdue and the existing position taken in Scotland should be updated and take a uniform approach with the secondary regulation being developed by the SRA, FSA and Ministry of Justice. 28. Should lawyers be permitted to provide legal or other services to a third party at no cost to the third party in return for referrals or instructions for other business? Aviva recognises that this is an area which has not been specifically dealt with in England in the Legal Aid and Sentencing of Offenders Bill 2011 and is a difficult area to regulate in view of the link to work being provided as part of a wider service including advice via charities. This is an area that Regulators who are being expected to draft the secondary rules will need to address. In our view, any other services provided will have an inherent value or cost and should not be provided as a route to avoid the proposed ban. It is however, the clear intention of the spirit of the proposed ban that any consideration for the provision of services should be treated as a referral fee if it exceeds a reasonable amount payable for the services provided. 29. Should lawyers be permitted to make payment to a company, or some other body, either in money or by some other consideration, in order to have their name placed on a panel for the purpose of securing a flow of instructions in litigation? The simple position here is that a lawyer should not be permitted to make such a payment or any alternative consideration where the work referred includes a personal injury claim and the fees paid for other types of work should not be increased to reflect the ban on paying referral fees in personal injury cases. In our view the regulators must ensure that panel arrangements or commercial agreements are not created or act so as to avoid the impact of any ban. In our view the present system in Scotland requires the Law Society to increase its regulatory oversight and recommend further changes to the rules or legislation to ensure the existing ban is actually effective.

11 30. Should the answers to questions 27, 28 and 29 be different, please explain why the situations should be distinguished. Aviva has not further comments to make with regard to this section. 31. In the event that payment for referrals, whether by money or provision of services, is permitted, should there be a limit upon the value of the referral fee or services provided? If despite the clear need to maintain and enhance the ban in respect of personal injury cases a cap is proposed, then has to be strictly enforced The immediate concern to Aviva is that the payment of referral fees has carried on in Scotland irrespective of the ban via the use of wider commercial arrangements/methods of avoidance. If a cap was introduced it would immediately be superfluous without an increase in regulation and clearer penalties for being in breach. The cap will simply not address the problem in isolation. In terms of the level of any cap the ABI has carried out independent research which demonstrated that the level of marketing costs in almost every other sector is less than 100 and the cost of marketing in our view with regard to lawyers should also be no higher than this figure. CHAPTER 7: BEFORE THE EVENT INSURANCE 32. Do BTE insurers adversely influence the conduct of the litigations which they are funding? In our view there is no demonstrable evidence that any BTE insurer influences the conduct of the litigation. All BTE insurers are subject to the Principles and Regulations created by the Financial Services and Markets Act, which have at their core the avoidance of any conflicts of interest between the insurer and the policyholder. In addition, the Legal Expenses Regulations of 1990 provide a further EU wide requirement that any potential conflicts of interest in terms of legal expenses insurance are avoided. Aviva is a legal expenses insurer and is fully conversant and compliant with the requirements. In addition any panel firm is also fully aware of their own regulatory position and that they must at all times act in the interests of the client. Aviva products are designed with the consumer in mind and to ensure that where a customer has an unfortunate accident and genuine prospects of success they are supported in making a claim.

12 33. Is it appropriate for a lawyer in the direct employment of an insurance company to assess whether a policy holder's claim falls within the terms of the policy? Aviva does not employ any in-house lawyers to determine whether a claim is covered when initially notified. However, we do not consider that this is inappropriate and any claim once made must be handled by person with the appropriate level of skill and knowledge and assessed in accordance with the insurer's regulatory responsibility. In our view it is therefore irrelevant as to whether a lawyer or a claims handler in the direct employment of the insurer carries out the assessment. 34. Is it reasonably practicable for BTE insurance policy holders to be entitled to instruct any lawyer of their choice, at any stage? Aviva believes that the existing requirement of the Legal Expenses Regulations 1990 implementing the EU wide directive is clearly structured to provide freedom of choice at the point of legal proceedings and our policies are structured to ensure that we are entirely compliant. The point at which the freedom to choose should be applied is in our view entirely linked to the type of claim which is being made and also ensuring that the lawyer instructed is appropriate and is prepared to act at a reasonable rate. The Taylor Review has identified that the cost of BTE insurance in the UK is considerably lower than in Germany and this is partly due to the different legal systems that operate. In addition many consumers do not know which lawyer they should instruct and by operating a panel and selection process (which undergoes regular audit and due diligence) Aviva believes it is able to ensure that our customers receive the best possible advice. 35. Should BTE insurance be encouraged and, if so, what suggestions would you make to address some of the criticisms levelled against it? In our view the service provided by a BTE insurer and the overall cover is an important product and allows a Claimant to receive advice, defend their legal rights and also pursue matters where there is a genuine prospect of success. Many consumers do not know how to pursue their legal rights and a BTE policy provides access to the legal advice and legal funding they require, especially in areas where they are unable to obtain Legal Aid. As a major BTE insurer the lawyers instructed our chosen in terms of the quality of service that they deliver to ensure that the product sold delivers the high level of service that we strive to provide to our customers. There has been criticism of the perceived way in which legal expenses operates, but much of the complaints are generated by lawyers wanting to charge higher rates than the rates insurers are able to negotiate. In our view where there is a genuine and reasonable requirement for a specific lawyer to be instructed in any case the insurer is required to consider the request and any dispute about the appointment and terms can be referred to an independent arbitrator.

13 CHAPTER 8: SPECULATIVE FEE AGREEMENTS 36. Are there any aspects of speculative fee agreements that require regulation? Aviva has again restricted its answers to Personal Injury claims. Aviva is of the opinion Speculative Fee agreements are providing a good facility for Pursuers to bring personal injury claims and provide access to justice as is shown by the figures quoted in 2.9 of the Consultation paper. Aviva draws reference to its answer to Chapter 1 - Aviva believes that the increase in numbers of personal injury claims being brought in spite of a reduction in the number of RTA collisions means Speculative Fee agreements are working and delivering access to justice. Aviva therefore proposes no need for additional regulation. 37. What should be the maximum uplift for success fees in Scotland? Aviva believes that the question of uplift for success fees should be a matter between solicitor and client and that, so long as the % success fee is made absolutely clear and transparent to the client at the outset of the process (meaning a Pursuer can shop around for the best deal) then this is fair. Aviva is aware though that maximum uplifts of 25% of damages have been suggested in England and agrees that this is a reasonable figure should a maximum uplift be set. 38. Should there be a cap on success fees as a percentage of damages? If so, at what percentage and at what level and heads of damages? Aviva agrees that there should be a cap and that the cap should be set as a % of damages awarded. Aviva is aware that maximum uplifts of 25% of damages relating to past losses only have been suggested in England and agrees that this is a reasonable figure should a maximum uplift be set. 39. Should success fees be recoverable in Scotland? If so, under what circumstances? There are many reasons why Aviva cannot support any recommendation recoverability of Success Fees in Scotland. to introduce Aviva considers it very important that the Consultation examine the history of recoverability in England which has been examined in detail by Lord Justice Jackson. The primary intention of making a success fees recoverable in England in 2000 was when Legal Aid for most personal injury claims was removed. The theory was to allow a claimant lawyer to recover additional costs in winning cases to cover the costs that they would not be able to recover in losing cases. It was not intended to become an additional source of income and profit for both lawyers and introducers. Aviva points the Consultation to Lord Justice Jackson's preliminary and final reports that found that as opposed to recoverability of success fees creating a "fund" and encouraging lawyers to take on the more risky cases they have in fact "cherry picked" cases with minimal risk. In addition costs bills have increased as lawyers have maximised the level of base costs and therefore success fee to increase their profits, without taking on the less certain cases.

14 It is therefore Aviva's view that the primary intention of recoverability in England ie of funding the losing cases was not achieved. Aviva notes that the Legal Aid Sentencing and Punishment of Offenders Bill 2011 currently passing through the UK Parliament in Westminster will reverse recoverability and the level of any success fee should once again be a matter between the claimant and their solicitor, so that the claimant has a real financial stake and interest in the case. Aviva stresses that the system which operates as Speculative Fee agreements in Scotland means Scottish solicitors have to properly engage with their client and take proper instructions and fully engage with them as to the litigation process and progress of their case. Aviva further draws the attention of the Review to the "Costs War" in England & Wales which followed the introduction of recoverability. This "satellite" litigation was in our view directly driven by levels of disproportionate legal costs stems from the changes introduced by The Access to Justice Act 1999 when legal aid was removed and recoverability of the success fee and ATE from the losing party was permitted with no caps or controls other than a maximum success fee of 100%. The lack of any proper controls and guidelines resulted in Insurers and other paying parties in civil litigation having to demonstrate that the levels of costs claimed were excessive and the judiciary had limited guidance as to what levels of success fee should be set and recoverable In the bulk of personal injury cases in England & Wales success fees have become fixed through mediations to avoid the huge satellite litigation which resulted from Claimant lawyers seeking to maximise the success fees. The rules gave no guidance as to reasonableness save for a maximum success fee of 100% and this resulted in compensators having to show the fees were unreasonable and led to the vast number of costs cases which have come before the courts. The unfortunate outcome of recoverability is that a success fee has quite wrongly become part and parcel of the standard recoverable fees in an individual case as opposed to representing an element of proportionate risk in an individual case or to cover the cost of losing cases. There is no better example of this than the continued recoverability of success fees of 12.5% in the Ministry of Justice low value RTA protocol cases. There is ultimately no risk of either making a total or almost complete recovery of costs in theses cases as the defendant has admitted liability within 15 days of notification and that admission is binding unless fraud or causation becomes clear which will only occur in a de minimus % of cases. It is in many respects a zero risk process. In our view compensators should not have to pay the costs of both the winning and the losing party. It is difficult to reconcile why the system in England & Wales currently results in an unsuccessful party not only having to pay the winners costs but also fund other litigation cases which are not successful in which they are not directly involved. Aviva implores the Review not to follow such a model. Aviva would also like to point out that use of CFA's in England & Wales have been abused - their use (and Collective CFA Agreements) has become prevalent in civil litigation even where the parties are wealthy or commercial organisations who are quite able to fund their cases. There is no better example than two recent decisions in England of Pankhurst v White & MIB and also the decision of the ECHR in MGN v United Kingdom as to the disproportionate costs behaviour which now exists since recoverability was permitted.

15 40. Should ATE insurance premiums be recoverable in Scotland? If so, under what circumstances? Aviva does not support this proposal. Aviva draws the attention of the Review to its response to Question 39. Lord Justice Jackson in England looked into recoverability of ATE Premiums in some detail. He found that the problem with ATE recoverability is that it is an inefficient form of costs shifting where defendants effectively pay claimant costs win or lose. Aviva also draws the attention of the Review to Lord Justice Jackson's overall premise that the recoverability of ATE premiums acts as to remove any element of financial risk from a claimant and this has had the effect of taking away any reason for the claimant to control his/her own costs. Aviva also considers it inconsistent that a claimant who takes the precaution of insuring himself against legal costs via BTE insurance does so selecting his/her policy carefully and pays a premium but a claimant who subsequently takes out an ATE insurance policy can recover the premium almost regardless of cost. As was made clear in Lord Justice Jackson's Review, in England since Rogers v Merthyr Tydfil 2006 defendants have found it almost impossible to challenge ATE insurance premiums as being unreasonable. Lord Justice Jackson, correctly in Aviva's view, notes this has distorted the current ATE market to one where there is no competitive incentive as a claimant will inevitably recover the premium price. This means there is no incentive for a claimant to shop around to determine the best deal and that ATE premiums are not reflective of risk. Added to this is the situation reflected upon by Lord Justice Jackson that ATE insurers are reluctant to take on "risky" cases and solicitors "cherry picking" potentially successful claims which has defeated the objective of ATE recoverability acting as a means of access to justice. Aviva therefore considers there to be no argument that ATE insurance premiums should become recoverable from a losing party in any class of litigation in Scotland. 41. If success fees and ATE insurance premiums remain irrecoverable in Scotland, is it reasonable to expect successful pursuers to contribute some of their damages towards payment of their legal fees and insurance premiums? If not, what are the alternatives? Aviva believes it is reasonable to expect any Pursuer to have a financial interest in litigation and contribute if the outcome is successful. Aviva does not anticipate any contribution by a Pursuer will be onerous and, as is currently the case in Scotland, encourages a Pursuer to take an interest in the conduct of litigation maintaining focus on cost. CHAPTER 9: DAMAGES BASED AGREEMENTS ('CONTINGENCY FUNDING') 42. Should the law be changed to allow solicitors and counsel to enter into DBAs? Aviva believes that law should not be changed to permit solicitors and counsel to enter into damages based agreements in civil litigation pertaining to personal injury.

16 This consultation has not adequately set out the case for such agreements being permitted in civil litigation and failed to consider the effect that such agreements might have on civil litigation when combined with any future rules or laws from the EU concerning collective actions as part of the impact assessment. Aviva believes that the case for such agreements has not been demonstrated Speculative Fee Agreements. above current If there were to be any such permission for damages based agreements the rules would have to be adequately drafted to safeguard a pursuer and ensure that a damages based agreement is a better or an alternative choice to entering into a speculative agreement. 43. Should claims management companies continue to be entitled to enter into DBAs? Aviva is aware that Claims Management Companies in Scotland have been permitted since 1998 to enter into DBA type agreements. Aviva has experience of dealing with Quantum Claims and other claims management companies and sees no particular market distortion caused by this model. Aviva therefore has no objection to the continued use of such agreements by Claims Management Companies in personal injury claims. 44. If DBAs are permitted in Scotland: a. Is it reasonable to expect successful pursuers to contribute some of their damages towards payment of their legal fees? If DBA's are to be permitted for Solicitors and Counsel in Scotland in personal injury cases, Aviva considers it is reasonable for a pursuer to contribute a % of their damagers as long as the Rules which govern this practice are clearly defined to ensure transparency and consumer protection. Aviva anticipates that in "normal" personal injuries actions there would be no need for a DBA over a speculative fee agreement however in more risky cases a solicitor may wish to offer a DBA to a pursuer to reflect the increased risk in running the case. In such circumstances Aviva considers that as long as the pursuer is made fully aware of this, then the risk will justify a successful pursuer contributing a % of his damages. b. Should there be a cap on the percentage of the damages that lawyers are entitled to charge? If there is to be any credible difference between a DBA and a speculative fee agreement, in Aviva's view the limit of the recovery from damages excluding future losses should be a higher cap on the % of damages. The cases which are more likely to be suitable for a DBA are those cases which have lower prospects and a higher risk of not being successful and lawyers are not prepared to take on a Speculative Fee Agreement. c. Should the percentage recoverable under a DBA be applicable to all heads of loss? In Personal Injury actions, Aviva is of the view that any losses allocated to the future eg Care, Loss of Earnings, Aids & Equipment etc should be isolated from a DBA.

17 Aviva believes this because such heads of damage are the Pursuer's future and to fail to protect these would call into question the objective of compensation - ie placing the pursuer in the position he would have been but for the accident in so far as is possible. d. Should there be an increase in the level of damages awarded? If so, by what percentage and how is this to be achieved? Aviva is firmly opposed to this. In England & Wales Lord Justice Jackson has suggested a 10% increase in General Damages to compensate a claimant for losing recoverability of ATE insurance and Success Fees. Neither of these are recoverable in Scotland and are not part of the personal injury process. Aviva can see no reason to introduce any increase in damages in Scotland as there is no counter balance - in England a defendant will pay less in legal costs to a claimant solicitor but more damages to a claimant. In Scotland a defendant will simply pay more - this is not proportionate. Aviva also reminds the Review that damages in personal injury cases in Scotland are awarded by both Judges and Juries. In England only Judges make awards. It is easy to increase damages in England by 10% as was done in Heil v Rankin Aviva questions how Juries who cannot be guided by Judges can factor in any increase? e. What forms of protection may be required for clients entering into such an agreement? Aviva is of the view that there should be specific regulations to ensure clarity and transparency for a pursuer. Aviva believes that if DBA's are to be considered in Scotland, a separate and full consultation on the impact of contingency fees in civil litigation is required. This is a new area of civil litigation funding apart from non-contentious business and employment tribunals and the case and impact of contingency fee agreements has not been fully considered. To Aviva, the main issue to resolve is how any conflicts of interest are to be managed and ensuring that any party who signs a DBA is clear as to how the case is being funded and is clear on the net amount that they will be recovering from the damages and liability for disbursements and any adverse costs. 45. If the current prohibition on solicitors and counsel entering into DBAs is retained, should steps be taken to prevent its circumvention by the formation of a Claims Management Company in which solicitors are directors or shareholders? Aviva repeats its answer to Q44e and believes that if DBA's are to be considered in Scotland, a separate and full investigation and consultation on the impact of contingency fees in civil litigation is required. To Aviva this is very much a new area of civil litigation funding apart from non-contentious business and employment tribunals and the case and impact on Scottish law of contingency fee agreements has not been fully considered.

18 46. Should there be regulation of claims management companies operating in Scotland? If so, what are the mischiefs to be addressed and how should regulation be achieved? Aviva notes the comments made in para 9.7 and 9.8 of the consultation document.to Aviva it appears that this issue has been examined in more detail recently by the Scottish Governmentin the consultationssurroundingthe Legal Services(Scotland)Act Aviva suggests that if no evidence of mischiefs has been found, then there is little call for regulation however Aviva does believe that the issue could be put to a further consultation looking specifically at how contingency fees or DBA's will impact CMC's and the legal services market in Scotland. CHAPTER 10: THIRD PARTY FUNDING 47. What are the risks/potential abuses involved in third party funding and how might these be addressed? The major risk is the extent to which a third party funder controls the litigation and whether the Claimant is able to obtain clear and objective legal advice if the third party funder wishes to either settle a claim or withdraw. In England & Wales there is a clear move toward permittingthird party funding and a code of practice is being developed. As detailed in the Taylor Review there is no present prohibition on third party funding and no clear understandingas to the extent of third party funding in Scotland. It is our understandingthat the code of practice being developed by the Ministry of Justice is designed to ensure that there are appropriatesafe-guards in place and in the absence of any such code in Scotland the adoption of a similar code to ensure appropriate consumer protection needs to be considered. 48. If regulation is desirable, what form(s) should it take? In our view a code similar to the proposed code in England & Wales should be implemented combined with a clarification of the Solicitors responsibility when advising a client where a third party funder is being consideredor recommended. 49. Should a party to a litigation who has entered into a funding arrangement be obliged to disclose details of that arrangement to any other party and, if so, in what circumstances? Aviva does not consider that there should be any difference with the present requirementto notify a case which is being funded by way of a conditionalfee agreement. CHAPTER 11: ALTERNATIVE SOURCES OF FUNDING 50. Is a disproportionate amount of the civil legal aid budget allocated to family actions and, on any view, are there ways in which this might be reduced? Aviva has no comments to make with regard to this section as it is not an area in which we are involved.

19 51. Should a CLAF or SLAS be introduced in Scotland? If so, which is preferable? Aviva has no comments to make with regard to this section as it is not an area in which we are involved. 52. If such schemes were to be introduced, what types of litigation should be covered? Aviva has no comments to make with regard to this section as it is not an area in which we are involved. 53. If such schemes were to be introduced, what should be the minimum and maximum disposable income of successful applicants? Aviva has no comments to make with regard to this section as it is not an area in which we are involved. 54. Should such schemes be liable for payment of the expenses of successful opponents? Aviva has no comments to make with regard to this section as it is not an area in which we are involved. 55. What further steps, if any, should be taken to promote pro bono funding of litigation and by whom? Aviva has no comments to make with regard to this section as it is not an area in which we are involved. 56. Should the Scottish courts have the power to oblige an unsuccessful party in a civil litigation to pay judicial expenses where the successful party has been represented on a pro bono basis and, If so, to whom should such a payment be made? Aviva has no comments to make with regard to this section as it is not an area in which we are involved. CHAPTER 12: SCOTLAND'S LITIGATION MARKET 57. What steps could be taken to make Scotland the forum of choice for litigation? In our view, greater predictability together with transparency of costs, combined with more judicial case management would improve our already enviable system. There is also a real issue regarding Civil Jury Trials and the present system where by the Jury is given little guidance (if any) in terms of what to award by the Judge and the outcome of Jury Trials are unpredictable for every party involved. This creates a culture where it is universally acknowledged by Advocates and Solicitors that it is impossible to predict an outcome. This simply does not fit with a modern judicial system being promoted for predictability and certainty. We would advocate the need for some Judicial intervention in Jury Trials, even to try to introduce a possible range of awards based upon submissions made by Counsel to the Judge with the Jury absent.

20 There are real delays within the current Judicial system and we would support a change in the privative limit of the Court of Session so that valuable court resources are retained at the correct level to ensure Scotland operates a judicial system which allows speed of access to justice while offering predictability over costs and outcome. 58. Apart from the introduction of a tariff-based system as described in Chapter 3, what measures might be introduced to reduce the difference between the actual cost of litigation and the amount recoverable as judicial expenses? We refer to our answer to Question 13. The disproportionate costs which presently exist in low value personal injury cases requires redress and the best way we can see would be a fixed fee regime for cases with damages of 25,000 and under. We do not accept there is a significant difference between the actual cost of litigation and the amount recoverable as judicial expenses and we demonstrate in our answers to questions 2. and 13 that in cases where the damages are 25,000 or less there is clear evidence that the Pursuers costs are higher than the damages sum at issue in a majority of cases. The Forum of Scottish Claims Managers study showed that in January 2012 settled cases; there were 258 cases where the damages were 25,000 or less. In 55.8% (144) of those cases, the Pursuers costs were higher than the level of damages. We believe this is the area in need of reform. 59. If a one way costs shifting regime is introduced in England and Wales but not in Scotland, would this create an incentive to litigate In England and Wales? No. We believe the introduction of one way costs shifting in England and Wales would be as a solution to a problem which does not presently exist with the Scottish system. In our view, the Scottish system exists as a forum of choice for litigation in personal injury claims where there is clear Scottish jurisdiction and particularly in areas of law such as civil fatal cases and we do not consider one way costs shifting in England and Wales would impact in any way upon that, 60. If damages based agreements are introduced in England and Wales but not in Scotland, would this create an incentive to litigate in England and Wales? No. We do not believe there would be any significant impact or incentive. CHAPTER 13: SPECIAL CASES AND CONCLUDING REMARKS 61. Do clinical negligence claimants face particular difficulties in the funding of claims? If so, what measures might be taken to address these difficulties? Aviva does not deal with clinical negligence claims and so has no comment to make..