What Has 2018 Brought to the Scots Legal System So Far?

• What is next for 2018?
• "Self-employed” parties - available rights against business and liabilities for their omissions
• Reported cases
• Changes to the Private Rented Sector
• The Contact (Third Party Rights) (Scotland) Act 2017 (“the Act”)
• Legislative developments

So far 2018 has seen a number of developments and changes in the UK and Scottish legal landscape, including the introduction of minimum alcohol pricing in Scotland, the first publication of ‘pay gap’ material, and the implementation of GDPR (resulting in hundreds of emails from mailing lists asking you, correctly or otherwise, to ‘opt in’).

There have, however, been a number of equally significant developments in the law for individuals, companies and employers alike in the conflicts sphere, which have perhaps fallen below the radar.

Here, WJM Partner Andrew JP Wilson and Solicitor Danielle McLaughlin take the opportunity to summarise some of the key developments in law in the past six months, as well as highlighting changes we might expect to see in the remainder of the year.

What is next for 2018?

Potential reform of commercial law of leasing?
The Scottish Law Commission has recently issued a useful discussion paper, dealing with a number of aspects of the law of leases, and especially the termination of commercial leases and seeking response on proposed reform.

Reform of the law Prescription (time bar)
Following an extension consultation by the Scottish Law Commission, a draft bill is currently progressing through the Scottish Parliament.

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"Self-employed” parties - available rights against business and liabilities for their omissions

In a number of cases already this year the courts have highlighted that business may not be protected from being liable for the omissions of ‘self employed’ or ‘gig’ contractors and may also owe them various duties under employment and worker regulations generally.

Pimlico Plumbers & Another against Smith [2018] UKSC 29

In this case Mr Smith had worked on a self-employed basis with Pimlico for over six years. In 2011 Mr Smith issued proceedings against Pimlico stating that he had been unfairly dismissed, had an unlawful deduction from his wages, a failure to pay statutory annual leave and discriminated by virtue of a disability. His contract contained restrictive covenants (restricting his ability to work for similar competitors should he leave the company), he drove a Pimilico van, was required to wear their branded uniform, had a right to substitute himself for another and, amongst other things, was free to reject particular offers of work and to accept outside work if no work was offered by Pimlico.
Ultimately the Supreme Court held that Mr Smith was a worker as defined by the Employment Rights Act 1996 and was therefore entitled to bring a claim for unlawful deduction of wages. They also held he was a worker as defined by the 1998 Working Time Regulations and therefore entitled to a period of paid annual leave. It was held that “he was employed” as defined by the 2010 Equality Act, entitling him to bring a claim against the company for disability discrimination and a failure to make reasonable adjustments. The Supreme Court, however, confirmed the view that he was not an “employee” engaged in a contract for services as defined by the Employment Rights Act 1986, and therefore he was not entitled to bring an unfair dismissal claim against Pimlico.

While the decision did not necessarily add or change the established principles in this area of law, it does comes as a timely reminder for businesses that the ‘self employed’ title may not give them the protection they assume it afforded them, and that their practice and procedures should be regularly reviewed.

Vicarious liability- Lauren Grubb v Natalie Shannon [2018] SC GLA 13

This case importantly highlights that the law on vicarious liability – where a party can be responsible for the actions of a third party - is continuing to evolve and that using ‘self employed’ contractors, or ‘gig employees’ may no longer exclude a business from such potential liabilities.

In this case Ms Grubb had sought damages for personal injury caused by an allergic reaction to an eyebrow tinting procedure carried out by a separate, qualified and self employed beauty therapist at Ms Shannon’s business premises.

Sheriff Reid ultimately held that Ms Shannon was responsible for the actions of the beauty therapist in question and ordered her to pay damages. This was notwithstanding the fact that the individual therapist in question was not employed or paid by Ms Shannon, there was no contract in place requiring her to work at the establishment; that she merely rented space on a daily rate and rented on an ‘as and when required’ basis.

In finding against Ms Shannon Sheriff Reid took the view that the test for vicarious liability-had been met. That (1) the relationship as between the therapist and Ms Shannon was of a characteristic to make it just fair and reasonable for liability to apply; and (2) that the omission by the therapist was closely connected with the activities of Ms Shannon and her business to impose a liability.

In reaching that view, the following factors were surprisingly of relevance: that the beauty therapist had integrated herself in to Ms Shannon’s business, performed core activities of the business, actively promoted the business and wore a branded uniform, that she held keys and the password to the business’ Facebook page and had authority to use both and had agreed to fix her prices for treatments to an approved level with Ms Shannon and could only offer discounts or special deals with Ms Shannon’s authority.

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Reported cases

Partnership Liabilities and Succession
Scottish Pension Fund Trustees Ltd v Marshall Ross & Munro, Charles G Bow and Patricia Grzybek [2018] CSIH 39

While this Inner House decision relates to the historic liabilities arising out of the Scottish Pension Fund, it provides useful guidance and a reiteration of the overall law on the less than straightforward principles concerning a new partnership’s liabilities for the responsibilities of its predecessors. The opinion of Lord Drummond Young in particular importantly reiterates that in Scots law there is, in certain circumstances, a presumption that where the same business is passed by one partnership to another, the new partnership takes on the liabilities of the former as well as its assets. For that assumption to arise there are three essential conditions:-

1. The new partnership must be “practically the same” as the old partnership. Lord Drummond Young felt that in his view this meant that that the business entity should remain essentially the same, despite changes in the individual members of the partnership;
2. The business of the partnership must be continued without interruption; and
3. The original partnership, if it continues to exist, must be left without assets. Lord Drummond Young was of the view that this requirement should not be interpreted strictly- a significant diminution in assets would clearly suffice in his opinion.

It must not be forgotten that the Court stresses that this is only a presumption, and there are circumstances in which such a presumption will clearly not apply. Therefore it is important for all partnerships to look at their own individual circumstances before reaching a view on the extent of any past liabilities.

When can a party be liable for economic loss suffered as a consequence of a misrepresentation
Steele & Another v NRAM Limited (formerly NRAM plc) [2018] UK SC 13
The Supreme Court (Highest Civil Court) in this case has provided important clarification on the circumstances in which someone, in this instance a solicitor, may be liable for careless misrepresentations which cause economic loss.

Here a solicitor acted for a limited company who had borrowed money from NRAM to purchase four commercial units. Standard Security over the four units was granted in exchange. Over time the company sold one of the units repaying part of the loan in exchange for restricting the Standard Security over the remaining 3 units. NRAM did not appoint solicitors. In 2006 the company sought to sell another unit. NRAM were unwilling to release the unit unless part payment was made with the security remaining in place for the remaining 2 units. Again, it did not appoint solicitors. The subject of debate before the Court was that the evening before completion, the company’s solicitor emailed NRAM stating and attaching “Discharges for signing and returning... as the whole loan was being paid off for the estate and I have a settlement figure for that”. This statement was inaccurate as the company was not repaying the whole loan and the security was therefore not to be discharged in full. Notwithstanding that, NRAM did not query the email nor check the statement and ultimately allowed the transaction to complete meaning that it no longer held any security over the remaining units. It was only some years later when liquidators were appointed to the company that NRAM discovered that their loans were unsecured. NRAM sought to recover the losses from Miss Steele on the basis that she had misrepresented the situation, namely that she and her law firm had assumed responsibility for NRAM, notwithstanding the fact that they were not her client.
The Court held that Ms Steel and her firm were not liable and that Miss Steele had generally expected NRAM to check her requests before complying with them, and therefore had not foreseen that they would rely on her assertions without checking their accuracy. It also shared the views of the judge in an earlier decision in the case - that any prudent bank would take precautions and would have checked the accuracy of the solicitor’s statement and not simply relied on it.

Importantly it held that a solicitor will not assume responsibility towards the opposite party unless (1) it was reasonable for the latter to have relied upon what the solicitor said, and (2) the solicitor should reasonably have foreseen that the opposite party would actually rely on the statement. The case has clarified that what was the leading authority in case such as this- Caparo Industries plc v Dickman [1990] 2 AC 605- is in fact more nuanced then it had previously been believed or interpreted to be.

To frack or not to frack?
Ineos Upstream Limited and another v The Lord Advocate [2018] CSOH 66

In this case Ineos sought to challenge (via judicial review) what it understood to be the decision of the Scottish Government to ban unconventional oil and gas activities in Scotland. Its position was that in 2017 the Scottish Government had unlawfully imposed an indefinite ban on the method of oil and gas extraction known as hydraulic fracturing or “fracking”. In response to the claim the Lord Advocate maintained the position that on a correct understanding of the law the Scottish Government had not imposed such ban, therefore Ineos had no case to pursue.

In this instance the Court decided to dismiss Ineos’s application on the basis that there was no prohibition on fracking. The Court acknowledged that while there had had been a number of ministerial statements to the effect that there was an effective ban, there was no legally enforceable ban in place. What existed was an un-finalised planning policy expressing no support on the part of the Scottish Government for the development or extraction concerned. Importantly the development of the policy was not complete and various stages, including consultation, had yet to be undertaken. Ineos would accordingly have the opportunity to contribute and participate in the policy.

This case is the first, and we suspect not the last, reported case by the Scottish Courts on the controversial of method of fracking and its legality in Scotland.

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Changes to the Private Rented Sector

The end of 2017 saw a new regime coming in to force in the private rented sector market. The key change being that from 1st December, 2017 the assured tenancies everyone had got to know were replaced with ‘private residential tenancies’. Assured tenancies in place prior to 1st December, 2017 don’t automatically convert and remain in place until brought to an end.

The new tenancies bring with them some significant changes for both landlord and tenants alike. On the issue of termination the key change is that landlords will no longer have the right to terminate the tenancy at a fixed end date - previously known as the ‘no fault’ ground. The tenancy can only come to an end if at least one of the 18 grounds for eviction specified in the Private Housing (Tenancies) (Scotland) Act 2016 applies. 

• Eight of the grounds are mandatory (e.g. landlord intends to sell the let property, refurbish it, live in it, use it for non-residential uses, tenant is no longer occupying).
• Eight are discretionary (e.g. tenant has breached a term of the tenancy agreement); and two grounds (tenant is in rent arrears over three consecutive months & tenant has stopped being, or has failed to become, an employee) being either mandatory or discretionary, depending on the circumstances of the case.

Timescales for notification of termination have also been updated. Tenancies of 6 months or less require at least 28 days' notice to be given. An 84 days notice period will apply for tenancies of more than 6 months and in certain other circumstances. In contrast a tenant is only required to give 28 days notice of their intention to leave.
If the tenant disputes the notice, an application is made to the First Tier Tribunal, rather than the Sheriff Court.

Importantly there are a number of exceptions to the regime so student accommodation which qualifies as Purpose Built Student Accommodation or is provided by an academic institution, holiday lets and housing provided to the police, military etc do not need to comply with the regime and alternative tenancies can be entered in to.

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The Contact (Third Party Rights) (Scotland) Act 2017 (“the Act”)

This importantly updates and simplifies what was perceived to be a complicated and uncertain law in respect of the rights a non contracting party held.

Prior to the Act third party rights were governed by common law and a doctrine called Jus Quaesitum Tertio (JQT). Under JQT, for rights to be created, a contract had to identify the third party; show that the contracted parties intended to create third party rights; and provide a benefit to the third party which couldn’t be revoked or altered. JQT was seen by many as complicated and difficult to enforce and was rarely applied in practice.

The Act introduces the following key changes:
• JQT is abolished going forward.
• There is no longer a requirement when establishing third party rights for the contract to be irrevocable. Thus parties can renounce any rights conferred upon them.
• The intention is for third parties to have access to all of the rights which would have been available to them if they were an actual party to the contract in question, including any defences and remedies against the other contracting parties, e.g. breach.

The changes brought in are not retrospective meaning that they will not affect contracts entered into prior to the date the Act came in to force (26 February, 2018). It will be possible to exclude the operation of the Act, therefore companies and business may want to give consideration to whether express exclusion clauses are required to be added to their stand contracts.

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Legislative developments

Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill 2018

While the majority of the provisions in the Bill are yet to come in to force (some significant fine tuning and rule writing is required), when they do the Bill will introduce some significant changes in the funding and liability for expenses of parties conducting Court disputes in the future.

Funding of litigation
Once in force it will permit solicitors to receive from clients pursuing damages claims a “success fee” if the client receives a financial benefit in connection with a Court Action they raise, i.e. the solicitor can be paid from any financial award granted by the Court or reached in agreement with the parties. While common in other jurisdictions, Solicitors in Scotland had previously been prohibited from entering into such ‘no win no fee’ arrangements.

Special additional requirements and protections are to be put in place for personal injury actions. There will, however, be provision for a solicitor to recover amounts from future damages/losses payments in certain specific circumstances.

Such arrangements will need to be in writing and the document must specify the basis upon which the amount to be paid is determined. Various other restrictions will apply which are too detailed for the purposes of this note.

Clearly the Bill will result in a significant change for the legal landscape and how court disputes may be funded in the future, particularly for those who might not necessarily have been able to fund disputes before.

Expenses in Civil Litigation in Personal Injury Claims - qualified one way cost shifting
The Bill has also restricted the extent to which an unsuccessful party in a personal injury claim can be found liable for the legal costs of the other side. In only certain circumstances (further detail will be provided in subsequent legislative Acts and Rules of Court) will an award against an unsuccessful party be possible.

Notification of Third Party Funds
The Bill also provides, subject to a few exceptions e.g. payment from the Scottish Legal Aid Fund, that a pursuing party receiving financial assistance by, e.g. insurance, will be required to notify the Court of the funder’s identity and any intermediary and the nature of the assistance being provided.

The aim of these provisions is to ensure greater transparency on, for example, who may be behind a court dispute litigation.

Group Litigation Proceedings

The Bill also introduces for the first time what are commonly known as “class actions” in other countries. The finer detail of how group litigations will be run and implemented and sanctioned in the future has yet to be determined, however, the hope is that for groups of people with similar legal claims against a single or group entity, for example as seen by the recent ‘Mesh’ litigations’, claims will be easier to progress and fund.

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