When personal injury lawyers talk about “damages”, they mean money paid by a compensator to an injured person, paid when that person, or their representative, establishes that another person or organisation is, in law, due them compensation.

In this context, “costs” means money paid by a compensator, on top of damages, to the injured person or, really, to that person’s solicitors, for the time, effort and expense of making and completing a vindicated claim.

The compensator is typically an insurance company, insurers’ bureau or, sometimes, the NHS, a public or quasi-public authority or a self-insured organisation, person or group of people.

I wrote last year about the ratio of damages to costs in certain personal injury claims, outlining differences between Scotland and England & Wales. These differences have recently become more pronounced. There is nothing inherently, or unchangeably, particular about Scotland or England & Wales to explain these differences. They have come about by choice.

Bruce Goodbrand is a Partner, Clyde & Co

Scotland has no system of fixed costs in litigated personal injury claims. England & Wales does.

On the ratio of damages to costs in Scotland, data referenced in my article last year showed that for litigated claims with damages of under £5,000, average costs were £1.63 per £1 of damages, with average costs £1.61 per £1 of damages in litigated claims where damages of £5,000-£10,000 was paid.

Applying this average to a £4,999 damages payment means an £8,148 costs payment, with a £16,098 costs payment on a £9,999 damages payment. The point remains that the earlier a settlement, the less the costs, but it would not be for the best for all claims to be settled immediately, especially if the facts or the law do not readily support them or if too much money is sought in damages. It also takes time to properly investigate claims and it makes sense to do so.

The solicitors’ fee element of Scottish costs increased by 9.75% for work done on or after 30 June 2023. This might exacerbate, or at least maintain, the disproportionality in Scotland between damages and costs.

The injured person’s solicitor is ordinarily paid the costs, although there will be outlays to be settled from those. That is not all the injured person’s solicitor can be paid; solicitors in Scotland have been able, from 27 April 2020, to take a percentage share of damages as a fee for success as well.

Disproportionality between damages and costs started to be addressed in England & Wales more than ten years ago when a system of “fixed recoverable costs” was introduced. This system has been expanded and, from 1 October 2023, extended further to regulate, on bands and stages with fixed monetary amounts, costs in most personal injury claims where damages are up to £100,000.

Should Scotland introduce a system of fixed recoverable costs? Yes, if disproportionality is to be addressed. Yes, if you want to try to reduce insurance premiums and cost to the public purse.

It’s worth remembering there are few, if any, fundamental differences between Scotland and England & Wales on liability to pay compensation and although there are differences that can impact on the amount of damages to be paid, these differences are most pronounced in £100,000+ claims, and the fundamental principle of damages is the same across Great Britain. The aim is to restore the injured person, insofar as an award of money can, to the position they were in before the incident. What, then, is the aim of costs?

Bruce Goodbrand is a Partner, Clyde & Co

Personal injury claims costs require a rethink - Bruce Goodbrand