The Prescription (Scotland) Act 2018
The team are delighted to have Graham Weatherston recently join. Graham is a solicitor advocate with rights of audience in the higher civil courts 2004. He has worked in civil litigation throughout his legal career with experience in most areas of contentious civil work.
Graham reviews the current position on Prescription (Scotland) Act 2018 which received Royal Assent on 18 December 2018. On its unanimous passing by the Scottish Parliament on 8 November 2018, the Communities Safety Minister Ash Denham observed, 'These changes will increase clarity, certainty and fairness, and benefit persons or bodies in resolving disputes.'
Well over a year later, the majority of the legislation remains unimplemented. It is understood that a particular problem is in the drafting of transitional provisions as the new law replaces the existing legislation. There are significant differences between the new Act and existing legislation under the Prescription and Limitation (Scotland) Act 1973 and how that has been applied in recent years by the courts.
The journey through the courts
Problems in relation to interpreting when and how time limits are to be applied to potential claims are nothing new. The Scottish Law Commission had highlighted ambiguities in the interpretation of section 11(3) of the 1973 Act 25 years before the Supreme Court issued its judgment in David T Morrison & Co. Ltd v. ICL Plastics Ltd  UKSC 48, 2014 SC (UKSC) 222, 2014 SLT 791, 2014 SCLR 711 as noted by Lord Hodge in his dissenting opinion in that case. Morrison effectively overturned 30 years of Scottish decisions including the unanimous judgment of the Inner House in the instant case in its understanding that, not only did there require to be an awareness that a claimant had sustained a loss for the prescriptive time period to commence, but '…section 11(3) can be relied upon to defer the start of the five-year prescriptive period to the date when a pursuer first becomes aware that the loss and damage which he has suffered was caused by negligence.' The Scottish Law Commission's subsequent 2017 Report on Prescription which preceded the 2018 Act was partly prompted by Morrison. In the meantime the, if anything, even more controversial (although, unlike Morrison, an unanimous judgment of the Supreme Court) Gordon's Trustees v. Campbell Riddell Breeze Paterson LLP  UKSC 75, 2017 SLT 1287, 2018 SCLR 129 was determined. It highlighted that applying Morrison could create outcomes which seem, as Lord Hodge observed in Gordon's Trustees, 'harsh' for creditors in cases where there might be uncertainty as to when a loss had been sustained. Anyone involved in professional indemnity insurance cases would recognise that the question of when, objectively, a claimant could become aware they had sustained an actionable loss rarely involves as clear-cut an event as, in the case of Morrison, a catastrophic explosion at a factory.
Since Morrison, Gordon's Trustees, and indeed the passage of the 2018 Act there have been a number of decisions at first instance and at appellate level by the Scottish courts confirming that 'harsh' outcomes for creditors not immediately aware that they may have sustained loss are becoming the norm in the application of the 1973 Act.
In Midlothian Council v. Raeburn Drilling and Geotechnical Ltd  CSOH 29, 2019 SLT 1327, Lord Doherty noted section 11(3) of the 1973 Act:
' undoubtedly has a narrower ambit than was thought to be the case before Morrison and Gordon's Trustees were decided.'
For anyone seeking to invoke it he did add, 'However it is not redundant. There are circumstances where it does postpone the commencement of the prescriptive period…' but he did not provide specific examples: '…in my view it is not necessary in this case to express views on scenarios different from the one before me. I think it preferable that guidance in relation to each such scenario is given in a case where it forms a necessary part of the court's decision, and where the court has heard full submissions in relation to it.'
The 2018 Act seeks to clarify the existing situation by including in the application of section 11(3) of the 1973 Act three 'facts' of which an otherwise unaware claimant who has suffered loss by the act or omission of another must become aware prior to the prescriptive period commencing in relation to any obligation to make reparation:
'(a) that loss, injury or damage has occurred,
(b) that the loss, injury or damage was caused by a person's act or omission, and
(c) the identity of that person.'
It is immaterial whether the creditor is aware that the act or omission is actionable in law. As can be seen, the 'discoverability test' substantially swings back the balance of parties' interests towards the creditor from where the current 'harsh' application of prescriptive time limits has reached since Morrison. It is notable that it was not previously a feature of Scots law that the commencement of a prescriptive period is postponed until one can identify whose act or omission caused one loss. As with the other provisions of the 2018 Act, however, which include for the first time recognition that it is possible to contract out for a period from the operation of prescriptive time limits in certain circumstances; clarification as to the commencement of and effect of the 20-year year prescriptive period so it functions 'as a long stop'; and the introduction of an express burden of proof to be borne by any creditor arguing that their right of obligation has not expired under prescriptive time limits, it is currently entirely unclear when any of these changes to the law are going to be implemented nor how the interests of creditors and debtors are to be weighed one against the other in the transition period from the law as it stands to the new legislation. The 'clarity, certainty and fairness, and benefit to persons or bodies in resolving disputes' to be ushered in by the 2018 Act continue to elude us for the time being.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.