How long do I have to make a damages claim under a contract in Scotland?
A review of the current law relating to damages and the potential changes that the Prescription (Scotland) Bill may bring.
Contractual claims governed by Scots law are subject to the time limits found in the Prescription and Limitation (Scotland) Act 1973 (“the Act”). In general terms (there are a few exceptions), under section 6 of the Act, if a “claim” (as defined) is not made within 5 years of the “appropriate date” then time bar will operate to extinguish obligations will be extinguished. This 5 year deadline is known as “the prescriptive period”.
When is the “appropriate date”?
In damages claims, the appropriate date is usually the date when the loss, injury or damage occurred. However, in relation to such claims, section 11(3) provides that the “appropriate date” could alternatively be the date from which the claimant became, or could with reasonable diligence have become, aware that such loss, injury or damage has occurred.
What this meant in practice changed radically in 2014, with the Supreme Court decision in David T Morrison and Co Limited (t/a Gael Home Interiors) v ICL Plastics Limited and Others.
Prior to ICL Plastics, section 11(3) was applied to the effect that the appropriate date was the date from which the claimant became aware (or could have become aware) that both (i) loss had occurred and (ii) that loss had been caused by the fault of someone. This second part typically had the effect of delaying the appropriate date.
In ICL Plastics, neighbouring property was damaged by an explosion at a plastics factory in Glasgow. The action was raised more than 5 years after the explosion. The Supreme Court held that the appropriate date was simply the date that the claimant knew that they had suffered loss i.e. the date of the explosion – there was no need for the claimant to know that the loss was due to the fault of someone. As such, the claim was time barred as more than 5 years had elapsed.
The Supreme Court’s decision was followed by Linda Anne Gordon and Others v Campbell Riddell Breeze Paterson LLP, a professional negligence claim against a firm of solicitors. The defenders were instructed by the pursuers to draft and serve notices to quit on the tenant of an agricultural property. The tenant failed to remove in terms of the notices and on 10 November 2005 the solicitors advised the landlord that a conflict of interest had arisen. Clearly, something had gone awry and in 2008 the Land Court held that the notices served were defective.
When then was the appropriate date for the purposes of section 11(3)? The date when the solicitors advised of a conflict, or the date of the Land Court decision?
The Inner House held that the appropriate date was November 2005; the pursuers had by that date incurred loss in the form of legal fees which, coupled with the solicitor’s letter anent conflict clearly indicated that something had “gone wrong”.
More recently, in 2017, James Clark and William Clark v Sandra M L Turnbull and Mark Robertson held that the appropriate date was the date upon which losses were incurred – even when the claimant was not aware that the loss was the result of an actionable wrong.
The Prescription (Scotland) Bill and the possible changes it could bring
The consultation draft of the Prescription (Scotland) Bill was recently released by the Scottish Law Commission. The Bill makes a number of changes to the 1973 Act. One of the most prominent issues raised in the Discussion Paper was the Supreme Court decision in ICL Plastics and the effect of this decision on the law in Scotland.
The Bill seeks to amend the current position by re-introducing the “discoverability provision” i.e. that the claimant must be aware that the loss was caused by the wrongdoing of another party before the prescriptive period will begin to run. The Scottish Law Commission have insisted that this is not an attempt to reverse the law to the position it was in prior to the Supreme Court decision but to remedy the current position which they describe as an “unhappy blend” of requiring both knowledge of the loss and an understanding of the law- which, the Commission state, was not envisaged by the drafters of the 1973 Act. The Commission was also minded to align the point with other comparable jurisdictions.
With this Bill only being at the consultation stage though, it may be some time before the Commission see their recommendations come to pass and for the law on prescription to re-introduce the discoverability provision.
In summary, the current position on the “appropriate date” for prescription to start running is from the moment the claimant becomes, or ought to have become, aware that they have suffered a loss. It matters not that they knew or ought to have known that the loss was caused by another. Mere knowledge of a loss is all that is required.