Is time running out to make a claim?
A review of the latest decision affecting the law of prescription in Scotland.
On 15 November 2017, the Supreme Court issued its decision in Gordon and others, as the Trustees of the Inter Vivos of the late William Strathdee Gordon (Appellants) v Campbell Riddell Breeze Paterson LLP (Respondent) (Scotland) (“Gordon v Campbell Riddell”) and made important comments in relation to the time limits imposed on parties in Scotland looking to raise a claim for breach of contract.
The law of prescription in Scotland is governed by the Prescription and Limitation (Scotland) Act 1973 (“the 1973”). The 1973 Act provides that the time limit for bringing a claim for breach of contract is 5 years from the “appropriate date”. In normal circumstances the “appropriate date” will be the date when the loss, injury or damage, arising from a breach of contract, occurred, or in the case where the claimant was not aware of their loss, injury or damage, the date on which the claimant first became, or could with reasonable diligence have become, aware of the loss, injury or damage.
The concept of when a claimant first became aware, or could with reasonable diligence have become, aware of loss has long been the subject of legal debate. The matter came to a head in the 2014 Supreme Court case of David T Morrison and Co Limited (t/a Gael Home Interiors) v ICL Plastics Limited and Others (“Morrison v ICL”) (see MacRoberts e-update on the case). The court found that the appropriate date was simply the date which the claimant became aware of the loss, injury or damage. There was no requirement for the claimant to be aware of the cause of that loss.
Gordon v Campbell Riddell: The Facts
The case was an appeal from the Inner House of the Court of Session involving a claim arising from a solicitor’s negligence. The Defenders (Campbell Riddell) had been instructed by the Appellants (the Trustees) to serve notices to quit on the tenants of three pieces of agricultural land. The land had been acquired by the Trustees because of its potential for residential development. The notices to quit were served in November 2004. Had the notices been effective, the tenants would have had to leave by 10 November 2005. Campbell Riddell then withdrew from acting.
In February 2006, the Trustees instructed a new firm of solicitors to raise proceedings in the Land Court to enforce the notices to quit. In a decision dated 24 July 2008, the Land Court found that two of the notices to quit were ineffective. As such the land was still subject to the leases and the Trustees were prevented from developing the land.
On 17 May 2012, the Trustees commenced legal proceedings against Campbell Riddell for breach of an implied term of the contract that they would exercise the degree of knowledge, skill and care expected of a reasonably competent solicitor. They sued for the loss of not being able to develop the land, along with the cost of instructing a new solicitor to raise proceedings in the Land Court.
It was accepted that the loss suffered by Trustees had occurred because of the breach of contract. However, Campbell Riddell argued that any obligation to pay the Trustees damages had prescribed (i.e. was out of time) because the Trustees failed to raise court proceedings against them within 5 years of the date on which they had suffered a loss. They argued that the date of loss was when Campbell Riddell issued a defective notice (November 2004) or at least when the tenant failed to leave (November 2005). The Trustees argued that the time limit should start running from the Land Court’s decision that two of the notices to quit were ineffective (July 2008).
The Supreme Court ultimately followed the decision of Morrison v ICL and came to the following conclusions:
- The 5 year period will start to run from the date the claimant “is aware actually or constructively” that he or she has suffered a detriment or that he or she has incurred expenditure;
- It was irrelevant that when the Trustees instructed their new solicitor, they were unaware that the Land Court would not enforce the notice to quit;
- Objectively the Trustees suffered the detriment on the date the tenant failed to vacate the land (November 2005) and in any event they knew they had incurred expense in respect of the detriment in February 2006 when they instructed their new solicitor;
- Accordingly, when the claim was eventually raised in 2012 the claim had expired.
The decision affirms the previous position that the prescription clock will start running when a claimant’s loss occurs, regardless of whether the claimant knew or ought to have known that loss was caused by another.
In this case the court concluded that loss occurred when the tenants failed to vacate the land. However, the court also commented that the clock started in any event when the Trustees incurred the expense of instructing the second solicitor to obtain vacant possession of the land. Such a finding possibly complicates the issue. Arguably, it follows that the appropriate date could be the date on which the claimant incurs expense to rectify the detriment. With two competing dates referred to by the court, it might be said that the court has further confused an already difficult area.
It has long been accepted that the law of prescription in Scotland is in need of reform. The Scottish Law Commission recently published a report recommending a number of changes designed to clarify the rules as to the time limits within which claims can be brought. However, until reforms are put in place, potential claimants should take a cautious approach when determining their time limits for bringing a claim, and assume that the clock starts running as soon as they knew, or ought to have known, they had suffered loss, injury or damage.