Wed 06 Aug 2014

A new approach to prescription

One of the first things a litigator will check when a new client walks through their door is when the client's claim arose. The law does not allow a pursuer to hold a claim over a defender's head indefinitely. The time that someone has to raise a claim is governed by the Prescription and Limitation (Scotland) Act 1973. Last week the Supreme Court issued its decision in the case of David T Morrison & Co Limited t/a Gael Home Interiors v ICL Plastics Limited and others [2014] UKSC 48 which has altered the approach to determining when a prescriptive period will start to run in certain cases.

The case involved a claim for damages by David T Morrison & Co Limited (Morrison). On 11 May 2004, a factory in Glasgow owned by ICL Plastics Limited ("ICL") exploded causing significant damage to an adjacent shop owned by Morrison. When Morrison sued ICL for damages for the losses it had suffered, ICL defended the claim on the basis that it had prescribed.

The 1973 Act provides that the sort of claim raised by Morrison prescribes after five years. However, the calculation of the five year period is not straightforward.  The general rule for determining when a five year prescriptive period will start to run is set down in section 11(1) of the Act and provides that it will start on the date on which the loss, injury or damage occurred (in this case the date of the explosion). Morrison had not raised its claim against ICL until after the five years had expired. However, it argued that its claim had not prescribed because an exemption to the general rule, set out in section 11(3) of the Act, applied. 

Morrison claimed that the effect of the section 11(3) exemption was that the five year period would not start until Morrison became aware that its loss had been caused as a result of negligence, nuisance or breach of statutory duty by ICL. In other words, the important date was when Morrison became aware that it was ICL's fault rather than when it became aware that it had suffered a loss. Morrison argued that the earliest it could have been aware of ICL's liability was on 13 August 2013 because that was when experts had inspected the premises and provided a report.

ICL was initially successful before the Lord Ordinary who was persuaded by its argument that an inference of negligence could be drawn from the fact that there was an explosion at ICL's factory. The basis for this argument was the legal principle "res ipsa loquitur" (i.e. the thing speaks for itself). But the Inner House overturned the Lord Ordinary's decision on appeal. It said that such an inference could not have been drawn, res ipsa loquitor did not apply and, therefore, Morrison was successful.  

The Supreme Court (by a majority of 3 to 2) found in favour of ICL. All members of the Court were united in holding that the res ipsa loquitor principle was simply not applicable to the case. That principle was not, the court held, concerned with the establishment of knowledge on the part of a pursuer. Instead, it is applicable to the law of evidence and concerns the situation where there is evidence which is so much in favour of the pursuer that it shifts the burden to the defender to prove that it wasn't negligent. It has no application in a debate on prescription such as that which took place in the present case.

The Court decided the case as a matter of interpretation of the wording of the 1973 Act. The majority (Lord Reed, Lord Neuberger and Lord Sumption) concluded that the wording of section 11(3) did not have the effect of postponing the start of the prescriptive period until Morrison became aware that the loss occurred as a result of ICL's breach of duty.  The period instead commenced when Morrison was aware that it had suffered a loss. Lord Reed pointed out that Morrison's approach was unworkable because, for example, a pursuer could never be "aware" that the defender had been negligent in advance of a decision by the courts. Further, if the period for prescription depended on a pursuer's "awareness" of the law, then the period would run more or less quickly depending on who the pursuer was. That was clearly unsatisfactory.

For the minority, Lord Hodge and Lord Toulson argued that the exception in section 11(3) should be construed as meaning that for time to begin to run there should be actual or constructive awareness of (a) more than minimal loss and (b) the cause of the loss through an act or omission.  If these criteria applied then Morrison would have succeeded.

The Supreme Court's decision has overturned years of authority.  Lord Hodge noted that for almost 30 years there has been a consistent line of Scottish authority which imposed a requirement of knowledge of causation.  In addition it could be viewed as imposing quite harsh requirements on pursuers although it would have been a brave solicitor who advised a client to delay raising a claim, given the existing authorities.  However, the effect which the decision will have in practice should not be overstated.  Its application will be limited to cases where damages or loss are not immediately obvious.  In addition many lawyers already adopt a cautious approach to questions of prescription so may already advise clients to raise claims at an earlier stage to avoid the need to rely on section 11(3). 

In an interesting postscript to the decision both Lord Reed and Lord Hodge referred to unimplemented recommendations by the Scottish Law Commission in its Report on Prescription and Limitation of Actions (Latent Damage and Other Related Issues) (1989) (Scot Law Com No 122). The Report recommended that the 1973 Act should be changed to expressly include requirements for knowledge that the loss, injury or damage was attributable in whole or part to an admission and for knowledge of the person liable to be within the pursuer's knowledge before a prescriptive period will start to run.

Lord Hodge urged that the Law Commission's recommendations be given fresh consideration as Morrison would have been able to pursue its claim if they had been implemented. Whether this will be done remains to be seen.

If you need any advice on how prescription operates in practice in relation to a claim you may have (or may have against you) please don't hesitate to contact us.

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