Prescription Update

Prescription Update 18 September 2017 Kirin Binning Associate, BLM T +44 (0)141 353 2121 E [email protected] Prescription Update Prescription plays an important role in the Scottish legal system. It sets out the time limits parties have to raise an action before it prescribes. On the flip side, it provides certainty for potential wrongdoers, in that, they will not face an action after a certain time limit has passed. This article covers developments on the law of Prescription in Scotland since the ruling in Morrison. David T Morrison & Co Ltd v ICL Plastics Ltd 2014, Supreme Court The UK Supreme Court ruling in Morrison came as a surprise to many. The Justices determined that the 5 year negative prescription period, in Scots law, within which a Pursuer requires to raise an action started as soon as there was awareness of loss (actual or constructive, with reference to the “reasonable diligence” test). Gordon v Campbell Riddell Breeze Paterson LLP, Supreme Court On 19 July 2017, the UK Supreme Court heard the appeal in Gordon v Campbell Riddell Breeze Paterson LLP. The court held, applying the Supreme Court decision in David T Morrison & Co, that the claims had prescribed on the Scottish five year period from the date of actual or constructive awareness of loss alone (distinct from knowledge of cause). The issue that the Supreme Court was to be addressed upon, in Gordon, was whether the five year prescriptive period begins to run on the date on which the creditor becomes aware that he or she has incurred a financial cost or whether he or she must also be aware that such a cost may constitute “loss” or “damage”. As it happened, much of the argument before the Supreme Court was not focused on that issue but seemed to be more of an attempt to persuade the five Justices to overturn the majority decision (3:2) in Morrison. The Supreme Court’s decision in Gordon has yet to be issued. Law, Law and Legal & General Assurance Society Limited (as trustees of JAL Fish Limited Small Self- Administered Pension Scheme) v Robertson Construction Eastern Limited, Lord Doherty, 2017, Court of Session The Scottish five year prescriptive period does not apply to “obligations relating to land.” The issue in this case was whether an obligation to deliver, and make payment under, an Overage (or “claw-back”) Agreement after the sale of land for possible development was such an obligation. The banking crisis of 2008, shortly after the sale in this case, meant the buyer did not apply for planning permission until 2013. The Overage Agreement was to provide for more money to be paid by the buyer to the seller if development consent was obtained. The obligation was a personal one under the sale contract (missives). It was held that this alone did not mean that it could not be classified as an “obligation relating to land”. Nonetheless, the land was not, in the Judge’s analysis, the “main object of the obligation” so it was not an obligation relating to land. The five year period, therefore, applied and Judgment for the Defender was issued, the obligation having prescribed. Scottish Law Commission’s Report on Prescription A draft Bill has recently been published, proposing to amend The Prescription and Limitation (Scotland) Act 1973 (the “1973 Act”). On 14 July 2017, the Scottish Law Commission published its Report on Prescription. The most significant proposed change is to legislate away the Morrison decision so that the discoverability formula for the five year clock to start ticking is re-set as when, as a matter of fact, the creditor becomes aware: (1) that loss, injury or damage has occurred; (2) that the loss, injury or damage was caused by a person’s act or omission; and (3) of the identity of that person. The First Minister, in a Statement to the Scottish Parliament on 5 September 2017, committed to introduce the Prescription Bill to the Scottish Parliament and implement the recommendations of the Scottish Law Commission. Accordingly, it is vital that we remain up to date with the law on Prescription for our clients and ensure that we are aware of the true date that a loss prescribes. 2.

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