The Supreme Court has today issued their decision in the case David T Morrison & Co Limited v ICL Plastics Limited & others [2014] UKSC 48.

Background:

In May 2004 a serious explosion occurred at the factory premises of the appellants (“ICL”) in Glasgow, causing the substantial collapse of the building.  Nine people were killed and others were seriously injured.  The shop owned by the respondent (“Morrison”), which was adjacent to ICL’s premises, suffered extensive damage. 

In August 2009 Morrison raised an action for damages in the Court of Session.  ICL admitted that it had had a liability to Morrison but argued that its obligation to do so was extinguished as it was raised more than five years after the date when it could have raised its claim.

Legislation:

The Prescription and Limitation (Scotland) Act 1973 provides that certain obligations are extinguished after a five year period where no relevant claim is made. The "appropriate date" on which the five year period begins to run is defined as the date when the obligation became enforceable.

Section 11 of the 1973 Act deals with determining when the obligation became enforceable.  Section 11(3) of the 1973 Act states that the commencement of the five year prescriptive period is postponed where the creditor "was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred".

Appeal:

At first instance Lord Woolman upheld ICL’s plea that Morrison's claim was time-barred.  On appeal, the Inner House of the Court of Session decided that a hearing on the evidence was required in order to establish the position.  ICL appealed to the Supreme Court.

ICL's appeal to the Supreme Court challenged the established approach of the Scottish courts regarding the correct interpretation of section 11(3) of the 1973 Act.  ICL argued that the five year prescription period began to run on the date of the explosion.  They stated that all Morrison needed to know, or constructively know, is that they had suffered loss. 

Morrison stated that the effect of section 11(3) of the 1973 Act was that time did not run against it until it had actual or constructive knowledge that it had suffered loss caused by some actionable wrong.

Decision:

The Supreme Court allowed ICL's appeal on a 3/2 majority. Lord Reed, Lord Neuberger and Lord Sumption allowed the appeal, while Lord Hodge and Lord Toulson dissented.

For almost 30 years there has been a consistent line of Scottish case law which has treated section 11(3) of the 1973 Act as imposing a requirement of knowledge of causation.  The Supreme Court rejects this approach, stating that the correct interpretation is that the creditor has only to be aware of the occurrence of loss, injury or damage.

Comment:

This is a groundbreaking decision that alters the law of prescription as it has been understood for the last 30 years.  This judgment will no doubt be widely discussed and may result in future litigations. 

All three of the judges that gave detailed opinions note that the Scottish Law Commission made recommendations for reform in this area of law in 1989. However, those recommendations have not been implemented by Parliament.  We will have to wait and see whether Parliament deems it appropriate to legislate in this matter.