In Scotland, the law of prescription (or time-bar) means that claims for damages arising from breaches of contract or other legal wrongs can be extinguished after a period of five years, known as the “prescriptive period”.

If you think that you have a claim for damages arising from a breach of contract or other legal wrong, it is vital that you know when that five-year prescriptive period begins.  However, a judgment issued by the UK Supreme Court on 30 July 2014 has overturned what, for 30 years, was the common understanding of when the five-year prescriptive period begins.

David T Morrison & Co Ltd t/a Gael Home Interiors v ICL Plastics Ltd & Others [2014] UKSC 19

The case before the UK Supreme Court involved an explosion at ICL’s factory in Glasgow which happened on 11 May 2004.  A neighbouring property, owned by Morrison, was seriously damaged by the explosion.  Morrison was unable to access its property until July 2004.  It said that it could not have established what caused the explosion, and then raised a court action against ICL, before 13 August 2004.  Morrison raised a court action for damages against ICL on 13 August 2009 (i.e. five years after the date which it said was the earliest date upon which it could have raised the court action).

ICL argued that Morrison’s claim had prescribed.  It said that the starting date of the five-year prescriptive period was the date of the explosion and that Morrison had therefore had until 11 May 2009 to raise its court action.  As the court action had not been raised until 13 August 2009, Morrison’s claim had been extinguished by prescription.

Morrison in turn sought to rely on a statutory provision which can delay the start of the five-year prescriptive period.  Section 11(3) of the Prescription and Limitation (Scotland) Act 1973 says that where a claimant was not aware, and could not with reasonable diligence have been aware, that it had suffered a loss, then the five-year prescriptive period does not begin until the claimant becomes aware, or could with reasonable diligence have become aware, that it had suffered a loss.

Morrison argued that section 11(3) meant that the five-year prescriptive period did not begin until the date upon which it was aware both that it had suffered a loss (which was obvious at the time of the explosion) and that the loss was caused by the fault of ICL.  Morrison said that it could not have known that its loss was caused by the fault of ICL before 13 August 2004.

Morrison’s argument that the five-year prescriptive period did not begin until it knew both that it had suffered a loss, and that that loss was caused by the fault of ICL, was consistent with an understanding of what section 11(3) means that had existed for some 30 years.

Unfortunately for Morrison, the UK Supreme Court decided that the five-year prescriptive period began when it became aware that it had suffered a loss.  That was the date of the explosion.  The start of the prescriptive period was not postponed to the date when Morrison additionally became aware, or could with reasonable diligence have become aware, that its loss was caused by the fault of ICL.  Morrison’s claim had therefore prescribed.

The UK Supreme Court’s judgment means that a claimant in Scotland must pursue its claim within five years of the date upon which it becomes aware that it has suffered a loss, or the date upon which it could with reasonable diligence have become aware that it has suffered a loss.  A claimant can no longer rely on the five-year prescriptive period beginning only at a later date when it becomes aware that its loss has been caused by the fault of someone else.

What happens now?

At this stage it is unclear how the UK Supreme Court’s judgment will affect both ongoing court actions, and claims which have yet to be raised, which are relying on the five-year prescriptive period running from the date when the claimant became aware that its loss had been caused by the fault of someone else.  The UK Supreme Court has recommended that Parliament clarifies the law.  The hope is that any prejudice to ongoing or impending claims arising from the UK Supreme Court’s judgment will be addressed by Parliament.  In the meantime, it is more important than ever that a claimant carefully considers when its claim will prescribe.

Important:

  • If you are currently pursuing or defending a claim in which prescription is, or could be, an issue, you should check whether the UK Supreme Court’s judgment will affect the claim.
  • If you have a claim which you wish to pursue, but have not yet done so, then you should be alert to the possibility that the claim could prescribe earlier than previously thought.  You should check when the claim will prescribe in light of the UK Supreme Court’s judgment.  It may be necessary to raise court action sooner than you thought.
  • If you do suffer a loss, start investigating the facts and trying to find a cause as soon as possible.  The prescriptive clock will be ticking already.

Link to Supreme Court decision: David T Morrison &CO Ltd v ICL Plastics Ltd & Others [2014]UKSC19