On 30 July 2014, the Supreme Court issued their decision in the case of David T Morrison & Co Limited t/a Gael Home Interiors v ICL Plastics Limited and others [2014] UKSC 48 ("Morrison" and "ICL"). The decision significantly changes the approach taken in determining when the prescriptive period commences for a claim for damages from the approach used by the Scottish courts over the past 30 years.

Background

The case concerned an explosion at ICL's factory in Glasgow, on 11 May 2004, which claimed the lives of nine people and injured many more.  Extensive damage was caused to neighbouring properties, including the shop owned by Morrison.  In August 2007, ICL and ICL Tech Ltd pleaded guilty to breaches of the Health and Safety at Work etc Act 1974 and, in July 2009, a public inquiry, chaired by Lord Gill, reported that a number of failures, including those by ICL companies, led to what was an "avoidable tragedy".  On 13 August 2009, more than five years after the explosion, Morrison raised an action against ICL, seeking reparation for the damage to its property, lost profits and other costs.

Under section 6(1) of the Prescription and Limitation (Scotland) Act 1973 (the "Act"), an obligation to make reparation prescribes if a claim is not made, or subsistence of the obligation not acknowledged, within five years.  Section 11(1) of the Act provides that the obligation to make reparation for loss, injury or damage caused by an act, neglect or default is enforceable on the date when the loss, injury or damage occurred.

ICL admitted that it was liable to make reasonable reparation to Morrison but argued that the obligation to do so had prescribed as Morrison had sufficient knowledge to raise an action on the day of the explosion.  Morrison relied on section 11(3) of the Act, which delays the start of the prescriptive period 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".  Morrison argued that the prescriptive period did not begin at the time of the explosion and, instead, started at a much later date as they were not aware, and could not with reasonable diligence have been aware, that the damage had been caused by negligence, nuisance or breach of statutory duty.

Previous approach 

Over the past 30 years the courts have taken a consistent approach in interpreting section 11(3) of the Act as requiring the pursuer to be aware that they have suffered damage and, in addition, that it had been caused by a breach of a duty of care.  The five-year prescriptive period for a claim would only commence once both of these requirements had been met.

In the Outer House of the Court of Session, Lord Woolman agreed with ICL that Morrison's claim had prescribed on the basis that Morrison were aware on the day of the explosion that the damage to their premises had been caused by negligence.  This was based on the principle of res ipsa loquitur as an inference of negligence could be drawn from the circumstances of the explosion.  Morrison were successful before the Inner House of the Court of Session on the basis that res ipsa loquitur did not apply.  ICL then appealed to the Supreme Court on the issue of the correct interpretation of section 11(3) of the Act.

Judgment

The Supreme Court held by a majority of 3-2 that the five-year prescriptive period commences from the moment there is knowledge of damage, regardless of whether the cause of the damage is known.  Consequently, it was held that Morrison's claim had prescribed.

In his judgment, Lord Reed, with whom Lord Neuberger and Lord Sumption both agreed, was of the view that if there had been an intention by the draftsman to require awareness of the cause of the loss, injury or damage before the prescriptive period could begin to run, then that would be of such importance that it would be clearly stated in section 11(3) of the Act.  Lord Reed contrasted section 11(3) of the Act with sections 18(3) and 22(2) of the Act, which relate to the postponement of the commencement of the limitation period in cases of personal injury. In sections 18(3) and 22(2) of the Act the limitation period does not begin to run if there is a lack of awareness of particular matters and the draftsman clearly stipulates what those matters are.

Lord Reed interpreted the wording of section 11(3) of the Act as being intended to deal with instances of latent damage.  In such instances, the date of actual or constructive knowledge of the damage would be the starting point from which the five-year prescriptive period would begin to run.

In his dissenting opinion, Lord Hodge also disagreed with the approach taken by the Scottish courts over the past 30 years in interpreting section 11(3) of the Act.  Lord Hodge was of the opinion that section 11(3) should be construed as meaning that the prescriptive period only begins to run from when there is actual or constructive knowledge of more than minimal loss which is caused through an act or omission, but not that it is due to a breach of duty.  Lord Reed found this approach appealing and suggested that it should be recommended for adoption as a matter of law reform.  However, he did not believe that such an approach could be interpreted from the current wording of section 11(3) of the Act.

Outcome

The Supreme Court's decision substantially changes the interpretation of section 11(3) of the Act.  Pursuers must now ensure that they raise a claim for damages within five years of becoming aware that damage has occurred.  However, there may well be further changes to the law in the near future if Parliament takes heed of Lord Hodge's recommendations, supported by Lord Reed.