Scottish law on prescription found wanting

In a recent case in the UK Supreme Court the Scottish law on the prescription of an obligation to make reparation for property damage caused by another’s fault was found to be defective and legislative reform was recommended. The problem would not have arisen if the law had been in line with European private law models.

I’ll call the case Morrison v ICL Plastics although its full name at [2014] UKSC 48 is a bit longer. It arose out of a serious explosion at ICL’s factory in Glasgow on 11 May 2004 which killed nine people, injured many others and caused extensive damage to neighbouring properties, including a shop owned by Morrison. Morrison raised the action for reparation more than 5 years after the damage occurred but within 5 years of the date when it first knew, or could reasonably be expected to have known, what caused the explosion. The prescriptive period in Scotland for such obligations of reparation is 5 years. The question was whether the obligation of reparation had prescribed.

The case turned on the wording of the Prescription and Limitation (Scotland) Act 1973. That Act makes the normal start of the running of the prescriptive period the date when loss, injury or damage caused by an act, neglect or default occurs. Section 11(3) then provides that if

the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware.

To keep things simple we can focus on actual awareness and ignore the reasonable diligence bit.

The question in the case was whether the words “caused as aforesaid” in s.11(3) meant that the creditor had to be aware of something more than the mere fact of the damage and, if so, what. Three of the judges held that the words “caused as aforesaid” added nothing of substance and that the prescriptive period ran from the date when the creditor first became aware of the fact of the damage. So the obligation had expired. Two of the judges held that the words “caused as aforesaid” meant that the creditor had to be aware of the cause of the damage before the prescriptive period would start to run. So the obligation had not expired when the action was raised. The judges were all agreed that the creditor did not have to know that there was a legal cause of action before the period began to run.

The minority view seems more reasonable but the important point is that the law on either view is defective. On the majority view the creditor could lose the right to reparation before knowing, or being able to know, that the damage was caused by anything other than an unfortunate accident or “act of god”. Even on the minority view the right could be lost before the identity of the person responsible for the damage was known.

It is not surprising that Lord Hodge, who was in the dissenting minority, called for legislative reform on lines already recommended by the Scottish Law Commission. As long ago as 1989 the Commission had recommended in its Report on Prescription and Limitation of Actions (Latent Damage and Other Related Issues) (Scot Law Com No 122) that the law be clarified by amending the legislation to state expressly that the discoverability formula included knowledge (a) that the loss, injury and damage was attributable in whole or in part to an act or omission and (b) of the identity of the defender.

This is essentially the solution in model European private laws such as the Principles of European Contract Law (PECL) or the Draft Common Frame of Reference (DCFR). The latter provides in article III. – 7:301 that “The running of the period of prescription is suspended as long as the creditor does not know of, and could not reasonably be expected to know of:

  • the identity of the debtor; or
  • the facts giving rise to the right …”

 

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