Scottish Time bar changes

The Scottish Government has recently opened a consultation on how the Prescription (Scotland) Act 2018 should be implemented. Among other changes to the law of time bar, the Act addresses the acknowledged “harsh” results of the Supreme Court’s decisions in Morrison v ICL and Gordon’s Trustees. The proposed implementation regulations suggest a three year period before the changes introduced by the Act become effective and that those changes will only have prospective effect. If the Act is implemented on these terms, we will continue to be dealing with the effects of the Supreme Court’s decisions for years to come.

Prescription under the 1973 Act

The Scots law of prescription prevents a claimant from enforcing a claim after a set period of time; governed by the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act). The most common prescriptive period in litigation is the five-year time bar, if proceedings haven’t been raised, which potentially applies to many claims in contract, delict (tort), and unjust enrichment.

With such a time bar, it is obviously important that claimants know when the period starts to run. This is governed by section 11 of the 1973 Act, which sets out a general rule that it starts to run when there is an “act, neglect or default” which causes “loss, injury or damage”.

That general rule is qualified by special rules such as, where the wronged party was not aware, and could not with reasonable diligence have been aware, that the loss, injury or damage had occurred, the start of the five year period is delayed until the wronged party first became or could have become so aware (the Discoverability Test).

Interpretation by the Courts

The Discoverability Test has been the subject of Supreme Court decisions which have given rise to results that the Court itself acknowledged could be seen as “harsh” on claimants; with time bar periods possibly starting to run from when a claimant knew something had gone awry even though the claimant did not know that it had suffered a loss.

The changes brought about by the 2018 Act

In response, the Scottish Government passed the Prescription (Scotland) Act 2018 (the 2018 Act), which amends section 11 of the 1973 Act so that the clock starts running for a claim to be brought from when the claimant is aware or could with reasonable diligence have been 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. the identity of that person.

The 2018 Act also makes some other changes to the 1973 Act, including:

• Changes to the scope of the five-year prescriptive period, in particular so that this covers most statutory obligations, with notable exceptions for obligations such as taxes, duties and rates.
• The introduction of standstill agreements, permitting parties to extend the five-year prescriptive period for a maximum of one year.
• Clarification of certain rules by which the five-year prescriptive period may be paused to take account of a claimant being induced by fraud or error to refrain from making a claim.

The proposed implementation and consultation

Although the 2018 Act received Royal Assent in December 2018, the provisions have not yet been brought into force.

Implementation of the Act is not necessarily simple. The 2018 Act shortens some prescriptive periods and lengthens others. Depending on how it is implemented, the 2018 Act could extinguish some claims that were previously valid and revive some claims that had previously prescribed.

Given this, the Scottish Ministers are consulting on their draft implementation regulations which propose:

• Bringing the 2018 Act into force three years after the commencement regulations are implemented. This is to give sufficient notice to potential claimants to allow them to bring litigation before their claims expire under the new rules;
• That the 2018 Act will not affect the prescriptive periods of obligations which are the subject of litigation prior to its implementation;
• That the 2018 Act will not revive any obligation that has prescribed prior to its implementation; and
• That the 2018 Act’s amended prescriptive periods will prescribe claims from the day of its enactment at the earliest.

These measures are designed to give parties owed and owing obligations that may be impacted by time bar an opportunity to arrange their affairs to take account of the upcoming changes.

These proposed transitional arrangements mean that the 2018 Act changes will not come into force for a number of years, meaning that the issues caused by recent case law will remain live ones for parties for years to come.

The consultation is open to responses until 14 October 2020.