Scottish parliament passes reforms to prescriptive time limits

The Prescription (Scotland) Bill implements recommendations made by law reform body the Scottish Law Commission, intended to provide greater certainty and clarity in relation to 'negative prescription'. An 'as passed' version of the bill will be published shortly, followed by a four-week period in which it may be challenged on certain grounds. At the end of this period, if there is no challenge, the bill will be submitted to the Queen for Royal Assent.

The question of when the prescription time limit begins to run has caused controversy - especially since the Supreme Court's 2014 decision in the Morrison v ICL Plastics case, in which it held that the time might start to run before it was known who had caused the loss. It was argued by some that this case, and the later Supreme Court decision in Gordon's Trustees v Campbell Riddell, could produce harsh and potentially unintended results. While that was a matter of debate   it is this argument, amongst other things, that the new legislation is intended to address.

There are a number of changes introduced by the bill of varying significance:

• the scope of the five-year negative prescription rule is extended to cover all statutory obligations to make payment that are not already subject to that rule, with some exceptions;
• statutory obligations to pay taxes, duties, rates or child maintenance and obligations to make repayments in relation to benefits, income support and tax credits are expressly excluded from the five-year rule;
• any obligation of the Keeper of the Registers of Scotland to pay compensation by virtue of section 77 or 94 of the 2012 Land Registration etc. (Scotland) Act will continue to be governed by the 20-year negative prescription rule;
• in determining the effect of fraud or error on computation of prescriptive periods, what matters is that the words or conduct of the debtor actually caused the failure by the creditor to make a claim to implement or part-implement the obligation. It is irrelevant for these purposes whether or not the debtor intended to cause the failure on the part of the creditor;
• more significantly, the running of the 20 year period in claims for damages now depends only on fault having occurred so cases where that fault is more than 20 years ago will end, regardless of when loss emerge. In addition the running of the 20-year 'long stop' period can no longer be interrupted by, for example, starting court proceedings. However, an extension is allowed to enable litigation which has started and is ongoing to finish;
• the bill introduces the concept of a 'standstill agreement', allowing the parties to agree by contract, but once only, to extend the five-year prescription period for up to one year in some circumstances.

Probably of most importance to day to day practice, with obligations to pay damages, the five-year prescriptive period will only begin to run when the creditor is aware, as a matter of fact:

• that loss, injury or damage has occurred;
• that the loss, injury or damage was caused by another person's act or omission; and
• of the identity of that person – although whether the creditor is aware that the act or omission that caused the loss, injury or damage is actionable in law is irrelevant.

Although the bill passed through the Scottish parliament largely unnoticed, some parts caused concern. The general idea that the long-stop 20 year prescription should not be interrupted was well received, although some felt that the provisions relating to a possible extension of the 20 year period would not work well for property rights, such as servitudes. This concern was addressed by way of an amendment at stage 2 of the bill.

Sometimes, when a court grants an order at the end of a successful court action such as one ordering someone to pay a sum of money, this court order takes the place of the original source of the obligation to pay the money – with its own 20 year prescriptive period which starts to run from the date of the order. This is not the case with other types of court orders, including those recognising the existence of a servitude. It emerged during the parliamentary process that this meant that a court could declare that a servitude existed, only for that right to be extinguished by prescription at the end of the court action. The amendment means that a property right will be treated as having been exercised or enforced when the claim was made in court, with the result that a new 20 year prescriptive period will run from this point.

As in all things, balance is the key. The effect on time and how the law treats that can be viewed form different perspectives. While the changes to the five year rule favour claimants there are other changes – particularly over very old claims, which go in a different direction. Whether balance has been achieved will await practical experience of the amended provisions.

Craig Connal is a commercial litigation expert at Pinsent Masons, the law firm behind Out-Law.com.