'Red Flags' — Risk management reflections on the Prescription (Scotland) Act 2018 and what you need to know

Master Policy broker Lockton highlights the key provisions of the long-awaited Act, which came into force in full on 28 February 2025.

Lawyers, and particularly litigators, know all too well that errors relating to prescription can cost a client dearly. The prospect of your client being unable to pursue an otherwise promising claim because it has prescribed on your watch is enough to cause sleepless nights. Given the high stakes, it is no surprise that prescription-related errors remain a feature of claims on the Master Policy.

The long-awaited Prescription (Scotland) Act 2018 came into force in full on 28 February 2025. In this article we take a look at the Act through a risk management lens.

The Act amends the Prescription (Scotland) Act 1973 and makes changes to the law of negative prescription to bring certainty to various scenarios following judgments that produced harsh results for creditors.

Key provisions of the 2018 Act

Sections 5 and 13 were the first provisions of the Act to come into force, back in June 2022.

Section 5 gives greater protection to a creditor – the five-year prescription clock will only start ticking when:

• the creditor knows that loss, injury or damage has occurred;
• they know that it was caused by a person; and
• they know the identity of that person.

The result is greater protection for the creditor, and addresses unfairness highlighted in recent case law; see David T Morrison & Co Ltd v ICL Plastics Ltd (and Others) [2014] UKSC 48 and Gordon’s Trustees v Campbell Riddell Breeze Paterson LLP [2017] UKSC 75.

Section 13 of the Act allows parties to agree an extension of the prescriptive period of up to one year, but only once.

So, what of the key provisions that came into force in February this year?

• Section 1 of the 2018 Act crucially brings all obligations to pay damages into the scope of the five-year prescriptive rule, and makes clear that any delictual obligations are also in scope (although there are still exceptions to watch out for; see Section 1 of the 2018 Act and Paragraph 1 and 2 of Schedule 1 to the 1973 Act).
• Section 2 brings certain additional obligations relating to contract within the scope of five-year prescription.
• Section 3 brings within five-year prescription all statutory obligations to make payment (provided any such obligation is not explicitly excluded by statute, and with some exceptions remaining in Schedule 1 to the 1973 Act). So, for example, council tax, child support maintenance and recovery of social security benefits are now caught by the Act.
• Section 4 clarifies and broadens the provisions on fraud or error, in terms of which the prescriptive period can be extended where the debtor has induced the creditor not to make a claim, either through fraud, words or conduct. The Act clarifies that the creditor does not need to have first formed an intention to make a claim which they were then dissuaded from making by the debtor; the requirement is simply the creditor’s failure to make a claim. Section 4 also confirms that it does not matter whether the debtor intended to stop the creditor from making the claim, only that that was the effect of their actions.
• Section 6 deals with the 20-year prescriptive period and provides that it cannot now be stopped by a relevant acknowledgement of the obligation and, where it is interrupted by a relevant claim, the full 20-year period will not be re-started. The Act thus ensures that the 20-year period operates as a longstop and will only be extended where a claim is already the subject of court (or other such) proceedings that have not been concluded.
• Section 8 seeks to bring some certainty to the question of when the 20-year clock starts to run in relation to claims involving recovery of damages. In these claims, time will run from the date of the act or omission giving rise to the claim (or the date on which it ceased if it was a continuing act). This replaces the previous position of time running from the date of loss or damage, which could have the undesired effect of allowing extended periods of time to pass before the prescriptive clock even commenced.

These are just some of the provisions of the 2018 Act. It is important to make sure you are fully up to date with all the amendments to the 1973 Act.

Risk management red flags

• When a client comes to you with a new claim, which prescriptive (or, for that matter, limitation) period applies? Make sure you and your team are up to date with the new provisions and can apply them. If you have not already done so, it is a good idea to invest time in detailed training.

• Section 11 of the 1973 Act as amended does not have retrospective effect. The transitional provisions provide that the amended 1973 Act will have no effect on rights and obligations which were extinguished by 1 June 2022 (Prescription (Scotland) Act 2018 (Commencement, Saving and Transitional Provisions) Regulations 2022, Regulation 3). This means that if a claim had already prescribed and could not be saved by any of the relief mechanisms in the original 1973 Act as at 1 June 2022, it cannot be rescued, even if the amendments enacted by the new Act would have saved it.

• An agreed extension under Section 13 of the 1973 Act as amended can only be made before the original prescriptive period ends. When negotiating an extension do not lose sight of the end of the prescriptive period; even if it looks likely that agreement will be reached, you cannot rely on this if the expiry of the prescriptive period is looming large. Diary entries will also be needed to manage the expiry of the extension.

• Make sure you record any agreement to extend the prescriptive period in detail. You must have agreement on the date prescription started and the date it will finish, taking into account the agreed extension.
• Remember that an agreed extension only applies to the parties to the agreement; the extension will not apply to any other creditors or debtors who are not party to the agreement.
• It remains the case that only service of a court action (and subsequent calling, where appropriate) will interrupt prescription. It is not enough to have warranted a writ or signeted a summons.

These top tips and more were also explored in an earlier Lockton article by Anne Kentish of Kennedys, published in October 2023. You can view Anne’s full article here: ‘Tick tock, stop (or start) the clock’.

Finally, the importance of training is worthy of a second mention; detailed training and consistent supervision is essential to avoid mistakes on prescriptive periods, as are regular file reviews. Take time to think about the training your teams have received and make sure all staff dealing with claims have the knowledge they need to manage prescription issues correctly.

Here to help

Lockton are here to help the profession and we welcome input from you as to what you would like to see from us by way of risk management content. If you have any suggestions or requests, please contact Matthew Thomson or Anna Forsyth.

Written by Anna Forsyth with thanks to Alan Eadie of DAC Beachcroft