Prescription: times a-changing at last

The Prescription (Scotland) Act 2018 will come into force on 1 June 2022.

Prescription has been the subject of extensive judicial analysis over the past decade, leading to an application of the law which some consider to be unfair to pursuers, who have lost claims to five-year short negative prescription before they became aware of the cause of the loss they had suffered. 

The recent cases of WPH Developments Ltd v Young & Gault LLP [2021] CSIH 39 and Midlothian Council v Blyth & Blyth [2019] CSOH 29 illustrate the potential for harsh outcomes for pursuers under the current law.

While the 2018 Act will not be fully implemented until February 2025, two significant changes will come into force on 1 June 2022: (1) the introduction of s 11(3A) and (3B) to the Prescription and Limitation (Scotland) Act 1973, which will amend the discoverability test in cases of latent loss; and (2) the introduction of standstill agreements for the first time in Scotland in relation to prescription. 

Test for commencement

Under the new s 11(3A), the five-year period will not begin until the pursuer is aware, or could with reasonable diligence have been aware:

“(a) that loss, injury or damage has occurred,

(b) that the loss, injury or damage was caused by a person’s act or omission, and

(c) the identity of that person”.

The effect of s 11(3B) is to clarify what is the presently understood position, that the pursuer being unaware that the act or omission that caused the loss, injury or damage is actionable in law will not delay the commencement of the five year period.

Judicial consideration awaits but, on the face of it, the introduction of s 11(3A) should avoid the perceived unfairness to the pursuer who, under the existing formulation in s 11(3), would find that the obligation they wish to enforce has prescribed before they could reasonably have come to know how their loss was caused or who it was caused by.

Retrospective effect?

To the disappointment of some pursuers (and a few practitioners), the new provisions will not revive obligations which have prescribed on or before 31 May 2022.

Obligations which, under the existing law, would prescribe through short negative prescription on or after 1 June 2022, will fall to be assessed under the new provisions, potentially giving pursuers several additional years in which to bring proceedings. 

Standstill agreements

The other significant change from 1 June 2022 is the introduction of standstill agreements pursuant to s 13 of the 2018 Act. Parties will now be able to agree to extend the five-year prescriptive period, on one occasion, by up to one year.

The contractual extension of the prescriptive period is intended to allow parties additional time to resolve the dispute, while avoiding the need to raise protective court proceedings in preservation of their position. This change is intended to mirror the position in England for standstill agreements in relation to limitation, and is likely to be welcomed by civil court practitioners in Scotland.