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Prescription: 2018 Act and Case Law Update

Stay informed about the Prescription (Scotland) Act 2018 and recent case law updates, including reforms, discoverability test, fraud/error provisions, and more.

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Prescription: 2018 Act and Case Law Update

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  1. Prescription: 2018 Act and Case Law Update Adam McKinlay, Advocate 31 January 2019

  2. Overview 1. Prescription (Scotland) Act 2018 2. Recent Cases

  3. Prescription (Scotland) Act 2018 • Royal Assent – 18 December 2018 • Substantive provisions not yet in force • Scottish Ministers have power to make transitional provisions by regulations: section 15 (1) • SLC Discussion Paper (No. 160) February 2016 • SLC Report (No. 247) July 2017 • Bill introduced on 8th February 2018

  4. 2018 Act Reforms • Discoverability test – section 11(3) • Fraud / Error – section 6(4) • Obligations covered by 5 & 20 year periods • Twenty year “long stop” prescriptive period • Standstill agreements • Burden of Proof • Definition and impact of “relevant claim”

  5. Discoverability test– current law • Section 11(3) currently deals with the situation where a creditor had suffered LID within the terms of section 11(1) but “was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred”. • Five year prescriptive period is delayed until the point at which the creditor acquired (or should with reasonable diligence have acquired) that knowledge.

  6. Discoverability test – current law • UKSC cases clarified scope: • David T Morrison v ICL Plastics 2014 SC (UKSC) 222 • Gordon’s Trustees v Campbell Riddell Breeze Paterson LLP 2017 SLT 1287 • Need awareness of LID as matter of objective fact • No need for creditor to have knowledge of: • Actionability of LID • Cause of LID – “caused as aforesaid” is purely descriptive • Identify of party responsible

  7. Lord Hodge in Gordon’s Trustees v CRBP para [22] • “Thus a person may begin a legal action and incur expenditure on legal fees on the basis of negligent legal advice or he or she may purchase a house at an over-value as a result of the negligent advice of a surveyor. In each case the person may be aware of the expenditure but not that it entails the loss. But it offers certainty, at least with the benefit of hindsight.”

  8. 2018 Act – key reforms For five year period to commence, creditor needs knowledge of “each of the facts mentioned in subsection (3A)” (3A) The facts referred to in subsection (3) are – (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.” (3B) It does not matter for the purposes of subsections (3) and (3A) whether the creditor is aware that the act or omission that caused the loss, injury or damage is actionable in law.

  9. Fraud/error - section 6(4) • 6(4) deals with the situation where a creditor is induced by the fraud, or words or conduct of the debtor, or any person acting on his behalf, to refrain from making a relevant claim • 2018 Act reforms: • Replace “induced to refrain from making” with “failed to make” • Debtor’s intentions are irrelevant

  10. Scope of 5 & 20 year prescriptive periods • 2018 Act Reforms: • 1973 Act does not apply where prescription or limitation period provided for elsewhere • Five year prescriptive period extended to: • Statutory payment obligations (not taxes) • Obligations relating to validity of a contract

  11. Twenty year “long stop” prescriptive period • 2018 Act Reforms: • Section 7 1973 Act (claims) • Start date will now be from date of debtor’s act or omission, not when loss flowed from it • No interruption from “relevant claim” • Section 8 1973 Act (property rights) • No interruption from “relevant claim” • No change to imprescriptible rights (Schedule 3)

  12. 2018 Act – other reforms • Standstill agreements • Competent (cf current prohibition in s.13) • BUT only (i) after prescriptive period started; (ii) for no more than one year; and (iii) on one occasion • Definition and impact of “relevant claim” • Include claims in administration/receivership • Prescriptive period interrupted until disposed of • Burden of proof

  13. Transitional provisions • SLC: “Nothing proposed in this report would have retroactive effect” (Report para 1.29) • 3 year transitional period? (Report 1.30-1.35) • Potential for claims which have already prescribed under the current law from being “brought back to life”? • Article 1 Protocol 1 of the Convention

  14. 2. Recent cases • Kennedy v RBS [2018] CSIH 70 • Remitted from SAC – s.112 CR(S)A 2014 • RBS terminated loans before expiry of terms • When was loss suffered: on withdrawal of facilities or when pursuer was required to sell his property in order to raise funds? • LP Carloway at para [20] – immediate loss

  15. “The sheriff erred, but perhaps only in expression, when he said that, for prescription to start running, the loss does not have to be actual. It does, but it does not either require to have been suffered or to be precisely calculable at the relevant date and it may increase over time. It is again an error, but only in expression, to say that it is sufficient that loss is inevitable. It has to have happened in one form or another. However, where loss is inevitable, as a matter of law, in almost all cases, loss will have already occurred. It is, put simply, quantifiable future loss.”

  16. British Overseas Bank Nominees Ltd & Anr v Stewart Milne Group [2018] CSOH 125 • Collateral warranty • Meaning of “equivalent rights in defence of liability as it would have against the Employer under the Building Contract”? • Held (per Lady Wolffe) that this did not import a prescription defence where defender would have had a prescription defence in claim by Employer

  17. Virgin Media v WH Malcolm [2018] SC GLA 61 • Damage to pursuer’s broadband cables • When did pursuer become aware of loss? • Para [70 et seq] – no attribution of knowledge of “mere contractor” under s11(3)

  18. Khosrowpour v Taylor [2018] CSOH 64 • Pursuer provided funding for mother-in-law to purchase council house at a discount • Solicitor failed to put in place binding agreement that property would be left to pursuer in her will • When did pursuer suffer loss – immediate or contingent upon future events? • Held (per Lord Doherty at para [28]) – immediate loss

  19. Prescription: 2018 Act and Case Law Update Adam McKinlay, Advocate 31 January 2019

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