On numerous occasions this blog has discussed the fundamental issue of time bar. However, the recent decision of the UK Supreme Court in David T Morrison & Co Limited v ICL Plastics Limited & others  UKSC 48 (“ICL Plastics”) indicates a complete change in the way that Scots law approaches certain cases.
In Scotland the time limit for bringing a claim for damages for breach of contract or negligence is five years from the date the obligation became enforceable. The legal rules on time bar are found in the Prescription & Limitation (Scotland) Act 1973 (the “Act”).
Under the Act obligations generally become enforceable on the date when loss occurs subject to certain exceptions set out in sections 11, 6(4) and 6(5) of the Act. These exceptions can postpone the starting date of the five year time clock.
For almost 30 years the Scottish Courts have interpreted the exception in section 11(3) of the Act to mean that:
A pursuer must have knowledge, or could have had knowledge with reasonable diligence
1) That they have suffered loss, and
2) That the loss was caused by an act or omission.
before the time clock starts to run.
However, this interpretation has been overturned by the decision of the UK Supreme Court in ICL Plastics.
The case concerned the explosion on 11 May 2004 at ICL’s factory in Maryhill, Glasgow. The explosion seriously damaged the adjacent shop owned by Morrison. It was immediately apparent, as of the date of the accident, that Morrison had suffered a loss. However, there was speculation for a period of time over how the accident was caused and who was responsible.
On 13 August 2009 (five years and three months after the explosion) Morrison raised a court action following the release of a report pointing to failings by ICL Plastics Limited. ICL Plastics defended the action on the basis that it had been brought more than five years after Morrison could have raised a claim and accordingly any obligation to pay damages had expired.
Morrison relied on the exception in section 11(3) arguing that the start of the five year prescriptive period was postponed as they were not aware, and could not with reasonable diligence have been aware, that the damage had been caused by negligence, nuisance or breach of statutory duty until a much later date.
It was held by a majority of 3:2 that properly construed, section 11(3) means that the pursuer only needs to know that he has sustained loss for the obligation to make reparation to become enforceable. This wipes away any argument that five year period should be postponed because the pursuer was not aware that the loss was caused by some act or omission.
One of the key arguments favoured by Lord Reed and Lord Neuberger, is that had the drafter of this legislation intended that the pursuer must be aware of the cause of the loss before the time clock started running, then that intention would have been spelled out clearly. It was also said that this approach was consistent with a natural reading of the provision in its context.
The effect of the decision is that the five year prescriptive period will run from the date that the pursuer first becomes aware (or could with reasonable diligence have discovered) that they have suffered a loss. Any investigations into the cause of that loss will have to be carried out within the five year period.
This decision was not entirely unforeseeable. Although there had been a string of consistent Scottish cases, there were often misgivings (or as Lord Hodge says in ICL “doubts at the margins”) about the soundness of the established reasoning. The ambiguity was highlighted in a Scottish Law Commission report in 1989 where it was recommended that the law be reformed to clarify the position in section 11(3). However, no such reforms were implemented.
Lord Hodge, one of the dissenting judges, was sensitive to the disruption that this decision may cause to some pursuers and in fact urges the Scottish Law Commission’s recommendations be reconsidered. Until such time as the law is reformed, anyone considering making a claim for a loss they have suffered should seek legal advice without delay to clarify their time bar position. On the other side of the court room, anyone defending a court action may find a preliminary plea of time bar may be just the ace in the pack of defences to dispose of a pursuer’s case.
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