20 May 2022

Alan Partridge noted that “what really binds us as a nation is when all of us, together, can’t stand something, like speedbumps, or anything changing”. Of course, subscribers to the linear nature of time, will appreciate its constantly changing nature. However, when it comes to our ability to tell time, perhaps change is not so welcome.

Pre-2014, it was assumed by lawyers that the five year time limit for raising certain claims for damages did not start to run until the creditor was aware (a) they had suffered loss (the ‘knowledge test’) and (b) that loss had been caused by the fault or negligence of someone else (the ‘actionability test’).

In 2014, following the decision in David T Morrison & Co Limited v ICL Plastics Limited & Others 2014 UKSC 48, the Supreme Court confirmed that lawyers had been setting their clocks wrong and that all that was required for prescription to run was knowledge that loss had occurred; not that that loss had been caused by any fault or negligence. Some considered this to be an issue, warning that “Morrison and Campbell Riddell have done quite a lot of damage, and will kill quite a lot more cases yet” (Robert Howie QC to the Delegated Powers and Law Reform Committee on 27 March 2018). In response, the Scottish Parliament introduced the Prescription (Scotland) Act 2018 (The 2018 Act) with its laudable objective “to address certain issues which have caused or may cause difficulty in practice” (Policy Memorandum SP Bill 26-PM 1 Session 5 2017). 

Now for those of you in the know, 1st June 2022 is a momentous date. If you buzzed at ‘World Milk Day’ or Spiderman’s birthday (well Tom Holland’s at least) you are far cooler (a term which likely spells my instant disqualification from the Scottish Young Lawyers’ Association) than me.  For my part ,1st June marks the coming into force of section 5 of the 2018 Act, the purpose of which is to undo the upset caused by Morrison. In doing so, Parliament introduced (or reformulated) a third leg to the test – the ‘discoverability test’. This means that the five year-time limit for certain claims will not begin to run until a creditor is aware (or with reasonable diligence ought to be aware): 

1. that loss, injury or damage has occurred (the ‘knowledge test’)         
2. that said loss, injury or damage was caused by someone’s act or omission; (the ‘actionability test’); and
3. the identity of who caused that loss, injury or damage (the ‘discoverability test’).

“These are matters of fact not law, and the creditor’s awareness or otherwise of the legal significance of these facts is not relevant to the application of the test. In the same way, knowledge of the identity of the person whose act or omission has caused the loss, injury or damage is knowledge of a fact; it does not matter whether the creditor is aware that the act or omission that caused the loss, injury or damage is actionable in law.” (Scottish Law Commission Report on Prescription No 247 at para 3.19).

The basis for this tripartite test has been summarised as follows:

“[P]rescription is about the extinction of obligations once they are enforceable. It is hard to say that there is an enforceable obligation unless it is known against whom we should enforce it...For each relevant person—that is, each party that might be sued—you need to be able to tick all three boxes: defect; act or omission; and identity. Once you have done that, the time will start to run, and you have five years in relation to each of those people.” (David Johnston QC to the Delegated Powers and Law Reform Committee on 20 March 2018).

Two issues flow from this:

• First, once a creditor knows they have a loss and who caused that loss, why does the creditor require a further five years to raise an action?  In short, what is the purpose of the five-year time limit if not to allow the creditor to ascertain these facts? (a point raised by Craig Connal QC see the Scottish Law Commission Report on Prescription No 247 at para 3.7). 

• Second, what is needed to trigger the creditor’s awareness of the identity of the wrongdoer? 

The first is a policy issue. It is clearly desirable to give a creditor time to get their house in order, instruct experts and advisors and decide whether to proceed with litigation, but how long a pursuer requires to complete this process is perhaps debatable.  The second issue is evidential. What triggers a creditors’ awareness, as a matter of fact, of the identity of the person who caused the loss?

It has been suggested that “what one would do is go to an expert and ask for an expert report that says what the problem is, how it was caused and who is at fault. Good-quality expert advice will tell you that the fault lies with the person who designed the foundations, the person who inadequately poured the concrete or whoever. That will allow you to start to accumulate the knowledge that you need for prescription to begin.” (David Johnston QC, to the Delegated Powers and Law Reform Committee on 20 March 2018).

The problem is that professional negligence and construction claims are awash with experts who disagree as to the cause of defects. Is the pursuer imbued with knowledge of who caused the loss because their expert tells them it was the builder’s fault, or does the fact that the defender’s expert opines it was the architect’s fault mean that the pursuer’s knowledge is displaced? Does the creditor know the identity of the wrongdoer when the defender’s expert report is disclosed, or is it only when the court determines that one party’s expert’s evidence is to be preferred? These are issues which the courts will need to grapple with, however in the meantime this potential uncertainty may cause issues for practitioners and insurers when considering time-limits on claims and run-off cover on policies.

Conclusion 

Whilst the Morrison era may represent the quartz crisis of prescription, the solution has the potential to take us back to sun dials and water clocks. Time limits will be determined by the passage of time as viewed through the creditors’ eyes. That was, to some extent, the position pre-Morrison, however, the need for a creditor to be aware, as a matter of fact, that it was Colonel Mustard in the Ballroom with the Lead Pipe, before time even starts to run, leaves open the possibility for claims to survive long past their current ‘use-by’ date.

Whilst it could be argued that a return to the pre-Morrison understanding of prescription may have “resulted in a fairer balancing of interests” (Scottish Law Commission Report on Prescription No 247 at para 3.8), at least Tom Holland will be marking 1st June with a smile, a birthday cake and hopefully a new Spiderman movie deal.

Here’s to you Tom, and a Happy World Milk day when it comes!

James Robb, Associate: jro@bto.co.uk / 0131 222 2939