04 August 2022

Parts of the Prescription (Scotland) Act 2018 came into force on 1 June 2022, bringing in new rules for the operation of 5 year prescription (time bar) in Scotland.

Jamie Robb provides a great analysis in his recent article which can be found here. 

However, the new rules only apply if the claim was not already time barred on 1 June 2022.  The courts can, therefore, expect to remain involved in deciding cases under the old rules for some time to come.

Under the old rules, the 5 year period for raising a claim starts when loss occurs.  Loss is to be assessed as an objective fact, with the benefit of hindsight. So, where the claimant has incurred “wasted expenditure”, which is in fact a loss caused by someone’s breach of duty, that will start the 5 year countdown – even where the claimant was unaware at the time that the expenditure was wasted.  For example, in Midlothian Council v Blyth & Blyth (2019), the claimant incurred the cost of building a housing development in reliance on what later turned out to have been negligent advice.  As a result, the development was uninhabitable and had to be abandoned.  The cost of building the doomed development was wasted expenditure which started the 5 year countdown, even though the claimant didn’t know until later that the expenditure was a loss. 

The Court of Session has recently ruled on another case under the old rules – C&L Mair v Mike Dewis Farm Systems Ltd (2022) which can be found here.

C&L Mair contracted Mike Dewis to supply and install a slurry tank.  The installation was carried out in February 2012 and paid for around that time.  The tank was installed on level ground, beyond which there was an embankment.  In September 2016, there was a circle slip of the embankment – the base of the embankment moved, and allegedly this caused damage to the tank such that it needed to be demolished and rebuilt elsewhere.  C&L Mair sued for breach of contract, alleging Mike Dewis had failed to consider or advise on the risk posed by the embankment. 

Mike Dewis argued the claim was time barred, on the basis that 5 years had already elapsed from the date on which wasted expenditure had been incurred.  The wasted expenditure, they contended, was the price paid for installation of the tank.  That expenditure was incurred in February 2012, more than 5 years before the court action was raised.  

C&L Mair argued that there was no loss until the slip occurred in September 2016, less than 5 years before the action was raised.  It was common ground that the slip was not inevitable.  On that basis, C&L Mair argued loss only occurred when the slip actually happened, and the 5 year period must therefore run from the date of the slip. 

Lord Braid decided the point in favour of C&L Mair.  His Lordship noted that the issue to be determined is when loss first existed as a matter of objective fact, and he addressed the application of hindsight as follows:

“To hold that [the loss] occurred in 2012, more than four years before the slip occurred, is not so much to apply hindsight as to look at matters in 2012 through the prism of a hypothetical crystal ball.  Even with the benefit of hindsight, it cannot be said that loss had occurred in 2012…In 2012, there was merely a risk that a slip might occur in which event the pursuer would suffer loss; but until that happened the pursuer could not be said to have suffered detriment.”

The outcome was very much dependent on the judge’s assessment of loss in the specific circumstances of the claim.  It was important to the outcome that the slip was not inevitable when the expenditure for installation of the tank was incurred in 2012 – hence no loss could be said to have occurred at that time.  

As Lord Braid acknowledged, “it is not always easy to decide on which side of the line an individual case lies”.  Doubtless other interesting cases will arise, and the courts will continue to be called upon to decide on which side of the line they belong. 

For more information on this case, the law of prescription, and other issues relating to construction and engineering claims, please contact:

Michael Collins, Senior Associate & Solicitor Advocate: mco@bto.co.uk / 0141 221 8012