At Alba Claims, we assist in the pursuit and funding of commercial claims which potential pursuers may otherwise not be able to afford. A key consideration in many of the claims we consider is whether a court action could be raised or whether it has become “time-barred” due to the passage of time. In England, this concept is known as limitation.
The current law
The law of time-bar has been confusing and unsatisfactory for a number of years in Scotland, particularly in construction cases involving latent defects and even professional negligence matters. There have been a number of court decisions over the last 5 years which have brought a degree of clarity, but time-bar continues to be a recurring theme in many cases.
This is about to change. A key provision within the long-awaited Prescription (Scotland) Act 2018 (“the Act”) will finally come into force on 1 June 2022 which will provide clearer guidance as to the date by which court actions must be raised to avoid any right to do so lapsing. This will come as a relief to many pursuers in litigated Scottish disputes, various types of which Alba Claims deals with.
In Scotland, the general rule is that a claim must be brought within five years of loss or damage, but the position is more complicated when the party who has suffered a loss does not actually know that a loss has occurred. In recent cases, it has been held that where the loss concerns a breach regarding professional services, incurring fees in relation to those services was enough in itself to start the ticking of the prescriptive clock.
What will change?
The Act covers a range of matters, but a key section will be section 5. The new wording replaces the existing formula (in the Prescription and Limitation (Scotland) Act 1973) for determining the knowledge which a pursuer must have before the prescriptive period begins to run.
Under the new formula, the 5 year period will not begin to run until the date when the creditor became aware, or could reasonably have been expected to become aware, of each of the following facts:
(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.
How will the changes help potential pursuers?
The Regulations associated with the Act state that Section 5 will come into force on 1 June 2022. Regulation 3 also provides that:
“3(2) Section 5 … has no effect in relation to any right or obligation which was extinguished before [1 June 2022]”
As such, if a claim is time-barred under the existing legislation as at 31 May 2022, it will not be subject to the new test. This means that a contractor who has incurred a loss on, say, 20 February 2017, will not be able to take advantage of further time in which to raise their claim. Conversely, the new test will apply to claims due to prescribe after 1 June 2022 and in those cases, the 5 year clock won’t start ticking until the pursuer is aware of the 3 above facts. On a strict reading of the Act and Regulations, this could mean that those looking to pursue various types of commercial claims may benefit from having more time in which to do so. This is said to address concerns that a well-known Supreme Court decision has brought forward the start of the 5 year prescriptive period in a potentially unfair manner.
It will be interesting to monitor case law over the coming months, and there will undoubtedly be more commentary to follow on this topic after 1 June.