Clarifications to the 2018 prescription act in Scotland

In Scotland, some clarification to the law of prescription, or time bar, has arrived, with 1 June 2022 seeing sections 5 and 13 of the Prescription (Scotland) Act 2018 coming into force. Whilst the new Act attained Royal Assent back in 2018, the Scottish Law Commission recommended a three-year period of implementation before the provisions started to take effect, hence the significant time lag.

Prescription relates to non-injury claims for delict or tort. Prior to the 2018 Act, the principle of prescription was governed by the Prescription and Limitation (Scotland) Act 1973 which stipulated a five-year timescale during which a claim must be brought. However, whilst under the 1973 Act this timescale could be adjusted by arguments raised as to an absence of any knowledge of the loss or damage, this point has been subject to a significant narrowing over recent years following cases such as Midlothian Council v Blyth & Blyth & Ors [2019] CSOH and David T Morrison v ICL Plastics [2014] UKSC48. Both cases reaffirmed that claims should be brought within a five-year period from the date that the pursuer became aware (or should have been aware with reasonable diligence) that they had suffered a loss. However, the narrow interpretation of the knowledge test has led to some interesting decisions, particularly in the case of Midlothian Council v Blyth & Blyth & Ors, where the court concluded that the Council’s case was time barred as prescription started to run from the date that the Council had paid the invoice of a consultancy firm, despite the Council’s claim that the consultancy companies’ negligence only later became known to them.

The insertion of new sub-sections 11(3A) and 11(3B) to the 1973 Act (now transposed into section 5 of the 2018 Act) aim to provide clarity, following the perceived unfairness of the court’s approach in the above cases, by amending, from 1 June 2022, the test for when the prescription clock starts to run. This now requires the creditor to be aware that:

• loss, injury or damage has occurred
• the said loss, injury or damage was caused by a person’s act or omission
• the identity of that person is known.

The second important change is found within section 13 of the 2018 Act, which now enables the parties to contract out of the prescriptive period, something previously prohibited under the 1973 Act. Standstill agreements are common in England and Wales and so, whilst this provision allows their Scottish counterparts to be on a more equal footing with them to extend prescription further, this new freedom has been curtailed in Scotland to circumstances where:

• the prescriptive period has started but not already expired
• the period is to extend by a maximum of one year
• it can only be entered into once in relation to the same obligation.

The introduction of standstill agreements is likely to be welcomed in the commercial litigation field, allowing the parties at least some level of autonomy beyond the previously strict timescales of the 1973 Act.

The remaining sections of the Act come into force on 28 February 2025. It is not clear whether significant satellite litigation is likely to arise from parties arguing when in time a claim becomes time barred, particularly if this falls closely to the new changes being implemented on 1 June. However, in the first instance at least, the 2018 Act is a positive step towards change as well as providing some much-needed clarity to the courts on how the issue of knowledge in prescription should be approached.