The Scottish Parliament has passed legislation reforming the laws governing when an individual’s legal rights and obligations are extinguished if not acted upon, addressing some of what were claimed to be the harsher results of the existing law.
The Prescription (Scotland) Bill implements recommendations, made by the Scottish Law Commission, intended to provide greater certainty and clarity in relation to “negative prescription”.
Negative prescription establishes time limits for when obligations and rights, such as obligations under a contract, are extinguished. If the time limit is missed, usually because court proceedings to enforce it have not started, the ability to enforce the right is lost.
When the prescription time limit begins to run has caused controversy – especially since a 2014 Supreme Court decision following the ICL Plastics explosion, in which it held that time might start to run before it was known who had caused the loss. Some argued that this approach could produce harsh and potentially unintended results. While that was a matter of debate, it is this argument, amongst other things, that the new legislation is intended to address.
The bill introduces a number of changes. The scope of the standard five-year negative prescription rule is extended to cover all statutory obligations to make payment not already subject to that rule. Statutory obligations to pay taxes, duties, rates or child maintenance and obligations to make repayments in relation to benefits, income support and tax credits are expressly excluded from the five-year rule.
In determining how fraud or error impacts time calculation, what matters is that the words or conduct of the person against whom the claim is being directed actually caused the failure by the other party to make a claim, intentionally or otherwise.
Significantly, the bill provides that the running of the long-stop 20-year cut off in claims for damages depends only on fault having occurred, so cases where that fault is more than 20 years ago will end, regardless of when loss emerges – the 20-year prescriptive period for obligations to pay damages currently runs from the date when loss, injury or damage occurred. In addition, the period can no longer be interrupted by, for example, starting court proceedings. However, an extension is allowed to enable litigation which has started and is ongoing, to finish.
Although it sounds technical, of most importance to parties day-to-day is the shift in commencement of the five-year prescriptive period, which will only begin to run when the claimant is aware not only that loss, injury or damage has occurred, but that it was cause by an act or omission and who was responsible for that.
Although the bill passed through the Scottish Parliament largely unnoticed, some parts caused concern. The general idea that the long-stop 20-year prescription should not be interrupted was well received, although some felt the provisions relating to a possible extension of the 20-year period would not work well for property rights, such as servitudes.
Sometimes, when a court grants an order at the end of a successful court action, such as one ordering someone to pay a sum of money, this court order takes the place of the original source of the obligation to pay the money – with its own 20-year prescriptive period which starts to run from the date of the order. This is not the case with other types of court orders, including those recognising the existence of a servitude.
As in all things, balance is the key. The effect on time and how the law treats that can be viewed from different perspectives. While the changes to the five-year rule favour claimants there are other changes – particularly over very old claims - which go in a different direction. Whether balance has been achieved will await practical experience of the amended provisions.
- Craig Connal, partner and commercial litigation expert at Pinsent Masons