The Scottish five-year “negative prescription” period extinguishes certain claims if they are not taken to court within that period. This does not apply to personal injury claims, which are generally subject to a three year time bar. The five-year period applies, for example, to property damage claims and certain claims for property-related loss arising from professional negligence.
The current law on the starting point sounds simple. The five years starts to run from when the claimant knows that they have suffered loss. Knowledge includes what could have been found out with reasonable diligence.
On the meaning of loss, Lord Hodge, now Deputy President of the UK Supreme Court, explained in a 2017 Scottish case that it does not matter whether the claimant “is aware actually or constructively that he or she has suffered a detriment in the sense that something has gone awry … It is sufficient that a (claimant) is aware that he or she has not obtained something which the (claimant) has sought or that he or she has incurred expenditure.”
The starting point of the five year period and the meaning of loss arose this year in a case before Sheriff Reid at Glasgow Sheriff Court.
An architect’s plans wrongly showed the boundary of a development site, resulting in a property developer building boundary walls on land which it did not own.
The question for the court was whether the five years started to run from when the developer spent money building the walls or from the date several months later when a neighbouring landowner queried the boundary. If the earlier date applied then the developer’s claim had been extinguished before it was taken to court.
Sheriff Reid held that the later date applied. He explained that he had a “nagging feeling that something may be awry” in Lord Hodge’s final sentence on the meaning of loss quoted above and that Lord Hodge perhaps meant to add the words “that was not sought” at the end. Reading those words in, the developer’s expenditure in building the walls was not, as the developer saw it, loss at the time the money was spent because they sought to incur that expenditure to have the walls built and did not know at the time that their money was being wasted, with the fact of waste only becoming apparent with the benefit of hindsight.
The argument for the earlier date is that the developer knew that they were spending money which, objectively, was wasted. An appeal against Sheriff Reid’s decision is ongoing, the outcome of which may shed further light on the starting point for the five year period and the meaning of loss under Scots law.
Another pending development is legislative reform of the starting point for the five year period. It remains unknown when this will come into force. When it does, the five years will start to run when the claimant knows not only of loss but also that it was caused by a person’s act or omission and the identity of that person.
This change may delay the starting point of the five years.
The new law is unlikely to bring an end to arguments on starting points because by adding two additional variables (knowledge of cause and identity of wrongdoer) to the variable of knowledge of loss, the scope for argument may increase.
There may also be scope for differing views on the meaning of loss as the legislation does not define that. In five years, lawyers may well still be puzzling over these issues. Time will tell.
Shirley Wyles is a Partner with BLM