Prescription and limitation applies to all claims in delict/tort and contract. Different rules apply north and south of the border, but the purpose of both is to ensure that a wrongdoer cannot be sued for a historic delict/tort or contractual claim. Time-bar will operate against these ‘stale’ claims, in order to avoid the difficulties of proof created by delays. This article looks at both jurisdictions and provides some tips on what periods apply and how and when to ‘stop the clock’ running for time bar.
Scotland: legislation
Prescription and Limitation is regulated in Scotland by the Prescription and Limitation (Scotland) Act 1973.
5 year prescription period
Under section 6 of the Act an obligation is extinguished after five years:
(a) without any relevant claim having been made in relation to the obligation; and
(b) without the subsistence of the obligation having been relevantly acknowledged.
In general terms, this applies to:
- obligations to pay a sum of money;
- obligations to pay compensation; and
- contract and breach of contract claims.
Note: the five-year period begins when loss arises and when the breach of contract or negligent act or omission has occurred. The period does not run from the date of the contract itself. It can be extended in a breach of contract or negligence claim to account for any period when the claimant was not aware and could not with reasonable diligence have been aware of the claimed loss.
20 year prescription period (longstop)
In addition, a 20 year prescription period is applied as a long-stop. An obligation will thus expire if, after 20 years, no relevant claim has been made and the subsistence of the obligation has not been acknowledged. This is a “catch all” provision which applies to all obligations. It is designed to impose an absolute time limit on obligations being enforceable. Unlike the five-year period, the 20 year period cannot be extended on the basis of a lack of awareness by the claimant.
Alternative time periods
There are some exceptions and alternatives to the five-year time period. The alternatives are limitation periods, within which actions must be raised:
- Personal Injury – 3 years (Sections 17 and 18)
- Defamation – 3 years (Section 18A)
- Harassment – 3 years (Section 18B)
- Product Liability – 10 years (Section 22A)
David T Morrison & Co Ltd v ICL Plastics Ltd & Others [2014] UKSC 19
The UK Supreme Court’s judgment means that where the five-year prescription period applies, a claimant in Scotland must pursue its claim within five years of the date when it became aware that it suffered a loss, or when it could with reasonable diligence have become so aware, and this applies whether or not the claimant knows that loss to be the result of a breach of contract or negligence by the party against whom it claims. This has altered the previous position in law. It will probably lead to more protective court actions being raised prior to the claimant concluding investigations into the claim.
England: legislation
In England and Wales the relevant legislation is the Limitation Act 1980.
Six-year limitation period
The 1980 Act applies a six-year limitation period in England and Wales to the following claims:
- tort;
- simple contract;
- sums recoverable by statute; and
- enforcing judgements.
12 year limitation period
The 1980 Act also has a 12 year limitation period for:
- actions on a specialty (e.g. contracts executed as a deed); and
- actions relating to recovering land. This is different to Scots law, and the consequences of entering into an English contract executed as a deed should be noted.
15 year limitation period (longstop)
Section 14B of the 1980 Act specifies a 15 year (long-stop) limitation period.
Alternative time periods
As in Scots law there are some types of claim which have different time periods:
- Defamation/Slander – one year (Section 4A) (although note that a fresh cause of action accrues every time the claimant is defamed)
- Personal Injury – three years (Section 11)
- Product liability – ten years (Section 11A)
In relation to negligence claims for latent defects, section 14A of the 1980 Act applies a ‘discoverability’ exception, meaning that the limitation period is the later of:
- Six years from when the cause of action accrued (i.e. when the damage occurred); and
- Three years from when the claimant knows or ought to have known:
- the material facts about the loss suffered;
- the identity of the defendant; and
- his cause of action.
However, note that this exception will not apply where the construction contract excludes liability for negligence (other than for death or personal injury which cannot be excluded).
How to stop time running
There are a number of ways to ‘stop the clock’ for time-bar:
- Raise court proceedings Raising court proceedings will stop time-bar and preserve an action. In England, this happens when the court receives the claim form. In Scotland, this happens when the writ/Summons is served.
- Commence arbitration proceedings Commencing arbitration proceedings will stop the clock for time bar.
- Agreement between the parties Parties can agree to a different period for time-bar, or can agree to stop time-bar running. There needs to be an unambiguous agreement and shorter limitation periods will be subject to a reasonableness test. This is well accepted in England and Wales, but there is no accepted practice in Scotland.
- Concealment Deliberate concealment of the facts giving rise to a cause of action will postpone the running of time.
- Admission An admission of liability will temporarily stop time-bar running, but it will start running anew.
- Insolvency A winding up order suspends the running of time on claims in respect of most types of debt.
Conclusion
Time bar is a tricky issue for the courts, as they attempt to balance the rights of an aggrieved party against the need to protect parties from historic claims as a matter of public policy.
The key aspect is to be very aware of time bar when considering a claim. After reviewing the facts, unless the proposed action or claim is manifestly within time, it is prudent to commence protective proceedings as a matter of urgency, or if parties are being co-operative, particularly in England and Wales, perhaps consider entering into an agreement to stop the time bar period running.
Also, if you have a choice of jurisdictions from North and South of the border, you should consider the facts of the case and if time-bar is a potential issue, consider which set of statutory provisions and case-law will best allow you to advance your claim, with the lowest risk of it being defeated by time-bar.
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