- Professional liability
Partner - London. United Kingdom
The law of prescription in Scotland governs the time limits for legal claims, including claims for damages.
The current law of prescription is set out in the Prescription and Limitation (Scotland) Act 1973. It differs from the English law of limitation in a number of ways. Most notably, the standard prescriptive period is five years in Scotland, as opposed to six years in England, and standstill agreements have historically had no effect in Scotland.
The starting point for the five-year prescriptive period has been the subject of no small amount of controversy in Scotland in recent years. It’s given rise to two Supreme Court appeals (Morrison & Co Limited t/a Gael Home Interiors v ICL Plastics  and Gordon's Trustees v Campbell Riddell Breeze Paterson LLP ), numerous other court judgments, a Scottish Law Commission report in July 2017 and, ultimately, the Prescription (Scotland) Act 2018.
Underlying this controversy, there has been a perception that the current law is too harsh on claimants, because it allows for the five-year prescriptive period to start running as soon as a claimant learns of the fact or circumstances that constitutes loss or damage, even if they do not yet know that it amounted to loss or damage. This left open the possibility that the five-year period could begin to run (and could actually elapse) before a claimant discovers that they have a competent claim or have even suffered a loss.
This difficulty is, in part, what the 2018 Act was intended to address.
The 2018 Act introduces a new three-part ‘discoverability test’ to determine when the five-year prescriptive period will begin to run.
In short, after 1 June 2022, the five-year period will not start until the claimant knows (or could “with reasonable diligence” learn):
This new test swings the balance of parties' interests back towards claimants in response to the perceived harshness of the current law.
Standstill agreements are another innovation of the 2018 Act, although anyone practising south of the border will already be familiar with the idea.
The 1973 Act prohibited parties from contracting out of five-year negative prescription. However, the 2018 Act will give parties the option to extend this period where:
The rationale for this new rule is that it will give parties more time to resolve disputes extra-judicially and limit the need for proceedings to be raised protectively, to pre-empt a prescription defence.
The practical implications of these developments will be wide-ranging: