Contributors
Key provisions within the Prescription (Scotland) Act 2018 are coming into force on 1 June 2022 and will have significant implications for prescription law in Scotland.
The Scots law of prescription (also known as time bar) extinguishes certain rights and obligations after the relevant applicable time period. In practical terms, this means rights or obligations you may have had will cease to exist or be enforceable after a prescribed period of time.
What is changing?
Whilst the majority of the Prescription (Scotland) Act 2018 (which we will refer to as the "2018 Act") does not come into force until 28 February 2025, two sections will shortly come into force that amend the Prescription and Limitation (Scotland) Act 1973 (which we will call the "1973 Act").
Section 5 of the 2018 Act amends section 11 of the 1973 Act, and now specifically provides that the prescriptive period does not commence until a creditor is aware of the following facts:
- That loss, injury or damage has occurred,
- That the loss, injury or damage was caused by a person’s act or omission, and
- The identity of that person (under s5(5) of the 2018 Act)
Another welcome addition under the 2018 Act is that parties will be able to enter standstill agreements, something which many will already be familiar with south of the border. As such, parties will be able to agree to extend the prescriptive period for up to one year, which should in theory reduce the instances a creditor is required to raise protective court proceedings to stop the prescriptive clock.
What does this mean for the construction sector?
A notable implication for the construction sector is in the recovery of latent damages claims. Latent defects by their nature often lie undiscovered for many years after completion. Recent case law caused particular challenges for the employers on construction contracts, as before the 2018 Act it could be argued that time starts to run from when the expenditure (loss) on a project is incurred, regardless of whether it was known that expenditure was wasted (under Midlothian Council v Blyth & Blyth & Ors [2019] CSOH).
The 2018 Act addresses this concern, in that a pursuer must be aware (or with reasonable diligence could have become aware) that the loss has occurred and that the loss was caused by an identified party's act or omission. This means that the prescriptive period will start later in many circumstances and will be a welcome change for employers.
It is important to note that the 2018 Act is not retrospective though. If a claim prescribes on or before 31 May 2022, then the 2018 Act has no effect. If a claim prescribes on or after 1 June 2022, the 2018 Act kicks in. We anticipate issues will arise surrounding whether the prescriptive period falls under the 1973 or 2018 Act in certain cases and therefore it is important to take professional legal advice as soon as possible if you think you may have a claim.
Finally, if your contract or dispute falls under English law, prescription will not apply - limitation periods and principles operate differently in England, being an entirely separate legal concept.
