The Scottish Limitation Act, also known as statute of limitations, sets time limits for bringing legal actions. Some rights and obligations expire after a certain period of time. This may mean that a creditor is unable to pursue a claim if it has not reacted to a debtor’s default.
Different time limits apply to different types of claims. Although these limits are clearly defined, uncertainties may arise when determining when the limitation period actually began. The 1973 law has drawn criticism because the five-year limitation period is deemed to start running as soon as a potential prosecutor learns of the events which caused the loss or damage, even if he does not yet know who caused it. such loss or damage. This may mean that the five-year period could even have expired before a plaintiff knows who to sue.
Although the majority of the New Limitations (Scotland) Act 2018 does not come into force until 28 February 2025, two sections have already been implemented (as of 1 June 2022), which significantly changes the current situation. The first of these is section 5 which aims to solve the problem exposed above.
This article modifies article 11 of the law of 1973 by fixing the starting point of the limitation period. The period from which the time for making a claim runs will not begin until the claimant becomes aware of the following facts – (i) that the loss, injury or damage has occurred; (ii) that the loss, injury or damage was caused by the act or omission of any person; and (iii) the identity of that person.
This change is likely due at least in part to the decision in Morrison v ICL Plastics. The Prosecutor knew that damage had been suffered following an explosion but he was unaware of ICL’s liability. They argued that the relevant date should be when they discovered ICL was at fault rather than when the loss itself was incurred.
The Inner House of the Court of Session held that although, on its face, the claim had been raised some years after it had been barred, the relevant date was in fact the date on which the Prosecutor became aware of the fact that ICL was liable for the loss suffered. . The Defenders appealed this decision, which was ultimately overturned by the Supreme Court. This seemingly unfair result raised an important question and is often seen as the catalyst for this recent shift.
Another very welcome change to the legislation is enacted through Section 11 of the 2018 Act, which also came into force in June. This section provides that parties in Scotland are now able to enter into “standstill agreements”, which has been an option in England for some time. The law of 1973 did not authorize the parties to contract outside the limitation periods.
This meant that even if the parties agreed that a time limit for bringing a claim should not apply, the court would still refuse to consider it if the time limit for bringing a claim had passed. The parties can now reach an agreement to extend this limitation period for a maximum of one year.
Although the parties will have to bear in mind the relevant dates for the expiration of a claim given that the extension must be agreed before the end of the limitation period, this may well reassure claimants who would otherwise be forced to raise proceedings simply to protect their position and avoid missing this crucial deadline.
While the rest of the 2018 law has yet to come into force, the two sections that have already come into force are a welcome change to legislation that had been seen as in need of updating. That said, the rules around statute of limitations are still not straightforward, so claimants are strongly encouraged to consult with a lawyer regarding potential time limits before it’s too late.
Erin Grieve is a Managing Partner and Associate in the Dispute Resolution Team of Addleshaw Goddard