On 28 February 2025, the much-awaited Prescription (Scotland) Act 2018 (the "2018 Act") was fully implemented into law. The 2018 Act, which came into force in stages, significantly reforms the law of prescription in Scotland and in particular, amends the Prescription and Limitation (Scotland) Act 1973 ("the 1973 Act").
The purpose of this article is to provide an overview of the reforms and why they were necessary.
What is prescription?
Prescription is the law of time bar in Scotland – the time-period after which certain rights and obligations, such as contractual obligations, are extinguished unless a relevant claim has been made.
Under section 6 of the 1973 Act, an obligation is extinguished after 5 years:-
(a) Without any relevant claim being been made in relation to the obligation; and
(b) Without the subsistence of the obligation having been relevantly acknowledged.
Section 6 generally applies to:-
(i) Obligations to pay a sum of money and other contractual obligations;
(ii) Obligations to pay compensation;
(iii) Breach of contract and breach of duty claims
Under the 1973 Act, the 5 year time period could be delayed under section 11(3) where a creditor had suffered loss, injury or damage but was not aware or could not with reasonable diligence have become aware that loss, injury or damage caused had occurred (i.e. latent damage claims).
It was generally thought to be the case that section 11(3) postponed the five year time-period until the creditor had some knowledge that their loss was caused by the another party, for example as a result of breach of contract or a breach of duty.
However, some controversial court judgments held that, when applying a strict interpretation of the wording of section 11(3), "knowledge" was not required. The result was to roll-back the time-period when the prescriptive period started to a time when the creditor was not aware that something had gone wrong but that they had incurred loss (e.g. when an invoice was rendered for work which was ultimately wasted).
David T Morrison & Co Ltd v ICL Plastics Ltd (and Others) [2014] UKSC 19
The Court held that where the five year prescriptive period applies (i.e breach of contract/breach of duty claim), the creditor must pursue its claim within 5 years of the date:-
(i) when it first became aware that it has suffered a loss or a detriment, such as wasted expenditure; or
(ii) when it could have, with reasonable diligence, become aware whether or not the creditor knew the loss/detriment was as a result of breach of contract of duty.
Gordon's Trustees v Campbell Riddell Breeze Paterson LLP [2017] UKSC 75
The Court held that when interpreting section 11(3) of the 1973 Act, "loss" means the "existence of physical damage or financial loss as an objective fact". Therefore, the prescriptive period is not postponed until a creditor is aware that they have suffered a detriment or loss, in the sense of an awareness that something has gone awry. It is sufficient that the creditor is aware they have not obtained something they sought or that they have incurred wasted expenditure.
Midlothian Council v Raeburn Drilling and Geotechnical Ltd [2019] CSOH 29
In this case, it was held that the prescriptive time-period commenced when an engineer contracted by the Council in 2006 failed to advise that the land upon which a housing development was to be built, required the installation of a gas proof membrane. The Council was unaware of the design error until 2013. Lord Doherty held that loss had occurred as soon as the pursuer had incurred expenditure in reliance upon the defenders' advice (i.e the engineer's invoices amounted wasted expenditure).
It was acknowledged in both Gordon's and Midlothian Council that these outcomes produced harsh results for pursuers. Nevertheless, it was held that it was a matter for Parliament to legisltate for any reform to the law of prescription.
Along came the 2018 Act to try to address the perceived unfairness.
The 2018 Act
The 2018 has been implemented in a piecemeal basis because of the challenges presented to pursuers as a result of the case-law narrated above. Sections 5 and 13 of the 2018 Act came into force in June 2022.
For claims which have not already prescribed by 1 June 2022, Section 5, in particular, amends the "discoverability test" in section 11 of the 1973 Act so that the prescriptive time-period will not commence until the date the pursuer is aware of:-
(i) the loss; and
(ii) the act or omission which caused the loss;
(iii) the identity of the person who caused the loss.
Section 13 allows parties to agree an extension to the prescriptive period of up to one year by agreement.
Unfortunately, section 5 did not have retrospective effect and therefore practitioners still have to grapple with section 11(3) of the 1973 for some time to come.
On 28 February 2025, the remaining key provisions of the 2018 Act came into force including:-
1. Five-Year Period for All Damages
Section 1 of the 2018 Act clarifies that all delictual claims shall be subject to the same five-year prescriptive period, ensuring claims are all made within a reasonable timeframe.
2. Fraud and Error Extension
Section 4 of the 2018 Act allows the prescriptive period to be extended in circumstances where the debtor, through fraud, words or conduct, induced the creditor to refrain from making a claim.
3. Extension of Twenty-Year Prescriptive Period
Section 6 of the 2018 Act amends Section 7 of the 1973 Act to ensure that there is a true 20 year long stop which cannot be defeated by either a relevant claim or relevant acknowledgment. There are limited provision allowing an extension of the 20 year period when a relevant claim is already in progress (i.e to permit conclusion of a court action)
4. Insolvency-related Claims
Section 10 of the 2018 Act expands the definition of “relevant claims” to include a variety of insolvency-related actions, such as the appointment of an administrator and the submission of claims in an administration under the Insolvency Act 1986. Not only does this expansion recognise insolvency-related claims, but also ensures they can interrupt the prescriptive period, providing additional protection to creditors in insolvency matters.
5. Burden of Proof
Section 14 of the 2018 Act introduces a new provision regarding the burden of proof for prescriptive periods. If there is any ambiguity about whether an obligation or right has been extinguished by the expiry of the prescriptive period, it is presumed to have been extinguished, unless the creditor can prove otherwise. "Creditor" is used rather than "Pursuer" because it is envisaged that the onus of proof could also arise in counterclaims as the the instance of a Defender.
6. Expansion of Statutory Obligations
The 2018 Act makes several changes to Schedule 1 of the 1973 Act, clarifying that all obligations are subject to the five-year prescriptive period including those related to land, payment of taxes, child support maintenance, council tax and non-domestic rates. The comprehensive list of applicable obligations aims to create a clearer and more predictable legal environment for parties dealing with such matters.
7. Resolution of Claims
Section 11 of the 2018 Act revises Section 9 of the 1973 Act to specify that any obligation-related claim will be considered ongoing until fully resolved. This means the prescriptive period will not expire while a claim is still being dealt with.
8. Final Disposal Definition
Building upon Section 11 of the 2018 Act, Section 12 offers a concrete definition for when a relevant claim is considered to be “finally disposed of.” A claim is disposed of when there no right to appeal, the appeal period has expired, leave to appeal is refused, the time for making an appeal has expired without an appeal being made, or the claim is withdrawn or abandoned. This clear definition ensures fair and accurate management of the prescription period and eliminates any ambiguity in the resolution of claims.
Conclusion
The full implementation of the 2018 Act marks a significant milestone in the evolution of the law of prescription in Scotland. The transition to the new regime may present some challenges (which will without doubt be explored in judgments to come), but the 2018 Act is a proactive step towards clarifying the legal position and ultimately, should lead to more effective resolution of disputes.
If you would like to discuss how these changes may affect any existing or potential claims—particularly where prescription could be an issue—please get in touch with Kirsty Waughman or Lauren Rae.
