Blog: A return to first principles in prescription reform is fair to consumers
Govan Law Centre (GLC) has argued that the Scottish government’s reform of the law of prescription - the date that obligations are extinguished in law - should go back to first principles. GLC’s principal solicitor, Mike Dailly, who set out that position yesterday before the Scottish Parliament’s Delegated Powers and Law Reform Committee, outlines it below.
The Scottish government’s aim - and the starting point of the Scottish Law Commission original Discussion Paper thinking - was to create clarity, simplicity, certainty and fairness in the law on prescription. GLC believes that this should mean all legal obligations are subject to a five year prescriptive period as a matter of principle. The current law, contained in the Prescription and Limitation (Scotland) Act 1973, is almost half a century old and the justification for requiring 20 years to pursue debts and obligations is outdated with today’s standards and technology.
While the Scottish Law Commission originally envisaged Scots law being simplified so that all statutory obligations would be subject to the five year ‘quinquennium’, the bill makes a number of exceptions to this rule for tax generally, national insurance, council tax, child maintenance and reserved social security benefits. These exceptions result in a 20 year prescriptive period.
GLC notes that public policy arguments have been accepted for differential treatment, but we still believe that the five-year prescriptive period should apply to all statutory obligations. For example, there is no justification for council tax to be subject to a six year prescriptive period in England but 20 years in Scotland.
If the Scottish government is not willing to amend the bill, GLC has encouraged the Parliament’s Committee to do so, which failing to consider a fall back compromise position. For example, the bill’s current exceptions could be subject to five years, and an extended period of 10 years in the following exceptional circumstances:
Where there has been willful, false or misleading information by the debtor which has resulted in a material delay in enforcing the debt due, or
the creditor can prove that the delay in enforcing the obligation was not due to a material delay on its part, and it would be in the public interest to allow an extended period.
As a matter of public policy, we can see why there may be a case for individual exceptions, but they should be genuinely exceptional, otherwise what the bill will fail in its goal of providing “certainty, clarity and fairness”, by allowing debts and obligations to linger for 20 years without being pursued as early as possible.
In relation to social security benefits, we believe there is no justification for not having all devolved and reserved benefits subject to the five year prescriptive period. It is inequitable that people have a month to appeal a benefit decision, while the DWP would have 20 years to pursue reserved benefit debts.
GLC believes that the “appropriate date” for the start date of the running of the five year prescriptive period for consumer debts in terms of section 6 of the 1973 Act should start from the last payment made. This current law is set out in section 6 and schedule 2 of the 1973 Act and depends on whether the contract makes provision for when repayment is due, which failing when a written demand for repayment is made.
We have a number of cases in court at present where old consumer credit debts have been sold by banks to debt collection companies, and we think the starting point for prescription for consumer debts should be simplified as the last payment made by the consumer. The alternative is the current position of highly technical arguments where the creditor can argue that a later start date applies, for example, when it demands full repayment – which can add an extra year or more to the quinquennium.
GLC fully supports section 5 of the bill which amends section 11 of the 1973 Act, and introduces a new “discoverability test’. Section 5 of the bill would address the 2014 UKSC decision in Morrison & Co Ltd v. ICL Plastics Ltd, which established that the start date for prescription was when a pursuer knew they had suffered loss, injury or damage. This can result in unfairness when no-one knew who was culpable until some years later.
Section 5 of the bill would require additional knowledge in relation to the fault/negligence and identity of a defender before the prescriptive period can begin in a damages claim. We believe this represents practical common sense, and is a fair and reasonable approach.
GLC argued that section 8 of the bill should be deleted. There is no cogent case to change the law on when the 20 year prescriptive period begins. At present the period runs from the date of a pursuer’s knowledge of a defender’s act or omission, however the bill would run the period purely from the actual date of the act or omission. We have no difficulty with section 6 of the bill in relation to removing interruptions to the 20 year prescriptive period.
We have significant concerns over section 13 of the bill, which would permit contracting out of the five prescriptive period by one year with a ‘standstill agreement’. Very often consumers in financial difficulty are in a weak and vulnerable position, and may not seek independent advice until the last moment, so we believe this provision could result in serious injustice in practice. We suggested a possible compromise that section 13 of the bill should only engage where there is certification from a solicitor or accredited money advisor (in debt cases) that the consumer has taken independent legal advice and agrees to extend the five year prescriptive period.
Mike Dailly was giving evidence on behalf of GLC, along with Mike Holmyard of Citizens Advice Scotland. The Committee’s Stage 1 inquiry on the bill is ongoing, with the minister scheduled to appear before the committee next week.