Analysis: Gordon’s Tr’s V CRBP

By way of background, the appellants are trustees. The trust owns farmland which was acquired for development purposes. The land was subject to three separate agricultural leases. In November 2003 the trustees instructed solicitors to serve notices to quit in respect of the three individual leases.

Due to a defect in two of the notices, further notices were served in respect of all three fields in November 2004. The tenant did not give up possession on the requisite date in November 2015 and the trustees were advised to seek alternative legal advice due to a conflict of interest.

The trustees instructed another firm of solicitors. They applied to the Scottish Land Court seeking removal of the tenant. By February 2006 the trustees had incurred legal expense via their new agents. In July 2008, the Scottish Land Tribunal held the notices to be invalid and as such the tenants remained in situ.

In terms of the Prescription and Limitation (Scotland) Act 1973, where an obligation has subsisted for a continuous period of five years after the “appropriate date”, and no claim is made, the obligation is extinguished. Section 6(3) of the 1973 Act provides that in cases of contractual breach the “appropriate date” is the date when the breach becomes enforceable.

Under section 11(1) an obligation arising from the breach of contract becomes enforceable when the “loss, injury or damage” occurred. Section 11(3) states that where a creditor is not aware or could not with reasonable diligence have been aware that loss injury or damage has been caused an obligation becomes enforceable when the creditor first became so aware. No real news there then.

The trustees initiated court proceedings against CRBP/the respondents on 17 May 2012. CRBP/the respondents position being that any claim had time barred/prescribed as was raised out with the five-year time limit and effectively the claim had extinguished. The trigger date for prescription purposes being five years from the date the defective notices had been served in November 2004 or alternatively when the tenants failed to vacate in November 2005. The trustees argued that they had no knowledge of such loss until Land Court decision in July 2008 and as such that they were within the necessary time limit for prescription purposes. The Lord Ordinary and the Inner House agreed that the claim had indeed prescribed. (Morrison v ICL Plastics applied).

The UKSC proceeded on the basis of a uniform approach and also held that the claim has indeed prescribed and dismissed the respondents(pursuer) appeal. Lord Hodge delivered the lead judgment in respect of which the other four justices agreed.

As for reasoning Lord Hodge confirmed that “..section 11(3) does not postpone the start of the prescriptive period until a creditor of an obligation is aware actually or constructively that he or she has suffered a detriment in the sense that something has gone awry rendering the creditor poorer or otherwise at a disadvantage. The creditor does not have to know that he or she has a head of loss. It is sufficient that a creditor is aware that he or she has not obtained something which the creditor had sought or that he or she has incurred expenditure.”

He noted that: “This approach is harsh on the creditor of the obligation, where the creditor has incurred expenditure which turns out to be wasted or fails to achieve its purpose, because the circumstances when the prescriptive period begins may not prompt an enquiry into the existence or likelihood of such loss. Thus a person may begin a legal action and incur expenditure on legal fees on the basis of negligent legal advice or he or she may purchase a house at an over-value as a result of the negligent advice of a surveyor. In each case the person may be aware of the expenditure but not that it entails the loss. But it offers certainty, at least with the benefit of hindsight.”

There is still room for some debate. Certainly it does appear particularly harsh. An example being, for instance, that should one find themselves in an acrimonious divorce situation with large sums at stake. A spouse forks out on legal expenses on an experienced family lawyer with all hope and intentions that those legal costs will be a hefty return on investment.

The pre-litigation negotiations trundle on. No scope for extra judicial settlement. A proof is assigned 18 months away. The proof calls but is delayed due to lack of court time, unavailability of witnesses or otherwise. A further proof is fixed six months down the line. That proof proceeds and a judgement follows six months later. The judgement is unfavourable. It becomes apparent that the advice was negligent. Legal fees incurred beyond that five year period. Is the claim time-barred with no scope for recompense. Ought one to instruct a solicitor to confirm that the advice that they are receiving form their principal solicitor is indeed correct? It would appear absurd but arguable on a risk basis. Should clients be seeking to delay payment of fees? Are no win no fee clients less at risk?

Let us not forget, of course, the live proposals for reform of the current legislation on prescription in Scotland. The proposals in terms of the draft bill being that prescription will not start to run until: the creditor is aware, as a matter of fact, (i) that loss, injury or damage has occurred, (ii) that the loss, injury or damage was caused by a person’s act or omission, and (iii) of the identity of that person. That is still some way off and even then we will possibly have a three year lead-in period before the legislation takes effect. Whether that legislation will ultimately take effect any time soon is questionable.